Posted March 23, 2009 2:59 PM
By Chris Wills
Starting Operations in a Downturn - The Light at the Start of the Tunnel?
It is not a good time for the airline industry currently, nothing new, and there are still a number of new airlines with plans to start-up operations. 2008 saw more start-ups than failures and there is no real reason to doubt that will happen in 2009.
One high profile airline that recently started operations is V Australia. I thought it would be interesting to look at some other airlines which started operations in downturns to see if V Australia is in big trouble or can expect a good future?
USA3000 Airlines inaugural flight was on the December 28th, 2001 just months after the terrorist attacks in New York and at a time of significant decline in passenger demand, particularly in America. Initially offering charter operations, it moved into scheduled services in 2002 and now has 11 A320 aircraft in service. Despite ceasing operations to Florida in 2008 due to the high oil price the airline still continues to operate scheduled and charter services to a number of destinations and in January 2009 the airline submitted its application to be certified into the USA Civil Reserve Air Fleet to be able to bid for domestic military work.
Air Canada Tango was another low cost airline established in final months of 2001, although it was an Air Canada subsidiary and short haul, it did start operations at a poor time for the industry. The airline operated long distance domestic flights with some international routes with at one point up to 11 A320 and eight 737 aircraft. Although the airline was dissolved in 2004, mainly due to fuel surcharge issues, it did make it through the hard formative years.
A closer fit to V Australia’s planned operation, Australian Airlines, was formed in 2001; however, it did start operations at a slightly better time, closer towards the upturn, on October 27th, 2002. A wholly owned Qantas subsidiary at its peak operated an all economy full service from a number of Australian destinations to China, Indonesia, Japan, Malaysia, Singapore and Taiwan using five 767-300ER aircraft. Although the airline ceased operations under its own livery in July 2006 it continued to operate flights for Qantas under a wet lease agreement. It was Qantas’ decision to discontinue the public use of the Australian Airlines brand in favour of having Jetstar Airways as its leisure carrier rather than a poor operation that lead to the ceasing of the airline.
Clearly it is possibly to get over the breakwater of starting in a downturn. It is difficult to start a business in the best of times, let alone an airline in the worst recession for 80 odd years. Still V Australia comes from a very successful brand with great heritage and number of siblings already in the industry. We will have to wait and see how well V Australia does, but it is fair to say that low fares are the way to tempt cash stripped passengers and it appears with 65% loads for the next two months already announced, so far so good.