The rest of the world may be in a recession, but it doesn't seem like it at AirTran Airways.
The Florida-based airline recently posted its best-ever profit after heavy losses last year and is expanding service by 13 flights to Baltimore-Washington International Thurgood Marshall Airport, where it is the second-largest discount carrier. The airline, which turned a first-quarter profit, expects to remain profitable through the rest of the year.
This all comes as people are spending less on travel because of the weak economy and other airlines are losing money, including Southwest Airlines, AirTran's biggest competitor at BWI.
AirTran executives said their good fortune is the result of heavy cost-cutting last year as it anticipated the slowdown in the economy well ahead of other airlines. Southwest and other airlines are just now looking at ways to make their businesses leaner.
"We were the first to step up and face the issue," said Bob Fornaro, the airline's chairman, chief executive officer and president.
"We sized up the situation and we were the first to take action. We took the steps and it has put us in a better position than our competition."
The airline furloughed pilots last year, discontinued unprofitable flights and offered leave to flight attendants. It also halted an aggressive expansion plan and opened up a new stream of revenue by charging extra for "ancillary" items that were once free, such as extra baggage and upgrades to business class.
AirTran also paid a penalty to get out of contracts that had it locked into paying higher fuel prices.
It has paid off so far this year with AirTran becoming one of just two of the top 10 airlines that posted a profit. Discount airline JetBlue, which recently announced it was launching service at BWI, also saw profits, as did discounter Allegiant Air, which has flights from Harrisburg, Pa., and Washington Dulles International Airport.
AirTran's load factor, which measures how full its planes are, rose to 76.3 percent in the first quarter, compared with 75.3 percent a year ago.
AirTran has been able to bring back employees and is beefing up flights at BWI as it works to turn it into a stronger hub and better position the airline to serve the Mid-Atlantic. It is adding flights to Dallas-Fort Worth, Seattle and Los Angeles, bringing its total flights at BWI from 45 to 58. It is also expanding services to Orlando and Fort Lauderdale, Fla., and Atlanta, cities it already serves. Some of the new flights are seasonal.
AirTran started serving BWI in 2001 when US Airways got rid of some of its gates at the airport.
"We are in the middle of a very deep recession, but part of our focus on Baltimore is because of the way it fits in our company," said Fornaro, who explained that BWI Marshall is an important hub for the airline.
In general, discounters are faring better than more expensive airlines because they haven't been hit as hard by the decline in business travel and are benefiting from people looking for cheaper flights.
Discounters also weren't hurt as badly by the decline in international travel.
"The low-cost guys are domestic only, so they're not getting hit as hard in the Atlantic, trans-Atlantic, Pacific and Europe," said Vaughn Cordle, chief analyst at AirlineForecasts, a research firm in Washington.
Cordle said AirTran has also been helped because its labor costs are lower since it pays its workers less across the board.
Meanwhile, Southwest hasn't seen the benefits of being the country's largest discount airline and instead watched its first-quarter profit decline more steeply than it expected as traffic declined because of the economy, especially among business travelers. It also has higher labor costs than the other discount airlines and was paying high fuel costs.
Southwest, which has 161 flights at BWI, has responded with plans to cut capital spending through 2010 by $1.4 billion by retiring some planes earlier than expected and delaying aircraft deliveries, among other things.
The airline is also offering voluntary buyouts to its 35,000 workers and has frozen hiring and executive pay. Southwest is also looking at adding Internet service to its planes as a way to raise revenue.
"Given the economic environment and the recession, we're not surprised to see declines," Southwest spokeswoman Wendy Eichinger said. "We're looking at all ways to return to profitability."
Eichinger wouldn't say whether Southwest was worried that its competitors that are performing better would take some of its market share.
"The benefit right now for customers is there are a lot of low-fare services like ours," Eichinger said. "In an economy like this, low fares are the name of the game. We'll still be able to offer those fares."
AirTran also isn't totally immune to the sluggish economy. It is cutting capacity by 3 percent to 4 percent this year and revenues are weak, declining 9 percent in the first quarter, because fewer people are buying tickets. It doesn't expect to add capacity until 2011.
