· Goldman Sachs seeks private equity venture
· Specialist carriers take off in transatlantic market
Goldman Sachs is considering investing in a business class-only airline after deciding to cash in on a boom in executive travel underpinned by its own jet-setting bankers.
It is understood that the investment bank's private equity arm has approached airline executives with a view to setting up a first-class carrier, following recent ventures such as Eos and MaxJet. Its buyout division also held informal talks with Silverjet, Luton's executive airline, about an investment but no deal was reached. If the airline did get off the ground it would be run as a conventional private equity investment and not as an air taxi service for Goldman's staff, banking sources said.
Single-class carriers have established a toe-hold in the transatlantic market amid an increase in business air travel, stoked by burgeoning company profits, London's increased importance as a financial centre and lower prices. Silverjet has reported that its planes are two-thirds full only four months after its launch. According to estimates from JP Morgan, specialist airlines now command a 17% share of the UK to US business-class market. Eos runs three flights a day between Stansted and New York; MaxJet runs a daily flight on the same route, while Silverjet has one flight a day between Luton and New York.
Silverjet claims it needs only 65 passengers on a flight to break even, because its average ticket price is £1,000 and a transatlantic return flight costs £65,000 to operate. It flies a Boeing 767-200, which has been redesigned from a 300-seat arrangement to accommodate 100 flat beds.
The first class-only business model has also attracted investors. This month MaxJet raised £47m in a stock market flotation as it seeks funds to increase its fleet from three planes to five. L'Avion, a French specialist airline that flies between Paris-Orly and New York, is also believed to be seeking extra funding.
Goldman Sachs and Silverjet declined to comment. Goldman Sachs Private Equity has shown an interest in transport assets over the past year - it led the £2.8bn takeover of Associated British Ports, but its bid for BAA, the owner of Heathrow, was abandoned after it emerged that Goldman bankers had offered to assist BAA's takeover defence.
The dominant players in the transatlantic business-class market, British Airways and Virgin Atlantic, have also announced plans for specialist flights, although they are likely to have two classes. Their most lucrative route, Heathrow to New York-JFK, faces greater competition from April when the Open Skies treaty will allow any European Union-based carrier to fly to the United States and vice-versa.
BA has asked the US transport department for permission for a specialist flight between Europe and the US next year, while Virgin has announced plans to launch an executive service, using up to 15 new planes. It will use the Virgin Atlantic name, flying between New York and European cities such as Paris and Frankfurt.
"We feel now is the right time to launch such a service," said Sir Richard Branson, the Virgin Atlantic founder. "It would provide more choice and better quality for customers who want to travel on a business-only carrier at exceptional value."
Private jet hire is also booming. According to the latest figures, 6.9% of European flights recorded by air traffic control were "business aviation" in 2005. NetJets, a firm that pools ownership of business jets, increased flights by more than a third last year to almost 63,000 and has been a successful investment for Warren Buffett's Berkshire Hathaway conglomerate.
Some airline executives, such as AirAsia's Tony Fernandes, believe the market will polarise around all-economy and first class-only carriers. He is in talks with private equity groups about launching a no-frills service between Malaysia and London-Stansted, which is expected to take off early next year. "If this is successful you will get market segmentation, with five-star airlines and three-star airlines," he told the Guardian this year.