Monday Update – December 17, 2018

More On The 40 Years of Airline Deregulation – We Take An Iconoclastic Review of 35 Airline Start-Ups That Went Down The Tube & Into Aviation History.

Better Air Access, But Lots of Start-Up Wreckage

A Review of Selective Airline Start-Ups Since Deregulation

It’s been four decades since December 15, 1978.

From that date forward, the airline industry was open to new competition. The assumption was that new airlines would spring up all over the nation, to go head-to-head with established legacy carriers, and bring lots of new consumer options.

Spring up they did. But not many went much further. Most went down like a baby grand out the 10th floor window – the victims not of competition from legacy carriers, but from self-inflicted folly, bad planning, and inept management. Arguably, no industry has likely seen so many start-up failures as did the US airline industry subsequent to the Deregulation Act… roughly from 1979 and 2000.

Airlines 1979-2000:  Economic Darwinism At Its Height

Actually, those who lament that there are only about nine major airlines left miss the fact that, because of deregulation, these now offer better air service than that which was possible when the feds had their fingers in how and where airlines should fly. Less airline brands, yes. But competition is there.

One thing unforeseen in 1978: New entrant carriers actually did not become a major part of the evolving Deregulation scene. Actually, most of them went down the financial ceramic fixture, as we’ll discuss below.

Changes In Air Service – A Lot Due To New Communication Channels, Not Deregulation. Yes, there may be less local air service at some small communities – but, contrary to civic hubris and pandering consultant studies, in many of these cases, it’s the consumer that has made the decision, and for them there are now better and more time-efficient air service options elsewhere – even in some cases with a 90 minute drive.

Not only that, but with new communication channels, the need and the value of doing a day trip between places like Albany and Buffalo have become far less cost-effective than 40 years ago. Frequent consumer service in markets like this isn’t coming back

The fact is that the economics of air transportation and the changes in communication channels have now made consumer-acceptable air service at many local small-community airports financially impossible.

There Are Whole New Consumer Options. As for engendering more new future airlines – it’s the economics of the marketplace that will decide, not political intervention. We have seen JetBlue and Virgin America come along in the traditional space – in the latter case so successfully that it was eagerly sought as a merger partner.

In the new impulse-buy segment, where price is being used to stimulate air traffic that otherwise would be staying at home, we have mostly leisure-focused service from Spirit, Allegiant, JetBlue, Frontier and Sun Country that has generated millions of new air travelers. The freedom to enter and exit markets without government influence has transformed air trips into a discretionary-spend option not possible in a regulated environment.

It is unfortunate that many politicians are myopically claiming that deregulation has harmed the nation. That is nonsense. After 40 years, it has brought market reality to the business, and consumers are the beneficiaries.

Consumers Often Have Better Options Other Than The Local Airport. Yes, some local airports at places like Topeka, or Youngstown or Pittsfield no longer have scheduled flights, and it’s a near-certainty that a return of such service is but a political pipedream. But their consumers today have robust air access to and from the rest of the globe at other airports that are not much time-farther away than are consumers in Suffolk County from LaGuardia.

Start-Up Failures – Non-Events. Keep in mind that all of these failed upstart carriers were on the margins of the air transportation system, and were essentially side-shows as competent airlines continued to grow and expand and bring wider global access to the US.

But the good news is that most of the lunacy in regard to airline start-ups has run its course. The cost hurdles to get into the business are enormous, and there’s no more room or financial tolerance of amateur act airlines.

But it was interesting – like the airline that turned itself over to what they thought was a big money man, who turned out to be a 19 year-old kid. Or the airline that zapped one community and state for almost $47 million, with the promise of creating jobs. Or the once-global iconic airline which is now essentially a rural freight railroad. Lots of fun and games.

But give or take a Skybus – which included crackpot features like hawking consumer products in the cabin – or a recent regurgitation of the name PeoplExpress that redefined the term “inept,” (neither covered here) it’s unlikely we’ll see anywhere near the start-up entertainment delivered roughly between 1979 and 2000. The wild west days are over.

Take A Gander At A Few Of The More Exciting Post-Deregulation Start-ups. Over the past few years, we’ve constructed a brief and admittedly somewhat irreverent review of the most exciting 35 failed attempts at starting airlines since 1978. 

Click Here To Take A look & Download – Enjoy.