Is there a market for a new international airline?

[Lezam]

I have been seeing airlines doing this for quite a few months now, pushing international routes out like they are going out of style. For example, delta has been aggressively creating new routes out of JFK to establish a dominance over international routes.

For the sake of argument, lets assume the current world economics were in place, but within the foreseeable future oil prices will go down.

Now, here is the thought. Is there a market for an exclusively international/longhaul airline based in the usa? It would try to establish dominance at a single airport, lets say jfk, and would have a medium to low cost structure. The purpose of maintaining a single airport presence is to capture the local market as best as possible. The service would be on par with a non us based airline, and would cater to a business/frequent flyer crowd, not leisure. Would it initially be able to tap into the market? Jetblue successfully shoved some airlines clear of its path with the lone ideal of great service. The airline could offer a few destinations at its start, expanding slowly, and maybe establish a frequent flier relationship with another airline for loyalty.

In my opinion, it wouldn't have to deal with any leisure flier droughts, and would focus its efforts on capturing the frequent flier.

Maybe it sounds crazy, but there has been an upsurge in efforts to expand international service over the past few months and it seems as though the domestic market is dwindling.

I know there have been a few economics left out, like the aircraft, slot restrictions, congestion, but if they would be able to overcome these...

Obviously there are no definite answers, but I think this could make for a nice chat!

[groundhand]

An interesting pitch.

The obvious answer would be to find a man with HUGE fortune (you seem to have a few based in the US) who is prepared to bet long term on success; and then watch that fortune dwindle away......

JFK would not, in my opinion be a good starting point in that the routes would be Eastbound across the pond. This would mean competing with just about every National (or ex national) carrier in Europe and the Middle East - all with established markets and customers, especially in the business market. 3 independents have tried to provide a 'different' service and all have failed - Eos, Maxjet and SilverJet.

The established carriers will fight tough to protect their Atlantic routes - think back to Laker - so anyone trying to get off the ground on the US East coast would need to have very big pockets and be in it for a minimum of 3-4 years before seeing any likelihood of returns. Similar applies for West coast bases.

And just to add to the difficulties, the US competition can blow masses of money knowing that they will not be allowed to go broke, Chapter 11 will allow them to continue no matter what their finances are like.

Back to the opening line...large fortune to bust in record time.

GH

[Rainboe]

Lezam- have you been camping for the last 6 months, completely divorced from all current events?

[HZ123]

Todays FT ponders oil at $300 a barrel by the end of this year. If so there will be a few less international airlines because most are having current problems at $180.

[The Real Slim Shady]

It makes absolutely no sense whatsoever to start up by going head to head with established carriers on tthe same or similar routes starting in their own backyard.

Only possible chance of success is offering a superior service from a minor airport e.g Islip to another minor airport e.g Franfurt Hahn or London Stansted or Paris Beauvais or Milano Bergamo.

Even then you would need very deep pockets.

[VAFFPAX]

Many carriers only have an extensive international network because they either charge premium for their service (Virgin Atlantic is exclusively intercontinental), or because they have an extensive local and/or regional business that they can charge premium on (BA/Lufthansa/AirFranceKLM).

For example YVR is not all that well-served from Europe by premium airlines, and if some colleagues are anything to go by, Air Canada is reviled for their service on their YVR-LHR route, so finding reasonable hubs that make good international connections with other airlines but are 'underused' for your market could make sense.

But to go intercontinental in this climate (especially with oil moving up the way it is currently) and not being able to hedge your costs is practically financial suicide, unless you can set yourself apart from the incumbents flying the same route, aggressively market yourself, and make massive losses on your flights (think a billion or three in the Queen's currency).

S.

[niknak]

Lezman

I've got a better business plan;

You raise the money to start the airline, give it all to me to invest in various schemes (mostly involving me increasing my personal wealth and having a good time) and you'll never see me (or your money) again.:p

[Lezam]

I just want to reiterate, I don't have deep pockets, and I found it an interesting idea. :)

But yeah, some economists have predicted lower oil costs in the next few months. So, there may be some relief in the aviation market while the legacies are licking their wounds.

How about an airline like boston, or even iad instead of jfk. JFK was just chosen as a random example. groundhand, mxj, ess, and silver were a premium airline with limited schedules. What I propose is a mid to low cost structure, in the middle of zoom and say Singapore. In your opinions, is the airline market really that impenetrable?

Additionally, the small airport near a large city works for ryanair, but it does not seem to work internationally. For example, AA has ceased to capture a decent market for JFK-EGSS. So I doubt a new route would work from smalltown usa to europe.

Thank you for all your interesting criticisms so far, hopefully you guys will contribute some more!