Air Transport World

America West gambled and won; the Phoenix-based new entrant has found that schedule and a low cost structure are keys to success. (airline company)

Phoenix--In December 1982, sixteen months after its incorporation and eight months after it had planned to inaugurate service, America West had $1,800 left in its company coffers and its founders were beginning to wonder whether their dream of provinding "Instant California" to Midwestern passengers through a Phoenix hub would ever become a reality.

But by Feb. 1, 1984, six months after its first reven a flight finally departed from Phoenix on Aug. 1, 1983, America West was serving 14 cities in 11 states with 11 Boeing 737-200s, and to its surprise had become the second-largest of the deregulation-spawned new entrants in revenue passenger-miles--admittedly a very distant second to People Express, but larger han such "old-timers" as New York Air, Midway and Muse Air. Its employe force had grown to 1,010 from 277 on opening day, it had banked $33 million in equity financing and ordered two 737-300s, and its load factors were well above 50% and nearing breakeven.

The rapid growth is continuing. By July 15 America West will be flying 18 aircraft and serving 18 cities.

"I think the results of our first six months demonstrate the viability of our concept and the potential for the future," chairman and chief executive Edward R. Beauvais told Air Transport World when we visited. He predicted that by the end of 1984 the carrier will have recouped the $9.9 million it lost during its development phase and 1983 operations, and that its employes will have received their first profit-sharing checks.

America West's concept revolves around providing "better-than-average service at a lower-than-average price," primarily to the frequent business traveler, through a hub-and-spoke system, says senior VP-marketing Mark Coleman. The carrier does not necessarily strive for the lowest fare in a market. Says Coleman, "Our schedule is 90% of our success. You have to give the customer convenience. Price is less of a factor."

In typical new-entrant fashion, the concept also includes a low cost structure built on low salaries coupled with employe stock ownership and profit-sharing, plus heavy cross-utilization.

Beauvais attributes America West's rapid growth to "finding a void in the marketplace" at Phoenix, and to the freedoms provided by deregulation. "We are not duplicating what someone else has done," he says, "nor are we stealing from the incumbents. Rather, we are making the markets grow in size. Deregulation allows you to recognize a niche and then fill it."

President Michael J. Conway says a new entrant must have "a viable plan of operation and a viable product. You can't steal your way in--you have to bring something new to the party." The Phoenix gateway

Beauvais sees America West's niche as providing "total California access" by serving all major and satellite airports in that state on a relatively high-frequency, low-fare basis through the Phoenix gateway. "We want a passenger to be able to go from our cities east of the hub to anywhere in California for about half of what he was paying before," he says. …

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