Neeleman, a potential new US airline, and the CSeries

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Published on Tuesday, June 19, 2018 

JetBlue founder to launch new US based airline

 

Serial airline entrepreneur David Neeleman is reportedly planning another airline startup.


The JetBlue Airways founder is raising funds for a new US low-cost carrier, according to Airline Weekly.


Neeleman hopes to secure about $100 million to get it off the ground.

The airline will be called Moxy Airways and will focus on underserved secondary airports in the U.S.


Citing people familiar with the matter, it says orders have been agreed for 60 Bombardier CS300 aircraft which will start arriving in 2020.


Moxy will operate a point-to-point flight model to keep a check on costs, according to an investor pitch presentation.


Neeleman has declined to comment so far but if it takes off,  Moxy would become the second largest Bombardier CSeries customer in the US after Delta Air Lines.


Apart from JetBlue, Neeleman also helped to establish WestJet Airlines and Brazil's Azul.

[Guest]

More on the possible new airline

Neeleman's reported US start-up could shake up US industry

• 18 June, 2018
• SOURCE: Flight Dashboard
• BY: Jon Hemmerdinger
• Boston

The reported plan by JetBlue Airways founder David Neeleman to start a new US airline using Bombardier CSeries aircraft could shake up an industry characterised by consolidation and a notable lack of new entrants.

The plan, should it prove true, would also mark a notable win for Bombardier ahead of its move to transfer majority ownership of the CSeries programme to Airbus on 1 July.

Industry publication Airline Weekly reported on 17 June that Neeleman is raising $100 million and has secured rights to buy 60 CS300s in a bid to launch a new US carrier called Moxy Airways.

Bombardier, however, declines to address the reports, and Neeleman did not respond to requests for comment from FlightGlobal.

"We do not comment on rumours," Bombardier says.

Perhaps a play on the word Moxie – meaning determination and pep – Moxy Airways reportedly aims to get off the ground in 2020.

The timeline coincides exactly with when Bombardier and its new partner Airbus intend to open a CSeries assembly site in Mobile, Alabama.

Neeleman's reported plan is to operate point-to-point flights from smaller cities – places like Trenton, Providence, Fort Worth, Burbank, Gary (Indiana) and the Long Island cities of Islip and Farmingdale.

But unlike ultra-low-cost carriers (ULCCs), Moxy reportedly aims to offer customers a more upscale product with more legroom and fewer fees.

That strategy is telltale of Neeleman, says Michael Boyd, president of Boyd Group International.

"He has this weird idea that if you treat people right, they will fly you again," Boyd says.

The CSeries could work well under such a model because it has a larger – and more comfortable, Bombardier would argue – cabin than competing aircraft, observers say.

Neeleman helped found Morris Air and Canadian carrier WestJet, and founded JetBlue Airways, offering customers leather seats with more legroom and free, live seat-back television.

After leaving JetBlue, Neeleman founded Brazil's Azul in 2008, growing that carrier into a powerhouse with a fleet of ATR turboprops, Embraer regional jets and larger gauge Airbus aircraft.

News of Neeleman's Moxy plan follows many years of airline consolidation in the US, which has left the industry in the hands of a relative few number of players.

American Airlines, Delta Air Lines, United Airlines and Southwest Airlines collectively carried 80% of domestic US seats in 2017, according to FlightGlobal schedules data.

Six other airlines – Alaska Airlines, Allegiant Air, Frontier Airlines, JetBlue, Hawaiian Airlines, Spirit Airlines and Virgin America carried most of the rest, data shows.

Low-cost carriers in the USA also primarily operate Airbus and Boeing narrowbodies – large aircraft optimised for relatively large markets, notes George Dimitroff, head of valuations at FlightGlobal's Flight Ascend Consultancy.

As a result, those carriers leave "a lot of smaller destinations out," he says. "I suspect this is the opportunity Neeleman wants to capitalise on".

Bombardier has said its CSeries burns 20% less fuel per passenger than competing aircraft.

"The CSeries is competitively dangerous to other carriers," Boyd says.

