January 15, 2008 / 11:58 AM / 12 years ago

UPDATE 1-Silverjet CEO defends strategy after MAXjet failure

(Adds CEO, broker quotes, shares)

By Pete Harrison

LONDON, Jan 15 (Reuters) - British business class-only airline Silverjet SILJ.L defended its strategy on Tuesday after one of its peers collapsed last month and a brokerage said it too was “doomed to fail”.

Silverjet Chief Executive Lawrence Hunt told Reuters the airline just had a record week of U.S. bookings and was nearing its target of charging 1,100 pounds ($2,157) per seat.

Rival MAXjet MAXJ.L filed for bankruptcy protection after traditional airlines like British Airways BAY.L competed more fiercely than expected last year and weakness in the U.S. economy kept business travellers at home.

On top of that, fuel costs rose dramatically, and unexpected flight cancellations created costly problems of rebooking passengers onto other airlines.

But Hunt said weakness in the U.S. economy might be helping Silverjet by forcing corporations to look for cheaper alternatives to traditional business-class travel.

“We had a record sales week last week in the U.S.,” he said. “We’ve seen a massive increase in corporate enquiries by companies looking to cut costs.”

Hunt said Silverjet would succeed where MAXjet had failed because it gave better service and had managed to put up prices when fuel costs rose, while MAXjet had kept them low to try and compete for customers.

He said he was not surprised by the way traditional airlines fought back against new rivals like Silverjet, MAXjet and eos.

“I think they were very competitive anyway,” he said. “American Airlines AMR.N was putting out suicidal fares for a while, which I think helped put MAXjet out of business.”

Brokerage Daniel Stewart questioned the airline’s business model on Monday and said Silverjet’s shares would be worthless within a year because it would run out of cash, causing its shares to fall by more than 14 percent.

Silverjet responded strongly, saying the report was inaccurate.

It said it took 5,000 bookings last week and was on track for profit. Its shares had recovered all of their earlier losses by 1129 GMT on Tuesday.

But the brokerage stood by its note, saying: “With prices as low as 401 pounds each way, 5,000 bookings could represent as little as 2 million pounds in revenue.”

Hunt said he was in early joint venture discussions with investors who want to replicate the Silverjet business model in India, China, South Africa and the Middle East.

The airline will put two new aircraft into service in late May or early June, and is looking at the U.S. west coast, Miami, India and South Africa as possible destinations, he added. (Reporting by Pete Harrison; Editing by Rory Channing and David Cowell)

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