airone1
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Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 6:23 pm

Hello A.net! I was thinking that since all the mergers have been happening and the number of airlines in the United States have decreased in the past couple years do you think there will be a resurgence of new start-up carriers in the US?
 
AWACSooner
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 6:31 pm

Given the failure rate of all the startups since jetBlue, the cost of fuel, and all the government red tape? Hell no!
 
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Polot
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 6:40 pm

As long as fuel prices are high and the economy is down...no. The mad startup rush usually happens in opposite circumstances (i.e. the 90s).
 
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enilria
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 7:10 pm

I think things are different this time because times are relatively good, but the legacies and even the LCCs are not adding any capacity. It is a major opening for start-ups. I think we will get 2 or 3 new carriers. How long they last I don't know. I still think B6 and perhaps US will merge out of existence in the next 5 years. We need more carriers.
 
srbmod
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 7:13 pm

Quoting AWACSooner (Reply 1):

Given the failure rate of all the startups since jetBlue, the cost of fuel, and all the government red tape? Hell no!

You forgot about Virgin America.

Quoting poLot (Reply 2):

As long as fuel prices are high and the economy is down...no. The mad startup rush usually happens in opposite circumstances (i.e. the 90s).

Getting the start up capital is the biggest hurdle, and even if you have a sizable cash reserve as a result, it doesn't guarantee success. Skybus was the most highly capitalized start up airline in US history (JetBlue previously held that distinction.) and were out of business and bankrupt less than 11 months after their first flight.

There is honestly a very limited market for new start up carriers, as many of them at best would be trying to cherry pick from other airlines.
 
brilondon
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 7:51 pm

There is always a chance. There is always a chance for anything to happen. If Warren Buffet decides to invest in an airline then they will have capital to use for the start up. There is always some person who has more money then they know what to do with who thinks there might be a market for another airline.
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HPRamper
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 8:39 pm

Quoting srbmod (Reply 4):
You forgot about Virgin America.

I don't think of Virgin America as a true startup since the Virgin brand is already well known across the world, and has other airlines that actually make money under the umbrella to subsidize Virgin America.
 
srbmod
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 9:03 pm

Quoting HPRamper (Reply 6):
I don't think of Virgin America as a true startup since the Virgin brand is already well known across the world, and has other airlines that actually make money under the umbrella to subsidize Virgin America.

Virgin America is primarily owned by folks other than the Virgin Group, who can only by US law, own 25% of the airline and cannot run the day to day operations of the airline, which makes "subsidizing" the airline via other Virgin Group airlines assets unlikely. The Virgin Group is a minority investor in the airline.

Virgin America IS a start up carrier. Now had they bought another US airline and rebranded it, then you could say they aren't a start up carrier.
 
civetfive
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 11:05 pm

I think we will see some startups as the economy turns around and capital flows again. WN and B6 are starting to turn the corner on their unit economics and won't be able to grow their way out of their emerging cost structure issues. More likely is a retrenchment or refocus in one shape or form, which will open the door for a new, low cost entrant to use the same business model that LCCs have been using time and again.

I wouldn't be surprised to see someone try to pick on AA or UA down in Texas (using a similar model that FL did in ATL) and if nothing else be a thorn in their side for a decade or so before growing pains and heavy checks start the cycle again.
 
NASCARAirforce
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 11:07 pm

Quoting AWACSooner (Reply 1):
Given the failure rate of all the startups since jetBlue, the cost of fuel, and all the government red tape? Hell no!

What about Allegiant Air? True they were around since 1997 but mainly as a charter company. They didn't start moving to their current low cost model until 2001 after coming out of bankruptcy with new management.
 
toltommy
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RE: Potential New Rise Of Start-Up US Carriers?

