Air Transport World

ValuJet: so far, so good.(includes related article on airline's order of McDonnell Douglas MD-95 aircraft)(Company Profile)

Atlanta-Drivers in the Eastern U.S. who have yet to hear of ValuJet soon will. The Atlanta-based newcomer has found a market niche, has developed a strategy and is setting a growth and earnings pace that has not been seen in the airline industry for a long time.

ValuJet celebrated its second anniversary on Oct. 26 by reporting a record $22.7 million net profit for its third quarter on revenues of $109.3 million, for a net margin of 20.7%. The revenues were up 171% over same 1994 quarter and the net was nearly four times as big. The results swelled cash holdings to $145.5 million and prompted a second stock split.

NatWest Securities, which thinks highly of ValuJet, notes that Southwest took eight years to produce a $20 million annual net income. ValuJet produced a $20.7 minion net in 1994 - its first full year of operation - and exceeded it in its eighth quarter alone. The late People Express, with which ValuJet often is compared, had a peak annual net profit of $10.4 million.

For the first three quarters of 1995, ValuJet amassed a $48.6 million net profit on revenues of $256.9 million. Operating profit was $77.2 million, a 30.1% operating margin. The net margin was 18.9%.

ValuJet celebrated its anniversary by placing a $1 billion order for 50 McDonnell Douglas MD-95-30ERs, with options for 50 more, becoming the launch customer (see box, page 69). Traffic growth has been as dramatic as its financial success. After starting up with two DC-9-30s from its Atlanta base to Orlando, Tampa and Jacksonville, Fla., it flew 5 millionth passenger in August. It enplaned 1,511,664 passengers in the third quarter, 145% more than it did in the same 1994 quarter.

Those interested in elaborate buildings, maintenance and training bases will be disappointed by ValuJet's headquarters. in some ways, "VirtualJet" is an apt description. There really isn't much to see (ATW, 9/94) but the airline itself is a fascinating blend of simplicity and sophisticated management, with some surprising applications of new technology.

Even the niche is fairly simple. As Lewis Jordan, president, COO and one of the four founders explains: "We offer low-cost, everyday-low-priced transport for the leisure traveler who probably would not have flown otherwise. …

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