Upstart Airline Winning the West With Low Fares : Transportation: Morris Air’s no-frills operation forces larger rivals to match its prices to stay competitive.

With a fleet of only 20 jets, newcomer Morris Air would not seem like much of a threat to larger and better known airlines.

Unlike travelers on full-service carriers, Morris passengers do without pre-assigned seats, hot in-flight meals--even without tickets. (Customers get a confirmation number instead.)

But armed with low prices and low costs, Salt Lake City-based Morris has spread rapidly across the West during the past year, forcing much larger rivals to fight back and match its fares.

“We are competing with them very aggressively,” said Neil Monroe, spokesman for Delta Air Lines, which has slashed fares out of its Salt Lake City hub in response to Morris.

Like other upstart carriers--such as Reno Air and Kiwi International--Morris was designed from the start to meet the demands of today’s cost-conscious traveler. In contrast, established airlines--such as American, Delta and United--face painful transformations if they hope to turn profits and meet customer expectations.

The recent strike by American’s flight attendants, for example, was triggered in part by the airline’s effort to extract concessions from workers and boost productivity to generate profits in an era of slow growth and low fares.

“When you build an airline from the ground up, it’s different from an established airline that’s all things to all people,” said June Morris, Morris Air founder and chief executive officer.

“We built the airline with low cost and efficiency in mind,” explained Morris, who started her carrier as a charter outfit in 1987, and converted into a full-fledged airline earlier this year. “We don’t serve a hot meal. But most people would rather (save) $10.”

Competing in an arena dominated by huge rivals is perhaps the biggest professional challenge yet for Morris, 62, a travel industry veteran and one of the few women to hold a leadership position at an airline.

“I think she found out what it’s like to swim with the sharks,” said Bobbie Sylvester, a Salt Lake City travel consultant. “When you compete with the big boys, there is no way they are going to retreat and hand over their market share to you.”

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The cutthroat airline business would be one of the last places one would expect to find the soft-spoken Morris, who occasionally sips tea with workers and has personally delivered birthday gifts to their desks.

“You would never dream that she was the type of person who wanted a challenge,” said Verla Felt, a longtime employee of Morris Travel, the agency Morris started 23 years ago. “But she thrives on a challenge.”

Few fledgling airlines succeed in the long run against large carriers. Of all the airlines started in the 1980s--remember People’s Express and Jet America?--only America West Airlines remains in business today, and it is operating under Chapter 11 bankruptcy protection.

“(The large carriers) can certainly bury you with advertising,” said industry consultant Ernest Arvai. “They can bury you with special promotions. There are a lot of ways they can make life miserable for a newcomer.”

Compared to the industry giants, Morris’s airline is tiny, with annual revenues of about $200 million--up from $50 million in 1990--and service to fewer than 30 destinations, including Los Angeles, Seattle and Denver. Following the example of cost-conscious Southwest Airlines, Morris operates only one kind of airplane--the Boeing 737--to reduce maintenance costs.

Despite Morris Air’s small size and scope, larger competitors have not been able to ignore its prices.

America West recently cut fares after Morris started offering Los Angeles-Tucson service with round trips as low as $98. Earlier this year, Alaska Airlines chopped the unrestricted Los Angeles-Seattle fare 60%, to $159 one way, in response to Morris and Reno Air. Delta, which dominates service through Salt Lake City, also has slashed prices to competing destinations.

“Local traffic is particularly important to us,” said Delta’s Monroe. “It’s important in supporting the overall hub operation.”

Delta has held onto nearly half the local market in Salt Lake City. But Morris’ share has risen steadily over the past year and now stands at more than 23%, according to officials at Salt Lake International Airport.

“The attitude of the people is that if Delta wins the business and Morris Air goes away, then prices will go up again,” said one travel manager in Los Angeles, explaining the new airline’s appeal. “People are simply supporting Morris to keep Delta in line.”

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Praised for taking chances and surrounding herself with loyal talent, Morris--using computers to help corporate clients control travel costs--built her travel agency into the largest in Utah and one of the biggest in the West.

“She is really quite an impressive strategist,” said Michael P. Lazarus, managing partner of Weston Presidio Capital, the San Francisco-based investment firm that owns a 20% stake in the airline. “She thinks like the consumer and provides the service that they need.”

In 1987, June Morris sold off her agency to concentrate on the charter flights she had started a few years earlier as a sideline. Morris charter flights left Salt Lake City filled with tourists bound for Hawaii and California and--in the winter--returned with skiers headed to the slopes in Utah and Colorado.

One of the carrier’s first and most popular routes--Salt Lake City-Los Angeles--linked the large Mormon populations in Utah and Southern California, Morris said.

Morris Air became a full-fledged airline offering scheduled flights earlier this year, after federal aviation officials fined the company for violating the restrictive rules governing charter operators. The rules, for example, prohibit charters from accepting credit cards and require passengers to sign a contract.

“It became increasingly difficult to stay within the guidelines,” Morris said.

Morris retains majority ownership of the company and veto power over major decisions. But she operates the company jointly with her son, Richard Frendt, who is chairman, and David Neeleman, the firm’s president.

“They tend to be hard-charging, young and energetic,” Morris said. “I sometimes hold onto the reins.”

Morris and her management team attracted industry-wide attention in October, after their complaints led to a Justice Department probe of allegedly unfair marketing agreements between major airlines and travel agents in Salt Lake City.

In congressional testimony on the airline industry, Neeleman criticized the bonuses paid by Delta to Salt Lake City travel agents to boost its ticket sales. Under the bonus program, agents agree to dedicate a certain share of their ticket sales to one airline.

Delta has denied any wrongdoing. According to the Justice Department, the investigation is still underway.

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Morris said she does not oppose the bonuses--called overrides--in general. She even accepted them when she was a travel agent. However, Morris objects to specific incentive programs like Delta’s that she claims are anti-competitive. Such override programs put newcomers like Morris at an unfair disadvantage, because they lock in a certain portion of the market for established carriers, said industry observers.

Despite the rivalry with Delta, Morris says the two carriers are different enough to operate profitably in the same market.

“I see no reason why Morris and Delta can’t work together in the same area,” said Morris. “They have the long-haul service that we don’t even look at. We found our niche and we are going to stay in it.”

Morris Air at a Glance

* Headquarters: Salt Lake City

* Founder: June Morris

* Chairman: Richard Frendt

* President: David Neeleman

* Destinations: 22, including Los Angeles, Salt Lake City, Portland, Seattle, Tucson and Boise

* Employees: 2,000

* 1993 Revenue: Approx. $200 million

* Ownership: Privately held

Source: Morris Air