Within a couple days of my post on Vision Airlines last week, I found myself on the phone with David Meers, Senior Vice President of the airline. As I said before, I had a lot of questions for him, and now I’ve had the chance to ask him directly. I’m still very skeptical of the viability of the Louisville route, but as David says, it’s such a small part of the company that it’s not going to make or break the airline. I’ll reserve judgment on the Florida stuff until we see what it actually is in the next couple months.
Cranky: It seems like you’re dipping your toes in a lot of different places right now, so is there an overall strategy, is it more of a transition, or is the goal just be in a bunch of different places?
David: We’ve always had a diversified revenue stream for our company but this is the logical next step for us. . . . As I mentioned in another article, it’s hard being in Las Vegas to ignore what Allegiant’s done. We like their business model. There’s really no barrier of entry to us. In fact, we feel like we have a great product, and we feel like we can deliver tremendous value to the consumer. So moving into scheduled service into underserved markets, particularly in leisure destinations, is a logical next step for Vision Airlines.
Cranky: I guess I’m a little confused about how Louisville fits into that.
David: Well Louisville – Atlanta is something we looked at as long as 6 or 7 years ago in terms of setting up a corporate shuttle for UPS. There’s been a need for a very long time. We’re probably personally familiar with it as a company because we have offices in Atlanta and a maintenance facility and offices in Louisville, Kentucky. So we as a company have experienced the high fares and limited service on that route. We’ve heard from other companies that there’s a need for low cost travel between those two city pairs so for us to start initially into Louisville and Atlanta made a lot of sense. There’s only one carrier on that route nonstop, Delta Air Lines, and if you look at Delta’s fares, they’re high. That was a very easy decision for us to make but in the long range most likely we’ll focus primarily on leisure destinations.
Cranky: So this is sort of a one-off opportunistic look?
David: Initially it’s a one-off but I could see us looking at other markets that are underserved that might connect to business centers. That’s not out of the question.
Cranky: Is there any sort of subsidy on this route?
David: Well, not unlike numerous airports around the US, they have incentives for new routes, new carriers, but in terms of any revenue subsidy or anything like that, there is no revenue subsidy.
Cranky: You had mentioned in Today in the Sky that you were hoping or expecting that UPS or Home Depot, large companies like that would come. The way that the legacy airlines structure their corporate agreements, I imagine it’s going to be very hard for them to shift business your way in a place like Louisville. Is this something you think you can get around?
David: I don’t want to comment on specific negotiations with specific companies, but with that said I think it’s safe to say, being a Louisville native, I know there is a large number of folks that will fly on Southwest from Louisville to Birmingham, rent a car and drive to Atlanta simply because of the high fares. I don’t expect us to cut into Delta’s market share. Delta isn’t our target. We’ll probably encourage folks to fly versus drive or fly to Atlanta instead of flying to Birmingham and then driving. I think Delta is probably not concerned with Vision Airlines with 32 seats per departure 2 times a day. Our threshold for success is very very low, so we’re pretty confident that we’re gonna be in this market for a long time.
Cranky: I would tend to agree that Delta’s not paying close attention but if they start seeing their big customers going other places, then they’ll notice. But if it is pulling people off the roads that’s a different story.
David: You’re right. We have 64 seats a day. Delta has 10 or 12 departures. We’re barely putting the number of seats that Delta has in the market on a regional jet. They’re the 800 lb gorilla and I’d be surprised if they respond to a 32 passenger Dornier. I’m not sure if it would be wise.
Cranky: Yeah, but rational behavior is not always the way things work in this industry.
David: I understand, and we’re not naive enough to think there may not be a response, but we’re not betting our company or betting the farm on this particular route. We have the Dorniers, we have pilots. This is not a very big risk for Vision Airlines.
Cranky: Let’s talk about Florida. When do you expect to be putting that out?
David: I imagine you’ll see an announcement in the next 45 days. We’re finalizing negotiations right now with various airports.
