What Is La Compagnie's Business Plan? The Deputy CEO Explains!

I think this is a good analysis. I would also compare fares of the big carriers as well. I get emails all the time from consolidators offering Europe fares that are often quite cheap. And those are real business class products on real airlines.

no mention of the trash bag amenity kit?

I guess "time will tell" is right. Because clearly they've done all of this number-crunching, and more, and they know they're not going to get 3500 on the average ticket.

I wonder what the endgame is.

Your 757 DOCs are waaaay off. Think closer to $8k/hr for DOCs (including m/x reserves) and $10k/hr with overhead and consumables, based on 250 MGH. If they are smart with costs, their numbers can probably be reduced a further 10%.

He is absolutely right that Eos and Maxjet failed due to distribution. The same distribution model that will kill his operation unless he invests in full type-A legacy messaging, BSP membership and inbound/outbound IET capability. Right now, I don't even see them in MITA yet let alone with concurrences. You cannot sell business class without those expensive distribution add-ons. Even then, the market for web sold O&D traffic between New York and Paris simply isn't large enough and he won't even be drawing a significant fraction of it.

Sad to say but I'll give them 6-8 months at most, unless their backers have huge capital reserves they are willing to waste.

Nicely done, Lucky. You asked some very good, insightful questions and I found this to be an interesting read. Right on.

Just why would anyone choose a business class without a lie-flat?

@ Sean M. -- Fascinating, always love your insight! Based on your experience, how much revenue do you think they they would have to generate per flight to break even?

@Drew

because it's cheaper than coach on other airlines? (for now... later, not sure) 😉

@Lucky - Thankfully, I am well qualified to answer any questions about the financial pitfalls of running an airline operating a single 757! 🙂 They will need to generate at least $120-130k/RT to have any chance of surviving. That means average unit roundtrip revenue of ~$2200-2500 at 75% LF in their current config.

Seems simple enough, but can they hit an average 75% LF at those fares? Conventional wisdom says no. The cost side is probably in order, but their revenue projections are probably a bridge too far.

I guess I am not very smart. How in the world can he say his product is not anything like OpenSkies premium econ? Implying his is better, how? Again, I dont claim to have any expertise in this (I have flown OpenSkies though), but to say his product is some how different and better, I dont get it. Your review speaks volumes. My two cents.

I would think that the best way a carrier like this could really distinguish itself is to make all of the pre-boarding process and post-flight less a pain in the butt. I don't know if that's possible out of Newark. Or JFK. Or Laguardia for that matter. Also don't know if you can make post-flight less a pain in the butt if it's a flight requiring you to go through immigration/customs. Also don't know if LGA has customs to make it a relevant option.

But, that's a place to stand out. Make check-in not only quick and efficient, but actually pleasant and enjoyable. It's a very small operation. The check-in/gate agents, who are probably the same people, have only 1 flight to worry about. Make it simple. Make it easy.

Not apples-to-apples, but I had a short, 1-hour flight for work a few weeks ago and did not fly commercially. Though, not on something like a Gulf Stream either. It was some kind of 9-person, single engine propeller plane. Flying commercial would've been more comfortable, but to be able to be airborne within 5 minutes of arrival was amazing. Didn't get frisked, patted down, zapped in a nude photography booth, my possessions didn't get X-rayed. Nothing at all. Walked from the car to the plane and took off.

Clearly, La Compagnie can't get you from your car into the air within 5 minutes. But, I think they can really provide a clear difference on the ground. Since that's the most unpleasant part of the entire experience, that is where you can really make a name for yourself against the huge airlines you're competing with.

They really should get their PR in order. I mean, you've been blogging, tweeting, posting on facebook and whatnot, and only now do they start paying attention. They could have been riding that wave for weeks, and they'd get their messaging through instead of confusion.

Did he at least say that he's going to keep in touch with you?

Wait did you publish your full trip report yet for your flight? I'd think your perspective may be different now that you talked to a Compagnie executive before publishing the full trip report, no?

