Transatlantic Market Is at Full Boil

New players said they would put some downward pressure on fares in the market.


Niche carriers are moving to fill perceived gaps with new transatlantic products -- particularly on the New York-London route -- as entrenched players add flights to further court high-yielding customers. Startup Silverjet is mimicking the model established last year by MaxJet and Eos by offering an all-premium inflight product at costs that undercut established players. While Eos, MaxJet and Silverjet look to shift customers from the front cabins of such entrenched players as British Airways -- and lap up new demand -- Canada-based Zoom is seeking price-conscious customers from the back of the plane with plans to launch low-cost all-economy service from the United States to London.

Meanwhile, as Delta Air Lines plans to add the "crown jewel" of its massive transatlantic expansion through an agreement late last month to purchase New York-London route authority from United Airlines, British Airways and Virgin Atlantic are adding to the number of daily flights that connect passengers from the Big Apple to Big Ben.

In addition to giving travel buyers more choices through new product categories on one of the most heavily traveled international routes, new players -- seeking to undercut established ones on price -- said they would put some downward pressure on fares in the market.

"The market between the U.K. and especially the northeast of the U.S. is probably the most competitive business travel market in the world, and the fares reflect that," said John Caldwell, president of travel consultancy Caldwell Associates.

Silverjet CEO Lawrence Hunt said his new endeavor would help "raise the whole point that prices are artificially high in business class. They don't need to be. They shouldn't be."

Eos and competitor MaxJet last fall both entered the market offering daily, all-premium services between New York JFK and London Stansted Airport with similar concepts -- a spacious inflight product offered at prices below comparable services from incumbent transatlantic operators

Silverjet is cheered by what it said are the recent successes of Eos and MaxJet, both of which within a year of launching hit load factors in the 70-percent-plus range.

"We're very encouraged by Eos and MaxJet's performance," Hunt said. "It took them a little longer to get out of the traps on distribution and marketing, but the proof of the pudding is in the eating: MaxJet's over-80-percent load factors; Eos is in the 60s or 70s. For us, that took over any concerns that the industry had or investors had about demand for this type of product. It took them six or seven months to get to break-even, which is a pretty good result for a new product category."

Hunt said Silverjet late this year or early next will launch twice-daily service between Newark International Airport and Luten Airport, which is about 30 miles outside London. The carrier is in the midst of purchasing Boeing 767s to serve the route and is in production to outfit each plane with 75-inch cocooned lie-flat seat-cum-beds.

"We think there's enough capacity in the market for three or four times a day service between London and New York, so we'll grow that as quickly as the demand allows us to," Hunt said, adding that Silverjet is looking to grow to 10 aircraft in three years on four different routes, two of which will be out of North America.

While starting on the Newark-Luten route, the carrier is not limiting itself to transatlantic service. "It's a long-haul, low-fare, all-business class product," Hunt said. "There are more than 30 routes out of London that would work for this service economically, so it's a huge opportunity. We think this is the next big thing in the low-cost airline niche focus."

The carrier will launch its service by capping fares at about $1,500 roundtrip, which it said undercuts premium class prices offered by entrenched players.

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