New Insights In the Quest for an All-Business-Class Domestic Airline

16 Sep

Virgin America InteriorIn the time time since writing an earlier post, “Domestic US All-Business-Class Airline?,” I have stumbled across some additional, interesting insights about the prospects for an all-business US airline. To quickly reiterate, in that post I proposed that a company like EOS or Silverjet, which offers business-class-only flights over the Atlantic, could be successful flying domestically within the US.

First off, I failed to point out in my previous post that some airlines have taken a similar, if not identical approach in the past. Midwest Airlines is effectively an all business class domestic carrier, and airlines like JetBlue and Frontier have tried to position themselves as premier economy airlines, with leather seats and seat-back entertainment systems.

Second, it is important to note that the recent boom in transatlantic business class airlines is likely to not only continue, but to increase in light of the upcoming March 2008 opening of the transatlantic market to new competition when the Open Skies Pact goes into effect. This will likely distract much attention from the domestic US market for the next year or two, as the existing business-class players focus their investments on expanding service between new, previously unserved markets.

Third, Richard Branson appears to have really set his sights on the US domestic airline market. Virgin is expected to enter the all-business-class fray with a new transatlantic option, competing with EOS, Silverjet, and the others. This, only months after Virgin American began service from San Francisco offering a new premium domestic option. Its flights are split like most traditional airlines with both economy and “first class” sections, but many new service innovations such as on-demand meals, custom MP3 music playlists, and a seatback entertainment system that even allows electronic chatting with fellow passengers.

Virgin American appears set to fill a niche for low-cost premium service, but doesn’t eliminate the attractiveness of a truly upscale business-class-only option, since that configuration offers advantages in terms of lightening-fast boarding, lower risk of screaming babies, and smaller planes that can fly to less congested regional airports.

Finally, I should point out that I am not the first to have thought about this. Steven Livett and Stephen Dubner over at Freakonomics wrote about this very opportunity just a few months ago. Similarly, Scott McCartney at the Wall Street Journal, author of the Middle Seat column, generated some interesting discussion on his forum a couple months ago about domestic opportunities when he wrote about L’Avion and Silverjet.

Have others already tried?

While I still believe United PS is the best example of the type of routes and target audience such an airline would target, MidWest Airlines (formerly Midwest Express) is an interesting case study. It offers a single, “premium” class of service that is close to traditional “business class” on most domestic carriers. They even bake fresh cookies onboard!

The airline is rated “tops” again and again by customers, and demonstrates that a niche player can indeed be successful in the airline industry. It recently fended off a hostile takeover bid by AirTran, whose efforts were blocked partially through grassroots objections by its customers.

But Midwest Airlines is still relatively small and doesn’t compete in all US markets. Interestingly, it doesn’t compete for most of the long-haul domestic routes like LA to New York and Seattle to Miami where I believe a business class airline has the greatest prospects. If a proposed purchase of the airline by private equity giant TPG Capital and Northwest Airlines goes through, however, this sort of move and expansion between more US airports might very well be in the cards.

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2 Responses to “New Insights In the Quest for an All-Business-Class Domestic Airline”

  1. tony September 17, 2007 at 4:29 pm #

    dude, i just realized how into airlines you are… ever consider working for like virgin america or something? that might actually fit pretty well.

  2. Dan Moniz September 30, 2007 at 1:52 pm #

    Midwest is reconfiguring their entire fleet, MD-80s and Boeing 717s, to offer both Signature Service (2 by 2 business class seating) and Saver Service (2 by 3 seating) on all flights, so it’ll cease to be an all-business-class airline, though I imagine even the Saver Service will be a pretty high-end coach service compared to other carriers.

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