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OSt7
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Business model of early US airlines within airlines

Mon May 29, 2017 3:53 pm

Hello fellow a.netters.

Long time reader here, finally get to post.

I am researching the early US airline-within-airline business models, more concretely:
- Continental Lite
- Shuttle by United
- Delta Express
- Metrojet
- Song
- Ted
as well as Buzz (ex KLM UK), and Tasman Express (Air NZ).

For this purpose I have several questions that could not be clarified via desk research and I am sure that some of you might be able to help out:
1. Did they offer passenger transfer or were solely geared for p2p?
2. Were they part of any airline alliance? Did they interline or codeshare?
3. Did they have FF programs and offered lounge access?
4. Did they offer onboard entertainment and onboard shopping?
5. Did they offer fare de-bundling and one-way prices?
6. How big was their fleet at peak size?
7. Did they share fleet and crew with the mainline?

Any information and hints are greatly appreciated!
Cheers!
 
xdlx
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Re: Business model of early US airlines within airlines

Mon May 29, 2017 10:54 pm

#3 AL Mentioned
1. p2p only, however pax transfer to mainline allowed
2. no Interline...no codeshare
3. Yes
4. No OBE, Beverage Service Beer/Wine/Spirits for sale.
5. OW prices available
6. Active maybe 36-42 Acft 737-200ADV.
7. Fleet was in transition from MNL to DLX, NO CREW SHARING

Profitable during first 60mo due Pilot Concessions, concept effectively transferred the bulk of NE traffic to FL from Mainline to Nonstop Service,
i.e., MCO-BOS was 5 Wide Body flights a day prior to Delta Express, and went up to 11 flights daily on the DLX brand.
 
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hawaiian717
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 12:25 am

For Shuttle by United (later rebranded as United Shuttle), based on my experience as a passenger:

1. Yes, connections were offered between Shuttle/mainline/Express.
2. I don't know if other carriers codeshared on Shuttle flights, but I think Shuttle flights followed mainline United's interline capabilities.
3. Shuttle flights were part of United MileagePlus, though I think they didn't have the same 500-mile/segment minimum that mainline and Express flights had. Weirdly enough, United was a Delta SkyMiles partner for a while too, and I earned SkyMiles for some of my Shuttle flights. Shuttle used MileagePlus as a advertising angle against Southwest; I remember the line "Their frequent flyer program can get you to Omaha. Ours can get you to Osaka".
4. Shuttle had the same audio-only entertainment offerings as mainline 737s, including Channel 9.
5. Don't know if they priced based on one way fares, but fares were all inclusive, same as mainline. No fees for checked bags, seat assignments, etc. Complementary beverage service, maybe charged for alcohol.
6. 58 per the Shuttle by United Wikipedia article.
7. Fleet yes, Shuttle livery aircraft sometimes appeared on maline routes and vice versa. Shuttle employees were paid on a separate lower pay scale than mainline.

One of Shuttle's major flaws, in my opinion, was having the hub at SFO. Delays there could wreak havoc throughout the system. In one instance, my brother was flying LAX-SMF on Shuttle and was significantly delayed because the plane hadn't even made it to SFO yet, and then had to fly SFO-LAX. I've heard stories of United using a 747 to clear up backlogs of multiple delayed LAX-SFO Shuttle flights.

Also Shuttle used zone boarding while mainline was still boarding by rows.

One thing to note, Song and Ted are second-generation airline-within-an-airlines that provided a more full-featured low cost product along the lines of JetBlue (newer aircraft, modern IFE), as opposed to the first generation attempts that tended to use older planes and more of a no-frills product.
 
Wingtips56
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 1:32 am

Shuttle by United didn't offer advance seat assignments, but did have assigned seating on check-in at the airport. We (competitor employees) were always mystified as to how Shuttle by United really offered UA any cost advantages. For example, no advance seat assignments but using the seat assignment technology anyway, at check-in. All Shuttle passengers had to check-in with an airport agent...either requiring more agents, or (as we witnessed) making the lines even longer and slower, with pax missing flights, including those Mainline passengers stuck in the back.
No dedicated Shuttle staff or positions at SMF, so regular agent costs there. I don't know if the cockpit was on a lower payscale or not.
I flew a SMF-LAX-SMF trip and didn't really notice any difference from before (UA mainline) other than the ugly paint job on the outside.
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airtrantpa
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 1:45 am

