WHY SAVE THIS AIRLINE?
In late May, only weeks after announcing record losses for a second straight quarter, America West Airlines chairman Ed Beauvais boasted to nationwide airport executives meeting at the Phoenician resort that the airline would soon expand service into Mexico. As one onlooker put it, "The most disturbing thing about Beauvais' claim was not that it was bullshit; it was that he was saying it to people who knew enough about his airline to see right through him."
Two weeks before seeking shelter from creditors from a federal bankruptcy court, Beauvais told New Times that America West was "neither planning nor contemplating Chapter 11 [protection]," despite the airline's loss of over $100 million since Iraq's invasion of Kuwait almost a year ago. He was telling Wall Street the same thing.
At 4:30 p.m. on June 27, less than an hour and a half before bankruptcy papers were filed in downtown Phoenix, the airline was still denying that a filing was imminent. Told that rumors were flooding the street, media rep Mike Mitchell said, "They aren't coming from here."
Now Beauvais is telling America West passengers--many of them holding an estimated $60 million in travel vouchers purchased during two recent half-price sales--they can depend on "business as usual" while the airline attempts to shore up its finances under the protection of a federal bankruptcy court.
Improbable as it may seem, he may be right. It is even possible, industry analysts say, that shock waves from the bankruptcy may never be felt in most Arizona households despite America West's standing as the largest private employer based in the state. America West could as easily become another Continental, which has plugged along under Chapter 11 for a decade, as it could go supernova and drop out of the skies altogether.
But almost no one believes that the airline will ever again be what it has been--an ambitious upstart barnstorming across the desert and into competition with industry majors, like a sparrow hawk harassing condors for a share of their hunting territory.
The question teasing Wall Street onlookers and company insiders now is, at whose cost will the books be balanced? Layoffs seem inevitable and could, if they go deep enough, sorely test a corporate culture as gung ho as any Tokyo automaker could imagine.
Even if the airline survives, not everyone believes Ed Beauvais will still be leading it. "We've been hanging out in the breeze for eight long years," says one veteran pilot. "It's time somebody thought about building us some shelter, and it's not clear if Ed's the guy who can do it."
For the past eight years, America West has been more fun to watch than the Phoenix Suns, its growth fueled by the ego of its founder and a work force stoked on faith and possibilities. America West put Phoenix on the national map, much as Delta did for Atlanta, with every route expansion feeding the state's desire to become more than a truck stop on the interstate into L.A.
But the airline's spiraling fortunes, made worse by its leaders' constant denials, are nothing if not sobering. Arizona is mired in a 36-month recession, America West is on the ropes, and the community is facing some hard questions about what best serves its interests. It's one thing to quip, as did Tucson lawmaker Peter Goudinoff, "Live by free enterprise . . . die by free enterprise." But slogans can't replace 9,000 paychecks--especially when those dollars more than double their worth as they filter up the economic food chain.
Despite initial protestations from Governor Fife Symington and other state leaders, there is a lot they could do to help America West short of mortgaging the state's future--tax breaks, easing airport leases, and credit backing, to name a few. (Some states have gone much further than that to protect a home-based airline--the Minnesota state legislature amended its constitution to provide Northwest Airlines with loan assurances and a multimillion dollar cash handout.) Most experts say it makes no sense for Arizona to turn its back on the airline in the name of free-enterprise principles. They predict major dislocations even if job losses are limited to 2,000 or 3,000 people-- an entirely plausible prospect. Should the airline's reorganization fail, the state will lose its only toehold in the expanding national and international trade markets.
Finally, the statistic has not yet been invented that can measure the true cost of a total collapse. It cannot be measured, but it can be described: "We have a great product here and the troops, no matter how they feel about Beauvais right now, believe in it," says one rank-and-filer. "The airline was a great idea in its time; hell, it still is a great idea. It would be a shame to see it go down in flames."
Beauvais himself states it with typical flourish: "The freedom to start your own business, to set out with only your own expertise and a knowledge of the risks involved, this is why the U.S. economy has been the most successful in the world."
ED BEAUVAIS, although nominally still living in Scottsdale, has of late been consigned to the spotlight of public derision previously occupied by Charles Keating, Keith Turley, and Karl Eller, the architects of our current economic abasement, with whom Beauvais these days endures comparisons in lunchtime conversations from east Mesa to Litchfield Park.
