If you haven’t seen this, get ready for a treat. Air Gumbo may not have worked out (yet…), but now we have a new plan from those crazy Cajuns down in New Orleans. Ready for it? They’re giving a bunch of tax breaks in order to get an investment group to buy Frontier and create a big new hub in New Orleans. Sounds like a great plan, right? Riiiiiiiight.
Let’s just be blunt. Is this a good idea? No, it’s not a good idea. I’m not quite sure how long this plan has been around, but the NewFrontierAirlines.com website seems new. The Memorandum of Understanding with Ponchartrain Capital to bring an airline to New Orleans has been around for a couple years, but it seems like the focus on making that airline Frontier has bubbled up recently.
The plan is this. The money-people will buy Frontier from Republic (since Republic has said it wants to sell). They will keep the Denver hub but then also establish a new hub in New Orleans with a minimum of 125 daily flights and 180 daily flights within 5 years. Then these guys will get a bunch of tax breaks from the local government and everyone is happy.
Oh wait, nobody will be happy because Frontier will fail miserably and go out of business. Do you really want to do that to all those cute little animals? I don’t think so. (Ok, maybe Polly the Parrot. She’s just asking to get axed.)
Enough talk about how bad this is. What exactly is being proposed? Basically, the plan is to build up a major airline hub operating from a new, $2 billion terminal (red flag!) in New Orleans. This hub will connect all corners of the US as well as several points in Latin America. Part of this includes connecting New Orleans with the six other commercial airports in Louisiana three times a day. This will all be low fare service with no bag fees or change fees.
It seems to me that just about any airline (let alone this one) is going to have a mighty hard time surviving without that fee revenue, especially in a high fuel environment where costs are already elevated. But wait, there’s a plan for that.
…an increase in fuel prices will be passed on to the customer by NewFrontier.
Of course! Why didn’t I and every other airline on Earth think of that? Just pass on fuel costs. Piece of cake. That brings me to another quote from the Q&A section.
The reason that most airlines fail is that they never attain the scale necessary to succeed – or their business plan is flawed.
I’m going to go out on a limb here and say that the latter is by far the big reason for airline failures. And this to me does not sound like a sound business plan. Apparently Michael Boyd and OAGback consulting disagree with me, at least according to the website. [Update: I've received a note from Mike Boyd saying that he did a study in 2005 for a very different concept, and he states his position best. "They dishonestly are using my good name to imply that I support this project. To be clear, I do not."] And maybe they’re right. After all, the Q&A shows some shining examples of how this has worked before.
11. Are there comparable sized markets to New Orleans that have been successful as hubs?
a. Yes. Memphis, Salt Lake City, Nashville, and Cincinnati.
Hmm, well Nashville hasn’t been a hub in many years though they seem to be counting Southwest’s roughly 75 daily flights as a hub. (Nashville’s metro area is also 35 percent larger than that of New Orleans.) I would hardly call Cincinnati and Memphis successful with their ever-dwindling operations. (They also have 80 and 11 percent larger metro areas respectively.) But what about Salt Lake? They have similar populations with Salt Lake even being a bit smaller, and Salt Lake seems to work as a hub. So New Orleans can do it!
No it can’t.
Salt Lake has the good fortune of being the only real alternative to the best hub in the mountain west, Denver. There are a lot of cities in that region that don’t have connectivity to the rest of the world without Salt Lake and Denver so Salt Lake plays an important role.
New Orleans does not have that. New Orleans is a mere 300 miles east of Houston and 450 miles southeast of Dallas. Both of those are huge markets that are much better hubs. And Atlanta is only 425 miles east. Memphis (or what’s left of it) is also just 350 miles north. New Orleans is surrounded by better markets that are hubs today.
Does that means New Orleans can’t support more service? I won’t say that. I would imagine that the city could probably support more a little more service than it actually has. Still, it can’t support a hub. If anything, this plan would kill what is quickly becoming a newly-viable Frontier.