Category Archives: EOS - Page 2

You Will Have Eos to Kick Around Anymore…

Eos Airlines announced that they’ve secured another $50 million in funding meaning:

a) They’ve blown through about $200 million
b) They won’t be going out of business this summer as I had previously thought

Their press release says that they’ll be profitable next year, but every financial press release they’ve ever put out suggests they’ll be profitable the following year.  Given fuel and British Airways’ new product, that’ll be a tough road.  It’s really a great product, though…

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A Small Item about Those Affected by the Skybus Shutdown

Articles are starting to pour in about passengers being stranded by the shutdowns of Skybus, Aloha and ATA, but we should also remember that as we read sarcastic articles about how poorly run (blah blah blah) these airlines were, that workers’s lives have been truly affected by the shutdowns.

I saw in a post on USA Today’s airline blog that Skybus owes about $50 million to creditors, including Airbus and others.  One name on the list caught my eye: “SourceSpeed, $250,000.”  SourceSpeed is the small business that built and ran Skybus’ website, a fact I know only because they also do work for Eos Airlines, where I have done work in the past.  They are a small business, run by a couple of guys with a slew of contract workers who do the actual coding.  SourceSpeed started working with Skybus shortly before they launched after another company screwed up the site launch.  I know that they worked an insane amount of hours and got the site up on time (even with some minor funny glitches, including a page on Skybus’ site that allowed you to book a limo transfer from Antarctica).

For them, I’m certain, $250,000 is a huge amount of money because it means that either the two founders will have to suck up that cost, or the guys actually doing the coding will have to suck up that cost.  Which, as the previous sentence suggests, simply sucks.  A lot of people beyond the SourceSpeed guys worked their asses off to get Skybus off the ground, and it certainly wasn’t their fault that there was no way that you could make money with a Columbus base flying to tertiary cities.  It’s a shame that they’re the ones who have to pay the price.

So while it’s little consolation, if you’re looking for some strong developers for your airline website, the guys at SourceSpeed are extremely impressive.  And since they’re short about $250k, they may cut you a deal to get the work.  Or not.  I have no idea.

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Black April: Skybus is 4th Airline to Shut Down this Week

I was just on my way home from an evening out, and I saw on the ol’ OTR phone that Skybus announced that it was shutting down, effective Saturday April 5th after less than a year in the sky. For those of you counting at home, that is the 4th airline to close down in the past week.

I’ll probably write something about all of this on Monday, but it is, as far as I know, the worst non-accident related week in the history of US aviation, with Aloha, ATA, Champion and Skybus all closing. Skybus blamed high fuel and a poor economy for their shuttering, but let’s be real: how can a poor economy hurt an airline selling $10 tickets? The fuel issue is very real, and at these prices, no airline can be a low-cost carrier without fuel hedges. Skybus really should blame a poor business model for their demise. As I just wrote recently, although Skybus was often compared to Ryanair, it actually had little in common with the Irish airline.

And as it’s 1 o’clock in the morning, I’ll wrap up by saying that the common wisdom was that there was almost nothing about Skybus’ business plan that made sense (as evidenced by longtime reader IAHPHX in the comments for this post). Turns out the common wisdom was correct. Next up? The smart money’s on ExpressJet…Or Virgin America…Or Eos…Or Silverjet…It’s going to be a rough summer. More on Monday.

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Eos: Welcome to Newark, Capital of New Jersey, or the US, or Something

Eos Airlines’ press release touting its new service from Newark to London-Stansted notes, “With up to 58 flights per week serving these two capital cities, you’ll be sure to find the schedule that best suits your individual travel needs.”

Um, what is Newark the capital of?  Essex County?

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Qatar Airways to Launch All-First Class Service

Qatar Airways announced that it will likely start all-first class service on some medium haul routes out of Doha by the end of the year.  No decision has been made yet on the aircraft, but they’ll be outfitted with Qatar’s ridiculously nice first class product.  SilverJet and Eos have both launched (or plan to launch) single-class premium service to Dubai, but both of those routes are from London, which is far trickier given the large amount of leisure traffic on the routes.  Medium-haul traffic from Qatar, however, could certainly succeed given the hefty amount of business traffic within the region.

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SilverJet: And the Hits Just Keep on Coming

Two pieces of bad news for SilverJet (and passengers who like the airline):

1) Eos’ announcement that it’s launching Dubai flights sent SilverJet’s stock reeling yesterday, down as much as 23% as investors believe that the struggling carrier won’t survive a drawn out fight with another airline.

2) A company that lent SilverJet GBP10 million last year has declined to convert the loan into equity (not a good sign) which, in English, means that SilverJet will be forced to continue paying interest on the loan — a rough call given their precarious financial situation.

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Eos to Launch Dubai, Newark

Eos has announced that it will launch flights between Newark and London-Stansted in May and between Stansted and Dubai in July.  You may be saying to yourself, that’s funny, because doesn’t SilverJet already fly between those cities?  Yes, yes they do.  Eos received some funding from some Middle Eastern sources last year, and it wouldn’t be surprising if flights to Dubai were part of the deal.

