Airlines Upgrade Service For Wealthier Fliers

Some airlines are focusing on high-rolling business travelers, leaving economy-class fliers off the plane altogether.

Start-up Maxjet Airways, which began all-business-class service between New York and London last fall, plans a Washington, D.C.-London flight next month. Fellow start-up Eos Airlines, flying between New York and London since autumn, offers only first-class accommodations.

And United Airlines, the USA's No. 2 carrier, just marked the one-year anniversary of its P.S. -- or Premium Service -- flights between New York and both San Francisco and Los Angeles.

The three takes on upgraded service spring from the fact that high-end, long-haul service may be the airline industry's last cash cow. In general, U.S. airlines are slashing amenities in a bid to bring costs in line with limited revenue. The start-ups, and United with its P.S., are betting that there's money to be made by catering to the relatively few air travelers willing to pay premium prices for luxury.

Tiny Maxjet and Eos are after just a crumb of a big, rich pie. The trans-Atlantic market represents about $20 billion a year in airline revenue. The U.S.-United Kingdom market represents about one-third of that.

Maxjet and Eos are each privately owned and each is flying between New York's John F. Kennedy airport and Stansted Airport, London's third-busiest airport after Heathrow and Gatwick.

British Airways, which operates a total of 10 flights a day from JFK and Newark airports to Heathrow, dominates the New York-London route. Virgin Atlantic, United, American Airlines, Continental Airlines and others also offer first-class, business-class and economy between New York and London.

'Very uphill battle' for start-ups

Maxjet and Eos each has only a few planes and offers no more than one round-trip flight per day. Heathrow traditionally has been the preferred London business airport.

Stansted, north of London, is in an area of high-tech development near the University of Cambridge. Train service connects Stansted to London's financial district.

Airline analysts remain skeptical of the start-ups. "This is a very uphill battle," says Washington-based aviation consultant Jon Ash.

Calyon Securities analyst Ray Neidl doesn't give either much chance. Says Neidl: "The established carriers remain strong in international markets. I just don't buy that either of these models will work."

Maxjet. The carrier flies the Boeing 767 fitted with just 102 business-class seats. The jet normally seats more than 200 including economy class.

The seats recline deeply but don't lie flat. Every seat is either on an aisle or at a window. The cabin offers 60 inches of space between the front of each passenger's seat and the seat directly in back, about double a traditional economy configuration.

Last-minute round-trip tickets go for $1,500, vs. about $9,000 for business class on British Airways, Virgin, American or United. According to Travelocity, Maxjet's last-minute business-class fare last week was about $100 lower than British Airways' fare for a last-minute economy-class seat.

Maxjet CEO Gary Rogliano likes to call his product "the industry's first low-fare, all-business-class airline."

"Eighty percent of our customers are coming from the premium cabins of our competitors," Rogliano says. "We give you everything they do and reduce the price 75%."

Extra Space Storage Chairman Kenneth Woolley, an initial investor in discounter JetBlue, is the largest among several investors. He owns 45% of Maxjet.

Eos. The carrier takes passenger pampering to a new plane, so to speak. It gives passengers more space and a higher level of luxury than Maxjet. And it charges more.

Its Boeing 757s seat only 48 passengers who are waited on by six flight attendants. Round-trip tickets to London booked at the last minute run $6,500, about half the last-minute first-class fare on British Airways.

Each Eos passenger has a walled "pod" that covers 21 square feet. Each pod contains a seat with reading light, a guest seat, side table, 110-volt power outlet and a fold-out table for eating or working. The seat converts into a 6-foot, 6-inch lie-flat bed. The bed comes with a feather pillow and cashmere blanket. Meal entrees include filet mignon and rack of lamb.

CEO David Spurlock says the accommodations resemble trans-Atlantic first-class cabins on British Airways or Swissair. As British Airways' former director of strategy, Spurlock is familiar with the competition. He says his airline offers the largest trans-Atlantic seat at a price half that of the competition.

"We are upping the stakes," he says.

Eos has the backing of several private investors including Golden Gate Capital, Sutter Hill Ventures and Maveron, a venture-capital firm co-founded by Starbucks Chairman Howard Schultz.

Spurlock would not comment on when Eos expects to break even. He says the percentage of sold seats is growing, and that early customers tend to be very frequent trans-Atlantic fliers.

United P.S. The high-end service is available on flights between JFK and both San Francisco and Los Angeles International. Offered on Boeing 757s, P.S. flights have first and business class and what United calls Economy Plus.

First class provides lie-flat seats that are normally limited to international flights.

Business class provides seats that recline deeply, and Economy Plus offers more legroom than standard economy class.

Complimentary meals are served in all three cabins, and all three classes offer access to 110-volt outlets for laptop computer use.

Business- and first-class passengers are given their own DVD players with a selection of movies.

United says P.S. is its most luxurious domestic service, with more seating space throughout the cabin than any other transcontinental offering and international standards for food and entertainment.

Round-trip fares booked at the last minute range from $4,550 for first class to $3,660 for business class.

Economy Plus round-trip fares on P.S. start at about $1,000, vs. about $700 on competitors' flights.

Dennis Carty, United's senior vice president for marketing, says P.S. was profitable in its first year and has helped United gain market share among business- and first-class passengers.



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