Is business-class travel going extinct? Part 1 of 2
In times of economic uncertainty, business travel decreases as organizations slash travel budgets. The International Air Transport Assn. is already reporting that business and first-class travel have experienced the biggest plunge in five years. Promising all-business class airlines like MaxJet, Eos and Silverjet have gone out of business in just a matter of months. Other airlines are cutting capacity too, as fuel costs rise. So what does this mean for the future of business travel? Is it going extinct, or is it here to stay? Letâ€™s analyze this from two perspectives: business class-only airlines, and full service airlines with specific all-business routes.
All-business class airlines: Verdict â€“ Going Extinct
The all-business model was always considered an experiment and at record high oil prices any new model struggles. Aviation analysts point to the premium-class graveyard where the tombstones are reminders of such short-lived U.S. airlines as Air One, Air Atlanta, McClain, Regent, MGM Grand and Legend. Most of these offered domestic US routes only, which re-affirms the point that there is little domestic market for all-business carriers.
MaxJet, Eos and Silverjet all operated trans-Atlantic routes as well as some between London and Dubai. Not only is this one of the most traveled business segment, it is one where customers have an over-abundance of choice. A business traveler can choose to travel by Business or First class on a plethora of full-service airlines. And this is the threat that premium carriers knew all too well, and often suffered from it. Most recently, American Airlines retaliated last year by launching a service to Stansted from New York JFK, putting it in more direct competition with Eos and Maxjet, both of which linked Stansted with JFK.
Another crucial factor is that with deep pockets, full-service carriers are able to sustain a loss-making route much longer than premium carriers can, since the latter canâ€™t dig into other sources of revenue. In fact, both Eos and SilverJet folded when a prospective investor pulled back.
Yet another reason premium airlines have trouble competing with big airlines’ business- and first-class products is because the big airlines offer more frequent flights to more cities and have the high-end customer addicted to their frequent-flier programs. Hence, switching to a premium carrier incurs an opportunity cost for the traveler in terms of lost â€œmilesâ€ and status. Premium airlines should tie up with full-service airlines such that frequent fliers can choose between the two services and still earn miles. Laâ€™Avion, which flies all-business between Paris and New York, has tied up with British Airwaysâ€™ Open Skies to do just the same. Smart thinking.
Hence, unless premium airlines are willing to think innovatively on ways to increase passenger numbers, the future looks bleak for them.
The next article in this series will evaluate whether business-class travel in general will survive or go extinct.