Early Air
Topic Author
Posts: 624
Joined: Wed Jan 17, 2001 6:53 am

Small Airlines..wave Of The Future?

Mon Jul 22, 2002 3:59 am

As a lot of you probably know, the fastest growing airlines are small, domestic, low-fare airlines that operate one type of aircraft. Jet-Blue became a large airline in no time. The same with Southwest. Both of these airlines generate a lot of profit. Unlike any other major airline, they almost never have a quarter where they report a loss of funds. Even after September 11th, when basically all airlines lost a lot of money, I believe WN and Jet Blue reported income. Is this the wave of the future? To me it is obvious this is where the money is. Do you think we will ever see an airline like WN or Jet Blue operating nothing but Trans-Atlantic flights, perhaps a shuttle service between JFK and LHR? I think it is much more promissing than the current setup. Whats your opinion?

Rgds,
Early Air
 
AirOne
Posts: 589
Joined: Mon Apr 03, 2000 4:41 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 4:05 am

There are also other small US airlines still making money. I know Frontier is doing well, and Vanguard, and Air Tran has taken a bad hit either. So, I guess what I'm saying would help support your hypothesis. But I'm not sure about the international stuff.

AirOne
 
sk945
Posts: 424
Joined: Thu May 09, 2002 6:28 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 4:06 am

Yes, I guess it will come a low-fare airline with intercontinental traffic. But they will after some years of earning, create businessclasses etc similar to today's mayor airliners and all will go back to normal. Hopefully they still sales lowfares tickets in economy. But my guess is that the low-fares airliners of today will be mayors in a couple of years or they will disappear.
 
Early Air
Topic Author
Posts: 624
Joined: Wed Jan 17, 2001 6:53 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 4:08 am

I agree with SK945 about the lowfare airlines being the majors in a couple of years or disapearing.
 
gr8slvrflt
Posts: 1452
Joined: Wed Jan 30, 2002 10:53 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 4:09 am

Most definitely. The major carriers have a cost structure that will be near impossible to extricate themselves from. Earlier attempts at low-cost transatlantic flights by Laker and PeoplExpress were blown out of the water by the majors' yield-management expertise but today's small airlines are more savvy, better financed, and have more positive reputations.
I work for Southwest, but the views expressed are my own and do not necessarily represent those of Southwest.
 
delta-flyer
Posts: 2631
Joined: Mon Jul 30, 2001 9:47 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 4:14 am

I think the growth of small airlines is limited. They operate in niche markets that are attractive to a limited number of customers.

Many business travelers need airlines that offer frequent daily departures from their home bases and can (with partners) take them anywhere in the world, and offer perks (FF miles, airport lounges, upgrades) the small airlines can't match.

That's why I fly Delta, as do most people in my office here in Jackson, MS. Our California folks use UA and AA, while our Cleveland folks use CO and Minneapolis folks use NW - for similar reasons.

Pete
"In God we trust, everyone else bring data"
 
Leo
Posts: 308
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RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 4:20 am

Early Air:

And now for somebody with a different opinion.....Low-cost 'long-haul' will NOT happen, because it already exists !!

Simple aircraft economics dictate that the seat mile cost advantage LCC's have over major network carriers is lost when flight routings are extended to over 1000nm (on average).

For this reason Southwest concentrates on short-haul only, with a few exceptions. JetBlue flies quite a bit transcon but makes real money on short-haul. easyJet's London-Athens service is at the limit of its cost advantage over BA and others.

Long-haul seat mile yield & cost on widebody aircraft is already near rock bottom, in this segment LCC's will not make a difference. You also need very dense long-haul point-to-point markets, of which few exist. Reason why we will not see it happen in the near future.

 
sk945
Posts: 424
Joined: Thu May 09, 2002 6:28 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 5:10 am

Yes, I guess it will come a low-fare airline with intercontinental traffic. But they will after some years of earning, create businessclasses etc similar to today's mayor airliners and all will go back to normal. Hopefully they still sales lowfares tickets in economy. But my guess is that the low-fares airliners of today will be mayors in a couple of years or they will disappear.
 
sk945
Posts: 424
Joined: Thu May 09, 2002 6:28 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 5:11 am

Pls ignore my second mess. It's the same as my last one. My PC acted real strange and the mess were posted again.
Sorry!
 
Guest

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 5:16 am

I'm waiting for BR to come in here and praise the all mighty AirTran Airways and to say negative things about American Airlines.

