La Compagnie to close its Luton to New York service in 3 weeks

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Low cost long haul airline La Compagnie announced yesterday that it is closing its Luton to New York service on 24th September.

The airline is blaming the new post-Brexit business environment for the move. This is, without a doubt, a contributing factor although the service did seem to be struggling to fill its planes with higher yielding passengers.

It was selling seats for £1,000 return, occasionally less, and those were widely available. For the leisure market, British Airways has been selling New York in Club World for as low as £1,199 in recent sales and the BA schedule is clearly more attractive. Business travellers tend not to book their tickets in sales, however, so the fault must lie with a failure to penetrate the corporate market successfully.

La Compagnie seat

We reviewed La Compagnie in July. Whilst slightly chaotic, Anika was impressed by the food and service and felt it compared favourably to World Traveller Plus or Premium Economy on BA or Virgin for a similar price point.

The current plan is to transfer the London aircraft to Paris. This will allow the Paris service to double up to two flights per day from October. Whether this works, given that the company is competing against the British Airways Open Skies operation, remains to be seen.

Passengers already booked on La Compagnie out of Luton are being offered a refund or a transfer to the Paris flight. La Compagnie will pay for a connecting flight from London to Paris. For anyone travelling over the next few weeks, the latter is likely to be the only reasonable option as the cost of rebooking at short-ish notice is likely to involve paying substantially more than £1,000 return.

La Compagnie joins the lengthy list of companies who have failed to make ‘all business class’ flights to New York work. With British Airways announcing last week that it is scrapping one of its two daily services from London City, the writing may be on the wall entirely – until the next time an entrepreneur gets his hands on an old plane ….

Category

General

krys_k says:

6 Sep6 September 08:26

Could Brexit have something to do with it? Trying to work that one out. My costs have gone up 25% since I spend most of my spend abroad and the pound has fallen. And I lost two deals worth around £500k because they were priced in $ and the price change made them unviable (most annoying thing was that it was a paper change and not real, but the maths no longer worked).
- Jonathan says:
  
  6 Sep6 September 08:58
  
  Brexit won’t have had an impact yet unless they werent hedged to oil (which prices in USD) which would have been rather silly.
  
  Re cost increase that’s an interesting claim given GBP is only down about 10% vs USD pre brexit levels. (I.e. 1.46)!
  
  The is still huge though and (one of my current gripes) for any brexiters who keep reporting that the fact “the FTSE 100 is up in GBP terms means brexit has been positive” need to learn basic economics.
  - Rob says:
    
    6 Sep6 September 09:03
    
    There was a massive short term drop in September bookings post the Brexit vote. Everyone in the hotel and airline industry I spoke to said this. I think it may now be levelling out, though, as it becomes clearer that nothing will change in the short term.
    - Brian says:
      
      6 Sep6 September 09:20
      
      Well yes – I’ve read that the British tourist industry is doing very nicely, since the pound has fallen and this is attracting people here. Won’t apply to the airline industry for ex-UK flights, but certainly will to the hotels.
      - Callum says:
        
        7 Sep7 September 03:55
        
        Won’t apply to ex-UK flights? So all these extra tourists are coming but never leaving (or leaving by ferry/train)!?
      - Alan says:
        
        7 Sep7 September 09:22
        
        I’d imagine Brian is meaning that those tourists that are leaving will likely be doing so on tickets bought in currencies other than GBP, vs those departing and returning to the UK (not an absolute, but in general)
  - Matt says:
    
    6 Sep6 September 14:04
    
    Politics aside, as a French company, revenues denominated in GBP will be significantly lower in EUR, whereas their costs (lease from Iceland air, fuel – probably in USD) will be higher in EUR. This coupled with the decline in British tourists going abroad (and La Compagnie mostly catering for leisure travel) means that they almost certainly saw their profits shrink after Brexit.
    
    That being said, I don’t believe that their business model was resilient to any form of shock/downturn, regardless of the source.
    - Robert says:
      
      9 Sep9 September 07:23
      
      Im sure Brexit might have contributed to their demise but I imagine it just sped up the inevitable. If they were doing rosey before Brexit happened I’m sure they would willing to try and ride out the storm a bit longer.
      - Robert says:
        
        9 Sep9 September 07:25
        
        I for one just don’t think there is a market in a mediocre product from a crappy airport for a couple of £ less. People who can afford or are willing to pay for business class, will go the whole hog and book BA or do something ex Dub. People looking to save money will just book economy. The only way these things will ever work is if they offer a business class product genuinely comparable to the major airlines, for a lower price.
blackberryaddict says:

6 Sep6 September 09:17

Maybe the next entrepreneur gets his hands on some new (and allegedly very cheap) planes, and starts operating the CSeries from LCY – that could be quite an odyssey.

