I’ve been an aviation geek since I was a little kid, and this industry is my passion. I’m grateful that I get to make a living covering this industry, without actually having to work directly in it. It’s an impossible, cyclical industry, and it requires a high level of masochism and passion to spend your career actually working in the airline industry.
With that in mind, I thought it would be fun to discuss something entirely theoretical. If I had to launch a US airline startup, what would I do? I feel like I have a unique, reverse engineered concept that no one has actually tried, reflecting how the industry has evolved. People might not agree with me on all parts of it, but I think most people will see merit to at least some of the ideas.
In this post:
Why many US airline startups struggle
Let me start by saying that I’d never want to start an airline, because I’m not that bad at math. 😉 I think Richard Branson had it right when he said “the easiest way to become a millionaire is to start as a billionaire and then start an airline.”
I also don’t like to waste other peoples’ money, and would want to treat it just like my own. If you’re going to invest in an airline startup, I tend to think you have better odds just going to the casino and playing roulette.
Despite that, over time, we see a countless number of airline startups. This is presumably fueled by a combination of passion, plus seeing an opportunity to get up to a high valuation fast, and then sell, at a high point in the cycle.
The reality is that the US airline industry is hard to break into. It’s dominated by the “big four” US carriers (American, Delta, Southwest, and United). Some of these airlines have been flying in one form or another for 100 years, and are the combination of endless mergers. They’ve only been able to build up their presence in markets through decades of persistence.
Yes, you have some other smaller players, but for the most part, they struggle to find their place in the market. I also think this is an especially tough time to break into the industry, as I’d argue that we’re reaching the point of overcapacity.
What’s interesting is that virtually every US airline startup in recent times has the same general concept — operate in underserved markets, with a budget model, competing on price. The problem is that when you look at how the industry has evolved, that’s not exactly a successful model anymore:
- The low cost business model is largely reliant on continued growth to keep labor costs down and avoid everyone being at the top of the pay scale, and the US is already a pretty mature market, so there are only so many growth opportunities
- Ultimately if you’re just competing on cost, you’re leaving yourself very exposed to competitive responses from major airlines, which have the ability to capacity dump and offer basic economy to compete, since much of their profits come from loyalty programs
- In order to make good profits from co-branded credit cards, you need scale, or at least need an affluent customer base
- We’ve increasingly seen airlines shift to larger aircraft, which is great in terms of the incremental per seat cost of those extra seats, but the problem is that actually filling those seats isn’t easy, especially if you’re trying to enter underserved markets
At this point, I think Allegiant Air is one of the only budget airlines that has a model that works semi-well. The airline flies under the radar and carves out niches that other airlines wouldn’t bother competing in, like flights from Flint to Destin. But this whole model of Frontier and Spirit taking on the legacies at their hubs is just a recipe for failure, and their numbers reflect that.
What I’d focus on with a US airline startup
If I were to start a US airline, I’d focus on several key trends, which all too many airline startups are ignoring:
- I think the trend toward more premium leisure travel demand is here to stay; that ranges from an increase in demand for premium economy, to an increase in demand for private jet travel
- For an airline to be successful, it needs to have the ability to generate outsized loyalty program revenue, so I would reverse engineer the airline concept around the loyalty program, and how that could contribute to the bottom line
- I don’t think the concept of all-business class airlines is ideal, because it carves out too narrow of a market; you need to go after a wider demographic both to cover costs, and to create upsell opportunities, because being able to generate ancillary revenue (and even sell upgrades) is key to success
- I think all too often, airline startups are focused on the cost side rather than the revenue side; while cost control is important, the only way to succeed and compete is to do well on the revenue front as well
My premium US airline startup idea
Again, let me emphasize that I don’t think this is the ideal time in the cycle to start an airline, as I think the industry currently has too much capacity. However, I think this is a concept that’s unique (no other startup has tried this), and I also think it would likely work out better than the other budget concepts we’ve seen.
The idea would be to go upmarket compared to anything else we currently see in the United States. I’d split the fleet between the Airbus A321neo family and the Airbus A220-300. Or depending on the state of the used aircraft market, maybe I’d go the route of acquiring used A320-family jets instead, because what ultimately matters to passengers is what the interiors are like.
The idea is to operate in premium markets (popular with both business and leisure travelers), but with a higher quality product than you’ll otherwise find in the US, and with more upsell opportunities. I’m not going to make this a 100-page business plan, but let me emphasize a few of the areas where I’d innovate.
Planes in a three-cabin configuration
At least for the bigger A321neo-style aircraft, I’d introduce a three-cabin layout. We’re talking a small economy cabin, a business class product comparable to domestic first class (or international premium economy), and then a first class product comparable to long haul business class. Think something along the lines of ITA Airways’ A321neo, except in an even more premium layout.
Why would I go for the three cabin layout? The first reason is because as planes get bigger and more fuel efficient, you have more real estate to play with. The problem with just cramming in more seats is that there’s only so much demand in markets. So it’s great that Frontier and Spirit have A321neos with around 230 seats, but if you can’t consistently fill them, that’s a total waste… you’re just flying around empty seats, rather than efficiently monetizing the cabin.
I’d take the opposite approach. Don’t have so many seats, but find ways to monetize them as much as possible. And by creating a three-cabin layout, you have a lot of opportunities for people to move up one or two cabins. That brings me to the monetization aspect of that…
View points as a core part of the business model
The US airline industry has transformed to the point that a large percentage of the profits at the major airlines come from their lucrative credit card agreements. Yet ironically, airline startups largely don’t seem to tap into that at all, partly because of where in the market they’re positioned.
What I think airlines often underestimate is that peoples’ willingness to pay might be different in points vs. cash, even if you were to place a value on those points. So I’d try to partner with all major transferable points currencies, and actually take a straightforward approach to monetizing flights and upgrades.
For example, say you have transferable points, and you want to fly a premium cabin from New York to Los Angeles. What are your straightforward options for redeeming? Honestly, to the average consumer, it’s mystifyingly confusing, and options are quite limited.
Ultimately airlines aren’t that creative in this area because their premium cabins are typically pretty small, and their goal is to not cannibalize revenue. But what if you were to reverse engineer that, and make upgrades more straightforward?
