Why Major US Airlines Don't Have Low-Cost Carriers? - United Shuttle, MetroJet and Delta Express

Why doesn't the USA's big three have their own low-cost carriers?
But here's the thing, they actually did!

United, Delta, and American all had low-cost carriers that operated in the United States - this is their story!

The early 90s of the united states was a turbulent time for airlines; the recession plus deregulation had opened the floodgates for all sorts of new airlines to enter the market and seek their fortune. With falling prices and a market keeping pace, airlines needed to expand quickly into the new low-cost segment.

These airlines were Delta Express, United Shuttle, Contential Lite and Metrojet by US airways.

Our first on the list, Delta Express, was marketed as a no-frills airline within an airline. It would operate a fleet of Boeing 737-200 aircraft out of Orlando, and focus on the holiday travelers with an all-coach cabin - with no in-flight entertainment or meal services.

The airline was relatively successful from 1996 to 2003, but still had one problem - Delta did not manage to gain enough productivity out of the workers and planes, and so its costs remained high compared to its rivals.

Plus, the spartan Delta Express was linked so closely to the mainline operations at Delta, that it confused passengers.

Delta Express was eventually shut down in 2003 and replaced by another Delta low-cost carrier called Song.

United wasn't going to be left standing still, and in 1994, they made a deal with the pilot and mechanics union to start a new airline with the groups owning 55% of the carrier. This new airline would replicate the successful regional competitor Southwest Airlines model, a single fleet of all the same plane and no hot meals, frequent services, and a simple fare structure.

The airline would have 58 Boeing 737s and operate out Oakland airport in the bay area as a point to point airline and would offer flights to destinations such as LAX, Burbank, and Ontario for as little as $19 each way - with the new name, Shuttle By United, branded on the side of the plane.

Fast forward three years later and a change in management saw the airline turned into a hub and spoke model, feeding passengers to mainline United international flights from SFO and LAX.

But there is a problem with SFO. It gets foggy, gets worse weather than Oakland, and has a significantly higher canceled flight rate. By 1999, the airline operated solely as a feeder for international flights, and long gone was its quick turnaround and cheap fares. United no longer had any cost savings by not using the airline and folded it back into the mainline carrier.

United would go on to have a 2nd crack at the market with United Ted, but that's a topic for another video.

Continental Lite was a very short-lived subsidiary airline of Continental Airlines back in 1993 that only lasted slightly over 18 months, after losing over $300 million dollars.

The carrier used a mix of aircraft from Contential, from DC-9s to Boeing 737-500 aircraft, with all-economy cabins. The airline was based out of Cleveland and North Carolina, and at its peak, had over 80 daily flights to 45 cities.

Alas, they couldn't seem to make any money, and by 1995, the service was closed and turned back into standard Continental aircraft. If given a choice, passengers would choose the bright and bubbly southwest brand.

Metrojet. Developed as a way to stave off new low-cost competition in the US Northeast. The carrier would have a single class of service, operate a single type of aircraft, the Boeing 737-200 and fly a very limited network out of Baltimore.

The airline reportedly was actually quite nice, with 33 inches of legroom, allowing two bags with each passenger, low fares, and excellent customer service. In fact, the success of MetroJet would actually be its downfall, because it seems that no one was paying attention to the main airline US Airways.

That's right, it seems all the attention was on the wonderchild and that US Airways started to struggle. Passengers started to choose not only to not fly rival low-cost carriers but fly MetroJet over US Airways as well, cannibalizing higher paying customers. MetroJet also had the least fuel-efficient aircraft in the US Airways fleet and operated with incredibly high wages - US Airways didn't renegotiate like the other carriers but used staff from the mainline carrier.

If MetroJet was to keep growing, it would be at the cost of US Airways.

After the horrible tragedy that was the September 11th attacks, and the subsequent fall in airline demand, US Airways closed the operation swiftly and merged it back into the mainline carrier.

These airlines would not be the last time these carriers experimented with low-cost, airlines within airlines, but would be the only attempt at the magical optimistic 90s. Stay tuned for the next in the series where we look at the airlines of the 2000s that rose and fell in the blink of an eye.

[FoundAndExplained]

Slight goof! Metrojet operated 737-200s, not 737-300s :) Forgive me! Thanks for watching :)

[rorymacve]

I remember my family and I used to fly Shuttle by United back in the 1990s up and down the west coast when we visited the USA, between San Francisco and Los Angeles, and San Francisco and Seattle. I always liked them because of the white version they had of the regular United Airlines livery. :)

[benhoffman]

United Shuttle was initially quite successful in terms of lower cost and higher productivity but it sadly became dysfunctional and difficult to sustain, especially after moving to SFO.

[gabrielb]

The series GROUNDED is so awsome i think it should be a Netflix series

[buddyrevell]

Flew both Song, Ted, and Flyi(independence air). With Ted and Song only difference i remember was leather seats. Everything else seemed the same. You should do something on independence air as well.

[ddelony]

The idea of a low-cost "airline within an airline" seems to survive with "basic economy" fares. Less overhead, as they can use the same mainline flights, plus they can upsell people with upgrades.

[johniii]

You forgot Ted and CO light, Song etc. The reason none of them were just quite simple they still had all the legacy cost. Low fares high cost structure

[kcindc]

I worked at UA HQ in Strategy during the Ted era and it was yet another example of “an airline within an airline” business model which was never viable for anyone. Ted was no exception. Labor costs were exactly the same as mainline UA, RASM was lower and the fleet utilization didn’t rise enough to offset the crappy yields….so what the heck was the point? I felt like the lone voice in the wilderness…

[tonydivito]

I remember back to back cancelled Shuttle by United flights, they dispactched a 747-400 between SFO and LAX.

[jakobole]

And now, because of all the mergers, the competition is non-existent some places. When was the last time the government of almost any western-democracy said "no" to a big are laws in place, but why if not used?

[alanrogers]

I live in Portland, Oregon, USA. Locally, we have Alaska Airlines and its subsidiary, Horizon Air for the shorter routes, mostly flying turboprop aircraft. They don't seem to be having any problems.

[waitwhatdoyoumean]

Can you do a video about Twa because I feel like they are left out in most aviation videos

[barontaylor]

Swoop is the low cost version of Westjet in Canada

[BennyGeserit]

With Delta Express the price was right but the seats got redone with exceedingly dense foam. The crew looked like they hated their jobs but they were flying the 737-200 which was safer than the corner cutting 800's and Max's of today.For short runs we need more trains and far less planes truth be told.

[TimTDM]

I finally found time to watch this video, it’s great as usual. The Grounded series has been my fav type of video so far. Thank you found and explained!

[riliryrimaddyvia]

Maybe you could do a video on Hong Kong airlines, a kind of underated airline?

[robertorafaelvazquezvazque]

Very interesting can't wait for the next chapter

[BobbyGeneric]

You made some major typos in your script.

[riliryrimaddyvia]

I'm confused, it said delta then United .Was there a mistake? 3:50

[pokepress]

Seems like this is something that looks good on paper but actually executing it is a lot trickier.