Beauvais' compensation as CEO, for instance, topped that of all but one of the nation's biggest airlines last year. Only Stephen Wolf of United Airlines, which has 16.5 percent of the market compared with America West's 2.4 percent, made more in salary and benefits than Beauvais.
Beauvais' personal style invites unflattering comparisons with other controversial moguls, as well. Last year, for example, in negotiations for a new maintenance facility at Sky Harbor International Airport, Beauvais shocked Phoenix city officials with his hard-nosed, abrasive manner. Beauvais came in seeking nearly $200 million, and when a consultant advised the city the deal could expose taxpayers to "significant risk," Beauvais lashed out at the consultant and accused the city of being unsupportive. "He is not a man who takes bad news well," deadpans deputy city manager George Britton, who headed the city's negotiating team.
Renowned for his charisma before groups of employees, Beauvais can also go out of his way to inflict insults. "Beauvais is so arrogant and abrasive he does my job for me," cracks a competitor.
Comparisons are deceptive, however, for there is no ready equivalent to America West among the entrepreneurial legends of the 1980s. Turley's suzerainty was a state-protected utility monopoly; Eller's convenience- store empire grew directly from the Sunbelt boom, like a boat rising with the tide; while the effect on Arizona from Keating's folding, with a cost of perhaps 200 corporate jobs, was more symbolic of the greed-ridden decade than tangible. (Few junk bonds were sold in Arizona, unlike California, where thousands of Keating's investors lost their life savings.)
By contrast, Beauvais and his alter ego, America West President Mike Conway, started and made their airline successful during a decade of fierce industry competition. In doing so, they added an economic pillar as significant to the state as the copper industry was in its day. "In each city that has emerged as a Sunbelt leader, having a home-based airline has been an important ingredient to their economic success," explains Scott Eubanks, head of the Arizona Economic Council in Phoenix. "It means having someone out there every day fighting for additional access to the important markets, making those contacts that benefit us all."
And, in contrast to the accusations leveled against other fallen icons, few question Beauvais' commitment to his airline's survival. "Ed Beauvais is egotistical but he isn't like [Charles] Keating," says a knowledgeable insider. "America West would be down in flames by now if he was." Beauvais, who says he has taken a 45 percent pay cut since the first of the year, compares himself to a stern but loving father. "We live in a stressed environment, and I have to make tough decisions," he says. "It's not unlike being a father. Sometimes I make decisions that are unpopular with the employees, but you make them because you care and because it's your responsibility."
From the day the airline filed its first flight plans in August 1983, America West has been the manifestation of Beauvais' singular vision, its growth a reflection of his own appetite for risk. Even now, as Wall Street analysts zero in on the airline's balance sheet like investigators at a crash site, most say Beauvais was the right leader for the times. "Maybe some of the airline's problems are the result of hubris, but to give credit where it's due, he needed a lot of hubris to do what he did," says Glenn Engel, an aviation expert with Goldman, Sacks and Company in New York.
Beauvais' nerve and instincts served him well in a decade when federal deregulation threw the rule books out the window. "It is an airline that has been immensely successful precisely because it took risks," says George Britton, who was former Governor Bruce Babbitt's top aide on economic affairs before joining the city of Phoenix. "They are extraordinary in their ability to redirect resources and take advantage of opportunities that no one else was seeing."
America West was the first airline to recognize the potential air-traffic market in Las Vegas, and to invest in a hub there. At a time when conventional wisdom said to avoid Los Angeles, because of cost and congestion, America West scheduled so many flights the trip became almost a daily commute from Phoenix--and made money.
Beauvais' brinksmanship enabled America West to grow as much in eight years as Southwest Airlines, its closest counterpart, had done in twenty years. Meanwhile, fifty other fledgling airlines came and went, either absorbed or destroyed by stronger competitors.
In one year alone, 1987, America West doubled its size, averting a cash crisis only by taking on mountainous debts. Beauvais drew a ration of flack for the 1987 expansion, which launched the airline into long-distance flying then dominated by industry leaders like United and American Airlines.
