Global Airlines, a start-up with (now) four A380s wants to break into the London-New York air market. Here’s why and how they might and might not achieve that goal.
Global Airlines And Its Ambitions
The youngest person to visit all the countries of the world and founder of Holiday Swap, a take on private home rentals, James Asquith is starting an airline. Global Airlines intends to fly from London-Gatwick using (4) Airbus A380 superjumbos in a four-class product. The first market was announced as New York JFK, but with more planes, the airline plans to fly to Los Angeles as well.
The airline anticipates flying from Spring 2024, and wants to focus on customer service in a way that competitors don’t. This will include better food, an improved security experience, and innovative retrofits. In one presentation, the company suggested as many as 90 airframes in the plan, easily making the carrier the second largest behind Emirates with a fleet 80% of Emirates A380 size.
How It Could Work
SilverJet attempted to break into the market by flying between the New York market (via Newark) and London Luton with a 767 and an all-business class product. Like other business class carriers before, it reduced the time required to check in for the flight (just 30 minutes prior), leaving busy executives to their work longer. It flew at a convenient time, departing at 10:00 AM daily from London and 5:00 PM. Newark departures were in the evening, landing back in England at either 7:10 AM or 9:30 AM. SilverJet isn’t with us anymore (despite lead-in prices of £799, because, in part, of how isolated Luton was at the time.
Global intends to fly from one of London’s two highest-traffic airports, in this case, London-Gatwick. Gatwick is connected by train to city, a 30-minute ride has riders in Central London. That’s already off to a better start.
Global will also have a variety of price points. Those shopping only economy fares might have missed the excellent value SilverJet offered for business class experiences for coach prices.
A vote of confidence has come from American Express, not something I’d imagine the bank enters into lightly.
“The new partnership will enable American Express Cardholders to be among the very first to book seats on Global Airlines flights, and they’ll also benefit from exclusive benefits, offers and promotions. — Laurie Baratti, TravelPulse
The A380 works in very few markets, but the ones where it does are high traffic and landing slot limitations. Singapore has long flown New York JFK to Frankfurt connecting trans-Atlantic customers to star alliance partner, Lufthansa among others. British Airways flies the A380 among other massive aircraft on the route and American, its codeshare and alliance partner combine for nearly hourly shuttle service between New York and London. United adds another handful of flights, as does Delta and its partner, Virgin Atlantic. Demand appears to be insatiable.
All of those network carriers are expensive; thus, JetBlue has made the market work for flights to Heathrow and Gatwick on A321 aircraft even without the alliance feed.
Is it a stretch to think that with this much demand, a new entrant wouldn’t stand a chance? Not likely.
Why It Might Not Work
SilverJet tried its all business class product but failed. So did MAXJet and EOS, all trying to crack the market with an “uncarrier” approach that utilized aged and retiring aircraft like the 767-300, 767-200, and 757-200 respectively. Flying all business class products is not the plan of Global, but not flying from Heathrow, using older aircraft, and trying to supplant Virgin and British Airways stranglehold were common themes. Global would add about as many business class seats as MAX and EOS did.
It’s not just business class only products that have tried and failed to break in. Norwegian shut down with a ULCC model. Norse has filled its shoes for the time being. Laker Airways made a similar attempt in the 1970s only to file bankruptcy in 1982.
American and British Airways codeshare on the route, one that is worth $1bn to British Airways annually alone and among the most valuable in the world. The pair share traffic and revenue across near hourly shuttles between the two markets often on very large equipment including the 777-300ER, and 777-200. **A prior version of this post included a reference to British Airways flying the A380 to JFK, but that should have been edited with regard to British Airways’ LAX service, the other destination Global intends to fly.** That doesn’t address United that flies frequently from nearby Newark, nor does it take into account Delta and Virgin Atlantic codeshares as well. The pair add another nine flights with widebodies, including the very large A350-1000, 767-400ER, and 787-900. Oh, and let’s not forget the JetBlue flights, two more A321s, one to Gatwick and one to Heathrow.
That’s a crowded space to add a massive aircraft and lots of seats for an unproven carrier with no mileage program to speak of at the moment.
An Alternative Theory
I was telling a friend about Global and some of the challenges and impracticalities of their plan as presented thus far. He put forth an alternative theory. In the US (though it may not be the same in the UK), transportation assets can be rapidly depreciated allowing financiers to gain the tax benefits of a purchase without outlaying the whole amount of cash and the asset backs the investment. Without getting into the specifics, the theory is that the financial backing is more of a tax strategy than airline start-up using Asquith as a mere rube and the contemplation of starting an airline that actually flies as a possible side benefit rather than the main goal.
Seth Miller wrote a well-researched piece for PaxEx in which he addresses the fuzzy math around acquisition cost, retrofit, and depreciation. It should be noted that while this is from an initial investor presentation, Global has stated it has moved on from this early presentation but has not supplied its more rational replacement.
“A key claim made in the investor pitch is that the company will be able to acquire A380s for its fleet at pennies on the dollar. The low CapEx enables the company to “remove the 27% depreciation and 19% interest costs” from its budget.” –PaxEx.Aero
While there may be a case to be made for this theory, this writer has seen (and outlined above) so many cases in which ambitious CEOs tried to tackle the London-New York market in earnest with a similar model, only to have failed and left both investors and travelers in despair.
There could be any number of outcomes for Global Airlines – there’s been plenty of attention. I don’t doubt that Global was able to secure notes and find investors. While the cost of the retrofits seems light, acquisition cost could be right. However, the choice of London-New York as the starting market is a crowded space and puts into doubt the rest of the plans. The initial presentation brings questions of validity and a reasonable understanding of the market challenges, as does the aggressive timetable. This writer would love to see a new product, but Global can’t seem to define what that is, yet other aspects seem plausible. Time will tell and that clock is quickly evaporating.
What do you think? Is Global Airlines a legitimate challenger to the New York-London market? Is this pie-in-the-sky thinking? Is there something else afoot?