Neeleman's reported plan comes amid a competitive battle between Embraer and Bombardier, both of which have been seeking to land orders from large US airlines, including JetBlue, Spirit and major carriers.

JetBlue is considering the future of its E190 fleet, but has delayed a decision amid Airbus' pending acquisition of the CSeries programme and news that Boeing is considering an alliance with Embraer's commercial aircraft division.

Dimitroff suggests that JetBlue's hesitancy could have opened an opportunity for Neeleman to step in.   https://www.flightglobal.com/news/articles/neelemans-reported-us-start-up-could-shake-up-us-in-449544/

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Delta orders 20 replacement CRJ900s

• 20 June, 2018
• SOURCE: Flight Dashboard
• BY: Edward Russell
• Washington DC

Delta Air Lines has ordered 20 Bombardier CRJ900s to replace older regional jets in its feeder fleet.

The aircraft will have 70 seats and come equipped with the Canadian airframer's Atmosphere cabin, says the US carrier. Deliveries will begin later this year and run through 2020.

Bombardier says the deal is worth $961 million at list prices.

Atlanta-based Delta does not say what regional aircraft the CRJ900s will replace nor which Delta Connection carrier will operate them. However, they are likely to replace either Bombardier CRJ700s or Embraer 170s which, with 69 seats, are comparably sized to the 70-seat CRJ900s.

The airline had 82 CRJ700s operated by Endeavor Air, ExpressJet Airlines, GoJet Airlines and SkyWest Airlines in its fleet at the end of March, its latest fleet plan shows. It also had 20 E170s operated by Republic Airlines.

Delta is in the process of winding down its feeder agreement with ExpressJet. This includes the removal of 30 CRJ700s for which Delta has yet to name a replacement.

The mainline carrier had 151 CRJ900s in its regional fleet at the end of March, the fleet plan shows.

The Delta order is the second for Bombardier's CRJ family from the USA this year. American Airlines ordered 15 CRJ900s for its PSA Airlines subsidiary in May.

Prior to the order today, Bombardier had 48 firm orders for the CRJ family, including 34 for the CRJ900, Flight Fleets Analyzer shows.

[Guest]

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Jul 31, 2018, 01:39pm

Does David Neeleman Have A Clear Flight Path For His New Airline?

 

Jeremy BogaiskyForbes Staff

Aerospace & Defense

 

PORTUGAL-TRANSPORT-TAPGETTY

David Neeleman probably would have preferred that word hadn’t leaked in June that he’s launching a new U.S. airline. Now the big carriers have time to plan how they’ll respond when it launches.

But the dynamic airline entrepreneur may not have actually tipped much of his hand yet, industry observers say, if at all.

According to an investor presentation seen by Airline Weekly, which broke the news of Neeleman’s plans, the founder of four other airlines, most notably JetBlue, is aiming to establish point-to-point routes in underserved secondary markets near major metro areas, with a provisional name of Moxy.

“Providence, outside Boston, features prominently as an example in Moxy’s presentation,” according to Airline Weekly. Other airports mentioned include Stewart airport an hour and half drive north of New York City, Baltimore, Phoenix-Mesa and in the greater L.A. area, Orange County, Ontario and Burbank.

 

The message to existing airlines: that he’s trying to create new business rather than take theirs with what would be the first new U.S. carrier since Virgin America started flying in 2007. “That’s what everybody tries to say: I’m not stealing from the rice bowl, I’m bringing new rice,” says the airline consultant Robert Mann.

Doubling down on the leaking of his plans, Neeleman let Airbus announce a tentative deal to buy 60 A220-300 jets at the Farnborough Air Show earlier this month. Neeleman said in a statement that the fuel-efficient planes “will enable us to serve thinner routes in comfort without compromising cost, especially on longer-range missions.”

The planes, developed by Bombardier, could be key to his plans, offering impressive fuel consumption savings courtesy of efficient Pratt & Whitney geared turbofan engines and a lightweight aluminum and composite airframe, and a relatively spacious cabin with five-abreast seating, both of which dovetail with Neeleman’s reported goal of providing a better passenger experience at a reasonable price.

