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When Will We See A New Airline in the US?

From the time of deregulation through 2007 or so, the US airline industry saw new entrants launch with considerable frequency.  Lots tried a variation on the east-coast-to-Florida-low-cost model (Kiwi, Eastwinds, a bunch of others), while others went upscale (MGM Grand Air, Eos, MAXjet, etc).  Restaurants (Hooters), clothing companies (Roots in Canada), and others will no seeming connection to the industry tried their hand.  Save for a handful (AirTran, Frontier, JetBlue, Spirit, Allegiant) they’re all gone.  That these airlines went out of business somewhat constantly hadn’t stopped others from trying.

But the spiraling economy has managed to stop new folks from trying.  We haven’t seen a new airline since Virgin America in 2007.  That they have yet to turn a profit, and have struggled to build a route network that was in their original plan (something tells me their recently announced flights to Cancun and Cabo were not in the original business plan) shows just how difficult it is even a well-funded new entrant to succeed.

So, I was thinking about whether this means there’s simply no opportunity or whether there are ways to succeed once the economy comes back.  So I turn to my readers — what model could a new airline succeed with in the US?  I’ll throw one out there:  Everyone rags on Spirit, but they’re profitable and they’ve managed to carve out a nice niche, even with some competition on Latin American routes from American out of Ft. Lauderdale.  One idea: could the same set up work out of Los Angeles?  With some feed coming from other West Coast cities, but primarily serving VFR-focused cities in Mexico (ie, not the major tourist destinations, which have plenty of service) and Central America?  With an extreme low cost model, with fares starting at $9, wouldn’t there be an enormous amount of demand for flights to San Salvador, Guatemala City and others out of Southern California?  Just a thought…I’m curious what others think…

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  1. I am not sure if it would work or not but i would love to see some one try.

  2. I see a few problems with your suggestion. First, LAX and Calif are the most saturated and hotly competitive markets in the industry with fares historically below the norms as a result. There is a reason it was, for such a long time, a graveyard.

    Second, I agree that the hispanic population in SoCal is large but you success depends on whether or not they can come and go at will and, I suspect, that most can’t.

    True Spirit, as with Allegiant, is a breed apart but given the high cost of financing and the general unwillingness to lend to anyone without a track record, I’d say it will be a long time before we see another new airline. There are a ton of aircraft available in the desert which has always been the recipe for new entrants but there is a reason we’ve not seen any new entrants since 2007 and some think VA is still crazy although with the reviews they are getting, it is an airline I wish I had. Cheers — Kathryn

  3. Beats me when we’ll see one, but I’d also guess it will be “ultra low fare” like Spirit.

    LUV seems to be moving “up market (chasing biz travellers) so basic transportation is probably the most underserved US niche right now. Consumers are seeing 25% increases in fares year-over-year. Something tells me that will create an opportunity someplace. Or at least some guy with jet fuel in his veins will THINK it’s an opportunity!

  4. @Kathryn – I can’t imagine the illegal population in SoCal is any different than in south Florida (though what do I know?). Yes, LAX is busy. That wouldn’t bother me so much. Spirit made a great business on the back of AA. And I’m going to guess you could get MD-80s for $4-6 million. It wouldn’t take a huge amount of outlay to try something (IAH-PHX will front us the money) :)

  5. There is a new airline planning to start up early next year in suburban San Diego north county – California Pacific. Will operate Embraer jets out of Carlsbad to a handful of destinations.

  6. What makes California a potentially furtile ground for new airlines is the situation on the ground: bad traffic. Secondary airports (like Carlsbad) could be appealing to a lot of folks because of the time and unpredictability of reaching the major airports.

    Of course, these opportunities tend to be niche ones, but probably better than battling the big boys head on.

  7. I was also thinking “smaller planes” and “point to point”. We always see the smaller planes [Embraer, Bombardier] used to feed large airports. Instead, I’d use them for point to point, standalone. You could fly out of Boulder, CO instead of driving to Denver, etc. A kind of Southwest with smaller planes. You could even go into “mini hubs”. I bet it’s easier to fill 50 seaters than feed a large 777. The turn around times would be amazing. People always think “cramped” when they think regional jets. But many people forget how quick it is to get in and out of a plane when there are max 50 people. It can take up to 30 minutes sometimes on the larger jets [jetbridge in place, people jamming the rows with overhead luggage, etc.]. If you don’t have a jet bridge and less than 50 people, you could be out of that plane in less than 5 minutes after the plane is parked. That can save you one hour round trip. Makes a huge difference for those flights when I fly out in the morning and fly back in the evening. Also, you’d need to go places where people don’t usually bring a ton of stuff because those smaller jets can’t carry really big cargo items. So, you could sell the idea of zippy flying in and out of places where you’d otherwise have to drive more than one hour to a bigger airport, pay for parking, go through crazy long security lines, long boarding procedures, etc. And sell the fact that you’d save the person 2+ hours of driving time, cheaper parking, less crowded airport (parking probably closer to the airport, no shuttles, etc.), easier/friendlier security lines, quicker boarding, etc. I’m already sold to the idea myself. You could get quite a good premium from business folks. And you’d ride someting bigger than most business jets anyway. You could also try reducing the number of seats and push the idea of exclusivity. you get to ride with effective business people, social networking possibilities, etc. There’s a bunch of ways you could spin such an idea to get the right price point and the right markets. Think middle New-Jersey to avoid the big NYC airports, somewhere creative around Sillicon Valley, etc. Bottom line: more seats than a business seats but maybe not as much as the usual commuter configuration. Sell the time savings, sell the idea of flying in a business jet without the costs of ownership (fractional or otherwise), we’d be talking regular scheduled flights here.
    …now, who has a couple millions so I can go out and buy some of those parked planes?… :)
    Pierre

  8. Ah, just went through my daily google news searches and this article says it very well:

    http://www.newschannel9.com/news/detroit-994424-city-stop.html

    plus all the other news about Delta and others ditching the CRJ-100 and CRJ-200. Recent prices for 50 seaters hover around 3 million$ (they are worth 9 million$). So, lots of them to be snapped up.

    So, yes, drop the 50 seater into a 40 seat configuration, add lots of perks like free snacsk and drinks, do it like Porter airlines does it at Toronto City Center: everyone has access to the lounge, in fact, the airport is a lounge with free wifi, etc. Prices are higher but you want to attract business folks that don’t fly with lots of luggage. In and out and get all the roadblocks out their way. Newspapers, wifi, printers, whatever it takes. Get them where they need to be FAST and get them back FAST.

    To go back to my original example (previous post): I checked the Boulder airport, it’s actually almost as close to downtown Denver as the Denver international airport is (41 minutes versus 30 minutes)!! So, not only do you serve Boulder, you could also serve a portion of the Denver area!!! Now we’re talking :)

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