And hedging fuel or not has nothing to do with it. The price of fuel isn’t the problem – in fact airlines who had hedged their fuel prices like Ryanair were suffering quite badly as fuel prices came crashing down. They would have had to hedge their currency to counter the fall of the pound post-Brexit. Andnot just for fuel, but their revenue in sterling is now worth 12% less in Euros which is what they report in, and what most non-fuel and non-aircraft costs would be in.

I think though it is just a matter of product/price that did them in – they can’t get the corporate market with the higher yields out of Luton with once a day service. Maybe it will be easier competing with Air France out of Paris on a twice daily service.
- Oh! Matron! says:
  
  6 Sep6 September 09:58
  
  Indeed. That’s why Delta is doing incredibly well: It doesn’t hedge it’s fuel. Obviously this could be fatal should oil go back up, but, right now, it’s doing incredibly well.
  - Rob says:
    
    6 Sep6 September 10:17
    
    Hedging is, fundamentally, a waste of money if you can afford not to do it. It is like insurance – you’re a mug to pay for it if you can afford to self-insure. Execs do it because everyone else does it and when fuel prices go up they have worse results than their competitors.
    - John says:
      
      6 Sep6 September 11:09
      
      If you don’t hedge fuel and the price goes up then all you have to do is add a “fuel surcharge”… oh wait….
    - Mr(s) Entitled says:
      
      6 Sep6 September 21:27
      
      Cant disagree with this more.
      
      Hedging: when done correctly, provides certainty. Often a commodity that businesses crave more than money itself. In my experience it is because they can afford not to do it that they do it. At some point for all but a few the dial switches from Wealth Creation to Wealth Preservation.
      
      I can afford to self insure. If my house burns down it will cost me in the region of 300k to rebuild. I insure it (and contents, including named valuables) for £320 p.a. Even if I never claim on the insurance I’d be an idiot to pass up that leverage (1:1000). Insurance is rarely a bad idea unless your leverage is nearer single digits. In which case that isn’t insurance, it is robbery.
      - Alex W says:
        
        6 Sep6 September 23:18
        
        But if you were a property magnate with 1000 properties it wouldnot be worth it?
      - Mr(s) Entitled says:
        
        7 Sep7 September 06:50
        
        Rule of leverage would still apply but I take your point. It is not about affordability in this instance it is about the loss being inconsequential.
        
        I would still insure given the leverage involved (especially if levels of debt are high across said property).
      - will says:
        
        9 Sep9 September 15:43
        
        The issue with hedging is this, if you are confident that your predictions will be correct you’ll make more money speculating than you will running a business reliant on the hedge with far less bother (I mean just buy oil and hold, easier than flying planes around right?), and if the hedge goes the other way you’re uncompetitive with those who did not hedge. Meanwhile you have to cover commission for the hedge, and hold enough reserve capital to cover any anticipated loss from the hedge tied up.
      - HAM76 says:
        
        14 Sep14 September 12:12
        
        Insurance are not about leverages, but about probabilities… There are insurance to cover the cost of extra-terrestrial kidnapping. The have an even higher expense to payout ratio. If leverage would be a relevant decision factor, those insurance would be even better than your home owner’s insurance.
    - Callum says:
      
      7 Sep7 September 04:01
      
      Much more akin to gambling than insurance (though insurance itself is a form of gambling!).
      
      If you know what you’re doing (which of course the majority don’t given the instability of the markets), you can hedge prices during the troughs so you pay lower prices during the peaks. “Self-insuring” wouldn’t give you the cheaper prices.
RTS says:

6 Sep6 September 10:06

What will happen to those people that bought the 25k membership lol…
Billy Buzzjet says:

6 Sep6 September 10:37

When will these companies learn the basic rules of marketing . People do not buy things because they are cheap. This service was crappy-chic at the best.
ww says:

6 Sep6 September 11:51

At least the Luton lounge got refurbished and it will be less crowded:).
Andy says:

6 Sep6 September 12:46

Using the BREXIT excuse again!

It is actually a result of the flawed business model:

Fly from Luton which has poor transport links

Use fuel hungry old 757’school

Only one flight a day

Only 2 aircraft in the fleet
- Callum says:
  
  7 Sep7 September 04:04
  
  It’s already been clearly stated how Brexit is responsible for a significant drop in profitability. Obviously they’ll overplay it to hide the poor state of the business before Brexit, but the insinuation that it had little/no effect is just as disingenuous…