Virgin Red-New US low cost airline

RE: Virgin Red-New US low cost airline

I haven’t flown on Jetblue, but my cousin does on a regular basis from JFK-ONT. The fact that he can avoid LAX is godsent, considering his proximity to ONT. He loves them. I have flown on SW only once, and it was exactly what you pay for. It was only an hour flight from ONT to Vegas, we got peanuts and a drink. But then again, SW has been able remain successful as a result. Would I rather pay a little more and get better survice, damn right! The amazing thing is, on similar routes, ‘scheduled carriers’ aren’t much more expensive than Southwest! At the time I used to pay $115US to fly from ONT to LAS on United, via LAX, and non-stop on SW I paid $99. Big deal, 15 lousy dollars. I’d rather pay that, get my mileage, get my assigned seat, and not have to worry. To get back to the subject matter, JetBlue is doing pretty well right now, and their growing. I’m sure maintanance problems will be dealt with as they arise. They have brand new aircraft. If I had a choice between the 2, I’d take Jetblue.

GD1

RE: Virgin Red-New US low cost airline

[updated:LAST EDITED ON 04-06-02 AT 12:52 PM (GMT)]>Wait a minute! You are barking up the wrong tree when you
>claim US protectionism will prevent low cost carriers from
>the UK getting established in the US. Do you see any low
>cost US carriers in Europe? I don’t think so

Okay, the set up cost is rather a large barrier to entry. But so is US protectionism. Do you think (hypothetically) that say, Singapore Airlines, Shell, or Vodafone would ever be allowed to buy Southwest?

The point is that they are not US companies.

One more point too:

I have never flown with either Southwest or Jet Blue. But, I imagine Jet Blue is nicer?

Ii I had to pay a few dollars extra – no problem. Also, what degree of route overlap is there between them??

RE: Virgin Red-New US low cost airline

>Will never happen.
>
>The US simply will not tolerate foreign competition. Bush is
>too much of a “Smith & Wesson Socialist” to do that.
>
>Didn’t BA try something similar with USAir about a decade
>ago? I vaguely remember something about that.
————————————————-
Wait a minute! You are barking up the wrong tree when you claim US protectionism will prevent low cost carriers from the UK getting established in the US. Do you see any low cost US carriers in Europe? I don’t think so.

The cost of getting all the infrastructure established,(maintenance, facilities, etc)would immediately put any foreign operation in the hole from a cost basis. Buying a hub and spoke carrier with a bleak financial picture like US Airways won’t help either given the typical point to point operation of a low cost carrier.

Southwest and Alaska Airways have been in a pitched low cost battle on the west coast of the US for years. Now they are moving to the eastern US. These airlines are masters and I mean masters at keeping costs down. Most new low cost carriers will be caught in a buzz saw trying to compete with them.

I may be wrong, but even Jet Blue’s cost structure looks too expensive. For instance Direct TV for free. It’s just another system to break down. And current entertainment systems do break down. When Jet Blue gets a little age on those systems and Jet Blue’s maintenance costs and airplane down times go up. I look for trouble at Jet Blue, especially if they cross paths with SWA in the future.

RE: Virgin Red-New US low cost airline

British American??

I think when it comes to doing deals on their own account, both carriers couldn’t give a fig about their alliance partners. The enlarged group would be so powerful, people will beg to be allied to them!

Think of the collossal buying power they’d have with Boeing…talk about over a barrel!

There’s plenty of precedents for transnational mergers, if that’s what you mean. The most well known of recent years is Vodafone. First they bought Airtouch then they bought Mannesman. It’s about what fits and what could fit; not where each company is from. The group could offer flights from almost anywehre in the US to anywhere outside the US (and vice versa).

RE: Virgin Red-New US low cost airline

Once again, Mongu, you make very good points. Very logical, indeed. Either way, I just don’t see it happening. One company being from the UK, the other being from the U.S. What would the airline be called? Will it be branded into one, or will they retain their own identities/liveries? Where will the other OneWorld members fit in to this? Will they want a piece of the pie, as well?

GD1

RE: Virgin Red-New US low cost airline

What’s wrong with Gatwick? I can’t understand the aversion to it, because it is actually much more pleasant than LHR. It takes about 10 minutes longer to get to from central London on the Gatwick express than Heathrow does.

Also, given that one of the 3 bodies who will have to approve a merger is the UK Office of Fair Trading, the UK economic interest will be a major issue in any proposed deal. I cannot see the EU competition authority favouring FRA or AMS over LGW either, so they will be a neutral in that respect.

Will it actually lead to market domination? I don’t agree that it will.

You ALREADY have what is essentially a cartel on business travel. That has arisen, partially, because BA and AA between them have a large number of the slots. A merged BA/AA would have, together, less slots than they had before. The new airline would therefore have less price-setting power than the existing BA/AA situation. You try booking a biz class return from LHR to JFK and you’ll probably find a difference of less than 5% in price between all of the airlines!

I also don’t favour the Microsoft comparison. MS operates in a market place with almost no regulation. The airlines are almost obsessively regulated. Bermuda II, for all its flaws, sees to that. The demand elasticity of LHR-USA business travel only goes so far; passengers will go to the European carriers if prices start to get even crazier than they are now.

