And we’re back with Spirit’s Chief Marketing Officer, Barry Biffle. Yesterday we dug in on the new routes out of Chicago and Vegas. Today, it’s time to talk fees. Many of you love to hate fees, but as long as they’re properly disclosed, then I see no problem at all with this kind of model. Here’s what Barry has to say. See a few of my comments at the end as well.

Cranky: Now what about Vegas? People have long thought of Southwest as the low fare airline, and you’re coming into Vegas-West markets where Southwest has long ruled the roost. But you think that Southwest’s fares have risen to the point where there’s room for a lower fare operator?

Barry: Well, we added LA last month. You’ve still got Delta, US Airways, American, and United. There are plenty of high cost guys. But we do have lower costs than Southwest. We also offer a different product. Southwest would actually go out and tell you that everything is free. They tell you bags are free, but what they really ought to say is that you’re subsidizing people who want to check bags. It’s like when you go out to dinner with friends and someone orders a really expensive bottle of wine. When you split the bill, you’re paying for it whether you drank the wine or not.

In 2006 our total revenue per passenger was $109. We actually had less than $5 in non-ticket revenue. In 2010, our average total prce including options was $112. It was only up $3 but our non-ticket revenue was $35. We don’t nickel and dime. What we’ve done is allowed people options. Most people are figuring out that we’re a much more consumer-friendly model. But we also cater to a different clientele. If you’re the guy who always orders that wine, you like the Southwest model.

Cranky: Let’s talk about one of the more controversial moves. You’ve started charging for people to bring carry-on bags.

Barry: We were averaging 17 gate-checked bags per departure at LaGuardia. The reason is because airlines lie to you, not Spirit, well, they don’t really lie but they’re allowing you two bags when there isn’t enough space above all the seats for everybody to jam a bag up there. If it’s a full flight, there’s a backup, nowhere to put the bag so its gets checked. It delays the flight and the customer gets mad. Will it be checked to my connection? Wait, I’ve got to get my medicine out. We don’t have those issues anymore. We’ve ended up with a better customer experience. Our total turn is down by 7 minutes because I’m not gate checking bags. Are we evil or are we actually the best option for consumers?

Cranky: Some people think that you’re being sneaky and trying to hide fees from them.

Barry: I want you to know what’s optional and what’s not and what’s included and what’s not. Part of the challenge is that there are so many requirements for disclosing this or that (not just in the airlines) and so people don’t pay attention. I don’t want to deceive anybody. I want people to feel good about the purchase that they bought. We just think the airline industry operated forever in a manner that didn’t give options. If you go way back, we assumed everyone wanted a meal.

At the end of the day, if you take a Haitian who lives in South Florida and they immigrated here 10 years ago and they’re living the American Dream and they want to go see their mother back in Haiti, who am I to say they need bags or they need a TV or they need food? We believe it’s our job to get them the cheapest possible way to go see their mother because otherwise they might not be able to afford it.

Cranky: But disclosure is a lot tougher for sales that aren’t through Spirit directly. And you do sell through third parties.

Barry: I think there’s frustration with the third parties. If they sell the ticket they should be obligated to tell our policies. How many times have you gone to Expedia and then you get to the hotel and there’s a $15 a day resort fee and it’s mandatory. Wait, so this is required of me and you didn’t tell me this? But they should have just said it.

There is an issue with people who haven’t flown us and bought us through a third party. The third party causes the most challenge. We like that distribution partner, but we’re not in all of them. We’re comfortable with the partners we have and we see value in it. We’re just trying to isolate the specific issue you mention. We’re not going to go to them with a big mandate, but at some point we’re going to have to figure out a way for them to disclose better and better present the options to the customer.

But the third party is a separate issue. When we changed our model in 2007 in a big way, there were people who had flown Spirit before who were not familiar with the new model. I’m not aware of a complaint we’ve ever got from Haiti, but routes that we had flown before, there was a higher propensity. There definitely was a conditioning of previous customers on previous routes. Last year was a good example. When we announced carry-on fees, we had these huge banners, maybe we went overboard. If I’m going to carry 700,000 people a month, if I get 99 percent, if 1 percent of people don’t know, that’s still a large number of people. I don’t know how we get every last person conditioned, but I’m committed to trying to get there.

Cranky: You talk about places like Haiti, but those are markets where people usually do bring a lot of bags when they go back to their families. There hasn’t been any backlash?

Barry: What we normally do to illustrate it to people is explain that your fares are going to drop so much that you can afford to go back and forth. Before you were paying $700 and you wanted to make that trip count, so you would take a gazillion things back with you. But now they don’t need to bring as much stuff. We see checked bags drop the longer we’ve been in a market.

