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Currency

The founder of JetBlue is about to start a new airline

TWO decades ago, David Neeleman founded JetBlue Airways, promising to “bring humanity back to air travel.” It has since grown to become one of America’s largest airlines. But stories of poor service and a lack of humanity still abound in the country’s aviation industry. And so it appears that Mr Neeleman is back and preparing to launch a new airline.

Airline Weekly, a magazine, reports that Mr Neeleman, with $100m in financial backing, plans to create a new carrier called Moxy. The airline will aim to fill a niche in the American market by offering low-cost direct services between smaller airports, while providing more comfort and perks than the country’s no-frills budget airlines.

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In some ways, it is an ideal time to enter the market. As Airline Weekly points out, every major American airline is currently profitable. The industry has not lost money in more than a decade. The Moxy team noted in a presentation seen by Airline Weekly that the American economy grew by more than a third in the decade ending last year, yet the number of domestic airline seats was roughly unchanged.

But starting a new airline is hard. The greatest challenges to launching a carrier are gaining financial credibility, raising capital, and securing access to good slots at major airports. Mr Neeleman seems to be primed to overcome these hurdles. As the founder of several established airlines including JetBlue—arguably the most successful American carrier launched in recent decades—he is respected by investors. He is already reported to have raised substantial capital—including some from Robert Milton, a former chief executive of Air Canada, and Henri Courpron, a former boss of the International Lease Finance Corporation, a respected aircraft lessor. And he appears to be sidestepping the intense competition for slots at busy airports by targeting smaller air fields. By serving airports such as Providence, Burbank, and Fort Worth—and secondary airports in major markets like Gary near Chicago—the airline will not only save money, but also cater to customers who do not want to deal with the crowds at the country’s most congested hubs.

Meanwhile, Moxy has ordered 60 CS300s aircraft from Bombardier, a Canadian planemaker, to begin flying in 2020. That will make Moxy the second-biggest buyer of the C-Series, behind Delta, America’s second largest carrier. The plane’s lightweight body and modern engines are designed to reduce fuel consumption. That can help cut costs, and ticket prices, for what is designed to be a low-cost airline. But unlike competitors such as Spirit that provide a bare-bones experience, it will offer free wi-fi and 19-inch seats (wider than on many American rivals). In other words, it might be a little more like JetBlue, but for some of the country’s less-served airports.

But there are good reasons to be critical of Mr Neeleman’s plan. Ticket sales are increasing dominated by price-comparison websites that nudge passengers towards the cheapest fares regardless of the service onboard. Whether it can buck the trend, as JetBlue has to some extent, will determine whether his plan can ever get off the ground.

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Source: economist
The founder of JetBlue is about to start a new airline

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