First-Class Flight Or Folly?

Morris says he and other executives of the new airline--which include chairman-designate Jake Garn, a former Utah senator, and president-COO John Pearsall, who worked previously at America West Airlines and the now-bankrupt National Airlines--have gotten a positive response from the Fortune 500 companies they have met with.

But a National Business Travel Association study last month found that less than 5 percent of the business travelers it sampled paid first-class and business-class fares between 1999 and 2002, and only a quarter of business people flew on an unrestricted fare. The majority, 70 percent, flew in coach on a restricted, or discounted, ticket.

In a separate survey, the trade group last month polled about 10 percent of the more than 2,400 corporate travel managers and travel service providers it represents. More than half said they expected their total travel spending this year to be down from 2002, when spending was already low. Three quarters of those polled said they didn't expect the business-travel industry to recover until next year, at the earliest.

"Business travel has been the hardest hit, which makes me a little suspect about the timing here [for Primaris]," says Kasper. "It's a narrow market to begin with and it would be difficult to sustain that kind of service." On the other hand, he notes that it doesn't cost nearly as much to start an airline these days as it did in the heady 1990s, when planes were packed with passengers. Air traffic has fallen off so much since then that many of the major carriers have been forced to "park" some of their planes. That means the cost to lease an aircraft is down dramatically from just a few years ago. And, with more than 110,000 job cuts in the airline industry since the September 11 attacks, there are plenty of well-qualified airline workers--from mechanics to pilots--looking for a job. Interest rates are also much lower now so it costs less to borrow money for a start-up. "All those things make it cheaper to enter the business than when the business is booming, because that's when the established airlines are soaking up all the airplanes and labor they can," says Kasper.

JetBlue Airways, one of the most successful start-ups in recent history, had more than $130 million in capital funding when it launched in early 2000. Primaris has told the Department of Transportation it plans to launch with about $60 million in capital, which it is still securing. Seventy-Six Degrees, a limited-liability company, now holds about 10 percent of the airline, and Morris says he has "soft commitments" from a number of other investors.

The airline also estimates it will have a lower break-even level than those at most airlines, which now need to fill about 80 percent of their flights to break even on average, according to the Air Transport Association, which represents the major carriers. Morris says Primaris will need to fill just over 60 of the plane's 100 seats on any flight to make a profit. (It is configuring its Boeing 757s to accommodate just 100 seats--about half the normal number of seats in a 757--for more space). And Morris is confident that the airline can meet that goal. "We're offering a great product for a very good price," he says.