AIR INNOVATORS
Change is in the air
What effect will new business models have on the way we buy air travel?
By MARK FRARY H
OW DO YOU MAKE A SMALL FORTUNE IN AVIATION? Start with a large fortune and launch an airline. Or so the old joke goes. Like many such jokes, there
is a kernel of truth in it. Making money is ter- ribly difficult but the sexiness of the sector is such that there are always people willing to try something new in the airline business. “There is a high margin of failure of airline business plans,” says respected aviation con- sultant John Strickland. “It comes down to the very high cost of a plane and often about assumptions of what people will pay and how many will travel.” The historically low oil prices the world
has experienced recently may be convinc- ing more aviation entrepreneurs to give it a go. However, oil prices are unlikely to stay low forever – and it’s not just rising oil prices that can ground your airline, says
62 BBT November/December 2016
Strickland. “Government taxes can affect your plans, as well as external shocks, such as terrorism and natural disasters. You need to have money to be able to deal with those.” Low-cost airlines seem to be here to
stay, however. The first, Pacific Southwest, launched in 1949. The last two decades have seen airlines that have reinvented the revenue model soar at the expense of legacy airlines, particularly in short-haul markets. Yet now, the low-costs are reinventing them- selves in the image of the legacy airlines they have usurped and realising they can charge for extras. Airlines such as Ryanair saw that they were missing opportunities for people to pay for things to get extra aspects of service, such as flexibility.
ALL-BUSINESS BATTLES Another model tried many times, but without lasting success, is the all-business concept. In early September, La Compagnie
announced it was closing its all-business route between London Luton and New York. The airline said the decision came as a result of “the new economic climate and aviation landscape in Europe following the recent UK European Union membership referendum in June 2016”. The airline claimed an average load factor of 77 per cent since June. The planes were reasonably full, therefore, but the average fares those passengers had paid was clearly not enough to support the route. However, the airline’s CEO Frantz Yvelin
said: “It has not been an easy decision, but we would like to emphasise that this is the suspension of, not the cancellation of, the London-NY route.” As a result, the airline has added an extra flight on its Paris-NY route. At the same time, British Airways is reduc-
ing the frequency of its London City to JFK service from 11 times a week to just six. The aviation landscape is littered with the carcasses of all-business airlines. Who now
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