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Editor’s Note: Following our previous CEO interview series in online travel, hospitality, and destinations, as well as our recent CMO series across verticals, we’ve launched another series, this time focused on the CEOs of leading airlines outside of the United States.
To better understand the challenges facing airlines in an age of fluctuating oil prices, rapid growth, and changing passenger expectations, our Future of Passenger Experience series will allow leaders in the industry to explain their best practices and insights.
This is the latest interview in the series.
For the founder and CEO of an airline with two aircraft and one route — Paris to Newark —Frantz Yvelin definitely thinks big.
Yvelin founded all-business class airline LaCompagnie two years ago, and though he is only 39, this is his second start-up. The first was L’Avion, which he and his partners sold to British Airways in July 2008 — just before trans-Atlantic business class demand shrunk drastically during the global financial crisis. L’Avion was the only one of the all-premium class airlines of the early 2000s to survive, though it is now called OpenSkies, and its aircraft include a coach cabin.
The other airlines of that era — Eos, MaxJet, and SilverJet — are long gone, and today Yvelin is the only independent entrepreneur trying the model, with La Compagnie flying 74-seat Boeing 757s once or twice per day between Newark and Paris. Until September, La Compagnie also flew from London, but it canceled that route, with Yvelin blaming “uncertainty” caused by the UK’s plans to leave the European Union.
The all-business class model has fallen out of favor for several reasons, but the biggest is probably competition. A decade ago, carriers like Air France, American Airlines and Delta Air Lines had mediocre business class products with angled seats and uninspired catering. Most legacy airlines have invested in their cabins since, leaving less room for an upstart to offer a better product. And in many cases, legacy carriers have more aggressively priced business class, making it challenging for an upstart to undercut a larger airline on fares. La Compagnie is able to charge lower fares than legacy carriers, but it does so in part because it has a less luxurious seat than most of its competitors.
Still, Yvelin has high hopes for the model, arguing it can work between New York and several cities in Europe, including Frankfurt, Geneva, Milan and Rome. Eventually, he said, all-business class might even thrive between Paris and Asia. But that sort of growth is not imminent, and it would require La Compagnie to add aircraft. So far, La Compagnie has no orders for new planes, though Yvelin said he hopes to find financing for growth soon.
We spoke with Yvelin in New York in late September to learn more about La Compagnie’s model and its plans for the future. This is the seventh in a series of airline CEO interviews we plan for the next several months.
Note: This interview has been edited for length and clarity.
Skift: You pulled out of London’s Luton Airport in September. Why didn’t London to Newark work?
Frantz Yvelin: London did work. We were at 77 or 78 percent load factor over the past four months. But on the 24th of June, the British people decided to leave the European Union. This is what has been called by media as Brexit. I respect the choice of the British people. I don’t think it is necessarily a good one, but it is their choice. Now, in our case, we needed to decide whether to keep investing in a market in which we are not absolutely certain where we could stay beyond two years. We are now benefiting from an open skies agreement signed between Europe and the USA. With all that in mind, that creates a mass of uncertainty, and a lack of visibility. It is impacting the entire sector.
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.
Skift: You’re adding a second trip on some days from Paris, but you still have only one route Newark— Paris. What are your short-term growth plans?
Yvelin: First of all, I am concentrating on increasing the Paris frequency. That is what is occupying all of my time. What I can say is La Compagnie is still on the path to keep growing. That will happen.
Skift: What routes might you launch?
Yvelin: We have other routes from New York to Europe in mind — cities other than Paris. We might also add other routes from Paris to the U.S. And from Paris, at some point I believe we will be heading eastbound as well, to Asia. But that’s not going to happen tomorrow.
La Compagnie is still only two years old. We are still starting. We succeeded on the Paris route where everybody was saying, ‘they won’t.’ And we are, with 85 percent load factor. The Parisian service is a success from New York.
Skift: Would you go back to London?
Yvelin: Within two years, we hope that Brexit will settle, and if as soon as it settles, we will be more than happy to keep investing in Great Britain. That is a market in which we do believe.
Skift: London and Paris are by far the most premium-heavy European markets, so it makes sense for an all-business class airline to connect them with New York. But there are there other European cities where all-business class can work?
