AirTran Recalls Pilots And Attendants

By Andrew Compart

AirTran on April 22 reported the airline’s highest first-quarter profit ever at $28.7 million, projected a profit for every quarter this year and said it is recalling all of the pilots and flight attendants it furloughed in 2008.

“I think AirTran will do very well over the next two years [even] if there’s no revenue improvement. This right now is a cost-based environment ideally suited for us,” declared Bob Fornaro, AirTran’s chairman, president and CEO.

Fornaro, however, said AirTran still does not plan to resume growth until 2011, for which it is projecting a 3% to 4% capacity increase. “Right now,” he said, “our goal is to earn our way out of the losses that we had in 2008.”

AirTran credited its record first-quarter profit in part to the big 50.5% drop in its fuel costs and its industry-leading low unit costs of 6.74 cents ex-fuel, as well as to its 7.2% cut in capacity and some network restructuring. It also benefited from an 86.4% increase in “other’ revenue, which includes money from its new baggage fees and other fee increases. That helped offset some of its 14.2% decline in passenger revenue, on an 8.2% lower average fare and 8.7% lower average yield.

The airline’s total revenue for the quarter fell 9.1% year-over-year to $542 million. But its operating expenses fell more, by 21.8%, thanks in large part to the lower fuel prices.

As a low-cost leader, the airline can afford the lower fares required to fill seats in this recession without sacrificing its profitability, AirTran executives said. Fornaro described the underlying fare structure as “very, very strong” from his airline’s point of view, although he’d like to see fewer sales.

“If the economy stays weak, we can remain profitable with our cost structure,” said Kevin Healy, senior VP-marketing and planning. The lower fares also helped produce AirTran’s highest-ever first-quarter load factor, at 76.3%, which helps with ancillary revenue, Healy added.

AirTran also is benefiting because leisure demand has held up better than business demand in the recession, and domestic leisure has been stronger than international leisure, Healy said.

“To the extent our network is geared to leisure travel, with our heavy concentration in Florida, that is a benefit,” he said. AirTran’s only international services are to Cancun.

That’s along the lines of what domestic low-cost carrier Allegiant pointed out last week in reporting a near tripling of its first quarter profit (DAILY, April 21). But AirTran, with its fleetwide business class, sells to a broader market than Allegiant, which markets exclusively to leisure travelers.

AirTran estimates about 40% to 45% of its bookings are for business, and the carrier said it also is doing well because seating upgrades and its business class load factors are running higher than they ever have.

Photo: AirlinersGallery.com

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