Upstart Airline Owner Takes Off Again With Western Pacific
Edward Beauvais is flying again.
Three years after leaving America West Airlines in a management shake-up, Beauvais is running upstart Western Pacific Airlines, one of the fastest-growing U.S. carriers.
It has caught the public’s eye by being different, using discount tickets, no-frills service and jets turned into flying billboards.
Then there are the promotional gimmicks. Last fall, Western Pacific persuaded more than 5,000 people to spend $59 on a round-trip to a destination they didn’t learn until they arrived at the airport. Western Pacific put the adventurers into whatever empty seats it had.
Western Pacific didn’t invent the promotion, but Beauvais called it “the best space-available program that the airline industry has been able to produce.”
Through January, in its first eight months of flying, Western Pacific boosted business at the Colorado Springs Municipal Airport to record levels and needled United Airlines by luring an estimated 100,000 travelers away from Denver International Airport.
Its success formula includes discount fares, a medium-haul route structure, no meals and a fleet comprising only Boeing 737s to cut maintenance costs.
It also operates its own reservations division, using an electronic “ticketless” system in which passengers get confirmation numbers similar to hotel reservations.
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Airline industry analyst Michael Boyd estimates that by spurning the major airlines’ reservation system, Western Pacific is saving up to $2 million a year in ticket-processing charges, or about $3.50 to $4 per passenger.
So far, Beauvais has avoided the problems that sent America West, which he founded in 1983, into Bankruptcy Court. And analysts say that as long as he shuns America West’s dreams of grandeur his new airline should prosper.
“I think by this time next year, strong profitability will be there,” said Boyd of Aviation Systems Research Inc., a Golden, Colo-based firm. “I think he’s in the right place at the right time.”
On a recent wintry day, Beauvais recalled his turbulent career as he sat comfortably in a conference room of a towering office building, his back to an expansive view of a storm drifting down Pikes Peak.
On the table was a replica of one of Western Pacific’s Boeing 737-300s, a bright yellow craft featuring the Simpson cartoon family, with Marge Simpson’s blue hair stretching up the tail. The plane was painted as part of a deal with Fox TV.
Beauvais founded America West with about $18 million, three aircraft and 280 employees. The Phoenix-based airline reached 15,000 employees and 115 aircraft by 1991.
The venture proved costly in the highly competitive market, and America West filed for Chapter 11 bankruptcy reorganization in June 1991. Beauvais stepped down as chief executive officer that September and resigned under pressure as chairman in July 1992. The company emerged from Chapter 11 in 1994.
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Beauvais returned to consulting, but his heart was in running an airline. So when the economy improved in 1993, he dusted off the no-frills concept, raised $28 million in private financing and started Western Pacific.
Beauvais readily admits he made mistakes at America West, particularly by delegating too much authority, a strategy that backfired when times grew difficult.
He said he’s putting the lessons he learned to use, keeping tighter control on management and hiring experienced executives.
Things have been working in Beauvais’ favor so far.
Fuel costs and interest rates dropped, and the Denver-Colorado Springs market, the seventh-largest in the United States, became ripe for a discount carrier.
First, Continental Airlines closed its Denver hub, leaving United Airlines to acquire about 70% of the region’s market.
Then the new airport in Denver opened in February, $3.2 billion over budget and 16 months late. Airlines’ fees increased from $5.27 per passenger at the old Stapleton International Airport to about $18 per passenger at DIA, analysts say.
Two months later, Western Pacific opened, paying a per-passenger fee of about $4.70 at Colorado Springs, the airline said.
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Western Pacific began with six daily flights to five cities. Today, it has 12 jets and offers 28 daily flights, serving Colorado Springs; Los Angeles; San Diego; San Francisco; San Jose; Las Vegas; Phoenix; Seattle; Chicago; Newark, N.J.; Washington; Houston; Dallas; San Antonio; Oklahoma City; Tulsa, Okla.; Atlanta; Indianapolis; Kansas City and Nashville, Tenn.
From April to December, the airline carried 379,120 passengers--about 27% of them from metropolitan Denver--for a 62.8% load factor. Beauvais said the airline needs a load factor of just under 60% to break even this year.
Western Pacific has about 40% of the market share in Colorado Springs, where six competitors either started or increased service last year. The airport recorded 1,415,943 passengers in 1995, up 79% from 791,045 in 1994.
Last month, United Airlines Chairman Gerald Greenwald told Denver employees Western Pacific was “in an economic sense, a nuisance.”
“I don’t argue with that,” Beauvais said with a laugh.
Western Pacific recently raised $50 million in an initial stock offering, with the goal of serving 35 cities and increasing its employees to about 2,000 and its jet fleet to 24 by year end. It also plans to launch a commuter service to Colorado’s ski resorts by mid-year.
Some analysts are concerned the airline may be headed for trouble with its rapid growth. They also point out that Western Pacific could face some competition from Denver-based Frontier Airlines.
“Frontier is moving into the void that was created by the pullout of Continental from the DIA market,” said Michael Shonstrom, research director at Neidiger, Tucker, Bruner in Denver.
If Frontier does well, “I think they can give WestPac a run for its money in some of their markets,” he said.
Beauvais said he recognizes Western Pacific’s limitations. They don’t seem to bother him.
“The potential for size is much more limiting for Western Pacific,” he said. “We don’t need to grow as large as America West grew.”
