Neeleman has confirmed A220 order for ‘Moxy’, but should prepare for large US competitors to pounce

Global airline entrepreneur David Neeleman formally committed to 60 Airbus A220s-300s (rebranded from the CSeries CS300) to launch a new US airline targeted at thinner, point to point routes.


Summary:

  • Global airline entrepreneur David Neeleman committed to buy 60 Airbus A220s-300s at the Farnborough Air Show to launch a new US airline;
  • Despite NDAs abound, details about the new carrier, currently dubbed ‘Moxy’ had been revealed by the media ahead of the global aerospace event;
  • Moxy is reportedly seeking to serve secondary airports in places such as New York, Boston and Chicago and focus on thinner route pairs;
  • Airfares in the US domestic market have been dropping during the past couple of years having peaked in 2014.

The working name for the venture is Moxy, and the project has been generating buzz for several weeks. The premise is to serve secondary airports in places such as New York, Boston and Chicago. Specific airports on Moxy’s radar include Meacham in Fort Worth; Gary, Indiana; and Burbank, California.

There’s no doubt that an opportunity could exist for Moxy. Southwest Airlines, the pioneer of the secondary airport, point-to-point strategy, has moved to gain access to primary airports essentially to boost revenue.  Included in Southwest’s top bases by ASK deployment are Denver, Phoenix and Los Angeles.

“After years of US airline consolidation, the conditions are improving for a new generation of US airline to emerge, focused on passenger service and satisfaction, ” Mr Neeleman said at the recent Farnborough Air Show.

Operating from secondary airports and recruiting a labour force that will initially be lower cost will certainly help Moxy keep its operating costs at favourable levels. However, it remains to be seen just how successful Moxy could be in the evolving US operating environment.

Generally, airfares have been dropping during the past couple of years. US airlines have just started to regain lost ground in their unit revenue performance, and a quick look at data from the US government shows that average domestic airfares peaked in 2014 before falling steadily from 2015 to 2017.

With overall lower airfares, it is not clear whether consumers will opt for secondary airports for their travel if there are similar prices and product options at primary airports.

For example, Providence, which is 95km south of Boston, is JetBlue’s second largest base measured by departing frequencies, and the airline has a goal of reaching 200 daily departures from the airport.

“The A220 will enable us to serve thinner routes in comfort without compromising cost, especially on longer-range missions. With deliveries starting in 2021, we will have ample time to assemble a world-class management team and another winning business model,” explained Mr Neeleman at Farnborough.

Mr Neeleman has a successful pedigree in the airline sector and this A220 order is of sufficient scale to suggest that he has some strong investment and therefore expected returns from this business strategy. A deal with Airbus for the Bombardier-built airliner would certainly come with significant concessions (up to half price, according to some sources), but until the business plan is formally unveiled it will be hard to say much more.