Fears for business-class airlines as MAXjet files for bankruptcy

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The Independent Online

When MAXjet filed for bankruptcy this week, few were surprised. Indeed, as soon as the business class-only airline took to the skies two years ago, analysts began predicting the demise of it or of one of its direct competitors, SilverJet or the more high-end Eos Airlines.

Now that MAXjet's fleet of five 767s has been grounded, the question has turned to whether it will be just the first of other crash landings of these upstarts which, with a fraction of the funding or the fleets of the big boys, have decided to take them on in the cut-throat competition for business and first-class trans-atlantic passengers.

The passenger segment they are targeting is where heavyweights British Airways and Virgin Atlantic make most of their profits and is the subject of fierce competition. The environment is set to become even more difficult when the "open skies" agreement that opens the route to other carriers comes into effect next spring. Add that to the rising cost of jet fuel it increased 50 per cent over the past year and worries about a drop in spending by corporate customers amid the deepening credit crunch, and there is a nagging sense that MAXjet won't be the last to hit turbulence.

"The prognosis was never good for business class-only carriers," said an industry analyst. "The big carriers are making the bulk of their profits on North Atlantic premium traffic, and they don't like that being attacked. If they decide to crush you, there is not much stopping them. They just lower their fares."

Indeed, Delta Airlines recently launched a London to New York-return business-class fare for just under £2,000, significantly reducing the fare gap.

Yet no sooner had MAXjet announced its demise than its rivals rushed out statements to assure the market that, for them, things were going swimmingly. SilverJet, which recently launched a Dubai service on top of its London to New York route, said its passenger numbers "continue to exceed expectations and forward bookings remain strong", while Eos said it was "buoyant about the future", du e to rising demand.

In favour of the upstarts are price and convenience. SilverJet and Eos offer beds and faster check-in for what is still as little as a third of the price of similar offerings from the larger carriers. Eos, which only operates between New York and London, is aiming for the cream of the market, refitting 757 jumbo jets with just 48 seats and pampering passengers with cashmere blankets and Taittinger champagne.

Yet size is a problem. Silverjet has a fleet of just three 767s, while Eos operates four 757s, meaning services are less frequent and much more vulnerable to mechanical failures or other unforeseen problems.

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