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When Will A New Airline Launch in the US?

Since deregulation, we’ve seen literally dozens of airlines launch and then disappear from the skies. Add that to the dozens of airlines that survived past deregulation but could not thrive in the competitive era, and you’ve got a giant pile of Wikipedia entries.

In fact, the only US-based mainline carriers created after 1978 that are still around are AirTran (not for long), Allegiant, Frontier, JetBlue, Spirit, and Virgin America. Basically 5. That’s an unbelievably awful survival rate.

That survival rate was horrible in the 80s and 90s, too, but that didn’t stop piles of rich guys from starting airlines. New airlines were launching all the time (Tower Air, ValuJet, Kiwi, Midway, Reno Air, Presidential, Vanguard, PeoplExpress, Muse, New York Air, etc). Now, given the economic environment, it’s highly unlikely that we’ll see anyone try to launch a new carrier.

But, I was wondering, when will we? We haven’t seen a new airline since Virgin America launched in 2007. That’s a very, very long stretch without a new airline in the US, considering the history of new launches. So, is this an opportunity for someone?

Probably not. But rational thinking has not exactly driven the industry. Inevitably, some new carrier will come along, and I thought I’d throw out an idea of what it would be.

Allegiant and Spirit are interesting in that neither relies on fares to make them profitable. Upwards of 1/3 of their cash come from non-airfare revenues. Both have focused on staying out of the way of competitors and creating a cost structure (and a culture that supports that cost structure) to make profitability a way of life. Frontier is the odd duck of the surviving airlines, as they’re a regional carrier — most of the country’s regionals have been sucked into other airlines (Western, NorthCentral, NorthEast, PSA, etc). They’re not exactly a low-fare carrier, and they’re not low frills. They’re in a market (Denver) with an entrenched player (United) and a successful low-cost carrier (Southwest). All signs point to them disappearing (a la AirTran, which is the airline most similar to Frontier). But they haven’t. Bravo. Virgin America hasn’t been around long enough to know whether they’ll survive long-term. I don’t see how they can, but it’s an open question. Finally, JetBlue (pre-cursor to Virgin America), really took the Target mass luxury approach and turned it into a successful airline. If you remember, they were wildly, wildly successful in the beginning. Sure, “luxury” airlines had been attempted in the past, but this wasn’t a luxury airline. It was a low-fare airline with some style. Clever. As they’ve grown, that’s become more and more difficult to replicate and they now look much more like any other airline than anyone would’ve suspected 10 years ago when they launched.

So what can we learn from that? Option 1: launch with a rock-solid brand, execute an in-flight service to match that, and hire enough people to maintain that over time. Ask Virgin America how easy that is.

Option 2: Go ultra low-fare, pile on the ancillaries, and stay the hell out of everyone’s way. I think we’ll see another Option 2 carrier come along. Allegiant is now flying to just about every tertiary airport that can handle any service at all to Vegas, Arizona and Florida. If they’ve left any out, Spirit has grabbed it (Hello, Latrobe). Spirit has blown out service from Ft. Lauderdale to the Caribbean, Central America and a bit of South America. There’s no room there.

Where I think this could work is with a Spirit-type operation out of a Southern California airport to Mexico and Central America. Like Spirit, you have a few flights to generate a small amount of feed from surrounding states, and concentrate on growing the network of flights from Southern California to VFR destinations in Mexico and Central America. Stay out of the way of Alaska, which is primarily serving leisure destinations. And pile on the ancillaries.

Will this happen tomorrow? Lord, no. But someone will start an airline at some point. And I think this has the best shot.

Thoughts?

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  1. California Pacific Airlines “in early 2012″ from CLD.

    http://www.flycpair.com/index.html

  2. Many of the carriers you mentioned were acquired or morphed into other carriers. Valujet became Air Tran, Reno Air was bought by American, PeopleExpress and New York Air folded in Continental, and Muse was bought by Southwest. While they are no longer around, it isn’t a case that they didn’t survive the tumult of deregulation.

    And as mentioned in the other reply, California Pacific Airlines is the only US candidate in the formal Part 121 applicant phase with the FAA. Their application was accepted in early September, 2011.

    • Yes, they were acquired, but in most if not all cases they were acquires because they couldn’t otherwise survive. Peoplexpress, New York Air, Valujet, to name a few, were not long for this world.

  3. The US has a good 8-10 airline choices today for most travelers, depending on the city and airport. It’s still a lot more competition than many developed or developing countries around the world. Brazil, roughly the same size as the US with a rapidly growing middle class flying more and more each month, has 2-4 airline options for most cities.

    • Absolutely – there are still probably too many airlines for the market in the US. But that hasn’t stopped people from starting airlines pretty much constantly since 1978. Except for the high price of fuel, the industry is probably better run – and in a better financial position overall – than at any point since deregulation.

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