Major Airlines Upset Start-Up's Aim To Link Oklahoma to Both Coasts

Gordon Werner · 08-22-2001, 03:42 PM

Major Airlines Upset Start-Up's Aim To Link Oklahoma to Both Coasts

By Bernard Wysocki Jr.

Staff Reporter of The Wall Street Journal

TULSA, Okla. -- Just a year ago, tiny Great Plains Airlines had a dream. It would use 50-seat regional jets to fly passengers nonstop between Oklahoma and a dozen major U.S. cities -- all because the major carriers didn't offer such flights.

Today, that dream is still unfulfilled. And one by one, the major carriers are starting to offer nonstop service on precisely these routes, beating Great Plains to the punch. At the same time, the airport directors in Tulsa and Oklahoma City are actively trying to market their facilities to any carrier, large or small.

Last November, AMR Corp.'s American Airlines inaugurated nonstop service between Tulsa and Los Angeles. "We tried for years to get them to fly that route," says Brent Kitchen, director of the Tulsa airport authority. "I think American figured, 'We're going to try it before Great Plains gets there.' " Then last month, Northwest Airlines ' Express Airlines 1 unit began flying nonstop Tulsa-Minneapolis. It will begin Oklahoma City-Minneapolis in September. Other carriers are planning still more possible pre-emptive strikes.

Like Midway Airlines, which declared bankruptcy last week in the face of slowing passenger traffic, Great Plains is discovering the huge obstacles facing upstart airlines as they battle for passengers against incumbents in a sluggish U.S. economy. In the case of Great Plains, the incursions from the majors illustrate how tough it is to compete against the big guys even when your strategy is one of coexistence. Great Plains has vowed to stay away from hub airports and has a policy of matching, rather than undercutting, the majors' fares.

But the big guys never vowed to leave Great Plains alone -- although they say the tiny airline didn't figure in their added routes. American Airlines officials deny that Great Plains had anything to do with the new service to Los Angeles. Northwest says its decision was based on potential traffic wasn't influenced by the existence of Great Plains.

Now Continental Airlines has told Tulsa officials it is considering a nonstop Tulsa-Newark offering within 18 months, bringing nonstop service to the greater New York City area, a high priority of Great Plains. Last year, 68,000 passengers traveled between New York and Tulsa, but had to change planes at hub airports. Continental Airlines says it has no imminent plans to fly nonstop between Tulsa and Newark but wouldn't comment further.

Great Plains' chief executive officer, James Swartz, is trying to position these incursions as a victory of sorts. Mr. Swartz says that the very existence of Great Plains is spurring the major carriers. If somebody else decides to fly, so what? Oklahomans still win. One way or another, it's mission accomplished, Mr. Swartz is saying these days.

Perhaps. But these pre-emptive strikes undermine Great Plains' original business plan and have dashed any hopes of flying to Los Angeles or Minneapolis. And if Continental moves ahead with Newark, that would probably kill the upstart's plans for nonstop service to New York. Mr. Swartz says he just hopes that if Continental makes a move, it's sooner rather than later. "I would hate to spend the $1 million it takes to open a market and then have another carrier go in there right on top of us," he says.

More air service is probably good for Oklahomans, but if Great Plains is hurt by competition, it could sour the public investment in the airline. Before Great Plains got off the ground, David Johnson, counsel to the airline, helped push through state legislation giving Great Plains tax credits that it could sell to raise money. Late last year, through tax-credit sales and a loan from the Bank of Oklahoma, with property put up as collateral by the city of Tulsa, Great Plains amassed $30 million in start-up capital.

This past March, Great Plains acquired Ozark Air Lines Inc. of Columbia, Mo., which gave it instant federal certification to fly. With the purchase came two smaller jets -- incapable of flying nonstop to the coasts -- which Great Plains immediately put into service between Oklahoma and Nashville to the east and Albuquerque to the west.

The good news is, these routes are proving successful. Great Plains often has more than 50% of the seats filled. But to reach profitability, Great Plains needs at least three more of these smaller Fairchild-Dornier 32-seat jets, which will entail getting lease financing for them. It would then expand its shorter-haul routes, perhaps flying between Oklahoma and such cities as New Orleans, Omaha and Colorado Springs. And to carry out its original strategy, Great Plains needs a handful of 50-seat jets, but these are in short supply.

So today, Great Plains finds itself with a two-track strategy. Its short-haul business is working, but the airline needs more planes to cover its costs. Its long-haul strategy is being taken apart city by city by the big carriers, although so far, its No. 1 hope -- to fly nonstop to Reagan National Airport in Washington, D.C. -- is still intact.

