La Compagnie’s Growth Strategy Is All Over The Place

La Compagnie is the fascinating all business class transatlantic airline that started flying in mid-2014. Their first route was between Paris and Newark, and I was able to review that flight within days of when they launched operations. Last summer La Compagnie launched flights between Newark and London as well.

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In March La Compagnie claimed they were breaking even on their Paris route, and were still “ramping up” on their London route (in other words, they weren’t yet breaking even).

Well, early last month La Compagnie announced that they’d be discontinuing their flight between New York and London because of Brexit. Then La Compagnie announced that they’d instead add a second daily flight between New York and Paris. That’s a questionable move, given that they were apparently already only breaking even on the route. By doubling capacity without a corresponding increase in demand, they’re undoubtedly going to lower their yields.

There’s one thing that’s for sure, in my opinion: Brexit or not, if La Compagnie can’t make the New York to London route work, there’s not any other transatlantic market that they could make work either.

Brian Sumers of Skift published a fascinating interview he had with La Compagnie’s CEO. While it’s clear that the CEO is a bright guy, I’m kind of in disbelief about how scattered his growth strategy is. If you have the time I’d recommend reading the article. Below I’ll share what I consider to be some of the highlights.

Why did La Compagnie pull out of London?

Supposedly London “did work,” but they pulled the route because of future uncertainty:

London did work. We were at 77 or 78 percent load factor over the past four months.

We did a deep analysis of every single point, and our conclusion was very clear. We do believe in the British market. We believe in London. But the main problem is that I cannot keep investing into an environment in which I am not sure I will have a place within two years. Clearly, Brexit was not in business plan.

In what other markets could La Compagnie operate?

The CEO makes clear that increasing frequencies between New York and Paris is his top priority. However, after that, the area where he sees opportunities for an all business class airline are a bit puzzling:

I can give you perspective because there are markets that are so strong today that we know they can work — London, Paris, Geneva, Milan, Rome, Frankfurt. That’s really clear. But some other cities may become attractive. Bordeaux is not served from America. If you want to go to Bordeaux from New York, you have to go through Paris or London or through Madrid. I think there is still not a market for daily service between New York and Bordeaux but at some point maybe there will be room, if only two or three times per week. Those are the things we are going to look at.

From Paris, hitting the [U.S.] West Coast at some point is something we could do. Hitting some other North American destinations is something we could look at in the future as well. And we cannot stay away from the strong growth in Asia forever.

In other words:

Who are La Compagnie’s customers?

The airline thinks their customer base consists 40% of people who flew economy before, and now they spend an extra few hundred dollars to fly business class, while the other 60% of people flew business class before, and now save money by flying La Compagnie:

La Compagnie is addressing a population of business travelers traveling already in business class and of coach travelers willing to pay a bit more to upgrade themselves into business class. About 40 percent of our passengers were not traveling in business before La Compagnie. They were traveling coach. For a few hundred dollars more, they can get a bed and travel much more comfortable. So they travel with us.

Then you have 60 percent of our customers. They used to travel business class before. And with La Compagnie they spend an average of $2,000 to 2,500 per person less. So you have the two types of customers making up the customer base.

Why doesn’t La Compagnie have fully flat seats?

I really think La Compagnie made a mistake by not installing fully flat beds. I get that they’re a low cost carrier, but the simple reality is that they’re not running a 100% load factor, and they could easily charge higher fares if they had fully flat beds. I suspect the real reason is because buying fully flat seats would have been significantly more expensive than the angled seats they got on the secondhand market. However, here’s their explanation:

We did it for an easy reason — to put a little bit more seats in the plane and to keep our prices low. Now with the new generation of airplanes we are looking at and which we commit to over the next months, the seats we are looking at for the future will be horizontal. The technology has evolved. That’s something we are very happy with.

Suggesting that “the technology has evolved” in the two years they’ve been in business seems like a bit of a stretch…

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Did La Compagnie sell their “all you can jet” passes?

A couple of months ago La Compagnie tried to sell “all you can jet passes” for a year, which cost $35,000. I’ve been wondering if they sold these, so here’s what the airline’s CEO has to say:

We sold a few. I was surprised to sell those passes. I cannot disclose any particular numbers but we sold most of them. Not the 10, but most of them.

I do wish they had asked a follow-up question about what happened with these passes when La Compagnie cut their London route.

Bottom line

It’s clear that La Compagnie is taking a more modest growth strategy than they initially planned to. Even so, I can’t imagine them increasing service between New York and Paris will end well for them, as it will likely lead to lower load factors and worse yields.

