Commentary

Neeleman Has An Audacious Plan For a New U.S. Airline Called Moxy

JetBlue founder David Neeleman is leading a group of investors that's buying 60 Airbus A220-300 airplanes with the intent of launching a new airline that’s been called Moxy.

“After years of U.S. airline consolidation, the conditions are improving for a new generation of U.S. airlines to emerge, focused on passengers, service and satisfaction,” Neeleman says in a press release issued by Airbus.  
Based on two sources and a investor’s presentation it had seen, Airline Weekly last month broke the news that the Brazilian-American entrepreneur was shopping a plan to add to the 11 major carriers now based in the U.S. — all of whom have been around for more than 10 years. Neeleman, who is no longer associated with JetBlue but is also an investor in TAP in Portugal and controlling shareholder in Azul airlines in Brazil, refused comment at the time.

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Indeed, “the number of airlines has been shrinking in the last decade as airlines merge and acquire rivals, cutting competition and reducing choices for air travelers,” points out Hugo Martin for the Los Angeles Times


“Now, Neeleman’s start-up has taken one of the most concrete steps yet toward getting off the ground: a tentative deal to buy 60 Airbus A220-300 jets. Airbus and Neeleman’s group announced a memorandum of understanding for the order on Tuesday at the Farnborough Airshow in England,” Ben Mutzabaugh writes for USA Today.

Neeleman is reportedly putting together $100 million, including his own capital, to finance the venture. 

“Given Neeleman's successful track record, and his own wealth (earned mostly from taking his start-up carriers public), finding launch capital for a new airline normally wouldn’t be difficult. But Moxy's reported strategic approach would be considered risky if it weren’t Neeleman pushing the plan,” writes Forbes’ contributor Dan Reed.

“That plan reportedly will focus on providing point-to-point service primarily to and from secondary airports. … According to Airline Weekly among the potential airports to receive Moxy service are Hollywood Burbank Airport, Fort Worth's Meacham Airport, and T.F. Green Airport in Providence, R.I.  Each is an interesting target because it’s hard to argue that limited service from such airports would be effective in competition against massive amounts of service offered at nearby airports.”

Also mentioned, according to USA Today’s Mutzabaugh: Orlando Sanford; St. Petersburg, Fla.; Phoenix-Mesa; McClellan-Palomar near San Diego; Newburgh/Stewart, N.Y. and Trenton, N.J., among others.

“The A220 will enable us to serve thinner routes in comfort without compromising cost, especially on longer-range missions. With deliveries starting in 2021, we will have ample time to assemble a world-class management team and another winning business model,” Neeleman says in a statement.

“Previously known as Bombardier CSeries, the Airbus A220 is a family of narrow-body, twin-engine, medium-range jet airliners marketed by Airbus but designed and built by the Canadian manufacturer Bombardier Aerospace,” according to Wikipedia.

The Moxy deal “is the second since Airbus took control of the aircraft program. Last week, JetBlue ordered 60 of the same aircraft for delivery starting in 2020 with the option for another 60 starting in 2025,” according to a Canadian Press report.

“Analyst Walter Spracklin of RBC Capital Markets said the A220 aircraft program is gaining traction with the JetBlue order and the commitment from Neeleman,” it continues. “We expect the joint venture will continue to win orders of meaningful size, with longer-term valuation implications owing to Bombardier's 34% stake,” Spracklin writes in his report.

“The Airbus news release did not address the question of where the jets will be built, or the timetable for establishing the new Mobile assembly line. Airbus has indicated that it plans to break ground this year and begin delivering aircraft by mid-2020,” observes Lawrence Specker for AL.com. “However, the order does give Airbus motivation to ramp up production to meet the demand. Currently, A220s are assembled in only one factory, a Bombardier plant in Mirabel, Canada. By comparison, Airbus assembles its popular A320-family planes at four facilities France, China, Germany and the U.S.”

By the way, Montreal-based Bombardier said Tuesday that it is opening a 14,000-square-foot showroom and regional office “in the heart” of New York City to bring it closer to its customers. The press release announcing the forthcoming space did not specify exactly where that heart might be but, contrary to Millennial sentiment, we suspect it’s not Brooklyn.
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