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On 1/30/2003 11
04 PM N513AU wrote:
MetroJet = flop
Continental Lite = flop
Delta Express = flop
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Yes, at first glance it's true. All of these airlines failed. However, when you look at the reasons why, it is far from a foregone conclusion that Song will meet the same fate. Here's why:
When any new airline tries to enter the U.S. domestic market, it needs a few things. It doesn't matter whether it's a new airline, or a subsidiary of an airline that has been around for decades. The ingredients of success are the same. These elements are even more essential than cost structure--without these, it doesn't matter how low an airline's costs are.
First, the airline needs to find viable routes, where there is passenger demand. Sounds basic, but airline management has been known to try to stimulate demand where there is none. This is why Continental Lite was a flop. They tried to build a hub at Greensboro--not exactly the hottest airline market at any time in history.
So, now suppose that there is an established market, with plenty of demand, such as the Northeast-Florida leisure market. In order to enter a market like this one, a new airline needs more than just low fares. It needs to differentiate itself from what's out there. Southwest was the pioneer in this area, offering unprecedented value and a quirky, fun attitude in the markets it entered--first in Texas, then throughout the West, eventually in the Midwest and East. Some might say they're also cattle cars, but the fact is, they were unlike anything else out there. So far, JetBlue has done the same thing, bringing not only reasonable fares and a fair pricing structure, but also coach-class amenities that far exceed passengers' expectations. This is where MetroJet failed, however. The fares may have been ok, but they never gave passengers a compelling reason to choose them over the established player, in their case Southwest. They offered all of the drawbacks of WN (no food, no IFE, etc.) with none of the benefits (established reputation, good marketing, etc.).
Finally, success also depends on maintaining an edge. Even an otherwise viable airline will have a hard time when someone better comes along. Southwest's competitors have experienced this over and over again, as did Delta Express. DLX had a decent product, and wasn't an inherent failure. Rather, it was simply a case of bad timing: a better product came along in the same market, namely JetBlue. Why fly on an old 737-200 when you could be on an A320 with IFE for the same price?
Now, with the arrival of Song, JetBlue is about to get a taste of its own medicine. Is JetBlue up to the challenge? I'm sure they are. But there's room for competition in the Northeast-Florida market, and--at least on paper--it looks like Song addresses most of the shortcomings of its predecessors, none of which really offered a compelling enough product to be sustainable.
So, since it seems that Song has met these preliminary criteria, it comes down to costs. Unfortunately only the folks in Atlanta know exactly how this will work out. The economics of an all-coach 757 are good, and it will be a lot easier to make money on low fares with 757's than with 737-200's, but will the economics be good enough to offset the higher wages that Song will pay its pilots? Only time will tell. For now, the important thing is that DL has clearly thought this thing through more carefully than any other airline-within-an-airline we've seen in the U.S.