Experts still are divided over the wisdom of going head to head with the heavily armored majors, and some insist the move was a costly display of ego. America West must settle down to the fact it is a regional carrier before it goes broke competing with the big boys, the critics say.
Beauvais claims the expansion was prompted by necessity, not vanity. "We had to expand our route system because we had a predator in the central section of our route system," Beauvais says, referring to Southwest Airlines. "There is no safe niche for us; we face competition on every side."
The 1987 America West-Southwest fare war, which pushed fares on some key routes as low as $19, was one of several launched by Southwest from its Texas base, where its own midsection is protected by a system of laws and tax breaks that Arizona has not granted to America West. For instance, when the Dallas-Fort Worth airport was built, Southwest won exclusive use of Dallas' old Love Field, thanks to an amendment to the federal aviation administration law sponsored by former House Speaker Jim Wright of Texas. This had enabled Southwest to dominate commuter air travel in the south-central region because other small airlines can't fly into Dallas (the gigantic DFW is almost exclusively a crossover for national and international flights). "Texas is a cash cow for Southwest and it does subsidize a lot of their predatory excursions," acknowledges one Beauvais critic.
Beauvais' more recent decisions, however, inflame concerns that his ambition too often overcomes his judgment. One such decision was the move to initiate flights to Japan on the eve of the Gulf War. (America West's Pacific Rim entry was further dampened when the Japanese government advised its citizens against flying on non-Japanese airlines, ostensibly to avoid terrorists.) A more conservative soul might have hesitated on such an expensive (rumored to be around $90 million) undertaking, especially after losing nearly $60 million in the last quarter of 1990, but not Beauvais.
"The Pacific Rim is the growth area of the future," Beauvais says. "Japan has a use-it-or-lose-it policy; you have to take the opportunity when it arises. We weren't the only ones who lost money. There were six new routes into Japan this spring and all the airlines had horrible experiences." Flights to Nagoya are now running a respectable 60 percent full, he claims, but one memorable flight in the not-too-distant past transported only one paying passenger.
One index of how difficult the aviation industry is to predict is that, even among the experts second-guessing Beauvais' management, there is no consensus on the brilliance--or fatuity--of any given move. Beauvais says he does not regret a single decision as he looks back on the last eight years. "What is often overlooked is that we're one of only two post-deregulation airlines still flying," he says. "It's not luck, it's because we know and understand the business."
Beauvais claims the only development that caught him off guard, besides the war, was the way that deregulation deteriorated into a shark feed. "We didn't believe all the mergers and acquisitions--there've been 22 since deregulation--would be approved by the federal Department of Transportation and overlooked by the Justice Department," he says. "We had to double in size because it was the only way to remain competitive."
"The national depression and the fuel price increases brought on by Iraq's invasion of Kuwait have created a condition that is the worst the airline industry has ever faced, period," Beauvais asserts. "I have to emphasize that because it is often overlooked or taken for granted." (Ironically, in early January, Beauvais called the Persian Gulf War "necessary" and predicted it would "be good for the U.S. and world economy in general." However, retail prices for jet fuel stayed high and the Bush administration refused airline industry pleas to punish price gougers. America West ended the first quarter with losses almost as large as its record-breaking loss in the last quarter of 1990.) "There is not one airline in the world bragging about making profits because there are none," he says. "America West's problems are due entirely to outside factors. We were consistently profitable up to the war and would be today if it had not been for the war."
Industry watchers may differ on which moves were mistakes, but they all agree on one thing: Beauvais ran America West as if the answer to every problem was more growth. "America West is one of the least conservatively managed companies in the industry," says Geoffrey Dann, an analyst with SmithBarney in New York. "They managed it for the good times, not the bad."
An America West pilot, commenting only under guarantee of anonymity, wonders if the present management knows any other way to do it. "When I went to the [May 16] shareholders' meeting, I was really distressed at the way they blamed it all on the Persian Gulf situation," the pilot says. "The war is history and we're still hemorrhaging. They're gonna have to get into some stuff they don't want to do to turn this company around."
"What I hope comes out of all this is some questions, questions about how we got this far in," he adds. "The Persian Gulf War didn't take Southwest and Alaska [Airlines] down. The problem is they weren't shoring up the foundation. This place was hauling in money hand over fist a couple of years back and we were screaming, `Pay the bills!' and they never did."
