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The Honolulu Advertiser
Posted on: Friday, November 23, 2001

Small airlines adapting quicker

By Nick Wadhams
Associated Press

DENVER — A handful of smaller, scrappier airlines are emerging battered but not beaten in the worst downturn in the history of the airline industry.

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Frontier Airlines

JetBlue Airways

Southwest Airlines

While the nation's largest airlines posted $2.4 billion in losses and laid off more than 100,000 employees in the third quarter, three small airlines — AirTran, Frontier and jetBlue — are going ahead with plans to add more routes and scoop up more customers as larger airlines struggle.

"I think the bigger guys are just kind of into survival," said David Neeleman, chief executive of New York-based jetBlue. "We're basically just going about our business."

Though all airlines have reported steep drops in traffic, and several small airlines have failed or teeter near bankruptcy, a few of the independent airlines have absorbed the damage caused by Sept. 11 far better than the larger ones.

Frontier, jetBlue and AirTran have distinguished themselves as leaders of the pack. Their simple route plans have made it easier to handle increased security measures, delays and schedule changes without disrupting their entire networks.

Frontier and jetBlue both reported profits in the third quarter. AirTran reported a loss of $10.6 million, including charges directly related to the Sept. 11 attacks, after 11 straight profitable quarters.

They are doing well enough to proceed with plans for expansion — an idea that is far from consideration for major airlines hemorrhaging cash like United, Delta, American and Northwest.

Frontier is proceeding with a drive to add flights to Alexandria, Va., and recently opened a route to Reno, while other airlines cut to that city. It has also rehired 70 of the 440 employees it laid off after the attacks.

Despite its financial troubles, AirTran, of Orlando, Fla., announced it will fly to Baltimore from an Atlanta hub. The move came after US Airways' low-fare carrier, MetroJet, cut its route between Baltimore and Atlanta. It also added a flight to Tallahassee.

"Our advantage in being small gives us the ability to jump around and make the moves quickly where we see the opportunity," said Sean Menke, vice president of marketing and planning at Denver-based Frontier.

The smaller airlines have also waged aggressive campaigns to attract passengers to their airlines away from the larger ones with savvy public-relations campaigns.

They have imitated the model of Southwest Airlines, a larger carrier that distinguished itself with low fares and a level of customer service that still hasn't caught on among larger airlines.

Frontier recently took out a full-page ads in Denver newspapers announcing a plan to give away empty seats to charities. When airports reopened after Sept. 11, jetBlue dispatched psychologists to gates in New York to comfort passengers.

"That's what those three airlines have to be recognized for — it's their attention to customer service detail" said Mike Boyd, an aviation consultant in Evergreen, Colo. 'If you get those customers to come back, you've locked in some future revenue.'

Though they are the most obvious examples, other airlines have followed the pattern.

Canada's Westjet, established in part by Neeleman, the chief of jetBlue, offered a deal for Halloween giving free tickets to anyone with the last names of "Black," "Orange'' or "Jack(s)."

All airlines, including the low-cost carriers, were hurt by the one-two punch of the declining economy and the two days all air travel was barred after the attacks. All reported steep declines in travel as passengers grappled with their fears of flying, while Morrisville, N.C.-based Midway Airlines shut its doors completely, letting go 1,700 workers.

Smaller airlines benefit from lower costs and more stable customer bases, analysts say. They also are not saddled with expensive labor contracts and have better relationships with unions.

AirTran mechanics and other workers represented by the Teamsters union have agreed to a shorter work week and reduced compensation to avoid layoffs.

When Frontier was faced with the possibility of laying off 40 pilots, the union agreed to an 11 percent pay cut through Dec. 31 to make sure no pilot jobs were lost.

"We have our differences from time to time but we always manage to work things out," said Ron Stock, president of the Frontier Airline Pilots Association.

The airlines have become so popular, analysts say, that instead of trying to convince markets they should be allowed to enter, markets are wooing them.

In Wichita, Kan., Mayor Bob Knight has put together a group of businesses that would guarantee a certain amount of flights each year for Frontier and AirTran if they agree to fly to the city. The larger existing carriers charge such high rates that travelers drive three hours to Kansas City to save on flights.

"There are substantial start-up costs and what we want to do is try and shield them form as much risk as possible," Knight said. Asked whether Wichita would help defray start-up costs, he said, "That would be part of the negotiations."