And that was the end of the interview. I tend to agree with just about everything Spirit says, but there are a couple practices that I don’t like. First, Spirit charges an $8 passenger usage fee each way. This applies to everyone unless you buy at the ticket counter, so that’s how they get around it being considered optional. I’m fine with that, but I want a disclaimer that shows me that I can save $8 each way if I go to the airport. It’s not very clear.

The second issue is with opt-in versus opt-out. As Barry mentions, people do get overwhelmed with disclosures and end up missing things. So when, for example, travel insurance is already pre-checked for me and I have to opt out, that’s a little tricky in my mind. How many people fail to uncheck it even if they don’t want it? Of course, this will be going away with the recent DOT regulation change, so it won’t be an issue for much longer.

Other than, I like what Spirit does. I have no clue if they can make big city markets work, but hey, they think they can and the results have been promising in those cities with the trial balloons they’ve sent up so far.

I know that a lot of people love to hate Spirit, but I’m not one of those people. That airline has made its model very clear. You’ll get a very low base fare but just about everything else will cost extra, including carry-on bags that don’t fit under your seat. If you don’t like it, you don’t have to fly on Spirit. But it’s a perfectly good model, and customers have responded. The airline is making money.

This past week, the airline announced some big moves. It will begin flying from Chicago/O’Hare to Boston, Dallas/Ft Worth, Detroit, New York/LaGuardia, and Orlando. You’ll also see flights from Vegas to Portland (OR), Oakland, and San Diego. These are big moves in big airports, and I was able to get Spirit’s Chief Marking Officer Barry Biffle on the phone to learn more about it. We ended up having a wide-ranging discussion, so it’s going to be broken into two parts. Today we’ll talk about the new markets. Tomorrow, look for talk about fees and why Spirit loves them so much.

Cranky: Where is all this capacity coming from for these new routes?

Barry: There are two more aircraft coming in at the end of this year and three more at the beginning of next year. There’s not a lot of frequency on these routes, so they don’t actually use a lot of aircraft. You can take San Diego to Las Vegas for example. It’s only an hour flight. We operate our airplanes 13 hours a day, so that’s a small amount of time for a roundtrip.

Cranky: Tell me more about this move. You’ve really focused on Caribbean and Latin America for awhile. Recently you’ve gone into small cities like Plattsburgh (NY) and Latrobe (PA). Now you’re doing big city routes.

Barry: The geography may be a little different, but it’s 100 percent consistent with the business model. What we look to do is provide something different in the marketplace; we are the price leader. We look for markets that have really high cost competitors, we look for really high fares, and we look for cities where we can we have an efficient operation. Then the question is: Will the market stimulate if we come in?

Cranky: But O’Hare is crowded and not the cheapest airport around, so can you have an efficient, low cost operation?

Barry: Specifically in Chicago, we’ve been there for a long time and we’ve been growing Chicago in just the last year and a half. We see the dynamics of the customer base in Chicago wanting more and more of what we offer. The fare environment has gotten really high. American and United have a great product and they’re serving the business customer needs very well but the reality is that $400 for a two-hour flight to Dallas is out of reach for leisure consumers and people visiting friends and relatives. So we saw a great opportunity there.

Las Vegas also meets those same criteria, and when you talk about the stimulation potential, Las Vegas is one of the greatest destinations on the planet. At the end of the day, it comes down to price. You have a lot of markets out there that are one- to two-hour flights that are over $100 on average. The only reason people go there is vacation or leisure, setting aside convention business. The price is gonna draw a lot of people in. Vegas is also important because the seasonal balancing opportunities are very good and it complements Ft Lauderdale. In Sept/Oct, which are decent convention months in Vegas, it’s hurricane season [in Florida]. Conversely, not a lot of people go to Vegas for Christmas.

Cranky: I understand the rationale for targeting these markets in general, but why O’Hare? If you are all about lowest costs and lowest fares, why not something like Gary or Rockford which is cheaper?

Barry: We’ve looked at Gary. We’ve looked at it a lot. It’s cheap. And we looked at Rockford. The best way to think about our airport selection is we will go where we believe we will have a cost advantage. We will not fly somewhere if we believe that the airport location is going to impede our cost structure. We fly to LaGuardia and we believe we’re the lowest cost operator there. We run 12 flights a day on one gate. We wouldn’t be in LaGuardia if I couldn’t find a way to be the lowest cost operator at the airport.

We’re already in O’Hare and by throwing out two gates of flying, we’re actually lowering our costs there. Our first choice is always going to be a secondary airport because of congestion and at the end of the day, the facility’s cheaper. But the reality is that there may not be a good secondary option. In Europe, it’s actually great, because there’s so much ground transportation. In the States, unfortunately, so many people have cars, but they don’t want to necessarily drive them that far.