For example, say you book an economy ticket on a transcontinental flight, and then you let people redeem 25,000 points to upgrade one cabin, or transfer 50,000 points to upgrade two cabins. The math on that would very much start to work out, especially if you scale it in terms of the number of seats.
The world of people with points isn’t some small niche. There are trillions of points in circulation, with people looking for great experiences, but not sure how to redeem them. That should be a more core part of the business model, if you ask me.
Provide a differentiated soft product
Sure, US airlines have generally upped their game in terms of inflight entertainment, Wi-Fi, etc. However, beyond that, there’s really not much differentiation in terms of the onboard product. That’s because airlines don’t have much of an incentive to rock the boat.
It’s the same reason that intra-Europe business class is typically just economy with a blocked middle — it’s a subpar product, but there’s no incentive for any major airline to change that.
With that in mind, I don’t think it takes much to “wow” people in terms of the onboard product, and to truly stand out as a luxury market leader. I feel like given how high airline operating costs are, many airlines just give up when it comes to investing an extra $10-20 per premium passenger to make an experience truly special. We’re talking things like proper cocktails, a meal that actually looks nice and taste good, and stuff like that.
Obviously there are also lots of challenges
I have a lot more thoughts on this concept (potential destinations, etc.), but I’m going to leave it at this for now. Let me once again emphasize that I’m not suggesting this would be some massive money making enterprise, especially with current market dynamics.
My point is simply to say that I think this is a unique concept, and that it has more upside than what we’re seeing at other startups. I do think that if someone wants to start a US airline (for whatever reason), at this point, premium is the direction to go.
Airline startups don’t do enough to reflect the reality that you can’t sustainably undercut the major carriers on price, you have to lean into loyalty program revenue more, and as planes get larger and more fuel efficient, there are ways to efficiently utilize that real estate, other than just cramming in as many seats as possible (some of which will only rarely be filled).
Heck, if anything, I think moving in this direction would be the pivot that JetBlue needs, given the markets that it operates in, with hubs in New York and Boston.
Bottom line
We haven’t actually seen much innovation when it comes to the business models used by airline startups, especially in the US. While it’s hard for any airline to break into the market, I think there’s something to be said for launching a premium airline that actually reflects how the industry has evolved, in terms of consumer demand and monetization.
People might not agree with all of my points, but I think there’s merit to at least some of them…
No. 1 You must have the idea that people will love, flock to.
No. 2 You need alot of capital, to pay your lobbyist to go to DC and Europe and other countries.
Branson made Virgin cool and then over time migrated to the normal.
SouthWest Herb Keller had it right for many years, and the politicians caught up with it.
As said before in this column, it will take a...
No. 1 You must have the idea that people will love, flock to.
No. 2 You need alot of capital, to pay your lobbyist to go to DC and Europe and other countries.
Branson made Virgin cool and then over time migrated to the normal.
SouthWest Herb Keller had it right for many years, and the politicians caught up with it.
As said before in this column, it will take a Musk to come with a gigantic flying device, say 1000 or more to fly, cool yes, not so expensive, but passengers treated well.
A Musk has to the money to pay politicians. And the ideas no one else thought of.
The essentially sad comment on such a plan is this. If your airline offered 3-3 seating in Y with a 32" inch pitch on a a321 at 2pm on a route for $330, a large number of pax looking to fly that same route at 2pm would take an earlier or later flight on a 3-3 b737 at 28" because the airfare is $315.
The closest airline to your idea I can think of is Philippine Airlines (on its domestic and short-haul international network). Philippine Airlines is profitable by segmenting the Filipino market (Cebu Pacific and AirAsia serve the price-sensitive customers with crammed in planes while PAL has economy seats but largely targets upmarket travelers).
Three flights I took last month on PAL in business class are illustrative. The first was a 1 hour domestic flight. Despite the...
The closest airline to your idea I can think of is Philippine Airlines (on its domestic and short-haul international network). Philippine Airlines is profitable by segmenting the Filipino market (Cebu Pacific and AirAsia serve the price-sensitive customers with crammed in planes while PAL has economy seats but largely targets upmarket travelers).
Three flights I took last month on PAL in business class are illustrative. The first was a 1 hour domestic flight. Despite the short length of the flight, the business class seats were fine leather and a quick hot meal was served. The second domestic flight a couple of weeks later was a 2 hour domestic flight. It was on an Airbus A330 (imagine a 2 hour domestic flight here in the US being on a widebody!) with lie-flat seats and a meal just one step below the quality of a long haul international business class flight. The third flight was a 2 hour international flight from MNL to TPE. It was also on an A330, but this time the lie-flat seats were in a spacious 1-2-1 configuration. The meal was high quality and included a service of fine champagne. The PAL business class lounge in MNL was also quite nice with good food.
The key to good service on domestic flights is to use small wide body planes like the A330. They may be slightly less fuel efficient than a narrow body, but it is nearly impossible to provide high quality service or luxurious meals in premium cabins with a single aisle aircraft. Airlines should pay for the extra jet fuel in order to earn a larger revenue premium from a much better and more differentiated premium cabin experience.
I think a entire Business Class airline could work. Seems to me as each year goes on more and more of a Aircraft is converted to Business Class. Some it seems are almost 50% Business Class now. I would add another spin to it. One Business Class price for all.
As long as Lucky’s airline only allows pics and video making while the plane is on ground, I’m in!
This is a fun thought experiment, but I think your underlying assumptions are fundamentally wrong.
1. ULCC in the US are not failing. It's just that the legacies co-opted their model. Why buy a ticket on Spirit when you can buy a similarly priced basic economy ticket from AA/UA/DL? In essence, the legacies adopted your approach of incremental upselling: sell someone a basic economy ticket, and then get them to "upgrade" to a regular economy...
This is a fun thought experiment, but I think your underlying assumptions are fundamentally wrong.
1. ULCC in the US are not failing. It's just that the legacies co-opted their model. Why buy a ticket on Spirit when you can buy a similarly priced basic economy ticket from AA/UA/DL? In essence, the legacies adopted your approach of incremental upselling: sell someone a basic economy ticket, and then get them to "upgrade" to a regular economy either on the same flight (witness the upsell when you go to checkout on your basic economy purchase), or their next one.
