N79969 From , joined Dec 1969, posts, RR: Posted (11 years 8 months 1 day 14 hours ago) and read 2628 times:
Delta, United, Continental and a plethora of other carriers are contemplating or have experimented with low-cost carriers within their own system. I was wondering about the opposite scenario.
What if a cash-rich low-cost airline like SWA setup a separate full-service airline to operate overseas? SWA would hold 100% of the shares of new company but the two carriers would be functionally separate. SWA would provide the domestic-feed (or hinterland service) for this carrier. The new carrier would be entirely separate from SWA in terms of operations, labor, and so on. None of the high costs associated with complexity would afflict SWA's core operation. (mixed fleet, flag and domestic flight and duty rules for crews, and so on)
The only integration that would in distribution and sales in which the two carriers would sell tickets on each other flights, share FF programs, and so on.
Has this concept been explored? Would it be viable? In my armchair view of the airline industry, it seems like it could work because they will have the domestic feed. The new carrier would compete in oligopolistic (or otherwise regulated) markets in many cases thus almost guaranteeing a certain rate of return. It could pick up traffic from other domestic carriers of course. Resources would not be drained battling other carriers in domestic markets. Another way of looking at this idea is taking the regional airline model and turning it inside out. An 'international Air Wisconsin' so to speak would operate on intercontinental hauls exclusively at a fixed cost per flight/pro-rata per pax.
Has this concept been explored? Would it be viable?
Slawko From Canada, joined May 1999, 3799 posts, RR: 9
Reply 4, posted (11 years 8 months 1 day 10 hours ago) and read 2495 times:
Why if so many major carriers of the world are adopting the LCC model for their network would existing LCC's even think of adopting an old and failing model??? Makes no sense...if anything I would say their is more chance for the southwests of the world to launch Low Cost International services, and even that is a real long shot...
"Clive Beddoe says he favours competition, but his actions do not support that idea." Robert Milton - CEO Air Canada
N79969 From , joined Dec 1969, posts, RR:
Reply 6, posted (11 years 8 months 1 day 10 hours ago) and read 2459 times:
Fair question. The concept I have in mind does not involve a new carrier with an integrated domestic and international system with hubs and spokes. It would not really be the same old and failing model. Rather it would be a full-service point-to-point flag operator that is fed by Southwest (for example) and in turn could feed Southwest. The hypothetical carrier would fly limited routes that could support point to point service. (BWI-London, MDW-London and so on.)
The carrier would be like a regional feeder for SWA. (except of course they would be using big aircraft over long distances). The new carrier would get a fixed amount per flight or pro-rata fare per passenger fed by WN. By the way, I think this idea really would not be valuable until the low cos in the US reach a saturation point domestically and are looking for ways to grow. This could be one way to grow.
I don't think the economics of longhaul and ultra-longhaul low cos would work. I think over very long stages, the cost advantages of low cos disappear: quick turnarounds would not matter much, incremental improvements in aircraft utilization would not matter much, and pax do prefer "frills" like food, movies, and service on very long flights.
I think the big network carriers are acting like lemmings in their rush to set up LCCs. I think they are setting them up because they cannot think of another way of competing with Southwest et al.
N79969 From , joined Dec 1969, posts, RR:
Reply 7, posted (11 years 8 months 1 day 10 hours ago) and read 2450 times:
Good point. But what I am suggesting is an operationally separate carrier. After this airline comes into existence WN would still be all-domestic, all-coach, and pure 737. The new airline would be wholly owned by SWA, the operations of the two carriers would be wholly segregated except for sales and ticketing.
Airworthy From , joined Dec 1969, posts, RR:
Reply 9, posted (11 years 8 months 6 hours ago) and read 2342 times:
>>The new airline would be wholly owned by SWA, the operations of the two carriers would be wholly segregated except for sales and ticketing.<<
That still would be too tough for a LCC.
Just think of the complexities you will face if you decide to do a BWI-LGW run.
1. You need to have special ticketing procedures for an international flight.
2. You have to obtain those international slots and gates.
3. You have to hire reservation staff, ground handlers, aircraft mechanics and other stuff tht will be based in a whole other country with a whole other set of rules.
Even you outsource all of this, it still will not be free and it still will take time, and what benefit will you get?
Yeah, you'll get some high yield pax, and maybe a descent profit on International runs, but your domestic side of the company (SWA) will have to sacrafice in the short term to help grow the new company.
I say you will open up a whole new can of worms if you start something like that. But, good companies are always improving and changing to meet the demand of customers. If in a few years there is an increase in demand for more intl tickets, or a better economy means more F class passengers, then the change might be beneficial.
But, as of right now, if I was SWA I would stay right where I am.
Cloudy From , joined Dec 1969, posts, RR:
Reply 10, posted (11 years 8 months 3 hours ago) and read 2317 times:
Southwest did once try a codeshare with Icelandair on some flights to Europe. You could fly from a FEW Southwest airports to BWI and then to Rekeyavik and then on to Luxembourg. It must not have worked to well, since it did not survive. My guess is that not enough people wanted to follow this kind of convoluted routing to make it worthwhile, even if WN/Icelandair were just selling off excess inventory.
They had refreshingly honest advertising about this on their website -
"Fly Southwest to Europe. Sort of."
Icelandair is the closest thing to an international lo-co I can think of. Virgin Atlantic would be next. If one of those two can pull off direct flights from major European or Asian destinations to one of Soutwest's largest stations, I can see something like this happening again, perhaps with more success.
I can also someday see WN making a run for the Mexican border and or the Carribian. Or effect some sort of link between its system and WestJet in Canada. But this would be far in the future. These things will have to wait until WN'S conventional expansion possibilities are exhausted. And that may not be for awhile. They can keep themselves busy for a long time adding long-haul flights and opening new US cities.