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New Air Carriers Take Aim at the Big Boys

MAXjet, EOS aim high with their high-amenity flights.
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When you operate one of the 19 flights that departs daily from New York's Kennedy International Airport to London, it's not easy to be noticed.

That fact no doubt explains why

EOS Airlines

has just unveiled a multimillion-dollar, first-quarter media campaign that began this week with a full-page ad in a huge nationally distributed newspaper.

EOS is one of two all-business-class airlines that launched service from Kennedy to London Stansted Airport this past fall. The other is

MAXjet

. While similar in many ways, these two high-amenity carriers aren't direct competitors.

EOS offers a $6,500 walk-up roundtrip ticket (roundtrip fares start at $3,500) and a luxurious product that includes beds, 21 square feet of personal space, and just 48 seats on its Boeing 757 airplanes. MAXjet roundtrip fares range from $999 to $3,958 for one of the 102 spacious seats on a Boeing 767.

What seems apparent is that EOS isn't filling nearly as many seats as it would like. Chief Executive David Spurlock will say only that passenger occupancy is increasing, but otherwise refuses to discuss "load factors," which is unusual for an airline.

One recent passenger told

TheStreet

that his flight carried only about a half dozen revenue passengers, while an airport observer said loads totaled about 50% on some holiday flights.

Whether the anecdotal information indicates any sort of pattern isn't clear, but obviously advertising is a proven method for selling airline seats. An EOS spokesman said Thursday that inquiries to the airline's call center have risen as a result of the ads.

Spurlock says surveys show passenger response to EOS has been extremely positive, exceeding even the reviews for highly regarded travel offerings like

JetBlue Airways

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and Ritz-Carlton Hotels. "We beat all our expectations in their desire to be repeat passengers and to recommend us," he says.

A former

British Airways

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executive, Spurlock raised $87 million from investors, mostly venture capitalists, to start the carrier. In his pitch, he compared legacy airlines to companies like

Sears

, which in the past tried to be all things to all people and came under attack in both "the price-sensitive end of the market and the top end of the market, where people produce better goods and services."

EOS plans to add four aircraft a year for the next five years. The company's board constantly reviews the topic of going public, but that won't happen this year, Spurlock says.

By some measures, MAXjet seems further along. The carrier will open a second route, Washington's Dulles International Airport to Stansted, late in the first quarter. Its chief executive, Gary Rogliano, says loads exceed 50%.

"Everything is going well," he says. "There is a lot of recognition and great receptivity in the United Kingdom and the United States."

Rogliano says he has raised "a lot more" than the $15 million specified in regulatory filings, but wouldn't specify the amount. MAXjet isn't focused on going public just now, but rather on expanding its fleet to a dozen airplanes within two years, he says.

A third airplane, expected this spring, may be used to provide added capacity on the Kennedy-Stansted route. Potential additional U.S. destinations include Boston, Chicago, Dallas, Los Angeles, San Francisco and San Jose, he says.

The Kennedy-London route is among the world's most competitive. Airlines include British Airways with seven flights a day,

AMR's

(AMR)

American Airlines AMR with five, Virgin Atlantic with three, and Air India, EOS and

UAL's

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United Airlines with one. MAXjet with six weekly flights, and Kuwait Airways has three weekly flights.

Each day, British Airways offers 600 business class seats and 140 first-class seats with beds to London's Heathrow Airport, says spokesman John Lampl. The carrier's highest roundtrip fares are $12,662 for first class and $8,572 for business class, with various substantial discounts for advance booking. Roundtrip fares start at $3,130.

"We compete against many different carriers," Lampl says. "We offer the most capacity to Heathrow, which people like due to the wide range of connections and the ease of getting into London."

In general, aviation experts are skeptical about the prospects for success by small carriers offering single daily flights in ruthlessly competitive markets.

Ray Neidl, aviation analyst for Calyon Securities, says carriers like British Airways and American have big advantages with multiple frequencies, Heathrow service and spare aircraft.

Dan Kasper, managing director of aviation consultant LECG, notes that "so far, it's not been possible for an independent company to sustain a premium service product. The business is so valuable to existing network carriers that they can't afford to lose it, and they respond very competitively."