JetAmerica Makes a Splash With New Service

JetAmerica, a new discount brand, will start service from Toledo, Lansing, and South Bend to various cities including Minneapolis, Newark, and Melbourne, Florida (as an alternate for Orlando). The brand will commence service in July and will offer 9 seats on every flight for just $9. Not surprisingly, such an offer has received lots of buzz in the media eager for stories about ways to travel cheaply in the recession. I am specifying that this company is a brand and not an airline, because neither the planes nor the crews will be under company ownership. Instead, JetAmerica is conducting a public charter operation with planes owned by Miami Air International. A technicality, perhaps, but it is also likely an indication that this is likely a method of "testing the waters", for the brand owners to see if these markets warrant additional service. The flights are modeled after Ryanair and (the late) Skybus, with no-frills and lots of fees for extra amenities. Skybus, if you remember, was a valiant attempt at the Ryanair model in the States serving a variety of cities from Columbus, Ohio, but unfortunately buckled under external forces that affected all carriers early last year. JetAmerica is aiming at the same market as Skybus, albeit in a slightly safer way for the owners.

Will JetAmerica find markets that it can thrive in? The answer to this question I feel is an unequivocal no. There is already a surfeit of capacity in our air transportation system. It is true, that JetAmerica will be serving smaller markets, the same markets in which Allegiant has succeeded at spurring new demand and growing traffic (Allegiant offers service from two of JetAmerica's three focus cities at Toledo and South Bend and offers service to Grand Rapids, roughly an hour from JetAmerica's third focus city at Lansing), even with less-than-daily flights. However, it is really debatable whether JetAmerica will find enough other demand to stimulate. Most of Allegiant's traffic is leisure traffic, and the company tailors its flight schedule accordingly, which it can do, because it has older aircraft which it can easily park. JetAmerica, however, plans on using newer 737-800s and acquiring them on a fixed schedule, making it hard for the company to easily reduce service if demand weakens.

Moreover, JetAmerica plans on serving three markets from its Midwest focus cities, Minneapolis, Newark, and Melbourne, markets which have competition or may not be able to stimulate the requisite demand. I am quite skeptical about the demand to Minneapolis, as it is hardly a leisure destination and is already well served from airports near Toledo (namely, Detroit), although to be fair, airfares are quite high because of the dominance of Northwest between MSP and DTW. Nevertheless, I suspect this route will quickly come to an end. The two other markets could potentially stimulate leisure traffic, and I would be a bit more optimistic about them. But as noted above, Allegiant offers competing service from JetAmerica's focus cities, including flights to Orlando Sanford Airport, which is closer to Orlando than Melbourne. Moreover, as the incumbent in the market, Allegiant may be difficult to unseat, since it has a reputation for friendly and reliable air service that makes it popular with customers. The Newark service could prove attractive, and that may be the most successful market for JetAmerica. But whether fares will be low enough to stimulate demand (without customers defecting to larger, nearby airports) remains questionable.

However, aside from the New York City area and Orlando, there are few other large, leisure-oriented markets near Toledo, South Bend, and Lansing that are suitable for this business model. Chicago is well-served by Southwest (and so is Baltimore, which could possibly serve as an alternate for DC, a city that has a huge tourist flow in the summer months). Allegiant dominates services to Florida and currently offers what it sees as a suitable schedule for the market, a market where low fares have already stimulated demand considerably. Whether JetAmerica will find success with Newark, possible service to the DC area, or some other market that does not have significant low-fare competition, I feel that it is unlikely that the company can expand to anything beyond a small niche airline, and I would not be surprised if it ceased operations within a year.