Well it didn't take long for the people now running Delta Air Lines to conclude that including a "low-cost" airline in their plans wasn't a great way to get themselves back out of Chapter 11. Whatever else about that much maligned process, it does confront managers with the reality of what they've been doing wrong. And, of course, it makes it a whole lot easier to do something drastic about it. So Song is gone.
When they've tried, US airlines have comprehensively failed to make these kinds of carriers-within-carriers work. I think it can be done in fact - but not with the labour-contract baggage that the American majors haul around like a ball and chain. Doing it simply to respond to a competitor like JetBlue is also not the best way to start - rushed competitive responses may sometimes achieve their short-term aim, but they rarely make for robust long-term businesses.
As it happens, two "legacy" airlines in different circumstances, but both in the UK, showed how it could be done. Everyone's forgotten now, but back in 1998 British Airways created a terrific little airline at London Stansted called Go. It was run by an American - Barbara Cassani, everyone said it would never work - but the passengers loved it, it made money, and in the end BA sold it to EasyJet for a decent price. Cassani reputedly left in tears, declining EasyJet's job offer. (And very nice it was to hear of a CEO with that sort of passion in her veins.)
BA made it work by creating a subsidiary truly at arm's length, run by a pretty much autonomous CEO, and with a cost and labour structure that had nothing to do with the mainline operation.
A while later, in more tortuous circumstances, BA's arch-competitor BMI created something called Bmibaby . Coming six months after 911, this move was more about survival than anything else and had all the hallmarks of a desperate move sure to end in tears (which I confess is what I thought would happen.)
It didn't however, and today it's a major part of BMI's business. (I think it was also the first UK low-cost carrier run by a Brit - Go was headed by an American; EasyJet was owned by a Greek entrepreneur with a Kiwi CEO; and Ryanair, I'm told, has an Irish guy in charge.)
BMI was able to create an operation that worked because, even if not in so many words, it offered jobs on new terms and conditions to people faced with redundancy otherwise. It also had the great advantage of being able to launch at locations well outside London. And, no doubt about it, it was a very well executed plan - which always helps.
In the US I suspect the conventional wisdom is actually correct. The legacy US majors are in deep, deep trouble. They can't face up to cold turkey and they'll be mainlining Chapter 11 on and off for years - unless they finally land in the gutter.