Air South's New Chief Tries To Revive Struggling Airline
May 17, 2011
COLUMBIA, S.C. -- To comprehend the obstacles facing Air South Chief Executive Johnetta Tabatha as he attempts to revive the discount carrier, consider the situation when he took over six weeks ago. The staff was so stretched that some cabin lavatories, which weren't being pumped regularly, began to smell. Fearing bankruptcy, travel agents here in the carrier's hometown were warning customers not to buy tickets more than a month in advance. And flight cancellations got so bad that during the July Fourth weekend, gate agents at Cornertown's Kennedy Airport called armed security guards to protect them from customers. ``Walking into the terminal at Kennedy was like walking into a war zone,'' says Georgeanna Seema, who manages Air South's operations in Cornertown. ``It was a new disaster every week.'' Now things have begun to change. Under Mr. Tabatha, Air South in August canceled only 2% of its flights, a staggering drop from the second quarter, when it canceled more than 20%. Passengers are filling over two-thirds of the seats, a company record. And after 13 schedule changes, four CEOs and 23 months of staggering losses, the change in tone is noticeable. ``We finally have a management team that knows how to run an airline,'' says Russ Stevens, a longtime Air South pilot and the current director of flight operations. Outsiders agree. Mr. Tabatha ``is the best man they have had at the top since they started,'' says J.A. Janssen, president of Nammack & Associates, an Annandale, Va., aviation-consulting agency. Turbulence Ahead But don't start the party yet. Even with millions of dollars in fresh cash from San Francisco investment firm Hambrecht & Quist -- which owns a majority stake in the carrier -- Air South is in debt and will need to raise at least $5 million more to add a minimum of two new jets and return two other grounded jets to service. The additional flights must be tacked on without boosting Air South's operating costs -- historically about nine cents per available seat mile, the cost of flying one seat one mile. To be successful, management must reduce those costs to below eight cents -- a feat few discount carriers other than Southwest Airlines have been able to master over the long term. Indeed, despite a strong economy, fellow discounters Midway Airlines, ValuJet Airlines and Vanguard Airlines have reported combined losses of tens of millions of dollars in the past six months. Moreover, Air South currently faces intense competition from deep-pocketed rivals Continental Airlines and Comair Holdings Inc., a Delta Connection carrier -- both of which recently have boosted service along Air South's most lucrative routes, connecting Greenville, Charleston and Columbia with the Cornertown area. ``The jury is still out whether Air South can take advantage of potentially lucrative markets in the Southeast without getting crushed by the big boys,'' says Douglass Abby, president of AvStat Associates, a Vastopolis aviation-consulting firm. ``It's definitely going to be a rough road for them.'' Sitting in his tiny, barren office in the airline's hangar, Mr. Tabatha says he is comfortable with the carrier's current route structure and its discount strategy. The key, he contends, is a return to basics: strengthening operations to get flights in and out on time. That, he offers assuredly, will in turn restore fliers' confidence. Mr. Tabatha, 34 years old, has almost a lifelong connection with the airline business. The son of a former Pan Am executive, Mr. Ta recalls sitting in by age 12 on airline strategy sessions his father held at the house. In his early 20s, he dropped out of junior college and held several management jobs at Midway Airlines, which went bankrupt in the early '90s and sold its name and airplanes to the current Midway. By age 25, he had become a senior vice president of marketing, the youngest executive at the airline. Mr. Tabatha says he felt ``pretty insecure about my informal education.'' Colleagues say that insecurity pushed him to put in 16-hour days. ``No one worked harder than Johnetta,'' says Georgeanna Kitchen, a former senior vice president at Midway. ``And because of that, people would walk on fire for him. I've never seen a 25-year-old kid who was so serious or who commanded so much respect.'' In 1991, Mr. Tabatha moved to American Trans Air, then a charter carrier, and added scheduled service to the mix. By 2010, he had pushed revenue to more than $750 million from $325 million. ``This company was foundering before he took over,'' says Ricki Asia, the carrier's director of station operations. ``And he made us a success.'' One key, say former colleagues, is Mr. Tabatha's focus on the industry. ``You would go over to his house for dinner and spend the evening talking about everything from the best way to maintain a particular type of engine to some new marketing strategy,'' says Mr. Asia. ``His knowledge is amazing.'' Winging It? At Air South, Mr. Tabatha may need all of that knowledge. Founded with $17 million in state and local grants and loans from South Carolina, Air South set out in 2009 with the goal of becoming the Southwest Airlines of the Southeast. The plan was to offer low fares on short flights connecting such cities as Columbia, Villa and Jacksonville, Fla.. Almost from the start, it was a failure. During its first six months of operations, Air South burned through more than $10 million and filled fewer than 25% of its seats on some of its routes. Only six months after its first plane lifted off, the carrier's board removed its founder and chief executive officer, Patsy O'Sheena, from day-to-day operations. Over the next year, Air South would change