Premium News Roundup

Two updates on premium travel:

1. My post yesterday regarding the disappearance of all premium aircraft is no longer valid, as OpenSkies announced today they would be removing the 30 economy seats on its aircraft and replacing them with 12 Prem+ seats. This had been long rumored and the timing is not surprising. The seats will be in place by October 1st just as OpenSkies enters the peak period for premium traffic.

2. Continental unveiled a new Business product. They are going lie-flat and it will be a huge upgrade. It is a wider seat and extends to 6'6 when fully flat. However, as Cranky points out, window passengers are going to have climb over their aisle counterparts to get to the bathroom. This a let down. Most premium passengers travel alone and thought of paying $4000 for a ticket and then having decide if your bathroom needs are urgent enough to risk waking the person next to you isn't the most appealing proposition. On the other hand, it is probably easier to jump over a flat bed than an angled seat.

Classism Wins Out

The deal is done. On Friday, British Airways announced that it has completed the purchase of L'Avion and will integrate it into OpenSkies by early 2009. Over the past three years we saw 4 airlines attempt to fly across the Atlantic with only business class seating. It is now official -- if you want to fly business class you are going to have to share the plane with people flying in a "lesser" class. Ah, the humanity.

Frequency vs Route Map

The arm-chair upside to this OpenSkies-L'Avion merger is that we will all quickly learn a great deal more about BA's strategy for its new baby business class airline. Based on all available information, it always seemed like OpenSkies would opt for Route Map vs Frequency. They'd launch Paris and then expand with single frequencies to other cities such as Brussels and Amsterdam.

With this strategy OpenSkies can assure they do not flood the market with too much capacity and it gives it more pricing power for the demand. However, as a business class carrier they'd be betting on that frequency would not severely impact its demand. That is, that if I am John Doe business class traveler, then I would love OpenSkies so much that I would fly on them at anytime, rather than a competitor that allows me to possibly get on an earlier flight or gives me comfort that there is a later flight if my original flight is cancelled.

But, with the L'Avion purchase they now have 3 daily flights from NYC-PAR. My bet is that they quickly shed one of these flights and settle on 2 flights and that will be the maximum they offer any market. Either way, after a month or two, we'll have a good idea on how they plan to expand OpenSkies.

OpenSkies Absorbs L'Avion

The big news of the morning is British Airways' purchase of L'Avion. BA shelled out a strikingly low 33 million Euro for the airline (68 million - 35 million in cash reserves) and will absorb L'Avion into OpenSkies. I discussed the impending possibility of this purchase in my podcast last week. Marc Rochet is an ex-BA guy and it is likely that relationship played a part in this move.

I had always heard that L'Avion was profitable, but with the entrance of OpenSkies and rising fuel costs I'm not sure they had any chance but to take the 33 million Euro and walk away. As for OpenSkies, they quickly gain a small customer base and, perhaps, more importantly, additional slots at Orly.

I had the pleasure of flying L'Avion once back from Paris. My assessment was that it delivered on its promise of Low Fare, Business Class French Style. It was not in the class of more upscale products like Eos or BA Club World. But, it never intended to be either.

Update: Others have pointed to the 757s as the key addition in this purchase. And that makes sense. According to all-knowing Wikipedia, BA has 13 757s. A note on the page indicates that BA plans to transfer 6 to OpenSkies. I'm not sure how this move fits in, but it seems to me that if OpenSkies wanted to launch other cities immediately they could do so without L'Avion's planes. But, given fuel, the more 757s the better.

OpenSkies Podcast

Earlier today I recorded a podcast with IAGblog's Addison Schonland. The discussion focuses primarily on OpenSkies and its implications for premium airlines. Check it out. Let me know if you have any thoughts.

Clarification: In the podcast we discussed OpenSkies offering the only flatbed between New York and Paris. In fact they offer the only business class flatbed between the two cities.

Welcome OpenSkies

In less than 24 hours OpenSkies' inagural flight will be jetting across the Atlantic. When OpenSkies was announced Eos, Maxjet, Silverjet and L'Avion were all flying their own all-business class configurations. Now, Openskies' codeshare partner, L'Avion, is the only one still flying. Interestingly enough, OpenSkies is offering a product that offers the Eos, Silverjet, and Maxjet products, respectively, in three cabins (Biz, Economy+, Economy).

Overall, OpenSkies (EC) has a very solid chance at succeeding. Below I've outlined the Pros and Cons:

Pros

1. Nothing screams success more than the aforementioned 3-class configuration. The EC product is really First, Traditional Business, and E+. It is relevant across every flying segment. The 3-cabins allow EC to charge a strong premium during traditional strong business months of June and October and discount appropriately during August and December. In addition, they have really boxed in the other carriers. For only a small premium to the market's traditional business class pricing, a customer can fly in First Class on EC. If the traditional business class seat is good enough, then it is less expensive on EC.


2. The 757's with winglets should help mitigate the rising fuel costs. To be sure, this is no life saver, but it is better than flying most anything else. (I think only Continental runs 757s to Paris on a few frequencies.)


3. Oneworld: EC is the first business class product to connect to a real Miles program.

Cons:

1. Corporate Contracts: I don't know have any intelligence on the corporate contracts out there for the New York-Paris market. But, I'm sure the market has gotten more competitive since EC entered. They will have to penetrate this market to succeed.


2. Travel Agents: Are they wary of these new business class products after the demise of all the others? It creates a hassle for them and its possible they no longer are willing to adopt change.


3. Recession: As the economy goes, so does superfluous business travel. Startups (even those backed by BA's big pockets) are sensitive to cash flow.


4. Connecting Travel: Right now it does not seem like you can purchase a connecting ticket on BA with codeshared AA flights. (i.e. ORD-JFK-ORY). I'd bet this is something they are working on.

If I was a betting man, I'd put my money on the Pros outweighing the Cons.

Correction 6/26/2008: Contrary to my initial interpertation, the Economy cabin on EC is plain, old Economy. It is not traditional Economy Plus.