ValuJet Vows Scaled-Back Service in 3 Weeks

ValuJet Inc. said Wednesday that it expects to resume operations in three weeks and fly only five routes, a small fraction of the 31 cities served before federal regulators grounded the low-fare carrier.

It also reported a 41% drop in second-quarter profit before a $19.6-million charge tied to the deadly crash in May of one of its jets and the subsequent shutdown by the Federal Aviation Administration.

With the charge, the Atlanta-based airline had a bottom-line loss of $9.6 million, or 18 cents a share--50% worse than the 12-cent-a-share average loss forecast by eight analysts polled by Zacks Investment Research.

“It could have been a lot worse,” said Brian Harris, an analyst at Lehman Bros., who added that the financial results show ValuJet kept its costs under control after the shutdown.

The airline said its cash dwindled to $208 million as of June 30, down $46 million in three months.

Meanwhile, ValuJet’s attempt to restart service could be stymied by the plan of rival Delta Air Lines Inc., which is beginning its own low-fare service.

“We know it will be a tough environment,” ValuJet President Lewis Jordan said.

ValuJet shares were up 12.5 cents at $10.875 in Nasdaq trading.

ValuJet reported second-quarter profit from operations of $10 million, or 18 cents a share, compared with net income of $16.9 million, or 28 cents, in the year-ago period, reflecting two stock splits in 1995.

Revenue fell 6.6%, to $81.2 million from $86.9 million.

ValuJet’s planes flew almost half-empty during the quarter. The airline said its quarterly load factor--the percentage of seats sold--was 55.7%, compared with 74% for the year-ago period.

A ValuJet plane crashed May 11 in the Florida Everglades, killing all 110 aboard. The FAA shut down the airline June 18, citing safety concerns.

The airline has since laid off most of its 4,000 employees. Jordan said initial restart operations would require about 1,200 people.

The FAA will limit ValuJet to operating 15 planes. The airline has said that if it’s allowed to fly, it might use fewer planes. It said it’s simplifying its 51-plane fleet and will fly only DC-9s. Before the shutdown, it also flew MD-80s.

A return to service would come as rival Delta is preparing to introduce its own low-fare airline.