Fri Jun 22, 2012 11:36 pm

If someone comes up with a viable business model that can attract investors, then we will see new entrant airlines. To think that there would never be another new entrant carrier in the US is silly. Seems like there's always someone here willing to lose a ton of money starting an airline....
 
point2point
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 12:03 am

Quoting NASCARAirforce (Reply 9):
What about Allegiant Air? True they were around since 1997 but mainly as a charter company. They didn't start moving to their current low cost model until 2001 after coming out of bankruptcy with new management.

I'm along the same lines of thinking. How about these "morphed" carriers, such as G4? I think that NK could be considered another one of them as well - since 2007 they have moved from trying to be a discount carrier into a ULCC model. F9 is attempting to somewhat replicate the NK model in that it too wants to be an ULCC now.

Any new carrier will probably have to follow the model of an ULCC - that's about the only realistic niche that hasn't filled up yet.

The premium model such as an MGM Grand might warrant some research for this economy, in that all economic trends are pointing to the rich getting richer. However, I think that there has to be more than the 1% for a viable airline.

What about this California Pacific, based out of CLD with E170's to a handful of nearby destinations. This model is attempting to fill a void at an underused airport in a basically well-to-do area. They're painting their first plane as we speak here. Or People's Express, 2012 version, flying 737s from PHF, PVD, PIT and PBI (just realized here and now that all of the airport codes of their initial planned hubs begin with a P - is there something to this?) on the theory that these airports are underutilized, and they will be offering nonstops to destinations from these (P) airports that they currently do not have?

So you want a resurgence of new start-ups?

 
 
srbmod
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 12:43 pm

Quoting point2point (Reply 11):
Any new carrier will probably have to follow the model of an ULCC - that's about the only realistic niche that hasn't filled up yet.

We all see how that worked out for Skybus.......

Quoting point2point (Reply 11):
The premium model such as an MGM Grand might warrant some research for this economy, in that all economic trends are pointing to the rich getting richer. However, I think that there has to be more than the 1% for a viable airline.

That's a very limited market, as most of the clientele that years ago would have used MGM Grand Air would likely have some sort of membership in one of the various private jet operations.

Quoting point2point (Reply 11):
What about this California Pacific, based out of CLD with E170's to a handful of nearby destinations. This model is attempting to fill a void at an underused airport in a basically well-to-do area. They're painting their first plane as we speak here. Or People's Express, 2012 version, flying 737s from PHF, PVD, PIT and PBI (just realized here and now that all of the airport codes of their initial planned hubs begin with a P - is there something to this?) on the theory that these airports are underutilized, and they will be offering nonstops to destinations from these (P) airports that they currently do not have?

Both airlines will be trying to cherry pick from other nearby airports (SAN in the case of California Pacific and ORF in the case of PeoplExpress.) and that will be an uphill battle for both airlines. Had WN not pulled the plug on FL's operations at PHF, PeoplExpress would likely to have never even been created or would have chosen a different airport if not for that.

Both California Pacific and PeoplExpress are still paper airlines (Even though California Pacific has an aircraft being painted.) and will be until they take to the skies. There's still the chance that neither airline takes flights as there are hundreds of proposed airlines that never got off the ground. Even if they do take to the air, the odds are stacked against them.
 
JONC777
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 12:58 pm

Given the fact that banks are more tight with loans and the volitatlility of oil I think it would be much more difficult for someone to start up an airline from scratch that in years prior. Mainline carriers have difficulty in todays world finding a business plan that consistently works much less trying to convince a bank that they wouldnt be pissing away millions by investing in the venture. I think in todays world you would likely see a group of investors come together or maybe even a hedge fund with a lot of cash try it. Anytime fares climb and overall service declines you leave room for a start up to come in. I just cant see someone who even has the cash to start up something choosing this industry vrs something else much less stressfull.
 
Bobloblaw
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 1:53 pm

Quoting airone1 (Thread starter):
Hello A.net! I was thinking that since all the mergers have been happening and the number of airlines in the United States have decreased in the past couple years do you think there will be a resurgence of new start-up carriers in the US?

