Startup airline La Compagnie found its niche as a low-cost business-class-only carrier. Now it's nearing profitability after just 5 years.
- La Compagnie is a French startup airline that flies all business-class planes between New York and Paris and, from May to October, between New York and Nice, France.
- The airline charges less than one-half of what mainline carriers usually charge for business class, and while the experience is a bit different, it's found a strong niche market of leisure and business travelers.
- Now, on the fifth anniversary of its first flight, it's approaching a major milestone: profitability.
- Business Insider sat down with cofounder and executive vice president Jean-Charles Perino to discuss how the airline has been successful so far in the notoriously difficult airline industry.
- Visit Business Insider's homepage for more stories.
Ticket sales in premium cabins like business class are crucial to many airlines' profit model. Sell the spacious seats in the front of the plane for thousands of dollars on a long-haul flight, while economy cabin tickets can go for just a few hundred.
The unfortunate downside is that the hefty price tag puts business-class seats far out of budget for many travelers.But what if it was possible to split the difference between the high prices for a few exclusive business class tickets and the lower prices for a ton of coach seats in the back half of the plane, creating lower prices for more business class seats on a given flight?
That's what La Compagnie, a French startup airline, decided to experiment with five years ago. The airline launched with flights between New York and Europe, and between London and Paris using all-business class planes.
Instead of a couple of dozen business class seats selling between $4,000 and $5,000 and a hundred or more coach seats selling in the $300-400 range, the airline experimented with a model flying narrow-body planes configured with about 75 business class seats and charged somewhere around $1,200 to $2,500 round-trip.
Making a startup airline profitable is a notoriously difficult task, but La Compagnie is on the cusp.
Now at the five-year mark since commencing flights, La Compagnie finds itself in a strong position as it inches closer to profitability. It recently took possession of two brand-new Airbus A321neo aircraft equipped with top-of-the-line lie-flat seats after previously relying on second-hand Boeing 757s with angle-flat seats.
According to a representative for the airline, it's currently on track to achieve profitability by early 2020.
A half-decade is a decent amount of time for any startup to become profitable. Amazon famously took 14 years - but the airline industry is notoriously fickle.As the airline replaces the 757 with the more fuel-efficient A321neo jets, margins will improve even further, as each flight across the Atlantic will require roughly 30% less fuel.
La Compagnie cofounder Jean-Charles Perino told Business Insider that the model has been highly effective for the airline, and that passenger response shows that the pricing model, combined with the product, is serving a niche, but high-demand segment of the market. Despite flying only twice a day, the airline has captured 20-25% of the business-class market share between New York and Paris, competing against airlines like Delta, United, Air France, and American, all of which have nonstop service between the cities.
And while it initially targeted leisure travelers willing to pay a measured premium for a better seat, business travelers are beginning to make up a sizeable segment of La Compagnie's passenger base.
"Currently, two thirds of our traffic is business" he said. "TMCs [travel management companies] and all the corporate [travel] agents are roughly 40% of our total sales," he said - the bulk of other sales come from online bookings, with roughly 5% being made through sales offices and call centers.
The appeal for both leisure and business travelers is obvious: price. According to Perino, 22% of passengers have never flown business class before. "It's an aspirational product," he said, while pricing puts it in the realm of affordable for passengers who might otherwise book extra legroom or premium economy seats on a mainline carrier - often for almost the same price.
That's led to a degree of tension with those corporate booking systems. Companies often have policies in place that prohibit employees from booking business-class tickets, but allow them to book premium economy. That rules out La Compagnie. But what happens when the boutique airline's lie-flat seats are actually cheaper than premium economy on the other airlines?
"With these very strict automated policies, they would not be able to book us," Perino said. "But people can take action when booking us would be cheaper."Passengers often get exempted from the policies, he said, by reaching out to their corporate travel managers, who can override the prohibition in order to book the business class ticket for less than the allowed premium economy seat. Flying business class for a corporate trip - especially when it's a red-eye - has the obvious benefit of allowing someone to be better rested, and better able to work, after landing.
To drive revenue and profit, the passenger experience has to be worth the price of the ticket.
"The market reaction is a direct reaction to the product we're putting in the market," said Perino. "We're a small airline; the experience is way different."
That manifests in a few different passenger-facing ways, Perino said. With only 109 employees in the entire company, sometimes flight attendants and passengers to recognize each other from previous flights.
"It's not unusual to have repeating customers knowing exactly who's on board in terms of our crews, and our crews knowing them by name," he said. "That's something that the big guys could not do."
While legacy airlines offer modern business-class products on the route, including direct-aisle access from every seat - La Compagnie uses a 2-2 seat layout, meaning the window seat passenger could still need to climb over their neighbor to use the lavatory - Perino described the La Compagnie experience as comparable, and even improved in some ways.
The entire stage of the flight is a unique experience, too, down to boarding and disembarking the plane, thanks to the small number of passengers flying.
"Instead of having 250 people on board, you have 74. It's quicker in, quicker out," he said.
While that can be a downside - one big open cabin means less privacy, and potentially more noise - he said that the relative privacy of the seats is more than enough, especially as passengers settle down.The experience has become well-reputed enough, and is so competitive on price, that some passengers are even choosing to "self-connect" to La Compagnie from other cities. About 20% of the airline's passengers book and pay for separate connecting tickets from other markets, including as far away as Florida or California, in order to fly La Compagnie with a business-class ticket on the longer transatlantic segment. Even with the additional flight, it's still cheaper than any of the competition.