Exclusive MGM Grand Air Quits, Sells Its 6 Jetliners : Airlines: Kerkorian-owned carrier was unable to make profit. Midwestern cargo, charter operator buys planes.
Tiny but posh MGM Grand Air--which catered to the entertainment elite with gourmet meals and private rooms--has gone out of business after its billionaire owner, Kirk Kerkorian, sold its six jets to a Midwestern air cargo and charter operator for an undisclosed amount.
The exclusive airline, whose Los Angeles-to-New York flight cost $1,400 and seated only 34 passengers, was renowned for shuttling movie stars, rock singers and Hollywood executives. Its passengers included Madonna, Guns N’ Roses singer Axl Rose and the New York Rangers hockey team.
But too few of the wealthy boarded the airline to make it profitable. So Kerkorian sold the carrier’s three Boeing 727 jetliners to American International Airways Inc., an Ypsilanti, Mich.-based concern owned by auto drag-racing veteran Conrad (Connie) Kalitta, the companies announced Tuesday.
Kalitta himself bought MGM Grand’s other aircraft, three McDonnell Douglas DC-8s, said AIA spokeswoman J. B. Dixson. Kalitta has been a fixture in professional drag racing for more than 30 years and, with his son, Scott, won several drag racing events last year.
From the time the reclusive Kerkorian started MGM Grand Air in 1987, the carrier maintained a contrarian niche in an airline industry that otherwise increasingly focused on slashing costs, providing fewer frills and offering cheap fares to survive.
But MGM Grand Air lost money for most of its existence, even though it served a clientele that could afford any seat on any airline. Those passengers also could fly first class on major airlines that offered more frequent service to more locations.
MGM Grand Air’s demise follows that of UltrAir, another high-service, high-fare airline that flew between Houston and Los Angeles but ultimately ceased scheduled operations in 1993.
The luxury airline market is now largely left to the Concordes that British Airways and Air France fly at supersonic speeds across the Atlantic. A British Airways Concorde flight from New York to London costs about $4,000. Though it offers economy fares, Britain’s Virgin Atlantic Airways is also known for providing upper-class seating with amenities such as in-flight massages.
MGM Grand Air had offered limited scheduled service and charter operations among Los Angeles, New York and Las Vegas, the home of its parent company, MGM Grand, a hotel and casino operation controlled by Kerkorian.
Shedding the airline “enables us to focus all our efforts on the operation and expansion of our core hotel and gaming business,” Robert Maxey, MGM Grand’s chief executive, said in a statement.
MGM Grand Air’s scheduled service was terminated Dec. 31, and passengers booked on its flights were being placed on other airlines, Dixson said. MGM Grand Air’s existing charter reservations will be honored by Kalitta through a firm named Grand Holdings Inc., AIA said.
The sale came only three months after MGM Grand spent several million dollars to refurbish its fancy airline so that it could resume scheduled “Golden Triangle” service to the three cities it served.
MGM Grand Air had offered scheduled service at one time, but suspended it in late 1992 because of losses attributed to the recession and intense airline competition.
MGM Grand Air then provided only charter service until it resumed scheduled flights Sept. 8. When it resumed scheduled service, MGM Grand--its jets’ tails painted with MGM’s familiar lion mascot--charged $1,400 between Los Angeles and New York, $1,000 between Las Vegas and New York and $180 from Las Vegas to Los Angeles.
MGM Grand Air maintained that its prices were not much higher than those for full-fare first-class seats on other airlines, but that the service was markedly different. MGM Grand Air passengers were treated to a stand-up bar and lounge, leather swivel chairs, sleeper seats and queen-size beds, private “stateroom conference areas,” and gourmet food prepared on board and served on fine china.
But the airline had far too many empty seats. The New Yorker magazine reports in its current issue that on two recent flights between New York and Los Angeles, the passengers were outnumbered by the airline’s five flight attendants.
The airline had a pre-tax operating loss of $5.4 million from January through November because of a soft charter market and start-up costs for the airline’s new scheduled flights, said Alex Yemenidjian, MGM Grand’s chief financial officer. Even with the addition of scheduled service, the airline kicked in only $13.3 million, or 2.3%, of MGM Grand’s $584 million in revenue for the first nine months of 1994.
MGM Grand earned $55.3 million in the first nine months of 1994. The company’s stock rose 62.5 cents a share, to $24.75, in New York Stock Exchange composite trading Tuesday.
Although the purchase price of the planes was not announced, MGM Grand said it was considerably more than the $8.5 million that MGM Grand expects to record as a profit from the sale in the fourth quarter of 1994.