MAXjet suspends shares

“Boutique airline” MAXjet Airways today requested that its shares be suspended in advance of a statement from the airline about its rather precarious financial situation. MAXjet flies five Boeing 767-200s from London-Stanstead to three US cities (JFK, Las Vegas, and Los Angeles) with around 100 leather seats apiece and four-course meals (not to mention champagne cocktails and canapés). The airline went public in June, but has since flown into a rough patch (their stock has fallen 50% and new route from London to Washington was axed, in addition to planned service to Miami starting next February).

Not all the news is negative, though. MAXjet carried 47% more passengers last month than it did last November, while the airline’s load factor increased 11% to 69%. But although more seats are being filled, MAXjet is finding it harder to make money. Lots of factors – increased competition with carriers like Silverjet and EOS, high oil prices, and a weak US dollar (which particularly affects an airline with so much UK-based traffic) could be to blame. The airline’s loss increased to $49.5 million in the first half of 2007, up from $30.4 million in the same period a year ago.

According to MAXjet, everything is business as usual, for now. The airline’s announcement about its finances, according to a statement released by the airline, will “be made as soon as possible”. “The company wishes to confirm to its employees, customers and suppliers that business continues to function as normal.” Whether or not MAXjet will be able to get over this remains to be seen – the transatlantic business travel market is notoriously competitive, and with British Airways getting in on the game soon, things aren’t likely to ease up. If BA arch-rivals Air France or Lufthansa also consider entering the premium transatlantic market at a more competitive rate (and Lufthansa has already made moves towards doing this), they could seriously jeopardize the futures of all-business class airlines like MAXjet.


coppers said...

I understand that if it thought they were actually insolvent that the American FAA would revoke MaxJet's Licence, as yet they have not done so. (CJC)

Richard Havers said...

It's none to surprising that their load factor is up they have been offering some tasty discounts.

According to one stock market analysts, "The whole thing came as a total shock to the market and it does make you question whether or not they have got the right model. British Airways and some of the other big carries seem to doing fine with their transatlantic services, so you really must ask about MAXjet." You have to question what credentials he has for being an analyst with such a dumb question. The business model of these single class, up-market airlines is questionable at best. For them to survive they have to run a 100% service and they have to avoid incurring the business wrath of the established carriers. MAXjet's model seems the least well thought out of the up-market carriers in that they have offered business class rather than first class - although the same rules apply to them. To make it work you need high yield passengers, because the cost base is not markedly different.

Still it’s good news for Eos and Silverjet (more so as they offer a business class only product) in that it might well keep the BA, Virgin, American and Continental wolves at bay. However, with choppy economic waters ahead watch out for even tastier offers.