Kevin O'Toole/LONDONRamon Lopez/WASHINGTON DC
VALUJET HAS ended the first half-year in good financial shape, despite its grounding, and appears confident of resuming operations on 23 August.
Although the airline was grounded by the US Federal Aviation Administration shortly after the Florida crash on 11 May, and has had to put aside nearly $32 million to cover the shutdown, ValuJet still managed to end the first six months of 1996 with a $1 million net profit.
The figures were helped by a reduction in costs because of the grounding. Fees for aircraft transfers and disposals also netted nearly $15 million.
The plan is to restart the airline at the end of August with 15 of its 43 McDonnell Douglas DC-9-30s. Initially, services would resume to five cities from its Atlanta base, later building to 17. ValuJet has already requested permission to start advanced ticket sales.
The airline aims to sell or lease 15 of the DC-9-30s by the end of the year, with another 15 to be stored in the Mojave Desert pending a return to service.
Other aircraft will be disposed of, including its four MD-80s. The remaining six, are due for delivery this year. Sales agreements have now been signed for two of the aircraft, and president Lewis Jordan says that the airline is close to finalising a deal with an unnamed buyer for the remaining MD-80s, four DC-9-21s and two DC-9-31s (Flight International, 7-13 August).
Elsewhere among the US start-ups, there is evidence of a limited fall-out from heightened FAA scrutiny and the publicity aimed at the low-cost sector in the wake of the ValuJet crash.
Kiwi International, which had four of its 15 Boeing 727s grounded in July, following FAA concerns over pilot training, estimates that this, together with the impact of the ValuJet crash, will cost it around $2-4 million in lost income over the current quarter. The airline nevertheless stayed in profit over the half year, while also managing to secure a $2 million cash infusion from Recovery Equity Investors.
Reno Air, flying 28 MD-80/90s and looking for more expansion, strategically withdrew its proposed public offering, citing the volatility in airline stocks as a main reason.
American Trans Air partially blames the effects of the ValuJet crash for a "disappointing" second quarter and an overall decline in yields. It says that its "aggressive expansion" to new destinations, including Florida, has not been as profitable as expected. The Florida service is soon to be abandoned.
AirTran Airways also blames flight cancellations and "negative publicity on the low-fare segment" for lower-than-expected traffic growth in June. It adds that bookings seem to have since recovered.
Others among the low-cost start-ups appear to have continued dramatic growth. Western Pacific Airlines, now entering its second year of service, saw traffic grow nearly eight-fold in the first half, having built up a fleet of 15 Boeing 737-300s to serve 20 cities.
The WestPac team, plans to launch Mountain Air Express in November to fill the hole left, by the withdrawal of Continental Express from Denver.
Frontier Airlines is already making headway from its Denver base. Two years after its launch, the airline has a fleet of seven 737-200s and two 737-300s. In July, it raised another $13.3 million towards leasing additional 737s.
Source: Flight International
