Two years on, Great Plains still stuck on the plains

Friday, March 14th 2003, 12:00 am

By: News On 6

TULSA, Okla. (AP) _ Great Plains Airlines executives, who were handed millions of dollars in public money to launch nonstop service to coastal business centers, expected to have two dozen planes in the air by now.

But almost two years after its first takeoff, the carrier leases just two small jets, has never earned a profit and serves five inland cities. The Tulsa-based airline is losing about $800,000 a month.

``That was beyond anybody's conception when we started this,'' Jack Knight, president and chief executive officer, said in a recent interview.

The latest blow came late last month when financing stalled for four additional Fairchild Dornier 328 jets that could have led to Great Plains' first profits and served its first coastal destination _ Washington.

Knight and David Johnson, chairman of Great Plains' executive committee, blame the carrier's struggles on lenders made wary of airlines after the Sept. 11, 2001, terror attacks.

``The whole financing industry remains upside down,'' Johnson said. ``We know it from looking at other airlines around the country. The list of those going into bankruptcy is getting fairly long.''

But some state lawmakers _ who approved $27 million in tax credits to help Great Plains fill an absence of nonstop flights from Tulsa and Oklahoma City _ see other problems.

So did the federal board assigned to bail out cash-strapped airlines.

In December, the federal Air Transportation Stabilization Board rejected Great Plains' request to guarantee $17 million of a $25 million loan. The board said the airline's planned fleet and route expansion, which the loan was to fund, was too aggressive.

``That tells me their troubles have nothing to do with 9-11,'' Rep. Kevin Calvey, R-Del City, said. ``That makes me question how well these guys planned this.''

Calvey says Great Plains, for which the city of Tulsa also put up public property as collateral for startup loans, broke its promise by not providing nonstop flights to coastal business centers from the start.

``The initial time when they asked for tax credits from the state, they said there'd be direct flights to New York,'' Calvey said. ``Why is it that they never even bought planes that could reach New York?''

Instead, Knight and Johnson bought bankrupt, Missouri-based Ozark Airlines and its two 32-seat Fairchild Dornier 328s, banking that flying to underserved regional airports could generate enough cash for a rapid expansion to the coasts.

``There was a presumption that more aircraft would be shortly following,'' Knight said. ``But then there was a whole series of difficulties that occurred, not the least of which was 9-11.''

Ed Faberman, with the Air Carrier Association of America, said Great Plains was right to seek growth regionally before tackling the big cities.

``When flying regionally, you're not flying against too many competitors,'' said Faberman, executive director of the Washington-based regional carrier industry group. ``You can grow with your service and improve your service before you take on the larger market. The carriers that have been successful have used that practice.''

Great Plains also said it's repaying all the public assistance it's received, either through fees to the city or by turning down rebates it would get from Oklahoma's quality jobs tax credit.

Knight said the airline hasn't decided whether to appeal the federal board's loan rejection and is hoping the Oklahoma Transportation Authority will help purchase more planes and land and buildings for a Tulsa hub. The authority voted in November to discuss the plan, but would need legislative approval to issue any bonds.

Additional public money became more important for the airline Feb. 28 when it announced it would have to delay planned service to Washington and Austin, Texas, because financing had stalled for the four new jets.

Tulsa-based Mach Aero International Leasing had agreed to purchase the jets and lease them to Great Plains but the leasing company's own financing with European banks hit snags, Johnson said.

About 25 of Great Plains 188 employees, who were hired in anticipation of the jets' arrival, had to be furloughed. Great Plains since announced that it will replace service to Colorado Springs with flights to Austin March 25. The airline also flies to Nashville, Tenn., and Albuquerque, N.M.

Meanwhile, the airline is running through its modest cash reserves, and it's unclear how much longer the airline can operate without a fleet expansion, Knight said. The company has about $7 million in debt.

``We've worked hard at getting interim funding of one kind or nature,'' he said. ``It's difficult to say today at this minute how long it will be.''

Yet, Knight and Johnson remain optimistic about their business plan. Small business people are filling the airline's flights, which feature Krispy Kreme doughnuts and Arby's sandwiches, they said.

``Once you get to the economy of scale, you're breaking even or making a little money, then you can say, ``Let's take a look at some long-range aircraft,''' Knight said.

State commerce officials say it's too early to give up on Great Plains after years of unsuccessful attempts to get major airlines to provide direct flights out of Tulsa and Oklahoma City. Many companies have either left Oklahoma or declined to relocate here because of the increased cost and inconvenience of indirect travel, they say.

``We have got to find out a way to improve our direct air service to the east and west coasts if we want to continue to be competitive,'' said Mickey Thompson, vice president for economic development at the Tulsa Metro Chamber.