RE: Virgin Red-New US low cost airline

[updated:LAST EDITED ON 19-05-02 AT 09:27 PM (GMT)]You make very good points. However, obviously if this was up to the shareholders, it would be great for both airlines! Why the hell wouldn’t it! Unfortunately, whatever is best for the shareholders, isn’t always best for the industry. Why do you think the United/USAirways merger was shot down? Because it would have created a huge monopoly in the US domestic sector by giving them nearly 50% of the market and increasing their east coast routes where USAirways dominates, not to mention strenthening their presence in Europe, where they currently only serve 8 destinations. The only reason the AA/TWA merger happened, was because TWA was finished. They were going to have to file for Chapter 11 bankrupcy protection for seemingly the 3rd time in the last decade. So even if AA and BA are both ‘troubled,’ they are by no means hanging by their last thread, so to speak. You mention that other airlines would be forced to use Gatwick. Yeah, well, the bottom line is, they don’t want to, nor should they be forced to! USAirways, Northwest, Continental, and Delta should be alloted some slots at LHR as well, and perhaps forcing AA/BA to take some more slots at LGW as a result. Finally, you mention it being good for competition, I don’t recall when any mega-merger was ever good for competition. When you have a giant dominating the market, they set their price, and everybody else is forced to comply. Sure, you have a little guy come in and set low prices and the big boy lowers theirs even further till it bankrupts the little guy, and it’s end of story for them. Once in a while you get one that sticks, like easyjet, Southwest, etc. But for the most part, they don’t last. That’s the very reason I refuse to buy fuel from Mobile/Exxon. Their the bigboys and regardless of what OPEC does, they control the market. Regardless of what the UK gov’t decides, the US gov’t just won’t let this happen, for all the right reasons. I have 2 words: MICRO SOFT.

GD1

P.S. I forgot to address the FRA/AMS issue. Hell, if I’m a biz traveler and I had to choose a transit airport other than LHR, I wouldn’t go via LGW either! I’d much prefer FRA or AMS. Both, very nice airports. If the UK econonmy suffers, then so be it.

RE: Virgin Red-New US low cost airline

The scenario you paint is exacly what would be best for both sets of shareholders though! It would also set a precedent for troubled US airlines to be bought – I’m thinking Northwest here.

In my opinion, it would be incredibly healthy to finally sort out LHR. If BA/AA had the majority of the slots, other airlines would be forced to take LGW seriously. The gross over-centralisation of carriers at LHR is a big problem now and will get worse.

I also think it would be good for competition. The other carriers (Virgin, Delta etc) would probably get more flight allowances as a result of the merger and would have to at last compete on price. So many biz travellers going via FRA and AMS is not good for the UK economy.

RE: Virgin Red-New US low cost airline

Why would it never happen? Let’s sit back and think about this. AA is the biggest airline in the world. BA is the biggest in Europe, the 4th biggest in the world, and owner of the majority of the slots at the busiest airport in the world in terms of international traffic. So these 2 coming together under one common name and livery, perhaps, to create a mammoth airline that nobody can touch with practically all the slots at Heathrow, the majority at DFW, and already huge at Miami, Los Angeles, Kennedy and Chicago-O’Hare. I just don’t think the logistics of this are aesthetically pleasing to the airline industry, at large. They should just be happy with a codeshare/alliance deal similar to Star.

GD1

RE: Virgin Red-New US low cost airline

Why would it never happen?

BA and AMR Corp are both looking a little vulnerable and could do with all the synergies going.

RE: Virgin Red-New US low cost airline

A mega code-share deal is one thing. AA puts BA flight numbers on all their US domestic routes, BA puts AA flight numbers on all their connections out of LHR. But these 2 merging? That would never happen, even if the U.S. allowed it.

GD1

RE: Virgin Red-New US low cost airline

The AA/BA deal was primarily a mega code share operation, yes.

But most pundits were calling it the prelude to a merger – sort of getting to know your partner before getting married, so to speak.

RE: Virgin Red-New US low cost airline

How would they “merge?” I thought they just wanted a very extensive code-share deal, a la United/Lufthansa.

RE: Virgin Red-New US low cost airline

I do believe that BA/AA were willing to surrender some of their LHR slots if they were allowed to merge. Sounds reasonable to me!

I think that the UK would benefit from US airlines flying here domestically – Southwest might give Easyjet a shock! I also think some UK airlines would do very well in the US market.

RE: Virgin Red-New US low cost airline

It would great for Branson to give his entry into the no-frills/low cost airline arena. There will be a lot of competition, however. Will he have a hub airport a la Jetblue, or will he concentrate on point-to-point services like Southwest? Both of these airlines are very distinct in their flavor, yet both very succesful. As far as the open sky deal goes, the U.S. gov. is correct in its decision to balk until BA/AA give up some of their slots at Heathrow. Until then, Oneworld will continue to come in a distant 2nd to Star.

RE: Virgin Red-New US low cost airline

The US has always had a policy of protectionism – ie. only Americans can own airlines in the US and Americans can only buy steel made in the US (for example).

This would only work if at least 51% of the voting rights of Virgin Red were owned by a US corporation or individual, I think. It would therefore not be controlled at all by Virgin.

RE: Virgin Red-New US low cost airline

do you doubt that US will stop them? Give me one reason why. USA has always had great ties with the UK in all industry, Virgin entering the US low-cost arena, i dont think its that big a deal.

RE: Virgin Red-New US low cost airline

yes , there is a lot of minor ones. Do you think that the US will let some ugly european compete them?

RE: Virgin Red-New US low cost airline

thats 2….name a few more in those etc. please 😉

RE: Virgin Red-New US low cost airline

Kabir,

Not many??? And what about Southwest ,JetBlue etc…