wigstheone
Jul 16, 02, 6:15 am
WICHITA, Kan. -- David Wells, president of Key Construction Inc. here, keeps a lid on expenses. But last December he readily committed the building contractor to spending $20,000 over 12 months to fly on low-fare carrier AirTran Airways.
Like many Wichita executives, Mr. Wells sees it as money well spent. For years, the city's airfares have been among the nation's highest. Lacking competition from low-fare carriers, Wichita was a seller's market for giants such as AMR Corp.'s American Airlines and Delta Air Lines.
AirTran, whose arrival in such a market typically drives down fares 50% or more, offered a cheaper alternative, even with the strings it attached to starting service: big financial commitments from area businesses and local government. Last year, nearly 400 businesses agreed to shell out a total of $4.7 million for AirTran tickets to woo the Orlando, Fla., carrier. City officials agreed to add as much as $4.5 million in revenue guarantees over two years. They also chipped in $600,000 to help promote the new service.
Much of the airline industry is still reeling from the effects of Sept. 11 and the economic downturn. Many carriers, such as UAL Corp.'s United Airlines and US Airways, have had to slash costs and routes and seek federal loan guarantees to combat a surge in losses.
By contrast, AirTran has quietly stayed a course of steady growth. Chairman Joe Leonard, a 58-year-old industry veteran, made his first Wichita-style deal several days after taking over three years ago. While the industry has struggled, he has pushed harder for such "public-private partnerships," as he calls them. The "public" part taps municipal coffers mainly for revenue guarantees that protect AirTran against losses during the initial phase of operations; the private builds "travel banks," in which businesses pledge to spend a specified amount on tickets. Both elements help to build a loyal following and a cushion against the early losses of expanding into a new city and the invariable backlash from bigger competitors who respond by slashing their own fares and expanding service.
http://online.wsj.com/article/0,,SB102676958277765400,00.html?mod=travel%5Fprima ry%5Fhs
Like many Wichita executives, Mr. Wells sees it as money well spent. For years, the city's airfares have been among the nation's highest. Lacking competition from low-fare carriers, Wichita was a seller's market for giants such as AMR Corp.'s American Airlines and Delta Air Lines.
AirTran, whose arrival in such a market typically drives down fares 50% or more, offered a cheaper alternative, even with the strings it attached to starting service: big financial commitments from area businesses and local government. Last year, nearly 400 businesses agreed to shell out a total of $4.7 million for AirTran tickets to woo the Orlando, Fla., carrier. City officials agreed to add as much as $4.5 million in revenue guarantees over two years. They also chipped in $600,000 to help promote the new service.
Much of the airline industry is still reeling from the effects of Sept. 11 and the economic downturn. Many carriers, such as UAL Corp.'s United Airlines and US Airways, have had to slash costs and routes and seek federal loan guarantees to combat a surge in losses.
By contrast, AirTran has quietly stayed a course of steady growth. Chairman Joe Leonard, a 58-year-old industry veteran, made his first Wichita-style deal several days after taking over three years ago. While the industry has struggled, he has pushed harder for such "public-private partnerships," as he calls them. The "public" part taps municipal coffers mainly for revenue guarantees that protect AirTran against losses during the initial phase of operations; the private builds "travel banks," in which businesses pledge to spend a specified amount on tickets. Both elements help to build a loyal following and a cushion against the early losses of expanding into a new city and the invariable backlash from bigger competitors who respond by slashing their own fares and expanding service.
http://online.wsj.com/article/0,,SB102676958277765400,00.html?mod=travel%5Fprima ry%5Fhs