Play time - new airline starts up, which airliner to use?
January 6th, 2009 |Call this a bit of a game, or perhaps just curiosity, but let's take a look at a hypothetical airline - let's call it Scare Air, and it will fly around a region with as few costs as possible while maximizing revenue and service.
For instance, it would connect MONCTON to CHARLOTTETOWN (Senator Callbeck?) to HALIFAX to SAINT JOHN to FREDERICTON (or some other New Brunswick target) to MONTREAL/OTTAWA/"TORONTO REGION".
Would you buy a couple of DASH or CRJ's and hub into a larger bird flying east-west to and from the Maritimes, or would you buy one, two, three (however many) Airbus 318/319/320/321 and do circle routes?
Remember the 318's take around 100 passengers, and the 321 has the lowest cost be passenger mile, carrying around 220 passengers.
Basic questions to answer include, would a passenger (Senator Callbeck) from YYG happily take a once or twice daily on a larger airliner (A321) versus the current AC system of five daily return flights to YHZ, or is the frequency of flights more important?
Assume also that there is one class of service on all flights east of Montreal, and any flights leaving the Maritimes has two class service.
Cost would be 8% less than current Tango fares on similar routes and times, but would be based on a more traditional service offering - meals out of the Maritimes, bag 'o snacks within.
AC - possible, buy under different rules, such as "100 miles per segemnt"
AA - cheaper than AC, but unbalanced revenue - likely to see this as adjunct to some existing AAdvantage members earning power, plus a co-branded Visa from Royal Bank providing side benefits.
SA - Scare Air points - easier to control revenue mix, suitable for regional flyers, but no connection to the other programs.
YHZ is a primate city in the region. I suspect that the majority of the traffic is in and out of YHZ. The secondary group is traffic connecting through YHZ onto mainline. The last group would be connections within the region.
Service to the Rock could be improved by development of direct flights to YYT, but non-stops to YYT from the second tier Atlantic centres probably only provide a traffic justification for fairly small aircraft.
As for equipment, I suspect even the 717 or 318 is a pipe dream. After all, the entire population of the region is under 3 million. JetBlue is operating out of a city with almost 4 times that many people, and an even larger catchment.
An even more important factor is cost of acquisition. CRJ's can be bought and paid for in CAD. 717's have to be bought in USD. 318's have to be bought in Euros. And both are subject to import costs.
April 1 1996- April Fools days. I am still in school and working PT on the Ramp in YEG for West Jet (Hudson General). At the time there were only 3 planes in the fleet servicing destinations from YYJ to YWG. One went mechanical mid afternoon. I ended up working 17+ hrs that day as EVERYTHING became a minimum of 4 hrs delayed. It was alright serving the YEG-YYC-YVR crowd, but to run out to YWG and back took 5 hrs and put everything further behind. The next week they cancelled the YWG destination. It cam back a few years later when their fleet increased, but to operate with a minimum of aircraft, I think you really need 1- 1 1/4 hr legs tops, otherwise the unexpected breakdown will really hurt you.
No free drinks or snacks, but charge a reasonable fee and then put a good selection in! (Like Via's cheap fares, lots of different candy bars, different kinds of chips, but just a few of each). Offer a decent cold breakfast for sale. (Breakfast bars, apples and/or bananas, extra milk and juice loaded). By selling it you can put in a variety.
For J and full Y, give passengers two drink coupons and two snack coupons when they check in (two of each in case they want to impress their seat partner or are thirsty; or make the coupon good for unlimited drinks for the passenger). Sell beer and wine on longer flights only. No hot meals.
if you really want 2-class service. But why?
It may seem that RJs' routes are too short to justify Business Class seating, but as the flights get up over two hours and almost three (e.g. YOW-ATL), I think a 1-2 or 2-1 seating, with extra legroom and extra big tray table, would be a good selling point for _working_ as much as anything.
Reward system options:
WN style: fly four times, get a free flight (or fly eight segments, get two free segments; full Y counts as two segments for earning).
