As the WSJ highlights, The U.S. airline industry's newfound health is breeding something not seen in years: a flock of startups.
Two fledgling carriers already have taken off. One is a reincarnation of the old People Express Airlines, a discounter that folded in 1987. The other is a French all-business-class carrier, plying the Paris-to-Newark, N.J., route.
Others are still in various stages of incubation, hoping to raise sufficient funds and receive government clearance to take wing.
Entrepreneurs see opportunity in the service cuts—a side effect of years of restructuring and consolidation—that have helped the U.S. airline industry attain its highest profit margins since the late 1990s. Today four big carriers control some 82% of domestic capacity.
Unfortunately, airline startups all share an ill-founded optimism, some analysts say—that they can defy the odds in an industry that has experienced 77 bankruptcies and multiple liquidations in the U.S. alone in the past 20 years.
The last major U.S. airline that launched and remains aloft is Virgin America Inc., which took off in 2007 backed by U.S. hedge fund investors and Richard Branson's Virgin Group Ltd. Virgin America wins kudos from customers, but has lost more than $600 million overall and just turned its first annual profit of $10 million last year.
Some aspiring carriers try to jump-start the process by beginning as charter operators, which isn't as costly, or renting planes and crews from other companies that already have the needed permits, said an aviation veteran who recently tried to shepherd one of the potential airlines through the paperwork.
People Express is temporarily renting planes and crews from a Las Vegas charter carrier called Vision Airlines while it tries to raise capital and win certification on its own. Mr. Erickson, the CEO, said People Express has raised $11 million but will need as much as $100 million in an initial public offering if it is to grow.
"It's a high-profile, sexy business," says Henry Harteveldt of Atmosphere Research Group, a travel research firm. "And if you keep a lid on costs, have the right strategy, aircraft and managers, you can make money." What's more, the U.S. needs more airline competition, he says. The problem is: "the best markets are spoken for."
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