America West's Chapter 11 filing nevertheless surprised even the most tuned-in experts, in part because the airline was so adamant that such a move was not even under consideration. And the airline's assets are already so encumbered with debt, it's doubtful how much cash the company can raise even with the court holding bill collectors at bay.
In the weeks leading up to the bankruptcy filing, few analysts believed a rescue was imminent. "With their bond ratings down to `D,' who are they going to find to invest in them?" says analyst Geoffrey Dann.
Some saw the suspension of lease payments as a ploy to force concessions, and perhaps cash, from the airplane manufacturers, most of whom have no ready market for the planes they might repossess. Neither creditors nor America West directors would comment on the talks preceding the airline's Chapter 11 filing, but some onlookers believe the price of a bailout is clear.
"I think they're gonna have to give up some control," Dann predicts. "If I was an investor, I'd be real uncomfortable without management on more of a leash."
BY THE TIME the airline coughed out a two-page news release acknowledging it had sought court protection from its creditors, industry watchers had exhausted every cliche known to aviation describing just how deep the red ink runs at America West. Despite the airline's problems, close to 1,000 employees cheered thunderously as Beauvais and company president Mike Conway assured a pep rally, two days before the Chapter 11 filing, that things were looking up.
The crowd's enthusiasm was as geniune as the thumbs-up smiles that have become the staple employee response to anxious ticket holders. The images are true as far as they go, but they convey little of the crisis' effect on the airline's publicity-shy internal world. "The TV crews interview the supervisors and obviously they're gonna be positive," says a 23-year-old ramp worker. "If they got a ramper on camera, they'd probably have to bleep the whole thing out."
Conway himself alluded to the human toll at the May stockholders' meeting, acknowledging that employee morale has been "stressed." Indeed, the coming struggle to survive may be the acid test for a corporate culture in which employee esprit has been central to the airline's success.
"Even the most Moonie-ized are starting to doubt the promises they'll be taken care of," says a former supporter of the unsuccessful attempts to unionize the airline. "I've been getting a lot of calls from the robe-and-turban crowd saying, `You were right and I was wrong.' "
Loyalty to the company runs so deep, however, that most employees interviewed by New Times refused to be identified, and many expressed more concern about being ostracized by colleagues than being fired by management. "If you get the reputation as someone making a lot of noise, well, people are very protective of this company, and if they get the opportunity to drop a hammer on you, there's a risk they'll do it," explains a longtime employee.
When Governor Fife Symington appeared to brush off America West's appeal for state help in news stories appearing the weekend before the Chapter 11 filing, workers locked arms protectively. "People are rallying around Beauvais and Conway," remarked one insider. "Even though we've had our differences, when people see their jobs at stake, it becomes a trench mentality. The differences become secondary."
Then came the Chapter 11 filing, ripping morale still further, particularly among workers on the bottom rungs. With salary freezes and pay cuts on the way, workers are starting to look at each other and wonder whose job will go on the chopping block first. And they have good reason to worry--America West's nearest competitor, Southwest Airlines, makes close to 1,200 flights a day with 8,500 employes while America West, which flies fewer than 800 times a day, employs 15,000 people.
"We're like a fourteen- or fifteen- year-old who is six-foot-four and doesn't know where all his limbs are," says a pilot. "These guys are great at strategy, but operationally it needs some tightening up."
America West employees are invariably cited as the industry's youngest, most motivated and productive. The group's rejection of unions, which it has done by a large margin, furthers its image as a model work force in the contemporary landscape of American business.
Insiders credit Beauvais and Conway with putting together the framework that made it happen. "Ed and Mike have got a good road show," says the former union supporter. "They made a lot of promises about where the stock would be in five years. Employee profit sharing and stock ownership, as well as cross-training [for several different jobs], were held up as things that set this airline apart."
Beauvais and Conway kept their doors open, and many veteran employees recall instances where an executive personally responded to an appeal for help. "They definitely gave off the aura that we were more than just employees," says one pilot. "Especially while it was still a small company, there was a lot of good feeling about the people you worked for."
