Mon. Dec 6th, 2021


Bjorn Tore Larsen knows how difficult the path he has chosen will be. The founder of a global maritime service company, the veteran investor announced earlier this year that he was moving to aviation after one of the worst years in the history of the sector.

“Some people say that starting an airline has to be crazy first,” says Larsen. “I’m not sure if that’s entirely true. But the airline business is very risky. It is very volatile. It is capital intensive; there is strong competition; and there are many unfortunate victims in terms of financial disasters. ”

Larsen’s Norse Atlantic Airways is just one of a clutch new carriers which is sailing in 2021 and 2022. Their founders hope to capitalize on the resurgent interest in travel after Covid-19 pushed the global industry to a record high. Loss of $ 118 billion last year as the question was dipped by two-thirds. To be successful, these businesses must work out profitable niches within an overcrowded sector by distinguishing themselves from existing competitors.

By the time Andrew Levy tried to found Avelo alone, he had been helping to differentiate the brands of airlines for decades. The service, which started end of april, is trying in some ways to be an American version of the European carrier easyJet: a reliable, cheap – but not super cheap – alternative for cost-conscious holidaymakers.

‘Do not grow too fast’

Levy selected the audience based on lessons learned from nearly 30 years of experience at three other airlines. The first was Valujet, which he joined six months after its launch in 1993. The low-cost pioneer initially skyrocketed so that it could become profitable faster than any American airline in history.

But cost-driven decisions to outsource maintenance, buy old planes and provide less training have begun to bite again, as the company has gained a reputation for safety issues and union issues. When one of his planes crashed in the Florida Everglades, killing 110 people, customers fled.

“Lesson number one,” Levy says. “Do not grow too fast, because you lose control.”

Avelo has had a few ways to be happy, with domestic travel in the US bouncing off Covid-19 much faster than most other markets.

Avelo has had a few ways to be happy, with Covid-19’s domestic journey bouncing back faster than most other markets © Joe Scarnici / Getty

At Allegiant, Levy learned another warning lesson: keep things simple. The ultra-cheap airline has focused on selling vacation packages that connect small U.S. cities with popular destinations. Las Vegas and Orlando were immediate hits, but expanding to Hawaii had to add longer-haul aircraft, complicating maintenance and increasing costs. “It was a mess,” he recalls.

After a turnaround at United Airlines, Levy on its own decided to launch Avelo in 2018. He opted for one type of aircraft and a simple game plan: secondary airports in the major markets that are cheaper and more easily accessible. The first hub is Hollywood Burbank, in Los Angeles. A second opens this fall in New Haven, part of the New York commuter belt. “We focus on routes that have not yet existed and airports that are underutilized,” he says.

In some ways, Avelo was happy. The U.S. domestic journey is returning much faster than most other markets from Covid-19. But Levy argues that his extensive experience in the industry has helped him make his own fortune. “This is not my first rodeo. Do not think it is easy, ”he says.

Jonathan Ayache does not want to make the mistake, but he argues that his perspective as a newcomer to the industry is one of his advantages as CEO of Lift Airlines in South Africa.

The airline, which started flying in December, is a joint venture with Global Airways, a local aircraft rental company that handles the operational side. Ayache’s most important task is therefore to build the brand and find ways to make it stand out on one of the busiest domestic routes in the world: Johannesburg to Cape Town.

This is where she joins Uber for seven years. The company has used an online platform to shake up the taxi industry, and Lift is trying to do the same in the same way. In a part of the world where many small carriers still rely at least in part on phones and paper, Lift goes all out online.

The site is set up to make it easy to do everything online, not just bookings but also changes and cancellations. This flexibility is the key to attracting customers, and it’s a boon to the airline, saving money on customer service agents. The airline’s relationship with Global also means it can quickly add flights on days booked quickly.

“I want people to do everything themselves. Nobody really wants to talk to anyone, ”he says. “We really try to simplify and eliminate all kinds of things that customers call.”

‘Customer-oriented approach’

Early on, Ayache realized that Lift gets a lot of questions about pets, so the airline now operates about 20 “dog-friendly flights” a week with specific seats available for people with pets, and is easy to book online. To welcome several animals at once, the service manuals and safety procedures had to be changed, but this gave the airline a selling point at a time when passenger levels remained depressed by the pandemic.

Jonathan Ayache: 'We call it a customer-driven approach: let me find a way to solve your problems'

Jonathan Ayache: ‘We call it a customer-driven approach: let me find a way to solve your problems’ © Brenton Geach / Gallo Images / Getty

“We call it a customer-driven approach: let me find a way to solve your problems,” says Ayache.

He hopes to follow up with a full service app that enables cancellations with a single click and book with just a few more. The airline also hopes to add flights to George, part of the Garden Route tourist area of ​​South Africa, as soon as the interest of passengers arises.

87%

Decline in international demand compared to April 2019

Larsen’s Norse Atlantic is also awaiting the impact of the pandemic. It will probably only start flying at the end of the year or the first quarter of 2022, because the specific niche – cheap transatlantic travel – will only be profitable if there are enough passengers to make sure planes are mostly full. Industry group Iata says international demand was down 87 percent available at 2019 levels for April, last month.

If that does happen, Norse hopes to notice not only for the low prices, but also for the approach to environmental, social and governance issues, with travelers. This will help address younger pamphlets that are both cost-conscious and addressing these issues, says Larsen.

The company plans to reduce its carbon footprint by investing in aircraft that can burn biofuels, and is using electric aircraft for pilot training.

Labor relations is another arena where Larsen wants to distinguish Norwegian from other low-cost airlines, most notably the Norwegian Air Shuttle, which has stopped offering long-haul routes after the loss of Covid-19 forced a corporate restructuring. Norwegians cut costs and sparked controversy by taking advantage of looser Irish labor laws and appointing teams on short-term contracts through an agency in Singapore.

Larsen says he works almost exclusively with unions in his shipping industry and prefers it that way. Norse has already signed an agreement with the American trade union for flight attendants. “We need to take care of our people and let them take care of the company,” he says. ‘It’s not me behind my desk that will make it a success. These are all my colleagues flying back and forth between Europe and America. ”

Leading a crisis: other airline chiefs share their insights

Ed Bastian of Delta

Ed Bastian focused on protecting the company’s workforce and liquidity in the face of the worst slump in aviation. Last year, he says, ‘was really very difficult. Brutal. ”

Tony Douglas of Etihad

Tony Douglas takes a phlegmatic approach to the crisis facing its sector. He came to a simple conclusion: do not be obsessed with things beyond your control.

brooke.masters@ft.com

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