2. In an industry where scale matters, the legacies have essentially co-opted every model out there and can do it better with their efficiencies of scale. This is why UA can run a 777/787 hourly between EWR and SFO, and on it, you can buy every ticket from a true long-haul lie-flat Polaris seat, to a domestic FC equivalent (their PE seat), to extra-leg room economy, to regular economy, to Spirit-equivalent basic economy. Rather than run 5 different aircraft for each of those customers, it's much cheaper to run one large aircraft capturing all 5 markets, as long as you have the scale of UA and are able to consistently sell all those seats.
3. I'm not convinced that the rise of leisure premium travel is actually a longterm trend. I think it's a combination of revenge travel from covid, and a strong economy leaving people with money in their pockets and -- upto now -- a constrained supply of seats. If you have to pay an outrageous amount for an economy seat, the upcharge to a FC seat is percentage-wise much less, and that makes it easier to swallow. Witness that almost no airline is expanding its domestic FC seat count, even on new aircraft that are being delivered. Everyone is sticking with the 3-4 rows of FC, and squeezing in as many economy seats as possible. If Delta is truly selling 80% of their FC seats, and yet not expanding that part of their cabin, that tells you something about whether they expect to continue to do so.
4. Regarding the points angle. Let's talk first about earning strategy. For the vast, vast majority of people, earning points through credit cards is a very, very bad deal. Because most travel cards have an annual fee, which means you need to charge enough on your credit card that you earn more points than you're paying out in the AF. Even a lower end card giving you 1x earning for a $100 AF, means you need to charge at least $10,000 a year to break even. The median household income is $80k. After taxes and non-credit card spend for stuff like housing, your car payment, etc. not that much is left over to put on credit cards. Realistically, to play the points game with credit cards, you need to consistently put at least $25k a year on them, to justify paying 1 or 2 annual fees. For higher end cards with bigger AFs, the math is usually even worse.
All this is to say that I suspect most people still earn their points by flying, since those points essentially come for "free", and since points don't expire for long periods of time, people can accumulate them over many years before spending them on a trip. It's a very small segment of the population that spends enough on credit cards (or flies frequently enough) to accumulate enough points to redeem 1-2 airline tickets every year. So your idea of making credit card spend the primary way to earn points will drastically limit your market.
5. Now about redeeming those points. I believe airlines have reported that the vast majority of their redemptions are for economy class seats. Sure, everyone likes to watch videos or read reviews of glamorous business class experiences, but for most people, the destination is the aspirational goal, not the flight, and they'd rather spend their points on 2 economy class seats to their dream destination, than waste those points on a single business class seat. This is especially true when you consider my point #4 about how slowly most people accumulate their points. Even reasonably priced upgrades are not worth it for most people, who'd rather save the points for an additional trip.
6. Finally, the network is a big deal. Even if everything I said above is wrong, and people want to earn points on credit cards and spend them on upgrades, the one thing most leisure travelers (and most travelers in general) abhor is connections. If you're a frequent flyer and are solo, then connecting is no big deal. If you're an occasional traveler it can be stress-inducing and confusing, and that's even if everything goes smoothly and you don't have any irrops. And if you have small kids, it can be a nightmare. I'd bet good money that with Miles and especially now with Jet as well (congrats by the way!), if you had an extra $100 to spend, you'd rather spend it to upgrade to a direct flight, than to upgrade the seat itself on a 1-stop itinerary.
This means that, as crappy as the service might be on a legacy airline, the fact that they're able to offer more nonstops means I'll gladly take their flight, over getting better service while dealing with the hassle and uncertainty of a connection. And that favors the large legacies over a niche carrier.
Anyway, imagining the possibilities are fun, but I suspect that being a points blogger (along with being a points blog reader :-) seriously skews our view of who the "average" traveler is and the choices they'd make.
So... if I was building an airline, what would I build? I do think there's an opportunity. I'd basically build the old Southwest. Maybe with a few changes like adding a lounge network at their biggest airports and maybe cheap upgrades to something like Spirit's Big Front Seat (i.e. better seats but without a separate soft product to maintain). IMHO, SW is making a huge mistake trying to ape the legacies, and leaving a huge hole in the market for the people that appreciated their unique offering. They've been the only consistently profitable airline (until now) and built themselves up to become the largest domestic airline in the country. They're throwing all that away to enter a death match with legacies that themselves have been through bankruptcies multiple times and have yet to show they can sustainably earn profits or support their share price. It boggles my mind and frankly, I'd capitalize on their colossal mistake.
I didn't wade through all of this -- it's harder to write a short post, than a long one -- but is there any suggestion of what route to fly? Like, wouldn't the starting point be to decide the sparting point, and then the landing point?
Case in point (somewhat at least) :
Midwest Express
I was relatively new to flying at the time, but They were awesome
I’ll just say that I used to live in Kansas City MO and had to fly to Seattle quite often. A direct flight on Midwest with a 2x2 business cabin was amazing. I would pay more to fly all biz direct than to fly in a mixed cabin direct. Oh, also the heated choloate chip cookies let you know we were close to the destination.
You make the assumption that America is a service driven society where people will pay for a premium product.
News flash - America is a country that can’t even pay for healthcare for its citizens. And is hated the world over, except my radical Zionists in Israel.
Wow, classic "Ben Dreams Big"! Thank you so much. I love your idea and agree with others that a better approach than building this from scratch is to acquire an existing, faltering airline and bring in visionary leadership and an influx of investors to transform it into your OMAAT Airlines. With existing presence in major hubs and existing routes with some popularity, you're jumping a significant hurdle. And this is exactly the kind of airline...
Wow, classic "Ben Dreams Big"! Thank you so much. I love your idea and agree with others that a better approach than building this from scratch is to acquire an existing, faltering airline and bring in visionary leadership and an influx of investors to transform it into your OMAAT Airlines. With existing presence in major hubs and existing routes with some popularity, you're jumping a significant hurdle. And this is exactly the kind of airline I've been looking for.
JetBlue are you listening?
Maybe you can invest in Global Airlines?
