If you were to start an airline and FF program...
 

What would you do? Let's say you and David Neeleman of JetBlue were able to raise a huge amount of capital for a startup carrier. How would you do it? What would you do different? Here's my idea, kick it around....

1. "Focus on the T". Take a map of the USA, and place a T on it. My focus would be on the areas that currently have little or no low fare options. North-South across the heartland, East-West across the northern third of the country. Yes, essentially take on NW. With the Humphrey Terminal at MSP currently open, it could make MSP a very strong focus city. My other focus city would be MKE. I would draw from S. Wisconsin and the Northern Chicago suburbs. Would also focus on US-Canada markets. To me that seems to be a ripe market for a low-fare carrier.

Fare structure: All fares are one-way, like WN. 14 day advance, 7, 3, and walk-up fares offered. Only full Y fares are refundable. Tickets sold by web and thru selected (not all) travel agents only. travel agents will have access to same web-only fares, and I feel that a 8% commission on each ticket will still be cheaper than labor costs of a telephone res center. Will not participate in TA Res systems like Sabre, all bookings via web. All ticketless travel.

Fleet: New Airbus A320 family. I prefer the comfort of the Airbus over the 737, so my choice is based on my preference. But the common rated cockpit is a plus as well.

Cabin: 2 class cabin. Minimum 16 seats in FC cabin. FC seats available for $50 per segment above full Y fare. Leather seats throughout, DirecTV screens at every seat. No meal service on board, even in FC. BYO.

FF Program: My program will recognize distance traveled, but will also recognize fare paid. For example:

Segments <250 miles = 1 credit
251-750 miles = 2 credits
751+ miles = 3 credits

fare bonus 14 day advance fare = 0 credit
7 day advance fare = 1 credit
3 day advance fare = 3 credits
walk up (full Y) = 5 credits

Credits may be used for upgrades or free tickets. FF rewards will be similar to Southwest. If a seat is available and you have enough credits, it is yours. No blackout dates on awards, but there will be capacity controls. During holiday periods only. All award travel must be booked online thru website. Elite levels will be offered with bonus points, but no free upgrades.

Thats as far as I've gotten. I tend to think about this when I'm waiting for an airplane. Anyone have any other ideas?

I wouldn't bother. Why fight for a piece of a business that has shown an industry profit only three out of the last 50 years?

I'd rather spend my money gambling at Vegas. I'd have more fun.

Mdtony -

I see your point, but... It's been shown that airlines can consistently turn a profit if they break away from the current business model. Southwest is consistently profitable because they have created their own niche. JetBlue appears to be bucking the trend as well.

Rather than watch the current system fall apart from the comfy seat at a blackjack tabel, I thought I'd try to see if I could build a model that looks good to the most frequent flyers.

i agree with mdtony.

why would anyone start a business in an industry that is so regulated by the government as so heavily taxed? having gotten my mba at a superb school, i know that one thing management teams abhor are events that are out of their control. this industry is full of them.

on top of that, the customers of the business are a bit, let's just say, extreme. i mean, if an elite kit arrives on march 1 instead of february 28, letters and emails arrive in droves from customers expecting something. that's kinda sad when customers are just waiting for something to go wrong so they can pounce. any idea how much is spent just on customer care? yikes.

then, there is all of the media scrutiny surrounding this industry. you don't see quite as many articles poking and probing regarding, let's say, semiconductors.

it's a rough business. i'll pass, thank you.

[This message has been edited by fly co to see the yanks (edited 02-25-2002).]

No way, I disagree 100%!

Doesn't matter how many MBA's you have or where they come from. Were it the case that airlines draw too much publicity and scrutiny, we'd all still be riding the train and shopping at Montgomery Ward's! I agree that the current system doesn't work well in most cases, but I think a better airline could be built...

Nice topic.

"My airline" would offer fares dependent upon how much business you were giving/willing to give to the airline. You would get very good prices with few or no restrictions in return for real loyalty measured by gross profit contribution and adherence to forecast travel plans.