But sticking to the topic, I sure hope that Small Airlines, like AirTran and National are NOT the wave of the future. IMO, the world of air travelers needs an airline with a global presence such as British Airways, American Airlines, United, and JAL just to name a few. Small airlines usually have just one hub, and are great for flying short distances, but when you need to make a long trip from a country to another country, a big airline with PTV's, huge frequent flier programs, and in-flight meals is what you need IMHO
 
DELTA777
Posts: 637
Joined: Tue Mar 07, 2000 6:34 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 6:07 am

I hope low fare airlines are not the wave of the future because a majority of them have bad service and I feel that they make flying closer to mass transit rather than a fun way to travel. There are a few ones that are ok, like jetBlue and Southwest. I also don`t think that they will start long haul flights. low fare airlines try to stick to one fleet type and try to focus on short range flights. Take AirTran for example... to start ATL-LGW flights they would likely have to get a B767 and serve meals, movies and other amenities that they do not have now, or want to have.

D E L T A 7 7 7
 
jessman
Posts: 1457
Joined: Sun Jul 08, 2001 1:11 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 6:32 am

Small airlines usually have just one hub, and are great for flying short distances, but when you need to make a long trip from a country to another country, a big airline with PTV's, huge frequent flier programs, and in-flight meals is what you need IMHO

Before I go on into the body of my statement I would like to clarify that we are talking about domestic mainline service, as opposed to regional traffic which in today's market is yet another animal altogether.

The problem is that the small airlines are SO good at flying the short distances that the large airlines are having trouble making money in the short to medium haul market and are therefore losing money at an obscene rate. At some point the big airlines will have to examine their roles. If they drop out of the short to medium haul market they would lose the feed that their international operations depend upon. They could use regionals for just the domestic feed, but regionals have limitations (range, seating, etc.) that could make them not perform so well against the LCCs.

My guess is that the current big airlines will shrink in the domestic market and focus on international and long-haul domestic service, relying on Low Cost Carriers to provide the domestic feed. Sort of like Pan Am did before regulation when they were not allowed a domestic network. Airtran already has a Ticketing and Baggage agreement with Delta, so they could conceivably be feed for Delta at Atlanta. Although they have to re-check their bags I have heard of people booking JetBlue to JFK then transferring to their international flight, so these things are not unheard of.

But I do not think there will be a dedicated Low Cost Carrier for international service, as previously mentioned it is done about as inexpensively as is technologically possible today. Also, there is proportionally a much larger segment of society that WANTS to pay for Business or First Class international service than wants to pay for domestic first class service, so the all coach layout is not as economically feasible on international routes as domestic.
 
Jetstream 61
Posts: 111
Joined: Wed Jan 05, 2000 5:10 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 6:54 am

This has been one of the more interesting topics I have read over the past several years, and after several years, I have decided to get into this again.

Now, as for low cost operators, I believe they will remain low cost domestic and business operators because that is their niche. Large carriers, on the other hand, are out to make money in the vacation/long haul market, which is where they operate best with their larger aircraft. Together, the two markets work hand-in-hand to get people what they want and get them where they want despite the sometimes fierce competition and pricewars.

Every airline was once a small, lowcost, alternative mode of transportation. Low cost airlines can not dominate the market because they will begin to add business class, cramped seats, and other cost cutting incentives to make as much profit as possible, thus making them large carriers. Personally, I feel that it is near impossible for low cost operators over run the airline market

Just my 2cents =)
 
Early Air
Topic Author
Posts: 624
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RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 7:36 am

I think that with the ideas of the low-priced airlines today, an international one would do much better than People Express. However, we would still need the big airlines. A lot of time times its nice to be able to sit in first class and have great food-serivce. No way would i like that get go away.

Early Air
 
jessman
Posts: 1457
Joined: Sun Jul 08, 2001 1:11 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 8:32 am

Every airline was once a small, lowcost, alternative mode of transportation

Not exactly. I concede that every airline was onece small. Every airline was indeed an alternative mode of transportation. I will in fact add to your statement and say that every airline started with short to medium haul service. Unpressurized propeller driven aircraft lent themselves nicely to that; but most of the cartel started as VERY high cost airlines. The early passenger aircraft cost a small fortune, and held very few people, therefore fares had to be high to offset costs. This wasn't really a problem because they were under the regulation of the federal government. The government gave them the authority to fly their routes and the Government set the fares. Flying at the time was a priviledge of the rich and continued to be until the time that the government gave the airlines the authority to make their own routes and set their own fares. At that point competition kicked in and fares went down accordingly.
 
