N79969 From , joined Dec 1969, posts, RR:
Reply 3, posted (12 years 2 months 3 weeks 3 days 6 hours ago) and read 1027 times:
Midway is around because the NC's congressional delegation saved it after it had ceased flying. AirTahiti also fly some ATRs as well.
To answer your question, small airlines are not viable businesses in my opinion. The airline industry is very capital intensive and there is very little room for product differentiation. The fixed costs are huge. Because of the amount of capital required to enter the business and low returns- the incentive for airlines is to get big. Since the rate of return is pretty much pegged, it makes sense to make that return on the largest amount of capital you can get. (Hope that makes sense)
There are also economies of scale and network effects that provide strong incentives for airlines to grow. The economies of scale are evident in airline hubs. The more airplanes and frequencies that are flown- the more fixed costs can be amortized.
Growing the network either organically or by codeshare lets airlines compete nationally and internationally. One of USAirways weaknesses is that they have such a weak presences outside of the Eastern US. They have a hard time competing in terms of destinations and frequencies with other airlines that have hubs in the east such as Continental or Delta.
In the short term, I think we will see small airlines come and go. In the long run, it is the big carriers that can hang through business cycles by virtue of their size and their network strength.
Mcdougald From , joined Dec 1969, posts, RR:
Reply 5, posted (12 years 2 months 3 weeks 2 days 6 hours ago) and read 971 times:
It helps if an airline has a niche. The no-frills carriers all started out small -- both Southwest and Westjet started out with three airplanes -- but grew rapidly because they filled a void in the market.
Here in Canada, there are also a lot of very small airlines that specialise in serving tiny communities and wilderness lodges out in the northern frontier, many of which can only be reached by air or canoe.
A lot of failed airlines are Johnny-come-latelys trying to imitate what another airline is already doing.