New low-cost airline targets smaller markets

Low-cost carrier JetAmerica aims to serve smaller markets it believes bigger airlines neglect

• Victor Epstein, Associated Press Writer
• On Tuesday May 26, 2009, 2:54 pm EDT

NEWARK, N.J. (AP) -- A new low-cost airline will begin serving mid-sized U.S. cities that it thinks larger carriers have left behind.

Clearwater, Fla.-based JetAmerica said 34 nonstop passenger flights a week will start July 13 at Toledo, Ohio; South Bend, Ind.; Melbourne, Fla.; Newark, N.J.; Minneapolis and Lansing, Mich. Twenty-eight flights start or end at Newark Liberty International Airport. The carrier will add six more flights -- from Toledo to Minneapolis -- starting Aug. 14.

JetAmerica is targeting small and midsize cities like Lansing, which has seen the number of daily flights at its Capital Region International Airport fall from 35 to 12 the past five years. The decline is part of a national trend that has seen airfares increase at those airports as daily flights have decreased.
Robert Selig, head of the Capital Region Airport Authority, said JetAmerica will give Lansing business travelers direct access to New York City and carry leisure travelers to central Florida.
"We don't have access to either one right now," Selig said. "So, this is going to fill a major void in our schedule." Filling that void won't be cheap.

The Lansing, South Bend, Melbourne and Toledo airports are subsidizing JetAmerica with $1.4 million in grants in its first year, along with about $867,000 in waived airport fees and $1.1 million in marketing and advertising assistance.

South Bend, Toledo and Melbourne received their grants from the U.S. Department of Transportation's Small Community Air Service Development Program, which has awarded $104 million to 223 recipients since 2002 in an effort to restore lost service and bring air fares down. Newark and Minneapolis, each of which serve more than 20 million passengers a year, are not offering assistance to JetAmerica.

John Weikle, chief executive of JetAmerica, said the subsidies will help insulate the new carrier from spikes in jet fuel prices. Higher fuel prices have contributed to the failures of at least four major airlines since 9/11. Smaller carriers have also been hurt.

Surging fuel prices helped bankrupt ultra-discounter Skybus Inc. last year. Weikle founded that Columbus, Ohio-based airline known for its $10 fares. The bankruptcy cost 450 employees their jobs.
JetAmerica's pricing scheme will share some Skybus characteristics.

Prices will start at $9 a seat and top out at $199. The $9 price will apply to the first nine to 19 seats on each plane. Passengers will pay $15 to check a bag. Food, drinks and in-flight TV will also come at a cost.
The carrier is starting out with one leased Boeing 737-800, expects to add a second in the first month, and have as many as four by July of next year. Weikle's business plans calls for an additional 189-seat jet to be leased every four months. Each Boeing 737-800 can fly to four cities a day, Weikle said.

Weikle estimated JetAmerica's revenue at more than $50 million in the first year and about $150 million in the second. He compares his business model to that of Wal-Mart Inc., which started out by serving cities of less than 50,000 people because competitors were not interested in them.

JetAmerica plans to serve Melbourne, Fla., with at least six flights a week. Richard Ennis, executive director of Melbourne International Airport, said JetAmerica's planes and nonstop routes persuaded him to support the carrier. Melbourne, a coastal community about 70 miles southeast of Orlando, recorded a 45 percent decline in passenger traffic at its airport from 2000 to 2008.

Ennis said carriers with larger jets like the Boeing 737-800 charge less per seat, which is an advantage enjoyed by Orlando International Airport and Orlando Sanford International Airport.
"It's the only way I can beat them out," Ennis said of the neighboring airports.