April 4, 2008 in Business

Horizon Air will endure, leader says

By The Spokesman-Review
 

Regional ties and a reservoir of customer goodwill keep Horizon Air flying while competitors fall from the skies, President Jeff Pinneo said Thursday, a day when a second airline this week ceased operations.

Although pressed by the same high fuel costs that claimed Aloha and ATA airlines, Horizon and sister carrier Alaska Airlines keep passengers coming back by offering a free morning cup of Starbucks coffee or a late-afternoon microbrew, he said, amenities he jokingly referred to as “chemical dependencies.”

Both Seattle-based airlines Thursday reported higher passenger numbers for March.

But the challenges are enormous, led by fuel costs that have rocketed from $250 million in 1999 to $1.3 billion for 2008, Pinneo told an audience of Washington State University supporters.

To cope, Pinneo said, Horizon planes taxi on just one engine, and the airline will reduce seat capacity by about 4 percent this year. Route expansions are out unless a community is willing to partner with the airline to get service, as Flagstaff, Ariz., did recently, he said.

Spokane International Airport, he noted, is one of two that considered input from Horizon while making expansion plans, with its Concourse C.

Pinneo complained about what he called competitors’ abuse of the bankruptcy system, which has allowed them to dump pension plans, wipe out investors, and re-emerge with lower costs. Horizon and Alaska are among the few airlines that have avoided re-organization, he said.

Early in his presentation, he showed a slide of airline brochures from the 1980s, following enactment of a 1979 law that deregulated the industry. Of all the carriers – Cascade, PSA, Western, and CalAir among them – only Coeur d’Alene-base Empire has survived.

Today, Pinneo said, the economics of the industry are so upside down that Alaska Airline Group – Horizon and Alaska – has more than $900 million in cash, but a market capitalization of roughly $650 million.

The head of Horizon since January 2002, Pinneo predicted the carrier will endure because it takes care of its employees, who take care of the passengers, who buy the tickets that generate the revenues that nurture investors.

“It’s amazing how deep the well of goodwill has been,” he said.


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