Why Don’t The Big 3 US Carriers Operate Low Cost Subsidiaries?

United, American Airlines and Delta Air Lines don’t operate low-cost subsidiary airlines and have chosen instead to unbundle and discount their tickets. Why don’t they operate an LCC and keep their various flagship products premium?

Bizarre aviation stories 2019
Why did United, American, and Delta give up on LCC? Photo: Getty Images

Why is having a low-cost-carrier is a good idea?

You only need to look at the success that Qantas has had with Jetstar to see how profitable owning a low-cost-carrier can be. 

Originally a small domestic low-cost airline, Jetstar has since ballooned out to one of the world’s biggest low-cost carriers, rivaling the likes of easyJet, Ryanair, AirAsia, Wizz Air, and others. What is also impressive is that Jetstar operates long-haul low-cost travel successfully, in spite of the failures of other low-cost carriers (such as WOW Air).

hetstar-787-sale
Jetstar owns a vast international network of airlines. Photo: Jetstar via Flickr.

By all accounts, this venture into the low-cost carrier space has been very successful for Qantas. This then leads to the question, why don’t the big three USA airlines have their own low-cost subsidiaries?

Believe it or not, United, Delta, and American actually had low-cost carriers in the past. In fact, it was likely that they were the ones that inspired Qantas to create their own.

United Shuttle and United Ted

United tried the concept twice. Their first attempt was an airline called United Shuttle. It ran from 1994 to 2001 and operated a fleet of Boeing 737s and 757s, and was originally conceived as the airline’s answer to Southwest. They eliminated hot meals and used fancy ‘computer electronic ticketing’ to reduce prices, and relied on a ‘high frequency’ schedule to drive profitability.

The airline just focused on the west coast, ferrying passengers around the bay area, and up/down the coast. It also fed passengers to United transcontinental services and international routes.

However, in 2001 when the dotcom boom ended and Silicon Valley went into a recession, the airline discovered that, despite operating 5% of all of United’s services, United Shuttle did not account for 5% of the companies profits.

United Shuttle
United Shuttle Boeing 737. Photo: Konstantin von Wedelstaedt via Wikipedia

United’s second attempt was in 2003 with a new airline called ‘Ted’.

Ted would fix the problems of United Shuttle, focusing on leisure destinations (not business) and using a single fleet of 56 Airbus A320s. The aircraft were all-economy and flew internationally to Mexico and Central America.

However, problems with the equipment meant that more often or not United would have to substitute in mainline United aircraft. In 2008, rising fuel prices resulted in the airline rolling the Ted fleet back into United and fitting out the aircraft with first class.

Delta Express and Delta Song

Delta didn’t want to be left out of the low-cost mania so, in 1996, it launched its own service called Delta Express.

Delta Express was created to compete with Southwest and the rising US Airways LCC Metrojet (which we will get to next). They had no meals onboard and no entertainment and exclusively used a fleet of Boeing 737-200s.

In 2003 the airline was rolled into a new concept at Delta, a new LCC called Song.

Song was a different beast; a low-cost-carrier that specifically targeted women. They did this through affordable prices and focusing on luxury amenities, such as leather seats, personal entertainment screens and extra legroom.

Why Don’t The Big 3 US Carriers Operate Low Cost Subsidiaries?
A Song Boeing 757. Photo: Paul Spikers via Wikimedia

Using a fleet of 45 Boeing 757-200s, it operated routes from the American Northeast to Florida, as well as some transcontinental routes.

When Delta suffered financial problems in 2005, it discovered that it could no longer support two different brands. Delta decided to fold the airline back into the mainline fleet. It wasn’t all for naught however, as the leather seats, seatback entertainment and electronic booking system ideas were deployed on the main Delta line.

US Airways MetroJet

American Airlines’ attempt was back when it was two different airlines, notably the US Airways side.

US Airways created MetroJet in 1998 to fend off the incursion of Southwest into its market, the United States Northeast. MetroJet would be situated around Boston and would operate a fleet of 49 Boeing 737-200s on a point to point model.  The airline had limited success and in the end, it was discovered that it was only operating at two cents per mile per passenger less than the mainline US Airways fleet.

Essentially, what was the point in the airline if it didn’t cost any less to run?

Why Don’t The Big 3 US Carriers Operate Low Cost Subsidiaries?
A MetroJet Boeing 737-200. Photo: Konstantin von Wedelstaedt via Wikipedia

It flew its last flight on September 24, 2001, a few weeks after the New York attacks that rocked the aviation world.

Why did all of these airlines fail?

All of these airlines had the making of something great and had a rival airline (Southwest) to follow. So why did they fail?

There are a few different reasons. The first is that of labor unions. For years the mainline carriers had been a premium operation. This means their pilots, cabin crew and maintenance teams were all highly paid and had a strong history of union service.

When these airlines wanted to operate low-cost services, they had to ask the unions to pay less to help their bottom line. Many refused to budge and made these ‘low-cost’ carriers not low-cost at all.

Additionally, many of the aircraft used were not suitable for low-cost operations. Other low-cost operators were using fleets of high-density configurations that easily packed more passengers on board, and were more resilient to fuel price hikes. When fuel prices rose, the mainline flag carriers were knocked out of action.

Joon
Joon’s was Air France’s attempt at an LLC which has since closed. Photo: Joon

Today, the big three have found a different way to compete with low-cost carriers. They unbundled their economy fares, charging extra for baggage and seat selection to boost their bottom line.

The mainline US carriers might have jumpstarted the trend of flag carriers owning low-cost-carriers like Qantas and Jetstar, but they no longer carry the torch. And from the looks of things, it doesn’t look like they want to try again.

If you liked this story, we recommend you read its fellow piece on how the legacy carriers are killing their LCCs

What do you think? Did you ever fly on one of these carriers? Let us know in the comments.

5 Shares: