Wednesday, May 27, 2009

If at first you don't succeed...

The founder of an ultra-low-cost airline, which lasted all of ten months before ceasing operations last year, has a new idea:
The guy who founded Skybus is at it again. Skybus founder John Weikle is now the CEO of JetAmerica, a new ultralow-cost carrier that is set announce its start-up plans today. USA TODAY reporter Dan Reed says JetAmerica plans to "start flying in July with promotional fares as low as $9 one way," a gimmick that also was employed by now-defunct Skybus.

As for JetAmerica, USA TODAY's Reed writes the airline "says it will fly Boeing 737s starting July 13 between Newark's Liberty Airport and four smaller markets that currently have only minimal, and expensive, regional airline service. Those four: Toledo, Ohio; South Bend, Ind.; Lansing, Mich.; and Melbourne-Vero Beach, Fla. The carrier also says it plans service from Melbourne-Vero Beach to Lansing and Minneapolis-St. Paul, and between Toledo and Minneapolis-St. Paul."
JetAmerica plans to begin with a schedule of 34 flights per week using a single 189-seat aircraft. Flights between city pairs will be operated on a weekly or semi-weekly, rather than daily, basis. For example, JetAmerica's service from Newark to Melbourne will consist of a single round-trip on Sundays and Tuesdays; the service between Melbourne and Lansing will consist of one round-trip every Saturday. This type of schedule is geared towards the casual or leisure traveler - it is of no use for business travel - but has been relatively successful for other carriers such as Allegiant Air. (Besides, there's probably not enough demand to make daily service between South Bend and Newark, Lansing and Melbourne, or Minneapolis and Toledo economically viable using a Boeing 737.)

JetAmerica, which will utilize the same "a la carte" pricing scheme Skybus offered - passengers will pay for everything from checked bags to pillows to in-flight snacks - technically isn't even a "real" airline. The flights will be operated under contract with Florida-based charter airline Miami Air International, which will supply the aircraft and the flight crews. As such, JetAmerica will officially be considered a charter opertation, rather than a scheduled airline. I don't think this is a big deal, however, other than that it's the easiest way to start up a new airline.

But will it work? It seems that Weikle has already tried this "Wal-Mart of the Skies" business model - the no-frills, rock-bottom approach of Europe's RyanAir (you know, that airline that recently thought about charging people to use the toilet) - with Skybus. That experiment didn't turn out so well, although Weikle himself claims he had nothing to do with its failure:

As for his ties past ties to Skybus, Weikle tries to play down that angle. An e-mail to USA TODAY that gave preview details of JetAmerica's announcement says: "Weikle will entertain one question about Skybus and this will be his answer: I was the founder of Skybus. I always intended to move forward with other projects after the first Skybus revenue flight was launched on May 22, 2007. I left the company on May 23, 2007, the day following the airline's first revenue flight. I was no longer with the airline and had nothing to do with the board of managers' decision to cease operations 11 months later in April 2008."

In other words, Weikle is claiming that his business model itself was sound. The reason Skybus reportedly racked up a net loss of $56 million on $80 million of revenue over three quarters of earnings was due to poor execution and high fuel costs. Which makes me wonder: once JetAmerica starts flying, is Weikle going to stay on as CEO or will have leave the company in order "to move forward with other projects?" And although fuel prices are reasonable right now, what happens when the economy eventually recovers and jet fuel returns to or exceeds its sky-high prices of a year ago, as it inevitably will? Methinks the "ultra-low-fare" carriers are going to be the first ones to go.

But hey, if you can get taxpayers to help foot your bill, then why not give it a shot:
JetAmerica is getting considerable public help in its start-up. The Associated Press notes "the Lansing, South Bend, Melbourne and Toledo airports are subsidizing JetAmerica with $1.4 million in grants in its first year, along with about $867,000 in waived airport fees and $1.1 million in marketing and advertising assistance. South Bend, Toledo and Melbourne received their grants from the U.S. Department of Transportation's Small Community Air Service Development Program, which has awarded $104 million to 223 recipients since 2002 in an effort to restore lost service and bring air fares down." Newark and Minneapolis are not offering any assistance, according to AP.
Heh. And to think that there are those who continue to argue that the commercial aviation industry "pays for itself."

Anyway, it will be interesting to see if JetAmerica succeeds where Skybus failed. The only real difference between the two airlines relates to route structure and schedule, but that just might be enough. However, given the way high fuel costs wreak havoc with the airline industry, I do think that the long-term prospects for an airline that offers $9 promotional fares are not exactly good. We'll see.

As with the case of Skybus, I don't ever see myself flying JetAmerica. If I want to fly a low-fare airline, I'll make the eight-mile trip from my house to Hobby Airport and hop aboard one of these guys.

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