Air Transport World

American Trans Air cites 'work ethic' for its success.

American Trans Air cites 'work ethic' for its success Indianapolis--With the difficulties of the deregulated marketplace claiming an increasing number of airline victims, it is refreshing to find in the U.S. heartland a real deregulation success story.

Over the past five years, since receiving its common carrier certificate in March 1981, American Trans Air has grown aggressively but with little fanfare into the largest passenger charter carrier in the U.S. In 1985, "America's Vacation Airline" carried 30% of all U.S. non-scheduled passenger traffic in a fleet now composed of nine Lockheed L-1011s, obtained from Delta via Boeing, and eight Boeing 727-100s purchased from United and Pan Am. Between 1982 and 1985 its revenues soared to $165.7 million from $30.6 million, its operating income grew to $15.7 million from $2.3 million, and its 1985 operating profit margin of 9.5% was second only to Southwest among the U.S. nationals. In the same period its boardings jumped 400% from 269,086 to 1,353,646, its RPMs 540% from 409 million to 2.6 billion, its capacity 522% from 522 million to 3.2 billion ASMs, and its employment 275% from 320 to 1,200.

What's more, its Chief Executive and sole owner, J. George Mikelsons, a softspoken entrepreneur who is referred to in American Trans Air's annual reports as "the shareholder," can point pridefully to a string of net profits extending back to 1976--just three years after he founded the company as a travel club operating a single aged Boeing 720. And the profitability is being achieved on, in 1985, an RPM yield of 5.9^ and an ASM cost of 4.4^--a gap of under 1.5^.

Providing some insight into how all this has been accomplished, VP and Chief Financial Officer Jerry W. Taylor says, "A charter carrier is a different breed of cat than a scheduled airline. It demands great flexibility and instant reaction, and you have to develop systems that accommodate those requirements."

Those systems have stood ATA (not to be confused with the Air Transport Association) in good stead in 1986. It has overcome two blows so well that revenues are expected to climb to $180 million this year, the bottom line is expected to remain black, and record profits are foreseen in 1987.

The first blow was the loss of some 75% of ATA's lucrative summer business to Europe because of the scares generated by terrorism incidents and the Chernobyl nuclear accident. ATA was hurt even more than the scheduled carriers by the precipitous drop in U.S.-Europe traffic, says Mikelsons, "because in our case it's a whole airplane that gets cancelled."

But, he continues, echoing Taylor's comments, "One thing we are is fast on our feet." When wholesalers began cancelling charters, ATA quickly "cut all sorts of deals," such as wet-leasing L-1011s to Air Algerie, Air Jamaica and World Airways. It also, says VP-Sales William L. Culkin, managed to generate new summer business to some of its big fall/winter destinations like Honolulu and Las Vegas. "This year taught us a lot," says Culkin, who was with Capitol for 13 years before joining ATA ("the best move I ever made") in 1982. "We were complacent about Europe, especially about our ethnic business. We found it could dry up in a hurry, but we also found we could replace it."

The summer's second incident was not the blow it seemed initially. In August, ATA lost its single McDonnell Douglas DC-10-40 in a ground fire at Chicago's O'Hare Airport when, according to preliminary National Transportation Safety Board findings, an oxygen generator in the back of a seat stored in the cargo hold was activated accidentally during turnaround maintenance. …

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