Where do you see some opportunity?
 
Cush
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 1:58 pm

Quoting srbmod (Reply 12):

We all see how that worked out for Skybus.......

I don't get why people keep bringing up Skybus as the "end all" of startup airlines. Yes it was well funded, but it also made a lot of mistakes. Bad timing when starting up, new aircraft, etc... If they would have purchased some cheap MD80's or older 737's, I think that things would be different. Look at the success G4 has. They don't have to worry about heavy lease payments each month, as the MD-80's are at bargain basement prices, with lots of spares to go around for them.

The airline industry relies on more than just the airline industry and a product type and market to succeed. An airline has a million other variables involved. Lets compare... Apple makes an iPad and it becomes a roaring success. The cost of oil jumps up $50, but the iPad still remains at $599, and people continue to buy them. They love the product. Now, on the other side of the fence. ABC Airlines offers a great product/service and is a roaring success. The cost of oil jumps up $50, and in turn they need to raise their fares and fees, which causes people to fly less. They love the product, but when it becomes outside of their price range or feasibility, they don't buy it.

Airlines will always be associated with vacations and travel for a majority of the world. A very small percentage of the world is able to fly for business, so most folks are flying for vacation. Even if a ticket is only $99 round trip, there is the cost of me driving to the airport, checking bags, paying for parking for X days, rental car or cab from airport to hotel, hotel costs, food, entertainment, etc... So even though an airline has a ticket for $99 r/t, the overall cost of that vacation could be hundreds or thousands of dollars more, and in a tough economy, or someone who has many bills to pay and cannot afford to travel, it doesn't matter how low an airline ticket is when there are so many other variables involved.
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srbmod
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 2:33 pm

Quoting Cush (Reply 15):
I don't get why people keep bringing up Skybus as the "end all" of startup airlines. Yes it was well funded, but it also made a lot of mistakes. Bad timing when starting up, new aircraft, etc... If they would have purchased some cheap MD80's or older 737's, I think that things would be different. Look at the success G4 has. They don't have to worry about heavy lease payments each month, as the MD-80's are at bargain basement prices, with lots of spares to go around for them.

Skybus is a textbook example of the new realities in the airline industry in the US. What may work for Ryanair in Europe (Skybus based their business model on Ryanair.) will not necessarily work in the US. The line between the low-to-no frills LCC/ULCC and the major US carriers continues to blur (Look at Delta offering a new fare class on some routes it competes with Spirit on out of DTW. Look at how many major airlines charge for things that previously only the low cost/ultra low cost carriers charged for.). The lack of connections dogged them as well, as passengers would have to claim their checked bags and then recheck them to their final destination and not everyone wants to go through that hassle to save a few bucks. I don't think that they could have succeeded even if they followed the model used by so many start up airlines in the past of picking up used a/c. JetBlue changed the game in that regards, which does make it more difficult to start up an airline due to the costs of newer a/c.

You really cannot compare Allegiant with Skybus as they are not the same type of airline. Allegiant is not a true ULCC (more of a hybrid of the model) nor does their operating model fit into any other airlines' business model (While airlines do have routes that are operated on certain days, such operations typically make up a small percentage of their flights.) Allegiant doesn't offer connections either, but their route network isn't designed for it as their primary bases of operations are leisure-oriented destinations and in some cases use the primary airport in that market as a opposed to a secondary airport away from the city.

Spirit operates using the ULCC model, but it is really is a hybrid version of the model, as ULCCs typically don't have frequent flyer programs nor do they offer connections or have multiple seating classes (NK still retains the Big Front Seat from their pre-ULCC days.).

ULCCs can work in the US, but the model has to be tailored to the US market.
 
JONC777
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 2:42 pm

Quoting HPRamper (Reply 6):

I dont view VX as a startup either but I do believe that they are more likely to provide innovation to the current travel experience than any existing domestic carrier.
 
PHX787
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 6:13 pm

Quoting srbmod (Reply 4):
You forgot about Virgin America.

