Topic of the Week: Where Will the Next Successful Start-Up Come From?

Miscellaneous

Sticking with yesterday’s theme that the US is a great place to run an airline right now, let’s turn the question to you. What do you think the next US-based successful start-up will look like? What area will it serve? What type of model will it use?

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37 comments on “Topic of the Week: Where Will the Next Successful Start-Up Come From?

  1. I don’t think we will see large carriers pop up. No more massive funded projects like JetBlue or Virgin America. There are simply better ways to invest capital and see returns faster. The US doesn’t have much low hanging fruit anymore.

    We will continue to see niche players like the new PeopleExpress or DirectAir type of operators. Perhaps some intra-California all-you-can-fly type of operation try to start again. Though, I am doubtful of long term viability of either model.

    I have no real insight into the cargo or charter markets.

    Perhaps the next thing isn’t really flying. I think short, point to point connections trying to fill the void of EAS and Great Lakes has opportunity–perhaps a bus operator should try their hand at these routes as they are can be much more price competitive, and for some of the routes, the timing isn’t too bad of a hit.

    The next great thing could be bringing corporate jets to consumers. Something like selling excess capacity or re-positioning flights to business customers in a more streamlined and compelling offering.

    Fun to think about!

    1. The success of Spirit has shown that there’s plenty of opportunity to grow in the U.S. domestic market. I believe NK has stated that there are 500 potential routes they could successfully begin, if they could. That’s a lot of low hanging fruit.

      If I was thinking of starting an airline right now, and I wanted to be in the ULCC space, now is the time to make my move…before NK gets any bigger and F9 solidifies their position.

    2. “””””Perhaps some intra-California all-you-can-fly type of operation try to start again. “””””

      Funny you should say that Noah since Surf Air just announced an order for 15 new planes with options for 50 more. I can’t see that type of operations really working on a large scale.

    3. I have a hard time seeing any “Uber for air travel” working, and many of them have already failed, because the availability is not there positioning-wise amongst the private jet fleets, and at the end of the day I don’t think there’s enough people, at the same time, willing to travel on a “spare” seat on the schedule of corporate/private jets. The advantage of private jet cards/fractional ownership is having a plane on demand, making the premium worth it. When you remove that advantage, but are not able to supplant it with rock bottom rates LOWER than commercial flight, it is unlikely to work.

  2. +1 for intermodal connections on the bus. It would entice a lot more people to book buses to the plane because the connection would be guaranteed if either leg is delayed.

    Buses are one of the cheapest modes of intercity travel and probably the best way to serve small towns. Direct airport connections are needed however.

    CO did this for a while with a bus service to Beaumont, TX from IAH.

  3. Someone new would have to come up with a regional operation where there isn’t one, or some niche market in major cities. And they would have to stay away from doing what everyone else does.

  4. More operations like Surf Air and Jet Suite. We flew SFO to LAS lat minute on Saturday. I think we paid $550 each round trip, on Southwest.

    For that coin I would have happily flown on a Sabb like Silver Air has, or whatever Surf Air is flying.

    Scheduled, inter-cal (and Vegas) from small, private airfields, where you don’t have to deal with the hassle and bustle of the giant commerical airlines. That’s the next upcoming thing in commerical avation.

    1. “””””Scheduled, inter-cal (and Vegas) from small, private airfields, where you don’t have to deal with the hassle and bustle of the giant commerical airlines. That’s the next upcoming thing in commerical avation.””””””

      Jeremy I almost said something like that. My city which if you look at a map of the bay area is in the center (as its billed) and has an airport. It gets private jets and the National Guard used to have a base there and flew in C130’s. During the 50’s a prop airline flew between Oakland and Hawaii and would sometimes use the airport in my city. So I’ve thought why can’t some airline come in and start service to Tahoe/Reno area, S. California, etc. Granted jets that could fly to Hawaii can’t come here (longest runway is 5,694FT), but there is a lot of places you could fly to and not have to deal with going to SFO or OAK. Would save a bunch of time and places like LAX area/LAS/SAN/RNO/TVL would have enough people to use the service. I’m sure that could be done else where in the USA also.

    2. There is California Pacific Airlines that flies out of Carlsbad to destinations in California and the Southwest. The only problem is that certification is taking forever which means there employees have been furloughed and their ERJ-170 returned to Embraer. Sadly the airline will most likely not get off the ground.

    3. I definitely think that there is a substantial (but still niche) market for air service from secondary airports in metro areas with high air travel costs.

      For example, Ultimate Air Shuttle operates out of Cincinnati’s Lunken airport (one of the main airports for private jets and private planes, and much more convenient than CVG), offering $400-$700 R/Ts to Chicago, Charlotte, and NYC areas, at schedules that allow a Cincy-based biz traveler to still eat breakfast and dinner at home, and to avoid the $$$ of a hotel stay. And yes, sadly those rates are pretty competitive to taking a RJ from CVG to one of the same cities…

  5. Well, there’s always Baltia!
    25 years in the making…actually just about ready to start.
    .no really they are…..
    always touting the route JFK to St. Petersburg Russia,
    and just in time for the Ukraine issue.

