Despite Airline Losses, New Companies Fly Into the Fray

DESPITE record losses of $6 billion over the last two years in the airline industry, a handful of small, brave new airlines have begun service in the last year.

The reason? There are price-conscious niche markets out there to be filled by smaller carriers. The major airlines become vulnerable when they cut back on services or overprice their fares between smaller cities and hub locations. In addition, failed airlines are providing plenty of airplanes for sale or lease these days at bargain rates along with personnel to fly and service the planes.

The US Department of Transportation reports that proposals for new airlines are under consideration "all the time." Many are small charter airlines wanting to graduate to scheduled airlines.

Here is a partial list of new airlines and smaller airlines expanding services:

* Newly formed Reno Air took off in July, using former Midway jets. It now operates from Reno, Nevada with flights to Seattle, San Diego, Los Angeles, San Francisco, Ontario, and Portland, Oregon.

* Only two months old, Kiwi International is flying 727's from a new hub in Newark, N.J. to Atlanta, Chicago, and Orlando.

* Beginning Jan. 10, UltraAir, with an eye on the luxury market (it plans to serve gourmet food), will fly from Houston to Los Angeles, and later to Newark, Washington D.C., and New York.

* Laker Airlines started service last May flying two planes from Freeport in the Bahamas to 10 US destinations including Miami.

* Key Airlines, with 30 years experience, is based in Savannah, Ga. It will fly all new planes by the end of the year, and recently added Chicago and Newark to its service to and from several Caribbean locations.

* Family Air, located in Las Vegas, plans to begin economy flights in February from Las Vegas to Los Angeles, New York to Miami, and Los Angeles to New York.

"The good part," says Glenn Engel, an airline analyst for Goldman Sachs in New York, "is that airplanes and personnel are cheap now. But the tough part for the new airlines is how to fill their planes all the time, not just at peak times. Reno Air wants to be a dominant player in their niche market, but is there enough of a market?"

`THE recent troubles of the airline have left many cities thirsty for the efficient, low-priced service we provide," says Reno Air president Jeffrey Erickson. And with the trend toward shorter, more inexpensive vacations, our nonstop access to the Reno-Tahoe market gives people an excellent alternative and quick, affordable vacations."

When Midway auctioned off its equipment, Reno Air was there to buy computers and other office equipment at about 10 cents on the dollar.

No other airline uses Reno as a hub. Reno Air hopes that gaming, recreation, and low air fares will attract customers to fly to Reno. The area around Reno has more than 30 casino-hotels, some two dozen downhill and cross-country skiing resorts, and 20 golf courses in the summer months.

Reno Air uses McDonnell Douglas MD 80's and offers a 21-seat first class section. "We're certainly not a sardine can arrangement when it comes to seating," says Sue Putnam, spokeswoman for the airline. With a two-week advance purchase, a roundtrip ticket between San Francisco and Reno is now $70. A one way flight between the two cities on a major airline is around $95, and there is no restriction requiring staying over Saturday night.

Newark, N.J.-based Kiwi International offers an unrestricted round trip flight to Atlanta, Chicago, and Orlando for $198 before Dec. 17. After that date the fare will increase to $130 each way to Atlanta and Chicago, and $150 each way to Orlando. No refunds allowed. A comparable flight to Atlanta on a major airline is $379 roundtrip, but with advance purchase restrictions.

Beth Mack, vice president of sales for Kiwi, says, "Our five year goal is to stay a small, regional carrier, and to fill a niche in an overpriced market."

Kiwi provides hot meals on the flights, and claims to provide three inches more than major airlines for knee space.

"Once they have established themselves," says Mr. Engel of the new airlines, "then the critical question is, do they have enough capital to withstand any challenges?"