=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2003/02= /04/BU147298.DTL ---------------------------------------------------------------------- Tuesday, February 4, 2003 (SF Chronicle) CLIPPED WINGS/Small, discount-price airline gives up on Bay Area commuter f= light Jim Doyle, Chronicle Staff Writer After slashing its fares to just $10, Valley Air Express has scrapped its turboprop flights from Santa Rosa to Oakland. Valley Air's station employees in Santa Rosa spent Monday afternoon packing up their offices, an airport administrator said. Telephones at the small regional airline went unanswered, and calls were not returned. It was unclear when the carrier made its last Santa Rosa-Oakland flight. An executive for Valley Air blamed the stalled economy and stiff competition from airport buses for the demise of its brief, bone-crunching run at a major market. But he insisted that the carrier is retrenching and buying itself some time until the airline industry recuperates. "It's a jungle out there in aviation," said Cory Robin, a Valley Air vice president. "The bigger airlines can operate at a loss. We want profitable quarters every quarter. . . . We have the flexibility to move our airlines and do things to find a market." Valley Air's difficulties come at a time when major airlines also are struggling. They have abandoned routes, laid off employees and, in the cases of United Airlines and US Airways, filed for bankruptcy protection. Some of the smaller regional airlines arguably have taken bigger hits. They don't have access to government loan guarantees and subsidies, and they run with profit margins so low, they are constantly in danger of going out of business. Robin said the airline will continue to offer charter and freight service in Southern California, then resurface next year with more passenger routes in Northern California. Valley Air's run at the potentially lucrative Bay Area market never quite gained cruising altitude. The Sacramento carrier, which began flying out of Santa Rosa in mid-September, offered the only scheduled service from Charles M. Schulz-Sonoma County Airport after United Express stopped flying to San Francisco and Los Angeles in October 2001. Two weeks ago, Valley Air cut back its Santa Rosa-Oakland flights from five per day to two and reduced all of its fares to $10. "We were losing on average between $30,000 and $40,000 a month. We're not talking big bucks, but it was enough to say: 'OK, we're done,' " Robin said. The cash-strapped airline lobbied local government officials for money to help build ridership levels, but a potential $500,000 state grant dried up with the governor's recent budget cuts. "We've lost money continuously since we opened Santa Rosa, but that's to be expected," Robin said. "Every airline expects to lose money for the first six months of operation. Of course, every time you have to pull out of a market, it's not a pleasant thing. We had hoped to establish a relationship with Sonoma County." Robin said that the carrier is forming an alliance with small regional carriers in Arizona and Washington state and repositioning itself to take over routes that were ended by larger and medium-size airlines. Next year, Valley Air plans to open up routes between Sacramento and the North Coast. It is also considering returning to Santa Rosa, perhaps with service to Los Angeles. Valley Air purchased the airline, formerly called Sun Air Express, a year ago. Its flagship Cessna Grand Caravan had previously flown back and forth between Redding and Oakland. The new owners used billboards, radio and print ads to promote the half- hour flights from Santa Rosa to Oakland. The airline originally offered a one- way fare of $75 with a reservation, and a $37 fare for standby passengers. By contrast, the two-hour ride to Oakland International Airport on the Airport Express bus is $20, plus $5 for all-day parking. Valley Air's flights were "good for business travel, but that was a small portion of the market," Robin said. "We did build up a steady amount of regular passengers who would ride us frequently, but most people elected to drive themselves or ride the bus if they had meetings in Oakland. Most of our customers were using the service to connect with JetBlue and Southwest flights. " Valley Air modeled itself after no-frills SouthWest Airlines and JetBlue, two of the world's most profitable airlines. Both carriers are able to offer cut-rate fares in part because they do not distribute their flights on Web sites such as www.travelocity.com and www.orbitz .com. "The majors designed the distribution system to keep the smaller and new= er airlines out," he said. "We're struggling to get into the bigger airports. We're doing what Southwest Airlines was doing 20 years ago. In Oakland, we had to fly into a private terminal (Kaiser Air general aviation) and take passengers by shuttle bus over to the main terminal." Backed by a handful of investors, the nonunion Valley Air hired experienced station crews and veteran pilots in their 30s and 40s. Each employee has a small piece of the company. Today's closing of the Santa Rosa-Oakland service will result in furloughs for pilots and ground employees. Cessna's Grand Caravan has nine single-row passenger seats, each with a cushy 36 inches of legroom. Planes are staffed with a captain and first officer, but no flight attendant. "We're a specialty airline that offers nothing but first-class service to every passenger at a low cost," Robin said. "Everyone has concerns about turboprops. Once they fly on it, we've won them over." Sonoma County airport manager John Stout said that he was not surprised = by Valley Air's decision. "It was a tough market for them to crack," he said. "There was a potential market, but they stopped promoting it in early November and you could see the numbers drop." Valley Air is banking on a resurgence of short-haul airlines. In the late 1990s, the larger airlines bought lots of feeder routes. Now, they're sticking to long-haul, high-density routes -- slashing costs by turning over the medium-size routes to carriers such as Sky West, Mesa Airlines and Horizon Airlines, which are parking their turboprops and buying small jet aircraft. "I think about a year from now it's going to be a very good market. If y= ou have $10 million burning a hole in your pocket, an airline is going to be a good investment," Robin said. "But of course there's also the adage that the best way to make a small fortune in the aviation business is to start with a large fortune. It's a very expensive hobby." E-mail Jim Doyle at jdoyle@sfchronicle.com.=20 ---------------------------------------------------------------------- Copyright 2003 SF Chronicle