Independence Air

[funguy2]

Ch. 12.

I have to disagee with you.

I think IAir is counting on a decent mix of connecting traffic... The fact is that I don't believe any of the smaller cities served can sustain their frequency levels based on 80% local traffic...

Example:
IAD-LAN:
7 flights/day or 350 seats
at 80% local (or 40 local pax per flight), thats 280 LAN-IAD pax per day each way. I just don't think the market is that big...
at 60% local (or 30 local pax per flight), thats 210 pax each day between LAN and IAD. Thats less, but I doubt there are even 200 pax per day each way traveling between LAN and the Washington area... on all airlines... (let's face it, some folks might perfer DCA and be willing to make a connection...)

So, at the end of the day, I have to think there will be a decent amount of connecting traffic, even on the CRJ's, because I just don't think the market sizes are that big...

Furthermore, it seems that IAir has repeated this pattern over and over:

LAN-IAD - 7x daily
CRW-IAD - 6x
ORF-IAD - 8x
TYS-IAD - 6x

If they did this once, I would call it an accident, but they did this repeatedly.

Also, anecdotally, they have been referring to their IAD hub as being the largest LCC hub in the nation. That doesn't sound like a company who is trying to focus on all local traffic...

 

[Cosmo]

funguy2:

Also keep in mind that most of IAir's markets have some degree of competitive nonstop service, ranging from a few daily Saab 340 flights (UEX in IAD-CRW) to 26 daily mainline and RJ flights (DL, FL and UEX in IAD-ATL). In your example of LAN, IAir's 350 daily seats each way are joined by another 200 seats each way operated by NW/Pinnacle, spreading the local traffic base over an even larger number of seats in a market that until a few weeks ago had never received any nonstop service. Despite IAir's assumption that its low fares and high frequencies will produce massive market stimulation (which BTW is an assumption that I don't really agree with), most of its routes will require a substantial amount of connecting traffic in order to have any hope of being profitable.

 

[Ch. 12]

Funguy-

I never disputed the fact that IAir will be stuck with alot of connecting traffic since the local markets aren't huge. My point is that the NEED mostly local traffic to have a sustainable operation...especially on RJs. Two high-seat-cost RJ flights to get somebody from LAN to GSP means that somebody is paying only $49 per segment and that is sure to lose money when you have many of those pax on a flight. They need double that to get anywhere near a sustainable profit and that would mean that they NEED almost all local.

I agree with you that they WILL GET alot of connecting traffic since the local demands are low and frequencies high but the NEED mostly local traffic to generate revenue. My whole point is that they are doomed to failure with a high-cost equipment type. And even if the 319's come into these markets, the local demand is still not high enough for the frequencies offered. Lose-lose situation.

Sorry if I was unclear on my previous post.

 

[USAir757]

Ch12 I agree. They will need to work on advertising, name and brand recognition in the Washington area first. As you suggested, an RJ LCC will not be profitable on connecting passengers, especially when you figure in the demand for each of these markets, and the current level of supply. Also, gaining market share for Washington-bound travelers will be difficult, as most of those people will prefer a flight into DCA, even if they have to pay a little more on UEX. I don't think it will take them long to realize this, if they haven't already. :blink:

 

[Hello Newman]

The loads have increased daily out of EWR. They run Hourly service to IAD on the half hour and loads are good. Looks like a lot of connections to CAE & RDU. One point I have noticed, is that durring an Irregular Operation, the C/S Personnel seem to have a very hard time handling the situation. The Experience Level and the inablility to reroute to another carrier seems to cause most of there problems.

[post="165293"][/post]​

[



YOU KNOW THEYVE GOTTA BE MORE DEPENDABLE THAN MESA OR PSA.

 

[funguy2]

Funguy-

I never disputed the fact that IAir will be stuck with alot of connecting traffic since the local markets aren't huge. My point is that the NEED mostly local traffic to have a sustainable operation...especially on RJs. Two high-seat-cost RJ flights to get somebody from LAN to GSP means that somebody is paying only $49 per segment and that is sure to lose money when you have many of those pax on a flight. They need double that to get anywhere near a sustainable profit and that would mean that they NEED almost all local.

I agree with you that they WILL GET alot of connecting traffic since the local demands are low and frequencies high but the NEED mostly local traffic to generate revenue. My whole point is that they are doomed to failure with a high-cost equipment type. And even if the 319's come into these markets, the local demand is still not high enough for the frequencies offered. Lose-lose situation.

Sorry if I was unclear on my previous post.

[post="165552"][/post]​

Ch. 12: Sorry for not getting back on this topic in a while...

My point was this... If IAIR is depending on 80% local traffic, then their business plan is doomed to failure, because they have oversaturated the local market, in many cases offering many many more seats than their is demand for in the local IAD markets. As I pointed out earlier, I doubt they can even carry 60% local traffic on some routes. Therefore, I can only assume that IAIR planned a decent mix of local and connecting traffic...