737doctor
Posts: 1291
Joined: Mon Mar 19, 2001 4:52 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 10:12 am

I wish I knew. As a Southwest employee, I hear of rumors all the time about possible routes to Mexico or Hawaii, but I discount virtually everything I hear. People like to talk and everyone knows how rumors take on a life of their own. I doubt that we will see anything like that with SWA for sometime. There are just too many expansion opportunities for us domestically that we have yet to explore.

I praise jetBlue for their own unique approach and it will be interesting to see how their business strategy plays out over the next few years, but I also doubt they will go international anytime soon. Like Southwest, they have lots of room to grow here in the States. They key is careful, calculated growth.

Just for clarification, here are some points to remember:

Southwest is already a major airline. True we don't fly internationally, but the true defintion of a major is an airline that brings in one billion dollars of revenue annually. We reached that status in 1989.

jetBlue is hardly a large airline. Southwest has over 13 times the number of aircraft. It's true that jetBlue had had remarkable growth in the past two years (much more than Southwest at that point in their history), but Southwest grew up in the age of regulation and had to contend with the Wright Amendment.

Southwest did report a profit in the 4Q of 2001. I don't know how jetBlue fared. Maybe someone else can enlighten us...

Regards.


Patrick Bateman is my hero.
 
jcxp15
Posts: 989
Joined: Fri Jun 29, 2001 12:05 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 10:24 am

jetBlue blows any other airline out of the water, and I don't think anyone can deny that. They offer cheap fares, DirectTV in each seat, which are all leather, and they serve great snacks. The question is "Do I want to fly an airline which offers all this, or would I rather fly one in which I will be cramped in an uncomfortable economy seat?". Any smart/normal person would pick the first statement over the second one just based on the statements (I can understand ppl picking the main carriers for miles etc... but not for comfort or service). Unfortunately jetBlue et al do not fly to many destinations which limits their use for every voyage.
The low fare carriers can almost do whatever they want to. Since the carrier usually is smaller, still growing, they can pull into and out of many cities without really being noticed where as the larger ones really cannot pull out. Also, since the larger carriers offer more destinations, it is harder for them to pull completely out of a city because they for 1) will lose any pax at that city 2) will give pax over to competing airlines and 3) will sometimes lose their "recognition" (i.e. certain people might say that the main carrier who pulled out did not really care about them).
Main carriers will always be around because they offer so many destinations, mileage programs etc... People will not want to fly on three different low-fare airlines to get to their destination (which would require re-checking in etc...). Low-fare carriers are good at running plane ticket prices down in many cities where the bigger carriers almost had a monopoly.
 
Guest

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 10:30 am

I think that the majors will have to eventually make one of two choices: Lower fares, or raise service. America West decided the former, and it looks like it is starting to pay off for them(much lower loss than expected). Other airlines will have to make that decision. I believe that DL will begin to show its response next week after that study they commissioned gives management some recommendations on how to compete with the LCCs. It looks like AA is also starting to give.
 
777D
Posts: 285
Joined: Fri Jun 15, 2001 7:27 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 10:59 am

I believe that Jetblue could offer service from JFK to Europe.

If I am correct, LH offers a BBJ from Berlind(?) to JFK. Why can't Jetblue offer the same service in a modified Airbus 320 to a European destination? Obviously the would have to hire overseas operations, sales, equipment, officen and etc. to accomplish this task but none the less there isn't any major hurdles that cannot stop Jetblue or even a Southwest airlines from doing this. Obviously WN has not plans but I was only using them as an example.

I am not basing this on any fact that I have inside information. Just my two cents.
 
Jaws707
Posts: 667
Joined: Mon Aug 06, 2001 10:45 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 11:14 am

I just want to sum up a lot of ideas that have been tossed around here. For an airline like Jetblue to offer international service they would no longer be low cost. They would need another plane type, offer meals on the long flights, and increase their overall service as this is what the consumers would expect. If they did all that then what difference is their between Jetblue and AA or United? The only difference would be that Jetblue might only fly 1 class while the majors would continue to have first or business. So basically if they change all those things then they are no longer low cost, but they basically become a major.
 
jfwjxn
Posts: 84
Joined: Tue Jun 18, 2002 9:13 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 11:17 am

LH offers Dusseldorf-Newark-Dusseldorf on a special 735 it has 48 business class seats. It is operated by a Swiss charter company. Its about $4500-$5200 r/t.
 
brons2
Posts: 2462
Joined: Tue Sep 25, 2001 1:02 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 12:30 pm

No, it's a BBJ, not a 735. The BBJ is a 73G with a 738 wing and extra tanks.
Firings, if well done, are good for employee morale.
 
777D
Posts: 285
Joined: Fri Jun 15, 2001 7:27 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 1:07 pm

None the less the it can be done with a higher fare from Jetblue but perhaps at a lower charge than LH?

This might not be something that Jetblue, Frontier, Airtran and Midwest Express would ever consider but as proven by LH, there seems to be a market for a dedicated flight from Europe to JFK at first/business class fares from cities that has a lack of non-stop to JFK or the surrounding area.

Perhaps the "low cost" airlines would code share this their flights with the USA and just maybe share the cost for such adventure as having a modified A320 from Europe to JFK. Frontier is moving to a all Airbus fleet within a few years and Jetblue is already dedicated to all Airbus fleet, why not ask Airbus to create such a jet so that Frontier and Jetblue could operate and code share on this flight? This can be done but from past threads and discussions these carriers will not attempt such a thing at this moment in time. It is obvious that a $249 roundtrip ticket is not feasible between JFK to Europe.

Once again this is not based on any fact or insider information. It is only to show that there is a possiblity that it can be done.

 
BR715-A1-30
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RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 1:35 pm

National_757, You are going to be waiting a loooooooooonnnnnnnngg time.

At least AirTran is not in Bankruptcy Court right now  Smile
Puhdiddle
 
BR715-A1-30
Posts: 6525
Joined: Thu May 30, 2002 9:30 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 1:39 pm

I hope low fare airlines are not the wave of the future because a majority of them have bad service and I feel that they make flying closer to mass transit rather than a fun way to travel

::Coughs::BullS***::Coughs::

That is the biggest load of crap I have ever heard. AirTran, Southwest, and jetBlue joke with you, and get this... THAT PROVIDES A FUN WAY TO TRAVEL. According to a friend of mine, Flying Comair was like Riding a School Bus.(Except on this school bus ride he got ginger ale and cookies)  Smile ::Shrugs:: I believe him. Sure, I will fly on a Delta 767, but definetely not one of their Narrowbody jets (Except the MD88)
Puhdiddle
 
doug_or
Posts: 3138
Joined: Sat Mar 18, 2000 9:55 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 1:46 pm

Sure, I will fly on a Delta 767, but definetely not one of their Narrowbody jets (Except the MD88)

wtf!?!?

may I inquire as to why?
When in doubt, one B pump off
 
doug_or
Posts: 3138
Joined: Sat Mar 18, 2000 9:55 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 1:49 pm

nevermind. don't respond. I'm getting a not so vague premonition we'll all just be stupider for having read it.
When in doubt, one B pump off
 
BWIA 772
Posts: 1613
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RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 3:17 pm


Am I might be wrong but the way i see it small airlines usually expand but depends on your definition of small. My own is one that has a fleet under 10.
Eagles Soar!
 
Guest

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 5:01 pm

The airline industry in the early 21st century will be greatly different from that in the latter part of the 20th.

I would forecast that the 'full service' carriers will disappear completely from short and medium haul markets. Air travel will become much more of a mass transit thing - you don't get fed or provided with movies on most buses or trains, so why should you on aircraft? People don't need the frills, and they just cost the airlines a lot of money.

Ultra-short hops in the US will also disappear ... it will be easier to drive rather than going through the current level of security.

In the States and Europe, it's the 'full-service' majors that are haemorhaging red ink - looking at today's ATW Online, I see UAL lost US$341 million in the second quarter, though without special items that increases to US$392m. http://www.atwonline.com/indexfull.cfm?newsid=2107; USAirways lost US$248 million and says that bankruptcy is very much on the cards http://www.atwonline.com/indexfull.cfm?newsid=2108; whereas on this side of the pond DBA (which is being taken over by easyJet) has had a strong increase in traffic and Lufthansa partner Eurowings has said that it is looking at entering the LCA (low cost airline) market. http://www.atwonline.com/indexfull.cfm?newsid=2110

A quick glance at who is making money and who is losing it shows Southwest and its clones making it big time on both sides of the Atlantic ... and full service carriers losing it equally big.

I don't believe that the new generation of true LCAs will leave their niche mass transit markets as has been suggested on this thread. Various airlines - such as Debonair here in the UK - have tried to offer a full service product at low fares but the reality is that it just doesn't work ... a fact that is borne out by their disappearance from the marketplace.

Nor are the LCA airlines "small" - after all, easyJet is looking at ordering 150 new aircraft, and Ryanair has already done the same.

The LCA model simply doesn't work for long haul markets, as it relies on cramming in as many sectors a day as possible - so that a B737 operated by an LCA might be carrying double or more passengers than a FSA one, over the course of a day. In order to offer really low fares, an airline has to either offer a premium product which effectively subsidises the low fares; or alternatively it needs to cram in as many people as possible (giving the sort of charter configurations we see in Europe).

Personally, I believe that a quality product at a reasonable (rather than low) price is likely to be the way of the future. I suspect that a lot of the gimmicks - such as PTVs - will become 'pay as you go' features, at least in economy.

Already, we are seeing First Class being removed from many long haul carriers, to be replaced by a premium business class; supplemented by a 'premium economy' product which bears a startling resemblance to the original business classes back in the 1970s! Personally, I believe that such product differentiation is wasteful - much better to go two class and have done with it.

As for single class premium airlines, I am undecided. Many years ago I worked on a start-up called British Atlantic, which subsequently became Virgin Atlantic. BAA's plan was to operate DC10-30s LGW-JFK in a 150 seat all J configuration. It might have worked then ... however I doubt it would work today, where the premium market is fickle and brand-loyal, thanks to the FFPs. The only viable way I can see that happening is if it is done by a major airline - such as LH with their BBJ; or Qatar Airways with their A-CJ; and only on the densest premium routes. I recall that Virgin mooted something similar a while back. The reality, though, is that thanks to the current security situation those people with serious money would rather use their own or a fractional-ownership business jet; or save time through the use of Concorde.
 
Joni
Posts: 2613
Joined: Thu Aug 10, 2000 11:05 pm

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 7:40 pm


Many full-service carriers are studying the low-cost carriers very carefully, to see what they can learn from them in terms of cutting costs. Overall, I'd see 3 major trends going on with regard to the airline market:

1) The most important one - traffic overall is increasing.
2) High-speed trains and LCCs are eating at the FSC's market shares in short hops
3) Increased global competition is driving corporations to streamline travel budgets, moving business traffic permanently from business class toward economy or economy plus classes.

So, overall the FSCs will likely evolve toward "intercontinental low-cost" models and move ever-increasing numbers of passengers, and an ever-increasing percentage of those, intercontinentally in economy class.

The reasons FSCs are in the red are points 2) and 3) above. They'll need to start making money from Economy-class tickets and reduce their reliance on business-class traffic sometime soon to improve their cash flow. That means taking some lessons from the LCCs, albeit the extent to which they can emulate LCCs is limited.

 
DELTA777
Posts: 637
Joined: Tue Mar 07, 2000 6:34 am

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 10:20 pm

I agree with Lowfareair, and sadly I think most majors will choose to lower service. I know Delta will for sure. I just hope more good low fare airlines like JetBlue and Southwest will come along. Lowfareair, is there going to be a big change in Delta? will they officially announce themselves as a lowfare airlines? shoudl be interesting
 
Guest

RE: Small Airlines..wave Of The Future?

Mon Jul 22, 2002 10:43 pm

Delta777: I don't see an immediate change in their branding. My guess is that the report will state something along the line of add more amenities, and advertise that and fairly low fares, or cut out certain items domestically.

right now the line is graying between service of the LCCs and FSCs. For example, AirTran has 10 daily flights ATL-MDW, and Delta has 11 ATL-ORD. AirTran's frequency is high enough to grab business travelers(AirTran has about 25% of the ATL-CHI market). Service is roughly the same: Peanuts and drinks, with slight variations on either side(DL has the better FF program, while AirTran's new seat selection enhancement gives last minute business passengers a better chance of getting that aisle seat towards the front, as only Y, B, and M fares can select seats). If DL wants to get more traffic, they will be forced to either cut costs to meet AirTran, or add amenities, such as MRTC, a small meal, and internet service(connexion).

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