And allow using a one-way free flight to upgrade from any ticket to J if available at the airport.
andrew
Keep the fare rules simple! Full Y, possibly J for nominal extra charge, 7-day advance, 21-day advance. That's it.
andrew
What, no websavers? http://www.flyertalk.com/forum/wink.gif
I am thinking a "universal" cabin with J class being a newspaper, more mileage accrued, first on and off, an "included" beverage and the like.
I agree with 21, 7 and walk-up fares - the 30 day fares tends to be what drives people nuts.
Use one type of AC, or at least share commonality. Reduces the fixed cost as much as possible.
Circle routes might work, but keep in mind should there be any type of delay(weather/mechanical) the Domino effect would ripple down the line. Point to point with short turnaround would provide some protection.
Another, do you offer any kind of FF program?
Assuming since we are "small" we could join aeroplan. Would the revenue drain from rewards seat be too much of a drawback to offering points?
A-321 is way too large for these Maritime routes. CRJ/ERJs would be more ideal, and possibly 2-class 717s for YYZ-YHZ.
Participation in AAdvantage would only work well if one of the airlines offered flights between the Maritimes and a nearby US city like BOS or NYC.
This hypothetical airline would have to be non-union, and payscale would have to be the lowest possible - at least in the beginning.
Oh, my bad! I was not thinking, was I? But does the 717 really look so good? After all, AA is putting them on the ground before other equipment.
How would it fare for the tank-up-and-go-as-long -as-you-can-before-you-need-to-do-it-again approach?
AA is getting rid of the 717 as it does not fit into their overall fleet plan. AA tends to have over 100 hulls per type (think MD82). It is the fleet commonality that helps them handle 900+ hulls.
Trucking fuel around gets expensive because more weight equals higher fuel burn. Also, consider that most Maritime airports have shorter runways than in the West, having the extra weight on landing could prove troublesome.
[This message has been edited by YEG Guy (edited 12-05-2001).]
And please don't flame me for my suggestion
(my wife calls me a dreamer)!!
Some day, one of us, might just say "Hey guys, why don't we start our own airline".
With all the resources here on FT, both in our intelligence, and our finances, wouldn't it be great to be able to start an airline that we could enhance, and build to satisfy the needs of the flying public, and, of course, make a profit. These are difficult times for the airlines, but...
Each day, on my way to work, I pass those 2J aircraft parked on the south end of YYZ near the 401. The assortment runs from A310's to B737-200's. Sad to see them not in the air.
Guess my wife was right--I'm just a dreamer.
(No flaming my suggestion, please--at my age, I'm all flamed out). http://www.flyertalk.com/forum/smile.gif
bj-21.
------------------
'Tis better to have played and won, then never to have played at all.
Jeff
I recall that there was a SimGame on the market called AIRLINE, or something similar, which let you set up and run an airline. It was not Mac compatible, so I never picked it up, as much as I was intrigued by the idea of giving Milton and company a run for their money.
Maybe it comes from running trains as a kid, but simulating such a business is a good exercise in understanding the complexities we tend to gloss over.
I think there are two things that need to be looked at. The first is acquisition cost. You can buy a 737-200 outright for less than a million bucks and fly 100+ folks. Or you could buy a beech 1900/ Dash 8 and have 40 seats, but at a cost of 4 Million + each. Fuel and assoc. costs are higher for the Boeing, and small markets may not support a 100 + seat aircraft. The smaller regional turboprops are more ideal suited for lower capacity, higher frequency, hub-spoke, or milk run routes.
Since the flights are relatively short, the operating costs are higher with the Boeing, but owning your own metal sure sounds good - one on the ground with three (or up to ten) in the air is pretty good backup, and at around the cost of two new birds "off the rack".
The middle way is to pick up on the used and distressed lease market and go with the A series. Only one product to service and a balance of operating and acqusition costs.
The turboprops are great cost wise, but it's got the image problem as Shareholder already stated, and even using a few of them might make the passengers think that they will be stuck on one YHZ-YYZ.
