Transport Airlines

The Growing Pains of 3-Year Old Niche Carrier Silver Airlways

May 12, 2014 10:00 am

Skift Take

Slow growth and narrowly focused routes are helping Silver succeed where other upstarts have failed.

— Jason Clampet

Free Report: The Changing Business of Extended-Stay Hotels

Redlegs21  / Flickr

A Silver Airways plane in Atlanta. Redlegs21 / Flickr


The day Silver Airways first stood on its own, Mother Nature brought the carrier to its knees.

A major storm struck in South Florida on the night before Silver’s first day as an independent airline last June, knocking out power in the Fort Lauderdale headquarters and forcing employees to work from a Margate call center and nearby hotel.

Flights were canceled, leaving passengers stranded at Fort Lauderdale-Hollywood International Airport — and because the airline had switched over to a new reservations system at midnight from its own shared system with United Airlines, gate and flight information had changed, leading to mass confusion.

“Day one of Silver Airways here in Fort Lauderdale was exciting, to put it mildly,” said president and CEO Dave Pflieger.

Just over a month into the job at that point, Pflieger went to the airport and found a “conga line of 100 people” waiting to get out. The airline had to cancel flights elsewhere, move planes into South Florida and keep the crowds informed. Pflieger said he walked around looking up flight numbers on his iPhone and telling people when to expect their flights to depart.

“We got every single passenger out of Fort Lauderdale,” he said. “It wasn’t our finest day, [but] I was proud of the way the team handled it.”

Silver Airways has had smoother sailing since then, though plenty of challenges remain for the airline that describes itself as a hybrid: part startup, part turnaround, both independent carrier and partner of a larger airline.

In the past year, the company has taken several steps to strengthen the business, including sharpening its Florida focus and adding interline agreements with partners including American Airlines, Bahamasair, Delta, JetBlue, US Airways, German airline Hahn Air and Japanese carrier All Nippon Airways.

Just last week, Silver announced an expanded partnership with JetBlue that will allow passengers to earn that airline’s loyalty points while traveling on Silver, and to book connecting flights between the two airlines on JetBlue’s website.

Silver announced earlier this year that it had secured up to $73 million in financing from GB Credit Partners in a recapitalization. The money will be used to partially repay some of the investments made by owner Victory Park Capital and provide up to $25 million for growth.

“These days, if you’re going to start a new airline, you need to be prepared to spend about $100 million and a couple years to get into flying if you’re going to be a low-cost carrier,” Pflieger said. “In the regional space it wouldn’t be that onerous. The airline industry is not for the faint of heart.”

Pflieger would not reveal financial details about the privately held company or say whether it is turning a profit yet.

“Things are going well and we’re sort of resetting and making sure we’re well positioned for future success,” he said.

The airline was born three years ago — May 11, 2011 — when Chicago-based investment firm Victory Park Capital acquired select assets from Gulfstream International Airlines, which had filed for bankruptcy the previous November. Financial details about the transaction were not released.

By the end of 2011, the investors announced that the new airline would be called Silver Airways. With the addition of six refurbished Saab 340B Plus aircraft — 34-seat turboprop planes — the airline unveiled its new fuchsia, silver and dark gray livery.

In the first couple years of its new existence, Silver Airways operated essentially under the radar when it came to public attention. Travelers who booked on United Airlines might notice a leg of their journey “operated by” Silver Airways as a regional carrier. The airline shared a reservation system with United but still started to earn a reputation as “a vibrant, dynamic newcomer,” as Air Transport World called it in early 2013.

The industry publication named Silver Airways its regional airline of the year in February 2013, citing its “strong leadership and a passion for providing safe, upscale and reliable service.”

“The thing that impressed us about Silver is it’s somewhat unique in the U.S. airline market right now,” said Aaron Karp, senior editor for ATW. Most regional carriers operate larger planes under capacity agreements with major airlines, he said.

“Silver is operating under its own brand and it’s operating smaller turboprops on niche routes that a lot of the larger airlines and larger regional airlines have stopped flying to,” Karp said.

The airline moved to a reservations system powered by Sabre, the global travel technology company, last June. That allowed customers to book flights directly on Silver itself rather than only ending up on it because of an agreement with another airline.

“I like to say down here, we’re a free agent,” Pflieger said. Silver flies as an independent airline from Atlanta south, and as United Express up north.

Now, Pflieger is focusing on digging into the markets Silver can best serve, with an emphasis on flying direct between cities in Florida and from Florida to the Bahamas. The carrier flies between 10 Florida cities — a new nonstop Key West-to-Orlando route starts June 12 — and seven in the Bahamas. It boasts more service between Florida cities and more flights between Florida and the Bahamas than any other airline in the country.

Airfare varies, and becomes especially expensive when demand is high. A check on the airline’s website shows round-trip flights for about $331 from Fort Lauderdale to and from North Eleuthera, Treasure Cay and Marsh Harbour in the Bahamas during the first weekend of June. A round-trip ticket to and from Orlando comes in at about $170.

While Pflieger said the low-cost model “doesn’t really fit in the regional space,” he said he does hear complaints from passengers when ticket prices get too high.

“Anybody who’s not talking about being low cost is going to go out of business,” he said.

Silver is still a small presence at Fort Lauderdale-Hollywood International, where it has increased available seats since 2010 while decreasing the number of flights — possible because it is flying larger aircraft these days.

