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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.
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From the Media 