I'm certain a market exists for that flight. http://www.flyertalk.com/forum/wink.gif
Airline: Aloha Airlines
Aircraft: Boeing 737-297
Location: Kahului, Hawaii, USA
Registration: N73711
Previous Registrations: None
Flight Number: 243
Fatalities: 1
MSN: 20209
Line Number: 152
Engine Manufacturer: Pratt & Whitney
Engine Model: JT8D
Year of Delivery: 1969
Accident Description: The aircraft suffered an explosive decompression and lost approximately 1/3 of its roof while cruising at FL190. Pre-existing fatigue cracks in the fuselage from numerous takeoffs and landings. One flight attendant was ejected from the aircraft, which landed safely at OGG.
andrew
The only major centre out east is Halifax, and it isn't that large. The cost of providing service to all the smaller cities is enormous, and I don't think they can support daily flights from more than one carrier. Even West Jet, which serves very small cities in the west, is only planning to add Halifax and St. John's in the next year.
If you were to start an airline in the east, the regional jet circle route model sounds best. But I wouldn't invest any money in it.
Whether you offer one-a-day or one-an-hour flights through the region, you're still incurring those fixed infrastructure costs.
Premium passengers go in the cabin (call it "Executive Class"), low-yield passengers in the cargo hold (call it "Hospitality Class").
andrew
This hypothetical airline would have to be non-union, and payscale would have to be the lowest possible - at least in the beginning.
Hey, the makings of a sweatshop! FlyerAl gets first dibs in the job market. Oh, and don't forget, employees cannot travel on the planes. Must upgrade everybody who likes to fly other carriers as much as possible.
Sorry FlyerAl, but I have to disagree with you (as I often do).
Do airlines pay provincial taxes on their fuel? I would expect cash strapped Atlantic provinces would baulk at the idea of gassing up in the states, then picking up passengers around the region, depriving them of fuel taxes on not only the aviation fuel, but the gasoline not being used by those who would otherwise drive these trips in their cars.
But I am sure such a jumbo flight everyday would be a hoot. Get on in one city and ride until it hits your destination. Keep the Mooseheasd and Keiths flowing. Put on a couple of fiddlers... [Anyone remember the old "Bistro" cars that VIA used to run on their Toronto-Montreal afternoon trains? Bistro Car on the CNR, was the refrain as we were entertained by piano players and lounge singers in a very smokey parlour car.]
As for the issue of road vs. air, a point to remember is that anything that shuts the roads down is going to make most of the airports inaccessible, and probably keep the aircraft on the ground as well. When road conditions are simply poor, rather than closed, most maritimers will shrug and say, "it's a day ending in y."
Now, if we could get our grubby little mitts on Shearwater, that would bring a whole new perspective on the game...
Specs 737-600
Max TK-off Wt : 65090kg
Max Range : 5649km
1 Class config : 132pax
Price : 40.5 - 49.0 mil USD
Specs 717-200
Max High gross wt : 54885kg
Max range : 3815km
1 Class config : 117pax
Price : 35.0 - 39.5 mil USD
All prices quoted 2001 USD
I'm sure there would be a discount for bulk purchases.
Regards YYZAC
Now a 747 domestic is about 200 mil USD LMAO ..... Rapid-air here we come.
Airbus is clearly the leader in both price and cabin quality, whereas Boeing tries to compete by doing buy backs of old metal - as a startup, there is none.
Of course, one can set up an offshore equipment company to reduce tax implications as well.
A CRJ can cost as much or more than some of the 100 to 120 seaters out there right now.
Avoiding YHZ is not so bad - you reduce costs by hubbing elsewhere, and people from the Rock, once you would start to run there (not right away) would accept a stop along the way at a hub to see prices that are clearly half of the AC typical fare.
The main issue of Maritimes versus NYC out of JFK is this - people gotta fly. In the US eastern seaboard, you have rail, excellent road systems (shortest route roads), bus lines, and dozens of air operators.
Within the Maritimes, you face bad road conditions in winter, toll roads and bridges, numerous bus stops due to population density - making for extremely long bus trips, countless tourists all over the place in summer - and traffic congestion in places, regionalized services - people in YYG may have to go to YHZ for a specific treatment, or YHZ to YQM for a regional sales meeting - at $300 for a flight, elasticity of demand dictates that you drive, whereas at $99 you may fly.
And if anyone has ever driven YHZ to Ottawa or Toronto, they will know that it is a long drive, especially in winter. Some brave souls try to make shortcuts by cutting through the U.S., but now this is even problematic.