So I’m of 2 minds here:  In general, it’s certainly better to stay out of the way of competitors.  But on the other hand, this may be a case of more competition helping to create the market.  On yet the other hand, given Emirates’ multiple nonstop flights from New York to Dubai, Eos is really just launching London-Dubai (there will be few people connecting NYC-STN-DXB).  Given that the bulk of their marketing comes out of New York, it will be very interesting to see whether they’re able to market a non-US-based route.

Oh, and what about Paris that was supposed to be launching this spring?

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British Airways to Launch All-Business Class Flights

British Airways will launch all-business class flights from London’s City airport to New York in 2009. No additional information about the service has been released, but you’ve got to imagine that SilverJet isn’t particularly pleased (Eos’ product is really first class, and I’ll guess here that BA’s pricing will be in the range of SilverJet’s fares. At least until SilverJet runs out of cash.)

(And a bit of a revision to this post:  BA will fly the flights with an A318 configured with 32 passengers, which is clearly aimed at Eos, not SilverJet.  Of course, there’s zero guarantee that either will be around by next year, as discussed in this post.)

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Don’t Believe the Hype: Silverjet and Eos Not Looking Good

With the demise of MAXjet, several articles have commented on EOS and Silverjet, frequently suggesting that they "say they are in good shape" (as in today’s NY Times) or something to that effect.  This wholly-unfounded assertion is based (as far as I can tell) on press releases put out by the airlines themselves (which are generally presumed to be doing fine, apparently, until they put out a press release like MAXjet did essentially saying they are going out of business.)  But let’s look at the facts:

Brokerage Daniel Stewart (UK) put out an absolutely blistering note on Silverjet saying, "Our target price is nil. We would sell at any price."  Ouch.  There’s more:  They add that their performance "is so far adrift of what is required that, in our view, the business is doomed to fail unless something changes – significantly and rapidly." 

SilverJet, of course, says that the figures cited in the report are wrong, but how wrong could they be?  The bank says their costs are twice their revenues.  OK, so adjust that by, what, 50%?  It still means they’ll run out of cash without an infusion.  Their average fares (about $2400 round trip) simply aren’t even close to where they need to be, and with AA at about the same price point in biz class, they have zero pricing power.  They’d need to lower their prices to fill up their half-empty planes, and that won’t cover the bills.  It’s not good.

And despite EOS’ press releases (and news reports) to the contrary, it’s not looking so good over there, either.  Reporters who don’t usually cover airlines will sometimes say that private carriers don’t release financial results, so their performance is a black hole.  That is not true — all airlines have to file financials with the US government (you can find them here).  So let’s look at what’s happening at EOS (full disclosure:  I worked there for a bit as a consultant.  I harbor no ill will, and I think it’s an amazing concept.)

Financials have only been released through the end of the 3rd quarter, so we’ll look at those:  Eos lost $11 million in Q1, $14 million in Q2 and $12 million in Q3.  Operating revenues were about $16 million in Q1, $20 million in Q2 and $21 million in Q3.   When you’re only taking in $21 million, a $12 million loss is significant.  They had only $9 million of cash on hand at the end of Q2 after burning through just under $15 million in cash in Q2 (though they’ve since raised $50 million — at this burn rate, they’ll be through that by Q3 of ’08). 

Perhaps we’ll see a turnaround.  But really, how is that going to happen?  How do you close the monthly gap between $7 million in revenue and about $12 million in costs? 

Although media generally lumped EOS and MAXjet together, they really weren’t competitors (EOS launched with a $6000 round trip fare vs. $1200 round trip fare; completely different products).  Silverjet and Eos are closer, so a defunct Silverjet will probably help Eos a bit.  Perhaps the Paris launch they’ve mentioned could help longer-term, except that:

a) launching a new city is costly;
b) L’Avion already serves that market with a Silverjet-esque product;
c) British Airways will launch that route with its new OpenSkies product soon

Doesn’t sound like that will turn things around by July. 

Without further cash infusions, Silverjet and EOS may very well be gone by the end of the year, though I’m certain someone else will come along and try to serve the route.  Consumers should be disappointed with that — EOS offers an untouchable product for, at times, 1/4 the price of British Airways’ first class.  Sad.

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British Airways to Annouce Launch of OpenSkies

British Airways is announcing today the launch of OpenSkies, a new subsidiary that will fly between business centers (centres) in Europe and the US.  Initial routes will include flights from Paris and Brussels to New York (though which airport is yet to be determined), because they will have no competition on those routes.  Oh wait, except for American, Continental, Delta, Air France, L’Avion, and Air India.  They’re really launching these flights because they’ve incorporated the new airline as a separate business, allowing them to pay their employees less, which will keep costs down and possibly allow them to actually make some money.

Maybe.  The other twist is that there will only be 82 seats on the 757s they’ll be flying.  24 business class seats, 28 premium economy seats (though these will have 52" pitch), and 30 coach seats.  I actually think this is what will give them a fighting chance.  The mix of fares will allow them to grab from a wider range of customers than, say, a single-class airline like L’Avion or Eos (if they launch the Paris routes they’ve announced), and not relying entirely on business traffic.

It’s a small operation – they only expect to have 6 aircraft by 2009, so they’re just looking to take advantage of a handful of citypairs where this concept would make sense.  I don’t think they’re crazy.

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