Doing It With Class
Airlines get down to business, as pampering travelers leads to plumper profits.
SOMEWHERE OVER THE ATLANTIC OCEAN-Justin Pannell leans back in his leather "suite" and snaps open a copy of the Times of London. The 49-year-old management consultant has made this trip across the Atlantic countless times, and in recent years the experience has been getting better. "Business class is getting bigger and bigger," he says. "One catalyst was the closing of the Concorde. People wanted exclusivity and speed. We lost speed, but it's still possible to have exclusivity."
It is common knowledge in the airline industry that international business travelers provide its bread and butter. They fork over top dollar, fly at the last minute, and will pay a premium for certain creature comforts. The most lucrative route, between New York and London, can cost as much as $9,000 round trip for a flight that takes an average of six hours each way. Remarkably, 8 percent of passengers provide 50 percent of airline revenues.
Now, airlines are fully realizing business travelers' importance. New all-business-class airlines have mushroomed over the past year. And traditional carriers are upgrading their premium-class services, especially on international flights. "There's somewhat of a domino effect," says Eric Ford of Eclat Consulting, which focuses on the airline industry. "If one carrier starts improving, others have to follow suit. The airlines all know that a minority of travelers on business fares provide a majority of the revenue, so you do anything you can do to steal a business traveler from another airline."
All business. Pannell is flying on Eos Airlines, an all-business-class airline that began service last October between New York's John F. Kennedy International Airport and Stansted Airport, northeast of London. Eos, named for the Greek goddess of dawn, has outfitted its four Boeing 757 jets, which usually carry 220 passengers, with 48 "pod suites" that give each traveler 21 square feet of space. "It's like a long executive jet," says Pannell. "When Boeing made this aircraft, it never imagined it would be used for something like this. It's still too early to say what will happen, but executives like it, and companies now have tighter travel budgets and want more bang for their buck."
On a recent flight, passengers received a champagne cocktail upon boarding and, after a four-course dinner, settled in to sleep, armed with Bose noise-canceling headphones and two-piece pajama "sleepsuits" handed out by flight attendants. As the airline prepared to expand its service to two flights a day last month, it reported that reservations were up 62 percent over the previous three-month average. Fares range from $2,750 with seven-day advance purchase to $6,500 for an unrestricted round-trip ticket. That's still about 20 percent lower than larger carriers' business-class fares, which usually range from $6,000 to $9,000. Eos plans to expand to two more U.S. cities sometime next year.
Founder Dave Spurlock, once a director of strategy at British Airways, came up with the idea for Eos when he realized business passengers were the most profitable segment of the industry. "Eos is a new breed of airline, built around the need for hassle-free flying," says David Pottruck, the CEO. "On a typical 777, which holds 250 people, the 195 passengers in coach class lose money for the airline. But the 50-plus people in first and business class are so profitable that they not only cover losses in economy but make a net profit. So we thought, why not just cut out the coach customers?"
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