New Ultra-Low-Cost Airline Led By Former United Executive Aims To Take Off This YearPlay
A second startup airline business with a prominent founder could soon launch in the U.S., after a decade and a half of airline industry consolidation that left consumers with healthier airlines but fewer choices.
XTRA Airways, as it's known today — although the name will probably change — could carry passengers as America's newest "ultra-low-cost carrier," or ULCC, by late this year, according to a document for potential investors seen by Here & Now and confirmed by Andrew Levy, the airline's CEO. He was most recently the chief financial officer of United Airlines.
That's more than a year sooner than a competing airline also in the works, for now dubbed Moxy, led by JetBlue founder David Neeleman. XTRA can launch its new business relatively quickly because the airline already exists as a charter carrier.
"There's a lot of room for more airplane seats in the United States," Levy tells Here & Now. As evidence of the opportunity, the document points to what XTRA considers full flights and high fares in America today.
Levy surprised United employees and investors by leaving the company in May 2018, just as its operations and profits were improving, to "return to the more entrepreneurial pursuits that have defined my career." Previously, he was the co-founder and president of Allegiant Air, a not-always-loved but almost-always-profitable ULCC. Allegiant Air is one of three major U.S. ULCCs, alongside Spirit and Frontier.
Ultra-low-cost carriers typically distinguish themselves from other airlines by including little other than basic transportation with the base fare and charging extra for almost everything else.
"There's a lot of room for more airplane seats in the United States."Andrew Levy, CEO of XTRA Airways
XTRA will distinguish itself from its competition by providing better service, according to the investor document. It says ultra-low-cost carriers in the U.S. are unreliable compared to others around the world, and rely too much on primary airports. XTRA will seek out lower-cost, second-tier airports.
Levy declined to further clarify XTRA's network plans but says the airline sees opportunities in underserved markets.
"Doing the same thing as everyone else, but trying to do it better, hasn't worked, historically, very well in the airline industry," Levy says. "So that's certainly not what we're trying to do, is out-Spirit Spirit or out-Allegiant Allegiant or anybody else like that. We aim to do something that's different."
Allegiant Air made its mark not only by fully unbundling its product — it often followed Spirit in that regard — but also by offering passengers in small- and mid-sized U.S. cities cheap, nonstop flights to leisure destinations like Orlando and Las Vegas, typically the only alternative to more expensive flights requiring a connection.
"We went after a market that was just different, and it was not being served, and created a business that is far bigger than I think many people thought it could ever be," Levy says of his time at Allegiant Air.
Moxy, Neeleman's planned airline, also plans to target nonprimary airports but with what looks to be a more upmarket product, eventually using 60 Airbus A220 jets. XTRA plans to use "new or near-new aircraft." The document doesn't specify a model, although XTRA flies 737s, according to to the airline intelligence provider ch-aviation.
XTRA hopes to have five planes flying for its new business by the end of this year and 45 by the end of 2023, according to the investor document. That would still leave it considerably smaller than the incumbent ultra-low-cost carriers today — all three have at least 80 airplanes — but about as big as Spirit was at the end of 2012, when it was already well known for its cheap flights and high fees.
America has lost several major airlines since the mid-2000s because of mergers and acquisitions, including US Airways, Northwest, Continental and AirTran. A few others, such as Aloha in Hawaii, went bankrupt. The only notable U.S. startup airline since JetBlue in 2000 was Virgin America in 2007, but Alaska Airlines later bought Virgin.
Countless other airline ideas never got off the ground. But now XTRA is the second airline idea to emerge in less than a year with a prominent founder who could attract the necessary investment capital.
The investor document says XTRA is looking to raise $100 million.
"We're well on our way and expect to be done relatively quickly," Levy says, adding that XTRA has attracted "outstanding investors" with "great industry credentials."
Could the grounding of all Boeing 737 MAX jets, following a second fatal crash last month, hurt XTRA's ability to find planes at acceptable prices? Levy says he doesn't think so.
"If [the grounding] looks like it's going to be extended, then I think people will start to make alternative plans, whether it's holding onto [older] aircraft longer or other ways to manage through the situation," he says. "But we haven't seen any difference in the supply of aircraft, at least not in the last several weeks."
"I don't think people are going to want to extend aircraft leases and then find out the MAX they were waiting for is going to be ready to fly in two or three weeks," Levy added.
This segment aired on April 2, 2019.