Silverjet - A Classic Case of Start-Up Failure

The low-cost business travel market to the US & Middle East is now just about dead after the failure this morning of Silverjet. Around 10,000 business class passengers were left stranded. They will find a way to get home, but for the airline industry the Silverjet collapse could be a sign of things to come.

Silverjet was formed by well-known travel entrepreneur Lawrence Hunt (who I came across in my time at Thomson Travel). The proposition was simple - offer low-cost business-class flights to New York and Dubai for about one third of the price of a British Airways ticket. Silverjet was initially competing with two other low-cost business-only airlines: MaxJet and Eos. Both these businesses have already gone bust.

The start-up losses (even after commencing flying) were substantial at about £1 million a month. However, according to The Times, this figure is rumoured to have doubled in recent months following increases in oil prices and reduced utlisation of Silverjet’s passenger capacity.

Silverjet was also hit last autumn by a doubling of air passenger duty in Alistair Darling’s pre-Budget report.

Silverjet was unusual for a start-up. It achieved a very early stock market flotation, with the shares priced at £1.20. Last week, Silverjet’s shares were suspended at 13p and they are now worthless. A dramatic fall from grace.

The question is, which airline is next?