This month, the airline has 18,350 available seats flying to and from FLL, a nearly 34 percent increase compared to the number its predecessor Gulfstream had at the same time in 2010 before filing for bankruptcy.

The airline, which employs 925 people, has its headquarters on the second floor of the Sheltair Aviation facility near the FLL tower. Silver has 58 employees within the airport itself and 139 at the main office.

With the push in Florida and the Bahamas, Pflieger is also moving to limit the airline to one type of plane — the 34-seat Saab turboprop. There are 28 in the fleet, and five 19-seat Beech 1900D that the airline is phasing out.

Part of Silver’s business has been flying federally subsidized “Essential Air Service” routes to underserved markets including small towns in Pennsylvania, New York, West Virginia, Mississippi and Alabama. Those represent more than $44 million in various stages of contracts that typically last two years. Silver has bid to continue two more years of service for up to nine of its existing cities, including five in West Virginia, three in Pennsylvania and Shenandoah Valley, Virginia.

Pflieger already pulled the airline out of that type of service in Montana late last year and announced in February that Silver intends to leave the Cleveland hub, which serves three Pennsylvania cities plus Jamestown, New York, and Parkersburg, West Virginia.

Last month, the airline said it would cease service between Atlanta and five cities in Alabama and Mississippi, a system where it had run into delays, cancellations and other operational issues. All of the service was considered “essential” by the federal government.

“What I’m doing is rationalizing our fleet, then the network — only flying where it makes sense,” Pflieger said.

In the case of the Cleveland and Atlanta hubs, the airline placed part of the blame on lower-than-expected passenger use and new federal regulations that govern flight and duty limitations and increased requirements for new pilots. The rule, which went into effect last year, requires new co-pilots to hold a certificate that requires 1,500 hours as a pilot, compared to one that only requires 250 hours of flight time.

Pflieger said the rule has contributed to a nationwide pilot shortage. Low-cost carriers hired away regional pilots, and new graduates coming out of aviation school aren’t yet qualified with enough flight hours to fill the jobs.

To make a dent in what’s expected to be a short- and long-term shortage, Silver formed a partnership with Broward College that will give preference for interviews and hiring to co-pilot candidates who graduate from the Professional Pilot Technology degree program.

Silver also announced a $12,000 hiring bonus for first officers, or co-pilots, to be paid out at key points over two years. The airline doesn’t disclose how much it pays its pilots, but the Air Line Pilots Association said the average starting salary for new first officers is $22,400 a year.

Russell McCaffery, dean of transportation programs at Broward College, said both the bonuses and partnership would be attractive to students.

“There are a lot of pilot jobs out there currently,” he said. “What’s special about the agreement is it makes the path for a student a lot easier.”

McCaffery said students have access to representatives from the airline during their training and don’t have to wonder who is hiring, how to navigate that process, worry about what the interview is like and where they might be based if they’re hired.

“It just makes it more convenient for them,” he said.

Several students are close to having enough hours to be hired by the airline, he said, and after that there’s “a whole pipeline” moving forward.

In addition to working on the pilot shortage issue and readjusting routes, Pflieger has built a new team by bringing in 20 executives from regional and larger airlines. The new leadership group is part of the plan to take Silver to the next level, he said.

“Don’t just be a regional airline working for one partner; now it’s all about we’re an independent startup airline for all intents and purposes,” he said. “It’s a higher bar.”

Silver does not release on-time performance, but for the time period between June and December of last year, the flight information site FlightStats.com shows a low of nearly 77 percent of flights on time in June and a high of more than 90 percent in October. Some passengers on social media and news stories in communities outside Florida have complained about excessive delays and cancellations — issues the airline has been working to deal with.

“As we restructure our fleet, pilot bases and hubs, we plan to fly where it makes the best operational sense — where we can not only meet, but exceed our guests’ expectations and continue to grow the airline,” said spokeswoman Misty Pinson in an email. She added that improvement efforts under way are being led by an entirely new team that has already made “huge strides.”

Those efforts are earning praise. In its readers’ choice awards late last year, Conde Nast Traveler listed Silver at No. 8 in its top 10 list of U.S. airlines. The magazine said Silver “burst onto the scene with a fleet of small to midsize turboprops that can zip fliers in smaller U.S. cities to points in the Bahamas and beyond.”

Silver isn’t shy about sharing its news: The airline has a robust media operation that sends frequent updates about its partnerships, awards, service additions and withdrawals and other tidbits.

Fort Lauderdale resident Liz Caldwell, who sells real estate in Broward, found out about Silver through real estate clients and a neighbor who worked on advertising with the airline.

Now, she uses Silver Airways to get to Eleuthera five or six times a year. Her family has a home there that it uses for its own vacations and as a vacation rental.

Previous air options, including a single-engine nine-seater, had ceased flying to the island, so Silver’s service was a welcome addition.

“To me, I think it’s great,” Caldwell said. “I think it’s comfortable. It was better than what we used to fly.”

Caldwell has even sent photos of her traveling crew — with the plane in the background — to airline executives she knows.

Pflieger said Silver evokes those kind of emotions in passengers.

“It’s almost sort of nostalgic-days-of-old flying, the Elizabeth Taylor era of walking on the tarmac, getting on the airplane, looking at the window and seeing the propellers,” he said. “Our flying hearkens back to the age-old flying.”

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