Joe Brancatelli - What Happened to the Hype about EOS?
When my business travel writer hero sent his short burst on the ‘bust’
at EOS in late April, we decided to dig more deeply into the outlook
for small upscale carriers moving forward. In coming weeks we will be
talking to those still standing, and those still planning.
But quickly, I asked the bearer of bad tidings, “ What about all that press hype, Joe?” His same day answer:
“As for the hype these carriers have had, -- well, to some degree it has
been justified. This was a new concept (at least across the Atlantic)
and worth discussing. However, I have always resented people not
attaching the history to it. So,…”
I'll tell you three things I have been thinking about today:
This theory that the luxury market is immune to market downturns is clearly baloney.
Luxury is expensive. None of the five all business class carriers
(Mima, Maxjet, EOS that are down, Silverjet that might tank before
summer, and L'Avion, which no one knows anything about because they
are, after all, French...) were well-enough capitalized. The reason why
JetBlue made it was it had $150 million in the bank to start back in
2000. I would think Eos should have had that much to start.
Luxury in airlines is also a function of schedule. That was actually
Eos' problems. It had to fly AT LEAST four times a day to match BA's
eight in the JFK market. That was almost 200 first-class seats. With
BA's eight daily flights, it only has 112 in first. So see point 2. You
better have A LOT of cash if you wanna fly in the luxury air market...
ABOUT THAT PECULIAR EOS AIRLINES BANKRUPTCY…May 1
When Eos Airlines
tanked on Sunday, I was shocked, but not surprised. After all, it was
the fifth airline of the month to fold. Still, the first reports said
the airline filed for Chapter 11 with $70 million in assets and less
than $35 million in liabilities. That was both shocking and surprising.
Now
that the supporting paperwork has been filed, the shutdown of the
all-business-class airline that flew between New York/Kennedy and
London/Stansted seems even more peculiar. And if you can look past the
top-line number (Eos burned through about $120 million since it
launched in the fall of 2005), the reason for its closure is
fascinating.
According to an affidavit filed by the airline's
chief financial officer, Eos had secured a promise of $50 million in
new funding from an existing investor. Before the unnamed investor
would close, however, he/she/it demanded concessions from Eos'
suppliers. Eos approached its aircraft lessors and, when confronted
with the concession request, the lessors promptly issued default and
termination notices. Eos management eventually convinced the lessors of
six of the seven aircraft to rescind the notices. That wasn't enough
for the unnamed investor, however. He/she/it claimed that the
Department of Transportation was "concern[ed]" by the term sheet of the
new funding. Then the investor simply pulled out, claiming he/she/it
"was no longer interested."
The closure comes while new Boeing
757s were being outfitted with the airline's 48-seat configuration, Eos
employees were in the Middle East planning new service and the
airline's Newark-Stansted route was ready to launch next week.
We began our recent report on ‘Family Travel Rising’ with the following:
“All the evidence -- whether you are looking at the Amex-Harrison Group study we reviewed in our last issue, or the Ipsos Mendelsohn Affluence Report completed in September, -- shows Family First when it comes to disposable dollars.
We believe family focus is going to be front of mind for a long time to come, long after the punishing economic climate has subsided. Provider brands will be hard pressed to provide much more than kiddie or junior, or young adult activities. Smart travel agents will have to rise to higher levels of creativity and performance on the family front to sustain customer loyalty and earn the benefits of word of mouth in the neighborhood.”
And last week we caught our favorite global traveler-editor-writer-commentator during a quiet moment at home in England, the home of The Gostelow Report. She shared these thoughts:
• The hotel industry has been very slow to realize that this big expansion in family travel was going to happen. We’ve had “connecting rooms and you can put the kids next door”. They moved on to two swimming pools rather than one. One was kid friendly and one was not. But we really haven’t had anything more than that.
• We are seeing more and more bigger family groups. Operators are having a real challenge coping with such groups because it’s not a group per se, but they form their own groups. They want to be private. They want their own thing. .They tend to do their own excursions. They suddenly want a bus to take them all out. So it’s a real, real challenge. And so far the hotel industry has not realized this is happening. Now, it’s not only families. We’re also seeing more and more groups of friends traveling. And the hotel industry is not incentivizing enough – say a pair of DINKs come- Double-Income-No-Kids. There’s no incentive to them at the moment to bring along two other friends or even four other friends. And there’s big potential on the marketing side there.
Everybody knows her, but her bio is worth repeating.
Mary Gostelow, president of Gostelow Travel: Hottest Hospitality News Worldwide, is an inveterate traveler on the road more than 300 days a year. She owns and publishes the definitive Gostelow Reports, monthly market intelligence briefings to the top levels of the hospitality industry. She is the editor of KIWI's online Wow! Magazine, and also sends out a monthly update to top travel professionals worldwide.
At the same time, she is contributing editor to such publications as Elite Traveler, enRoute, Hotels and Le Magazine.
But Lux 360 Found a Brighter -and we think, Sensible Side-
From Harvey Chipkin’s report in the British online Hotel Report-a paid service from William Reed Business Media- http://www.wr-bi.co.uk/ - Reproduced here with publisher permission
At the first industry wide meeting following the fall financial meltdown and the recent presidential election, the consensus seemed to be that, yes, the industry faces a historically challenging situation that will last for awhile. But there was also a feeling that lodging is in a better position than other industries – and, happily, a few silver linings were perceived as well.
We’ve all heard the bad news over and over: global liquidity drought, drops in rate and occupancy, a dismal outlook for employment, and a possibly extended recession. But some leaders managed to find ways to take – if not a positive view -- at least a more nuanced one. Following are a few comments about why weeping and gnashing may not be the only appropriate attitudes.
Steve Joyce, who recently became CEO of Choice Hotels International, said he has been “the only optimistic person in the room at a number of events over the last few weeks.” I strongly believe,” said Joyce, “that there is a paralysis factor and that you can’t base projections on two weeks of hysteria.”
“Forecasts in this environment,” he continued, “are entertaining but not much use.”
Other ‘smart marketer’ insights from Joyce, Mark Lomanno of Smith Travel Research; Peter Yesawich, CEO of The Y Partnership; Michael Kaufman, Chairman of National Restaurant Association; Patrick Ford, CEO of Lodging Econometrics; and Roger Thomas, Steve Wynn’s design guru for many years.
Nat Ives, in Ad Age Online Sept 6, cites new data from Ipsos MMR which assures that well-off readers read print publications just as much now as they did 5 years ago.
Also, survey respondents making more than $100,000 annually said their average hours online had grown to 22.1 each week from 10.7, while the time they said they spent watching TV sunk to 18.6 hours from 23.7 in the 2003 survey. Read the full Ives story at http://adage.com/mediaworks/article?article_id=130685. Lux 360 attended the client briefing this week and will provide additional perspective in our Sept. 30 issue, interviewing Ipsos MMR President Bob Shullman.
From the Media 