I still can’t really wrap my head around the markets where the CEO sees growth potential, though. New York to London and New York to Paris are the two transatlantic markets that are most premium heavy. Could an all business class airline really thrive to Frankfurt, Bordeaux, Rome, Milan, etc.? After all, an all business class airline can only hope to capture a small percentage of the overall market share.

I’ll be curious to see what this airline looks like in a couple of years… if it’s still around.

Comments

  1. One of the main reasons their London route never reached high loads was because they chose Luton as their base. Business travellers don’t want to travel to Luton. It’s as simple as that. Leisure pax paying for what is essentially a Y+ product also don’t want to travel to Luton. They should have stumped up the extra landing fees and got a slot at Gatwick. Pax could bare an extra, say $50 per ticket if the flight left and arrived at Gatwick rather than Luton.
    One thing I have NEVER understood about this airline is if they are never expecting to reach 100% loads with 74 angled flat seats of 62” each (so 1240” in 19.5 rows of 2-2), why not install fully-flat seats that take up a bit more room and just have a few rows less? Looking at BA’s all-Business fully-flat 2-2 A318 seats as a comparison, they take up 72” each. They could (just) fit 17.5 rows of fully flat BA seats, so, 2 rows less than now, so 8 seats less. 8 seats removed is 10.8% of the current load factor, meaning at their current 85% load factor on Paris routes, they could have fully-flat seats and STILL have seats empty!

  2. As Ben sait honestly I think Luton was the reason London – New York didn’t work. It’s just so far out, it’s far from practical for the business class traveller. The reason it works with Paris is they fly out of CDG, if thet flew out of Beauvais Airport I’m pretty sure their load factors would be quiet different.
    I really hope they come around and get their new plane with new full flat seats, because for the niche spot they are trying to fill in, they have potential yet they dont seem to be sticking to what works…

  3. “they could easily charge higher fares if they had fully flat beds”

    I – someone who has actually bought tickets on La Compagnie – would not pay higher fares for flat bed seats. The whole point of their product is to make business class affordable. For a 7 or 8 hour flight, I don’t need a flat bed seat and would probably just fly economy of La Compagnie got any more expensive than it is (roughly $1600 rt, or $1400 on sale).

  4. Was at EWR the other day and happened to pass by their gate. Looked like a mix of families and business types. I see them advertising all over the place these days (maybe i’m just getting targeted from reading your blog) and if i were to go to Paris I would highly consider them. While their business model may be tough, I think there is a market for this J- class (hate to call it Y+ since it beats most Y+ i’ve seen/flown) and market segmentation is alwaysa good thing

  5. It most definitely beats Y+. The best Y+ I’ve flown is Turkish, and that was pretty miserable for a 12 hr flight. The seat reclines a bit more then in regular Y, but not enough to really be comfortable. The La Compagnie seat, on the other hand, is more like a Barcalounger – actually better, because it reclines even farther.

  6. I don’t know, maybe it would be better if they flew more US-CDG rather than EWR-Europe routes which could get them in a Norwegian type of situation….

  7. As someone who used them frequently i miss the U.K. route. It was hardly 50% full on any flight I took. The Luton airport was perfect as I travel north so it shaved an hour + off driving and could be out of the airport in 15 mins.
    Newark is much worse an airport than Luton. Maybe Manchester/Leeds would have been a better airport to capture those willing to shell out more particularly families (unfortunately). Another option would be to make it adult-only, there’s definitely a market for child-avoiding flights!

  8. So, the CEO cannot disclose the exact number of passes sold, but it’s “most of them” but not 10.

    So, it’s 6,7,8, or 9, and revealing the exact number is so propietary that it can’t possibly be shared.

    Right, because United (revenue $38 Billion) and AA (revenue $41 billion) are doing all they can to find out which side of $100 k the company got for the passes.

  9. I’m looking forward to flying with them in the near future but I have no idea when. I’m based in Australia so if a Asia to Europe trip was available I’d go.

    Lie-flat seats… on a longer 10+ plus flight yes, pre AF J class update had the angle seats… they were OK but once you’ve flown flat (SQ/VAus/EY) it’s much preferred on a longer 12-14 hour flight.

  10. Best Y+ in my opinion is CX, and this looks miles ahead of that. Without having flown La Compagnie, there product looks more like a J- than a Y+.

  11. It’s a J- that, 10-15 years ago, would have been J, and 20-25 years ago would have been J++.

    I was really quite pleased with it, which is why I’m fanboying away here, but realistically I doubt their business model is the slightest bit viable. I give them another year max – less if oil prices spike.

  12. There’s a premium/business travel market for NYC-GVA given the heavy UN and banking presence in both places, so that may actually be a viable strategy.

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