Atlantic Coast’s Strategic Plan

Here’s a link to Atlantic Coast’s business presentation for operating as a standalone low cost carrier.

The points ACA makes:

  • Low cost carriers are a growing market niche.

  • Washington, DC is a big market.

  • Regional jets are good and other low cost carriers use or are considering them.

Uh, okay. They’ve stated the obvious. How about their plan?

  • Utilize their current terminal at Dulles (perhaps minus the old T gates).

  • Fly Airbus aircraft to LA, San Francisco, and Denver — United bread and butter routes, and in the first two cases routes where they face competition from JetBlue which services Oakland and Long Beach.

  • Utilize their planes a third more than the major carriers — although it’s not clear how they achieve this with a transcon, at least one routes and departures for which there is a ready market.

  • Price below current market, without respect to advance purchase requirements. Complicated though the status quo may be, they price the way they do for a reason.

  • Charge Southwest-style fares at Dulles. While Dulles is preferred for many customers, it also has higher costs — so it’s unclear how they’ll generate Southwest-style profits.

  • They also plan to charge more and offer greater frequency on some routes than other low cost carriers, hoping that Dulles will be sufficiently preferable to their customers to command a revenue premium. But it’s unclear that those customers willing to pay the premium are in the market for a low cost carrier without a major loyalty and elite program anyway.

  • “Superior Customer Service” is a claim that just isn’t credible for Atlantic Coast to make, at least to anyone that has ever flown them and experienced boarding gate bedlam. And they have no experience rolling out a reservations infrastructure to boot.

  • They have a track record, so we should trust them. But that track record is with an entirely different business model. There’s no reason to believe that making money on a fixed-compensation basis while deferring to United for most decision-making should translate into making money on a standalone basis. In fact their track record under their current business model is the reason precisely why they should not change course. Walking away from such a track record destroys rather than instills confidence in management.

They think they’ll make a slight profit (really, breakeven) in 2005. But they’re making money now and even with concessions in their contract to continue as a United Express carrier they should continue to do better than as a standalone. Even their rosy future projections have them returning to only a 10% operating margin compared to the 15% margin they currently have.

A fool’s mission if you ask me. Maybe they’ll wise up and come to terms with United, or they’ll at least affiliate with another major carrier. Their shareholders can only hope.

Update: Atlantic Coast will be renaming themselves Independence Air. Here’s a story.

Meanwhile, Mesa is pledging to continue is takeover attempt. If Mesa is successful, and has to cough up money to cancel Atlantic Coast’s orders, then Atlantic Coast has eroded shareholder value in an attempt to retain control. At least that’s how Mesa is spinning it.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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