Photo: James Reppucci.
Many people have asked me why I was so interested in this low-cost carrier - MetroJet. Honestly, I don’t have a good answer. The entire subsidiary era is still so fascinating to me - diversity at airports had never been greater. A dynamic existed for every major carrier with a “little brother” low-cost carrier subsidiary that was witty and always a sight to see. I remember my first-ever trip to Disney and seeing MetroJet lined at the terminal in Orlando-MCO, trying to figure out why they looked just like but were not quite U.S. Airways.
History
Emerging from intense labor negotiations in 1997, former legacy carrier U.S. Airways shifted its focus to reacting to the low-cost carriers disrupting the market and winning market share on the East Coast. Notably, most of this competition was heating up in the Northeast region of the United States. Southwest Airlines had just introduced point-to-point service from many smaller markets, such as Albany, N.Y., and Providence, R.I., also areas where U.S. Airways had a large customer base it wanted to protect.
Nothing good ever comes from sitting idle. Knowing it had to react, the airline's answer was to launch a low-cost subsidiary within its company umbrella. Landing on the name “MetroJet,” the first flights began on June 1, 1998, from a new hub in Baltimore. The choice of Baltimore-Washington International Airport was different for the parent company, as U.S. Airways had never operated a hub or focus city there prior. The selection of destinations they offered was from a previous merger with Piedmont Airlines in 1989, but it dwindled and did not amount to much.
Service was not limited to just a hub-and-spoke network - point-to-point flights were established in markets like Albany and Syracuse to Orlando-MCO to compete directly with other low-cost carriers. The airline’s financial performance was remarkably successful, even with its inefficient fleet of 49 Boeing 737-200s.
The problem was that the parent company was not quite in the same boat. Riddled with financial difficulty in the late 1990s/early 2000s, U.S. Airways had hoped MetroJet would start to hedge many of the losses they were incurring. However, they found they were actually cannibalizing their operation, particularly at Washington-Reagan National Airport, where they held a large hub.
With their low fares in Baltimore, passengers traveled up the freeway instead of utilizing their often-congested network at Reagan National. A combination of leaking passengers from their primary hub and the lower fares they purchased significantly impacted their profitability in the Washington, D.C. Metropolitan Area.
Yet, the airline continued to coexist with its parent company, now beginning to open up routes connecting smaller Northeast airports with destinations in Florida. For example, you could fly to Fort Lauderdale from smaller markets like Hartford, C.T., and Providence, R.I. Meanwhile, MetroJet would open a handful of cities from Washington-Dulles; however, these were short-lived.
However, MetroJet’s downfall came rather abruptly. Like other legacy carriers with adorable subsidiaries, U.S. Airways began to realize it was too complex to fund two separate airlines. While they shared the same resource pool, there were too many moving parts to make it work successfully.
The proverbial nail in the coffin was the terrorist attacks on September 11, 2001. The following week, U.S. Airways formally announced the termination of their MetroJet project. Beginning in December 2001, the MetroJet fleet began to be either returned to U.S. Airways or retired outright.
As usual, unions played some role. To cease MetroJet’s operations, U.S. Airways invoked a force majeure clause to terminate existing union provisions. A force majeure allows parties to void a collective bargaining agreement due to extenuating circumstances beyond both parties' control. In this case, the force majeure was 9/11.
Business Model
Like many other low-cost carriers of the time, the idea was there, and for the most part, so was the execution. The problem was never really MetroJet - their parent, U.S. Airways, was the one losing money.
Off the bat, MetroJet faced the same problem as competitor Delta Express - a large, inefficient fleet of Boeing 737-200 aircraft. I understand the logic since the Boeing 737-200 was a versatile aircraft well-suited for many smaller markets. However, without question, the operating costs were affected substantially due to this fleet choice.
The product itself was about what you would expect from a low-cost carrier. The seating was all single-class with a capacity of 118. However, the seat pitch was a comfortable 33”, which indeed made customers happy.
Using Baltimore as a hub was a bold move that positioned them ideally to match up against Southwest, their targeted competitor. Similar to their rival, a Baltimore hub would optimally connect smaller cities in the Northeast with popular Southern markets and maximize output. At the time of launch, Southwest had offered 74 daily flights out of a growing Baltimore hub of their own with intentions to open a crew base in the short-term future.
This idea actually backfired. At first, U.S. Airways believed the location adjacent to Reagan would complement its existing network. However, it ended up doing the opposite. The drawback was that this, in fact, led to internal leakage and stole passengers from themselves at Reagan National. This dilemma directly affected yields since these passengers paid less to essentially fly the same airline.
Other impressive decisions stood out to me - for example, launching service to Manchester and Providence. This timing was vital as Boston was finishing up the “Big Dig” project, which rendered Boston Logan International Airport virtually impossible to get to by highway. In the late 1990s/early 2000s, Manchester and Providence reached their heyday thanks to passengers avoiding unprecedented congestion en route to Logan.