Song had transfers I flew song TPA-LAX, than DL connection LAX-SAN. They did enjoy skyteam benefits, IIRC song flights qaulified on skymiles, I have a song boarding pass with my skymiles number on it. The IFE on song was top notch and was later incorporated into mainline delta once song was dissolved back I to delta.i believe the pilots were Delta pilots, but the cabin crew were specific to song and had Kate Spade uniforms. All song flights operated with a delta call sign. Hope that helps

Song was/is my favourite airline. I caught a lot of crap working for Airtran and ha in song as my favourite airline.
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maxpower1954
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 2:48 am

Metrojet had pax transfers to mainline US Airways. All employees were from mainline, for pilots it was a bid position at a lower pay scale. Agents, FAs, MX and ramp made normal mainline rates. For me, it was an escape from years of being a reserve 737-200 Capt in CLT to a senior block holder slot in BWI.
 
drdisque
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 2:56 am

I'll answer it for Ted

1. Yes, it offered transfers and in fact all routes were to UA hubs
2. Yes, NH codeshared on Ted flights out of SFO and LAX and LH codeshared on Ted flights from IAD and ORD. Importantly, at the time it was NH and LH's primary access to major markets like PHX, MCO, LAS, FLL, and TPA which were for significant periods of time Ted-only stations. Ted aircraft had the Star Alliance logo by the door like regular UA.
3. Yes, earning and burning was the same as regular UA flights. If you were Star Gold and traveling on an international itinerary or flying international business with a segment on Ted, you could use the RCC. Ted was essentially treated the same as flying economy on United.
4. Initially they had "Tedevision" which was a modified version of the entertainment on the dropdown screens of the A320 specifically tailored to Ted. Later it got the same dropdown video as the rest of the Airbus and 757 fleet. It had the same audio as the mainline Airbus fleet.
5. Checked bags and seat assignments were included. The "airline" was benchmarked to JetBlue which offered those things. All domestic fares were one-way fares as virtually all routes competed with Southwest and/or JetBlue which exclusively use one-way fares. International routes (CUN, CZM, SJD, MBJ, PUJ) may have been roundtrip.
6. 56 identical A320's. They initially sat 162 but after Economy Plus was added they sat 156 (therefore requiring a fourth FA for just 6 seats). They differed from mainline A320's by not having first class or a rear galley and by having an orange stripe under the overhead bins.
7. Yes. Ted initially was SUPPOSED to be offered as a concession to the pilots and/or FA union in order to keep jobs but at a lower scale. However, neither union went for it and Ted went forward crewed like any other UA mainline flight. In fact for FA's Ted routes were fairly popular since there was no F cabin to babysit and because you got 4 FA's to spread the load over rather than the mainline Airbus' 3.

Because of the FA issue, Ted offered few advantages over mainline from a cost perspective. It really only made sense on routes where F class really didn't sell (ORD-CUN was surprisingly the route that suffered the most from the elimination of Ted). Ted wasn't a huge failure but it also wasn't compellingly successful. Ted was disbanded when United decided to retire the entire 737 classic fleet during the beginning of the 2008 fuel spike/recession. The Ted aircraft were needed to cover for the 737's on many short and medium haul business routes. Also, to fund the 737 cuts, UA completely cut the former Ted stations of PBI and FLL and made RSW a UAX station and made MIA seasonal mainline/UAX.

One more fun fact about Ted - in response to WN adding DEN, Ted very briefly flew MDW-DEN. It was a tremendous disaster for UA, only capturing pax that were already UA loyal but diluting yields, but it's notable for being the only time that UA has flown to MDW since they moved to ORD in the 1950's.
 
AWACSooner
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 3:06 am

maxpower1954 wrote:
Metrojet had pax transfers to mainline US Airways. All employees were from mainline, for pilots it was a bid position at a lower pay scale. Agents, FAs, MX and ramp made normal mainline rates. For me, it was an escape from years of being a reserve 737-200 Capt in CLT to a senior block holder slot in BWI.

I absolutely miss the flying tomato...one of the best flashy paint jobs of all time.
 
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OSt7
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 1:55 pm

Thanks everyone for your quick and exhaustive replies! A few points for clarification:

xdlx wrote:
6. DLX Active maybe 36-42 Acft 737-200ADV.


- Do you remember the a/c seating capacity? Was it all economy?
- Were flights sold via the same outlets as mainline flights?

hawaiian717 wrote:
For Shuttle by United (later rebranded as United Shuttle), based on my experience as a passenger:



- Do you remember the a/c seating capacity? All economy?

airtrantpa wrote:
Song was/is my favourite airline.