Fares would be far lower than Y or B fares, but a bit more than leisure fares.

I would have a one class cabin with comfortable 2 X 2 seats, perhaps in a fleet consisting only of either A320 or B737s.

I might do a hybrid point-to-point model with small mini-hubs, using primary airports to make interlining and connections easy.

Actually, the biggest problem with the airline business is labor.

Labor holds the airline over a barrel. There is too much of an imbalance between the power of labor and management.

Unions are strong in the USA today only in two areas, really: transportation and government. In each case they hold most of the cards.

I think new business structures might be the answer, perhaps a franchise model a la "United Express" where many different local operators work together under a common tradename.

I like the franchise idea. I know British Airways has done some of that in South Africa and the UK, but I don't know if it works well or not.

As for the labor situation, that's why I eliminated telephone res sales. A travel agent is much more efficient if the agent doesn't have to use a GDS to access inventory. Southwest doesn't participate in any except Sabre. And a travel agent who doesn't sell doesn't cost the company in salar/benefits. "DuxfanAir" could even use it to their advantage.

2X2 seating? I don't know.... That business model doesn't seem to work well for Midwest Express, because you need the higher yield to offset the loss of seats. MRTC seems to have worked at AA. The customers like the increased legroom, and it has allowed AA to reduce the number of seats sold at fire sale prices, thereby increasing yields. But maybe a 3X2 seating config, like the old Air Canada domestic FC product could work?

Actually, Midwest Express has been consistently quite profitable except for just recently.

The 2X2 seating works because it eliminates complexity. Having only one class is far easier to administer and cuts numerous operating costs.

"My airline" would cater to business travellers and get them to pay more, and in return would be more comfortable. The higher revenue would more than offset carrying those empty, narrow seats http://www.flyertalk.com/forum/smile.gif

fly da to see the dux!

Richard, sounds like you and I might be competitors. http://www.flyertalk.com/forum/wink.gif

I would build an airline that caters to all, but rewards those spend/fly the most. By catering to all, you insulate yourself from downturns. By keeping costs low enough, you avoid having to gouge business travellers in order to subsidize leisure travellers. by placing fare incentives in the FF program, you give business travellers an incentive to spend more. Having one cabin for simplicity of product makes sense, but there's a reason why AirTran put a business class cabin on their airplanes. There's a reason MetroJet didn't work, it wasn't diferent enough from Southwest to draw customers away.

besides, Tyler has already created a slogan for "DuxfanAir" http://www.flyertalk.com/forum/tongue.gif



[This message has been edited by duxfan (edited 02-25-2002).]

duxfan: hmmm...did i say that a better airline couldn't be built? that's odd, i didn't think i said that. what i said was that i wouldn't want to be in the business. from a manager's perspective, there is too much out of my control that impacts my performance/livelihood.

[This message has been edited by fly co to see the yanks (edited 02-25-2002).]

So the real question is:

"If you were starting an airline and had lots of financing, what parts of your airline would be different than Southwest?"

I would do everything I could to keep unions out.

As for 737s vs. A320s, the 737s might be more fuel efficient if you get blended winglets. http://seattlepi.nwsource.com/busine...rtners25.shtml

However with a slogan like "fly da to see the dux!" I can't fathom who would want to fly on this airline. http://www.flyertalk.com/forum/wink.gif

Since I can't figure out why 777 pilots are paid more than 737 pilots other than union seniority, I would order 777-300s and hope to acheive insanely low CASMs, resulting in insanely low fares. But maybe I'm just naive...

FCTSMBAW

I'm sorry, I stand corrected, and you are correct about the above quoted statement.

