THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, June 2, 1996 TAG: 9606010327
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON AND DEBBIE MESSINA, STAFF WRITERS
LENGTH: 145 lines
Air South envisions crowds of military personnel, families and businessmen flocking to its gate in Norfolk, snapping up its discount fares.
On June 20, the airline will begin service at Norfolk International Airport, enticing travelers with one-way fares as low as $49. But locals shouldn't get used to the low rates - at least not yet. Air South is trying on this market for size.
In the past, the Columbia, S.C.-based airline has played hopscotch, skipping around the Southeast in search of underserved and discount-hungry markets. Its pattern of starting services in new markets and then retreating has infuriated some airport managers.
In St. Petersburg, Fla., an airport official threatened to seize one of the company's jets. In neighboring Tampa, the airport went to court over Air South's pile of bills.
Will things be different here?
Industry analysts say it's not unusual for new airlines on shoestring budgets like Air South to bungle about, shift their services and lose money.
Upstart airlines often bounce around, taking up to six months in one location to determine whether the market is favorable.
``If it's not, they should cut it off and try something different,'' said Barbara Beyer, president of Avmark Inc., an aviation consulting firm in Northern Virginia.
In less than a year, the airline has pulled out of four airports in North Carolina and Florida. Raleigh-Durham, one official said, got competitive. So did Tampa. Tallahassee was a ``ho-hum'' market; St. Petersburg, a logistical mistake.
And Norfolk?
Norfolk is a part of the company's makeover. With only seven 122-seat Boeing jets, Air South has pared service in other areas to make room for service to Norfolk and Greenville/Spartanburg, S.C.
In Norfolk, Air South will offer one flight a day to New York and Chicago, and two to Jacksonville, Fla. It also will serve Miami, with a stop in Jacksonville. More flights and destinations may be added by the year's end.
``We've just gone through a whole new route restructuring,'' said Tom Volz, Air South's chief marketing officer. ``Our airline, on June 20, will not resemble the original airline. The addition of Norfolk and Greenville-Spartanburg completes that.''
Locally, officials say they're not worried about Air South making an early departure. Wayne Shank, deputy executive director of the Norfolk Airport Authority, doubts Air South will sting Norfolk the same way it did Tampa.
``We protect ourselves the way our leases are arranged,'' Shank said. ``We require security deposits. We continue to monitor accounts receivable. We don't have a problem with bad debts.''
Shank said the protections apply to all airlines serving Norfolk, not just fledgling low-fare carriers.
``Airlines, in the last several years, have been a very volatile industry,'' he said. ``That's generally the rule, not the exception. A number of airlines have gone through some turmoil.''
Air South pulled into Tampa in August 1995 but stopped paying several months later. In April, the airline skipped town, leaving $500,000 in unpaid bills, said Jim Johnson, senior director of airports.
``We're not in the business of kicking people out,'' Johnson said. ``But we expect them to pay their bills.''
The airport sued Air South, and the case is still winding through court.
Across the bay in St. Petersburg, airport officials fumed after Air South packed its bags and hopped to Tampa. Air South also owed the St. Petersburg airport money but maintains it has since repaid its debts. One airport official, infuriated at the company, threatened to seize an Air South jet.
Air South's Volz laughs.
``The guy was watching too many Rambo movies.''
Volz doesn't think Norfolk will be a Tampa or St. Petersburg. He says company officials are convinced they'll succeed in this market, mostly because of its demand for low-fare jaunts to Navy communities such as Jacksonville.
``We've done an awful lot of homework,'' Volz said.
To keep Air South or any other airline, the community should be supportive, said Michael Boyd, president of Aviation Systems Research Inc. in Golden, Colo.
``If you don't want to be a jilted lover, then support the airline, buy tickets on it,'' Boyd said. ``This is an airline investing scarce resources in Norfolk. As long as they're on time and they treat passengers with a glint of humanity, there should be some quid pro quo from the local consumer base.''
If Air South remains at Norfolk International Airport, it will bring with it a host of benefits.
First, it will fill in gaps in airline service. For example, there are currently no direct commercial flights to JFK in New York or to Chicago's Midway. And there are no nonstops to Jacksonville.
Leisure travelers who don't want to pay hundreds of dollars for airline tickets also will get a break. For example, Air South says it may pair up with a New York travel agency that sells trips to Hampton Roads tourist attractions like Busch Gardens Williamsburg.
Another benefit: Industry analysts expect Air South's fares will be matched by the competition.
``Airlines are like lemmings,'' analyst Beyer said. ``If one goes in and does it then everyone else goes and does it.''
If Air South succeeds here, it may face even bigger competition. Southwest Airlines Co., based in Dallas, could add service in Norfolk, consultant Boyd said.
Air South says it's not concerned about bad publicity over the May 11 ValuJet crash in the Florida Everglades. The accident raised safety questions about low-fare airlines using older airplanes.
Several airline and industry officials downplayed those concerns.
``We have a high experience level in key areas,'' Volz said. ``The average tenure in the left captain's seat is 27 years.''
For Air South, the numbers seem to back up this claim. In its two years of operation the airline has had no accidents.
While Air South's fleet of seven Boeing 737-200s is on average 20 years old, the company strictly maintains them, Volz said.
Air South likes to think of itself as a ``relaunched'' company. Since its bungled debut, Air South has appointed a new chief executive, attracted more financing and revamped its strategy.
The company wants to follow the path of Southwest, another upstart that blossomed into the fifth-largest airline, with nearly $2.9 billion in sales last year and a fleet of more than 200 aircraft.
Air South might be closer to that goal if it had not been poorly managed by its first chief executive, Patrick O'Shea, industry officials say.
Under O'Shea, the airline attracted $17 million in public financing from the state of South Carolina and several localities. Then, the company's costs soared, productivity dropped and consumers reacted to the airline's record of late arrivals and departures, according to a November 1995 article in the Atlanta Journal and Constitution. O'Shea fired several key company officials.
The money evaporated.
The company has a new leader, Rod Brandt, president and chief executive officer.
``He's a different cut of cat, completely,'' Volz said. ``I've known Patrick for many years. Patrick has brought those set of skills - tenacity, intense focus, bullheadedness - with no barriers at all. On terms of the people side . . . it was a little bit different.
``Changes needed to be made.''
Air South also has attracted new financing: about $7 million from Hambrecht & Quist, a San Francisco-based investment firm. The airline has even toyed with going public. It also would like to buy three to four jets by year's end.
Under new direction, the company revamped its routes. It calls its new strategy ``Hub-Bypass,'' which is designed to provide passengers with direct flights from underserved Southeastern cities to big markets in Florida, the Midwest and the Northeast.
Air South still isn't in the clear. It lost $13.7 million in 1995, according to the U.S. Department of Transportation. Company officials, however, say they expect to show a profit this summer.
``We would say that we're in the relaunch phase,'' Volz said.
But if the company had planned wisely at its debut, where would it be now?
``Who the hell knows?'' Volz said. ``I was with a sleepy company named Southwest from 1978 to 1984, and everybody laughed at us. They didn't have a profit for the first three years.'' ILLUSTRATION: Map
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