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Executives at the upstarts cross their hearts and deny any intention of stealing business from the wary giants. "We're not pulling traffic away from anyone," says Mark Morro, chairman of Air 21, which last December began flying Fokker F.28 4000s, leased from USAir, out of Fresno. "We're bringing passengers back to the airport." Lewis Jordan, president of ValuJet, which bases its 47-plane fleet in Atlanta, says Delta, its looming neighbor at Hartsfield Airfield, has nothing to fear. "We stole people from their living rooms and automobiles," he insists, not from Delta flights. Maybe, but ValuJet earned $67.8 million last year on sales of $367.8 million, nearly triple its sales in 1994.
ValuJet's low fares undeniably attract customers who would otherwise have had to pay Delta's prices. Art Gilbert, 42, an insurance consultant from Baltimore, Maryland, recently traveled the 48 miles to Dulles Airport in northern Virginia to take a ValuJet flight to Atlanta. "I live closer to Baltimore's BWI Airport, but this flight is $400 cheaper than the other carriers," says Gilbert. "My round trip ticket cost $189."
Thanks to a surplus of planes, starting an airline has been relatively affordable in the past couple of years. A Boeing 737 can be leased for about $15,000 a month. Put together a couple of planes and a pinch-penny operating plan, and you've got your wings.
The supply of idling aircraft is matched by a supply of idling airline executives. "The airline business is tough," says ValuJet's Jordan, "but it's all we really know." Jordan is a former president of Continental. KIWI CEO Jerry Murphy spent 24 years at Pan Am; Western Pacific's chairman, Ed Beauvais, started America West; and Air 21's chairman, Mark Morro, co-founded and was president of Wings West Airlines. They have seen, up close, airlines struggling and going under.
What makes these guys think they can avoid the same fate? The answer begins with the 100,000 or so employees jettisoned by the airlines during the restructurings of the past six years. They constitute a formidable pool of skills itching to get back into action, at a cut-rate price. Air 21's Morro hires pilots for $40,000 a year, as opposed to $100,000-plus at the majors. First officers get $24,000, and flight attendants start at $18,000.
The theme extends to corporate overhead. At ValuJet, Jordan conducts business from a $100 desk he bought at Home Depot. Air 21 operates from a vintage Army Air Corps barracks at the Fresno airport. The furnishings are Holiday Inn castoffs and a pawnshop TV. In-flight meals are a rarity, and other economies are visible. Air 21 doesn't buy paper napkins; it gets them free from restaurants in Fresno that thereby gain advertising for their names.
Surprisingly, this sort of penurious ingenuity yields only a slight edge over the majors, who have been frantically cutting costs as well. Using a basic industry yardstick--operating expense per seat, per mile flown--analyst Engel figures that last year American, Delta and United averaged 8.76[cents] a mile; the upstarts averaged 7.64[cents].