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Is It Possible To Have A Contracted Airline?  
User currently offlineFalstaff From United States of America, joined Jun 2006, 6098 posts, RR: 28
Posted (4 years 7 months 3 weeks 1 day 9 hours ago) and read 4185 times:
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After watching a large number of RJs flying over the house I began to think about the possibility of a airline that owns no planes, has no pilots, no FAs, no rampers, no agents, etc. There are contract companies that do or could do all of that stuff. We already have RJs flying around in the names and colors of major carriers. Many travelers don't know or care that their Delta flight (used as an example) is on another carier using the DL brand. I am by no means advocating this kind of thing and I think it should never happen, but could it happen? Could a major airline or a start up carier contract out all of its services and essentially be a paper airline? It has been done in other industries. The Pabst Brewing Company no longer owns any breweries and has only around 100 employees. Nearly every part of their business, except for administration and marketing, is contracted to other companies. Most of their customers have no idea they operate like that and most probably don't care. Car Manufacturers, at least US companies, contract out a great deal of engineering and in some cases even build cars or parts under contract for other companies.

[Edited 2010-01-29 05:34:54 by falstaff]


My mug slaketh over on Falstaff N503
11 replies: All unread, jump to last
 
User currently onlineBraniff747SP From United States of America, joined Oct 2008, 2983 posts, RR: 1
Reply 1, posted (4 years 7 months 3 weeks 1 day 8 hours ago) and read 4118 times:

I know for sure tht there was an airline trying to start up, like that... I think it was JetAmerica, if my memory serves?


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User currently offlineJQFlightie From Australia, joined Mar 2009, 978 posts, RR: 1
Reply 2, posted (4 years 7 months 3 weeks 1 day 8 hours ago) and read 4108 times:

thats how my airline works... Comapanies own the aircraft and lease them to us, the cabin crew are owned by a different company and contracted to the airline, ground staff are contractors, catering, ramp services... i think you will find that most LCC's have this model..


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User currently offlineDLPMMM From United States of America, joined Apr 2005, 3592 posts, RR: 10
Reply 3, posted (4 years 7 months 3 weeks 1 day 7 hours ago) and read 4063 times:

Hooters Air was run that way. The planes and personnel (except for the Hoooters Girls) were all subcontracted from Pace.

http://en.wikipedia.org/wiki/Hooters_Air


User currently offlineMandala499 From Indonesia, joined Aug 2001, 6858 posts, RR: 75
Reply 4, posted (4 years 7 months 3 weeks 1 day 7 hours ago) and read 4042 times:

I think the late "goodjet" in Sweden was one... it didn't even have an AOC.
We call these "virtual airlines/carriers"

There's one here, Transnusa ( http://www.transnusa.co.id/ )... it doesn't have an AOC, it has a management and sales force, but the rest, are outsourced. Airplanes come from Trigana and Riau Airlines, with sales also with Mandala. Anything after you purchase your ticket in flying with them from A to B, is outsourced!

Mandala499



When losing situational awareness, pray Cumulus Granitus isn't nearby !
User currently offlineItalianFlyer From United States of America, joined Nov 2007, 1099 posts, RR: 2
Reply 5, posted (4 years 7 months 3 weeks 1 day 7 hours ago) and read 4024 times:

In the USA, other contract 'paper airlines' are Myrtle Beach DirectAir....Western (II) and the MIA-HAV shuttle on Vision. As stated above, Jetstar is an example in Oz, JIN in Korea and what is left of VARIG in Brasil.

Oh...another example was UPS's adventure in operating pax charters with 727's from SDF,PIT,CVG and IND (i think) in the late 90s/very early 00s.

[Edited 2010-01-29 07:17:59]

User currently offlineMetJetCEO From United States of America, joined Jun 2007, 412 posts, RR: 1
Reply 6, posted (4 years 7 months 3 weeks 1 day 6 hours ago) and read 3925 times:

In my opinion, that is the only way for a startup to go. Though they pay a higher cost per hour they dont have to maintain maintenance ops, crew related functions, and can even outsource ground ops. Essentially they become a tour company that oversees reservations and the airport staff.

In addition, they can opt to book flights as a Part380 operator which alleviates a great deal of approvals, and funds needed to start an operation.


