Entrepreneurs take a flier on airlines

Ventures called long shots because of risky climate

July 08, 2005|By THE BOSTON GLOBE

John Wraga doesn't own a single plane, but from his office at Hanscom Field in Bedford, Mass., he is crafting a grand vision for the future of air travel: an all-first-class airline with a manicurist, exercise equipment and "everything you can think of onboard."

Wraga is among a number of entrepreneurs who want to become airline magnates: Fourteen applicants - Wraga not included - are seeking certification from the U.S. Department of Transportation to start airlines.

It couldn't be a worse time to get into the business, though. High fuel costs, low ticket prices and fierce competition have led airlines to seek Chapter 11 bankruptcy protection. Also, yesterday's terror attacks in London might have an impact on air travel.

But Wraga and the other applicants say they are trying to bank on the industry's financial doldrums to boost their bids to become the next big thing in the skies. Some of the ventures are headed by former airline executives and pilots, who are seeking millions in funding. They are betting that passengers want airlines with a unique approach, and they're hoping to snag bargains on planes that are being sold off by troubled carriers.

But airline specialists - and even some involved in the new ventures - say those bets are long shots.

"If you wanted to lose a lot of money, it's a great time" to get into the airline business, acknowledged Bill Mishk, vice president of planning at GoJet LLC, which is also applying for a flight certificate.

GoJet's parent, Trans State Holdings, operates flights on 50-seat aircraft for United Airlines from St. Louis. It formed GoJet last year to seek permits to fly 70-seat Bombardier regional jets. It also might try to expand and venture out on its own.

Atlantic Express Inc. of Purchase, N.Y., plans to fly between New York and London, under the name Eos, starting this year. Eos, the name of the Greek "goddess of the dawn," bills itself as a premium service and promises flights on Boeing 757s with only 48 seats, or about a quarter of the normal number, to increase legroom.

The company is headed by David Spurlock, a former British Airways executive, who says the aspiring carrier has secured $185 million in financing.

Skylink Airways Inc. of Dulles, Va., hopes to start up MaxJet, a low-fare carrier that would fly used Boeing 767s. It took delivery of the first plane last month, said Mike Malik, chief marketing officer.

Boston-Maine Airways Corp. of Portsmouth, N.H., owns 21 Boeing 767 jets, bought used from United several years ago, said David A. Fink, the company's president.

Under the name Pan Am Clipper Connection, Boston-Maine flies three planes from Portsmouth to Bedford, Mass., Newburgh, N.Y., and Trenton, N.J. It has applied for certification to fly to Ohio, Florida and Puerto Rico.

Fink pointed to the availability of used airplanes, which can be bought cheaply from airlines in downsizing mode or in bankruptcy proceedings and which can help bolster the hopes of new players. He got into the business by buying the assets of defunct Pan Am Airlines out of bankruptcy in 1998 and bought most of his planes from United Airlines just before it filed for bankruptcy in 2002.

"They parked them all in the desert, and I saw the opportunity," he said. "It's like buying an automobile. You can go buy a new car or you can buy used cars. We always buy used cars."

Aviation consultant Michael Rottblatt said many start-ups also are looking for deals on new jets from manufacturers like Boeing, Airbus and Bombardier, which are hungry for new business.

"There are planes that were ready to come off the assembly line when the airline industry collapsed and airlines said, `We can't pay for them,'" Rottblatt said. "Meanwhile, Boeing and Airbus are in the business of selling airplanes, so they're making it very affordable by underwriting the cost of buying aircraft."

Cheap planes, though, don't necessarily mean that start-ups will have an easy time.

"It's going to be more and more difficult to see new carriers come online," said Darryl Jenkins, a visiting professor of business at Embry-Riddle Aeronautical University.

Aside from needing cash for planes and other expenses, start-ups have to win approval from the Federal Aviation Administration and the Transportation Department.

FAA certification is geared toward ensuring the safety of a new airline. The agency requires safety and maintenance manuals to be submitted, as well as the chief pilot's cockpit history. The Transportation Department certifies airlines based on their financial viability, and looks at the management experience of the principals.

Wraga, a former operations manager at Logan International Airport and current aviation consultant, has put together a team that includes a former pilot and a former member of the National Transportation Safety Board. The group has several investors, he said, but won't apply for permits until more funding has been lined up.

Staying in the air is often more costly than some start-ups can handle, said GoJet's Mishk. Even if a new airline can get a good deal on planes, it might still wind up hamstrung by the costs. "Airlines have always been considered a somewhat sexy business, sort of like being an actor," he said. "The reality is sort of like being a lawyer. It looks good on TV, but once you learn how much research and work goes into it, people lose interest quickly."

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