Two airlines that are entering the market with new business models are La Compagnie and WOW. They are different in their strategy, but effective in their way of expanding and offering lower cost for different markets. La Compagnie will use 757 in an all business class model to provide cheaper business class to more travelers, and WOW will offer ULCC model which will allow all coach travelers to travel for much reduced cost. Both are oceanic carriers that will give the big three, united, American, and Delta a run for their money. They are able to do this via reduced staff, outsourced labor, and information technology.
“La Compagnie, Yvelin’s new carrier, runs 74-seat, all-business-class 757s between New York City and Paris, charging about $2,000 round-trip vs. $5,000 to $11,000 for the same seat on a larger carrier.”
“Iceland-based WOW Air is trying to make that concept fly in the transatlantic market, albeit with a higher level of service. “The rise of the ULCC has been very successful when you look at Europe and the U.S.”
La Compagnie is a company with one aircraft (757) and with only one approved route from Paris to Newark. They have a good model, but they need to be able to scale. This growth is essential to have a profitable business plan, because all of their eggs are in this one 757’s basket and any down time will result in lost profit, which is unlike delta where they have many spare planes to replace planes on routes.
WOW is much bigger with 6 aircraft and 17 destinations that’s headquartered in Iceland. The destinations are throughout Europe and has a low staff of 170 and has plans to expand. With the ordering of 320 and 321neo this is an aggressive strategy with plans to increase from 90k to 450k to 720k passengers by the end of 2014.
WOW has the better business plan based on growth, but La Compagnie has the ability to grow faster if the usage rate is high because it’s geared to higher paying passengers and therefor would not need to add as many aircraft as WOW based on their market demographic. Both offer reduced prices for their respective market, and one has a faster growth strategy in the short term, so I would pick WOW as the winner in the short term, but if La Compagnie has success then they could make more profit in the midterm.
Globally air travel is turning into a commodity and that scares the shareholders of American airline companies. Commodity pricing and service reduce profits and this isn't just a trend in airlines, but in manufacturing, servicing, and maintenance. All the categories are betting outsourced because it’s cheaper. The airlines started the outsourcing in the beginning with regional's to reduce prices and increase routes via unprofitable routes in the US and are now seeing this trend come to oceanic routes and they do not like this because it was the last frontier of high profit economic routes. Competition reduces profits and increases benefits to the consumer that’s why WOW is increasing growth plans and the big three are opposing such carriers. I see that in the future their will continue to be more entrants and more competition and even more aircraft with different design and business models that will saturate routes and turn travel into a commodity.
http://wowair.u
https://www.lacompagnie.com/en/
“La Compagnie, Yvelin’s new carrier, runs 74-seat, all-business-class 757s between New York City and Paris, charging about $2,000 round-trip vs. $5,000 to $11,000 for the same seat on a larger carrier.”
“Iceland-based WOW Air is trying to make that concept fly in the transatlantic market, albeit with a higher level of service. “The rise of the ULCC has been very successful when you look at Europe and the U.S.”
La Compagnie is a company with one aircraft (757) and with only one approved route from Paris to Newark. They have a good model, but they need to be able to scale. This growth is essential to have a profitable business plan, because all of their eggs are in this one 757’s basket and any down time will result in lost profit, which is unlike delta where they have many spare planes to replace planes on routes.
WOW is much bigger with 6 aircraft and 17 destinations that’s headquartered in Iceland. The destinations are throughout Europe and has a low staff of 170 and has plans to expand. With the ordering of 320 and 321neo this is an aggressive strategy with plans to increase from 90k to 450k to 720k passengers by the end of 2014.
WOW has the better business plan based on growth, but La Compagnie has the ability to grow faster if the usage rate is high because it’s geared to higher paying passengers and therefor would not need to add as many aircraft as WOW based on their market demographic. Both offer reduced prices for their respective market, and one has a faster growth strategy in the short term, so I would pick WOW as the winner in the short term, but if La Compagnie has success then they could make more profit in the midterm.
Globally air travel is turning into a commodity and that scares the shareholders of American airline companies. Commodity pricing and service reduce profits and this isn't just a trend in airlines, but in manufacturing, servicing, and maintenance. All the categories are betting outsourced because it’s cheaper. The airlines started the outsourcing in the beginning with regional's to reduce prices and increase routes via unprofitable routes in the US and are now seeing this trend come to oceanic routes and they do not like this because it was the last frontier of high profit economic routes. Competition reduces profits and increases benefits to the consumer that’s why WOW is increasing growth plans and the big three are opposing such carriers. I see that in the future their will continue to be more entrants and more competition and even more aircraft with different design and business models that will saturate routes and turn travel into a commodity.
http://wowair.u
https://www.lacompagnie.com/en/
I agree that La Compagnie’s one aircraft is a problem. I can’t believe they only have one aircraft. They will definitely need to expand their fleet and their destinations soon or they will be out of business. I like how you compared these airlines to the regionals but on an international scale. Outsourcing is pretty much what makes these airlines competitive.
ReplyDeleteWonder what the "Big 3" are going to do to compete? I could see them branching off and creating a seperate low cost international carrier. United tried it with TED yet that was only domestic.
ReplyDeleteYou make a good point about how La Compagnie will have to grow soon because they are currently only operating with one aircraft. Any mechanical/weather issue has the potential to set them back a full day, and a business class customer is not likely to become a repeat customer if that happens to them.
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