Efforts by floundering US network carriers to start low-cost subsidiaries are gathering momentum, but analysts are far from convinced the strategy will be a success.
United Airlines plans to divert 30% of its total capacity into a new low-cost carrier, codenamed "Starfish", and has gained grudging support from its pilots' union. Earlier this month Delta Air Lines unveiled its low-cost subsidiary Song (Flight International, 4-10 February).
Meanwhile, American Airlines, having earlier dismissed the idea, is studying the possibility of forming a low-cost operation. Air Canada plans to transfer 40% of its capacity to its Tango and Zip low-cost brands.
Last year US network carriers tried to cut domestic operating costs by transferring more routes to cheaper regional operators, but the airlines face stiff competition from low-cost carriers.
The latest move should give scope to cut costs much further by increasing aircraft utilisation and lowering wage bills.
However, the mainline US carriers have poor records in this area. Song will succeed Delta Express, which Delta chief executive Leo Mullin admits has failed to produce hoped-for cost savings. United Shuttle and US Airways' Metrojet have also closed down. The majors will have difficulty convincing the markets that these new attempts will fare differently.
Opinion was divided among industry watchers at the Hamburg Aviation Conference this month. Analyst Markus Franke of Booz Allen Hamilton says network carriers should follow Lufthansa in developing a "portfolio operation", with different brands serving business, regional and leisure markets. Urs Binggeli of McKinsey says low-cost carriers tend to be most successful on monopoly routes, but new subsidiaries would face established low-cost competition.
Source: Flight International