This is largely the idea I've been trying with as an armchair CEO for about 5 years, down to a lie-flat F on an A220.
I'd flesh this out with:
* 6 products on board: 2 lie-flat F, 12 1-2 recliners in J, half of the Y rows are extra legroom (34" pitch) with a PE (blocked B and D seats with extra legroom and meal service at 1000 mile distance), Y+ (extra legroom...
This is largely the idea I've been trying with as an armchair CEO for about 5 years, down to a lie-flat F on an A220.
I'd flesh this out with:
* 6 products on board: 2 lie-flat F, 12 1-2 recliners in J, half of the Y rows are extra legroom (34" pitch) with a PE (blocked B and D seats with extra legroom and meal service at 1000 mile distance), Y+ (extra legroom plus free drinks), Main, and Basic
* Op-ups to resolve over sales and fill F to 1 seat, J to 9 seats, and PE to 75% happen one hour before departure; these upgrades clear without regard to status but instead on distance flown since last upgrade
* Otherwise can use points (dynamically priced based on inventory in original and upgraded cabin) to upgrade; elites can get up to 100% of those confirmable-in-advance upgrades rebated if they requalify for status
* Redemption structure is tilted towards using points to knock down the cash price, especially on premium cabins (e.g. a $1200 cash F ticket (before taxes) would be 7500 points plus $900, 18.7k points plus $600, 33.7k points plus $300, or 120k points... note that at the 7500 points for a $300 discount, that's 4cpp... J/W/Y+/Y/BE would have slightly different thresholds (and a point redemption minimum of 5k would also come into play) with completely flights with no cash being 1cpp)
* ME3-style model: focus on connections to/from secondary cities (e.g. ISP, HPN, Stewart, Trenton... much like how the ME3 will fly into Luton etc.) via a centrally located hub (BLV? CVG? SDF?)
* Address the network issue when bootstrapping by having an OTA: get points and elite credit for booking trips where at least the origin or destination aren't served by this airline (viz. if you need to fly JAX-SAN, you can book a revenue ticket on DL and get this airline's points and elite credit) and allow points to be used for revenue tickets on such routes operated by other airlines
* Earn rate would be 0 on basic, 1 point/$ Main, 2 points/$ Y+, up to 6 points/$ in F
* Elite credit is spend minus 15 cents per mile ($100 flight covering 600 miles would earn only 10 status points, $200 flight over that distance earns 110 status points), with points redeemed for award flights counting as $1 for every 200 points
Isn't Ben's concept what Virgin America was or intended to be?
I’d go the other way. Any big carrier can copy this and out you under and afford to take the hit. How many planes do you? Just pop a loss making 777 three cabin on ludicrously cheap until you run out of cash. See Norwegian / BA at LGW.
I’d probably look at much smaller and cheaper to operate used props but done nicely more like an A220 interior on EAS routes that are underserved...
I’d go the other way. Any big carrier can copy this and out you under and afford to take the hit. How many planes do you? Just pop a loss making 777 three cabin on ludicrously cheap until you run out of cash. See Norwegian / BA at LGW.
I’d probably look at much smaller and cheaper to operate used props but done nicely more like an A220 interior on EAS routes that are underserved or served by more expensive to operate jets. The small incremental journey time could be offset by pax experience and cost and big carriers don’t have competing fleets or frankly financial incentives to even care about those routes. Grow slowly get acquired and then buy your A380s and go Global.
Years ago 2005) I thought about a budget carrier in Asia operating A380s. Based on market trends and how that would have gone I imagine my EAS idea would also bankrupt me!
Always amazes me to see a lot of people think there is actually a gap in the market for xxxxx.
There is no PF Changs in China or Mixue in Montana for a reason.
But please prove it and put money where your mouth is and make billions.
Invest with Ben and lauch it. I wish all of you the best. But I'm not a target customer and for that reason, I'm out.
Once an AA “Target customer”, always an AA nonsensical customer, is that not you to a ‘T’ bro? …. :-)
Jokes on you wanker BA apologist.
I usually fly Delta.
Such an admission is bound to put a smile on Tim’s face, bro.
A serious misconception regarding your chosen airline, Delta is certainly a better proposition than AA (according to the World Rankings), however, both are well below par in comparison to the likes of BA, yes? Any honest snowflake would know that fact and would not cut off their nose to spite their face, just to prolong their miserable flying experiences.
Remember...
Such an admission is bound to put a smile on Tim’s face, bro.
A serious misconception regarding your chosen airline, Delta is certainly a better proposition than AA (according to the World Rankings), however, both are well below par in comparison to the likes of BA, yes? Any honest snowflake would know that fact and would not cut off their nose to spite their face, just to prolong their miserable flying experiences.
Remember bro, he who laughs lasts is worth two in the bush …. :-)
These are all good ideas, but my ideal configuration for narrow-body aircraft would be one side reserved for business class seats while the other is for economy. It's not enough for me to see jealous passengers walk past me during the boarding process......I want to enjoy the view for the entire flight.
I am going to keep posting nearly the same general comment on these topics. Keep it up Ben! I love these unique "thought pieces" on the state of the industry. Really appreciate your perspective on these sort of topics.
@ben Do you think there's a market for long haul business like product in US domestic for under 2000 miles. I am not sure. By your own theory, you pay ~$50 per hour premium for current domestic FC. Let's say for better product, you'd be willing to pay $100-$150 per hour. That's $400 to $600 additional. Do you think there's a market for that?
@Ole - Whenever I fly on a widebody aircraft domestically within the US, I always see the passengers around me commenting about how nice the lie-flat seats look in the premium cabins (I am talking about domestic AA 777 and 787 flights, Delta A350 and A330neo flights, and domestic United widebody flights with polaris - not operated by their domestic 777s). I think that if an airline was to have that on domestic US flights...
@Ole - Whenever I fly on a widebody aircraft domestically within the US, I always see the passengers around me commenting about how nice the lie-flat seats look in the premium cabins (I am talking about domestic AA 777 and 787 flights, Delta A350 and A330neo flights, and domestic United widebody flights with polaris - not operated by their domestic 777s). I think that if an airline was to have that on domestic US flights on narrowbodies on more routes, many people would have that same effect. Put that on a flight between JFK and MIA, or better yet, between LGA and MIA, and many more people will get to see that product.
