There have been a few people out there attempting to get into the scheduled commercial airline business over the past year.  A recent example is the group attempting to start a new People Express with 737-400 aircraft.  All have been aiming at niche markets and I think that is doomed to failure.

It’s attractive to look at the old Southwest Airlines / Ryanair model of flying to secondary airports and think that you too could succeed with this by flying into an airport near a major city.  That did work when airfares where stunningly high in such markets.  Today, not so much.

The problem is that these niche carriers have to compete with the likes of Southwest, JetBlue and even Allegiant and Spirit Airlines.  These airlines are flying into major(ish) airports with low fares and offering rock bottom fares in most cases.

Even flying into major markets with a superior service doesn’t always guarantee profits.  Take a look at Virgin America who began service in 2007 and has not yet earned a sustained profit.  They hang on and even incrementally improve their performance but even after 5 years, the airline does not earn a return on investment yet.

If you want to succeed with a new airline, you have to first have a monstrous amount of capital.  It’s capital that gets the deals done for things like aircraft and facilities.  You have to have a good service product at fares that are competitive.  Competitive fares exist across the board among airlines, however.  Even legacy carriers are offering extremely competitive fares in most markets.

You have to be brave enough to go up against the largest airlines in the world.  In the United States, that means competing against Delta, United, American Airlines and Southwest.  Not a single one of those airlines is afraid of competing and all have learned lessons in not ignoring a newcomer.

New airlines will be started but now isn’t the time.  The US airline industry needs time to digest its changes and time to let things settle on the markets each airline is serving.  Even when they are started and successfully so, they will have to be managed by people who want to grow the business.

JetBlue was the major up and coming airline in the industry right up to the moment the board of directors panicked over operations due to winter storms and fired David Neeleman.  Now it’s an airline that is looking for routes to feed into existing structures and it ventures outside its home areas rarely.

Speaking of David Neeleman, he is the one I expect to see back in the United States one day.  I think we’ll see him starting a new airline sometime in 2015 to 2017 and it will be a refinement of his JetBlue and Azul (Brazil) airlines but with even more capital that he has raised in the past.

But most will fail.  The attraction to starting, owning and operating an airline is strong but it requires a very special leader and those people come along only a few times each generation.

Filed under: Airline Service by ajax
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