McClain Failed Fast

McClain Airlines Jules Rondepierre says he felt a rush when McClain’s blue-and-gold 727 lifted from the runway at Phoenix’s Sky Harbor International Airport last Oct. 20. It had taken McClain Airlines’ seven founders--all veterans of the industry--3 1/2 years and $1 million from their own pockets to get the airline off the ground.

Four months later, it was over. Three of McClain’s four luxury jets had been repossessed, and the troubled company filed for Chapter 11 bankruptcy protection.

Phoenix-based McClain’s strategy was to offer business travelers what it called board room service--its planes had Oriental carpets, wide leather seats, china dishes and free newspapers. McClain hoped to make money flying business travelers on two routes: Los Angeles-Chicago and Phoenix-Chicago. Instead, it lost money flying passengers between Chicago and nearby Rockford, Ill.

McClain’s problem was that it couldn’t get enough planes last October to start frequent service between Los Angeles and Chicago. It wanted at least four Boeing 727s but got only one. McClain flew the so-called Rockford Shuttle to preserve its landing rights at Chicago’s O’Hare International Airport while it searched for more planes.

Shuttle passengers--and there weren’t many--got luxury rides for $19. McClain lost money on every flight. McClain got the planes it needed, but not until January--one month before it failed. Rondepierre, McClain’s marketing vice president, says the airline didn’t start out with enough money to absorb the losses on the shuttle. The airline also wound up paying higher prices for aircraft than it expected, due to a tight market for 727s.

Rondepierre says the airline got started without being able to raise all the money it needed. McClain’s founders had wanted $30 million but scaled back to $12 million after finding that “it was impossible to raise that much money for such a project.”

McClain gave all its customers replacement tickets on other airlines and is now trying to reorganize under bankruptcy court protection. It hopes to resume service. “We were undercapitalized,” Rondepierre says. “It’s that simple.”