MIAMI -- There is
plenty of room for more low-cost carriers in the U.S., according to
an industry consultant and airline aspirant at a low-cost carrier
conference here. That proposition may soon be tested by several
All of them,
however, face serious challenges in getting off the ground and
making their business plans work.
the new entrants and their prospects came during panels and insider
chatter at the World Low Cost Airlines Congress-Americas here on
June 27 and 28. The conference was a regional version of the third
global World Low Cost Airlines Congress that will take place this
September in London.
conference, which attracted about 600 participants and 100 airlines
in just its second year, reflected the growing presence and
influence of low-cost carriers around the world. Their numbers have
been booming in Asia and especially Europe, so much so that Europe
is widely considered oversaturated and due for some weeding out of
the weaker entries.
The U.S. market
has been more stable and less dynamic. The only new low-cost,
low-fare carriers recently have been Independence Air, which
flopped financially, and Mesa Air Groups Go!, which just started
and offers only Hawaii interisland service. But a few more
entrepreneurs are hoping to give it a shot within the next year or
CEO of Latitude Transport Advisory, offered them hope.
conference attendees that Ryanair charges half as much for a ticket
as Southwest, and he contended theres nothing inherent in the U.S.
that makes it a higher-cost market than Europe.
opportunity for lower-fare new entrants in the U.S., said Tangorra,
a former chief strategic adviser for DJ Air Group, which aims to be
among the new entrants.
proposed new entrants also are poised to find out whether there is
more room, if they can overcome obstacles.
One is Virgin
America, which is still stalled and struggling for approval from
the Dept. of Transportation because of a debate over whether it
really is under U.S. control, as required by law, given the
involvement and investment of Virgin Group Chairman Richard
Virgin Americas vice president of planning and sales, arrived here
to proclaim confidence his airline would get off the ground in
2007, if not this year. But he didnt reveal more about its
which signed a licensing agreement to use the Virgin name, is
relying on the brand to give it a big boost. Clark said the Virgin
brand has greater than 90% recognition in large metropolitan
emphasized pricing and next-generation onboard products as key
differentiators, but he didnt say a lot about either. CEO Fred
Reid, however, recently told the San Mateo County Times that
product plans include broadband access, an entertainment system
with a 9-inch screen, interactive games, on-demand movies and the
ability to use a touch screen to order food that is sold on
new entrant, Skybus, did not show up here, but there was some
chatter about the Columbus, Ohio-based airline, which in March
received DOT approval to fly.
Skybus already is
billing itself as Americas Ultra-Low Fare Airline. But it remains
to be seen whether the Ryanair model will work in the
said Skybus had retained Ryanair or former Ryanair managers and was
trying to make itself the Ryanair of the U.S. market. Skybus
reportedly plans to outsource everything it can and has been
pushing uncrowded airports to provide big incentives and price
breaks to win Skybus service.
But the latter
strategy, which Ryanair has used to great effect in Europe, is not
being greeted warmly by airports here, the insiders said. And one
of them said there has been some disgruntlement and disagreement
over Skybus proposed routes.
low-cost carrier not only gets big cost breaks from airports, but
it cuts costs by removing seatback pockets and reclining seats and
recently began charging for checked baggage. It also relies heavily
on ancillary revenue from items such as hotel and rental car
bookings, travel insurance, onboard sales and other travel-related
items, so much so that it is aiming to let half of its customers
fly for free by 2010 since it would make money from their other
low-cost carrier for the U.S. market is Louisiana-based Air Gumbo,
which has been persistently pursuing its plan since 1998 despite
seeing it derailed by 9/11 and Hurricane Katrina.
Air Gumbo CEO
Ralston Champagnie said he came to the conference amid a new
fund-raising effort and hoped to file for DOT approval this year
and fly by 2007.
still faces what may prove to be his biggest challenge: convincing
investors that New Orleans will bounce back enough to make feasible
his plan to fly Bombardier regional jets out of New Orleans, Baton
Rouge and Shreveport for service to neighboring and nearby
he hoped to tap into federal dollars for rebuilding New Orleans as
an incentive for new investors to come onboard. He said Air Gumbo
also planned to tap into the culture of New Orleans and southwest
Louisiana with a gumbo design on its planes, gumbo onboard and jazz
music while boarding. He said the carrier was working with Apple
and cabin designer BE Aerospace to incorporate an iPod-based
entertainment system in seat armrests.
little concern about competing against Southwest out of New
Orleans. I think theres still lots and lots of room [for new
entrants], he said.
three low-cost carriers declared their opposition to in-flight cell
phone use. Weve heard loud and clear from our customers that they
dont want cell phones in flight, said Travis Christ, US Airways
vice president for sales, marketing and distribution. AirTrans vice
president of marketing and sales, Tad Hutcheson, said his airline
did not want them either. Barry Biffle, Spirits senior vice
president and chief marketing officer, said cell phone use would be
are worried about the rising cost of fuel. But Subodh Karnik, ATA
Airlines chief operating officer, said the biggest concern for
low-cost carriers should be the possibility it will come down too
much. Karnik, who previously worked for Delta, Continental and
Northwest, said legacy airlines have cut costs so much that a
significant decline in fuel prices would suddenly make them
profitable and could entice them to place large aircraft orders
that would flood the market with capacity. That would eliminate the
capacity constraint that has allowed U.S. airlines to raise
Spirit is still
aiming to become the leading low-cost carrier to the Caribbean and
Latin America, but not to everywhere in Latin America. Biffle said
the range of Spirits aircraft limit the future service to Central
America and the northern part of South America. That could include
the northern part of Brazil, but Biffle said the lack of Portuguese
speakers on Spirits staff makes him leery of entering that
To contact reporter Andrew Compart, send e-mail to [email protected].