Phoenix gives America West Airlines a lift
Tempe, Ariz. — ``People probably said the same thing the year after the bicycle was invented,'' says Michael J. Conway, president and chief operating officer of America West Airlines. ``They probably said this is such a good idea, why didn't anyone think of it sooner?'' He is referring to his airline's use of Phoenix, Ariz., as the hub of its route system.
America West is a classic ``deregulation airline,'' with its low fares; its fleet of smallish, fuel-efficient aircraft, most of them ``previously owned''; and its ``cross-utilized'' nonunion work force, whose members rotate as stewards, baggage handlers, and reservation agents.
But in addition to these cost-structure advantages, America West has had an edge in its choice of Phoenix as a hub.
``They're in a high-growth area where the competition was fragmented,'' says Mark Daugherty, an airline analyst with Dean Witter Reynolds in New York. Many carriers have served Phoenix, but none had ever used it as the center of a hub-and-spoke route system.
And so America West, which began flying only Aug. 1, 1983, has become the dominant carrier in Phoenix, with 90 departures daily as against 55 for its closest competitor -- and a 22 percent share of ``passenger originations'' in Phoenix, a distinction formerly held by Republic Airlines.
Probably more important, ``We think we've turned the corner'' from red ink to black, says Mr. Conway. ``We have one of the highest load factors in the industry,'' hovering around 60 percent. America West has just announced a net loss for 1984 of $15.4 million on revenues of $122.6 million. But the airline saw an operating profit in November, and a net profit in December, and is expecting a profitable 1985.
America West routes connect the midsize cities of the Southwest (El Paso, Texas; Albuquerque, N.M.) and Midwest (Des Moines; Wichita, Kan.) with California, via Phoenix. It's not direct service. But with what Mr. Daugherty and others praise as its ``wonderful facilities'' in Phoenix, the airline can offer smooth connections. The service is faster and cheaper than has been available hitherto.
America West, with 23 cities on its route map, has opted for ``alternative'' airports (Oakland instead of San Francisco, for example) and secondary cities, such as Colorado Springs instead of Denver. ``It appears they are trying to avoid competition,'' says Mr. Daugherty.
Chairman Edward R. Beauvais says his line offers service on a number of competitive routes, ``but we don't believe in challenging the 800-pound gorilla.''
Although a low-cost operator, America West isn't exactly a no-frills carrier. Rather, the airline has decided just what ``frills'' to offer. Instead of the usual in-flight dinners, American West serves deli sandwiches, on the grounds that no one likes the usual fare and business travelers, in particular, would appreciate the extra legroom available on planes with no hot-food galleys.
``We offer the important essentials for the frequent business traveler -- a complimentary copy of the Wall Street Journal; assigned seats; booking through travel agents; and interline connections when they want them,'' Mr. Beauvais says.
``We're in a service industry,'' he goes on, ``and the quality of our product depends heavily on the motivation of our people. We feel that's our strength.''
So does Daugherty, who cites ``motivated employees'' as one of the reasons to be bullish on America West. All the line's employees are required, as a condition of employment, to buy stock in the company; there is also a profit-sharing plan that will come into force with the first profitable quarter.
``They have the advantage of being a new airline, instead of an old one trying to change,'' says Arthur Amman, vice-president and analyst at Boettcher & Co., brokers, in Denver. ``They don't have the people problems. They're able to get 40 hours a week out of their people, and with part of their salary coming from profit sharing, their people have got to believe in what they're doing.''
All this may sound very much like things you've read about People Express, and, in fact, Mr. Conway puts his airline in the same select class as People: ``Only two airlines formed since deregulation have reached the critical mass to become dominant carriers'' in their home-base markets.
But he and others strive to make it clear that this is not just a Sunbelt People Express. ``Their cross-utilization program is different from ours. For one thing, we have a more traditional corporate structure.''
``America West has been able to see the mistakes People Express has made, like overexpansion, and avoid them,'' says Mr. Amman. The people at America West ``are just staying where they're at right now.''
Conway intimates that he would like to see the investment community distinguish better among the airlines and not tar all of them with the same brush when one or more of them get into trouble. ``We'd like to see them develop some sophistication and approach it thus: Air transportation is here to stay, and someone has got to fly, so who is it going to be?''