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Will Boutique Airline La Compagnie be Profitable?

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compagnieWhere Eos, MAXjet, and Silverjet have failed, co-founders Frantz Yvelin and Peter Luethi hope their new business-class-only airline, La Compagnie, will succeed with daily flights between Newark Airport and Paris Charles De Gaulle.

Yvelin and Luethi bring an extensive amount of expertise to the competitive industry. Yvelin founded L’Avion, a New York City-to-Paris business class airline, which he successfully sold to British Airways for 54 million pounds in 2008. Similarly, Peter Luethi previously served as the Chief Operating Officer for Jet Airways.

Both have high hopes for the new venture, as Luethi declares, “it’s the right time to introduce a new sole-business-class operation over the Atlantic.”

The Plan

Tickets are currently on sale in France and will go on sale in the United States starting on July 1. Flyers will be able to choose from five round-trip flights a week at three different round-trip airfares: the fully-flexible option at $4,600, mid-tier option at $4,200, and the restricted option at $1,800.

The new airline has plans to expand operations to seven days per week, and they will have a second aircraft in December.

The Perks

The aircraft will have 74 seats, two on each side of the main aisle. The seats will be 26 inches wide—which is 9 inches wider than the seats in coach—and will allow flyers to recline during their flight. Flyers will also receive a Samsung Galaxy Pro 12-inch tablet, with USB ports and power outlets, and a small refreshing kit by Caudalie, with lip balm, face cream, and eye cream. The aircraft will also have at least three flight attendants who are fluent in international languages.

Before the flight, passengers will have access to Transportation Security Administration (TSA) priority screening and are allowed two free checked bags. Any sporting equipment like golf clubs or skis will also be checked for free.

Will the new airline be profitable?

There is reason for concern, however. La Compagnie faces stiff competition from other airlines, especially British Airways’ OpenSkies. The airline poses a real threat with flights between New York and Paris starting at $1,120, a significant discount compared to Compagnies’s current pricing plan. In addition, larger airlines can boast greater resilience to price shocks and loyal customers due to their frequent flyer packages.

Needless to say, the high costs and competition also make it difficult to create a fruitful airline. For instance, Virgin America had its first profitable year in 2013, six years after launching.

Additionally, while the International Air Transport Association (IATA) has an overall positive financial outlook for 2014, they still retain reservations about the industry. In fact, the IATA suggests a net profit of about $5.94 per passenger in 2014 and affirms “competition remains intense and industry-wide average yields are expected to fall by 0.6 percent in 2014.”

Likewise, PricewaterhouseCoopers determines the recent merger of American Airlines and US Airways enables the largest four airlines and their regional partners to control more than 80 percent of US commercial airline traffic.

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By Justin Shamtoob with Siena Mazero for PeterGreenberg.com

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