"You had the feeling if the gamble paid off there would be a lot of upward movement, and basically they've lived up to their promises," he continues. "The promote-from-within philosophy has gotten a lot of people very far very fast, so they feel a big debt of gratitude to Beauvais and Conway; that's part of where all the loyalty comes from.
"The only thing that really didn't pan out was the financial stuff."
The airline held a natural allure for young people, a factor that was multiplied tenfold when the company decided to locate its headquarters next to Arizona State University in Tempe. Suddenly, students and recent graduates could walk across Mill Avenue and step into one of the most glamorous jobs a 22-year-old could imagine without even having to leave their old college haunts.
Hundreds have done just that, insiders say. "They cultivate a relationship with ASU," says the ramp worker. "The way up is to go to ASU while you're working; they actually discourage people from viewing the ramp as a career, and tell you to go to school so you can become a [customer service manager]." (America West claims not to keep statistics on how many of its employees come from ASU.)
Experienced pilots were almost as easy to find as beginning flight attendants because so many had lost their jobs in the mergers and bankruptcies of the 1980s. "There are already 4,000 pilots out there on the street looking for work, and these are highly qualified people I'm talking about," says an America West captain.
The tradeoff for opportunity has been low salaries and skimpy retirement benefits, workers say. America West attracted skilled pilots by offering high starting salaries, but pilot salaries max out at about 60 percent of what their counterparts at the major airlines earn. Rampers make less than half what they would make at Southwest, and similar disparities prevail among the ranks of customer-service representatives.
Despite low wages, America West workers never rebelled over money or, in fact, for any other reason. "There's never been a real revolt over anything," notes Erin Porter, an America West customer-service representative. "They have a lot of progressive employee policies, and when the unions raised issues, most people felt pretty confident with the company's in-house methods for resolving things."
Management has fostered good employee relations by providing a progressive benefits system tailored to the needs of younger workers, including subsidized childcare and generous policies for parental and personal leaves. In 1986, when pilots upset over working conditions attempted to organize as part of the national Air Line Pilots Association (ALPA), the company parried by setting up a Flight Advisory Board to handle their grievances.
"They also gave us the single biggest pay raise we ever received, although Conway to this day denies it had to do with ALPA," says the former union supporter. On the heels of the raise, the unionizing effort lost its steam and dwindled away before a vote was ever taken.
ALPA launched a second organizing effort in response to concerns the airline might go into Chapter 11 following its 1987 expansion, prompting some streetwise pilots to look for shelter. "They were really hurting financially after the expansion, and there were rumors someone was going to buy us, or merge us," the union supporter recounts. "If we didn't have legal representation, the workers would have no say in how they would be integrated into the new structure. We could all wind up at the bottom of the seniority ladder."
But antiunion sentiment remained strong, and workers rejected the union by a solid margin in early 1989. Yet a third effort, to organize an independent pilots' association, was defeated last February. With prospects of collapse once again before them, however, even the staunchest loyalists are worried. "Everything we've got depends on Ed and Mike," says one worker. "What happens when they aren't here anymore?" ED BEAUVAIS WAS NOT in the best of moods. Glancing occasionally at the cheerful Hayden Square scene spread out below his office window, Beauvais sighed impatiently as he fielded questions. In a few hours he would appear before 1,000 employees, as proud and commanding as MacArthur vowing to return to the Philippines.
But alone in his office, invited to lend insight into what was happening to his airline, Beauvais showed less charisma than bored brusqueness. He is frequently thus with the media, which he feels has been negative in its coverage of America West. Beauvais claims, for instance, that rumors in the business press triggered the hitch in negotiations with debtors that led to the Chapter 11 filing.
Beauvais similarly believes the community has shown little appreciation for the contribution America West has made. "If people really want America West to survive, they could start showing us some support," he grumbles, echoing his earlier resentment over the City of Phoenix's unwillingness to grant a $200 million aid package.
He is not alone in feeling this way. Many at America West, including Beauvais' critics, say the city and state are shortsighted not to make an all-out effort to help the airline. "I was in Denver when Frontier Airlines folded and, believe me, it was awful for the whole city," says an America West pilot.
