It may have been a red-hot summer season for the US major carriers, but the climate remained decidedly chilly for the low-cost startups. Air South is the latest to feel the cold draft of Chapter 11 bankruptcy and analysts believe there will be more casualties unless Washington intervenes.
Air South, based in Columbia, South Carolina, ceased flying on 28 August, just short of three years of operations. Its fleet of seven B737-200s had served cities up and down the eastern US.Latest figures from the US Department of Transportation show the airline lost $7.6 million in the first quarter compared with a $4.2 million loss for the same quarter in 1996.
Indeed, first quarter results for 16 smaller US carriers, including Air South, Frontier, Kiwi, PanAm, ValuJet and Western Pacific, paint a bleak picture. They reported a combined loss of $87 million compared with a $1.6 million profit in 1996.
US airline consultants Morten Beyer & Agnew say that while poor management, public avoidance post-ValuJet and Federal Aviation Administration 'vigilantism' share some of the blame, the root cause of the impending collapse by so many startups is 'the ruthless and unrestrained predatory competitive practices of the major airlines.' The company calls for a 'meaningful enforcement' of US antitrust and competition laws, for the opening of slot-controlled airports and for the FAA to 'get off the backs of new carriers.'
Edward Faberman, executive director of the Air Carrier Association of America - a group formed earlier this year to lobby on behalf of small carriers - agrees that government intervention is the only way to reverse the trend. 'The carriers are doing whatever they can, by combining into merged companies, looking at their routes, at market solutions and working with local communities. Now it's up to the government to step up to the plank and make sure it is a fair and competitive system that does not include predatory behaviour.'
North of the 49th parallel the no-frills carriers appear to be faring little better. Canadians were due to lose one of their largest low-cost carriers, Greyhound Air, from 21 September unless a partner could be found to inject up to US$10 million and run it under another name. Greyhound Canada Transportation, which is winding down the airline as part of an agreement for a friendly takeover, said there had been a couple of expressions of interest, but the prospect of finding a new owner still seemed unlikely at presstime.
Greyhound's reasons for getting out of the airline business are more to do with the desire of its new owner, Ontario-based ground transport company Laidlaw, to focus on the traditional coach operation than with external pressures. In fact, the airline generated a small pre-tax profit of around US$750,000 for the quarter ending 31 July and had an average load factor of 91 per cent in August. But the company says startup costs almost doubled when it was caught up in regulatory red tape which delayed its launch last year by almost three months and caused it to miss out on much of the peak summer season bookings.
And Greyhound Canada's president and chief executive, Dick Huisman, believes the airline would have lost money in the winter season ahead. 'Rather than create uncertainty about the future of Greyhound Air and see the business erode during the period, we determined we had to wind down the air services,' he says.
Karen Walker/David Knibb
Source: Airline Business