Sit down on ITN and look at the loads around NB, NS, PEI and going to Montreal, Ottawa, Toronto - the flights are full.
Many interesting observations and thoughts.
And please don't flame me for my suggestion
(my wife calls me a dreamer)!!
Some day, one of us, might just say "Hey guys, why don't we start our own airline".
With all the resources here on FT, both in our intelligence, and our finances, wouldn't it be great to be able to start an airline that we could enhance, and build to satisfy the needs of the flying public, and, of course, make a profit. These are difficult times for the airlines, but...
Each day, on my way to work, I pass those 2J aircraft parked on the south end of YYZ near the 401. The assortment runs from A310's to B737-200's. Sad to see them not in the air.
Guess my wife was right--I'm just a dreamer.
(No flaming my suggestion, please--at my age, I'm all flamed out). http://www.flyertalk.com/forum/smile.gif
bj-21.
Blackjack-21, if I were not sitting here on my shiny pants on the other side of the Atlantic, I would be clawing at the chance to get something going. This is what entrepeneurship is all about, and the time is right!
JetBlue flies A-320s because the markets they serve are large enough to support that size of aircraft.
A-321 is way too large for these Maritime routes. CRJ/ERJs would be more ideal, and possibly 2-class 717s for YYZ-YHZ.
Participation in AAdvantage would only work well if one of the airlines offered flights between the Maritimes and a nearby US city like BOS or NYC.
This hypothetical airline would have to be non-union, and payscale would have to be the lowest possible - at least in the beginning.
1) Think Airbus in more ways than one - when AC carries 240 people one way YYG - YHZ each day, and a bus costs maybe $50 to do the same trip, but in 6 hours, I think one big bird migh do, if the passengers are willing to accept 2x a day and not 5x. Remember, a short hop to Moncton, pick up a few more, drop some off, and on to YHZ.
2) The link up with AA would not need direct, connecting flights - the Royal Bank visa would be enough.
3) There is no need to "keep out the union" - as long as everyone is in the same union, and classified either as "driver", "fixer" or "other". In other words, flexibility above all.
I don't think the A318 would be a good aircraft for a startup. Note that the A318s have been generally purchased by airlines that already operate other A320-family a/c (weight penalty is worth the savings in cockpit commonality). The IAE engines are not offered on the A319s (only the CFM56s are common to both).
I imagine the 717s will go a lot cheaper than the $35mm list since there will be only 3 major operators of the type by the end of next year and it's pretty much orphaned and appears destined for discontinuation.
I suspect the 737NG models, even the -600, would not be appropriate for use in the Maritime provinces. The -600 has more pax capacity and may be heavier than either the 717 or A318. Only a relative handful (81) have been ordered (SK is the largest operator of the type with 28 a/c, and because it also operates the -700 and -800 and Tunis Air is a distant 2nd with 7).
The only major centre out east is Halifax, and it isn't that large. The cost of providing service to all the smaller cities is enormous, and I don't think they can support daily flights from more than one carrier. Even West Jet, which serves very small cities in the west, is only planning to add Halifax and St. John's in the next year.
However, isn't flying to low-profile airports one of Wesjet strategies to offer low fares. Plus there's the added advantage of more on-time departure due to low traffic. I was totally surprised when Wesjet recently anounced its new flights to....
Sault-Ste-Marie?!?! I could'nt have guessed that there was enough traffic for 2 airlines (I assume AC is flying there) but it goes to show that small markets can be profitable
That's what Ryanair is doing in Europe too. By flying to these small, unknown airports, they are usually the only airline serving them and so they get royal treatment by the airport authorities (cheap landing fees, dedicated groundgrew, and event grants by the towns who like having an airline serving them). Low traffic also allows them a turnaround of less than 25 min. I know it's hard to compare dense european markets with the canadian market but it shows that low-traffic destinations can be turned into higher-traffic routes (or even hubs).
Of course I'm not saying we need more Wesjets and Ryanair but they could teach a lesson in no-nonsense management.
