storminpilot
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http://www.charlotte.com/mld/observer/8111087.htm
Posted on Fri, Mar. 05, 2004
Low-fare airline for Charlotte? -- Investor eyes city, but odds are against him
TED REED
Staff Writer
A New Hampshire investor says he has taken preliminary steps to begin a low-fare airline in Charlotte, a plan experts say faces long odds.
The chief obstacles include raising capital and surviving an anticipated assault by US Airways, which would seek to protect its biggest hub in Charlotte.
John MacLeod, 38, a one-time financial analyst at John Hancock Financial Services, said his plan is to fly to major East Coast airports such as Boston Logan, New York La Guardia and Washington National.
MacLeod, who contacted The Observer about his plan this week, said he wants to raise $100 million to $150 million. He said the initial $5 million would come from family and friends. The rest would come from a bank, which he would not name, and from investment banks.
MacLeod said he is in negotiations to buy a carrier, which he also would not name. The U.S. Transportation Department would have to approve a transfer of the operating certificate. MacLeod estimates that plan would enable him to begin flying in four to six months.
A second option, he said, is to start from scratch. That means acquiring airplanes, hiring workers and securing approval from the Federal Aviation Administration and the Transportation Department. The process would take at least a year.
MacLeod, an N.C. native, said he chose Charlotte for his venture because its high airfares present an opportunity "for an airline with low costs to come in and pass the savings on to the business community." Also, a new Charlotte-based carrier could conceivably capitalize on US Airways' financial weakness, his advisers said.
Charlotte is the site of a US Airways hub, but provides relatively little local traffic. The combination means that ATA is the only low-fare carrier operating in Charlotte.
Eventually, MacLeod envisions that he could acquire new airplanes, expand the route structure and employ 2,000 to 2,500 workers in Charlotte.
MacLeod would employ Ken Holliday, a former pilot and charter airline executive, as chief executive. Michael Roach, a onetime Continental Airlines executive who co-founded Phoenix-based America West Airlines in 1983, is a consultant.
Roach said Charlotte resembles Phoenix in 1983. It is dominated by a single carrier (Hughes Air West dominated Phoenix); population growth is likely; and nobody thinks a locally based start-up airline can succeed.
"For every 100 wannabe startups, one actually gets started," Roach said. "It's a bloody field. But if (MacLeod and Holliday) are among the small percentage that make it, this can be a profitable venture."
MacLeod's group is scheduled to meet today with Jerry Orr, aviation director at Charlotte/Douglas International Airport. "At least a half-dozen people have had the idea to start a low-fare carrier in Charlotte," Orr said. "I'm happy to listen to them all."
So far, none of the ideas have worked, Orr said. He said gate space is available and that the low cost of operating at Charlotte/Douglas is an advantage for any carrier that operates here.
Josh Marks, a partner in Washington aviation consultant Velocity, said a new carrier that starts up in Charlotte would face massive resistance from US Airways.
"US Airways will defend Charlotte to the death," he said. "Any startup going into Charlotte needs to have hundreds of millions of dollars in equity financing, new aircraft and a route structure with real breadth and volume."
US Airways may be struggling financially, but it will not hesitate to defend its biggest hub by matching fares, he said.
In its Philadelphia hub, US Airways will face competition from low-fare king Southwest Airlines, which will start service May 9. But the startup of a proposed low-fare carrier at its Pittsburgh hub has been delayed from June to late summer. Backers say they need more time to raise $125 million. The effort was conceived by Ed Beauvais, another former America West executive.
"I don't know if I would encourage anyone to start a low-fare airline in Charlotte," said aviation consultant Mike Boyd. "You're not talking about a very large traffic base, and I think it would be hard to find capital."
--------------------------------------------------------------------------------
Ted Reed: (704) 358-5170; [email protected]
Posted on Fri, Mar. 05, 2004
Low-fare airline for Charlotte? -- Investor eyes city, but odds are against him
TED REED
Staff Writer
A New Hampshire investor says he has taken preliminary steps to begin a low-fare airline in Charlotte, a plan experts say faces long odds.
The chief obstacles include raising capital and surviving an anticipated assault by US Airways, which would seek to protect its biggest hub in Charlotte.
John MacLeod, 38, a one-time financial analyst at John Hancock Financial Services, said his plan is to fly to major East Coast airports such as Boston Logan, New York La Guardia and Washington National.
MacLeod, who contacted The Observer about his plan this week, said he wants to raise $100 million to $150 million. He said the initial $5 million would come from family and friends. The rest would come from a bank, which he would not name, and from investment banks.
MacLeod said he is in negotiations to buy a carrier, which he also would not name. The U.S. Transportation Department would have to approve a transfer of the operating certificate. MacLeod estimates that plan would enable him to begin flying in four to six months.
A second option, he said, is to start from scratch. That means acquiring airplanes, hiring workers and securing approval from the Federal Aviation Administration and the Transportation Department. The process would take at least a year.
MacLeod, an N.C. native, said he chose Charlotte for his venture because its high airfares present an opportunity "for an airline with low costs to come in and pass the savings on to the business community." Also, a new Charlotte-based carrier could conceivably capitalize on US Airways' financial weakness, his advisers said.
Charlotte is the site of a US Airways hub, but provides relatively little local traffic. The combination means that ATA is the only low-fare carrier operating in Charlotte.
Eventually, MacLeod envisions that he could acquire new airplanes, expand the route structure and employ 2,000 to 2,500 workers in Charlotte.
MacLeod would employ Ken Holliday, a former pilot and charter airline executive, as chief executive. Michael Roach, a onetime Continental Airlines executive who co-founded Phoenix-based America West Airlines in 1983, is a consultant.
Roach said Charlotte resembles Phoenix in 1983. It is dominated by a single carrier (Hughes Air West dominated Phoenix); population growth is likely; and nobody thinks a locally based start-up airline can succeed.
"For every 100 wannabe startups, one actually gets started," Roach said. "It's a bloody field. But if (MacLeod and Holliday) are among the small percentage that make it, this can be a profitable venture."
MacLeod's group is scheduled to meet today with Jerry Orr, aviation director at Charlotte/Douglas International Airport. "At least a half-dozen people have had the idea to start a low-fare carrier in Charlotte," Orr said. "I'm happy to listen to them all."
So far, none of the ideas have worked, Orr said. He said gate space is available and that the low cost of operating at Charlotte/Douglas is an advantage for any carrier that operates here.
Josh Marks, a partner in Washington aviation consultant Velocity, said a new carrier that starts up in Charlotte would face massive resistance from US Airways.
"US Airways will defend Charlotte to the death," he said. "Any startup going into Charlotte needs to have hundreds of millions of dollars in equity financing, new aircraft and a route structure with real breadth and volume."
US Airways may be struggling financially, but it will not hesitate to defend its biggest hub by matching fares, he said.
In its Philadelphia hub, US Airways will face competition from low-fare king Southwest Airlines, which will start service May 9. But the startup of a proposed low-fare carrier at its Pittsburgh hub has been delayed from June to late summer. Backers say they need more time to raise $125 million. The effort was conceived by Ed Beauvais, another former America West executive.
"I don't know if I would encourage anyone to start a low-fare airline in Charlotte," said aviation consultant Mike Boyd. "You're not talking about a very large traffic base, and I think it would be hard to find capital."
--------------------------------------------------------------------------------
Ted Reed: (704) 358-5170; [email protected]
