Soar Loser?

Western Pacific Airlines, the media darling that captivated the public by offering a low-cost alternative to high prices at Denver International Airport, has hit heavy turbulence in its effort to become a homegrown success story.

While other airlines have been reporting record profits, the Colorado Springs-based carrier has been flying half-empty airplanes and will probably lose $4 million this year. The value of the company's stock has dropped by half since June, and expansion plans have been scaled back.

Western Pacific's charismatic founder, Ed Beauvais, who once crash-landed America West Airlines into bankruptcy court, has gotten loads of free media attention through stunts like dressing up as a wizard and painting Bart Simpson's sarcastic mug on the side of his planes. But Beauvais's dream of creating a national carrier is being frustrated by new competition in both Denver and Colorado Springs. And the word in some parts of the aviation industry is that Western Pacific must turn things around fast or risk joining the heap of extinct discount carriers going back to ill-fated People Express.

"If they don't start making real money soon, they're going to run out of cash in the next year or two," predicts Scott Hamilton, editor of Commercial Aviation Report, an industry newsletter. "If Beauvais could translate public relations into butts in the seat, he'd have a great airline."

Western Pacific grew quickly after being launched in April 1995. United Airlines had taken advantage of its near-monopoly status at Denver International Airport to dramatically hike fares, and angry travelers were willing to commute to Colorado Springs to enjoy bargain-basement prices. Starting with just three planes, the carrier quickly grew to fifteen jets. Colorado Springs's twelve-gate airport was so overwhelmed with passengers that Beauvais pressed the city to build a second concourse that would double the airport's capacity.

But Beauvais's dream ran into trouble when Denver-based Frontier Airlines recognized the potential for a local discount carrier last year and began offering bargain fares to many of the same destinations as Western Pacific. Barely two years old, Frontier is now DIA's second-largest carrier, turning a $2.1 million profit in the first half of this year. (Last week the carrier said it would lose money in the third quarter because of slow traffic in September.) Frontier is credited with reining in United Airlines' ticket prices--United now matches some of Frontier's fares--and even with helping DIA achieve the first significant increases in passenger traffic since the airport opened.

Frontier president Sam Addoms says his carrier benefits from having a larger potential customer base in Denver, even though DIA is an expensive airport to operate out of. "The people getting on our planes are not from Colorado Springs, they're from Denver," he says. "We have the benefit of a stronger market."

Even in its Colorado Springs home base, Western Pacific is facing new competition. Several carriers, including United, have increased service to Colorado Springs and have matched Western Pacific's ticket prices. Last month Western Pacific reported filling just 52.5 percent of its seats, down from 55.1 percent in September 1995. Profitable carriers like United usually fill 70 percent or more of their seats.

A spokesman for Western Pacific declined to be interviewed by Westword after expressing displeasure with an article on the airline that appeared last year ("I'm Ed, Fly Me," November 15, 1995). That article detailed Beauvais's controversial management of America West, which was based in Phoenix.

For several years America West was a successful regional carrier, but after Beauvais added routes to the East Coast and exotic locales like Hawaii and Japan, the airline got into major trouble. There is still much bitterness toward Beauvais in Phoenix, because to avoid shutting down, the airline had to lay off thousands of employees. And even those who kept their jobs saw the value of the company stock they had been required to buy drop to almost nothing. Angry investors forced Beauvais out of America West in a behind-the-scenes coup in 1992.

Observers such as Hamilton wonder if Beauvais is making the same mistakes he made at America West: expanding too far, too fast. That expansion has been made possible by a $50 million stock offering that was held last year. Western Pacific had $30 million in cash left at the end of June, making possible ventures like a commuter service the airline will launch on December 4. Mountain Air Express will serve in-state mountain resorts from Colorado Springs.

For some, however, that move draws an uncomfortable comparison. "There are some similarities between Western Pacific and America West," Hamilton says. "There are similar patterns. Beauvais is now creating a commuter airline, which is what he did in Phoenix. It didn't work there, and it remains to be seen if it will work here."

Western Pacific is also putting together travel packages with rental-car and hotel chains, something America West did. In interviews, Beauvais has touted these new ventures as the key to turning Western Pacific around. He has blamed the airline's losses on a jump in fuel prices and passenger fear of discount airlines following the ValuJet crash earlier this year.

For now, the airline is scaling back its planned expansion. Last week Western Pacific eliminated seventeen jobs, most of them at out-of-state airports where it has reduced flights. Beauvais once predicted Western Pacific would have 24 planes by the end of 1996, but analysts now think the airline will add just a few planes over the next year. As for Colorado Springs, it still hasn't decided whether to build a second concourse to serve the carrier. Colorado Springs airport director Gary Green says Western Pacific expects to open a temporary five-gate concourse by early December, and that will accommodate its needs for now. "They haven't told us anything officially on their expansion plans," adds Green.

Hamilton says Western Pacific needs to take drastic, but less dramatic, action. "Ed is simply spending money as if he's earning it," he says. "The more conservative approach would be to put a cap on adding new cities and build the traffic up. They simply have to start making money."

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Stuart Steers
Contact: Stuart Steers