Nowadays, many more people are willing to pay more for a premium product, often irrationally. I do think there will be a market where people would want to book such a seat for a three hour flight just for the experience. As Ben said, if the airline has an A321neo, how likely is it that all of the seats will be filled if it is in an all Economy configuration. Meanwhile, if you have a few of those lie-flat seats, I think there will be people willing to book them consistently where the costs make sense. The seats offer more privacy, and can potentially also offer lounge access.
Now, I would market it in a way where the lie-flat seats are First Class, the domestic first class like seats are premium economy, and then coach, in order to allow business people traveling on their companies dime to be able to book the cabins according to their company travel policy.
Ben, I think you're onto something. And I'd love to see you go crazy enough to work with someone and start this. I believe there will 100% be an airline startup in the US created by a blogger/content creator in the next decade. It makes a lot of sense.
I think the US market is probably the most interesting one to operate in. But the other route I'd go is to look at the European...
Ben, I think you're onto something. And I'd love to see you go crazy enough to work with someone and start this. I believe there will 100% be an airline startup in the US created by a blogger/content creator in the next decade. It makes a lot of sense.
I think the US market is probably the most interesting one to operate in. But the other route I'd go is to look at the European market and just replicate the US-style frequent flyer + upgrade programs. Having converted from BAEC to United, I don't get why BA don't do the exact same thing with upgrades and monetising of their premium cabins that US programs do. Flying empty business class seats is bonkers. I think it'd be a game changer and competitive differentiator to capture traffic. The risk is Europe doesn't have the same spending power and CC interchange to potentially make this work.
Mine is: fly with pets. Well, not an alligator or a horse. Dogs and cats.
Rotate the destination to maximize the demand. Every flight comes with al certain number of mile multiplier receivers, may be 10? The FA and crew will have the say who to award the multiplier to.
I want to see route maps and pricing before I consider flying Ben's airline. Obviously, I want blogger's reviews too. When's the inaugural flight and from/to where?
This is basically what jetblue tried to start as. Lie flat suites transcon, upscaled product (e.g. free wifi back in the day)
You see where it is now.
The only way your idea might work is by providing lie flats in markets which don't currently have it (Seattle, San Diego and Portland to East Coast airports, Chicago to various Carribean/Mexican/Latin destinations etc).
When JetBlue first started (1998), wifi wasn't a big thing. But all their seat backs had video screens with on-demand TV. That was huge - I still remember people raving about it. Your point still stands, however: the competition eventually caught up with JetBlue, offering a similar elevated product, and look where JetBlue is now. This is more or less the point Sean M. made below: whatever successful innovations a startup comes up with, the...
When JetBlue first started (1998), wifi wasn't a big thing. But all their seat backs had video screens with on-demand TV. That was huge - I still remember people raving about it. Your point still stands, however: the competition eventually caught up with JetBlue, offering a similar elevated product, and look where JetBlue is now. This is more or less the point Sean M. made below: whatever successful innovations a startup comes up with, the legacies will copy it the minute those innovations start attracting passengers - and the legacies have the economies of scale that smaller carriers don't. So they tend to win.
No premium airline can generate profits and survive without corporate agreements, and for that segment, there is no incentivize to differentiate. Corporate travelers earn miles in the airline they travel, and can very rarely earn transferrable currency points because they use corporate cards. You'd have to go against behemoths to earn corporate travel agreements, and a better travel experience is not a swayable rationale.
An airline where Democrats pay twice as much and Republicans pay nothing. The dems love socialism so much anyway why not pay for all the rest of the flyers.
As a benefit, in the event of emergencies, the republicans are given weapons on their assigned seats where they can "finish the job" on the dems so that you don't survive with horrible disabilities in the future.
Except that your airline has only one destination: the airport servicing the concentration camp that I'd have established for all registered Repugnants and anyone who voted for Mango Mussolini.
Twice as much as zero is still zero.
Or, we could not turn everything into a senseless and thoughtless political fight.
I think your problem would be that there are few routes that could support this service — particularly the lay-flat. And you’ll have great difficulty getting slots/space at the premium airports you’ll need.
But good luck. I’ll book the inaugural.
OK, so you want to sell upgrades for 25,000 transferrable points (say, from Chase, Amex, or Citi). How much are those banks paying airlines to take 25,000 points from them? I'm guessing it's no more than $100. But if your one-way transcon economy fare is, say $300, you could probably easily fill the next higher cabin just by offering that fare for $400, and skip the points hassle entirely. The question is whether you'd make...
OK, so you want to sell upgrades for 25,000 transferrable points (say, from Chase, Amex, or Citi). How much are those banks paying airlines to take 25,000 points from them? I'm guessing it's no more than $100. But if your one-way transcon economy fare is, say $300, you could probably easily fill the next higher cabin just by offering that fare for $400, and skip the points hassle entirely. The question is whether you'd make enough to break even (and beyond) by relying on points transfers at the "market rate" (what banks pay airlines for the transfer).
Just as a traveler I’d love to see the old Midwest Express.
The chocolate chip cookies were lovely.
Sounds like you're about to start...Breeze Airways
Kinda wondering if this is the best audience to be asking. Very few econo travelers here and they're a solid majority of flyers out there. These people probably won't care one bit about premium offerings but, like many premium travelers, care about network size.
I mean... is it economically feasable to offer a United/Delta/AA level network w/o the volume these econo travelers offer?
I could write volumes on this subject but I'll try to condense my comments.
You make the assumption that the market is basically mature and consequently your best play is for a larger slice of the existing pie rather than baking a new larger pie using different ingredients (eg. Allegiant). To do that, you have to deliver a better value proposition than the incumbents. Given the humongous scale differences that will exist, it is...
I could write volumes on this subject but I'll try to condense my comments.
You make the assumption that the market is basically mature and consequently your best play is for a larger slice of the existing pie rather than baking a new larger pie using different ingredients (eg. Allegiant). To do that, you have to deliver a better value proposition than the incumbents. Given the humongous scale differences that will exist, it is nearly impossible to achieve that niche in any meaningful markets without attracting a competitive response that a new entrant simply cannot afford to sustain.
