Open Skies Tries to Get Lift

Let’s say this up front: I am rooting for OpenSkies. It’s an airline. Cheered for an airline lately? Didn’t think so. OpenSkies is tiny at this point, but it does something very few other airlines do: provides luxurious, stress-free transatlantic service at a really good value. So you know the odds are against it.

The new carrier is a boutique subsidiary of British Airways that flies 64-seat, single-aisle 757s to Amsterdam and Paris from Newark and J.F.K. It has two cabin classes: in the back is a 40-seat premium economy section called Prem+ that is basically discounted business class. The seats recline 140 degrees–more than enough to sleep comfortably–and the service matches that of any business class out there. The front section is called Biz, with 24 lie-flat seats, high-quality food and amenities. Round-trip pricing to Amsterdam starts at $1,100 in Prem+ and about $2,400 in Biz. (See pictures of the history of air communications and in-flight entertainment.)

OpenSkies is named after the deregulatory policy that frees airlines to add new city-to-city routes beyond their once protected home turf. OpenSkies chose Amsterdam and bought another business-class fledgling, L’Avion, to gain access to Paris and slots at Orly and share costs and culture. BA doesn’t fly to those places from New York City, and it sure as heck isn’t going to undercut its own lucrative business-class traffic to London.

Could there be a worse time to start an airline? OpenSkies lifted off last June, as the global economy was seizing up. Even though airlines got cost relief via collapsing jet-fuel prices, the deepening recession has caused demand for seats to fall faster than supply could be shrunk. The result: airlines are suffering, as usual.

Still, BA sees a huge gap in the market. “It’s for people who recognize that transatlantic travel is something you want to do in other than economy class,” says Dale Moss, OpenSkies’ effervescent managing director. Business-class flyers to Amsterdam and Paris pay as much as $8,000 round-trip on legacy carriers such as KLM and Northwest. For that money, you get to board first; then you wait for the other 200 passengers to crowd in after you. Asks Moss: “Would you rather be on an airplane that has two-by-two seating that takes, what, 15 minutes to board, or would you rather fly a loaded 777?” (See time.com/travel for travel tips, stories and advice.)

If there are $8,000-a-seat passengers in the front and $400-a-seat flyers in the back, the reasoning is that there’s got to be a sizable segment of business flyers who wouldn’t mind saving thousands and leisure travelers who will pay a little more to get 20-in. (50 cm) seats and tons of legroom and not share space with wailing babies and tour groups. For road warriors, this concept is a no-brainer. “It was a third the price and at least three times the experience, an inverse proportion,” notes Mary Egan of the Boston Consulting Group (BCG), a recent OpenSkies passenger to Amsterdam.

But targeting that segment has failed before, notably in London. Indeed, BA and American Airlines used price-cutting and other tactics to help shoot down three business-class-only carriers. Nor will the incumbents in Amsterdam fail to react. KLM and Northwest have already slashed business-class fares.

In Amsterdam and Paris, business passengers make up 65% to 70% of the traffic, a percentage that works for OpenSkies and points to opportunities in other business centers like Frankfurt and Milan–if BA gives the airline enough support. BCG’s Egan, a consumer-products specialist, says that consumer awareness of OpenSkies is limited and that as a boutique brand in a large company, it is always vulnerable. “All my clients have little brands like this. But the problem is, Can you keep incubating them?”

A recession doesn’t help, but Moss says OpenSkies is gaining altitude. “Once we get people on board,” he says, “they become some of our best salesmen.” That includes Egan, who, despite her concerns, is rooting for OpenSkies too. Please don’t go out of business, she e-mailed Moss. “I love your airline.”

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