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February 6, 2008

Low Cost Business Class Flights – a sustainable business model

“The most profitable of all airfares in the travel industry, are the trans-Atlantic business-class fares”, claims Global Travel News, and British Airways seems to agree completely. Having only recently announed plans to launch a new airline with 24 business class seats, called OpenSkies, British Airways has now announced … plans to launch a new business-class-only route.

OpenSkies is expected to begin operations in spring, so it is a quite short term strategic movement. On the other hand, the new business-class-only route will be available next year and will be flying between London City Airport to either Newark -New Jersey or Kennedy – New York, twice a day.

Analysts, rightly, believe that with these moves, British Airways has put down another bet on the resiliency of trans-Atlantic business class flights. Silverjet’s comment on British Airways’ most recent announcement was that it is “a ringing endorsement for the company’s business model”.

The success or failure of both airlines’ business models though will be judged by at least three key parameters: price, location, and brand recognition.

British Airways has undisputably strong brand recognition. Silverjet, on the other hand, has certainly made the news, but not quite for the right reasons. With its stock having lost almost 81% of tis value in the last twelver months, it is speculated that Silverjet might follow MaxJet’s path, which went bankrupt in December, 2007.

British Airways has expressed its intention – through the mouth of Woody Harford, the senior vice president for North American commercial operations – to keep the airfares “within the absolutely same neighbourhood” with its existing business-class service, called Club World. Silverjet enjoys its own private terminal in Luton airport, in North London, and yet it is offering business-class flight tickets at less than 1/3 of the current British Airways’ airfares – which operates between London Heathrow and New York.

Of course, I – since I am working nearby – cannot agree more that London City airport is the financial district’s most easily accessible airport. However, British Airways has to seriously consider the range of tis airfare prices, taking into account the small inconvenience of the “quick, (it-will-take-only-40-minutes-I-promise), gas-and-go stop” for a full fuel load (at an western British or Irish airport) that British Airways’ aircrafts will need to make, before continuing their journey across the Atlantic, due to London City airport’s strict takeoff weight limits.

And let the battle begin…

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