Silverjet's TV ad campaign

Festive spirit was in short supply last December at the offices of business-only airline MaxJet, which following widely reported financial difficulties, filed for bankruptcy on Christmas Eve.

This is the latest twist in the story of the wave of new business-only airlines that first took to the air in 2006. These carriers followed in the vapour trails of budget airlines, which demonstrated that despite enormous costs and other logistical barriers, it is possible to break into the air travel market. Together with rival Eos and – later – SilverJet, MaxJet was aiming to break the monopoly on lucrative long-haul business routes held by the likes of BA and Virgin Atlantic. All three aimed to shake up the market, offering a new take on executive travel to entice customers away from market leaders.

MaxJet's implosion poses questions, not only for the remaining new entrants, but also for BA and Virgin with relation to their service, pricing strategies and use of marketing.

Fundamental marketing errors

For SilverJet, in the short-term at least, MaxJet's loss has been its gain. Lawrence Hunt, CEO of SilverJet, says January has proven to be lucrative. “Sales have skyrocketed,” he says. “This is partly because of what has happened to MaxJet, but also because we've been around for a year now and we've got a track record.”

Hunt is clear on why MaxJet was not successful. “It wasn't giving people enough reasons to switch carriers – it's a competitive market. Its prices were comparable to ours, but without the service advantages.” By this he is referring to SilverJet's premium service, which includes a specially built private terminal at Luton Airport and flat beds on all planes. “MaxJet also spread itself too thin, expanding into too many routes too quickly,” he adds.

Hunt's views are echoed by regular long haul traveller Nick Johnson, MD of market research agency Evo, who clocks up airmiles to maintain his global client base. Johnson says he flew with MaxJet once but was not impressed. “It felt like a cheaper version of business class,” he says. “If you've never flown business class before, you might think it was a good upgrade.” For the seasoned traveller it was a step down, particularly bearing in mind that there was little price difference. It seems MaxJet failed on two of the fundamentals of marketing: product and price. This played a key part in its downfall.

Challenger brand

SilverJet, by contrast, has been focused on the fundamentals of marketing since its launch in January 2007 and whilst it hasn't had an entirely turbulence-free year (refinancing twice) it appears to be gaining altitude. “We were selling 2500 tickets per month at the start of last year – this is now up to 8500,” Hunt says.

Much of its messaging has been focused on its premium service, but it has also launched a loyalty programme, as well as putting clear water between itself and market leaders – particularly BA. Its recent TV ad sent up BA's long-running 'One world' campaign, whilst the saphic overtones of its Youtube viral campaign have been smirked at by over 300,000.

Richard Cope, analyst at Mintel and author of UK Business Travel, suggests such messaging will create stand-out in the travel industry, which he says is unsophisticated in marketing terms. “BA has limited brand appeal – it's vaguely associated with something traditional.” He describes Virgin as a “lifestyle brand” with no direct appeal to business decision makers at all.

The shape of things to come?

Whilst 2007 was a landmark year for business-only airlines, 2008 looks set to be similarly eventful. Most observers agree further consolidation is almost a certainty. “The main problem business carriers face is the same as leisure carriers: over supply,” says Cope.

“Oil prices are at an all-time high, so the pressure is on,” says Claire Butcher, account director at Ogilvy Primary Contact, responsible for Delta's B2B UK communications strategy. But the victims might not only be new entrants. “A number of US airlines such as United are only in business because of Chapter 11 [bankruptcy] protection,” she adds.

Despite this, she believes there are more entrants in the pipeline. “It's the nature of the industry that names come and go: remember Buzz, British Midland, Go and TWA?” Indeed, BA is reported to be developing a concept for a business-only carrier based in continental Europe and flying to the US.

It all creates a confusing picture for an industry that gets more complex still when you factor in plane-size, point-to-point versus global hubs and airline alliances. The good news for the airlines is that the globalisation of the world economy is creating more, rather than less, opportunities with huge competition for new markets like China. If the new entrants can establish themselves and create clear points of difference, they will be well-placed to exploit these opportunities. An effective, considered and strategic approach to marketing will be critical to both objectives.

 

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