Denver-based Western Pacific has joined the long list of US low cost carriers to bite the dust. The airline has been unable to buy the time needed to turn around since limping into Chapter 11 bankruptcy last year.
The US industry has been anticipating Western Pacific's demise for some months. Since filing for bankruptcy in October 1997, the airline had resorted to offering consecutive deep discount fares that even it called 'fruitcake sales', and had hiked agency commission rates to 20 per cent. But president and chief executive officer Robert Peiser insists the story could have ended differently. 'We believe Western Pacific's turnaround was imminent, as evidenced by our bookings,' he says.
Analysts say Peiser's belated optimism might hold more weight had Western Pacific's senior management been able to put aside internal squabbles last year and follow through on a planned merger with Denver-based low cost competitor, Frontier Airlines. The Denver market could not support two low fare operations, each of which was also fighting against the dominant presence of United Airlines.
With Western Pacific's fate sealed, attention is now focused on Frontier's survival. Most observers are cautiously optimistic, given that Frontier no longer has a low cost competitor in Denver and might be able to gain critical mass by acquiring up to four of Western Pacific's Boeing 737s to add to its fleet of 14 737s.
Also, by surviving this far, Frontier may yet benefit when new Department of Transportation guidelines on anticompetitive behaviour are issued. Expected during the first quarter of 1998, the guidelines will define what constitutes anticompetitive behaviour - something the US majors say has never been made clear.
Last year, Frontier filed a predatory behaviour complaint against United, a charge that the major denies. A number of new laws aimed at encouraging new competition and helping small, low fare airlines such as Frontier will also be proposed in Washington DC this year.
Frontier says the mood at the company is upbeat, even though its third quarter results, due to be issued at presstime, were expected to be negative. In its second quarter, Frontier reported a net loss of $2 million on revenues of $38 million. The company says that 60 per cent of its capacity was selling against Western Pacific, whose 'irrational pricing' since October hurt Frontier's load factors.
For four months, according to Frontier president Sam Addoms, from the time Western Pacific completed shifting its 43 daily flights to Denver from its former hub at Colorado Springs, the Denver market was 'supersaturated with excess capacity.' In January, Frontier's load factor was 53 per cent, down from the figure of 59 per cent which the airline achieved 12 months ago.
With Western Pacific out of the way, Frontier is focusing on its plan to attract more business travellers. By the end of the year it plans to have introduced a first class cabin into all of its aircraft and it is looking to increase frequencies to three or four daily flights to each city it serves. The airline has also begun serving Baltimore, Boston and New York, traditionally strong business markets.
'We have become very popular ever since Western Pac bit the dust,' notes Frontier. 'Most analysts agreed there was room for only one low fare airline in Denver and we said it would be us.'
Karen Walker
Source: Airline Business
