AirTran Right for City, Chief Says
By Kyle Stock, The Post and Courier, Charleston, S.C.
May 22–AirTran Airways is hemorrhaging money to pay for fuel and planning to freeze or shrink its route map, but its chief executive officer reaffirmed the discount carrier’s commitment to the Charleston market Wednesday.
AirTran’s local service to its Atlanta hub has performed better than expected when it was launched 12 months ago, according to CEO Robert Fornaro, who was in town for the company’s annual meeting of shareholders.
“It’s the right fit and it’s a strong city,” Fornaro said of Charleston. “It’s probably a little bit better than we thought. … It’s a city that we want to stay in.”
However, the low-fare carrier, the country’s No. 8 airline in terms of passengers, plans to raise prices from its current average one-way fare of $99 and charge fees for odds and ends such as seat selection and extra bags in its bid to climb back to profitability.
In doing so, AirTran is following the rest of the industry. For example, American Airlines, which also serves Charleston, announced Wednesday that it will charge $15 to stow a bag in the belly of a plane, in addition to the $25 it assesses to check a second piece of luggage.
By almost all measures, AirTran is soaring. In the first quarter, it flew a record high number of passengers and its planes are more full than ever, at 75.3 percent. Its revenue in those three months surged 18 percent over the year-earlier period.
But like most U.S. carriers, AirTran could not outclimb gas prices. The Orlando-based airline swung to a $35 million loss in the first three months of the year compared with a $2 million profit in same period of 2007. Almost half of its spending in the latest quarter went to fuel.
“Trying to put together a business plan for this has been very tricky,” Fornaro said. “You can’t save your way out of it.”
AirTran said Wednesday it will scrap a plan to expand its route map by 10 percent this year, and it is no longer considering nonstop flights from Charleston to its small hub in Baltimore, a route that “made sense” a few months ago.
The airline is in negotiations to sell a jet and defer the purchases of several planes on order.
“We’re moving fast, but quite frankly we need to move even more quickly,” Fornaro said.
The company is also trying to trim fuel expenses with seemingly trivial policies, such as asking passengers to lower their shades before exiting the plane, taxiing on a single engine and making longer, slower final descents. “It’s expensive just to turn the plane on, so little things like that really add up,” said Kevin Healy, senior vice president of marketing and planning.
The cost-cutting strategy that executives discussed at Charleston Place did little to calm turbulence on Wall Street. AirTran shares plunged another 10.5 percent to $2.91, a 52-week low, in heavy trading on the New York Stock Exchange Wednesday. A year ago, the stock was worth about four times more.
While investors were growing increasingly bearish, Mayor Joe Riley joined local economic development officials in pledging support for the airline.
“I desperately wanted to be here to thank you … because your entry into the market has been so important to us,” Riley told the AirTran board and executive team. “It’s been a huge boost to our economy.”
Since AirTran landed in Charleston almost a year ago, passenger traffic at Charleston International Airport has grown about 20 percent, and airfares in and out of the Holy City terminal have plummeted faster than those in any other U.S. city. AirTran now holds 9 percent of the local commercial air market, according to statistics compiled by the Charleston County Aviation Authority.
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