Unbelievable: La Compagnie & XL Airways Are Merging

Filed Under: La Compagnie, Other Airlines

In late October I wrote about how French all-business class airline La Compagnie was apparently in merger talks with French low cost airline XL Airways. Well, it’s actually happening — an all business class low cost carrier is merging with an all economy class low cost carrier, for an undisclosed amount.


For a bit of context, La Compagnie has two 757s, while XL Airways has five A330s and one 737.

Per Business Insider, here’s what we know about the deal:

The two Paris-based airlines will form the new XL Airways-La Compagnie Group and will continue to specialize in low-cost, international, long-haul service.

The newly merged company will be led by XL Airways CEO Laurent Magnin while La Compagnie founder Frantz Yvelin has resigned from his post and will not participate in the newly merged venture.

The new XL Airways-La Compagnie Group will be better-positioned to capitalize on the cost advantages of a larger operation. This is especially the case for La Compagnie, which operates only two aircraft.

The combined company is expected to boast 800 employees and €400 million ($425 million) in annual revenue.

While a larger operation can in theory lead to cost savings, it doesn’t change the fact that the two airlines are running very different business models, so I’m not really sure where these synergies are coming from.

What does this mean for La Compagnie and XL Airways?

I suspect not very much. Chances are that the airlines will continue to operate with their current business models. I doubt La Compagnie is suddenly going all economy, and I doubt XL Airways is suddenly going all business class. I also doubt this is going to lead to some rapid expansion.


I suppose in the long term it’s possible that they take a hybrid approach, and start offering both cabins on all their planes, but that also eliminates the unique value proposition of La Compagnie.

I do have to wonder what’s in it for XL Airways, and what they’re hoping to get out of La Compagnie. Did they not get the memo that no all business class airline has ever succeeded long term?

But that’s not the real takeaway here…

La Compagnie’s CEO is a (lucky?) genius

This is really the most fascinating part of the story. La Compagnie’s CEO, Frantz Yvelin, started an all business class in early 2007, called L’Avion. It did basically the same thing that La Compagnie is doing now. Presumably L’Avion never turned a profit either, but they really lucked out when they managed to sell to British Airways in July 2008, so they could expand their OpenSkies division.


The airline sold for ~$107 million, which isn’t bad for an airline that was around for just a bit over a year and didn’t turn a profit.

So Frantz Yvelin started an airline, sold it to their biggest competitor, and then started (basically) the same airline over again.

I assumed that this time around he actually hoped to turn a profit, because he couldn’t possibly expect to sell again, could he? British Airways wouldn’t buy the airline again, and who else really has a reason to buy a struggling airline with a business model that has never before worked?

La Compagnie hasn’t turned a profit so far, and with them having recently discontinued their London route, I had even more questions about their future.

But I think now his strategy is pretty clear, and I don’t know whether he’s simply a genius or just crazy and very lucky. But it seems pretty clear that he was looking to have La Compagnie acquired again, as the business model independently has never worked.

This is just so crazy.

Maybe he’ll start the same airline for a third time now, and hope to be acquired again?

Congrats to Frantz Yvelin. I thought his all business class business model would never work. I still think that’s true, though what has changed is that the way he planned on making money was never by running a profitable airline.

Well played, well played!

What do you make of XL Airways and La Compagnie merging?

(Tip of the hat to View from the Wing)

  1. I mean this in the nicest way possible, because I love your site, blog, and product insights….but sometimes you don’t seem to have the best business acumen. Buying out a competitor when that competitor is taking market share from a you for a short period of time can make more sense than waiting for the competitor to go out of business–you don’t have to be turning a profit to be valuable in an acquisition. If you’re BA, and you are going to take a $100M hit anyway (hell even a lower hit than that), you might as well get some assets out of it and buy out instead of just realizing a loss in revenue. This happens in many other industries all the time, not sure why you are so shocked.

    Anyway, like you said, should be interesting to see what they do moving forward. Appreciate you sharing this and other things, as always!

  2. I haven’t followed transatlantic premium airfares since my JFK-LHR travel dropped off a few years ago. I know JetBlue’s mint has pushed the “Big 3” to lower their transcon business prices. Has La Compagnie had a similar effect on TATL prices?

  3. Lucky,

    I have to agree with shgroamer 🙂 All good though. I enjoy your blog. Read it every day.

    Companies usually have three outcomes: lifestyle (mom&pop stores, boutique consulting, etc), billion dollar IPOs or they grow to a point that they get acquired.

    I don’t know the airline industry but I can imagine that an airline is not in the lifestyle business. I doubt that we will see another airline starting from scratch and becoming one of the big guys. Therefore, it was kind of obvious that this airline was going to get acquired from the get-go.

    Company A acquires company B because what B offers (IP, market share, etc) can empower/improve/grow company A (so it can become a billion dollar company).

    So not surprised. It was expected

  4. I am afraid Lucky I am another one who has to say that your post shows you don’t really understand how businesses work and an acquisition process (your VX/AS articles are another example). Sometimes I do wish your blog just concentrated on what you are good at- earning miles and trip reports. Rob at Head for Points has it right- and he is someone who was involved in private equity for a number of years and therefore understands an acquisition process and yet doesn’t comment.

  5. @ shgroamer — Maybe I didn’t explain myself well, but I think we’re saying the same thing. If BA was committed to keeping OpenSkies around, then I see the merit to them buying out L’Avion. However, did they bring back the same concept again with the intent of BA buying them again? Or where are the synergies in XL Airways taking them over?

  6. It’s Lucky’s opinion on the acquisition, hence it’s a blog. If you are looking for a thorough review on M&A might as well go to Bloomberg or the Economist.

  7. I see what you’re saying…It’s not only about concept, it’s about market share. Bottom line is an all premium airline took market share from BA (not only their openskies concept or an all premium brand). That’s (yes, a concept) coming in and disrupting a large airline’s overall market. Buy out makes sense there and you see this all the time and profit has nothing to do with it. That was my main point. And yes, he probably started it again with the intent of scaling and selling (to BA? maybe, but probably not). This is not shocking at all.

    With the XL situation, I’m sure a mutually positive deal was struck but motives will remain to be seen as we see their “new” go forward market strategies (maybe they’re already clear and I don’t know them because I honestly know little about XL). They could just be acquiring assets to get gobbled up as well.

    Thanks for the reply! Can you pleeeease review SQ’s a350 J SFO-SIN. I know it’s not in line with what you’re doing as of late and going after less known carriers, but selfishly, I’m flying it in June 🙂

  8. @Shgroamer

    I sometimes wonder if I am the odd man out. My wife loves to go to ‘rotten-tomatoes’ BEFORE she sees a movie. I do not want to know anything so that I can have a full experience without any expectations.

    If you are already booked on an SQ flight you already ‘know’ that it will be better than most other carriers on the same route. Why would you care what Lucky says? If he gets Krug and you only get Cooks then you will definitely be disappointed ;-). However if it is the reverse won’t it be better?

    Have a great flight.

  9. At the very least, XL get landing slots? Which these days go for a few million a pop and I imagine have a bunch of red tape associated. buying the airline with these slots must be an easier route. So there’s one reason that doesn’t necessarily involve ‘synergies’

  10. @alan maybe we are just different, but 50% of it for me is getting excited about a trip and planning it. That includes reading trip reports and I happen to enjoy Lucky’s. I’ve been doing it this way for many of my trips lately and I enjoy it.

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