But since the question was "if you were to start an airline and FF program..." and you've decided that you wouldn't try I guess we're even then, huh?

http://www.flyertalk.com/forum/biggrin.gif

hey whlinder, haven't seen ya around since bowl season!

you might not like the slogan, but I can't imagine that "ride with the huskies" would work either! LOL

actually, I really don't think the unions would be a problem. Southwest is very heavily unionized, but their labor agreements do not fit the mold of typical labor agreements. they pay among the highest in the industry, but they have the contracts structured to get among the highest productivity as well. unions and management can work together, when both sides WANT to work together.

maybe the 737's could be made more fuel efficient with the winglets, but until you find a way to widen the cabin, the A319/320 is still much more comfortable in coach. compare a UA 737 seat with a UA A320 seat, and you'll see what i mean!

You are all forgetting one thing. The biggest thing of all. Customer service. To beat the rest, that's what you need to concentrate on. Provide the best customer service out there. Listen to your customers, find out what they want and need and then provide it.

I'm around; I think we frequent different forums for the most part.

I should have ribbed you about the Huskies beating the Ducks in basketball, since we are terrible and you guys are decent (tournament bound at the least).

"Ride with the Huskies" probably wouldn't "fly" anymore than a Duck related slogan.

Are you sure there isn't a lowfare carrier flying Airbii that has selected Huskies and not Ducks as a logo?

http://www.airliners.net/open.file?id=144905

http://www.airliners.net/open.file?id=202854

http://www.airliners.net/open.file?id=196985

What a beautiful tail! What a hideous engine!

And which plane does Frontier have on their homepage? http://www.frontierairlines.com/
You guessed it!

Unions like a WN would certainly work. But can it be replicated?

I agree that UA's A320/19s are MUCH more comfortable than their 737s. I guess Boeing didn't fix this with their 737NGs? Maybe try the 757-300, lowest CASM for a single aisle plane.

(crap, airliners.net just went down and my links don't work. Once it is up again they should all work.)

[This message has been edited by whlinder (edited 02-25-2002).]

What I would do buy a bunch of 737-200's and 727's (cheaper to buy now; worry about maintenance and fuel later if I'm still in business). DC-9's would be OK but the F seats aren't as wide, so I'm going with the classic Boeing.

Coach 3x3 and F 2x2, as usual. F is 40" pitch, and coach 32" pitch. All fares are one-way. All F fares are exactly double the coach fare for the same trip.

I decided on F=2*Y because each F seat is 1.875 coach seats (6/4*40/32). Charging 2 instead of 1.875 covers the extra catering.

F will have meals or snacks depending on distance (snack at the least). Coach will have a meal if F has a meal.

Since most of the big-city markets are either dominated by WN or a major's hub (e.g., AUS-ELP, CVG-LGA), I'll hit whatever is left. LGA-TUL, DAL-ICT, IAH-GGG (that's Tulsa, OK, Wichita, KS, and Longview, TX). It should be no surprise that those markets currently have high fares. http://www.flyertalk.com/forum/smile.gif

By piecing together all these routes, obviously I won't have one or two big hubs, but I will have connections available similar to what WN does. WN is commonly called "point-to-point", but it doesn't mean you can't change planes. There are plenty of routes on WN where you must change planes or take a one-stop direct flight.

WN doesn't serve places like ICT and GGG because: 1) they can't have 10 flights a day given the demand in and out of those places; 2) they depend on people willing to drive for hours just to fly WN.

JS Airlines will have to charge more than WN to cover the cost of hiring people to serve relatively fewer people boarding JS at GGG versus WN at DAL, HOU or LIT, but given the fares charged by Eagle, I'm sure I can make money. http://www.flyertalk.com/forum/smile.gif

I suppose no unions would be best, but I'm not hung up on that. If an airline with poor labor relations could magically make the union disappear, they would still have poor labor relations, but without the strikes. Strikes are pretty rare, but unhappy employees are there 24/7. Happy employees make for happy customers.

What sets JS Airlines apart from the other airlines is that the customer can choose between non-stop and saving money. On other airlines, even WN, the fare is solely a function of origin/destination. That means some people get to pay a low fare for a non-stop flight (e.g., LGA-DFW advance purchase), while other people pay a high fare to change planes (e.g., LGA-TUL).

