Quote:
Originally Posted by atlantaguy
Mark, I predict this will be a roaring success. You need to remember that in addition to business demand between these two metros, there are 50 million + tourists annually that travel between Orlando & Miami. MOST flights operate between ORL & Ft. Lauderdale, which really isn't convenient for business travelers. Considering check-in time, security check points, etc, this will be totally competitive to flying. The traffic on the Turnpike &/or I-95 can be totally jammed (and the Turnpike is considered pricey to a lot of people).
These folks know what they are doing, in my opinion - and they happen to have the deep pockets to pull it off.
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Its not the size of the markets that makes me worried. It is their desire to pay enough to cover costs that I worry about. There aren't a lot of examples to use when comparing costs but using Amtrak costs and then giving FEC an efficiency bonus, I come up with somewhere around $40-$55 one way tickets between Miami and Orlando to cover operations costs. That includes high load factors. Toss on that $1 billion dollars in investment and we are talking about pretty high prices.
And lets not pretend that they have all the money in the world. In 2007, FECI was sold to Fortress for $3.5 billion dollars. So $1 billion is almost a third of what the company is worth. And Fortress itself makes $250-300 million net income in a year on $47 billion in assets managed. This is a huge investment for them, certainly they can afford $1 billion dollars but can they continue to pump money in to build the business or will they cut and run if things go poorly at the beginning.