Small Birds in a Big Sky

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A few new carriers are making a special pitch for the luxury market. St. Louis-based Air One provides all passengers with first-class service at coach prices. To date it has been a losing proposition. Air One has lost $14.3 million this year. But its passenger count picked up this fall, and it confidently plans to triple its fleet of planes as well as expand service to as many as twelve cities, possibly including Houston and New Orleans.

Flying on Los Angeles-based Regent Air is like staying in the high-roller suite at a Las Vegas hotel. The airline, which made its inaugural New York-Los Angeles flight in October, was founded by three former Caesars Palace executives. Regent Air chauffeurs passengers to and from the airport in limousines, furnishes in-flight secretaries and hair stylists, and even provides private lounges and staterooms. Just before takeoff, the cabin attendant purrs, "The sky is no longer the limit." The price for all that opulence: $1,620 to $4,320 for a one-way cross-country ticket (ordinary first-class fare: $650). Regent claims rising sales for its flights and insists that its fares really are a bargain compared with the $2,000-an-hour cost of flying by executive jet.

With the upstarts grabbing more and more business, major carriers are adopting new strategies. The parent company of Denver-based Frontier Airlines has created a nonunion subsidiary called Frontier Horizon, which is expected to chop per-passenger operating costs down to about two-thirds those of its corporate brother when it begins operating Jan. 9. Though Frontier officials claim that they are not antiunion, the airline's offices in three cities have been picketed.

If labor costs are trimmed, Harvard's Meyer expects the big carriers to compete more forcefully. Says he: "They have both economies of scale and experience in running reservations services, dealing with travel agents and operating terminals and marketing operations."

Despite their energy and eagerness, tiny carriers can face tough battles if they go head to head with established competitors. After a line named Mid Pacific began making inroads in the Hawaii market, Hawaiian Airlines started pointing out in its advertising that the average age of Mid Pacific's planes is 17 years. So far it is too soon to tell whether the advertising will cut into Mid Pacific's business; in nearly three years of operation, the airline has a near perfect safety record.

What the new carriers lack in experience, they often make up in hustle. The key to success for the lilliputian lines seems to be to stay small and keep their special character. Says Muse Air Chairman M. Lamar Muse: "We have to be different. When we banned smoking, it wasn't a moral crusade or anything, it was our perception of the marketplace." Muse is doing well. It turned its first profit, $780,000, in the third quarter of this year. Says Vice President John Puskarich of Sunworld: "We've all learned from BranifFs mistakes. Around here we follow the KISS method: 'Keep it simple, stupid.' " So far the formula is paying off. —By Alexander L. Taylor III. Reported by Richard Woodbury/Los Angeles and Adam Zagorin/New York