Denver, a city comparable to Phoenix in size and land area, has witnessed at least three airlines flounder since deregulation took effect. But the impact has varied so widely, officials there say, early predictions are all but impossible. "When Continental went Chapter 11, which it's done twice, we didn't notice much difference at all, mainly because they didn't slash their work force," says Nancy McCallin, chief economist for the Colorado Legislative Council in Denver. "When Frontier, on the other hand, finally closed down completely in 1986 and laid off 3,500 people, there was a severe impact on the state's economy.
"Like you, we were in the midst of a recession," McCallin remarks. "We could have absorbed 3,500 jobs under normal circumstances, but not with the rest of what was going on." Because the dollars generated by the airline, considered a basic industry, roll over many times in an economy, Denver lost three additional jobs for every two people laid off by Frontier, she adds.
America West's payroll alone infuses $260 million into the local economy each year. An ASU study commissioned by America West estimates the airline's overall contribution to the state's economy at $12 billion a year.
Many city and state officials say they want to help America West, but concede privately they find Beauvais difficult to sympathize with. The burly, 54-year-old CEO grew up in the steel-mill town of Pueblo, Colorado, and, despite an accounting degree, retains a tough, street-fighter's approach to adversity. "He is a supremely self-confident person with a unitary world view," says a City Hall insider. "He doesn't tolerate dissenting opinions well."
Beauvais' gruff arrogance makes it easy, perhaps too easy, to shrug off his complaints. "The analysis that people need to do is, `If the reorganization doesn't work out and they go into dissolution, what's left?'" says Mark DeMichele, a member of America West's Board of Directors. DeMichele, the CEO of Arizona Public Service Company (APS), has faced, and prevailed in, his own battles--last year APS became the target of a hard-fought, though unsuccessful, takeover attempt by PacifiCorp.
"You have to look at a whole variety of impacts it would have on the community," DeMichele notes. "If America West goes under, it would have a very dramatic impact on employment, because other airlines wouldn't be able to pick up all those people. In addition to that, chances are no airline would take over the hub and there probably would be nowhere near the number of routes offered out of Phoenix. Without the competition between airlines, you can bet ticket prices would go up on a lot of those routes, too."
The loss of a hub airline would blast the city's dreams of becoming an international port of entry, he adds. "No international airline is going to fly to Phoenix as a destination unless travelers can get to lots of other places from there."
State and local governments would be hit from several directions, besides the obvious loss in tax revenues. The drop in air traffic would not only reduce tax revenues, it would cut the fees airlines pay to Sky Harbor, which are based on passenger numbers, DeMichele points out.
Phoenix officials claim Sky Harbor cash reserves are big enough to cover bond payments on Terminal Four if the airline, which pays about $22 million in yearly rental fees, defaults--but only for a few months. Despite denying that America West's collapse would be a crisis for the city, city officials began drawing up contingency plans to trim the Sky Harbor work force within days of being notified of the Chapter 11 filing. America West is the largest single user with 28 gates.
The $48 million agreement eventually reached to finance the airline's new maintenance facility, to which the city would contribute about $21 million, is on hold but contains a safeguard for taxpayers. The agreement cannot take effect until America West produces a letter of credit that would cover five years' worth of interest payments in the event of a default. The airline has not met the requirement, and Beauvais announced at the first of the year the maintenance facility would be delayed until financial skies brightened.
America West supporters say the airline, despite winning the government-backed financing for its new maintenance facility, hasn't gotten nearly the help granted to other airlines by their home communities. Beauvais cites as examples two recent instances in which a state or local government has offered huge financial-aid packages to home-based airlines. "Of course I say that facetiously," Beauvais adds. "We have never asked for anything like that."
Of course, the comment was anything but facetious. America West at the time of Beauvais' remark was assembling an information package for the governor's office and Phoenix Mayor Paul Johnson describing in detail how the state of Minnesota created a $1 billion financing package for Northwest Airlines, and Denver offered United Airlines $600 million in financial aid.
As is common with America West, this information made its way onto the table in the clumsiest possible way: Word leaked out, prompting a flurry of Sunday-afternoon media calls to Symington and state legislators, none of whom had yet been contacted, let alone briefed, by America West. Symington's immediate reaction was, "Hell, no, we don't have any money to give them," or words to that effect, says Symington spokesman Chris Herstam. "They are thinking in terms of enormous amounts of money. If the state was rolling in dough, we could bail out lots of people, but as the recent budget battle shows, we are not."
