I think you're (all) looking at it from an airline perspective, not from an investor perspective. While I understand why, you're not thinking like the decision makers.
There are two basic reasons to rebrand a certain part of a company.
1. Fresh new brand which can be perceived as not having the "problems" as the parent company, but even more importantly as having a different "message". You can, if nothing else, get away with taking away all the perks without an uproar. Look at GM
. You have Chevrolet, Oldsmobile, Pontiac and so on. While you may know in the back of your mind that "it's all the same company", it really isn't perceived that way, and the market can be attacked differently with different brands. If you try selling the same product to business and leisure travelers, you are in for a tougher ride, since the message becomes confused.
2. Separation of accounting and thus risk. This is the most important one. If you attempt to reform a company like Delta in one go, it will take FOREVER. You will run into union problems, culture problems, logistics problems. For example, catering. Say you have a contract with the catering company for x meals of type y every day, valid for another 2 years. You can't just cancel the contract because you stop serving those meals and go for sandwiches. Also, creating a separate company allows you to dump it in case it goes badly without affecting (as much) the finances of the parent. When IBM launched the PC
, it was so uncertain about the new machine's future that it started a separate company. Lower risks. Also, as in the case of Go! you can sell off a complete unit if the need arises. It takes much less time to sell off the whole lock, stock and barrel than some bits here and there of a larger company. Conversely, as in the case of 3com selling Palm, if the company really takes off, you can sell it off for a big profit, thus raising capital for your "core business".
So my point is that Song and Ted are good ideas if they work, but trying to apply the same principles to the whole of Delta or United is a bad idea. What if a certain idea doesn't work? Do you really want to risk your (admittedly on life-support) cash cow on an unproven concept?
Some points about earlier posts:
"Flynavy makes a good point indirectly...if he's a guy who has a bunch of UA
miles, or whatever airline we happen to be discussing, then chances are he'd like a FC upgrade. Can't get that with Ted, Song, et al."
- You get what you pay for. But if you care about miles, you are probably a business flyer and you should understand the disadvantages of LCCs for business. Granted I often fly Ryanair on biz, but I prefer BA
if the price difference is reasonable.
"I realize that the point of Song is to create an operation with lower costs than mainline flights, but, as a New Yorker I wish DL
had put the startup money into its very bad JFK
- I understand your point, but if you only have a certain amount to invest, you put it where will (potentially) return most.