Of course, fares on the big airlines tend to become more competitive after
moves like this, so it's good news for consumers as long as the smaller
airports can survive.
Friday, February 5, 1999
Start-Up Airlines Aim for the Sky
Several Niche Carriers Seek to Make It in an Industry Made Up of Giants
By JAMES F. PELTZ, SEEMA MEHTA, Times Staff Writers
As a red-and-white Boeing 737 from the Midwest emerged from cloudy skies
and landed at Los Angeles International Airport on Thursday, it marked an
event that's notable these days: the birth of a new airline.
AccessAir, a tiny start-up that began service from its base in Des Moines
to Los Angeles and New York, took to the skies at a time when many
consumer advocates, state officials and federal regulators are complaining
that there's a dearth of new entrants in the airline industry.
But AccessAir, analysts say, heads a line of several new airlines that
could be launching service in the coming months.
One is National Airlines, a Las Vegas-based discount carrier that's being
started by two casinos and plans to start flying this year. And there are
applications for 11 more airlines that are either pending or being
prepared, up from just one last year, according to Darryl Jenkins, who
heads the Aviation Institute at George Washington University in
Washington.
"The suggestion that there are no new entrants is incorrect," said
Jenkins, who issued a report last year that cited mismanagement as the
main reason new airlines fail.
Many others blame the major U.S. carriers for the shortfall in new
airlines, contending that the big airlines' domination of many
metropolitan airports and their operating tactics amount to unfair
competition that dissuades others from starting new airlines.
The U.S. Department of Transportation last year proposed a new policy
aimed at deterring big airlines from slashing fares or taking other
actions aimed solely at driving start-ups out of business. That policy is
still being reviewed by Congress.
The existing carriers deny claims that they're stifling competition. And
Jenkins and other analysts assert that the lack of successful new airlines
mainly reflects the carriers' poor management and the crash of a ValuJet
Airlines DC-9 in the Florida Everglades on May 11, 1996.
That crash, which killed all 110 people aboard, put a chill on new
entrants during the next two years because ValuJet was a relatively young,
low-cost carrier. (ValuJet now operates as AirTran Holdings Inc.)
Still, there's evidence that a niche airline, if operated correctly, can
survive and prosper among the industry's giants. One example is Midwest
Express Airlines, which serves Los Angeles and two dozen other cities from
its base in Milwaukee. The carrier, the main unit of Midwest Express
Holdings Inc., began as the company fleet for paper-products giant
Kimberly-Clark Corp. before becoming a commercial airline in 1984.
AccessAir believes it can profitably serve a niche market by providing
low-cost, daily direct travel from Des Moines, Peoria, Ill., and other
Midwest cities to Los Angeles and New York--even though it's starting with
just two airplanes.
"We're starting to provide service to communities that don't have service
to major East Coast and West Coast cities," Frank Rosenberg, AccessAir's
interim chief operating officer, said as AccessAir celebrated with ribbon
cuttings and champagne at LAX Terminal 6. "The community needs [direct
service] for the community to grow and Iowa to grow."
Travelers currently can fly from Los Angeles to Des Moines on several
carriers, but nearly all require at least one stop.
Indeed, some of the $29 million that's funding AccessAir's start was
provided by corporations such as Peoria-based Caterpillar Inc., because
they're frustrated that employees can't get direct flights from their
headquarters to the two coasts.
"Des Moines is known for having some of the highest fares in the country,"
said Shane Percival, AccessAir's district sales manager. "We've selected
these particular markets that are underserved--Des Moines, Moline and
Peoria."
Rosenberg said AccessAir would succeed because it's not competing with the
large carriers head-on. "Our intention is to stay away from the big guys,"
he said. "We're not going to operate out of their hubs."
AccessAir hopes to have up to six planes by the end of the year. It plans
to expand service to Colorado Springs, Colo., later this year, and
hopefully to Reagan National Airport in Washington and San Francisco next
year. Possible future markets include Portland, Ore.; Seattle; Miami; and
Sioux City, Iowa.
The average cost of a round-trip AccessAir fare between Los Angeles and
one of its Midwestern destinations is about $300.
Some of AccessAir's inaugural customers were certainly pleased. Allen M.
Richards, of Montour, Iowa, said trips to Los Angeles normally meant
driving 200 miles to Omaha and flying to one of the major carriers'
Midwestern hubs before reaching LAX.
But on Thursday, AccessAir's direct flight got him to Los Angeles in three
hours. "It saves half a day," said the lawyer, on his way to an American
Bar Assn. conference.
Whether AccessAir can prosper will depend in large part on "whether Des
Moines is large enough to support it, whether it has enough people flying
those routes to make it profitable," said Jenkins of the Aviation
Institute. "That's the great unknown," he added, "and there are people
willing to risk money to find out the answer."
* * *
Renewed Liftoff?
The airline industry has been a tough one to breake into. Of the airline
wannabes that apply, most are authorized by federal regulators, but few
actually start service--and stay in business. However, applications are up
so far this year, and new carrier AccessAir began service from the Midwest
to LAX on Thursday.
Applications:
Through Jan. 31: 5
Authorized*
Through Jan. 31: 0
Actual Start-Ups
Through Jan. 31: 0
* included authorizations that were later revoked.
Source: Department of Transportation.
Copyright 1999 Los Angeles Times. All Rights Reserved