ScottTexas

AA has recently been emphasizing how they see growth in their international markets, but these too could be poached by an upstart LCC featured in the WSJ today....


All-Business Airline Orders 40 Jets

Primaris, Ahead of Launch,
Secures Funds for Boeings,
Including 7E7 Dreamliners
By J. LYNN LUNSFORD
Staff Reporter of THE WALL STREET JOURNAL
October 21, 2004; Page D3

Primaris Airlines, an upstart carrier that aims to offer all-business-class service between New York and other major U.S. cities as early as May, announced today that it has raised enough money to order 40 new airplanes from Boeing Co. and that it will become the first U.S. airline to operate Boeing's new 7E7 Dreamliner.

The Las Vegas carrier will place firm orders for 20 new Boeing 737-800 jetliners and 20 7E7s. It also has secured options for 25 more 737s and 15 more 7E7s. The total value of the firm orders is about $3.8 billion at list prices. Deliveries would begin in 2007, and would replace leased jetliners that the airline plans to use in the interim.

Primaris now operates a single leased Boeing 757 that most recently was used to ferry the White House press corps. The airline says it believes it has lined up financial backing that will enable it to start a premium service that would do for business travel what Southwest Airlines and JetBlue Airways have done for economy travel, at a time when the full-service carriers have been cutting back on the perks. "We feel very confident that there is a market out there for what we are offering," said Mark Morris, chief executive of Primaris.

(edited here)

Several start-up companies, including Legend Airlines and MGM Grand Airlines, have attempted to create all-premium-class airlines in recent years, but they failed because the ventures were undercapitalized and couldn't compete with the major carriers' frequent-flier programs and their pricing power with major corporations. For Primaris, a particular challenge will be that many of the domestic routes it intends to serve are already extremely price-competitive.

There are certain niches where similar business models appear to be working. PrivatAir, a Geneva-based company, has been successful since 2002 in operating Boeing 737 business jets and Airbus A319 corporate jets for Germany's Lufthansa between Düsseldorf and Newark, N.J., as well as between Düsseldorf and Chicago, and Munich and Newark.

Primaris officials say they believe the airline can compete with existing full-service carriers by offering better service at a lower price. All of the company's planes will feature in-flight broadband Internet access, ample legroom and wide leather seats arranged two abreast on either side of the aisle. Mr. Morris said the airline believes it can offer the service for about $80 to $100 more a ticket than a comparable seat on a low-cost carrier. It says it believes it can offer fares between New York and London or Frankfurt starting at $400 to $600 one way.

The airline initially plans to begin nonstop service from one of the New York-area airports to Los Angeles and San Francisco. Over a period of a couple of years, it hopes to phase in service between several major U.S. cities, including Chicago, Atlanta, Dallas and Denver. Mr. Morris said the carrier hopes to use the 7E7s domestically, as well as to serve potential overseas routes to the busiest cities in Europe, Canada and Asia.

JDiver

Seeing is believing - this won't be the first LAS-based "upscale airline" that tries to fly.

chicagorich

I find it interesting, given the AA announcement regarding St Maarten, that LH is apparently contracting out some mainline jet service to a private company focusing on the business class market.

Could AA consider doing that for its business markets and de-emphasize f/c on other aircraft on less traveled routes?

..

PresRDC

From Legend to Atlanta Air, the history of post-deregulation U.S. aviation is littered with defunct carriers offering an all first class business model. It does not work and is unlikely to work with such a large aircraft.

I doubt they're loosing any sleep at DFW.

chicagorich

No, they're too busy losing piles of money...

tismfu

Is this the first premium start-up to say it's looking towards Asia and Europe? If so, it will be interesting to see how the markets react to LCCs poaching what remained of legacy carriers' dominance.

Also of interest is how Primaris says it plans on flying 7E7s domestically.

greggwiggins

Maybe they're going to succeed at this, but Primaris doesn't have exactly the best reputation here in Washington right now; at least among those of us who commit journalism for a living. Their single aircraft has been shopworn and notoriously unreliable.

