Kevin O'Toole/LONDON
THE MAJOR CARRIERS are not the only ones beginning to benefit from an upturn in the US airline market. With traffic growing relatively robustly and yields at last drifting upwards, the second tier of US national and regional carriers is also beginning to show a better clutch of results.
As a snapshot of the available first-half results shows, profits are still not universal, but where losses persist they appear to be easing, and the underlying picture appears to be one of expansion. Almost all of the healthier carriers are showing strong double-digit traffic growth and, judging by latest returns for July, the improvement is continuing into the third quarter.
Leading the way among the low-cost start-ups, ValuJet has continued its breath-taking expansion through the second quarter, shrugging off analyst warnings.
Now, with a fleet of 31 McDonnell Douglas DC-9s, the Atlanta-based no-frills carrier has more than doubled in size over the past year and shows few signs of flagging. Chairman Robert Priddy points out that, far from declining, operating margins hit a new high of 30% in the June quarter.
A better second quarter helped the less-profitable start-ups recover some of their momentum, including Kiwi International, which achieved a profit for the first half. Among encouraging signs for the employee-owned carrier is a growth of almost 60% in passenger numbers over the half and a welcome 14% rise in yields, although the airline admits that load factors of 54% still need to improve.
Reno Air swung back to profit in the second quarter, helping to reduce the loss reported for the first half, despite harsh competition on the West Coast.
Paper making giant Kimberly-Clark (K-C) reports that profits for its Milwaukee-based Midwest Express operation trebled in the second quarter. The improvement gave a timely boost ahead of K-C's plans to offload 70-80% of its airline interests through a public flotation. Both the core Midwest Express business airline and its Skyway Airlines commuter carrier are to be included in the sale.
The AirTran group says that it is pressing ahead with plans to spin off its low-cost AirTran Airways jet operation into a separate company following an encouraging performance in the June quarter, the first in the group's financial year. AirTran Airways, which was launched in October, now operates six Boeing 737s from its base in Orlando, Florida. The operation carried almost 90,000 passengers during the quarter and reached profitability in June, says AirTran chairman Robert Swenson.
Mesaba Aviation, the group's Minneapolis-based Northwest Airlink carrier, was also among regional feeders benefiting from a general improvement in yields and traffic volumes.
Atlantic Southeast Airlines continued its run of impressive results with a 23% operating margin for the first half, although analysts have been marking down Delta Connectors on fears that Delta will cut rates.
Among the United Express carriers, Air Wisconsin again increased profits from its growing fleet of British Aerospace 146s, and Atlantic Coast Airlines returned to profit after 1994's restructuring. ACA axed unprofitable routes to Florida and the northeast, cut two aircraft types from its fleet and put in place a $20 million recapitalisation. As with Air Wisconsin, BAe took a hand in the turnaround at ACA, which has refocused its fleet around the Jetstream J31 and J41.
Charter operators also benefited from growing traffic volumes, with World Airways and Tower Air showing gains in traffic and utilisation rates. Amtram, parent of American Trans Air (ATA), reported a more muted performance for its seasonally sensitive charter business (the USA's largest), but the slack was more than taken up by 50% growth in passenger numbers on its growing scheduled services.
ATA has also settled plans to expand its base at Indianapolis, Indiana, with an investment of $400 million and the hiring of at least 1,450 new staff, to add to its 2,000-strong workforce. Rivals in St Petersburg and Orlando had attempted to lure the carrier away, but Indianapolis won with an attractive package of incentives.
Source: Flight International