    Suddenly they change to “Non Stops to Europe”.

    They may start, but I think their demise will be a little faster in fruition than their first flight!

  6. Just some random brainstorming, but I’m curious if one of the next successful carriers is varied more in their method.

    Given the mess that is EAS right now I’m curious if there is room for innovation in the methods used, for markets where land travel really isn’t an option. Perhaps something along the lines of:
    1. Bringing back milk runs.
    2. Flying at a lower altitude to make landings and takeoffs not take as long in the approach.
    3. Having the safety video in a hold room on the ground so turns can be lighting fast.
    4. Skipping a stop if there isn’t anyone to pick up or drop off. (This’d require reservations 24 hours in advance.)
    5. Codesharing with every airline out there. (Well, except DL, they’ll want exclusivity.)
    6. Start and end at a different airline’s hub to put connections on both sides. (Say ORD-X-X-X-X-SLC or something.)

  7. Won’t high speed rail in CA limit additional intrastate service?

    Here’s a novel idea: how about starting a domestic airline with less seats that is comfortable to fly? I am not talking about the transatlantic service that sprouts up occasionally with jets retrofitted with 40 luxury seats. I am talking about taking 160 seats down to 120 and making comfort a priority. It wouldn’t have to be luxurious and loaded with amenities – just very comfortable seating. It certainly would be in contrast to the way things seem to be headed. I think there is a market for that and many customers would pay $20-30 more one way for comfort.

    1. 160 seats down to 120 and then asking everyone to pay another $30 isn’t going to cut it. Say each seat at 160 is $100 = $16,000 > 120 seats at $130 = $15,600. Sure you can raise the ticket price to where it would be more profitable but as many have tried before, the model doesn’t work.

      If anything I see more ULCC. As we all know, WN really isn’t cheap anymore. Spirit is and doing quite well. I see more of that happening. It doesn’t take much to pick a moderate sized city, lease a few 737’s, and start flying to Florida and Mexico. SY does it relatively well from MSP and this is a fortress hub for DL. I’d think someone has enough cash and is foolish enough to start a similar operation in a place like Cleveland, Memphis, etc.

        1. Before that they found out that travel agents will most likely sell a flight on the first screen. They did wonders with Sabre to get lots of extra revenue during the 80s and I’m sure that haloed over a bit to the 90s.

    2. Many people pay a lot more than $30 to have that feature right now — it is called first class seating. Being a large guy that doesn’t fit in a coach seat if I could get a decent seat for $30 more I would jump on it whenever I need to fly. Right now the premium over coach is at minimum $1000 round-trip to fly from GRR to SFO or OAK (and that sometimes includes a prop-plane flight to ORD crammed into a too-small seat). I like the idea to have an airline with decent seating for a small premium, it would save the over 300 pound segment of the flying population a lot of cash.

      Profitability of a all-decent seat airline is questionable, unfortunately — especially at only $30 more than current coach prices. I think if it worked at all the additional fare would be in the neighborhood of $200-$300. Unfortunately the super-size population that actually would avail themselves of this service (which would be mostly heavy/tall people as we would be saving $700-$800 on a cross-country flight) is small, the normal flying public would not even consider such an airline at the necessary extra fare as they fit in coach seating just fine.

  8. Close to home for me DL has a couple highly profitable routes flying people up to the booming North Dakota oil region. The only options come through MSP and those flights are full and NOT cheap.

    Knowing natives from the region they bemoan how the fares have spiked, due to demand of course. Many have said running a charter up there for Christmas would be cheaper. Well…thinking along those lines…many of the oil workers up there are from places like TX. Why not wet lease a 737 or similar and run routes back and forth between TX and ND for oil workers. If the avg. fare on DL is $600+ for the route with connections you could probably get at least that for a non-stop route to DFW or IAH, etc. I wouldn’t build an airline around it but seems a money making opportunity on top of a boom.

  9. Could there be a start up that would be willing to take on WN point to point in Texas markets. Before every carrier was afraid to because WN would “squash them like a bug”. Now that WN has the highest labor cost it could create a great opportunity for a start up.

    1. The problem there is that to a large extent, you wouldn’t be dealing with WN, but with the even larger behemoth called AA. Much of the traffic generated would be Dallas or Houston. You could perhaps spin up a decent-sized competing operation at HOU, but in Dallas, DAL is gate-capped, and unless UA is willing to relinquish its two gates (doesn’t seem likely), any new operation would have to go through DFW. I’ve said here and on other sites that the “convenience” factor of DAL is overrated, but to the extent that WN will defend its turf, imagine having to deal with both them at HOU/AUS/SAT and AA at DFW. I just don’t see that happening.