At Reagan, the airline faces a different problem: All of the airport's 771 daily landing slots are taken. It has hired lobbyists to try to get some slots. The best estimate is that these won't come until spring of 2002, at the earliest -- and by then, airlines that already have slots (such as USAirways) might decide to inaugurate service to Tulsa.

Mr. Swartz says it is theoretically possible to make a "code-sharing" agreement whereby Great Plains flies to Washington under the umbrella of another airline, whether it's USAirways or somebody else. On the other hand, another carrier, including USAirways, could decide to go it alone and start serving Oklahoma and Tulsa by itself. That would sink Great Plains' plans to fly to the nation's capital.

"In that case, it's game over," Mr. Swartz says.

Write to Bernard Wysocki Jr. at bernie.wysocki@wsj.com

Forrest Tohill · 08-22-2001, 04:19 PM

Sounds typical... if the big boys choose for the game to be over, it will be over... at least in the 50 seater plus bracket.

What will be telling is just how long the major airlines keep up these "new found" flight segments.

We need some input from the now and again resident Okie here.

AlphaSigOU · 08-24-2001, 06:17 PM

Great Plains seems to be doing OK in Tulsa, OK, with service to OKC, Nashville (BNA) and Albuquerque. They purchased Ozark Airlines and currently fly their Dornier 328 Jets still in the colors of Ozark.

However, it didn't take long for AA to offer service from TUL-LAX. Northwest's Express Airlines 1 commuter affiliate is also offering service from TUL-MSP.

I think they'll do all right, if they focus on other short haul markets, possibly OKC or TUL to ICT (Wichita), COS or other smaller cities not otherwise served by the big ones.

