A New Airline's Quirky Search for Customers
Is Eos a Viable Business Model?
April 4, 2006: Vol. 2, Issue No. 26
IN THE NEWS
Eos offers first-timers reduced fares, money-back guarantee
Eos, the new airline offering premium-only service between London (Stansted) and New York (Kennedy), is offering reduced fares and a money-back guarantee to certain British Airways and Virgin Atlantic business travelers willing to try Eos for the first time.
—Travel Weekly Daily Bulletin, March 29, 2006
IKEA billionaire founder proud to be frugal
Kamprad always flies economy, drives 15-year-old car
GENEVA—IKEA founder Ingvar Kamprad, ranked 4th richest man in the world, drives a 15-year-old car and always flies economy class, in part to inspire his 90,000 employees worldwide to see the virtue of frugality.
—Reuters, March 27, 2006
A Money-Back Guarantee for Business Class Flyers of British Airways and Virgin Atlantic.
Fly A Better Business Class Service To London With Lower Everyday Fares.*
Dear Business Class Flyer,
Maybe you think you're flying the best business class to London. But we're willing to bet you're wrong. Eos, our all-premium class airline is designed to be better. And if after flying with us you disagree, we will give you your money back.
This was the start of a full-page advertisement that ran in The New York Times and The Wall Street Journal on March 29, 2006.
After 45 years of marketing everything from books to travel to pornography, I thought I had seen it all.
This offer—and this business model—stopped me cold.
The great literary critic and cultural historian, Alfred Kazin, once described happiness as settling into a seat on a jet airliner with a book, a notebook and a martini.
I agree with Kazin, especially if I'm on a cheap excursion to London where I will be staying in a cheap hotel (clean sheets, hot shower and a lock on the door) and hitting the museums, theatres and restaurants.
A New York flight to London is no big deal—just 6 or 7 hours—a bit more than flying to California.
So I gawked at ads running in The New York Times last February announcing an all-business-class airline, Eos, offering flights from New York's JFK to London's Stansted from $1,425 to $3,250 one way. That's $2,950 to $6,500 round-trip or $5,900 to $13,000 for two people. Taxes and fees that run $100+ per person are extra.
That's a lot of money for just 12 hours in the air.
The Eos Model
In Greek mythology, Eos is the winged goddess of dawn. In 2006, Eos is the brainchild of 38-year-old David Spurlock, a former senior executive with British Air who rounded up $87 million from the venture capitalists plus another $100 million in lease financing.
Spurlock's premise is to customize Boeing 757s—normally configured to carry 220 passengers—so that just 48 guests each have 21 square feet of space, including a 78" lie-flat bed and "boutique" catering.
The bottom line: The cost is less than walk-up business class on British Air and Virgin Atlantic, while the experience and the amenities are promised to be far superior.
Among the goodies offered:
- Curbside escort if you're running late
- Luxury passenger lounge at Kennedy (actually the Emirates facility) with full buffet, wines and bar.
- With Stansted Airport's smaller, more efficient layout, it is promised that you'll save as much as 45 minutes getting to London.
- "Best-in-class meal service and flight entertainment"
- "With 21 square feet of personal space, Eos offers plenty of room for face-to-face dining, group meetings, or just a good night's rest."
I don't have a problem with a high-powered businessperson on a crazy schedule blowing big bucks for a business trip—whether it's first class commercial or a corporate jet.
A Rich Business Flier I Know
My nephew is a Wall Street investment banker. Good looking, always elegantly attired and addicted to his BlackBerry, he's perpetually on a dizzying schedule, constantly flying off to somewhere in the world for a meeting, followed by a meeting somewhere else in the world.
Responsible for multibillion-dollar deals and mergers, the guy cannot show up in a Fortune 100 boardroom, gaga with jet lag after spending the night with his seatback being kicked by a screaming kid.
But can an itty-bitty luxury class airline with just three 757s that charges fat prices from JFK to an itty-bitty London Airport attract enough high-rolling, over-the-pond commuters to have a viable business?
My bet is no.
In the first place, if one of the three 757s needs a repair before it can take off, the businessperson on a tight schedule is stuck at Stansted with zero leverage and miles from Heathrow where many options exist for the first class traveler in a hurry. For example, British Air alone operates 10 flights a day between Heathrow and JFK/Newark.
The Rich Are Different
"The rich are different from you and me," Scott Fitzgerald once said to Ernest Hemingway.
"Yes," Hemingway replied. "They have more money.
This is echoed by Eos's advertising agency, AgencySacks that operates under this corporate philosophy:
Advertising to the affluent is different. Well-heeled, well-spoken, well-educated, they include the worlds' most discerning and skeptical consumers. Every day, AGENCYSACKS creates desire among the super-affluent on behalf of globally celebrated luxury brands. Intelligent and thoughtful, our communications achieve brand authenticity and generate consumer passion. There isn't one right formula for every luxury company. But there is one agency that understands this niche better than any other, and we invite you to learn more about us.
In the mind of Andrew Sacks and his team, rich people apparently feel comfortable with gray mousetype that is difficult to read, for this is the Web style of both Eos Airline and its agency.
Maybe if a consumer gets used to the soothing, upbeat sales messages in this tiny gray, unreadable font, the footnotes with special instructions and disclaimers in the same gray mousetype will go unnoticed.
