Flying Outside the System

When this magazine reviewed the status of elite and unconventional air travel two years ago (ATW, 6/03, p. 42), we talked quite a lot about a startup called Indigo, which planned to connect Chicago Midway with Teterboro using 16-passenger Embraer Legacy jets.
Indigo, like so many all-premium airlines, is no longer with us, but that has not squelched enthusiasm for a different kind of air service aimed, as the Concorde was, at a premium market.

As Boeing Commercial Airplanes CEO Alan Mulally puts it: "I don't know of any other business that puts all three levels of service in one place." Lexus and Toyota dealers are separate, Holiday Inn has Crowne Plaza and Express, but airlines carry the steerage proles and the aristocrats of first class in the same aircraft. And until recently, all attempts to do anything different cratered-apart from the heavily subsidized Concorde.

The picture today is more encouraging. One all-premium-class service that was a fledgling in 2003 has prospered. Another apparently well-financed project along the same lines has been announced. Meanwhile, the development of air-limousine services using new aircraft and new information technology is continuing, offering a completely different alternative to both air and road travel for shorter trips.

The distinction of being the first company to make real money out of a premium service belongs to Geneva-based PrivatAir. An early operator of the Boeing Business Jet corporate variant of the 737-700, PrivatAir realized that the BBJ and the comparable Airbus A319LR were the first aircraft to make attractive platforms for an all-business-class service. Compared with earlier single-aisle types, they had greater range potential and were certificated for ETOPS as standard.
Working with Lufthansa, PrivatAir came up with a new business model for premium-class services. Rather than trying to make the leap into becoming a fully operational airline, the company operates services under contract, providing aircraft hours, crew and maintenance. The airline sells the seats and the flight operates under the airline's flight number and brand name.

Lufthansa and PrivatAir inaugurated Dxsseldorf-Newark service in June 2002 (ATW, 8/02, p. 30). Dxsseldorf-Chicago and Munich-Newark flights were added in the following year. On Jan. 16, PrivatAir signed another customer to its program, initiating a Zurich-Newark service for Swiss International Air Lines, which is in the process of being acquired by Lufthansa. PrivatAir uses a BBJ on Dxsseldorf-Newark and A319LRs on the other two Lufthansa routes, all with 48 seats, while the Swiss service is the first to use a 56-passenger BBJ2 with slightly greater pitch and lie-flat seats. PrivatAir and Swiss advertise "quiet, efficient and personal service" from a four-member cabin crew drawn from a 31-strong pool of multilingual flight attendants, most of whom used to work for Swissair.

The flights are timed to suit business travelers: The departure from Zurich is at 1645 local time, the end of the business day, and arrival is at 2015 in time for a transit to New York City and a civilized check-in time at the hotel. The return flight leaves at 2145 for dinner, sleep and a lunchtime arrival in Zurich. Another consideration is to avoid the busiest times at either end of the route.

All the services are on a six-day schedule and can be operated comfortably by a single aircraft. They are intended to complement an airline's other operations. For example, Lufthansa inaugurated its first all-premium service to replace an A340 flight that was barely sustaining itself because it was losing traffic via Amsterdam, while Zurich-Newark connects two major financial centers that otherwise do not generate a great deal of traffic.

The Next Step

Perhaps the next step, in both size and ambition, is represented by Eos, a proposed, US-owned airline headed by former British Airways Chief Strategist David Spurlock and funded by a group of venture capital companies. By the end of September, it plans to start service from New York JFK to London Stansted with 3-4 757s leased from ILFC and fitted with 48 lie-flat seats.

Even without details of the interior, the fact that Eos has no more seats than PrivatAir in a much larger cabin indicates that it is aiming for a high standard of comfort, between business and first class. And the fact that it has three aircraft on order shows that it plans to operate several daily flights to capture as much of the market as possible. What it has not hinted at so far is a fare.

The airline's statements indicate a major focus on loyalty and "customer-centric" business-that is, marketing practices that emphasize adapting to and anticipating the customer's needs. That suggests that the Eos team recognizes its main challenge: Wooing high-end customers away from competitors who are well aware of the need to retain them and can reward them handsomely through their frequent-flier programs and their global network. Eos has a strong management team that includes Continental Airlines veterans Bonnie Reitz and Richard Metzner and already has raised $185 million in funding.

The choice of Stansted is a logical one. Long regarded-and rightly so-as a large patch of concrete reached by cowpaths and surrounded by hen-houses and surly peasants, Stansted now has the best connections of any long-runway airport to London's big money, The City financial district and the huge Canary Wharf business development, thanks to an upgraded rail service from Liverpool Street. If connections to other airports are not critical, it is ideal.

Also bidding to launch transatlantic premium service is Italy's Eurofly. The low-cost and charter carrier started offering mixed-class A330 service from JFK to Bologna, Naples and Palermo in June and plans to begin a Milan-JFK service in January with a 48-passenger A319LR. As with PrivatAir, Eurofly follows the one-airplane/six-flights-weekly model.
Although there are established airlines on the route, it believes Milan loses some New York traffic through Zurich or Paris because of better schedules.