I'm copying a paragraph from Dana Milbank's "White House Notebook" column as published in the October 12, 2004 Washington Post.

Primaris, the one-plane airline the White House has hired for the suspected purpose of eliminating the White House press corps, continues its descent into aviation history. On one flight, a television news producer was disconcerted to feel something fall in his lap on takeoff: It was a sheared-off screw of unknown origin. On another flight, a jetway rammed the plane, cracking the plastic inside of a forward door, which was patched with duct tape.

Spyder

If they're sleeping well in DFW these days it may be because they're listneing to Nero's fiddling.

In the case of Legend, AA financed an effort to crush competition. AA re-fitted a bunch of Fokkers and then slashed prices on the routes until Legend went bankrupt. Hard to know how much cash AA spent to drive their competitor out of business but I'm sure they lost money on every seat they sold.

Where will that cash come from this time around? Hard to beg the government for a bailout while hemorrhaging cash to stifle competition.

fly co to see the yanks

hmmm...i was thinking that this was the "niche" Virgin America was going to go after.

TRRed

I also started thinking back to National Airlines. It appears some of the execs may have been with National. I never knew what happened to all of the 757s that National had . . .

FWAAA

You and I remember things differently. My recollection is that Legend quickly discovered that its fare structure didn't work, and that AA simply matched Legend's fares as they fell. And I applaud AA's fight against Legend - Legend's announced business plan was to siphon off AA's paid F and full-fare passengers at DFW, which, if successful, would have severely harmed AA.

Legend had a plan, and AA competed against that plan. Legend lost (as competitors often do). That doesn't make either Legend or AA the bad guy. AA was the winner and Legend was the loser, that's all.

Had Legend chosen ATL or EWR or HOU or DTW or MSP or DIA, I assume the story would have played out exactly the same way it did at DAL, except with different cast members.

Spyder

Don't know how you can say the fare structure didn't work and that they were siphoning off AA customers. Those two statements don't jive. If Legend was such a bad idea, AA could have let them die a nice neat death. That AA was so predatory tells you something about how real the threat was.

Additionally, AA only operated the Fokker's until they killed off Legend. Then off to the desert. There was a clear desire for the service by PAX while it existed in the marketplace. It's just that AA didn't want that service to exist at that price as it conflicted directly with the prices they need to gouge to cover their current operational inefficiencies.

That's not business, that's mafia.

FWAAA

Legend's announced business plan was to siphon off the highest yielding AA passengers and to charge fares similar to those charged by AA. I didn't say they "siphoned off AA customers." I said they planned to siphon off those customers.

Of course, at AA's high fare level, Legend found insufficient demand. When it lowered its fares, demand materialized. I flew AA's Executive Class service once the price came down.

Nope, not exactly. Legend died on December 2, 2000.

http://airconsumer.ost.dot.gov/cessations/legend.htm

AA operated the F-100s with a reduced service level (but same 56 F seats) at DAL until September 11, 2001. Following September 11, the DAL service did not resume. Neither did plenty of other AA service. We can only guess as to whether AA would still be at DAL had September 11 never happened.

Apparently, at the right price, demand does exist for big seats to Chicago, LAX and LGA from DAL. Just not at the prices Legend initially sought to charge. You know, those same fare-gouging prices charged by AA.

Spyder

Here's a link ot a piece from the Wall Street Journal that may help to jog your revisionist memory.

http://www.ssc.wisc.edu/~sseverin/aafollowup.htm

By no stretch of the imagination were AA's actions good for consumers.

FWAAA

Thanks. I'd seen the article.

Sure, it attempted to paint AA as the bad guy, but it doesn't change my revisionist memory. In fact, it confirms some of my points:

You mean that AA's DAL service was not beneficial at all for consumers? Not one bit??

Didn't AA provide an alternative to Legend? Were it not for AA, Legend would have been the only choice for 56 seat all-first-class service from DAL, wouldn't it? Isn't it better to have two competitors providing the service than allow Legend to enjoy monopoly status?