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Palm Beach Airport’s Risky Bet on PEOPLExpress Airline

Jul 20, 2014 5:00 pm

Skift Take

We can’t help but agree with Brancatelli’s skepticism about the airline’s prospects.

— Jason Clampet

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PEOPLExpress  / Facebook

A PEOPLExpress plane on the tarmac. PEOPLExpress / Facebook


Palm Beach International Airport is pinning hopes and money on another start-up airline.

Two years ago, Direct Air flopped, stranding passengers because it couldn’t pay its fuel bills.

This time, PBIA lured low-fare PEOPLExpress, which had its inaugural West Palm Beach flight last week.

The airport is offering financial incentives to the start-up, but experts warn it’s not clear how the airline is going to make money.

PEOPLExpress is flying daily, except on Tuesdays, between West Palm Beach and Newport News/Williamsburg International Airport in Virginia.

Mike Boyd, the founder of aviation consulting firm Boyd Group International, is concerned about whether the route is busy enough.

“There is virtually no traffic between Newport News and West Palm Beach,” said Boyd. “They are going to have to make West Palm Beach a gateway to South Florida and that’s hard to do.”

PBIA could not provide statistics when asked how many people are already traveling to and from Newport News on currently connecting flights, saying it would need to hire a consultant to do so.

However, Sophie Gaeta, director of service development for Palm Beach County’s Tourist Development Council, said airlines normally have those numbers and base their decisions on them.

“They pick out what they feel would be a market that is underserved and that there would be sufficient passengers to travel daily,” Gaeta said.

Over the years, PBIA has faced a steady decrease in traffic. In 2013, PBIA had 2.8 million passengers — a 20 percent drop from 3.5 million in 2007. Fort Lauderdale-Hollywood International Airport saw a 3.8 percent increase from 2007.

But in a time when airlines are merging to stay alive, cutting routes and raising fares, it seems like the perfect opportunity for PEOPLExpress to make a comeback with its cut-rate prices. After all, this is the path taken by two successful airlines — Southwest Airlines in 1971, and JetBlue Airways in 2000.

It’s also what Michael Morisi is thinking. Morisi, who was a station manager for the original PEOPLExpress in the 1980s, has revived the brand and acquired its no-frills trademark.

“With all of the consolidation of carriers now, there has been a loss of direct routes,” said Morisi, founder of the current operation. “This is an opportunity for us to return the low-fare nonstop service.”

The original PEOPLExpress made a short-lived splash in the commercial airline industry back in 1981. It touted cash payments on board and friendly customer service. PEOPLExpress struggled to survive amid airline consolidation and was acquired by Continental Airlines in 1987.

Consolidating airlines has been a longtime trend in the aviation industry. Northwest merged with Delta in 2008, Southwest acquired AirTran in 2011 and American Airlines and U.S. Airways joined forces last year.

Joe Brancatelli, a business travel columnist for The Business Journals, wrote that more than 90 percent of U.S. scheduled commercial service is run by six players. So given the circumstances of an American aviation oligarchy, it’s a time for celebration whenever a newcomer airline comes roaring down the runway, he said.

Certainly Palm Beach International Airport thought so. Last week, the airport welcomed the carrier with cake, balloons and ribbon-cutting. A Boeing 737, which was painted in the carrier’s green, gray and white color scheme, was showered by a water canon salute upon arrival.

To lure the fledgling airline, PBIA offered such incentives as waiving landing fees and gate charges, which can amount up to $100,000.

Mike Simmons, PBIA’s finance director, said the airport is willing to invest some of its money, which is collected from other airlines, to help PEOPLExpress flourish and give customers better rates. The incentives typically expire after a year or two.

“They are putting a multimillion-dollar asset into our airport,” Simmons said. “This is our way of sharing a little bit of the risk.”

Unlike most airlines, PEOPLExpress’ website does not offer hotel booking. It also decided to opt out of Travelocity and Expedia to avoid their fees, Morisi said.

PEOPLExpress is awaiting certification as a commercial carrier from the Federal Aviation Administration. In the meantime, the carrier is doing business under management with Vision Airways, a charter airline.

Under the agreement, known as a “wet lease,” Vision maintains the aircraft and employs the pilots and crew.

Business travel columnist Brancatelli called the wet leasing business model a proven failure.

“The arrangement almost always collapses after a few months, usually with the operating carrier and the owner of the brand name squabbling over money,” Brancatelli said. “Passengers are inevitably stranded, holding worthless tickets no other carrier will honor.”

PBIA rolled out its water canon salute for the launch of Direct Air in 2010. But Direct Air ceased operations in 2012, stranding passengers, because it couldn’t pay its fuel bills. Direct Air wet leased Boeing 737s from XTRA Airways and flew from PBIA to places like Worchester, Mass., and Niagara Falls in New York.

So even with the gate and landing fee breaks from PBIA, PEOPLExpress must still fill its flights to pay jet rental and fuel.

Morisi said they can handle it.

“We are very comfortably financed,” Morisi said. “We believe the structure we put into place will allow us to achieve profitability relatively fast. It will allow us to sustain and continue to grow.”

Bryan Glazer, president of Television News/JetPlane Public Relations, thinks PEOPLExpress might be on to something.

Before PEOPLExpress, the only available flights from Newport News to PBIA required passengers to travel in cramped regional jets to Atlanta and Charlotte. They endure long layovers and pay fares $100 to $200 more expensive than on PEOPLExpress’ non-stop, two-hour flights, said Gazer. Introductory fares for PEOPLExpress start at $56 each way in July.

“This is a potentially winning business,” Glazer said. “Nonstop routes no other carrier offers at affordable fares — that’s the niche market.”

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