Dedicate

Another approach to premium service is Air France's Dedicate. Like the Swiss/PrivatAir Zurich-Newark route, Dedicate is a way to serve low-volume, high-yield segments. In this case, however, the primary target is the oil and gas industry. This means different destinations-Tashkent, Atyrau in Kazakhstan, Malabo in Equatorial Guinea, for instance-and a mix of business and economy traffic. AF operates the Dedicate routes with A319s configured with 28 business and 54 economy seats.

Alongside its all-business-class service with PrivatAir, Lufthansa has teamed with NetJets, the world's largest fractional business jet operator, to offer Lufthansa Private Jets, a new service that integrates a jet charter with the airline's scheduled flights.
The service first was offered from Munich at the end of March on a trial basis and reaction was so positive that it now is available at Frankfurt.

A call to Lufthansa books a jet, typically a smaller type like a Cessna Citation Bravo, for a fixed rate determined by distance. A flight from Munich to London is in Zone 3 and costs E9,530 ($12,622) for the first passenger and a flat E300 for each additional passenger. NetJets can serve more than 1,000 airports throughout the EU, Switzerland and Norway. Passengers use Lufthansa's first-class facilities, including the new palatial dedicated first-class terminal at Frankfurt, and are welcomed personally at the aircraft door and guided to their private jet.
At Frankfurt, the NetJets aircraft actually fly from neighboring Egelsbach, a 15/30-min. Mercedes ride away.

Pampered Passengers

Lufthansa is selling pampering and convenience. Travelers do not need to deal with a jet charter company in another country and they know the exact price going in.

Meanwhile, the most radical use of small jets in air travel is still in the works. When ATW looked at this area two years ago, Vern Raburn and Rick Adam, both heading up efforts to develop twinjets that are much less expensive to buy and operate than any of today's types, were saying there were plans in the works, mostly under wraps, to develop air-limo services that would function quite differently from the arcane, expensive and intimidating world of air charters. They would deliver on-demand air travel to the masses-or at least to several tiers below the

C-suites where it resides today.
Subsequently, Embraer announced plans to develop its own microjets as well.
The first such effort surfaced in April with the announcement of DayJet, founded by high-tech entrepreneur Ed Iacobucci. It was disclosed that the company already had ordered 238 of Raburn's Eclipse 500 light jets with options on 70 more. While Eclipse is building the aircraft, Iacobucci's company, which started under the codename Jetson Systems, is working out how to use them.

Day Tripper

DayJet is not intended to drive airlines out of business. It gets its name because it turns overnight trips into day trips within a region that may be a few hundred miles across-the typical sector will be 200-400 mi., says Iacobucci, and he expects that most of DayJet's customers would otherwise drive to their destinations. Unlike an airline, the system will run five days a week with two 8-hr. shifts per day.

Iacobucci started by looking at existing jet charter operations. The best of them were inefficient because it was impossible to guarantee backhaul; the airplane dropped off its passengers and returned empty or sat on the ground. "When you increased the fleet size with smaller dispatchable units, it solved a lot of problems," he says. "There were more solutions for backhaul. But that created incredible complexity." It was like the classic "traveling salesman" problem, an attempt to create the shortest path among a large number of points but raised by two orders of magnitude. Another level of complexity: Government regulations state that any on-demand air service like a jet charter must be negotiated individually between the customer and the operator and that the customer must initiate the negotiation.

DayJet needs about 40 aircraft in the air in a region in order to work, says Iacobucci. The customer will call or enter a requirement: A trip between two points with a desired arrival time and a "no earlier than" departure time. Within 5 sec. the system will respond with a price and a schedule. The challenge is mind-bogglingly complicated. The system, he says, "relies on not making decisions. It runs through millions of options to determine the best plan for the day."
Passengers who accept an earlier departure time will get better rates; their aircraft may pick up or drop off another passenger en route or may just arrive early so as to get to another flight. Passengers who set a tight time window-in effect, demanding a nonstop flight-may pay the entire cost of the leg, so if another passenger can be found, the system is making a clear profit. Every time a customer books a flight, the computer program will reevaluate the entire system to provide the best solution.

There are lots of reasons for developing DayJet within restricted regions. One is that one-stop routings that look very strange can still work within passengers' time constraints if most segments are short. Another is that it keeps the complexity within more-or-less sane bounds. However, Iacobucci expects that service regions will grow and overlap as computer power increases.

The company expects to start operations in mid-2006 after the Eclipse 500 is certificated and delivered. Average fares will be "slightly higher than full coach." He stresses that the service is complementary to airlines. In fact, he suggests some passengers will find that they can meet their travel needs by using DayJet outbound and returning on a scheduled airline.

In fact, if you put the DayJet concept together with Eos's Stansted flights and Lufthansa's Private Jets operation, an interesting picture emerges, one in which premium travelers fly long distances in big jets with big seats and then switch seamlessly to small quasi-private aircraft that take them to small airfields close to their final destinations. It's not the future that everyone expects, but today's world of LCCs isn't what anyone predicted either.