Will New Startup Airlines Disrupt The Market?

Discussion in 'Blogstand' started by Prior2Boarding, Jul 24, 2014.  |  Print Topic

  1. Prior2Boarding

    Prior2Boarding New Member

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    Living in San Francisco / Silicon Valley means that there isn't a day that goes by where I don't hear the word "disrupt". People want to disrupt everything from how you make restaurant reservations, how you find parking spaces, and even how you drink from a cup, which got the Stephen Colbert treatment in one of the funniest segments I've seen in a long time.There's an interesting article over at the WSJ today about four new startup airlines that are potentially looking to break into the ultra tough airline industry. In an industry that has extremely high cost of entry and regulatory hurdles coupled with razor thin margins, we see airlines come and go all the time. Even the major carriers aren't immune, with United and American going through bankruptcy in recent years. This has led to hyper-consolidation, now with just four carriers servicing over 80% of domestic travel.This is why these four new airline startups, only two of which are actually funded and ready to take off, think they can break into this industry and succeed. One of the two, La Compagnie, launched just this past Monday and made a splash with an introductory deal from Newark to Paris at just $2,014 round-trip for 2 people, in their all-Business Class configured Boeing 757 with just 74 seats. Those seats will be angled lie-flat, but while the hard product won't be industry-leading, that is an insanely good price and better than what you can find in Economy Class with the major carriers. If their initial success goes as planned, they La Compagnie hopes to offer 4X weekly service by September, and daily service by November.The other airline already up and running is a reincarnation of the old People Express Airlines which went under in 1987, and has already made its inaugural flight out of Newport News, VA on June 30th. People Express will be servicing Newark, West Palm Beach, FL, Pittsburgh, and Boston initially, with fares as low as $56 one-way.The two other startups that are still raising capital include a new version of the long-departed Eastern Air Lines that has raised $10 million and placed orders for 10 Boeing 737-800s with the hope of flying as soon as January 2015. Other applicants even include a company that wants to fly 581-seat 747 jumbo jets domestically.What does this mean for you?Competition is good in any industry - it raises supply and ultimately reduces prices. In order to successfully disrupt, that's exactly what these airlines will need to do, which is to undercut the prices that are already available to consumers. That means you'll be able to find some great deals on routes which are serviced by them.So the key question is, will you be willing to take that initial leap-of-faith and try one of these new airlines? In my opinion, their timing is great as the major carriers continue to gut their frequent flyer programs, angering their loyal customers in the process. Everyone is loyal only up to a certain point. Like many other leisure travelers, I've become far less loyal to my primary carrier, and now find myself "Kayak-ing" to find the best deal. If these startup airlines routinely show up at the top of my Kayak search as the lowest cost option, and the price differential is big enough, there will come a point where I'll be willing to give them a shot. From there, the startups that are able to continually offer a safe, reliable, and cheap option may just be able to win enough market share to succeed and grow, like Virgin America has been able to do in recent years.For those of you in markets where these startup airlines are servicing, would you consider giving them a try?

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