Is A New Budget Airline Soon Entering The U.S. Market? – XTRA Airways CEO Seeks Funding For Regular Operations To Start By 2020

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XTRA Airways Inc. a Florida based charter carrier owned by former United executive Andrew Levy is currently on high speed to secure US$ 100 Million in funding to start operations of a yet to be named budget carrier.

The business plan is apparently to serve secondary markets in the continental U.S. which have been neglected by the major carriers with flights to begin late 2019 or early 2020.

In times where many budget airlines are struggling and several such as FlyBe and WOW air just experienced their grounding it’s remarkable that the U.S. market apparently offers ground for just such a carrier.

Not just that – a second budget carrier with the name MOXY is set to take to the skies in 2021 as well, run by successful airline pioneer David Neeleman. Surprised they were able to pull that name off given that it’s the same as Marriott’s budget hotel brand.

You can find more information about the efforts of XTRA on Bloomberg (access here).

The former chief financial officer of United Continental Holdings Inc. is betting that the U.S. airline industry needs another budget airline.

Andrew Levy, who also helped establish Allegiant Travel Co., is raising money for a new low-cost niche carrier designed to serve secondary airports with a reliable experience that differs from current players in the market.

“We think the opportunity exists for a real high-quality, highly reliable, extremely low fare, basic transportation service,” Levy said Tuesday. The airline, which has not yet been named, will offer “a better product and experience but still offer really low prices,” he said, comparing the venture to the past experience of Southwest Airlines Co. “I think Southwest showed that for many, many years.”

The Houston-based company has not decided on an aircraft type but is leaning toward leasing Boeing Co.’s 737-800, given the worldwide grounding of the company’s new 737 Max. The planes would seat 189 passengers, a high-density approach designed to help the company offer fares below the industry average. …

Levy, 49, purchased XTRA Airways Inc., a Florida-based charter carrier, in August. XTRA’s parent last year sold most of its fleet to Swift Air but kept one Boeing 737-400 to retain its Part 121 commercial airline certification. …

The airline is seeking to raise $100 million and expects to finish its fundraising by June. The carrier could start service with around five aircraft late this year or in early 2020, Levy said.

Levy said his revamped airline would not be a clone of ultra low-cost carriers like Spirit Airlines Inc. or Frontier Airlines Inc. It would seek to innovate parts of the low-cost travel experience, including offering a more simplified fee structure than competitors, which typically charge ancillary fees for things like seat assignments, water and carry-on bags.

Nowadays, ancillary fees have become a trademark of pretty much every airline, if not for a bag then for a seat or vice versa. It helped U.S. airlines that haven’t been doing well for decades to soar again and post record profits, yet the plan by Levy seems to be contrary to that strategy.

There must be people who are convinced that the business plan makes sense and provide capital for the new venture to enter the market. It’s a bold move to firmly look towards the Boeing 737-800 even though the troubled MAX version will eventually be fixed.

Conclusion

Competition in the airline industry is usually a good thing for the consumer and this is especially true if the new carrier will actually serve secondary markets that would indeed help many travelers who currently don’t have decent transportation options at their disposal.

Even though the major carriers fly to many smaller airports it often involves a ride on a small regional jets and inconvenient connections. I’m interested how both this project as well as the MOXY competition is going to pan out in 2 years from now.

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