BA's new business only flights seen hurting Eos more than Silverjet
02.02.08
British Airways' plan to launch twice-daily business flights from London City Airport to New York, announced yesterday, will hurt Eos Airlines, the Stansted Airport based all business class carrier, harder than its Luton Airport based rival Silverjet, analysts say.
Eos and Silverjet both say trading has been strong since December, when their budget business-class rival Maxjet filed for bankruptcy protection. But analysts say the sector is vulnerable to weakening consumer demand, rising fuel costs and a competitive backlash from traditional carriers like BA.
Eos, which operates a premium service out of Stansted, is seen as being hit most by the move. ABN Amro analyst Andrew Lobbenberg said: ' I think this is a bullet aimed squarely at Eos, targeting travellers from the City. The tactical objective is clear.'
Analyst Gert Zonneveld at Panmure Gordon agreed that Eos, which is at the luxury end of the transatlantic business class market, is more likely to suffer from the increased competition than Silverjet, which aims at the middle of the market, charging around £1100 a seat.
Silverjet Chief Executive Lawrence Hunt said: 'BA's announcement is a ringing endorsement for Silverjet's business model. It is also an admission that the old multi-class model of airline travel, with its rip-off prices and erratic customer experience, just isn't working.'
However, BA's new services has a weakness not mentioned in all of the hype yesterday. London City Airport has a restricted runway and BA will be unable to operate from the airport with a full load of fuel for the New York bound flight. It will have to refuel on the way, possibly at Dublin or Shannon, which will add significantly to the journey time.
Flights from New York to London City will be non stop, but the flights to the US will take around nine-and-a-half hours. This will still be quicker than having to cross the capital to Heathrow, especially with a 15-minute check-in before flights, and the stop in Ireland could be used to pre-clear US immigration, an option in Dublin, but suddenly it doesn't sound quite so attractive.
However, the analysts are still bullish. Chris Avery, aviation analyst at JP Morgan, told the FT: 'Our rough calculations show profits at 60 percent loads at representative corporate London / New York fares, so this innovation looks to make economic sense.'
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