For example: suppose I'm operating one flight RIC-OKC-COS-GEG, and another flight RIC-TRI-MEM-XNA-OKC. If you want to fly RIC to OKC, the non-stop will cost you more than the three-stopper. The cheap passengers will take up the other seats that I can't fill at TRI, MEM (NW hub) and XNA.


FF program: mileage based on origin/destination only. It's a cross between miles per flight and trip credit like WN. Miles for confirmed F upgrades or award tickets (F or coach). NO ELITE LEVELS. It's elitist, complicated, and produces a lot of stress for passengers and gate agents before boarding! Besides, you won't need elite status when my check-in lines are reasonable and the FA's help people stow their second carry-on under the seat in front of them. http://www.flyertalk.com/forum/smile.gif

Low miles for capacity controlled upgrades/awards; high miles for a "rule buster".


edited to add: no video (no int'l or long-haul domestic flights); passenger phones in each F seat and one phone in the rear for $1.00 a minute; audio with free headsets and pilot/ATC communications a.k.a. "channel 9" on a certain other airline.

[This message has been edited by JS (edited 02-25-2002).]

If I started an airline, I would copy Southwest's model to the letter (737s, etc), but focus on cities that are known to be potential additions to the Southwest route structure.

A few years later, Southwest buys me out!

I like your thought process there... LOL

Southwest doesn't acquire other airlines. They grow internally.

The profitable airlines are the regionals. Look at Delta's purchase of Comair -- the founders probably made a bunch of money on that one.

Richard:

Southwest Airlines, didn't they buy Morris Air from David Neeleman?

------------------
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~BUZZ~ thanks for playing....

Southwest bought a lowfare competitor, I believe its name was TransStar, in it's early days. In the early 90's they bought an airline out of Salt Lake City by the name of Morris Air. A good chunk of Southwest's flying in the Mountain West, and Pacific Northwest came from that acquisition.

I'll follow up to my own post. Yes, Southwest has made acquisitions in the past. That's why I would model my new airline (TinoAir has a nice ring) just like LUV.

Plus, because all of the employees would have stock options, they would offset any potential loss of seniority through a one-time payment from their option profits.

Unlike LUV, though, there would be a return of the hotpants and free drinks. http://www.flyertalk.com/forum/smile.gif

HotPants and free drinks? Maybe you should call it "Crazy Tino's Jetways"!

However, it is obvious that you are a master of free publicity. I can just see your inaugural flight now, Feminists at the ticket counter, protesting the "degradation" of women who have freely chosen to wear the hotpants. Sen. Dianne Feinstein standing in front of the TV cameras outside the terminal, decrying the "inevitable air rage" that will come from the free flowing booze on board!

Sign me up!

I think the hotpants would do a lot to curb the air rage from all the free drinks! Or is that the other way around?

I won't get into setting up Utopian Airlines®. That could take days. And I'd want you to pay me for that. http://www.flyertalk.com/forum/wink.gif

But I will state a major change to my FF program. I would base free award travel more closely on distances flown rather than more broader regional critera.

For example, it's never made much sense to me why it's the same mileage requirement to fly LAX-Hawaii as JFK-Hawaii, when the latter is twice the distance.

And you wouldn't earn "miles." That's never made sense to me either, because you don't get 25,000 miles of travel for 25,000 miles in your account. The use of the word is all wrong. Credits. Or points. That's the ticket.

fly ta to see the hotpants!

yeah, but that doesn't matter to the PC crowd... c'mon, they FEEL safer and that's the most important thing, right?

If I were in charge of a new airline and FF program I would begin by making all the rules perfectly clear from carry-on baggage to award benefits. No need to be a super ****he to find out how it works.

I would have 2 class airplanes with 'upper' class in the rear of the airplane (on smaller planes) with no access for economy pax. Yes it would take longer for 'upper class' pax to get off the airplane, but they would have more privacy, security and bonuses the economy pax wouldn't have to interfere with. (Yes, I've had it with economy class 'visitors' to FC and Business!!!

