Great Plains: One of the WSJ's "Challengers" of 2001


In 2001, the Wall Street Journal picked four startup companies and tracked the companies' fortunes over the course of 2001, in a series entitled "The Challengers." One of those four startups was Great Plains Airlines, and I'm happy to report that the WSJ articles about Great Plains are available online for free on their website. Along with articles specifically about Great Plains, there are related articles about the state of the airline industry and the problems besetting small airlines long before the 9/11 attacks.

Some highlights:

  • Bios of Great Plains founders James C. Swartz and John H. Knight.

  • An interactive guide to the airline's business concept, including a map of existing non-stop routes from Tulsa in 2000, Great Plains' planned routes, actual routes, and how the major airlines rendered their plans moot by offering direct service.

  • A detailed background on the airline and its founders. It mentions that in 1996 the two were "prowling around" for an airline to buy in Florida, talks of their efforts in Wichita, and describes how they wound up in Tulsa:

    The two men were in Wichita, Kan., laying the groundwork for starting an airline there when Tulsa came calling. The city in the northeastern corner of Oklahoma is a classic second-tier city, and for years, the locals have been unhappy with their air service, usually having to make at least one connection to get to cities on the coasts. Finally, Tulsa Chamber of Commerce activists took action. Hearing about Messrs. Swartz and Knight, the city's leading lights in the fall of 1997 persuaded them to focus on Tulsa instead. As Mr. Knight recalls, things weren't progressing so well in Wichita, so the choice was easy.

    What followed was a three-year effort to get state and local government to help finance the airline. David Johnson, a prominent Tulsa lawyer and counsel to the airline, helped push through state legislation that would give the tiny airline tax credits that it could sell to raise money. Last year, through a combination of tax-credit sales and a loan from the Bank of Oklahoma, with property put up as collateral by the city of Tulsa, Great Plains managed to amass $30 million in start-up capital. (Today, Mr. Johnson is an investor in Great Plains and sits on its board.)

    The article mentions their revenue projections -- $144 million in the third year of operation.

  • A timeline of milestones through the end of 2001.

(More highlights after the jump.)

  • A May 31, 2001, interview with Daryl Jenkins, airline consultant and director of the Aviation Institute of George Washington University about the financial challenges faced by small airlines, in which he makes this comment:

    I don't know how deep the state of Okahoma's pockets will be, or how friendly [Oklahomans] will be when things go bad. We saw in Iowa recently where they put up all the money for AccessAir. They gave them an additional tranche of financing when AccessAir knew it would be filing [for bankruptcy]. In 90% of the cases where communities put up money, the community loses that money. I can't think of a case where [the] community put up money for a startup airline and got back the first nickel.

    AccessAir was the Iowa-based airline that was wooing Wichita about the same time as the Great Plains founders were in 1997. AccessAir flew 737s from Des Moines, Peoria, Illinois, and Moline, Illinois, to Los Angeles and New York LaGuardia starting in March 1999. AccessAir went belly-up in November 1999, about the time that the City of Tulsa gave its blessing to state tax credits for Great Plains Airlines. (You can read more about AccessAir's business plan here, about the Iowa AG's investigation into predatory pricing here -- the major airlines matched the startup fares of the state-government-subsidized airline.)

  • An August 21, 2001, article about major airlines preempting Great Plains's plans to provide service from Tulsa to Newark, Minneapolis, and Los Angeles. A couple of interesting quotes from Great Plains CEO Jim Swartz:

    Great Plains' chief executive officer, James Swartz, is trying to position these incursions as a victory of sorts. Mr. Swartz says that the very existence of Great Plains is spurring the major carriers. If somebody else decides to fly, so what? Oklahomans still win. One way or another, it's mission accomplished, Mr. Swartz is saying these days.

    Perhaps. But these pre-emptive strikes undermine Great Plains' original business plan and have dashed any hopes of flying to Los Angeles or Minneapolis. And if Continental moves ahead with Newark, that would probably kill the upstart's plans for nonstop service to New York. Mr. Swartz says he just hopes that if Continental makes a move, it's sooner rather than later. "I would hate to spend the $1 million it takes to open a market and then have another carrier go in there right on top of us," he says. ...

    Mr. Swartz says it's theoretically possible to make a "code-sharing" agreement whereby Great Plains flies to Washington under the umbrella of another airline, whether it's USAirways or somebody else. On the other hand, another carrier, including USAirways, could decide to go it alone and start serving Oklahoma and Tulsa by itself. That would sink Great Plains' plans to fly to the nation's capital.

    "In that case, it's game over," Mr. Swartz says.

  • An October 10, 2001, article about Great Plains' plan to offer service to Colorado Springs, which appears to have been driven by a show of hands at a Rotary Club luncheon, rather than the list of the most popular destinations for Tulsans.

  • A December 19, 2001, item noting the resignation of James H. Swartz as CEO. It was "game over" for him, and the company's business plan looked increasingly irrelevant, but the company would continue to seek and receive financing from the State of Oklahoma and the City of Tulsa over the course of the next year.

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This page contains a single entry by Michael Bates published on November 21, 2004 11:35 PM.

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