Yvelin: Yes, there are. Not all of them. Let’s be very clear on that. But [from New York] there are at least two points in Italy that make sense. There is at least one other point in France which makes sense. There is at least one if not two points in Germany which make sense. There is probably one point in Spain which would make sense. So from New York to Europe, we know we have development opportunity ahead of us. It is not making us stressed at all.
The product itself cannot be duplicated everywhere. It would be nonsense for us to fly to the Middle East, for example. It would be nonsense for us to operate on flights less than four hours. Do you see any corporations paying for business class on flights less than four hours? No.
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. So we will at some point take a deeper look at Asian development. But we have to be careful.
Skift: Can you share specifics of what New York to Europe markets could work in a few years?
Yvelin: It is very difficult to tell you where we will fly five years from now. I don’t know. 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.
Skift: Your first attempt at trans-Atlantic all-business class service, L’Avion, was the only niche airline of the early 2000s to survive in any form. It is now called OpenSkies, and it still flies between Paris and New York, though it is no longer an all-business class airline. Do you view them as a competitor?
Yvelin: I cannot comment that much to what OpenSkies is doing. They are a generalist player with three classes on board — you have coach, you have premium economy and you have business. That’s not something that we do. We are a specialist. We only do business. All I can say related to that deal is that L’Avion was funded with 52 million euros back in 2006 and 2007. It was sold in 2008 for 78 million euros. I show respect to British Airways. When they purchased L’Avion they said they would do plenty of things. They have done some. They have not done some others. It is their choice. But they kept most of the stuff. I think they are doing what they know. And what they know is how to do a legacy product with a generalist philosophy. That’s not something we do.
Skift: What’s the target passenger market for La Compagnie?
Yvelin: 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.
Skift: But your product is not as nice as some competitors offer. Your seats do not go fully flat, and not all passengers have easy access to the aisle. Is that a problem?
Yvelin: We do not pretend to do the best one. But we do one of the best over the Atlantic. And something is for sure — we sell it two to three times cheaper.
And when you board a La Compagnie plane, you don’t have to wait for the coach class to board. When you de-board the plane — when you arrive in Newark — you don’t have to manage to deal with all those 200 other passengers to go through immigration, or get your bags. You cannot have more than 73 other passengers traveling with you. That’s not the case with United. That’s not the case with Delta. That’s not the case with American. That’s not the case with British Airways, Air France, etc.
Skift: Your seats are so close to being fully flat. Why didn’t you just install a true flatbed?
Yvelin: First of all our beds are 180 degrees. That being said, they are not horizontal. They have a slight angle. 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.
Our model is not to provide the best business class seat in the world. Our model is to provide the best value for business class in the world. That’s what we do, and 97 percent of our customers are very satisfied with what we are providing them on a daily basis over the Atlantic — even if that is not totally horizontal.
Skift: How else do you keep your costs in line?
Yvelin: We have only one product on board, from the first row to the last row. If you take any Air France airplane, you have on the long haul four classes of service — first, business, premium economy and coach. In coach, you can even have the cheaper coach seat — because it’s the middle of the row — or you can have the coach that’s more expensive because it’s close to an exit. Or you pay more for a window seat. It starts to be ridiculous.
At La Compagnie we have one product. We make it simple. There’s one service, from the first row to the last row. Everybody has fast track [security]. Everybody has access to the lounge. Everybody has the choice between the same meals. Everybody has the same wine or the same champagne. We keep it simple. We only do that. We focus at what we do best. We only provide a business class product for a limited number of passengers.
We bring to the long-haul business class the very same thing that Southwest or EasyJet brought 35 and 20 years ago to the short-and medium-haul coach class service.
Skift: When you started L’Avion, your competition had not yet invested in their onboard products. Flat-beds were a novelty then. Is it more difficult to compete with legacy carriers now? Many have better products than you.
Yvelin: They were in a situation where they had no choice. They had to improve their product. Yes, at some point, we have seen their products getting better. The new Air France business class is a good example. I think it’s a good product. But you do not have it on the Airbus A380. You don’t have it on one airplane out of two out of JFK. But even if you would have it, are you ready to pay $8,000 or $7,000 or $6,000, when you can fly with us for $1,400? That’s the question you have to ask yourself.