As for food in the a/c: bring it back! It seems that the makority of passengers like to eat during the flight. Why not feed them properly. I read somewhere that inflight meals cost something like 3-4$/passenger onmajor airlines. While I understand that airlines want to cut costs but is a 3-4$ "food surcharge" going to cause an uprising? I don't think so, on a 400$ ticket, who would care if it went up to 404$
if it meant a decent meal on board?
Well that's my two cents
One flight attendant was ejected from the aircraft, which landed safely at OGG.
the aircraft or the F/A landed safely? sorry, i just couldn't help myself....
I must agree on one point FlyerAl made: JetBlue can use Airbuses because its routes are denser and its city-pairs support 130+ seaters. The Atlantic provinces just can't do this with decent frequency of service.
And as noted, weather will be a major issue if you adopt the "circle routing" you propose. You basically have to keep to a hub-spoke, dedicated aircraft/route model or you get into the creeping delays that plagued WestJet in its first year using the circle approach. [One never hears about these disasters, but its reliability was pretty questionable when a 737 went down, and the replacement jet was being used elsewhere covering for another jet that had gone down earlier. It happened regularly which prompted the decision to order newly minted 737s for fleet expansion.]
I suppose our close personal friend Bob would pay us about $500K per month to use them.
Combi can't use YQM. It could probably land--empty. But it couldn't take off again (unless maybe you gutted it and fuelled it with an eye-dropper).
As for the issue of road vs. air, a point to remember is that anything that shuts the roads down is going to make most of the airports inaccessible, and probably keep the aircraft on the ground as well. When road conditions are simply poor, rather than closed, most maritimers will shrug and say, "it's a day ending in y."
Now, if we could get our grubby little mitts on Shearwater, that would bring a whole new perspective on the game...
Shhhhhhhhh!
Problem is, the municipality is so in love with having 1200-ish base workers that it would never even think about a super-regional lcc airport - but there are other locales. After all, if the price is right, people will fly from Halifax via a hub as well.
Of course, Shearwater might not be where it is in the future, either. http://www.flyertalk.com/forum/wink.gif
As to the road thing, so many people drive to Halifax to take flight from there - Cape Breton, PEI, New Brunswickers, that the road issue is the difference between making that flight to sunnier climes or staying home in the snow for the next two weeks.
[This message has been edited by msn (edited 12-06-2001).]
When people talk about competition in Atlantic Canada, I keep thinking about the number of partners CP had in that region in the late 1990's. Didn't they sell off their regional carrier, which became Air Atlantic, which was then sold to Inter-Canadien, which then went bankrupt and CP was forced to use mainline aircraft to provide service over Christmas during the last year of their operations? No one could make money there competing with Air Nova. More recently, Can Jet and Royal had substantial operations into Halifax and both were sold.
If you were to start an airline in the east, the regional jet circle route model sounds best. But I wouldn't invest any money in it.
EPA was around for years, and made money. The CP thing was always that it was "west" back then, I think, and the Air Atlantic people went with oddball metal, didn't they?
In any case, Air Nova blew its brains out on marketing to keep the ball rolling and flew five minutes behind Atlantic anywhere they went.
The issue there is to not use YHZ as a hub and you will have a number of automatic advantages.
As to investing, wait for the prospectus! http://www.flyertalk.com/forum/wink.gif
The CRJ is perfect for the smaller routes and the 737 is great for the high density routes. I would also maximize cargo capacity to only premium time sensitive products.
I would only have point to point ticketing with no connections on the way.(unfortunatly this is the largest cause for delays on your full service airlines and the reason PAWOBS are high).
I would offer the employee incentive to work for me regardless of whether it is a unionized shop or not. You take good care of your people they inturn take good care of your customer.
I have often thought of how nice it would be to run an airline.... My wife also calls me a dreamer.
Ahhhh back to the real world now...
Regards YYZAC
The only problem with my airline is that I would not have my favorite AC in the fleet,
The 747.
Cheap landing fee and direct rail connection to downtown of other major centres.
I must agree on one point FlyerAl made: JetBlue can use Airbuses because its routes are denser and its city-pairs support 130+ seaters. The Atlantic provinces just can't do this with decent frequency of service.
And as noted, weather will be a major issue if you adopt the "circle routing" you propose. You basically have to keep to a hub-spoke, dedicated aircraft/route model or you get into the creeping delays that plagued WestJet in its first year using the circle approach.