I would not serve meals on flights less than 4 hours in 'upper class-none in economy, would sell drinks in economy as in Ryan Air. If you know that no meals are going to be served you can make your own arrangments and do a better job of it.

I would have areas of the airplane that are 'no kid' zones so that adults can work, sleep, talk in peace.

I would make the toilets 50% bigger in floor space!

I would increase circulation of fresh air!

I would hire and train flight attendants who have experience in law enforcement and working with people rather than pretty people who are hired for their low weight and looks. Skill in mascara application would not add points at the interview!

I would sell one-way tickets at fair prices and cut down on all this garbage about 'non-refundable' etc.

I would have an FF plan that issues a debit card that pax can use to 'buy' tickets, upgrades, drinks, gifts, prizes and travel packages.

I would require safety seats for all infants and small children!!!!

Could be...then again the only thing I KNOW about the airline business is that if I ran one, I would lose my shirt in no time.

I don't know which is an easier way to lose money: farming, insuring Mars probes or the airline business.

Easy:
- Credits based on miles flown
1 - 500 miles - 1 credit
501 - 1000 - 2 credits
etc...
- Bonus credits for full fares
- 3 fare classes - Full fare, discount fare, and el-cheapo fare
- 1 roomy class for everyone (like Midwest Express).
- NO middle seats (I guess that means I'd buy 717's)
- Big Overhead bins
- At least 5% of seats can be bought with credits - untill the flight sells out
(about 4 - 6 seats per flight).
- No blackouts, rule buster, etc...
(you snooze, you lose)
- Decent food on flights over 3 hours
(I'd comp the 1st drink too).
- No elite status - everone gets treated like people instead of cattle.
- PTV's like JetBlue with on-demand movies
(some free, some PPV)
- "Airplane" ALWAYS a free on-demand movie
(Surely you can't be serious - I am, and stop calling me Shirly)
- Credits could be used to buy drinks, PPV movies, etc...

Aren't the rules spelled out pretty well with existing airlines? Or do you mean that the carry-on rules would never be bent?

(FT edited out "sleuth" because you misspelled it, and it thinks you typed a word that means selling oneself http://www.flyertalk.com/forum/smile.gif )

But the whole point of First Class being in the front of the plane is so F passengers don't have to walk all the way to the back when boarding, and they don't have to walk all the way to the front when deplaning, waiting for coach passengers to deplane first. Look at how much trouble some people go to just to sit in the forward section of coach. Putting F in the back makes no sense at all. You can keep out coach passengers just as easily regardless of where the F cabin is located.


What's the point of First Class, then? Who would buy an F ticket and carry a meal on board?

How can you have a seating section that purports to serve working (alone) or sleeping passengers at the same time as talking passengers? Some adults talk loudly.

You really need to have a work alone/sleep section and a talking section within the no-kid section (I take it the kid section is a free-for-all w.r.t. talking vs sleeping?)

If someone books a seat in the work/sleep section and strikes up a conversation with the adjacent passenger, they will have to get up and move to the talking section. If the flight is full, they'll have to negotiate with talking passengers to trade seats. Or, you can block off a quarter of the seats in each subsection of the 'no-kid' zone so people can switch between sleeping and talking sections more easily.

That's a waste of space. People spend most of their time in their seat, not on the toilet (unless you get stuck in it by not standing up before flushing http://www.flyertalk.com/forum/smile.gif ). Use extra space for seats, not lavatories.


Buy DC-9's, MD-80's, DC-8's, or 727's. Problem solved.

Why? Seems like a waste of law enforcement training, unless you anticipate a marketing campaign towards recently released felons.

Sounds OK.

With your 'no-kid' zones and mandatory safety seats, why don't you simplify matters and call it Club Airline? (adults only)

Apparently you have a disdain for children, so rather than having your narc FA's kick-box parents who take their infants out of their seats for breastfeeding during cruise, follow the K.I.S.S. principle and make your airline adults-only.



[This message has been edited by JS (edited 02-28-2002).]