It's the brand name. People on the west coast are quite familiar with it, so I'm sure they'll fly it.


Quoting poLot (Reply 2):
As long as fuel prices are high and the economy is down...no. The mad startup rush usually happens in opposite circumstances (i.e. the 90s).

Well what about when the economy comes back up? I can see airlines starting up at underused airfields like CVG, IND, etc etc etc
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Bobloblaw
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 6:25 pm

Quoting PHX787 (Reply 18):
Well what about when the economy comes back up? I can see airlines starting up at underused airfields like CVG, IND, etc etc etc

I got bad news for you. The economy is back. This is "back" in a world with excess debt.
 
cloudboy
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 8:39 pm

I don't think that we are going to see a "resurgence" in the sense of a bunch of new carriers looking to start up, at least not in any reasonable time frame. Buy I don't think that we will never see a new carrier ever again, either. All us armchair airline CEOs here on the board have our own opinions of what is attractive and what isn't, but the fact is there is always someone out there willing to try a crazy business idea everyone else says wont work, and enough crazy financial interests out there that will fund it. That doesn't mean they will be successful.

Personally I think that enough people are getting fed up with the limited number of major carriers. The Low Cost model quite frankly is getting old, and unlike Europe where you have another transportation option to give it competition, the US market is static, ripe for a new entrant with new ideas. As the majors consolidate and aim for the cream of the crop, there is a growing pool of mid level fliers who are getting marginalized. At some point someone is going to aim for this market.

The one potential game changer would be if the US suddenly made a hug investment in passenger rail. This would give new form of competition to the airlines, and stir up the industry and get it to start innovating again to stay in business.
"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
 
727LOVER
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 9:09 pm

Quoting srbmod (Reply 12):
We all see how that worked out for Skybus.......

Well, its working for NK

Quoting bobloblaw (Reply 14):
Where do you see some opportunity?

I once did a thread about a GVV based airline:
Would A Chicago/Gary(GYY) Based Airline Work? (by 727LOVER Jan 8 2008 in Civil Aviation)
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anstar
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 9:26 pm

Quoting HPRamper (Reply 6):


I don't think of Virgin America as a true startup since the Virgin brand is already well known across the world, and has other airlines that actually make money under the umbrella to subsidize Virgin America.

Funniest thing I've read on A.net today! It is a fantasy if you think Virgin Atlantic or Virgin Australia subsidise Virgin America...
 
ridgid727
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 9:59 pm

If California Pacific does get certification, and makes it to the skies, I would wager that for survival it will be neccessary to become an express or connection carrier for someone else within 18 months after startup. It will be tough to make it as a stand alone airline, especially counting on Carlsbad as your major revenue producing source..
 
Goldenshield
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RE: Potential New Rise Of Start-Up US Carriers?

Sat Jun 23, 2012 10:14 pm

Quoting ridgid727 (Reply 23):
If California Pacific does get certification, and makes it to the skies, I would wager that for survival it will be neccessary to become an express or connection carrier for someone else within 18 months after startup. It will be tough to make it as a stand alone airline, especially counting on Carlsbad as your major revenue producing source..

Or possibly a bit longer than that. It's also possible that either Horizon or SkyWest (talking strictly west coast here) could hostily take them over to a) get rid of a potential competitor, and possibly b) get a new aircraft type, or c) use that certificate to start branded ops.

Of course, look how long Shuttle America limped along until they were bought by Republic.
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DesertAir
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RE: Potential New Rise Of Start-Up US Carriers?

Sun Jun 24, 2012 12:16 am

Here is a new idea. What about a start up airline made up of entirely retired airline personel? Since everyone would be on pension, everyone from the CEO down would make minimum wage...just for the love of airline work. Using the Q400 Stockton, CA could see service to SFO, LAX and weekend service to SAN. Modesto could see LAX service again. The price structure could be simple like advanced and walk up. The idea is to break even, pay the bills, invest in the company, give good service to underserved communiities and have fun.
 