- I guess they also offered one-way fares?
- Did customers have access to Delta lounge facilities?
- Did they sell any items onboard except food/ drinks?
- Was it 100% owned by Delta? Was it managed by Delta management or a different management team/ some overlaps?
- Was there a route overlap?

maxpower1954 wrote:
Metrojet had pax transfers to mainline US Airways.


- I guess they also offered one-way fares?
- Did they codeshare?
- Did customers have access to lounge facilities?
- Did they sell any items onboard except food/ drinks? Any onboard entertainment?
- Was it 100% owned by US Airways? Was it managed by US Airways management or a different management team/ some overlaps?


drdisque wrote:
I'll answer it for Ted


- Did they sell any items onboard except food/ drinks?
- Was there a route overlap?
----

Many thanks again for your help!

Florian
 
airtrantpa
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 2:55 pm

- I guess they also offered one-way fares?
- Did customers have access to Delta lounge facilities?
- Did they sell any items onboard except food/ drinks?
- Was it 100% owned by Delta? Was it managed by Delta management or a different management team/ some overlaps?
- Was there a route overlap?

Yes song sold one-way fares. When I traveled to SAN, I always took song, and booked one way fares, since I was never knowing when I was returning home.

Yes pax had access to Delta's lounges. At TPA song had around 30-35 flights​ a day, composing 1/3 or all DL flights (I could be wrong in this number) out of TPA, and those pax had access to the beautiful delta lounge in airside E.

Yes song sold items onboard as well as a song store. I bought a martini glass, and a t shirt which I still have onboard. From the song store I have purchased models, shirts, hats, a Christmas ornament, a watch etc. So g being a "hip" airline sold designer clothes as well, Kate Spade made the flight attendant uniforms.

Yes it was 100% owned by DL. Compeition between NY/BOS-FL, and FL-west coast was quite heavy, B6 FL and WN were cutting into DL profits, so song was created to compete for effectively with them, and was successful. Song actually made money for DL.

As for route overlap, iirc the flights operated between song cities were mainly operated by song instead of mainline Delta. (Someone on here can probably give a more definitive answer). eg. DL flew to the hubs, ATL, CVG, DFW, SLC from TPA while JFK, BOS, LAS,LAX,SJU, BDL, were served by song, using Delta flight numbers, and I believe some skyteam members had code shared on song flights.
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jimbo737
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 3:10 pm

Someone is writing a business plan.....
 
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OSt7
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 3:28 pm

jimbo737 wrote:
Someone is writing a business plan.....


Haha, I wish. :-)

This information will feed into a research paper on in-house LCC business models. For early US in-house LCC ventures it is difficult both to find public sources as well as involved airline managers.
 
drdisque
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 4:18 pm

OSt7 wrote:
Thanks everyone for your quick and exhaustive replies! A few points for clarification:

drdisque wrote:
I'll answer it for Ted


- Did they sell any items onboard except food/ drinks?
- Was there a route overlap?
----

Many thanks again for your help!

Florian


- no - they only sold snack boxes and alcohol
- when Ted was an active brand, no (with the exception of Ted briefly flying MDW-DEN when UA mainline flew ORD-DEN). In fact whole stations were converted to Ted. This meant they changed all the airport signage and branding to Ted. These conversions were done at FLL, TPA, MCO, LAS, SJU, and RSW (and I believe also PHX, though not 100% sure). After Jan 6, 2009 when the Ted brand officially ended, the Ted aircraft that remained in 156 seat configuration kept flying but were officially just United mainline flights with an all Y/Y+ configuration. Sometimes an aircraft would be repainted back to the shades of blue before the interior was converted to put F back in (although the reverse was not true - if the paint still had Ted on it, the interior was still 156Y). Anyway, these all Y aircraft were deployed mostly to former Ted routes, but also to some random routes that tended to be low yielding but didn't fit with the Ted branding, particularly DEN-GEG and ORD-MHT. There was also overlap then obviously as the last 156Y aircraft were "De-Tedded". Because UA's top priority was to aggressively pull down the 737 classic flying, the Ted A320's had to fly as much as possible when not in the shop for mods.

One other interesting point of note - a few weeks prior to the official announcement in mid 2008 that Ted would shut down, the Ted website shut down and started just redirecting to United.com - part of this was cost savings so they didn't have to maintain a separate website, but also the data showed that people just didn't like the Ted website as much. Of course, united.com always sold Ted flights, but for awhile, only as part of a connection. If you requested a city pair that was a Ted route, it would re-route you to the Ted website and booking engine.
 