Cranky: So you’re saying people don’t want to drive to Gary or Rockford for low fares?

Barry: Specifically with Chicago, my opinion is that if you’re going there for business, Midway is just as convenient to downtown or easier than O’Hare. In our case, we’re not targeting business traffic, so I don’t look at it that way. If you think about the geography where the population lives, specifically the suburban population, it’s north and west of downtown. So O’Hare is much more convenient than Midway. If you look at Gary, there’s just not that much population, and definitely not the affluent population on the south side, south and east of Chicago.

I actually think we’re still intrigued with Gary and I would actually argue that Gary serves a different geographic base. Rockford is a little bit different. You do kind of appeal to some of that west and northern suburbs and of course, I guess Allegiant has chosen that. Our view is that I’m already at O’Hare so we want to grow O’Hare to its potential before I consider another airport.

Tomorrow, we’ll talk fees. I can already hear you guys typing your comments, so I look forward to a “Spirit-ed” discussion. (Sorry for the pun, but I had to do it.)

And we’re back. Today, I pick up my interview with Horizon Air President Glenn Johnson by talking about future growth and Alaska’s recent decision to outsource some flying to SkyWest. [Read Part 1 of the interview]

Cranky: Looking at Horizon now compared to a couple years ago, you look a lot more like any other regional carrier other than the fact that you’re owned by Alaska Air Group. Is this foreshadowing a possibility of doing flying for other airlines?

Glenn: Yeah, I wouldn’t rule that out. Right now our focus is on getting our transition to the all-Q400 fleet and getting our profitability to the level of Alaska’s. You know, Alaska has just achieved its 10 percent goal for return on invested capital, and that’s the goal for Horizon as well. We’re halfway there. When we get to that level, I think we would be competitive in terms of being able to go out and look for other business if that was in the interest of [Alaska] Air Group to have us do that.

Cranky: And you don’t have many competitors flying Q400s.

Glenn: And I think the Q400 is a great airplane in the right markets. Obviously it doesn’t compete on real long haul markets. With the number of seats it has and the incredible fuel efficiency, it’s a fabulous competitive tool for us.

Cranky: Looking at the Alaska network, there’s really limited growth opportunity for that airplane. You’ve talked about going into the State of Alaska, but other than that, do you see real growth opportunity with Alaska’s network?

Glenn: We’ve actually just recently introduced service from San Jose to Los Angeles. It’s an interesting one for us to watch because it’s an intra-California marketplace … obviously a competitive marketplace but also pretty well-suited from my perspective for the Q400 so I think there’s lots of opportunities once we get the cost structure right at the company.

Cranky: That market is interesting as well because you’re going up against one of your codeshare partners too. I was waiting to see if we’d see some American regional jets disappear in favor of the Q400 at some point.

[silence]

Cranky: Probably not gonna comment on that, I guess. [laughs]

Glenn: [laughs] Nope. I’ll leave that one alone.

Cranky: What about the Alaska flying? Are you talking about that at all yet?

Glenn: We haven’t announced anything other than what we’ve said on the [earnings] call which is that we are actively looking to see if the Q400 has a place doing State of Alaska flying from a technical standpoint and from a community standpoint as well. If you think about the State of Alaska flying, and my last job was as the CFO for [Alaska] Air Group so I have some insight into this, we need to figure out the right mix of flying where we can still handle the right mix of cargo and passengers. At the end of the day, the Q400 on the right stage length has better economics than a 737. That can allow us to provide service more efficiently and produce lower fares. That’s what customers want these days.

Cranky: Are there are any tech issues with the Q400 up there?

Glenn: It kind of depends on which cities and that’s why we’re looking across the whole range. Alaska pioneered the [Head-up Guidance] system and we have that, so as far as low visibility flying we’re fine. And Alaska pioneered [Required Navigation Performance] RNP flying, particularly for the Juneau Airport which is quite tricky. Horizon has work to do to get to the same level of RNP certification at each airport. That’s what I mean when I talk about technical issues.

Cranky: Switching gears, as a Long Beach resident I was wondering how you would continue to serve Long Beach when the CRJ-700s are retired. I see there’s an agreement with SkyWest to take some of your CRJ-700s. I imagine that’s making some people nervous at Horizon.

Glenn: We haven’t talked about specific city pairs but all along as we’ve talked about simplifying down to a single fleet type with Q400 flying, there are some markets that we are serving on behalf of Alaska on the CRJ that are not great candidates for a Q400. You could probably technically do Pacific Northwest to Southern California routes with a Q400 but it adds 20 to 25 minutes time and so that’s probably not ideal. Alaska is still working on specifics on which markets. It’s just 5 airplanes.