Cranky: This will be more along the lines of an Allegiant-style model?
David: Exactly. You’ll see us focus on point-to-point routes going from underserved cities to leisure destinations and also letting consumers buy additional services like a hotel room and a package or a car or various activities, golf, show tickets.
Cranky: Do you have a lot of those relationships set up today?
David: We’ll initially start with air seats to the destinations but we’re in the process of finalizing negotiations with a number of resorts and providing via the global distribution systems, provide the gateway for that product that we can distribute with air seats to the consumer and provide a great value. We’ve looked at the economics and the value we can deliver and we’re confident we’ll be extremely competitive.
Cranky: When we’re talking about the Allegiant model, what is it specifically that interests you most? Are you looking at a couple days a week, more frequency?
David: I think you’ll see us 3 or 4 days per week in the cities we’re gonna be announcing. It’ll be less than daily service initially. The schedules will be around the typical consumer travel patterns. A Sunday-Wednesday-Friday, Tuesday-Thursday-Saturday type of travel pattern fits with the destinations. The playbook is fairly easy to read. It’s easy to see what the travel patterns are, it’s easy to see what the other providers are doing. To emulate success is a fairly easy thing to do. Particularly when we feel like our cost structure and biz model puts us in a place to be more competitive.
Cranky: Are you looking to expand the fleet or just use the airplanes you have today?
David: Both. We’re going to start with the aircraft we have today. We have three 737-400s under contract. One’s in maintenance as we speak with the others in the next 30 days. We’re looking to add more airplanes in the spring.
Cranky: More 737s?
Cranky: Are you focusing more on the classic 737 because it’s lower cost or are you looking at the newer ones as well?
Cranky: For the moment, we’re looking at adding more classics. As we look into higher utilization routes, it’s not out of the question for us to add additional [next generation 737s]. You get some fuel savings, and a little more speed and more seats, but if you’re not using the airplane more than 180 hours a month, it doesn’t make sense to use the airplane.
Cranky: Are you looking at using the 767s in schedule operations?
David: Primarily we’re focused on charter with the 767s but it’s not out of the question. We’ve had some discussions already with other carriers to provide ACMI agreements. I think you’ll see the 767, we expect to have worldwide operating authority in the next 60 days and the next step would be to finish up ETOPS.
Cranky: Would you be looking at long haul low cost operations in the future?
Cranky: A lot of airlines have tried that, not in the US as much, and it’s been a tough nut to crack.
David: I think if you look at what Allegiant mentioned with respect to Hawai’i, the only barrier to us is ETOPS. That’s a very important thing to consider.
Cranky: You guys aren’t raising money for this, this is all being funded from existing operations?
David: Right. Unlike other airlines, we’ve been around since 1994. So we’re not solely dependent on the earnings from these commercial routes. We have ICE contracts, ACMI work, casino contracts. So there’s other revenue sources for the company besides limited scheduled service. That’s what I mean when I say I think we have the business model that gives us an opportunity to be out with a low cost fare because we’re not having to support our entire company from earnings from the commercial operations.
Cranky: In terms of the product, you say you have a good product. What is it like on the airplane?
David: One of the great things, unlike the regional jets, the Dornier 328 has a 31 inch seat pitch and it’s similar to sitting in a 737 seat. I’m a pretty big guy and I’m 6’2″ and I can tell you that I can’t hardly sit in a window seat on a CRJ whereas in a Dornier 328 I can sit in a window and it’s very comfortable. The good news for travelers is that the creature comforts onboard are much better than what you get on a CRJ. We are going to offer complimentary snacks and soft drinks. Until we go long haul we probably won’t get into the meal service business. We do have a couple of ideas that we’re entertaining that would be unique. We’re just in the preliminary discussions so it would be premature to talk about it.
And that was that. So, if anyone gets a chance to fly on these guys to Louisville, please let me know. Otherwise, I’ll be back to talk more about them when the Florida announcement comes out.