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deltacto
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Re: Business model of early US airlines within airlines

Tue May 30, 2017 6:43 pm

OSt7 wrote:

xdlx wrote:
6. DLX Active maybe 36-42 Acft 737-200ADV.


- Do you remember the a/c seating capacity? Was it all economy?


From Delta's October 1998 timetable - Delta Express 737's were all coach - 119 seats
this compares to the mainline 737's at 12 First and 95 coach
 
xdlx
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Re: Business model of early US airlines within airlines

Wed May 31, 2017 1:30 am

Yes all Mainline DL 737 had 12F/95Y as they migrated to DLX they converted to 119Y
 
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OSt7
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Re: Business model of early US airlines within airlines

Wed Jun 14, 2017 2:51 pm

Thanks again for your answers! Research is progressing well and currently I have ~85% of data collected (for roughly 75 airlines). Obviously happy to share insights once the paper is finished.

I have a few more questions for the carriers mentioned above:

Continental Lite:

- Did if offer lounge access?
- Exact size of fleet, ac types and seats per fleet subtype?
- Transfer to mainline possible?

Shuttle by United:

- Direct competition against LCCs on route?
- Seats per a/c/?
- Onboard sales of goods (except food)?

Metrojet:

- Codesharing?
- GDS?
- Lounge access?
- Onboard entertainment and sales?


I am also having trouble to collect data for the following early non-US carriers, Buzz and Go (both from the UK):

Buzz:
- Connection between flights possible? Connection into mainline KLM network?
- Codesharing, interlining?
- GDS?
- Seats on the BAE146?
- Onboard entertainment and sales?
- Lower labor cost/ higher productivity?
- Shared management functions?
- Route overlap with KLM mainline?

Go
- Connection between flights possible? Connection into mainline BA network?
- Codesharing, interlining?
- GDS?
- Lounge access?
- Debundled fares?
- Onboard entertainment and sales?

Many thanks!

Florian
 
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hawaiian717
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Re: Business model of early US airlines within airlines

Wed Jul 05, 2017 12:10 am

OSt7 wrote:
Shuttle by United:

- Direct competition against LCCs on route?
- Seats per a/c/?
- Onboard sales of goods (except food)?


Shuttle's primary competitor was Southwest. They also likely competed with America West on some routes, especially into the America West hubs at Las Vegas and Phoenix.

Seating capacity was 8F/126Y on the 737-300 and 8F/108Y on the 737-500. Compared to mainline which was 8F/118Y on the 737-300 and 8F/100Y on the 737-500.

I don't recall any sales of onboard items (possibly other than alcoholic beverages).
 
jetero
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Re: Business model of early US airlines within airlines

Wed Jul 05, 2017 12:26 am

OSt7 wrote:
Continental Lite:

- Did if offer lounge access?
- Transfer to mainline possible?


Lounge access model different in US than elsewhere. There's free access only in F/J for international flights, and CO Lite didn't fly international. If you were a member of the Presidents Club, you could access the lounge regardless if you were flying Continental or Continental Lite or any other airline for that matter.

I assume you mean did CO sell connecting itineraries between CO Lite and CO mainline? Yes.
 
USPIT10L
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Re: Business model of early US airlines within airlines

Wed Jul 05, 2017 12:49 am

US wasn't in an airline alliance when MetroJet was operating...they didn't join Star Alliance until 2004. MetroJet flying ended in December 2001.
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ytib
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Re: Business model of early US airlines within airlines

Wed Jul 05, 2017 1:14 am

hawaiian717 wrote:
OSt7 wrote:
Shuttle by United:

- Direct competition against LCCs on route?
- Seats per a/c/?
- Onboard sales of goods (except food)?


Shuttle's primary competitor was Southwest. They also likely competed with America West on some routes, especially into the America West hubs at Las Vegas and Phoenix.

Seating capacity was 8F/126Y on the 737-300 and 8F/108Y on the 737-500. Compared to mainline which was 8F/118Y on the 737-300 and 8F/100Y on the 737-500.

I don't recall any sales of onboard items (possibly other than alcoholic beverages).



