Source: Chicago Tribute
JetAmerica: New airline ready to fly with $9 seats
By Julie Johnsson | Tribune reporter
May 27, 2009
Aviation entrepreneur John Weikle isn’t afraid of a stiff head wind.
He plans to launch a new airline in July, modeled after Irish discounter Ryanair, with super-low fares and designs on Chicago-area customers and others who don’t mind driving a little farther to get a good deal. Tickets go on sale Wednesday.
Never mind that U.S. airlines are weathering one of the largest contractions in aviation history, or that a good chunk of the public is likely to stay grounded until the economy improves. About 14 million fewer Americans are expected to fly this summer, down 7 percent from 2008, according to the Air Transport Association, an airline trade group.
Weikle thinks this is the perfect time to give wing to a new carrier, positioning it to take off into an economic upswing and focusing on markets where competition is limited.
His instincts are sound, aviation experts said, but his odds of succeeding are low.
“His timing is actually pretty good,” said Vaughn Cordle, a former airline pilot turned market researcher, who thinks the uptick in consumer confidence points to an airline industry rebound in 2010. “Unfortunately, airlines serving those small markets very rarely make it. He will not get economies of scale or scope.”
Weikle’s venture, JetAmerica, will lure customers with fares priced as cheaply as $9 and by flying full-size jets between midsize cities such as South Bend, Ind., and Toledo, Ohio, and tourist destinations such as New York and central Florida.
Sound familiar? That’s because Weikle (pronounced “why-kel”) also founded Skybus, a discounter that featured $10 fares and targeted smaller Midwestern markets like Columbus, Ohio, and Gary, places treated as afterthoughts by major carriers.
Some dubbed the upstart Skybust, however, when it folded in May 2008, having operated for less than a year. The discounter racked up a net loss of $56 million on $80 million of revenue over three quarters of earnings, according to federal data compiled by AirlineForecasts LLC, Cordle’s firm.
Weikle, who left Skybus shortly after it began flying, says the carrier had a sound strategy but executed it poorly. Sky-high oil prices didn’t help, either.
Skybus also was weighed down by heavy overhead, including orders for 65 new Airbus A319s. As that venture failed, Weikle started formulating plans for JetAmerica but found little interest among investors until oil prices plummeted.
Weikle’s new company will start with just one plane, a Boeing 737-800 leased from Miami Air International along with flight crews, that will seat 189 passengers. He plans to add three aircraft over the next year from Miami Air, which would provide backup planes as needed, Weikle said.
“We hope to get it right by growing very slowly,” he said.
The first nine people to buy tickets on a flight will receive fares for $9; the most expensive seats will go for $199 apiece. SkyAmerica plans to launch service with 34 flights per week between Newark, N.J., and Toledo, South Bend, Lansing, Mich., and Melbourne, Fla. The carrier will start flying between Toledo and Minneapolis in August.
The discounter plans to add other cities to its network, including Rockford, Weikle said. The carrier expects to generate sales of $50 million in its first year and $150 million the second year by charging passengers fees for amenities, like sodas and snacks, and by encouraging more people to fly.
But will it make money? As soon as other airlines view JetAmerica as a threat, they’ll likely ratchet down prices to steal customers, Cordle predicted.
Chicago-based United Airlines, for one, said it will fight to keep area customers.
“We are Chicago’s hometown airline and will compete aggressively with competitive fares, better service and more convenient flight options,” said Robin Urbanski, a United spokeswoman.
But Weikle thinks he can borrow from the success of Allegiant Air, another discounter that has found a way to make money by serving smaller cities. “Our goal is to stay away from the competition,” he said.
Analysts say he has a novel strategy that may prove sensible, especially in the current environment.
“It’s not a bad way to see if the concept works,” said aviation consultant Robert Mann.
Weikle declines to say how much he has raised from investors. But he also is relying on millions of dollars in financial support, waived fees, government aid and free marketing from some of the airports he’s serving.
Concept is good - it will be interesting to see if it actually works.
Web page: jetamerica.com/
Anybody remember the original JetAmerica? They flew between SNA and ORD and other points. They were purchased by AirCal.
pilots