MetroJet developed unique procedures to make client processes more efficient. For example, gate agents assigned seats the day of the flight, giving them a clean seat map to work with. The logic was that, by starting from scratch, these agents could better control boarding and avoid unnecessary problems. For example, it was far easier to seat a family traveling to Disney together with a clean sheet.
The company also approached time management very proactively. In fact, while the aircraft was parking, their arrival procedure included the fleet services agent driving the jetbridge estimated to save 5-7 minutes on the turnaround time. To optimize the inflight service, flight attendants would hand a drink service form to customers at the same time as their inflight snack. By the time they completed the initial service, other crew members had begun to hand out drink orders.
Finally, the relationship with U.S. Airways was sufficient to support organic growth. Loyal customers now had a low-cost option to earn miles towards their Dividend Miles program, their frequent flyer program. This dynamic was a feature that low-cost carriers like Southwest and AirTran could not match.
Marketing
MetroJet was the project of an extensive organic effort made by U.S. Airways. By creating a large internal task force to develop a low-cost product, the company gave employees a sense of ownership in the new carrier. This effort was critical in getting employees to buy into what they were trying to do.
MetroJet leadership came up with the following mission statement for their project:
“To serve the low-fare demands of the marketplace effectively while competing at a profitable level against low-cost carriers.”
Internally, U.S. Airways painted the picture of an airline trying to protect its territory. As I mentioned, Southwest was making formerly competitive markets non-competitive. Even though they drove down their airfares, more was needed to match Southwest.
To get an idea of what their product would offer, the task force members participated in a “walk a mile” program where they switched roles with other team members. Further, teammates would experience other successful low-cost carriers like Southwest, Delta Express, and Shuttle by United. By doing this, each employee could see how the pieces fit together to infer a different perspective and develop a well-rounded product to offer customers.
When developing its customer journey, MetroJet honed in on the following components:
Purchase of tickets.
Check-in.
Boarding.
Inflight service.
Communication with customers and employees.
The task force went as far as to undergo qualitative research through focus groups and quantitative customer surveys sent to Dividend Miles members. Research efforts were capped off by reviewing industry surveys and academic studies pertinent to the emerging low-cost carrier.
Before launching their first flights, MetroJet tested future processes using control groups on mainline U.S. Airways flights. Aspects of the customer journey were examined, such as different customer check-in and boarding processes.
The final task of the U.S.-2 group was coining the airline’s name. Once again, the group allowed U.S. Airways employees to choose, identifying “MetroJet” as the winning brand. The name brought a sense of modernism, as now U.S. Airways could meet a new, different, and ultimately broader range of customers.
There was much to like about the airline, as a customer survey identified service attitude, on-time performance, and efficient check-ins as the airline's most prominent attributes. Boarding passes would only be issued at the departure gate, ensuring face-to-face interaction between customers and employees.
What I liked the most about MetroJet was its livery. The red had a way of “popping” and shared many of the same features as its parent organization. The font was the same, and the tail featured the legendary U.S. Airways flag that will live on gloriously. Simple but elegant - everything you hope a low-cost subsidiary would illustrate, telling passengers that this was no ordinary startup. MetroJet was the product of an established airline.
MetroJet Today
Only a little, if anything, remains today of what MetroJet was. Their fleet of aircraft was retired rather quickly, as the Boeing 737-200 only lived a little further in the marketplace in general in favor of the Boeing 737 Next Generation family. The closure of MetroJet left U.S. Airways with even less of a presence in Baltimore than they had when they started, a result of shifting as much as possible back to their hub at Washington-Reagan. Today, Baltimore is a city overtly dominated by Southwest.
In a broader sense, there are a lot of things that live on today. The inflight service is identical to Southwest’s current inflight process, where flight attendants take drink orders by zone and hand out snacks prior. Quick turnarounds are also the industry standard, including the proactive measures MetroJet implemented, such as having a cabin attendant follow the last passenger up the aisle to clean up trash.
Ultimately, the results of MetroJet's extensive marketing research created the ideal low-cost carrier which lives on today. Although the fleet type left much to be desired, other aspects of their model exemplify low-cost carriers today, such as the time-sensitivity and efficiency aspects. While MetroJet was far from the first low-cost carrier, they were among the first to adopt a highly-successful framework.
Unfortunately, their parent company, U.S. Airways, also no longer exists. In 2015, American Airlines acquired U.S. Airways as one of the largest mergers in airline history. In most of these smaller markets MetroJet served, American only flies hub-and-spoke service to airports like LaGuardia and Charlotte. However, the intrinsic success of MetroJet and other carriers leaves you wondering how much room there is for similar competition from smaller cities today.