Even with anticipated market stimulation of lower fares (i.e. the "Southwest Effect"), I still beleive there are just too many seats in the smaller market for IAIR to be successful on locals alone. Add to that the competitive pressure on most routes, as pointed out by Cosmo, and IAIR had better prepare for the economic realities of operating an RJ hub. Maybe the airport folks at Newburgh who asked IAIR to scale back their initial service were on to something. Perhaps we will see IAIR add a whole bunch of new destinations by cutting back flights in existing markets as time moves forward. That's what the situation seems to call for...

 

[Ch. 12]

Funguy-

I have been agreeing with you that it appears that IAir is not putting significant weight in to the local passengers with the high frequencies that they have. But I am taking it a step further to say that they cannot make it as a connecting carrier by using mostly RJs...even if that is only the short-term. Take a page from WN and if there is demand from SWF to GSO, FLY IT...don't take the people to DC first and take on the added costs of two flights and a connection. The only way an RJ carrier can be successful as an LCC is to serve the markets non-stop and avoid connections when that is not where the real demand is.

So I am not disagreeing with you that IAir is looking to use the connections to fill its planes, but I am saying that they are obviously more concerned about LFs than they are about RASM which is where they should be focused. Sure...they may fill many flight segments from XXX to IAD but these pax will be getting two segments for the price of one (one fare, two flights w/costs). Unless they understand that LFs alone won't make you...especially with RJs...IAir is done before the spring break rush next year.

 

[funguy2]

Ch. 12:

I think we are on the same page...

The problem with GSO-SWF, (or SWF-BUF, or LAN-EWR, or any other point-to-point market for IAIR) is one of the following:

1. Somebody else flies it because its their hub (or will if IAir introduces service)
OR
2. The market size is too small, even for a low-fare on an RJ

I think you are right, that with an RJ operation, any hope at being profitable comes from having a point-to-point operation, not a hub. I am just not sure how many point-to-point markets are out there for IAir... Maybe they need to fly against US Airways w/ RJ's and low fares in upstate NY... I remember USAir used to fly BUF-ALB, BUF-BDL, SYR-BDL, and others with DC-9's and F-28's! Maybe that would be a first good point-to-point move for IAir? These markets may be underperforming vs. historicals because UAir pricing and turbo prop service? Put 'em on a jet and decent fares, maybe you can make a go at it? Seems better an overscheduled RJ hub... (I'm kinda "thinking out-loud" here)

On a related note... FLYi, Inc. Reports July 2004 Traffic

IAir is only 6% of ASM's for July... But the load factor worries me... In July, they started the highest O&D markets first and should have been benefiting from the free publicity from start-up... problematic indeed.

 

[mrf777]

I dont know why they have 9 non-stops per day CLE-IAD, CO can get you most anywhere non-stop.

 

[whlinder]

I think FlyI's problem with connecting traffic is that their connecting fares are set too low. Their walk up fares for connecting flights should be less than their competitors, but the advance purchase prices should not be much less than the walk-up for connecting flights.

For example, EWR-LAN Advance purchase is $89 OW. Last minute its $180 OW. DH needs those $180 last minute purchases, but $89 for a connection doesn't do much good. Bump that $89 up to like $129 OW for AP, or even higher. You won't get many takers, but DH shouldn't need many passengers like that, since they should be trying to get at least 60% of their traffic to O or D at IAD. The $180 last minute fare will help the bottom line though. Maybe they should just restrict the inventory of the lowest AP fares really tight, like WN, but that doesn't seem to be the case.

I still maintain that with a better distribution system, FlyI would be doing a lot better.

 

[funguy2]

Well, it looks like IAir has figured out what we've been talking about...

Independence Air Announces New Non-Stop Low-Fare Service From Knoxville and Columbia to Orlando

I presume they may carry a little IAD-MCO traffic over Columbia and Knoxville, but these look like they are intended to be local traffic routes... supporting our issue that they need to find some higher O&D markets than IAD-LAN...

I presume one of the first A319 routes will be IAD-MCO, so any connecting traffic to MCO over TYS and CAE will probably be temporary, and a small number, since there's lots of low-fare ways to get from DC to Florida.

Also, the fact that they only are adding 2 flights/day to each seems to support the idea that they expect a fair number of connecting pax on LAN-IAD at 7x/day. LAN-IAD service seems to be well in excess of the local market needs, where TYS-MCO is probably in-line with the market size.

 

[ngneer]

However, not coincidentally, Delta Connection to Begin Service between Knoxville, TN and Orlando, FL. It seems whenever IAir starts up a new route, they get the attention of the big guys.

 

[whlinder]

July Load factor on DH is 47%

Not so hot.... they need more distribution channels, and fast.

 

[ngneer]

This doesn't sound good either: Independence Air Cuts Flights From Raleigh, N.C., Schedule.

 

[bankernclt]

Does anyone know if Independence will start CLT to Florida service, connecting in IAD, once they expand their Florida service? I noticed on their website that SAV, ATL and JAX are not available from CLT via IAD.