Both sides are hopeful a new contract will be worked out this year. If AirTran can hammer out a deal with its 1,000 flight attendants, its flight path toward continued growth and profitability looks good.
Despite an industry slump, AirTran completed five consecutive profitable quarters in June. For the second three months of this year, it posted a profit of $57.2 million, or 74 cents a share, a tenfold jump from the same period a year ago. Total revenue rose 22.7% to $233.9 million. More impressive, AirTran earned $21.9 million, or 28 cents a share, excluding special government reimbursements and other items, besting Wall Street expectations by 9 cents a share.
Ticket bookings in the three-month period were the strongest in the four years he's been at the airline, AirTran President Robert Fornaro told analysts and investors during a conference call.
Making its ascent
Since hitting a 52-week low of $2.34 last fall, AirTran's shares have climbed to $14. "This is one of the best-managed airlines in the industry," says James Parker, an airline analyst at Raymond James & Associates. "They took an airline with a negative image and changed it into an airline that is very much in tune with travelers."
Indeed, seven years ago -- when the airline, then called ValuJet, was just 3 years old -- it appeared destined for the junk heap after one of its jets crashed into the Everglades, killing all 110 people on board. Another startup airline -- Air Florida -- never recovered after one of its planes crashed into the Potomac River in Washington, D.C.
The founders of ValuJet were determined to survive. The airline acquired Orlando-based AirTran Airways, adopted its name and moved its headquarters from Atlanta to Orlando. Robert Priddy, then chairman and CEO and one of the founders, stepped aside. Joseph Leonard, a seasoned former Northwest Airlines executive, was hired as chairman and CEO.
The new management began aggressively expanding the airline's route system and targeting business travelers. AirTran now operates 492 daily flights to 46 cities. In Atlanta, its major hub, AirTran is the second-biggest carrier after Delta Air Lines, with 190 daily flights.
Expansion
During the second quarter, AirTran, for the first time, pushed westward with service from Atlanta to Las Vegas, Denver and Los Angeles. "Our strategy is to look for routes with high fares," Fornaro says.
AirTran also has been upgrading its fleet of jets. The airline was expected to have replaced all of its aging DC-9s with new Boeing 717s by the end of September. It expects to take delivery of 50 Boeing 737s by June and has an option for 50 more. The longer-range 737s will help the company achieve its westward expansion, a move aimed at balancing out its north-south routes, analyst Parker says.
Meanwhile, in the east, where AirTran has a strong position, Parker sees continued growth potential as struggling competitors have cut back on their service. Since filing for bankruptcy protection in 2002, for example, US Airways last year decreased its fleet by 113 planes, or 28%, Parker says.
Keeping its costs low has enabled AirTran to stave off competition from Delta, which has responded to discount carriers by expanding its own discount airline, Song. Delta has been losing money on those routes where AirTran has been turning a profit.
AirTran executives say money-losing carriers will lead to further consolidation, and that should present additional opportunities for them. "We've spent the last four years building a strong network, leg by leg," Leonard says. "We're very bullish, very confident."