Goldenshield
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RE: Potential New Rise Of Start-Up US Carriers?

Sun Jun 24, 2012 12:48 am

Quoting DesertAir (Reply 25):
Here is a new idea. What about a start up airline made up of entirely retired airline personel? Since everyone would be on pension, everyone from the CEO down would make minimum wage...just for the love of airline work.

Already done, but they flew cargo. Didn't last too long, either.
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srbmod
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RE: Potential New Rise Of Start-Up US Carriers?

Sun Jun 24, 2012 1:13 am

Quoting 727LOVER (Reply 21):
Well, its working for NK

Spirit is not a true ULCC along the lines of what Skybus tried to do and what airlines like Ryanair have been successful at doing. NK has a frequent flier program, Spirit offers connecting flights on a ticket, as well as the option to upgrade to a seat with better legroom and is wider (A holdover from their pre-ULCC conversion.). A true ULCC does not offer that sort of stuff. NK has taken the ULCC as created by Ryanair and tweaked it to fit their needs, as that's the only way the model can work in the US on a national level. G4's approach is more regionally focused and one cannot buy a ticket on them from say Fort Lauderdale to Los Angeles as they don't offer this service and even if you could get there by booking multiple G4 flights, their operating schedules would more than likely force you to stay a day or two somewhere along the way. Meanwhile, NK offers non-stop and connecting service to LAX from FLL.
 
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Polot
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RE: Potential New Rise Of Start-Up US Carriers?

Sun Jun 24, 2012 1:33 am

Quoting srbmod (Reply 27):
Spirit is not a true ULCC along the lines of what Skybus tried to do and what airlines like Ryanair have been successful at doing. NK has a frequent flier program, Spirit offers connecting flights on a ticket, as well as the option to upgrade to a seat with better legroom and is wider (A holdover from their pre-ULCC conversion.). A true ULCC does not offer that sort of stuff.

That all of course depends on what you consider a "true ULCC". The term isn't definite; there is no rule out there that a ULCC has to have no frequent flier program or that it must offer no connections. Air Asia is often considered an ULCC, yet they offer connections, have a frequent flier program and (slightly) premium seats. It is completely open to interpretation, just as the term LCC is. Just because the European ULCCs don't offer those services/amenities doesn't mean that is the only way to run a ULCC.

Quoting srbmod (Reply 27):
G4's approach is more regionally focused and one cannot buy a ticket on them from say Fort Lauderdale to Los Angeles as they don't offer this service and even if you could get there by booking multiple G4 flights, their operating schedules would more than likely force you to stay a day or two somewhere along the way. Meanwhile, NK offers non-stop and connecting service to LAX from FLL.

I'm not sure how this proves or disproves that G4 or NK are or are not ULCCs, all you are saying here is that the two airlines are focused on different routes.

[Edited 2012-06-23 18:39:48]
 
ACdreamliner
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RE: Potential New Rise Of Start-Up US Carriers?

Sun Jun 24, 2012 10:06 am

Quoting bobloblaw (Reply 19):
Quoting PHX787 (Reply 18):
Well what about when the economy comes back up? I can see airlines starting up at underused airfields like CVG, IND, etc etc etc

I got bad news for you. The economy is back. This is "back" in a world with excess debt.

Are you for real? World debt is nothing new! The bigger the depression, the bigger the boom. The economy is being held back because of lack of confidence in house prices. There are so many people sitting on homes they no longer want to live in and as soon as confidence is back we will have a housing boom like never before, this feeling/perception of increased wealth with filter through consumer spending and the economy will surge back into boom times.

As for US start ups, there will be an influx of them, the likes of Delta, United and American/US/JetBlue will come to big to adapt and it will allow these new entrants a foot hold. With the global demand from Oil dropping slightly because of recession and crude heading south (thankfully) the ingredients are falling into place nicely for start ups.