The Money-Back Offer
I have to put myself inside the head of my high-flying nephew. He's the ideal target prospect for Eos—a world traveler who frequently flies to London, always in business or first class with British Air or Virgin Atlantic. With billions of dollars in mergers and acquisitions filling his head, he's constantly focused on his work.
So when Eos runs a full-page ad in The New York Times and The Wall Street Journal offering a discount trial round-trip flight on the ultimate new luxury service to London, he might stop and read it. Here's the second paragraph of the ad:
Just call 800.583.0566 by April 12, 2006, and book our special introductory $3,500 round-trip fare for first time Eos flyers. This fare includes free car service and a "refresher room" at the airport in London. If you're not 100% satisfied with your Eos experience, we'll issue a full refund.**
Ah, the pesky asterisks. To what do they refer?
The copy that follows ran across the entire width of the bottom of the newspapers' broadsheet page—five lines of 7-point gray sans serif mousetype:
**Terms and Conditions: One unrestricted round trip journey on Eos between New York and London for $3500.00 USD. Per person government imposed taxes of up to $100.00. PFCs of up to $16 and the September 11 Security Fee of up to $10 per roundtrip ticket are additional and must be paid at time of reservation. If the customer is not completely satisfied with our service, EOS will refund the fare less applicable taxes and fees. Customers seeking refunds must notify Eos in writing within 48 hours of the completion of their last flown segment and detail their reason(s) for dissatisfaction. Dissatisfaction due to circumstances beyond Eos' control are exempted from refundability. Customers must be first time Eos customers and have flown at least four flight segments in British Airways ClubWorld or First Class, or Virgin Atlantic Airways Upper Class during the period September 15, 2005 to April 11, 2006. Customers must provide to EOS via mail or fax copies of valid mileage program statements or ticket receipts with boarding passes evidencing travel as specified above at least 7 days prior to travel on Eos. Determination of eligibility is made at the sole discretion of Eos Airlines, Inc. Reservations must be made by April 12. Customer may change travel plans without penalty. All travel must be completed by May 26, 2006. Unused travel has no value and will not be eligible for refund or change. Offer is valid for travel purchases made with a US billing address by April 12, 2006 and is limited to one ticket purchase per customer. This offer is not combinable with any other promotion.
The guts of the footnote:
Customers must be first time Eos customers and have flown at least four flight segments in British Airways ClubWorld or First Class, or Virgin Atlantic Airways Upper Class during the period September 15, 2005 to April 11, 2006. Customers must provide to EOS via mail or fax copies of valid mileage program statements or ticket receipts with boarding passes evidencing travel as specified above at least 7 days prior to travel on Eos. Determination of eligibility is made at the sole discretion of Eos Airlines, Inc.
Eos and AgencySacks are telling my nephew, who earns millions of dollars a year, to dig through old files or mileage statements for the records of four British Air or Virgin Atlantic business class flights and send them in by mail or fax.
Once these documents have been received, the powers that be will determine whether this supplicant is Eos-worthy and eligible to spend $3,500 for a round trip and get his money back if dissatisfied.
My nephew—and other top-gun business executives who Eos wants to attract—don't have time for this kind of Mickey Mouse.
Put another way, consumers who would respond to this insulting offer from Eos and agree to jump through hoops in order to qualify for a discount and a money-back refund are not customers who Eos would want. Instead, they are very likely weasels with time on their hands who would read the fine print and look on this proposition as a chance to get a free round trip to London and screw Eos.
These are what Best Buy CEO Brad Anderson calls "devil customers"—the same kind of chiselers and shysters who buy loss leaders only to resell them on eBay or buy merchandise in order to collect rebates, and then return the merchandise once the rebate has been deposited in the bank.
Ultimately, Where Does Eos Find Customers?
Trans-Atlantic air traffic to and from the U.S. represents a $20 billion-a-year market with roughly one-third spent on U.K. travel. That said:
- A large percentage of business and first-class travelers are either upgrades or non-paying frequent fliers. Neither category is of interest to Eos.
- Many top executives pride themselves on flying economy class. Among them: IKEA's Ingvar Kamprad and the late president of Remington, Victor Kiam. Kiam used to say he had no need to fly first class. "The back of the plane arrives the same time as the front."
- Old money flies economy.
- The rich-rich (e.g., Warren Buffet and Don Imus) fly private jets everywhere.
So the potential universe for Eos—business travelers who pay full business fares—is quite small.
I have to believe that Eos is not a true business airline at all.
It's a plaything for fairly rich wannabes and the wannabe rich.
Takeaway Points to Consider
- When launching a business, it's imperative to know the size and make-up of your universe.
- Your new business can only make money two ways: satisfying needs and creating wants.
- It is folly to expect you can demand that the prospect work like hell for the privilege of doing business with you.
- The eight copy drivers—the emotional hot buttons that make people act—are: fear, greed, guilt, anger, exclusivity, salvation, flattery and patriotism. Telling business people that they must mail or fax proof of their worthiness to do business with you isn't flattering. It's presumptuous and a pain in the butt.
- Eos is overtly trying to build a business by cherry picking British Air and Virgin Atlantic customers—and saying so in its promotions. A promotional effort that mentions the competition by name, takes the consumer's mind off you and focuses attention on the other guy(s). If nobody has ever heard of you, chances are that are you'll come out the loser. As the old saw goes, "The devil you know is better than the devil you don't know."
- A good database marketing consultant could find likely customers for Eos far more efficiently than running ads in The New York Times and The Wall Street Journal, where perhaps one reader out of 500 is an Eos candidate.
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