  10. I could see a new EAS type of Airline in the West flying from DEN, PHX to places like Los Alamos, NM or Las Cruses, NM. Speaking of Los Alamos the question is now when will Cranky write a report on how the new Subsidiary routes from Last Year that he either hatted or liked are doing. Now if that does not happen I do see like most other people some sort of inter California Airline poping up just because they could offer cheeper flights compared to UA AA or DL and more direct options such as KFAT-KLGB if no airline is currently flying that which I bet I am wrong

  11. Is the hub and spoke model going to work forever? Maybe we are getting close to where competition is going to be exclusively point-to-point, each major competing with each other. The end of the hub-and-spoke system.

    Then, finding the right aircraft, finding enough qualified, adequately-paid pilots to fly them, finding some enlightened managements that know what customers want, what customer service means, and what honest and open competitive marketing looks like, wouldn’t there be many, many of these outlier, former “spoke” communities begging for such service? Add in those that were on the EAS subsidy.

    Sort of like the local service carriers of old, each carrier independent and not a code-share of someone else, not opeating milk-runs, rather pure connecting operators with the airport of the major point-to-point service. Point-to-point complementery service, not in competition with the majors. Airports designed to servce competitors, and the feeders into the majors. Airport operators no longer having to design gates for a hub, that, even with the aiports’ best efforts which too often go to waste because the hub airline just decides to up and leave.

  12. Does the USVI count? The need for a low cost airline in the Caribbean could be a good opportunity. You just have to navigate the bureaucratic red tape of the island nations.

  13. The “new” Eastern is the most likely new start-up. Will be charters at first, then scheduled. It will be interesting to see their scheduled plans for MIA. Outside of some off-peak JFK slots they’re pretty much shut out of the NYC market unless the do the outlying airports of ISP and SWF. MIA is high cost, but is probably begging for LCC service so there may be some viable routes new EA can serve.

    Any new start-ups may do well to take a page from the old Southwest model of using secondary airports like the aforementioned ISP. There are some airports near medium/large cities that have some potential: ISP of course, GYY when the runway work is done, ONT is a shadow of it’s former self and BUR is becoming pricey. PIT is sitting on a ton of empty gates as is STL, but WN hasn’t done much with PIT while STL is one of their “not-a-hub-hubs”. OAK and SJC have seen their heydays and could support some increased low-fare service. PBI sits in the shadow of MIA and FLL and the “new” PeoplExpress chose that as their South Florida station, possibly to avoid the competition. ABQ has lost a load of WN flights. MEM has poor O&D so that’s probably a low probability.

    And of course there is the ever-elusive long-haul LCC market. Norwegian’s making a bit of a splash on the European side, I wonder if an Allegiant-style long-haul operator could make a go of it from the US?

  14. Although not to the extent of what some other commenters may be envisioning, Horizon has seriously increased its intra-California flying the last couple years.

  15. If I had to guess, the next “new frontier” in domestic aviation will be a ULCC that provides a friendlier customer experience than Spirit – like an IndiGo in India. They’ve been moderately successful by peddling friendly FAs and ground staff, good frequencies, and on-time planes, even though their fees are just as obnoxious as NK (e.g. a Rs. 200 “convenience fee” for booking and even changing a flight online). Frontier tries this model but just doesn’t seem to have the bandwidth for some reason, and with Indigo Partners now in charge, seems to be becoming more like NK every day (witness the big devaluation of the loyalty program announced last week). Personally, I’ll find a way to work around the fees of a ULCC, but won’t put up with surly employees or crappy on-time performance – I can fly AA/UA/DL and at least get decent FF benefits for that.

    I also like the idea of one of the legacies (or Southwest) piggy-backing with an inter-city bus service to serve small/EAS markets. Markets like SBN or small airports in lower Michigan come to mind. Poor weather and ATC congestion makes the RJ/turboprop service to ORD unreliable, a problem that is probably only going to get exacerbated by the upcoming rebanking by AA and UA that will push more traffic into narrower time periods. Why not switch to a bus service which can still operate (albeit slower) in poor weather, and won’t be affected at all by ATC. Heck, you could even have passengers clear security and check baggage through at originating small airport and deliver them straight to the secure side of the terminal at the hub (just thinking out loud on that part – no idea if that’s even feasible in practice).

    1. I think that exactly that was attempted at Fort Collins/Loveland into DEN. If there’s passenger demand for it, the regs are okay with the TSA checkpoint being a few hours’ bus trip from the actual gates.

  16. We’ve discussed this several times, Brett. Family Airlines is going to be the next big thing, I guarantee it.

    I mean, how can a 742 with three fork catering, free bags, and the like running LAX-LAS five times a day *not* make money in this excellent climate of ours?

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