Room to grow for low-cost
carriers; challenges loom for newbies
By Andrew Compart, Travel Weekly
MIAMI -- There is plenty of room for more low-cost
carriers in the U.S., according to an industry consultant
and airline aspirant at a low-cost carrier conference
here. That proposition may soon be tested by several
All of them, however, face serious challenges in
getting off the ground and making their business
Discussions of the new entrants and their prospects
came during panels and insider chatter at the World
Low Cost Airlines Congress-Americas here on June
27 and 28. The conference was a regional version
of the third global World Low Cost Airlines Congress
that will take place this September in London.
The global conference, which attracted about 600
participants and 100 airlines in just its second
year, reflected the growing presence and influence
of low-cost carriers around the world. Their numbers
have been booming in Asia and especially Europe,
so much so that Europe is widely considered oversaturated
and due for some weeding out of the weaker entries.
The U.S. market has been more stable and less dynamic.
The only new low-cost, low-fare carriers recently
have been Independence Air, which flopped financially,
and Mesa Air Group’s Go!, which just started
and offers only Hawaii interisland service. But a
few more entrepreneurs are hoping to give it a shot
within the next year or so.
Anthony Tangorra, CEO of Latitude Transport Advisory,
offered them hope.
Tangorra told conference attendees that Ryanair
charges half as much for a ticket as Southwest, and
he contended there’s nothing inherent in the
U.S. that makes it a higher-cost market than Europe.
“There’s an opportunity for lower-fare
new entrants in the U.S.,” said Tangorra, a
former chief strategic adviser for DJ Air Group,
which aims to be among the new entrants.
Several other proposed new entrants also are poised
to find out whether there is more room, if they can
One is Virgin America, which is still stalled and
struggling for approval from the Dept. of Transportation
because of a debate over whether it really is under
U.S. control, as required by law, given the involvement
and investment of Virgin Group Chairman Richard Branson.
Brian Clark, Virgin America’s vice president
of planning and sales, arrived here to proclaim confidence
his airline would get off the ground in 2007, if
not this year. But he didn’t reveal more about
Virgin America, which signed a licensing agreement
to use the Virgin name, is relying on the brand to
give it a big boost. Clark said the Virgin brand
has greater than 90% recognition in large metropolitan
Clark also emphasized pricing and “next-generation” onboard
products as key differentiators, but he didn’t
say a lot about either. CEO Fred Reid, however, recently
told the San Mateo County Times that product plans
include broadband access, an entertainment system
with a 9-inch screen, interactive games, on-demand
movies and the ability to use a touch screen to order
food that is sold on board.
Another proposed new entrant, Skybus, did not show
up here, but there was some chatter about the Columbus,
Ohio-based airline, which in March received DOT approval
Skybus already is billing itself as “America’s
Ultra-Low Fare Airline.” But it remains to
be seen whether the Ryanair model will work in the
Industry insiders said Skybus had retained Ryanair
or former Ryanair managers and was trying to make
itself the Ryanair of the U.S. market. Skybus reportedly
plans to outsource everything it can and has been
pushing uncrowded airports to provide big incentives
and price breaks to win Skybus service.
But the latter strategy, which Ryanair has used
to great effect in Europe, is not being greeted warmly
by airports here, the insiders said. And one of them
said there has been some disgruntlement and disagreement
over Skybus’ proposed routes.
Europe’s biggest low-cost carrier not only
gets big cost breaks from airports, but it cuts costs
by removing seatback pockets and reclining seats
and recently began charging for checked baggage.
It also relies heavily on ancillary revenue from
items such as hotel and rental car bookings, travel
insurance, onboard sales and other travel-related
items, so much so that it is aiming to let half of
its customers fly for free by 2010 since it would
make money from their other spending.
Another proposed low-cost carrier for the U.S. market
is Louisiana-based Air Gumbo, which has been persistently
pursuing its plan since 1998 despite seeing it derailed
by 9/11 and Hurricane Katrina.
Air Gumbo CEO Ralston Champagnie said he came to
the conference amid a new fund-raising effort and
hoped to file for DOT approval this year and fly
But Champagnie still faces what may prove to be
his biggest challenge: convincing investors that
New Orleans will bounce back enough to make feasible
his plan to fly Bombardier regional jets out of New
Orleans, Baton Rouge and Shreveport for service to
neighboring and nearby states.
Champagnie said he hoped to tap into federal dollars
for rebuilding New Orleans as an incentive for new
investors to come onboard. He said Air Gumbo also
planned to tap into the culture of New Orleans and
southwest Louisiana with a gumbo design on its planes,
gumbo onboard and jazz music while boarding. He said
the carrier was working with Apple and cabin designer
BE Aerospace to incorporate an iPod-based entertainment
system in seat armrests.
He proclaimed little concern about competing against
Southwest out of New Orleans. “I think there’s
still lots and lots of room [for new entrants],” he
In other conference happenings:
* Executives for three low-cost carriers declared
their opposition to in-flight cell phone use. “We’ve
heard loud and clear from our customers that they
don’t want cell phones in flight,” said
Travis Christ, US Airways’ vice president
for sales, marketing and distribution. AirTran’s
vice president of marketing and sales, Tad Hutcheson,
said his airline did not want them either. Barry
Biffle, Spirit’s senior vice president and
chief marketing officer, said cell phone use would
be “too loud.”
* Most airlines are worried about the rising cost
of fuel. But Subodh Karnik, ATA Airlines’ chief
operating officer, said the biggest concern for
low-cost carriers should be the possibility it
will come down too much. Karnik, who previously
worked for Delta, Continental and Northwest, said
legacy airlines have cut costs so much that a significant
decline in fuel prices would suddenly make them
profitable and could entice them to place large
aircraft orders that would flood the market with
capacity. That would eliminate the capacity constraint
that has allowed U.S. airlines to raise fares.
* Spirit is still aiming to become the leading
low-cost carrier to the Caribbean and Latin America,
but not to everywhere in Latin America. Biffle said
the range of Spirit’s aircraft limit the
future service to Central America and the northern
part of South America. That could include the northern
part of Brazil, but Biffle said the lack of Portuguese
speakers on Spirit’s staff makes him leery
of entering that market.
To contact reporter Andrew Compart, send e-mail