The barriers to entry as a mainstream operator in the USA are near insurmountable, even with a good idea. The only way to likely achieve that scale is via merger of multiple smaller operators.
Sorry, but I don't see this as having realistic potential of success even with adequate financial and operational backing.
I'd mostly agree, but Breeze has done a pretty good job and seems to be here to stay. I'd give Neeleman credit for securing enough capital and having the passion and persistence. JSX is another cool example of a model that seems to be working. Are either of these examples as big as any of the legacy carriers? No, but they're growing and offer unique products.
JSX is a niche player but it also has a sufficient network built up. It seems to be somewhere between private and commercial but it's been able to build a route network sufficient enough to attract high end flyers. Starting from scratch is difficult. The person flying to London might fly many other places. There might be a few key routes this works but it was tried in the past and failed.
I wouldn't...
JSX is a niche player but it also has a sufficient network built up. It seems to be somewhere between private and commercial but it's been able to build a route network sufficient enough to attract high end flyers. Starting from scratch is difficult. The person flying to London might fly many other places. There might be a few key routes this works but it was tried in the past and failed.
I wouldn't call Breeze an all premium airline but it's certainly trying to be a true hybrid. The question is what happens when Breeze really gets in the crossfires of the US3 when it grows it's network.
"but Breeze has done a pretty good job"
Of what?
They've cancelled nearly as many routes as they've launched; entered-and-left multiple markets more than once (e.g. Oklahoma City); and severely lack brand recognition in some of the markets they've been in for years. A single, and sole, quarterly profit (reported at a time when they still failed to meet annual projections) doesn't undo all of that.
@Sean M. - I see your point, and agree with you somewhat. However, what if an existing airline was to transform itself to such a business model? Such as jetblue?
It would make perfect sense for jetblue to try this out. They already have trouble profitably filling their seats. It is very easy to find cheap flights on jetblue, even close to departure. If they modify the cabin layouts with such products, they would be...
@Sean M. - I see your point, and agree with you somewhat. However, what if an existing airline was to transform itself to such a business model? Such as jetblue?
It would make perfect sense for jetblue to try this out. They already have trouble profitably filling their seats. It is very easy to find cheap flights on jetblue, even close to departure. If they modify the cabin layouts with such products, they would be able to charge more in all cabins, and should be able to make more money than they are right now. Meanwhile, they are also large enough that if one of the larger comeptitors wanted to modify their business model to compete with jetblue, it would be a significant cost to the competitor. Either the competitor launches a subsidiary to compete with jetblue in certain markets, but that would be a large cost undertaking and if jetblue is able to figure out its loyalty program before that, then it would be a competition with no clear projection of who wins. The risk would be huge for the competitor to do such a move, but jetblue already isn't making money, nor does it have a significant market share in any market which is also a huge cash cow. And I cannot see the big 4 US Airlines fully transforming themselves to such a model across their network, because that just wouldn't work for them. Jetblue would also have a lower cost base compared to the legacy carriers. I think if jetblue did this, they would be able to carve out a niche and improve profitability from it as a result. They don't exactly have anything to lose with such a pivot, compared to other current US airlines. And if any smaller airline tried to compete with jetblue, B6 themselves would be the large airline which has the power of scale and loyalty in the market where they could squash such competitors. While I see your point that a new airline may not be able to successfully launch with such a concept, I do see this working for an airline like jetblue.
Funny to see all those people disagree with an someone spending his lifetime in the industry doing the very thing you're arguing against him.
Prove him wrong, start the airline, and rub it on Sean M. with the billions you're trying to make.
I have a better idea. What if I acquired 4 a380s to only fly between London and New York/LA? I’d put the plane in a four class configuration of Economy, Business, First, and Beyond First, which has a strong enough internet connection to play videogames online. I’ll have a charter company manage the flying and get a few promoters to keep my assets inflated. No chance this could fail.
@ Scooter -- Can't believe I didn't think of that. Take all of my money, I'm in!!! :p
Don't forget that you have to revolutionize travel by offering caviar and champagne!
True - good point. And all travel bloggers and youtubers fly free
> There are trillions of points in circulation, with people looking for great experiences, but not sure how to redeem them.
This is a feature, not a bug. Premium-cabin awards don’t scale profitably.
@ Gva -- There are different parties involved here. Credit card companies and airlines have different incentives. Credit card companies don't mind if you redeem your points, and use them as a currency. It's no different than how you can transfer points to JetBlue TrueBlue, Southwest Rapid Rewards, etc., which are revenue based programs.
Airlines effectively sell those points to card issuers, so the incentives to the airline ultimately matter.
How about starting with the Porter Air Model and begin with E195-E2 and A220-300 aircraft and focus on secondary markets/airports that have limited regular service. Don't go international to avoid many of the TSA screening issues. Have a small fleet of premium configured A321neo's for East Coast to Honolulu, but don't limit yourself to New York for such flights. Look at other cities like DC and Orlando as well. IF you want to go International...
How about starting with the Porter Air Model and begin with E195-E2 and A220-300 aircraft and focus on secondary markets/airports that have limited regular service. Don't go international to avoid many of the TSA screening issues. Have a small fleet of premium configured A321neo's for East Coast to Honolulu, but don't limit yourself to New York for such flights. Look at other cities like DC and Orlando as well. IF you want to go International for the Pacific, perhaps buy/copy United's Island Hopper route and put an A220 on it (a more modern opinion compared to the older 737's that United uses. Remember that many of the stops on the Island Hopper have limited regular service, so you can compete on product rather than price
Except it would be 2030 by the time you could get a 321 xlr
Airline Industry: Many attend, few understand. You are in the majority. You are lucky that you won't burn other people's money.
Great idea, but the places this would work are slot constrained. You can't just offer flights from BOS, LGA, ORD, SFO, DCA etc. at times people want to fly.
@ Nick -- Airport congestion is obviously a major issue, and it takes time to build up a presence at airports. But there are also often alternative airports that can be flown to, at least to start.
