Risky business
by This email address is being protected from spam bots, you need Javascript enabled to view it on Monday, 09 June 2008
American author Bret Harte once said: "the only sure thing about luck is that it will change". It's likely the 19th century writer had only his experiences, or those of family and close friends, in mind when making the still relevant statement.
But chief executives charged with developing all-business class airlines can empathise with Harte's sentiment. Indeed, directors responsible for overseeing and developing the specialist carriers could be forgiven for rueing their collective misfortune.
On December 24, 2007, Stansted-based airline Maxjet Airways went bust after struggling to cope with rising fuel costs and increased competition. Some four months later, Eos Airlines was the next business to fold after the carrier's management filed for bankruptcy. Like Maxjet, the US airline failed to overcome the economic slowdown and tighter credit lines.
With two airlines crash-landing in six months, most industry experts expected Silverjet to follow suit. They were right, with the Luton-based carrier entering administration on May 30. Several factors contributed to the airline's demise. Firstly, a financial analyst dismissed Silverjet's shares as worthless. The carrier's reputation then suffered at the hands of a British politician, whose misquoted comments about Silverjet's service proved damaging.
Finally, the global downturn provided little respite, with the carrier's revenues taking a big hit. Despite the airline's woes, CEO Lawrence Hunt remained bullish to the end. The entrepreneur said he had encountered similar problems with previous ventures - but it's widely known the airline industry is an exceptionally tough nut to crack.
Silverjet's passenger figures showed the carrier secured healthy loads for flights from Luton to Dubai and New York. But that wasn't enough to save the ailing airline.
Businesses like Silverjet can't survive on adequate traveller numbers alone, especially when investors make false promises. Indeed, before the airline's collapse, Viceroy Holdings agreed to inject $25 million into the business. A further $75 million was also on offer, providing the companies reached agreement. But Hunt and his team were forced to suspend all operations when Viceroy failed to help.
Silverjet's demise suggests all-business class airlines will not survive in the current economic climate. But in different market conditions, the business model could potentially thrive. Perhaps Hunt just needed more luck.
Rob Morris is the editor of Aviation Business.
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