Aug. 11 (Bloomberg) -- Frantz Yvelin and Peter Luethi, a French-American duo who sold their first Paris-New York business-class-only airline to British Airways, are at it again.
The partners, who got 78 million euros ($104 million) from British Airways in 2008 for L’Avion after less than two years of operations, have created another venture to offer the same service.
LaCompagnie, which started operations July 21 with one used Boeing Co. 757, flies twice a week from Paris to New York. Keeping overhead costs at rock-bottom, LaCompagnie is able to sell round-trip tickets at about 1,300 euros, half that on Air France-KLM Group. By offering what it claims is the best bang for the buck, the new airline says it’s in a sweet spot as businesses looks for ways to cut costs.
“Traditional carriers make huge margins”, Chief Executive Officer Yvelin, 38, said in an interview at the company’s headquarters in Le Bourget, near Paris. “We’re addressing increasingly cost-conscious corporations and travellers.”
Not everyone is convinced such a service is viable.
“Business-class only operations have always been problematic,” said Hubert Horan, an independent aviation consultant based in Phoenix, Arizona, who has previously worked for Northwest Airlines, Swissair and other airlines. “Business-class demand is diffuse and seasonal.”
A case in point: British Airways ended L’Avion’s days as a stand-alone service, folding it into its OpenSkies brand, with broader offerings. Similar carriers EOS Airlines, SilverJet and MaxJet stopped operating after less than five years in service.
With no attractive frequent-flier programs, no economies of scale and the high cost of fuel, it’s hard for small airlines to compete with bigger rivals, industry analysts said.
“History shows it’s not attractive for a new entrant and previous attempts, before the global financial crisis, saw the rise and fall of EOS, MaxJet, SilverJet and L’Avion,” said Jonathan Wober, the chief financial analyst in London for CAPA Centre for Aviation, a civil-aviation think-tank.
Bigger carriers like Air France can mitigate their losses over a longer period and a larger fleet, Horan said.
“They’ll work especially hard to protect high-yield traffic on prominent routes like New York-Paris,” he said.
BA’s purchase of L’Avion, which was completed in July 2008, gave the U.K. carrier an established customer base and market knowledge that helped secure OpenSkies’s position at Paris’s Orly airport, said a spokeswoman for BA’s parent company IAG SA. The announcement of the purchase came less than two weeks after OpenSkies began flying in June 2008. For the year ending March 31, 2009, British Airways booked a 7 million-pound ($11.8 million) net loss from the acquisition.
LaCompagnie’s Yvelin remains undeterred.
“I’m actually happy that they ended it, now we have no competitor,” he said. “L’Avion was a great success; being bought by British Airways was good for our reputation. That’s why we can be here today.”
LaCompagnie’s flights are flying at about 70 percent of their capacity, which is the break-even level, Yvelin said. By the end of the year, the company expects to have two planes, flying six flights a week.
Although LaCompagnie doesn’t have the flat beds that have become standard for most business-class and first-class seats on airlines, it offers passengers Samsung tablets for in-flight entertainment and gourmet food by Christophe Langree, the former chef at the official residence of the French prime minister.
With its offer, LaCompagnie plans to take on Air France, which offers seven flights daily to New York, British Airways and a host of U.S. airlines. All of them have more flights between the two cities, frequent-flier plans, and other advantages that LaCompagnie doesn’t have.
Yvelin said the company saves money by having fewer than 60 employees and “no office in the 17th arrondissement of Paris,” alluding to Air France’s headquarters. Most employees are in France. It has four staff members based in New Jersey.
LaCompagnie raised 30 million euros, with investors including A Plus Finance and private-equity funds.
“It’s enough money,” Yvelin said.
Richard Aboulafia, an aerospace analyst at Teal Group Corp. in Fairfax, Virginia, said that amount might be enough “if everything goes very well.”
“But things rarely go very well,” he said.
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