New Year,
Old Woes
THURSDAY, JANUARY 6, 2022 -- We gave the airlines more than $50 billion in bailouts to keep them flying and fully staffed during the pandemic. They gave us a parade of staff shortages, a summer of operational meltdowns and a Christmas present of more than 20,000 flight cancellations.

So, yeah, I'd say we need some new airlines to compete with the Terrible Big Three (American, United, Delta), the Terrible Small Three (Southwest, Alaska Airlines and JetBlue) and the Flying Freak Brothers (Allegiant, Spirit and Frontier). You can't reform bad management or remake organizations committed to passenger-repugnant policies. You can only find new players to force them to raise the bar.

The problem is that the three new players who launched last year don't look much like competition. Based in Burbank, Avelo seems content to be another kind of Spirit or Frontier. It has phony low fares, egregiously high fees and a route network that changes almost daily. Aha! appears to be mimicking Allegiant, but its parent company, the regional carrier ExpressJet, has already failed at branded flying. (Anyone remember XJet?) I note the hypothetical existence of Airbahn, but lots of paper airlines have come and gone without ever having flown an arrival or departure.

Then there is Breeze, the brainchild of David Neeleman, founder of JetBlue and Azul of Brazil, driving force at Morris Air and WestJet of Canada and savior of TAP Air Portugal. Smart money does not sneer at that kind of success. But Breeze has been a bore so far. It flies second-tier jets to second-tier cities and must offer $29 one-way flash sales to generate attention. It promises big news and big cities when the first of its Airbus A220s go into service this year, but Breeze has already lost its new-airline sheen. It's hard for a carrier, even a Neeleman project, to launch a successful second act.

And while I hate being the sad-sack pessimist when we so badly need good news on the flying front, I must point out that the history of airline start-ups in the 40+ years since deregulation shows disruptive innovation is nearly impossible.

Consider the ludicrously named Aha! as a case in point. As mentioned, ExpressJet already failed once trying to repackage regional jets as a branded alternative. And the industry's most incredible flame-out was a commuter carrier trying to go big. Independence Air needs to be remembered simply because of the colossal stupidity and financial hubris of its managers.

It's not for nothing that I dubbed it the Dumbest Airline in American History in 2005. Independence started life as Atlantic Coast, a profitable commuter carrier based at Washington/Dulles Airport. But when its major partner, United Airlines, declared Chapter 11 late in 2002, Atlantic Coast was asked to make gigantic financial concessions. Atlantic Coast's management refused and even rebuffed a $500 million buyout offer from another commuter line. Instead, Atlantic Coast recast itself as Independence Air and went it alone. It was a disaster from start to finish. Atlantic Coast's share price plunged more than 20 percent on the day the Independence Air scheme was announced. It then lost at least $500 million operating as Independence from the first flight on June 16, 2004, to the day it collapsed on January 5, 2006.

As I say, Breeze badly needs a second act when its A220s begin flying. Jumping from third-tier airports to the big time is not an easy task. Still, you can sometimes remake a carrier successfully. New York Air proved that.

The second airline to start after deregulation, New York Air was an unremarkable discounter until it refocused on business travelers in late 1982. And it became the most fun you could have flying coach. Of course, it didn't hurt that it mostly competed with Eastern Airlines on East Coast shuttle runs.

The Eastern Shuttle was notorious for high fares, disdainful employees and nonexistent service. New York Air countered with free booze and the Flying Nosh, a goodie bag full of bagels or cheesecake. And I once watched an infuriated crowd of flyers melt into laughter when a New York Air gate agent offered anyone who surrendered their seat "passage on the next flight, $200 in cash, four free roundtrip tickets anywhere we fly and a college education for your first-born child."

"I tried to make it fun," recalled Larry Twill, who briefly ran New York Air. "I told my people that if we screwed up, give the customer a free ticket. And if in doubt, give them a free ticket."

Twill died last year, but his customer-friendly attitude resurfaced long after New York Air was folded into Continental Airlines in 1987. Neeleman's JetBlue operated out of the offices of Twill's Manhattan investment firm before it launched in 2000.

But Neeleman can't bet that a new image will cure all ills. Consider the original Midway Airlines, the first new carrier to officially fly the deregulated skies.

Midway's original goal was to duplicate the low-fare Texas success of Southwest Airlines at Chicago's then-disused Midway Airport. When that proved unprofitable, Midway hired a FedEx executive named Arthur Bass. In June, 1983, Bass focused the airline on frequent flyers, rebranded as Midway Metrolink, enlarged overhead bins, improved the food service and even pulled a seat from each row of the airline's DC-9s. Business travelers adored it, but not enough to switch from United or American, the O'Hare incumbents.

Avelo is wedging 189 coach seats into Boeing 737s, which means a brutal seat pitch of just 29 inches. Clearly, this is not an airline for business travelers. Which raises the question: Why won't someone try building a good airline for road warriors? The answer, of course, is that several someones have tried--and failed.

Air 1 once offered business travelers first class transportation for the price of coach. Boeing 727s, designed to seat about 150 passengers, were outfitted with 80 leather-covered chairs reclaimed from defunct Braniff International. Founder Mark Morris also bought Braniff's first class china, silverware and wine cellar. About a third of Air 1's pilots were refugees from Braniff, which folded in 1982. Air 1 fared no better than Braniff, however. Its first flight was April 1, 1983 and it was bankrupt by October 26, 1984.

Before Air 1 tanked, it tried to buy an under-development carrier called McClain Airlines. Founded by one-time TWA pilot and Marriott executive Tom McClain, McClain was even more luxurious than Air 1. Its 727s were painted an elegant midnight blue and gold and outfitted with 76 seats. There were private pre-departure lounges, elaborate meals and Champagne. All priced at the prevailing coach fares.

"We're going to make a lot of money," McClain told Business Week in January, 1987. He didn't. McClain, the airline, was bankrupt six weeks later, grounded after just five months of flying.

Regent and MGM Grand once laid the perks on transcontinental runs--and collapsed. A gaggle of all-business-class carriers have plied the Atlantic and crumbled. And there have been less flashy attempts to cater to business travelers. Air Atlanta, initially an all-first-class carrier and later an upmarket, two-class airline, flopped despite raves from customers. Midwest Express, founded by Kimberly-Clark, the paper-goods behemoth, offered nice meals and 2x2 configurations on DC-9s. It survived fitfully for two decades, but eventually bowed to market realities, too.

Are there any lessons here? I dunno. But we end where we started: The U.S. airline industry as currently run is failing us--and we need competition. Where it may come from is anyone's guess.