We have a $1,400 all-in business class fare between New York and Paris. We are typically two to three times cheaper than the legacy carriers. Most of our passengers, when they fly with us, they do it clearly to spend less than they what they would spend with the others. They are quite happy spending their money wisely with us.
Skift: Air France discounts its tickets sometimes, too. You can find tickets next spring and summer from New York to Paris for less than $2,500, or from Paris to New York for slightly less.
Yvelin: Yes, even 2,000 euros sometimes [from Paris]. But good luck if you want to find that 2,000 euro ticket on Air France. You can find it, in August, when there is really nobody in the front of the plane. But even when they propose their 2,000 euro tickets, we still have 50 percent cheaper ones.
Yvelin: There’s so much trans-Atlantic competition. Why are you so convinced this model can work?
There is one figure that convinced me to get into the business. If you take the trans-Atlantic market, and you take the business class passengers, do you know the percentage of passengers they represent? About 15 percent. Do you know the percentage of revenue they represent for the airlines? [About] 50 percent. That means that is where the airlines are making their money. So enough is enough. The party is over. We are giving back to the people the capability to spend their dollars at the hotel, or to go to clubs in New York or Paris, or to buy shoes for their girlfriends or boyfriends.
Skift: You said you’re looking at new aircraft. Which ones?
Yvelin: We are looking at the A321neo, not necessarily the [long-range version]. Our planes are very light so we don’t need the auxiliary fuel tank option [that the long-range version has]. We only fly 70-plus passengers on board, which would still be the case with the A321neo.
We are also looking at the 737 MAX 9. It’s a little bit cheaper than the 321neo. It’s a little bit better in terms of performance. But it is not as good as the A321neo in terms of cabin. If you take all the economics, both airplanes are very close.
If Boeing is finally making a 737 MAX 10 — and we know they are working on it — then that may actually be interesting. But for now we are evaluating the two options, which are the 321neo and the 737 MAX 9, and we will see what will happen.
We would also welcome Boeing’s decision to actually develop a real replacement to the 757. This airplane is the most efficient single aisle airplane in the world. We are a proud Boeing 757 operator.
The last airplane we would be interested in — but this would be at a much later stage — would be the [Airbus] A330-200 or the 330neo that will come as its replacement, and the [Boeing] 787-8. But that would be to fly farther, not necessarily to operate the nine or 10 hours across the Atlantic. Those would be the airplanes for Asia or the West Coast of the U.S.
Skift: How would you afford new planes?
Yvelin: I can’t tell you too much but I can tell you we have been working at how we can finance the new generation of airplanes. We have found some interesting offers. I hope we will be in a position to commit to one or the other in the future.
Skift: What about just adding a couple more used Boeing 757s for short-term growth?
Yvelin: Before Brexit, my answer would have been yes. We had plans to add [some] 757s that we liked, and were in pretty good shape. Before Brexit, we were on target, somewhere around the first quarter 2017, to add a third airplane to the fleet, so we could double Paris. That was in the plans. Since we have suspended operations into London until Brexit settles, there is now one question for us, which is, do we still commit to another 757? Or do we wait for the new generation of airplane in two years? We are still working on that at the moment. We want to grow, but we want to grow in a smart way.
Skift: A few months ago, you said you would sell 10 all-you-can-fly passes. For $35,000, a passenger would get unlimited flights for a year. How many did you sell? And why did you do it?
Yvelin: 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.
We had a lot of discussions internally about it. My team said, ‘we should be doing that.’ and I said, ‘We don’t want to be doing that.’ It’s a nightmare in terms of complexity of managing it, and in terms of booking and the taxes, and who is going to pay. But at La Compagnie we do enjoy what is a breakthrough. So we said, ‘OK, let’s do it. But we’ll just do a few.’
Skift: Will you lose money on the promotion?
Yvelin: It depends on how much they fly. It’s too early to tell. I will tell you in nine or 10 months from now. The passengers who are using them are very happy with it.