British Airways has announced that it will be launching a business class only flight between New York and London City Airport. I find it interesting, as it is yet another attempt by an airline to find a way to generate true product differentiation in an industry where little true differentiation exists. It's also interesting because several start-ups have tried and failed at operating such a business class only service across the Atlantic.
Of course, this initiative clearly makes more sense than BA's failed attempt to launch a low-cost subsidiary (named GO) to compete with Ryanair and other low cost carriers in Europe. BA's historical strategy and capabilities fit much more appropriately with the business class only concept than the GO concept. Of course, GO wasn't truly an effective low cost positioning, as BA insisted on trying to maintain some of its traditional service elements such as assigned seating.
As for this attempt to offer business class only service, it does face a key hurdle in that flights may have to stop to refuel in Shannon, Ireland because London City Airport's short runway limits takeoff weights. Offsetting that hassle is the fact that London City is closer to the financial district than Heathrow, and passengers can clear US customs in Shannon. Still, a quick-and-dirty calculation performed in my class with my students suggests that BA will have to operate at nearly full capacity on these flights for them to be profitable. Empty seats are a very costly thing, given the high price that will be charged for each seat and the limited number of seats (32) on each plane.