Their range could also abet plans Neeleman shared at Farnborough to knit his new airline into an international network with the carrier he co-owns in Europe, TAP Portugal, and his Brazilian startup Azul, allowing for service from the Northeast U.S. to the U.K., or Florida to Brazil, though it might make more sense to make the connection at U.S. airports.

 “They have the potential to feed each other dramatically,” says Mann, but it won’t work unless Neeleman builds a strong network in the U.S.

Can he do that with nonstop routes connecting secondary markets? After years of consolidation, there are many markets that are underserved – Henry Harteveldt of Atmosphere Research Group points to former hubs abandoned by major carriers like Memphis, Cincinnati, Pittsburgh and St. Louis – but that’s not to say they’re unserved. “Many of them do have relatively easy access to big airports through regional airlines and the hub and spoke system,” Harteveldt says.  

The competitive response could be ferocious on many point-to-point routes. Delta, United and American all have extensive fleets of regional aircraft with 50 to 76 seats that they could deploy on any routes where Neeleman establishes service (Delta and JetBlue also have A220s on order). Southwest, which only operates 737s, may find the planes are too large to be economic to respond with in some markets.

The incumbent airlines could also make moves at hubs close to any secondary airports that Moxy flies to — for example if Moxy establishes service at Stewart near New York City, JetBlue, Southwest or Frontier could lower fares or increase capacity at LaGuardia or JFK to reduce the attractiveness of the longer trek north.

Mapping out a route network that minimizes a competitive response will be key, but Harteveldt thinks Neeleman will need to establish hubs in at least a few major markets – that’s where the demand leads, and the efficiencies of the hub and spoke model generate better returns. That may mean trying to claw his way into the big, congested airports with shortages of gates and counter space.

“The people who do route planning for Moxy face a big challenge,” says Harteveldt. “It’s far more complex than it was for JetBlue 20 years ago.”

Along with the airline consolidation that has occurred over the past few decades, there’s also been investor consolidation, points out Mann, and the small club of private-equity funds and venture capital firms that invest in airlines are unlikely to support a startup that they think would truly hurt their existing positions.

In the best-case scenario, Neeleman's team truly finds a way to expand the market, perhaps beyond underserved geographies to other income brackets as well. According to Atmosphere Research, the average household income of travelers on American, United, Delta all top $105,000 a year, boosted by their first class and business passengers; JetBlue and Southwest passengers are at about $100,000. Budget airline travelers average $78,000, while the average household income in the U.S. is $55,000.

But given the likelihood that the established airlines will match or beat his fares on routes they compete, Moxy will have to differentiate itself in other ways — Neeleman’s old tricks like more legroom and free snacks won’t be enough, says Harteveldt. One way he thinks it could stand out is by crafting a better digital experience for customers to shop for and book flights, and offering travelers more flexibility.

First deliveries of planes are scheduled for 2021, according to the Airbus release. Mann estimates that the airline could start out with 15 to 20 planes serving a dozen cities, with at least four flights a day per market – the minimum for running a legitimate schedule for business travelers.

Given Neeleman’s track record, he shouldn’t have problems recruiting, however a growing pilot shortage could be a limiting factor. Having a brand-new plane with a good reputation will help, but the larger carriers can offer pilots the prospect of flying to a wider array of destinations, including overseas, and may be able to pay more.

Neeleman will likely have the bankroll to deal with tough competition out of the gate and any economic surprises, like the nosedive in air travel that the fledgling JetBlue weathered after 9-11 — “He’s always been careful to way overcapitalize his startups,” says Mann. And whether the leaked investor presentation gives a true sense of his plans or not, one benefit of the inherent flexibility of working with airplanes is that he can decide to change the game plan if market conditions look different two years from now.

What are his chances for success? Hard to say till we see the route network and more details about the value proposition. “You would never want to bet against David Neeleman," says Harteveldt. "What’s unclear is whether this is the time to bet with him.”