So the rumors were true: XL AirwaysandLa Compagniecame together yesterday, Thursday, December 1, 2016, to form the first French low-cost airline group.
An incongruity? Not from their point of view… However, marrying a low-cost airline like XL Airways with La Compagnie, which operates in full Business class, is not a matter of course... So why do it?
Two airlines with very different histories
If XL Airways and La Compagnie aretwo very different businesses in their history, they have one thing in common: men with great experience in air transport, namely Cédric Pastour as founder for XL Airways on the one hand, and Frantz Yvelin for La Compagnie on the other.
XL Airways, a low-cost airline that has become profitable only on long-haul routes
XL Airways was founded under the name of Star Europe then Star Airlines in 1995, as a charter airline operating on behalf of various Tour Operators on medium-haul tourist routes with Boeing 737s.
Then XL Airways beganlong-haul operations in 2009, starting with New York and Las Vegas. Gradually, the airline will own 3 Airbus A330, then disengage from medium-haul operations due to competition from low-cost airlines EasyJet and Ryanair, which tour operators no longer hesitate to use, and now charter airlines from Eastern Europesuch as Enter Air.
From now on, the airline is also being attacked on the long-haul low-costmarket by foreign players such as Norwegian and Eurowings (Lufthansa group), but especially by French players such as French Blue(Dubreuil group) or the future Boost (Air France-KLM group).
It is in this context that XL Airways had to find partners… Yes but what for?
La Compagnie, the wrong good idea
The history of La Compagnie is more recent: 2013, the year of creation of DreamJet, the ancestor of La Compagnie. The concept is simple: to offer a Full-Business class cabin in a Boeing 757, with old generation seats, called Lie-Flat (flat, but leaning), and at unbeatable prices, to attract a leisure or “Bleisure” clientele (half-business, half-leisure stay).
Frantz Yvelin had already had this idea earlier when he foundedL’Avion with Marc Rochet (current CEO of Air Caraïbes) in 2006.
Same players shoot again… Because what seems to be a good idea on paper turns out to be a really bad one:
- Frequent flyers will never use this airlinefor the simple reason that it only has a minimalist loyalty program and above all that its network is super thin: if I fly from Paris to New York all the time for work, there is little reason for me to want to return to New York on vacation with miles;
- The occasional leisure customer is only willing to pay the lowest fare for a business ticket. It is a safe bet that it is not possible to break even if all seats are sold at this price, let alone if there are still seats available.
This difficult equation led L’Avion, which has since been acquired by British Airways, which operates this airline under the OpenSkies brand, to introduce economy class seatsin addition to the BizBed (Business) and BizSeat (Premium Eco) cabins that existed at the origin of L’Avion
But then why merge?
It is clear thateverything is differentin these airlines: the brand, the positioning, the service and the crews. Where they converge isin the area of leisure customers.
For XL Airways, this is aclear diversificationof its product. For La Compagnie it is a more important network. And for both, obvious economies of scale on crews, maintenance, handling, etc.
What about the customers?
Not sure if this will change much at first: it is possible that the two brands will continue to operate separatelyfor some time. On the other hand,a common loyalty program is possible, or even affiliation to a low cost alliance. Let’s see what are the first work streams that will be opened by the new management!
