I read a fascinating, if not rather lengthy, article today by William Swelbar on his blog site Swelblog commenting on Republics purchase of both Frontier and Midwest Airlines. Swelbar is a research engineer at the Massachusetts Institute of Technology, who has 25 years of experience consulting with a focus on the airline industry.
In his article, Swelbar comments on the apparent brilliance of Republic CEO Bryan Bedford and how he has positioned Republic to take advantage of “an environment in which it is increasingly clear that the legacy carriers do not – and cannot – now operate under a cost structure that will support the number of airlines trying to survive in the hypercompetitive domestic US airline business.”
Swelbar goes on to describe the changing market conditions in the US airline industry due to the current recession and notes, “We’re entering a new era in the US airline industry. Change likely won’t depend on the kind of calamity or crisis that triggers the “force majeure” clause that allows airlines to suspend or break contracts. Instead, new market economics may force a restructuring of the industry in which the victors are those, like Republic, which simply have a better business model – a flexible and agile model. The top domestic airlines of tomorrow might be Southwest, JetBlue, Republic and maybe two of the five current legacy carriers.”
“Republic’s move demonstrates that the major carrier’s reliance on feed markets to cross subsidize this fact could be over. Air travelers want low fares and, time and again are showing they’ll drive to whatever airport – and airline — offers them.”
“In the very near future, it might be a very different set of carriers that dominates the US domestic landscape.”