Lucky,

I think Boeing's fuel cost per gallon number is wrong. Cut that fuel cost in half and you have a much more sustainable business model.

I personally think a bare bones business class product is long overdue. While I love the level of service in current premium travel, it is a luxury that most people/corporations don't need and is a incredible waste of resources, if they're honest with themselves. Private jets have a purpose (time is money), caviar on a business trip does not.

@ Joey -- Nope, haven't published the full report yet, it's coming next week. Don't think my perspective will change, really. I've already shared my major thoughts, and those will be reflected in more detail in the trip report.

I've been trying to figure out a long weekend trip for sometime in August or Sept and this has motivated me to visit Paris with my wife and another couple. 2 tixx for $2011 when the cheapest non-stop in coach is $1623 (AA) or $8275 in biz (Delta) really can't be beat.

Recognize this is unsustainable and that the product doesnt compare to the competition. But that being said anybody who is interested in visiting Paris in 2014 should be taking advantage of this deal.

Thanks!!

@Sean M: "The same distribution model that will kill his operation unless he invests in full type-A legacy messaging, BSP membership and inbound/outbound IET capability. Right now, I don’t even see them in MITA yet let alone with concurrences. You cannot sell business class without those expensive distribution add-ons. Even then, the market for web sold O&D traffic between New York and Paris simply isn’t large enough and he won’t even be drawing a significant fraction of it."

What do all those abbreviations mean? What is "full type-A legacy messaging"? What are concurrences?

@ Alex -- Smart guy!

@snic - To put it as simply as possible, a "new generation" distribution model doesn't work for Business Class travelers. There aren't enough of them who book through channels other than their corporate travel agency using GDS systems with all the bells and whistles. A startup doesn't have leverage to negotiate down GDS fees and the cost of setting up this functionality will easily run into 7 figures and multiple years. They also need interline agreements (concurrences) and onward traffic beyond their gateways to grow traffic. They don't have these and by the time they get them, the cash will probably have run out.

Another pretty obvious issue is that Paris isn't London. NY has a lot of O&D traffic, to be sure, but Paris still isn't a huge business destination, and things can get really dry in the winter (ex Christmas) and the spring (ex spring break). And even at that, as Sean M. says, businesses tend to buy their tickets exclusively through corporate travel agency channels. People who expense their tickets also tend not be very price sensitive. As for leisure travelers, well, let's just say that for the most part they're not going to fly business class at all, even at a discount. It'll be interesting to see how long this lasts. Like, everyone here, I hope they can somehow survive.

From a marketing standpoint, he can call it "business" all he wants. If your hard product is on the bottom end of what's out there, you have an uphill battle.

For the market that he is trying to target, the truth is, there's two types of products: Economy with 30" of pitch, and "not Economy with 30" of pitch." By having an inferior hard product, he's certainly decided that they will only going to play a pricing game. If he prices his fares at "business class" prices, then he'll lose to well informed competition. So, they can market their product however they want; price is going to be king.

i guess their end game is to merge with Monsanto and take over the world.

Sean thanks for the insight! Very entertaining to read.

From I'm reading in all the comments, it seems that La Compagnie won't be able to target the true business travelers. Additionally, what is the business travel market for NYC - Paris route?

However, I do see that this may go for the leisure travelers who want to get to Europe, ideally in biz class, but who will never spend more than $3K on a biz class ticket, and really don't know the difference between "real" business class. I just wonder how big that market is?

If a coach ticket costs around $1,000 to europe, and I can get to Paris on a "biz" class ticket for $1500, I would pay the extra $500 just for the fun. I would probably do this for every european trip I would have. This is doable if you are in NYC. But for everybody else, it gets more complicated.

So I wonder if La Compagnie has plans to partner with other airlines, loyalty programs etc.

Bottom line IMO, it seems that La Compangie is trying to fill in a gap between Economy (or Premium Economy) and "true" Biz Class. Is there a market for that?

While I love the level of service in current premium travel, it is a luxury that most people/corporations don’t need and is a incredible waste of resources, if they’re honest with themselves.

