THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, June 20, 1996 TAG: 9606200391
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY ADAM LEVY AND CARRICK MOLLENKAMP, BLOOMBERG BUSINESS NEWS
DATELINE: ATLANTA LENGTH: 111 lines
Ted Habib has nine tickets to the 1996 Summer Olympics gold medal soccer match Aug. 3 in Athens, Ga.
Habib's problem: The Chicago travel agency executive held confirmed seats for himself and eight relatives on ValuJet Inc., an airline that may never fly again.
The Federal Aviation Administration grounded the carrier this week after an intense investigation revealed serious safety flaws in ValuJet's operations after one of its planes crashed last month in Florida killing 110 on board. The agency did not say when or if it would let the Atlanta-based airline resume flying.
``There are no more economical seats available to Atlanta and it's way too long of a drive from Chicago,'' Habib said. ``I'll have to pay through the roof.''
ValuJet's shutdown leaves Newport News at least temporarily without any jet service. USAir dropped its jet service to the city shortly after the ValuJet subsidies were announced. Newport News officials said USAir was planning to remove the jets anyway, but USAir said the subsidies played a role in the decision.
ValuJet had flown up to four nonstop jet flights per day from Newport News to Atlanta, where it is based. The schedule was cut to two per day after the May 11 crash focused glaring attention on the startup carrier.
The airline said it hopes to begin flying again in 30 days.
Newport News economic development officials have stopped sending nearly $70,000 in monthly subsidies to ValuJet Airlines until the grounded discount carrier starts flying again.
ValuJet President Lewis Jordan said nearly all the company's 4,000 employees have been laid off and only a handful of executives will remain to oversee development of a new strategic business plan.
He said that while the airline's service suspension agreement with the FAA is for 30 days, a firm restart date is ``beyond my control.'' He said the FAA has told him that initially it will let ValuJet fly only between 10 and 15 of its 51 airplanes, which would allow a maximum of 120 flight segments a day.
Jordan said customers holding prepaid seat reservations will get their money back. ValuJet flew direct from Boston to Washington, Atlanta and Florida destinations.
Thousands of tourists were counting on ValuJet - the second busiest airline serving Atlanta - to fly in and out of the host city for the summer games. Now, fans all over the eastern United States are racing to book alternative flights or studying road maps for the shortest route by car.
Julie Mango, a Washington-based consultant, expected to fly ValuJet to Atlanta during the Olympics. Now she plans on piling her fiance, sister and parents into her car for a 12-hour drive.
``Five of us in one car won't be a fun trip,'' said Mango, who has tickets to basketball, track and field and equestrian events. ``The other airlines are not honoring ValuJet vouchers.''
For ValuJet, the grounding couldn't have come at a worse time. Officials expect more than 2 million tourists to descend on Atlanta around the time of the Olympics, which run from July 19 to August 4.
Airlines are heavily booked.
Last week, ValuJet's Jordan said his company's planes were full for the duration of the games, which would have provided a welcome surge in business. ValuJet had halved its daily flights to 160 from a peak of 320. And many of those flights had plenty of empty seats after the May 11 crash of a ValuJet plane in the swampy Florida Everglades raised concerns about the airline's safety.
Until it stopped flying, ValuJet was the second busiest airline at Hartsfield-Atlanta International Airport, trailing only Delta Air Lines Inc. Delta will have 94,000 seats on flights in and out of Atlanta each day this summer. If ValuJet doesn't resume service, its 20 gates at Hartsfield's Concourse C could attract plenty of interest from carriers that want to fill the void.
``All airlines have the option to sublease gates to other airlines,'' said April Major, an airport spokeswoman. ValuJet already subleases some of its gates to charter-flight operators.
Demand for gates will be intense during the games. The FAA expects as many as 800 additional daily flights in and out of Atlanta while the Olympics are under way.
Valujet's sudden shutdown will sharply increase fares along the routes previously flown by the low-cost carrier, according to travel agents and others who watch air fares closely.
Tom Parsons, editor of Best Fares magazine, predicted Tuesday that fares could increase as much as 70 percent in Valujet's former markets, while Blake Fleetwood, owner of Planatarium Travels in New York, predicted that those fares will at least double.
A recent Department of Transportation study, estimating that Americans saved $6.3 billion last year flying low-cost carriers, also said the low-cost carriers now compete in markets that account for almost 40 percent of domestic travelers. But because they are niche carriers, most low-cost lines have largely carved out markets that do not compete head-to-head with the major carriers, and rarely with one another.
When the big carriers do match their low-cost competitors' fares, they do so with a limited number of seats, and they require a round-trip ticket and a Saturday stay.
Like ValuJet customers everywhere, clients of Bay Pines Travel in St. Petersburg, Fla., who were booked on the carrier are scurrying to make other travel arrangements, said agency office manager Debbie Elgin.
But it is not clear which airlines are taking ValuJet passengers. Nor is it clear how or if customers will get their money back, she said.
Elgin said ValuJet has left travel agencies and their clients in the dark.
When Kiwi International Airlines was grounded by the FAA two years ago, the Newark, N.J.-based airline quickly sent faxes far and wide to travel agents offering contingency plans.
``We haven't heard `boo' from ValuJet,'' Elgin said. MEMO: The Boston Globe, The New York Times and the Knight-Ridder
Financial wire were used for this report. ILLUSTRATION: Graphic
VALUJET IN NEWPORT NEWS
[For complete graphic, please see microfilm] by CNB