I firmly believe ULCC's have had there day. PAX are fed up being charged for everything now and want a bit of service to fo with their flight. I'm not talking 5*, just a smile and being made to feel valued. Charge for things that make a difference, but not everything you can think off (FR's £1 toilet for example). The future of short haul flying is with Good Value carriers, not ULCC's IMO.
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DesertAir
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RE: Potential New Rise Of Start-Up US Carriers?

Sun Jun 24, 2012 6:15 pm

Quoting ACdreamliner (Reply 29):
The future of short haul flying is with Good Value carriers, not ULCC's IMO.

Amen! This is what small and medium size cities seem to lack, Good Value Carriers. Southwest is a good value carrier. They may not always been the least expensive but give good value: no change of flight fees except for fare differnces, no unreasonable bag frees, frequent service on many routes, consistant service...Carriers like Spirit pretend to be low cost but change for everything, often resulting in a sour experience. To not have to pass the check in counter is of great value for me. Not so, with carriers that charge for carry-ons...
 
PHX787
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RE: Potential New Rise Of Start-Up US Carriers?

Sun Jun 24, 2012 6:33 pm

Quoting ACdreamliner (Reply 29):
As for US start ups, there will be an influx of them, the likes of Delta, United and American/US/JetBlue will come to big to adapt and it will allow these new entrants a foot hold. With the global demand from Oil dropping slightly because of recession and crude heading south (thankfully) the ingredients are falling into place nicely for start ups.

   thank you!! These new start ups won't be any old Virgin America or B6 - these airlines will become "legacy" carriers that I potentially see maybe buying out airlines like AA or US (given they stay separated.)

And in regards to larger airfields with not that much service, they're just waiting to be used by these start ups. For example, CVG has 4 large runways, a large number of gates, Concourse C can be renovated easily i think, it's all just playing the waiting game.

Quoting ACdreamliner (Reply 29):
I firmly believe ULCC's have had there day. PAX are fed up being charged for everything now and want a bit of service to fo with their flight. I'm not talking 5*, just a smile and being made to feel valued. Charge for things that make a difference, but not everything you can think off (FR's £1 toilet for example). The future of short haul flying is with Good Value carriers, not ULCC's IMO.

Exactly. Someone like me who flies often but doesn't have much money just wants to pay once and not worry about the charges later that could be tagged on for the simplest crap.
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FlyPeoria
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RE: Potential New Rise Of Start-Up US Carriers?

Sun Jun 24, 2012 10:06 pm

Quoting airone1 (Thread starter):
Hello A.net! I was thinking that since all the mergers have been happening and the number of airlines in the United States have decreased in the past couple years do you think there will be a resurgence of new start-up carriers in the US?

How about a little variation on this topic. Should fuel prices trend downward (a situation viewed as a longterm trend) and US passenger traffic resumes rapid growth, taxing capacity at major hubs, anyone think the legacies might revive past hubs and/or might they return focus cities to full-fledged hub status?

IMHO, that might stamp out the need for some upstarts...
 
ckfred
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RE: Potential New Rise Of Start-Up US Carriers?

Mon Jun 25, 2012 1:57 pm

Quoting brilondon (Reply 5):
If Warren Buffet decides to invest in an airline then they will have capital to use for the start up. There is always some person who has more money then they know what to do with who thinks there might be a market for another airline.

That won't happen, ever. Warren lost a lot of money on his investment in US. I think Warren has joked that someone should have shot the Wright Brothers at Kitty Hawk, to save the investment world from having to deal with the ups and downs on the airline industry.

And finally, I was once watching CNBC when both Warren Buffet and Herb Keleher were on. Warren said that every time he gets the itch to buy airline or airline stocks, he calls Airline Owners Anonymous. He says, "Hi, my name is Warren, and I'm thinking about buying an airline."

Then, someone talks him out of it.

Keleher just laughed and laughed.

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