User currently offlinePHXMKEflyer From United States of America, joined Nov 2003, 291 posts, RR: 0
Reply 7, posted (4 years 7 months 3 weeks 1 day 5 hours ago) and read 3864 times:

Midwest Airlines.

Since the beginning of November they have no YX pilots, FA's, dispatchers, or crew schedulers. All the YX planes that now say "Midwest" on them are operated by Republic crews. Even the CSR's and rampers are no longer YX employees either, as of Jan. 1 they are now part of F9.

So essentially, yes, it is possible to have a contracted airline.


User currently offlinePanHAM From Germany, joined May 2005, 9376 posts, RR: 29
Reply 8, posted (4 years 7 months 3 weeks 1 day 5 hours ago) and read 3853 times:

The term "contract carrier" is actually given to those who lease out equipment to other carriers. Atlas is such a contract carrier and there have been hundreds of contratc carriers over thze decades. Nothing prevents them from being a scheduled or charter carrier on the side.

The annual hadj is based on contract carriers leasing out equipment on an ACMI base. More and more, sales is contracted out even by large carriers to regional GSAs (general sales agents) for cargo as well as for passenger. Hardly any airline handles its check - in, airport handling, cargo handling all by themselves, it is usually contracted out to handling agents. Maintenance is another field that can be contracted out.

This can work in both directions, of course an airline could contract out simply "everything" except management and skeleton staff.

In shipping, ocean cargo, there is a term NVOCC which stands for Non Vessel Operating Common Carrier. An NVOCC can issue negotiable documents without owning ships.



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User currently offlineJA From United States of America, joined Dec 2004, 564 posts, RR: 1
Reply 9, posted (4 years 7 months 3 weeks 1 day 1 hour ago) and read 3666 times:



Quoting MetJetCEO (Reply 6):
In my opinion, that is the only way for a startup to go. Though they pay a higher cost per hour they dont have to maintain maintenance ops, crew related functions, and can even outsource ground ops. Essentially they become a tour company that oversees reservations and the airport staff.

In addition, they can opt to book flights as a Part380 operator which alleviates a great deal of approvals, and funds needed to start an operation.

With the right people...yes. I have finally been afforded an opportunity that is pretty close and I am going to run with it.


User currently offlineMacsog6 From Singapore, joined Jan 2010, 531 posts, RR: 0
Reply 10, posted (4 years 7 months 3 weeks 1 day ago) and read 3584 times:
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The issue with using contracted carriers is the margin on margin question that plagues all contracted services. If something costs $5 and I want to make a profit, I have to sell it something over $5, say $6. If a contracted carrier sells at $6, the purchaser would then have to mark up the $6 to a higher price, add in the costs of running the business (advertising, reservations, regulatory, etc.) which would make his costs higher than $6, say $8 with overhead and profit included.

Then someone else comes along and says, if I had my own planes, I can cut out the mark-up. Thus, he can sell for something lower than the $8, in this example it would likely be $7, and in a market where so many people see the product as fungible, they flock to the lowest price.

The best way to make this work is for the contracted carrier to have several customers that he can spread his costs among - and that has yet to happen and few people are willing to wait, tying up that much capital, hoping that other cusotmers come along.

The business model to do this is very dicey.



Sixty Plus Years of Flying! "I fly because it releases my mind from the tyranny of petty things." - Saint Ex
User currently offlineGemuser From Australia, joined Nov 2003, 5659 posts, RR: 6
Reply 11, posted (4 years 7 months 3 weeks 21 hours ago) and read 3440 times:



Quoting JQFlightie (Reply 2):
thats how my airline works... Comapanies own the aircraft and lease them to us, the cabin crew are owned by a different company and contracted to the airline, ground staff are contractors, catering, ramp services... i think you will find that most LCC's have this model..

I don't think JQ is quite what the OP was referring to. JQ does have an AOC (operations) and COA (maintenance), so while JQ then contract out all those services you mentioned, they are legally responsible for putting it all together. There are others, see reply 4, that don't even have an AOC/COA, they, in effect, contract AOC/COA services from some one else.

At the extreme end as an example of an "airline" that doesn't really exist is fellow QF Group member QantasLink. It's a planning, marketing, PR group within QF, all operations happen on the QF AOC/COA. It is interesting that both extremes, fully certified legacy airline, heavily contracted LCC and non existent name only airlines exist in the one group. I guess it shows just how flexible you have to be to run a successful airline business these days.

Gemuser



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