All-business class MAXjet to file for bankruptcy

updated 2:31 p.m. ET Dec. 24, 2007

NEW YORK - MAXjet Airways ceased operations on Monday — leaving jets on tarmacs and stranding passengers on Christmas Eve — as the all-business class airline said it would file for bankruptcy protection.

MAXjet cited soaring fuel prices and the deteriorating credit market for what it called a “drastic measure.” But analysts said the company’s failure may raise questions about the viability of all-business class airlines.

The company also announced the immediate resignations of its non-executive chairman, Ken Woolley, and directors Paul Kehoe and Roger Flynn.

MAXjet launched in 2005 and offered “all-premium” flights between Stansted, New York, Las Vegas and Los Angeles. But analysts said it couldn’t compete with deeper-pocketed AMR Corp.’s American Airlines business class.

“High fuel prices were a contributing factor, but American’s inauguration in October of (service between New York’s John F. Kennedy International Airport and London’s Stansted Airport) ... was the coup de grace,” said Robert Mann, an airline consultant in Port Washington, N.Y.

While business class service can be very profitable to airlines, it’s also a very “thin” market, Mann said, serving, typically, “40 to 70 seats per flight, depending on the route and aircraft.” Any loss of market share to a competitor can be devastating, particularly to an all business-class carrier like MAXjet that didn’t have revenue from economy passengers — or a robust route system — to fall back on.

“They could not get the current premium class passengers away from major carriers,” said Mike Boyd, president of The Boyd Group, an Evergreen, Colo., airline consultancy.

MAXjet’s decision to cease operations forced the carrier to reserve hotel rooms for stranded holiday passengers who had booked return flights between New York and London. MAXjet said it was working with rival all-business class Eos Airlines to find alternative routes. Meanwhile, Continental Airlines and Silverjet Aviation Ltd., another all-business class carrier, said they would honor limited numbers of MAXjet tickets.

MAXjet operated five Boeing 767’s configured to seat 102 passengers, and flew 74,760 passengers this year through the end of November.

MAXjet did not return calls seeking comment, but in a message posted on the Dulles, Va.-based airline’s Web site, president and chief executive William Stockbridge apologized.

“With today’s fuel prices and the resulting impact on the credit climate for airlines, we are forced to take this drastic measure,” Stockbridge said. “We are extremely saddened to discontinue a service that we so passionately believe in, and we thank our loyal flyers.”

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