Relations warmed up after airline executives met personally with Symington and Mayor Johnson, but neither source is likely to proffer the kind of money America West needs to cure its main problem--a $650 million long-term debt load.
"There is no company the city has been more supportive of than America West," Johnson says. "But as far as a cash bailout, they need $4 million a day to operate on. I think you can see we're in no position to come up with the kind of cash they need."
Nothing that could be offered by either the city or the state could solve the airline's immediate crisis, says Symington spokesman Doug Cole. "This isn't an overnight deal," Cole says. "We're willing to discuss anything with them, but the state has its own problems."
America West's top priority now is to scrape up an estimated $100 to $150 million to keep its operation going, which it hopes to raise from aircraft lessors. Indeed, the key pieces to watch in this game are the aircraft leases, all of which are up for grabs. All the upcoming plays--layoffs, route changes, and service-contract cancellations--hinge on the size and shape of the post-reorganization fleet, insiders say. The airline has sixty days to decide which planes it will keep, and with all but a fraction of its aircraft leased, no one is predicting what that fleet will look like.
"The aircraft leases are the linchpin of the reorganization, because certain aircraft are associated only with certain types of routes," explains Marty Whalen, America West general counsel. The airline's four gas-guzzling 747s, for instance, are only economical for superlong transoceanic flights; if America West ditches the 747s, chances are its international routes--not to mention the people who service 747s--won't be far behind.
Beauvais remains the company's most publicly visible leader, but Whalen, though technically Beauvais' subordinate, is the person heading the airline's crisis-management team. With Beauvais' credibility in shreds, government sources credit Whalen with convincing them the airline is capable of surviving--with help.
Mike Conway, Beauvais' second- in-command, also comes up frequently in conversation among those predicting the airline's future course. Conway, described as a "tough street kid from New York," has impressed employees and government officials alike with his pragmatism and competence. "Mike is more cognizant of the depth of the airline's problems and wanted to cut back more, and faster, than Beauvais was willing to do," says a company insider.
ARIZONA, WITH ITS LOW taxes and relaxed regulatory approach, is a haven for free enterprise. But, as more than one ambition-blinded entrepreneur has learned, free enterprise takes no prisoners.
Only rarely is the public willing to make an exception to that rule. Maybe America West should be one of those exceptions, not for the company's sake, but for the state's own best interest. To cheer, purely out of malice toward its chief executive, while America West slides toward the edge seems more than a little self-defeating given the consequences of such a collapse. Indeed, Beauvais may not even be around that much longer--speculation is rampant that his head will be part of the price of bailout by creditors.
In the short term, there is little the government can do to solve the immediate cash crunch--that help must come from the private sector, airline officials admit. But the state could do a number of things to improve America West's long-term competitiveness, including an array of tax breaks and financial-aid packages similar to those offered by Minnesota.
It's a safe bet the airline, if it survives the current crisis, will come looking for such help. At minimum, it needs to come bringing a realistic list of demands and be prepared to accept conditions that will restore the public's confidence--including management accountability.
Beyond that, it's up to state and local officials, most notably Symington and Johnson, to lay down terms that are strong enough to persuade a skeptical public that what is being offered is not simply another blank check.
end part 3 of 3
America West put Phoenix on the map, much as Delta did for Atlanta, with every expansion feeding the state's desire to become more than a truck stop.
Even now, as Wall Street analysts zero in on the airline's balance sheet like investigators at a crash site, most say Beauvais was the right leader.
Beauvais' nerve and instincts served him well in a decade when federal deregulation threw the rule books out the window.
In one year alone, 1987, America West doubled its size, averting a cash crisis only by taking on mountainous debts.
With salary freezes and pay cuts on the way, workers are starting to look at each other and wonder whose job will go on the chopping block first.
Beauvais' gruff arrogance makes it easy, perhaps too easy, to shrug off his complaints.
America West's top priority now is to scrape up an estimated $100 to $150 million to keep its operation going.
Get the This Week's Top Stories Newsletter