The alternative is to pay their employees vastly more. Two jobs both require IAH to DBX 2x a month both jobs pay $300k. One lets you fly Emirates Business class and the other premium economy. How much more will you have to make up for premium economy?

@John -

Defined benefit plans would still be the primary employee retirement vehicle if your argument held water. If you're running your business properly you are always weighing cost vs. benefit. There is a cap in the value an employer places on an employee, as there is a floor to the value an employee is willing to accept.

If I'm running the company that has employees fly twice monthly long-haul, I would absolutely be interested in saving $50k to $75k a year each by having them fly La Compagnie as opposed to Air France. If an employee puts up a fight, and I value that employee accordingly, I'd pay them an additional $25k to stick around. And if you prefer sitting in a Air France Business Class seat 24 times a year as opposed to a La Compagnie seat and $25k, then you have your priorities out of order.

You don't have to, nor should you, take my word for it. Just look around. What I've said above is the same reason why 1st class is slowly being removed from various airlines and premium economy is slowly being increased. My argument is that a Premium Econ/Biz hybrid, like La Compagnie is not a bad idea, if they can find the right balance.

And if you prefer sitting in a Air France Business Class seat 24 times a year as opposed to a La Compagnie seat and $25k, then you have your priorities out of order.

I already make and have enough money, I don't want an extra $25k a year. I want to be comfortable and be waited on.

Ron,

Are you familiar with the law of diminishing marginal utility? If you're already making 300k or 600k an extra $25k isn't nearly as valuable to you as 32 hours of comfort and luxury per month.

Then you can buy your own ticket. And as an employer of many who fly internationally, I would question where your priorities lie.

Mr. Bingham, is that you?

What I’ve said above is the same reason why 1st class is slowly being removed from various airlines and premium economy is slowly being increased.

But, business class is much nicer than first class was 20 years ago and premium economy on something like Lufthansa is where business class was 20 years ago. They are moving the needle up in terms of premium rather than down.

Then you can buy your own ticket.

Presumably one would take their book of business to a competitor with a more generous travel policy. That's the reason business and first class exists. If companies could get away with having everyone travel in coach, they would. But, they don't. Because, they can't.

I know where I stand financially, and I know I would absolutely take $25k over marginally better comfort and luxury I have no need for.

This is a pointless argument.

As I said, you don't have to take my word for it.

As I said, you don’t have to take my word for it.

Is business class now nicer than first class was 20 years ago?

I totally agree with Cory's comment. In such an industry I think point of differences and point of parity analysis is a must. If your hard product is not on par with competitors then you have to be different somewhere else. He says he's looking to fly small businesses/firms, independent business travellers, etc. in and out of Paris which is obviously not London in terms of business travel. I hope he run a nice quantitative market analysis to say that, because if the only potential market is Paris area and NYC area and you don't offer anything different (who would fly La Compagnie other than NYC and Paris residents?) then there's something wrong. Outstanding ground services and MUCH shorter time between check in and take off could be a good POD but it really doesn't seem they way the want to go, plus I fear market size is simply not there.

The mysterious economics of this operation scream "money laundering."

Their product isn't good enough to compete with genuine J and their projected prices aren't low enough to compete with Y+. They're stuck in an uncomfortable middle.

I work for a large multi-national corporation. Our corporate policy used to allow employees to travel in business class if the segment was longer than 9 hours. Unfortunately that policy has changed and now we must always book in economy at usually the lowest faire. To fly business, I have to call the airline and upgrade myself to the "lowest upgradable faire" and then use miles. Since La Compagnie doesn't have any airline partners, I won't be flying with them for business.

I keep reading all these comments about how their beds aren't flat and who in their right mind would not want to sleep flat? I don't want to sleep flat because I have sleep apnea and sleeping at a small incline, say 30 degrees, solves that. The numbers are something like 20% of adults 18 and up have sleep apnea, and those numbers rise as you get older and fatter. Just picture all your parents and grandparents always falling asleep in their easy chair... Picture all those commercials with adjustable beds... there is a market for that and those are the people who want to sleep in these non-flat beds.