For the United 1k customers they were also offered free upgrades when space was available up front. This was different than having to use the 500 mile certs which at that time you used on mainline aircraft.
Correct, no sales of food on Shuttle by United besides alcohol.
If it wasn't mentioned above Shuttle by United also used WilMA board (Window, Middle, Aisle) as zones instead of the rows which they used at the time for mainline. If I was traveling with another and had window and middle, we would both have the zone for the Window seat. Six zones were used thus First Class, Zone 1 (Back Windows), Zone 2 (Front Windows), Zone 3 (Back Middle), and so on.
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Cody
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Re: Business model of early US airlines within airlines

Wed Jul 05, 2017 1:53 am

Continental Lite

1. They offered transfers to other Lite flights as well as the regular Continental flights. Connections made to other Lite flights all over the place (Greensboro, Greenville, Atlanta, Newark) while transfers between the two brands primarily in Houston and Newark.

2. They interlined with the same airlines Continental did.

3. You earned mileage through One Pass and had access to The Presidents Club.

4. No onboard entertainment unless you count Continental Magazine. They served Biscoff Cookies, Pretzels and Peanuts as well as free soft drinks with alcohol available for purchase. After they eliminated Lite, Peanuts were removed from all Continental flights and replaced with bagel chips.

5. No Debundling, but yes to one-way fares.

6. Not sure

7. Crews could bid for both operations during typical cycles. A lot of people avoided Lite by bidding around Greensboro. Agents were all Continental employees. I never saw ticket counter signage that said Continental Lite. I observed it just saying Continental. It was almost as if you didn't know you were on Lite until you saw it on the airplane or after you boarded and realized there was no First Class. Uniforms were all the same with the occasional exception of a random flight attendant wearing a polo shirt with Khaki pants. Announcements rarely mentioned the word Lite.
 
Cubsrule
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Re: Business model of early US airlines within airlines

Wed Jul 05, 2017 2:04 am

drdisque wrote:
One more fun fact about Ted - in response to WN adding DEN, Ted very briefly flew MDW-DEN. It was a tremendous disaster for UA, only capturing pax that were already UA loyal but diluting yields, but it's notable for being the only time that UA has flown to MDW since they moved to ORD in the 1950's.


UA also flew MDW-IAD during the early 2000s MDW experiment. I remember YV CR7s but there may also have been a few Ted flights. There was actually a brief period (no more than 2 years or so) in the early 2000s when all 6 legacies flew to MDW. Perhaps relevant to this thread, DL flew Shuttle 738s - not quite a full airline within an airline but sort of the same idea - on MDW-ATL in that time period.
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RyanairGuru
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Re: Business model of early US airlines within airlines

Wed Jul 05, 2017 3:54 am

It's important to remember that Delta Express and Song were intended for separate markets with different target demographics. While Delta Express ended with Song, there were major differences.

Express was always about North East-Florida pre-Jet Blue. Branding wise it was Delta, and intended for low yield leisure passengers to fly on a "lower cost" product compared to Delta mainline. Virtually everything was "Delta" as far as the passenger was concerned apart from the all-Y aircraft.

Song was totally different. It was a direct response to JetBlue, and targeted towards the "hip" customer that was flocking to JetBlue. I read somewhere that Song's target demographic was a 30 year old professional in New York. This is why they had totally separate branding with no mention of Delta; a bold, eye catching livery; decent IFE; and designer uniforms.

Delta Express was "cheap" Delta, Song was JetBlue.
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USAirALB
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Re: Business model of early US airlines within airlines

Wed Jul 05, 2017 5:04 am

MetroJet and Delta Express were great.

I used to fly them with my family as a child before WN entered ALB, both MetroJet and Delta Express flew ALB-MCO throughout the late 1990s/early 2000s.

At first MetroJet was US Airways' last attempt to save the BWI hub from WN. IIRC, the first MetroJet routes were BWI-PVD/MCO/MHT/etc... As it became more apparent that US would not be able to save BWI, MetroJet began to focus on the Northeast-Florida market. MetroJet also had a sizeable presence at IAD as well. Seat assignments were given out upon getting to the airport.

On board, they had the same grey seats as US but IIRC they had a bit more red in them than usual. Seat pitch was great! No less than 32 inches. Full beverage service, along with peanuts/pretzels. Longer NE to Florida flights got a free snack pack dubbed the "Le Petit Snack" that I remember having raisins, cookies, and crackers with spreadable cheese in it.

I don't really remember the service on Delta Express very much, but I do remember getting a rectangle plastic wrapped Delta Express branded snack pack that had a tootsie roll, a granola bar, and raisins in it.
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