Wednesday, July 28th, 2010

While almost all travelers highly value cheap airplane tickets and cheap vacation packages, not everyone appreciates why it is so difficult for start-up airlines and low-cost airlines to thrive. The problem is that the fittest do not always survive.
The challenges facing start-up airlines, as well as low cost airlines like JetBlue include:
• Access to takeoff slots/gates at desirable airports

• Restrictions on foreign investment in American airlines currently limits foreign ownership to 25 percent of voting rights

• Rules preventing foreign airlines from flying within the U.S.

Industry experts question whether smaller airlines will be able to stay in business because the big legacy airlines benefit from global networks, government policies which favor them and marketing advantages that come with size, especially when negotiating contracts for profitable corporate travel.

Large legacy airlines are protected by a structure that limits the ability of new airlines to get into markets and expand. The fact that miles earned for business travel are an untaxed employee benefit is a policy that favors large well established airlines. It is not generally understood that the very popularity of existing frequent flier programs makes competition more difficult.

Some travel experts argue that letting some of the large legacy airlines go bust would be good for competition, opening up takeoff slots and airport access to more nimble, competitive airlines.

Currently the federal government is unwilling to let badly run inefficient large legacy airlines go away even though there are low cost well run efficient airlines ready to expand.
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