Could you even imagine the hype in the points and miles community if an airline had consistently available upgrades to premium class for 25K miles readily available from all the major credit cards?
most importantly what's the value of the OMAATAir mile? 1.3cpp? 1.8??? This will determine my level of interest
Quickest way to be a millionaire - be a billionaire and launch an airline.
Yes he uses this very quote in the article. Way to read
Your JetBlue angle is interesting. Another avenue to this might be one of the big 3 creating a subsidiary that’s the high-end airline you’re describing. Basically an inverse of Delta Song/Lufthansa’s zillion subsidiaries.
Imagine AA’s 321T, but with way higher quality because all contracts/standards are different from the main brand. The main brand would mainly be there to help provide the needed connectivity/feed
I'll be honest, this was too dense for me to read, but based on the quick skim, I would say this is what Alaska should do.
Essentially, Alaska should make their transcont service (as well as international) at least as good as Polaris LAX/SFO-EWR, and offer it on all cross-country routes between LAX/SFO/SEA and JFK/BOS/MIA/ATL, as well as routes from HNL to ORD/JFK/BOS (probably not MIA because why would you go to Hawaii and not...
I'll be honest, this was too dense for me to read, but based on the quick skim, I would say this is what Alaska should do.
Essentially, Alaska should make their transcont service (as well as international) at least as good as Polaris LAX/SFO-EWR, and offer it on all cross-country routes between LAX/SFO/SEA and JFK/BOS/MIA/ATL, as well as routes from HNL to ORD/JFK/BOS (probably not MIA because why would you go to Hawaii and not the Carribean).
Do the same for TP routes from LAX/SEA/HNL to HND/ICN/SYD/DPS/HKG.
I wouldn't bother competing on TA routes -- focus on getting cross-country traffic with market-leading service, and then TP service. Once you knock that out of the park, buy a TA business by buying JetBlue out of bankruptcy. Perhaps then rename the airline.
I assume you would add more FAs than the legacy carriers. One issue with upgraded food service is galley space. Would the aircraft require a larger galley and what would that do to costs?
If Ben's airline can design a cheap and fast system of expanding leg room and replacing economy seats for pods, that could shake the industry, particularly if Ben was the only airline to have it.
As far as a 3 cabin A321 with lie flat cabins, I am not going to pay more for that unless somebody else is paying or the flight is long and overnight. If others feel the same way, Ben's A321 might work on a domestic US red eye transcon but not a high density domestic flight, like ATL FLL or LGA ATL.
Only one airline is old school legacy and that is Delta. The others are not. Texas a International, America West, Southwest are from the 1970's. Alaska is sort of old.
I like the idea of a larger PE/domestic first equivalent cabin as the middle cabin. It's a very comfortable way to fly without the often unnecessary lie-flat bed. The problem I've seen, which you appear to be addressing, is that the PE cabins aren't that big. Just 24-32 seats on a lot of widebody aircraft. This seems to drive the price up for those seats higher than it needs to be otherwise, with lots of regular economy seats still open and losing money.
Please cross reference the Ritz-Carleton post
Perhaps too obscure a comment. There is a post about starting a luxury airline just after a post about a failing luxury cruise line.
Another idea: bring or copy Japan's Yamato into US, it is like a luggage-focused courier, they have agreements with virtually every hotel across Japan, and even convenience stores to drop and pick up your luggage, and it is insanely cheap.
I've had a great experience with this service in Japan, but I don't think it fits the current US market. In the US, you're most likely either driving or flying unless you're traveling along the Northeast Corridor. If you're driving, you're carrying your luggage in your car. If you're flying, you either have a manageable carry-on or you're checking bags. If we had more intercity/regional rail connectivity I'd agree on a Kuroneko Yamato-style luggage delivery...
I've had a great experience with this service in Japan, but I don't think it fits the current US market. In the US, you're most likely either driving or flying unless you're traveling along the Northeast Corridor. If you're driving, you're carrying your luggage in your car. If you're flying, you either have a manageable carry-on or you're checking bags. If we had more intercity/regional rail connectivity I'd agree on a Kuroneko Yamato-style luggage delivery service, which saves you from having to travel with possibly heavy bags with you in the train. I could see a limited market in the NEC or Florida for it though.
wow. You do some of your best thinking - or writing - during periods of intense family activity.
I believe you are right in the trend this industry is going but ultimately the existing carriers can match your proposal fairly easily.
The big 3 are all adding premium configured A321NEO fleets because that platform produces the lowest cost and greatest potential to segment the cabin multiple ways and still have a viable number of total...
wow. You do some of your best thinking - or writing - during periods of intense family activity.
I believe you are right in the trend this industry is going but ultimately the existing carriers can match your proposal fairly easily.
The big 3 are all adding premium configured A321NEO fleets because that platform produces the lowest cost and greatest potential to segment the cabin multiple ways and still have a viable number of total passengers.
as for the points angle, the big 3 (and WN although we have less visibility into their loyalty program) can easily throw billions of loyalty points into circulation (or reduce) points in order to match competitors just as they with cash fares.
I am a tad older than you, Ben, but the biggest conclusion that can be made as the US airline industry approaches 50 years of deregulation is that it really has not worked as intended. Covid allowed the big 4 to further consolidate their power.
Airfares are much lower on an inflation adjusted basis and airline labor is still very well paid relative to similar industries but they have paid a high price for maintaining that compensation premium.
Air service is more concentrated to the largest markets and service is better than in other parts of the world including Europe in some regards but worse in others.
and, in reality, DL is the only airline that is generating globally comparable or leading financial returns while best balancing all of the investor, passenger/community, and employee objectives.
AA perpetually just barely gets by financially and is a low performer on service.
WN has a strong history but is underperforming financially and is complicating its product.
The entire rest of the low cost and ultra low cost sector is not financially viable for the long term.
and UA has had a huge 5 year growth spurt based on an older, less fuel efficient fleet (which may or may not matter since energy prices are at historically low levels) and underpaid employees relative to the rest of the big 4.
With that much financially underperforming capacity, it is hard to envision anyone successfully breaking into the US airline industry and obtaining any degree of scale.
great thoughts and I hope you do lots of deep thinking in a couple years as US airline deregulation hits 50 years and even more airlines follow DL in celebrating their 100 year birthdays.
No need to read his drivel it's yah Delta can do anything you want better.
iow, it went completely over your head.
Tim, it actually takes a modicum of intelligence, patience and understanding to read a post of more than a handful of words. Clearly, like his name …. Parnel is missing something. In the case of the name “Parnel”, it is customary to spell it with two letter L’s, in the case of its post …. that is a matter for further consideration over a cool libation.
All Premium airlines have been basically a disaster. What they lack are network (big problem), a robust FF program, the ability to handle irregular operations and lounge network. They might work on certain routes like JFK/LHT, JFK/MIA, MIA/EZE but again you're basically back to the same issues. Moreover, for the upper crust private is becoming more "affordable."
Trying to get to the FL today at MIA was like wadding through the black hole of...
All Premium airlines have been basically a disaster. What they lack are network (big problem), a robust FF program, the ability to handle irregular operations and lounge network. They might work on certain routes like JFK/LHT, JFK/MIA, MIA/EZE but again you're basically back to the same issues. Moreover, for the upper crust private is becoming more "affordable."
Trying to get to the FL today at MIA was like wadding through the black hole of Calcutta. The hallways just clogged with clueless people. If I had the coin I'd fly private, maybe I'd fly less but it would be a much more pleasant experience when I do.
I would think even those cash upgrade fares on an individual basis are still a money loser for airlines but it's certainly worth getting something that would otherwise be given out free.
Another perk to add would be complementary low tier elite status to the major banks premium card members. I think that's a good way to get premium revenue customers thinking about your product.
How would you plan for devaluation of the FF program? I think this needs to be an issue at the inception of the program, not down the road. Customers hate it when you take things away. Even little things.
Funny, I come to many similar conclusions about new airline startup ideas. Especially that one about less seats and more upselling. I would never try to compete on price as large airlines can alway dump you out of market - instead competing on product sounds much more interesting.
May I add a European perspective to that, as we don't have the same points / credit card landscape: Besides upselling on points I would also strongly...
Funny, I come to many similar conclusions about new airline startup ideas. Especially that one about less seats and more upselling. I would never try to compete on price as large airlines can alway dump you out of market - instead competing on product sounds much more interesting.
May I add a European perspective to that, as we don't have the same points / credit card landscape: Besides upselling on points I would also strongly look into upselling with cash some time after booking. It amazes me how little some airlines do on that front - some days or weeks after booking there should almost always be an upgrade offer available. Now this mustn't be predictable and prices should be variable, so people don't assume those offers and always book cheapest economy. But still there should always be some sort of upselling available - all the way until boarding (but no selling seats at the gate or in the plane, thats cheap).
I also very strongly agree with your view about providing a better product. In todays world this HAS to be instagramable, social media focused in ALL classes. And it's ridiculous that airlines are cheap on premium class meals when you consider how little they actual cost - yet many people will rave about your airline if you just feed them well (and again, visually appealing is just as important).
Harmonize your fleet. If you're talking high-end, E195 with all rows like Delta's first class for routes less than 2000 miles and A220 with all rows herringbone lay-flat for routes more than 2000 miles.
@ Lee -- I think the E195-E2 is a great alternative to the A220, so it would also be worth considering. I just don't think all-business class makes sense, because you immediately lock out too much of the market. You need the market of people who might be willing to pay $X amount for economy, and then later decide that they're willing to pay either cash or miles to upgrade.
Cool! Just to further visualize this, are you thinking of something like an airline that has something like A321T's from AA (obviously, you know, ones that have seats that work). Or would you take something more like the AA A321XLR but have a much bigger premium economy cabin and less economy? Some combo of the two maybe?
Obviously all with a points system that actually does a better job of monetizing upgrades between the...
Cool! Just to further visualize this, are you thinking of something like an airline that has something like A321T's from AA (obviously, you know, ones that have seats that work). Or would you take something more like the AA A321XLR but have a much bigger premium economy cabin and less economy? Some combo of the two maybe?
Obviously all with a points system that actually does a better job of monetizing upgrades between the cabins. All depends on the routes as you note. Don't mean to focus on AA, just those two cabins came to mind with what you were describing.
Every moment is a good moment for dreaming big!
@ Peter -- Appreciate the thoughts. Basically, somewhere between A321XLR and A321T in terms of layout. American's A321Ts have 10, 20, and 72 seats, while American's A321XLRs are going to have 20, 12, and 123 seats. I would envision an economy seat count of under 72 seats, and split the extra space between the two front cabins, with something similar to the A321XLRs.
Thanks for the reply!
Would you have extra legroom economy? I can’t help but think that would impact upgrades to PE. Took note of what AA is doing with their new 787P - 51 business, 32 PE, only 18 MCE, 143 economy. And I don’t think AA announced any MCE on the XLR?
Fun exercise!
Dom Perignon? Krug?
Caviar?
Business class with doors?
Would the livery be retro? Modern?
@ Adil -- Hah, think more like Qatar Airways business class quality in terms of meals and drinks (well, minus the caviar, unless there's a real deal to be had).
Regarding the most premium cabin (whether that's branded as first or business), yes, I absolutely think doors are the way to go. When it comes to the livery, I'd say more "elegant" and eye-catching than necessarily retro or modern. I actually think Beond has done a really good job with that.
Ben, I genuinely think you would enjoy a Airline Sim game like "Airline Sim" - you create your own airline down to the hard and soft product / plane and schedule routes - right up your alley lol.
@ Historia -- Hah, I've played it before, and I enjoyed it! Wish I still had time for that...
So this would be AA's 321T with improved service?
@ ML -- Something along those lines in terms of layout (though I'd have the middle cabin be more like domestic first class), though the difference would be in soft product and also monetization.
Fair. But I was also referring to the fact that they only flew premium transcons and that seemingly didn’t work out (to the extent they’re reconfiguring them, make of that what you will).
I believe the AA A321T is in a First-Business-Economy config but Ben was referring to a Business-Premium Economy-Economy config in his post so it'd be more in line with Delta's upcoming Premium A321neo with Delta One, Premium Select, and Economy.
Cool stuff man!