Major airlines are getting new competition from carriers that are placing luxury front and center.
Buoyed by the growing leisure demand for seats in first class and business class—which has Delta, United and American airlines expanding their premium cabins by from 25% to 75%—these new players are finding fresh ways to cut the drudgery out of commercial flying.
Among them, Maldives-based BeOnd is preparing to begin service in the fall with nonstop flights connecting the country’s capital Malé to Dubai, Delhi and a handful of other destinations in the Middle East and Asia. The airline says it will serve seven cities by the end of 2023. The premise: Every seat on the plane will lie flat, and passengers can have luggage portered directly from home to their hotel without having to lug it through the airport.
In some destinations, BeOnd will be able to fly in and out of private terminals, eliminating the need for long security queues; in others, it promises expedited immigration services. Prices will start at around $1,500 one way. The cabins will have seats configured in rows of two, with iPad Pros and wireless headsets replacing traditional back-of-the-seat screens.
Reservations are expected to open this summer after the airline takes delivery of its first plane, an Airbus A321 narrow body jet that has just 68 seats instead of the standard 220. Chief Executive Officer Tero Taskila tells Bloomberg his goal is to expand BeOnd’s route map to Australia and Europe in the first year.
“We really want to make travel hassle free,” says Taskila, adding that BeOnd is not meant for ultra-high-net-worth individuals, most of whom use private jets. “We are looking at people who haven’t been able to find space in first class on other airlines, or cannot afford it because they are a family of four,” he says.
BermudAir similarly aims to better connect Bermuda’s pink-sand coastlines with the US—specifically, Boston; Fort Lauderdale, Florida; and Westchester, New York—with 30 business-class only seats in a leased Embraer E175 aircraft that can normally hold 88 passengers. In its application for a foreign air carrier permit from the US Department of Transportation, BermudAir says it hopes to begin flying as soon as possible. Although prices remain unavailable, seats are likely to be scooped up by those who work in offshore banking, a pillar of Bermuda’s economy.
Already in service is Taiwan-based Starlux Airlines, which began flying its Taipei-Los Angeles route in April on an Airbus 350-900 and on Tuesday announced it is increasing its Taipei-LAX frequency from five flights a week to daily. The self-proclaimed “luxury airline” has distinct cabins—including economy class—but delivers a premium experience with more space and truly high-end finishes, even in more affordable seats.
Starlux’s business model is proven. Its approach is comparable to those of beloved aviation leaders like Singapore Air or Qatar. BeOnd, on the other hand, is rolling the dice on a strategy that has brought little success, says Henry Harteveldt, president and travel industry analyst at San Francisco-based Atmosphere Research Group.
Going back decades at least a half-dozen airlines have attempted to pull off an all-premium-class model and failed, he says, pointing to such flops in the US as MGM Grand Air, Regent Air and SilverJet—all defunct.
“The track record for all-premium airlines is flat-out terrible,” says Harteveldt, who believes it’s going to be very difficult for niche carriers to compete for customers on well-trod routes or to such destinations as Bermuda, where warm weather is limited to a relatively short season. The market tends to end up smaller than airline executives believe it will be, he says.
What makes a luxury airline?
Plenty of airlines offer a premium experience in the sky, but BeOnd and Starlux are extending the customer journey so that it’s not tarmac-to-tarmac but door-to-door. BeOnd airfares include chauffeur service from your home to the airport—you can opt out—and curbside check-in with a concierge who will take your bags and review your documents via iPad.
Starlux, meanwhile, has a partnership with PS, the private luxury terminal at LAX, which offers its own customs and security checkpoint; accessing it ordinarily requires an annual membership of more than $900 a year. Chauffeur service is also included.
Onboard, the two carriers take radically different approaches to luxury aviation. BeOnd’s lie-back seats are by Italian manufacturer Optimares, which typically outfits business jets for the ultra-wealthy. Taskila says the design is “timeless luxury” without the “bling bling.”
It’s a streamlined look that swaps seat screens for iPad Pros and wireless headsets. In a subtle but smart move, each tablet is loaded with content in a customer’s preselected language; parents can also pre-set age-appropriate controls for kids. There’s no such thing as flying coach: Everyone on the plane gets a similar lie-flat seat.
Starlux, by contrast, has four cabins that range from first class down to economy, all designed by BMW Designworks. In business and first class, you can set your seat to “Zero G” mode that’s meant to support your spine; screens are supersized in every cabin, and there are six-way adjustable headrests in coach.
Although this is not radically reimagined flying, it’s a clear step up from the average plane. Thoughtful touches, such as offering pre-departure meal ordering in all cabin classes, demonstrate the potential for airlines to think of themselves as hospitality providers, not just transportation options.
A tricky business model
A notable exception to the past failures of premium airlines is La Compagnie, a boutique airline whose main offering includes 76 lie-flat, business-class only seats on a daily flight from Newark, New Jersey, to Paris-Orly Airport.
“They certainly have a following; there are people who like the product or service and will pay for the value they offer,” Harteveldt says, noting that La Compagnie’s offer fewer daily flights than Air France or United.
La Compagnie’s prices start at $2,400 round-trip, and flights have run twice a day since 2014. It also offers seasonal service from Newark to Nice from $2,350 and six weekly flights from Newark to Milan Malpensa Airport from $2,300. The airline plans to take possession of two additional aircraft by 2026, which may help it expand operations as far as Beijing, Johannesburg or South America, according to Christian Vernet, La Compagnie’s president.
Vernet says the airline reached 75% load factor across all its routes for summer 2022; this summer, his projections range from 75% to 85%. On the whole, its prices are around 20% to 25% less than what legacy carriers offer in business class.
A key difference between La Compagnie and Maldives-based BeOnd is the audience: The former hits a sweet spot with business travelers on an overnight route, while the latter is looking for leisure travelers seeking a premium journey to their luxury vacation destinations. That previously would have worked against BeOnd, but is likelier to resonate in the current climate.
Still, in order to succeed, all-premium carriers such as BeOnd and BermudAir will have to follow La Compagnie’s lead by pricing fares lower than their well-known competitors. BeOnd’s starting $3,000 round-trip fare between Dubai and Malé would be up against Emirates’ $2,880 to $3,309 average roundtrip cost in business class for that route this fall.
As it stands, says Harteveldt, “It’s going to be very difficult for these niche airlines to find enough customers to become profitable.” And to achieve staying power, he adds, they’ll need to clear additional hurdles. The aviation business requires sums of capital exceeding $100 million, excellent customer service and strong enough leadership to navigate staffing shortages and complex operations.
For his part, BeOnd’s Taskila says he is undeterred. For Harteveldt, all competition comes as good news for consumers. After all, he says, “One, or maybe all, of these airlines will force some of the established carriers to up their own games.”
By Lebawit Lily Girma / Bloomberg