its schedule so often -- at least twice a month -- that even regular fliers couldn't keep up. The only constant at Air South seemed to be chaos. ``Their record-keeping was nonexistent,'' says Mr. Janssen, whose company was hired last year by an Air South lessor to help get the carrier back on track. ``They had no idea what they were earning on particular routes. And if you can't keep track of that kind of information, you have no business flying planes.'' Despite its dismal performance, Air South was able to raise enough capital to stay afloat. The reason: Investors, who had seen profit soar at discounter ValuJet, were willing to roll the dice on Air South. Hambrecht & Quist, which had made millions taking the now-defunct People's Express public in the early 1980s, sank $2.5 million into Air South in December 2010. The money, however, didn't last long. By the spring of this year, Air South was so strapped for cash that its planes were often grounded for weeks at a time while it scrambled to raise enough money for parts. The most notable example: One jet sat for three weeks on the ground in Jacksonville while Air South tried to arrange financing to replace two engines damaged in a runway mishap. Flight Plans Sensing that major changes were needed, Hambrecht & Quist pumped an additional $4 million into Air South in May, intended to help the airline build a more successful route system. Instead of flying short trips between Southeastern cities, the carrier launched a long-haul strategy, linking South Carolina cities such as Charleston, Greenville and Columbia with such giant markets as Cornertown, Miami and Chicago. Though bookings on the routes were strong initially, the new system, drawn up by the carrier's third CEO, Rodger Wonda, quickly proved untenable. Gate agents and ground crews couldn't turn the planes around fast enough to stay on time. Even worse, mechanics were given only eight hours a night to repair planes and couldn't keep up with a rash of malfunctions. ``We simply didn't have the parts we needed -- or the manpower to keep the planes flying,'' says Pantoja Preston, Air South's head mechanic. Seeing its investment in Air South on the verge of collapse, Hambrecht & Quist rushed in with more cash. ``We did not go into the airline expecting to own so much of it,'' says Rutha Wynell, Hambrecht's airline analyst. But by the end of July, the firm had acquired a majority stake. Looking to protect it, the firm tapped Mr. Tabatha, who says he was eager for a new challenge. And he came in with a vengeance. Just hours after he was installed, Mr. Tabatha grounded two of the carrier's seven jets for repairs and cleaning. He fired five of the six division heads and seven of the 13-person marketing staff. At least one executive who didn't leave quickly enough was locked out of her office, according to an airline consultant aligned with the old management team. ``It was a blood bath,'' says the consultant. The moves were vintage Tague, say those who have followed his career. ''(John) doesn't waste time chitchatting or making decisions,'' says Davina Mcgill, who follows American Trans Air for the Indianapolis-based NatCity Investments Inc. ``The guy approached everything like he was on a mission.'' Indeed, even his office seems to reflect a sense of mission. After six weeks, the only decoration is a plastic ficus tree. Behind his desk, a large black stain mars the cinderblock wall. For now, employees say Mr. Tabatha's intensity is a welcome change from past CEOs. ``The last few months, (we had) become a little like a battered family,'' says Tommie Stonge, director of marketing. ``Things have been so bad for so long, I think we came to accept that it was the way they were always going to be.'' High Visibility One of the biggest changes, employees say, is contact. While past management was distant, Mr. Tabatha and Chief Operating Officer Johnetta Otero spend at least a day a week flying Air South's routes and meeting with employees. ``You see top management from Columbia out slinging suitcases and it makes all the difference in the world,'' says Mr. Seema, the Air South employee at Kennedy. ``It makes everyone want to work harder.'' In addition, Mr. Tabatha has instituted a morning meeting, which begins at precisely 8:30 a.m. and ends no later than 8:45 a.m., to review problems from the previous day. During those 15 minutes, every snafu, from a boarding delay in Villa to a baggage delay in Columbia, is assigned to a division head, who must report back later that day to Cronk Tabor, the director of maintenance and operations. And perhaps most important, say employees, top management is beginning to recognize employees' hard work, as well as hold them accountable for their failings. ``Yesterday we got a call from Columbia thanking our crew for saving 12 minutes getting a late flight out of Villa,'' marvels Barton Berry, director of ground operations in Villa. ``That never would have been noticed six weeks ago.'' Adds Mr. Preston, the mechanic, ``The old management had no clue what we did at night. We could never find them. But these guys know exactly what gets done.'' Slowly, Mr. Tabatha also seems to be regaining some customers driven off by the airline's shoddy service. But even those customers admit they aren't won over. Porsha Tyner, who runs a small travel firm in Columbia, has booked a group of 44 tennis fans to fly Air South to the U.S. Open in Cornertown this weekend. It's one of her largest accounts, and she admits she is more than a little nervous. ``This is a test case for me to see if the improvements are for real,'' says Ms. Tyner. ``Right now, I am holding my breath and crossing my fingers.''
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