08-22-2001, 03:42 PM	#1
Gordon Werner Insane Collector Join Date: Jun 1998 Location: Somewhere else Age: 37 Posts: 2,059	Major Airlines Upset Start-Up's Aim To Link Oklahoma to Both Coasts Major Airlines Upset Start-Up's Aim To Link Oklahoma to Both Coasts By Bernard Wysocki Jr. Staff Reporter of The Wall Street Journal TULSA, Okla. -- Just a year ago, tiny Great Plains Airlines had a dream. It would use 50-seat regional jets to fly passengers nonstop between Oklahoma and a dozen major U.S. cities -- all because the major carriers didn't offer such flights. Today, that dream is still unfulfilled. And one by one, the major carriers are starting to offer nonstop service on precisely these routes, beating Great Plains to the punch. At the same time, the airport directors in Tulsa and Oklahoma City are actively trying to market their facilities to any carrier, large or small. Last November, AMR Corp.'s American Airlines inaugurated nonstop service between Tulsa and Los Angeles. "We tried for years to get them to fly that route," says Brent Kitchen, director of the Tulsa airport authority. "I think American figured, 'We're going to try it before Great Plains gets there.' " Then last month, Northwest Airlines ' Express Airlines 1 unit began flying nonstop Tulsa-Minneapolis. It will begin Oklahoma City-Minneapolis in September. Other carriers are planning still more possible pre-emptive strikes. Like Midway Airlines, which declared bankruptcy last week in the face of slowing passenger traffic, Great Plains is discovering the huge obstacles facing upstart airlines as they battle for passengers against incumbents in a sluggish U.S. economy. In the case of Great Plains, the incursions from the majors illustrate how tough it is to compete against the big guys even when your strategy is one of coexistence. Great Plains has vowed to stay away from hub airports and has a policy of matching, rather than undercutting, the majors' fares. But the big guys never vowed to leave Great Plains alone -- although they say the tiny airline didn't figure in their added routes. American Airlines officials deny that Great Plains had anything to do with the new service to Los Angeles. Northwest says its decision was based on potential traffic wasn't influenced by the existence of Great Plains. Now Continental Airlines has told Tulsa officials it is considering a nonstop Tulsa-Newark offering within 18 months, bringing nonstop service to the greater New York City area, a high priority of Great Plains. Last year, 68,000 passengers traveled between New York and Tulsa, but had to change planes at hub airports. Continental Airlines says it has no imminent plans to fly nonstop between Tulsa and Newark but wouldn't comment further. Great Plains' chief executive officer, James Swartz, is trying to position these incursions as a victory of sorts. Mr. Swartz says that the very existence of Great Plains is spurring the major carriers. If somebody else decides to fly, so what? Oklahomans still win. One way or another, it's mission accomplished, Mr. Swartz is saying these days. Perhaps. But these pre-emptive strikes undermine Great Plains' original business plan and have dashed any hopes of flying to Los Angeles or Minneapolis. And if Continental moves ahead with Newark, that would probably kill the upstart's plans for nonstop service to New York. Mr. Swartz says he just hopes that if Continental makes a move, it's sooner rather than later. "I would hate to spend the $1 million it takes to open a market and then have another carrier go in there right on top of us," he says. More air service is probably good for Oklahomans, but if Great Plains is hurt by competition, it could sour the public investment in the airline. Before Great Plains got off the ground, David Johnson, counsel to the airline, helped push through state legislation giving Great Plains tax credits that it could sell to raise money. Late last year, through tax-credit sales and a loan from the Bank of Oklahoma, with property put up as collateral by the city of Tulsa, Great Plains amassed $30 million in start-up capital. This past March, Great Plains acquired Ozark Air Lines Inc. of Columbia, Mo., which gave it instant federal certification to fly. With the purchase came two smaller jets -- incapable of flying nonstop to the coasts -- which Great Plains immediately put into service between Oklahoma and Nashville to the east and Albuquerque to the west. The good news is, these routes are proving successful. Great Plains often has more than 50% of the seats filled. But to reach profitability, Great Plains needs at least three more of these smaller Fairchild-Dornier 32-seat jets, which will entail getting lease financing for them. It would then expand its shorter-haul routes, perhaps flying between Oklahoma and such cities as New Orleans, Omaha and Colorado Springs. And to carry out its original strategy, Great Plains needs a handful of 50-seat jets, but these are in short supply. So today, Great Plains finds itself with a two-track strategy. Its short-haul business is working, but the airline needs more planes to cover its costs. Its long-haul strategy is being taken apart city by city by the big carriers, although so far, its No. 1 hope -- to fly nonstop to Reagan National Airport in Washington, D.C. -- is still intact. At Reagan, the airline faces a different problem: All of the airport's 771 daily landing slots are taken. It has hired lobbyists to try to get some slots. The best estimate is that these won't come until spring of 2002, at the earliest -- and by then, airlines that already have slots (such as USAirways) might decide to inaugurate service to Tulsa. Mr. Swartz says it is theoretically possible to make a "code-sharing" agreement whereby Great Plains flies to Washington under the umbrella of another airline, whether it's USAirways or somebody else. On the other hand, another carrier, including USAirways, could decide to go it alone and start serving Oklahoma and Tulsa by itself. That would sink Great Plains' plans to fly to the nation's capital. "In that case, it's game over," Mr. Swartz says. Write to Bernard Wysocki Jr. at bernie.wysocki@wsj.com

08-24-2001, 06:17 PM	#3
AlphaSigOU Insane Collector Join Date: Jul 1999 Location: Wylie, Texas Age: 43 Posts: 1,419	Great Plains seems to be doing OK in Tulsa, OK, with service to OKC, Nashville (BNA) and Albuquerque. They purchased Ozark Airlines and currently fly their Dornier 328 Jets still in the colors of Ozark. However, it didn't take long for AA to offer service from TUL-LAX. Northwest's Express Airlines 1 commuter affiliate is also offering service from TUL-MSP. I think they'll do all right, if they focus on other short haul markets, possibly OKC or TUL to ICT (Wichita), COS or other smaller cities not otherwise served by the big ones. __________________ *Chuck Corway (AlphaSigOU)* *Causa latet vis est notissima* -- the cause is hidden, the results are well known. James Bond: "I'll take the full odds on the ten, two hundred on the hard way, the limit on all the numbers, two hundred and fifty on the eleven, thank you very much." Plenty O'Toole: "Hey! You've played this game before!" James Bond: "Just once." *REMEMBER THE ALAMO!!! REMEMBER PEARL HARBOR!!! REMEMBER SEPTEMBER 11!!!!*

Thread Tools
Show Printable Version Email this Page
Rate This Thread
Rate This Thread:

08-22-2001, 04:19 PM	#2
Forrest Tohill Master Collector Join Date: Dec 1999 Location: Dallas, Texas, USA Age: 50 Posts: 713	Sounds typical... if the big boys choose for the game to be over, it will be over... at least in the 50 seater plus bracket. What will be telling is just how long the major airlines keep up these "new found" flight segments. We need some input from the now and again resident Okie here.