"AirTran's fortunes soar while other airlines falter"

Tuesday, September 2, 2003

AirTran's fortunes soar while other airlines falter
Turnaround of former ValuJet after 1996 crash impresses the experts.
By Mike Schneider
The Associated Press

 
ORLANDO, Fla. - The crash of a DC-9 into the Everglades in May 1996 that
killed all 110 people aboard made an industry pariah of the low-fare airline
ValuJet.

A little more than seven years later, the carrier, now known as AirTran
Airways, has made a stunning recovery.

So far in 2003, AirTran has started offering cross-country service,
announced a $5 billion aircraft order and reported its fifth consecutive
quarterly profit at a time when financial fortunes are sagging for many
major carriers.

''Six years ago, you had old planes, poor service, weak management,'' said
Ray Neidl, an airline analyst with Blaylock & Partners in New York.
''Everything has completely changed.''

The airline, which began flying this year to Denver, Las Vegas and Los
Angeles, will add Ronald Reagan Washington National Airport and San
Francisco to its schedule later in the year. AirTran officials say they plan
to expand into new markets, most likely the West Coast and Midwest,
particularly as American Airlines and other carriers reduce service to
cities such as St. Louis.

AirTran now offers 492 flights a day to 43 cities, but will grow even faster
with plans to open service in three to five new cities each year.

''We can put airplanes anywhere,'' said Joe Leonard, AirTran's chairman and
chief executive officer. ''We'll keep pushing our web out further and
further.''

Most low-fare airlines try to distinguish themselves as carriers that offer
more than just cheap tickets because major airlines can always match their
prices. JetBlue has onboard TV and leather seats. Southwest has an
irreverent sense of humor with its shorts-clad crew singing silly jingles.
The old ValuJet had a cartoon critter logo that adorned its aircraft.

AirTran doesn't have any such distinguishing features, said Alan Bender, a
professor of airline economics at Embry-Riddle Aeronautical University in
Daytona Beach.

''I haven't been able to figure out in the case of AirTran what their
gimmick is,'' he said. ''I scratch my head at what makes AirTran special.''

The airline may lack a gimmick, but its turnaround is unprecedented in
recent commercial airline history, Bender said. Other airlines, such as Air
Florida, have sunk under the weight of fatal crashes. Air Florida folded in
the late 1980s, just a few years after the 1982 crash of Flight 90 into a
Washington bridge, killing 78 people. ValuJet appeared headed in the same
direction.

Investigators blamed the May 1996 crash on explosive-tipped oxygen
generators that ValuJet's repair contractor, SabreTech Corp., improperly
packaged as cargo. The airline was vilified, temporarily grounded and its
maintenance contractor was convicted of criminal charges. Eight of the nine
counts were later thrown out on appeal, but it marked the first time an
aviation company was prosecuted in response to a U.S. air disaster. Insurers
for the companies ended up paying the families of victims tens of millions
of dollars.

''I would bet significant money that they wouldn't have made it without the
name change,'' Bender said. ''That was a stroke of genius because they
couldn't have been perceived by the public as more of a pariah than they
were.''

AirTran's road to rehabilitation began in 1997 when ValuJet acquired
AirTran, dumped its cartoon critter logo and moved its headquarters to
Orlando from Atlanta. Next came a management shakeup in 1999 that brought a
new team of executives headed by Leonard, a longtime industry executive who
served as chief operating officer for now-defunct Eastern Air Lines. Only
one member of the company's current 14-member leadership team worked for
ValuJet at the time of the crash.

No factor, Leonard said, has been more important to the company's turnaround
than retiring the airline's aging DC-9s and bringing in new, roomier Boeing
717s for short to medium hauls. The last DC-9s will be retired from
AirTran's fleet later this year.

The airline last month placed an order for 50 new Boeing 737s and an option
for 50 more and ordered up to 10 Boeing 717s.

Industry experts said the new planes have dramatically improved AirTran's
safety record. ''Now you look at the airline and it's one of the most modern
fleets in the world,'' said John Wensveen, a professor of airline management
at Embry-Riddle.

AirTran also has been helped in the past two years by changes in the
commercial aviation industry after the Sept. 11 terrorist attacks.
Cost-conscious business travelers have gravitated toward the low-cost
airlines, and AirTran has made a special effort to promote its business
class.

AirTran has been one of the few airlines to remain profitable during the
slump in commercial flying, and in June it had a monthly haul of 1 million
passengers for the first time. AirTran reported a second-quarter net income
of $57.2 million on $233 million revenue, compared with $5 million in net
income on $190 million revenue in the second quarter of last year.

The company's bottom line was helped by a $38.1 million cash reimbursement
from the federal government given to all carriers to blunt the effects of
the Iraqi invasion on air travel. Without the reimbursement, AirTran's net
income for the quarter would have been $21.9 million.

Now, more than seven years after the ValuJet crash, many travelers don't
associate AirTran with its predecessor.

Mark Wolsonovich, who regularly flies on AirTran from Orlando to Chicago or
Akron, Ohio, because he can save as much as $50 a ticket, had no idea that
the airline used to be known as ValuJet.

''To me, that's one of those flukes,'' Wolsonovich said of the 1996 crash,
while waiting for a flight from Orlando to Chicago. ''Things like that
happen.''


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