Dear JS, I respect the amount of time you spent reading my post. Thank you!

For several years I worked for an oil company. I had the task of organizing the use of the corporate jets. If someone wanted to ride, I had to sign off their 'ticket'. Talk about popular! Birthdays were a blast.

We had an assortment of aircraft. The most popular among the big wigs were the ones which had the passenger compartment in the rear and the boardroom/meeting facility/staff areas forward. The big guys liked having their privacy.

The most favorate was a concerted 727. The bathroom actually had a bath tub, but that's another story. The 'little people' rode up front, chiefs in the rear.

We also had an assortment of smaller jets. Those were the good old days. My office organized the cattering, flowers etc.

So I have a little history with planes. I'll give you that flying commercial is a fish from a different ocean, but I think if you gave FC pax more privacy on narrow bodies, they would be willing to buy more tickets.

As it is now, unless you wait back in a secluded holding area, and you board with everyone else--on narrow bodies being in FC is 'show and THEY tell'.

As for the extra room in the lav--obviously you have never tried to pull up a pair of Sheer Energy panty hose in an airplane lav!!

As service declines on most airlines, I believe that a service-determined company will find a market.

I'm not anti-kid--I like kids to be safe. It's the elder woman in me.

Niche airlines are the only ones that have much of a chance of being profitable in all markets. Unfortunately, from the customer's standpoint, niche airlines can't really service the needs of travelers who want or need to visit a variety of places.

I wouldn't want to start my own airline for that reason. Owning WN would be fine, but as the owner, living in NYC, I'd never be able to fly my own airline since they don't service the major airports here. Furthermore, unlike a Star or OW alliance which can get me anywhere in the world, WN can't even get me out of the country.

To me, it would be like owning a local chain of fast food restaurants, but having to eat at McDonalds or Burger King all the time.

d

Forget the hot pants...

Hooters Airlines! Can't you see the owl on the tail of the airplane?

I have never actually gone to Hooters but the concept sounds valid. All the airline food could be purchased from the local Hooters. $$$$

Doppy, you always make a lot of sense! Yes, a nitch airline is a huge risk. Now that my chances of catching a ride on an executive jet are slim to none, I've learned to fly the so-called friendly skies.

What we lack now is 'civility', a word my mother loved to use.

Flying is now a chore!

That is so darn sad. WN does make it better if you can deal with their system, but WN can't take me to Europe.

Not long ago I was on an AA flight where a mother was flying home in a rush because her son had been killed. From time to time she was sobbing. A kind FA offered to help and got the whole story. (The woman was seated behind me, I couldn't miss the story). By the time we landed in ORD, the FA had arranged that the woman be escorted from the plane through customs etc. The FA offered to drive the woman herself if other arrangments didn't turn up!

I waited with the woman at baggage claim (there's no getting around that) and watched AA people take her in hand and make the situation as smooth as possible.

It is entirely possible to fly in a civil atmosphere where we are if not nice, polite to each other!

I am tired of flying in situations where people argue over who gets overhead storage space and the ARM REST of all things!

I think you're on the right track oldpenny16 with civility.

If I started a new airline, I'd focus on it. Only nice FAs, pilots, gate/ticket/res agents AND customers.

Rude businessmen who push other people out of line because they're "flying first class" (especially when the people they push out of line are also in FC) would be asked not to fly with us again. Pax who are rude/drunk/belligerant would be asked not to fly again. Pax who yell at the gate agent to get an upgrade, pax who upgrade themselves by sneaking into FC seats, etc.

Unfortunately, I run into so many jerks when traveling, I'm worried that 90% of my customers would be asked not to fly with us again.

Instead of blaming the FAA for taking the fun out of flying, most people should blame themselves. If it were the FAA's fault, once you got in the air everything would be fine and you'd have a great time, since the FAA is only involved in ground security. That's not the case, there are way too many rude pax and FAs. The FAA can't do much about that.

If only people would try not to be such jerks when they fly.... I'm not even asking for people to be nice, just not be jerks.

d