Well, buying new, Airbus is the absolutely most aggressive with the offers, so it is hard to look towards a new Boeing product. As terenz has pointed out, there are certainly 717's to be had, but I wonder about the true cost of running these older birds.
Secondly, what I was looking at is circle routes in the Maritimes and then connecting east-west's to central points, so going mechanical might not be too bad an issue with the circle route segments all being relatively short.
Of course, what I am wondering is, what is decent frequency of service?
[This message has been edited by msn (edited 12-05-2001).]
CRJ's or Boeing 717's or Airbus 319's doing circles around the Maritimes.
CRJ's and Airbus being financed, Boeings being bought outright.
Universal cabin, with J service, free drinks and snacks on all flights, interesting offerings (Moosehead beer and some sort of genuine New Brunswick pretzel?), and all the rest.
E-tickets only, 21- and 7-day advance fares and walk-up.
Some sort of loyalty program, and flexible award redemption.
Quick turn around flights and no job classifications for the operating staff outside of "driver", "fixer" and "other".
So, does anyone know the curve for a Boeing 717? The optimum combination of weight, range, speed and distance. If you want fast turnaround, you want to fuel up as few times as possible, but how does this affect the weight, therefore the fuel consumption and range (and further fuel required), and therefore the costs?
The A318 with only 100 seats is not "too big", but would not delivery service flexibility to make profitable runs east-west, whereas an A321 is quite a hammer to swing for flights that last as little as 28 minutes.
From what I have seen, these routes with 40 seaters servicing them are at capacity - with one "big bird" touching down once or twice a day with 35 minute turnaround, these marginal routes become quite interesting.
Specs 737-600
Max TK-off Wt : 65090kg
Max Range : 5649km
1 Class config : 132pax
Price : 40.5 - 49.0 mil USD
Specs 717-200
Max High gross wt : 54885kg
Max range : 3815km
1 Class config : 117pax
Price : 35.0 - 39.5 mil USD
All prices quoted 2001 USD
I'm sure there would be a discount for bulk purchases
I'm sure there would be.
BAT doesn't have any 717 right now, but plenty of 737 to go around. Pretty obvious why so many carriers seem to use it - it's a good combo of get up and go.
Still, new A metal is much lower than B to acquire.
What was the model that went topless at Hawaii way back? I'm thinking all the short hops (many t-o's and landings) are pretty stressful on the airframe.
Issue there again is the operating costs - I understand that the CRJ's stand up well compared to the ARJ's especially, but an A318 or A319?
Even JetBlue has stuck with Airbus for the smallest routes.
How would it fare for the tank-up-and-go-as-long -as-you-can-before-you-need-to-do-it-again approach?
So, does anyone know the curve for a Boeing 717? The optimum combination of weight, range, speed and distance. If you want fast turnaround, you want to fuel up as few times as possible, but how does this affect the weight, therefore the fuel consumption and range (and further fuel required), and therefore the costs?
The 717s seem to work for Hawaiian (short turnarounds at least at the non-HNL airports), AirTran and the low-cost competitor in Australia (now bought out by QF).
The max. T/O weight for the short-range model is 110K lbs vs. 130K lbs for the A318. The longer-range 717 model is 121K lbs.
there are certainly 717's to be had, but I wonder about the true cost of running these older birds.
The 717s are actually fairly new with the first a/c delivered just over 2 years ago and TW got their first Feb. 2000.
AA is getting rid of the 717 as it does not fit into their overall fleet plan. AA tends to have over 100 hulls per type (think MD82). It is the fleet commonality that helps them handle 900+ hulls.
Trucking fuel around gets expensive because more weight equals higher fuel burn. Also, consider that most Maritime airports have shorter runways than in the West, having the extra weight on landing could prove troublesome.
[This message has been edited by YEG Guy (edited 12-05-2001).]
Yes, but I'm looking at BOS being in the loop and filling up there each time. http://www.flyertalk.com/forum/biggrin.gif
The 717's run at least $35 Million USD a pop, right? Just how low can they go from the TWA fleet?
#If you have any other info about this subject , Please add it free.# |