And you’re right, the Horizon employees are concerned about the impact of that and my reminder to the employee group is that we’re very competitive with the Q400. We’ll become even more competitive when we get through the rest of the business transformation process – getting to a single fleet type, getting the rest of the reliability and cost issues with the Q400 taken care of. At the end of the day I think the Q400 becomes a competitive advantage for us in the right size market against anybody else.

Cranky: I assume there is some anxiety around which routes will be taken over, but I’m sure they’re nervous saying, “can this grow any further? Will it take routes away from us?”

Glenn: The best way to not have that happen is for us to have really competitive costs so we can produce seats for Alaska at the best costs possible within the family.

Cranky: Is there any discussion about Alaska Air Group spinning off Horizon into a separate company? Sell it to a larger regional?

Glenn: We’ve said that no, we acquired Horizon (I say “we” because I was at [Alaska] Air Group) with the intent of having that feed owned within the Air Group. Horizon has an important place within [Alaska] Air Group. The challenge for Horizon until recently has been they were producing all that feed but not generating adequate return on the $750m of capital on the Horizon side of the business – about 25% of total capital of [Alaska] Air Group. The board was rightly concerned; we certainly couldn’t invest more capital in the Horizon side of the business with no return on it, and even with the existing capital, we had to get it to generate an adequate return.

For the year 2009, we generated 5% return on invested capital at Horizon and 11.2% for Alaska so Horizon is moving along. We were in the 1 to 2% prior to that in terms of return on invested capital on the Horizon side. We’re moving pretty swiftly ahead. We just have to keep focus on that and we can get to 10% return and then we can look at additional investments for Horizon. But absolutely the stated intent is to keep Horizon within the Air Group and have it be an important feed provider for Alaska.

For those who hadn’t heard, Alaska Air Group’s wholly-owned regional subsidiary Horizon Air will be losing its brand some 25 years after Alaska first bought the airline. Instead, Horizon flights will all be marketed under the Alaska name. I spoke with Horizon’s president and Alaska Air Group veteran Glenn Johnson about this big change. Tomorrow, I’ll have the second part of our discussion where he talks about growth opportunities and outsourcing.

Cranky: A lot of changes at Horizon this week, several of which have been in the works for quite some time. To start, why retire the brand now?

Glenn: Sure, you know Horizon’s just about to celebrate its 30th anniversary, so the name and the brand has been built over all those years but we made the decision to go to 100 percent capacity purchase agreement (CPA) flying [Ed note: that's where Alaska buys capacity from Horizon and handles pricing and marketing] effective January 1. While that doesn’t necessarily mean you have to change the external branding, we thought that was a good opportunity to look at it. Certainly the Alaska brand … I don’t know if you know my background; I’ve been at [Alaska] Air Group for 28 years back and forth between Alaska and Horizon so I think I recognize the value of both brands … but certainly Alaska is a much better-known brand.

I think what we came up is kind of unique in the industry. We didn’t go with Alaska Express or Alaska Connection but the Alaska name and the Eskimo on the airplane with the Horizon name still there. I think that captures the value of both of the brands. And as we think about taking Horizon up to the State of Alaska, certainly there’s no better brand to have on the side of the airplane than the name of the state. It all seemed to come together.

Cranky: What were you doing with the brand before this? Obviously it was on the side of the airplane but was there a lot of brand promotion over the last couple years?

Glenn: I would say that we’ve been ratcheting it down over the last few years. When we first acquired Horizon at [Alaska] Air Group back in 1986, we kept the two brands completely separate and over the years we’ve found more and more opportunities to co-brand things. In 2010 about 50 percent of our flying was done on behalf of Alaska as CPA flying and the other half was done on what we’d call brand flying where we did our own advertising and promotion in some of the small communities. So there was some level of effort and cost put into the Horizon-specific brand but I think there’s a more cost effective solution here to go with the Alaska brand and get the benefit of all the advertising that goes into the Alaska brand for both companies.

Cranky: Externally, the only thing that seems to be changing is the paint job, right?

Glenn: Right. There will be some airport signage so where we have a Horizon backwall we’ll change those out to Alaska backwalls. The airports will transition to be just Alaska. We have to still say the flights are operated by Horizon Air like any other CPA carrier.

Cranky: Is anything changing internally? I know there’s already been a huge behind-the-scenes effort to consolidate.

Glenn: It really doesn’t and that’s one of the things we’re talking about with employees this week. They’re anxious about this. Losing their identity, so to speak. But we remain a separate company with a separate operating certificate. We still have all the same employees. Still have our folks in Horizon uniforms in terms of pilots and flight attendants. We’re maintaining the service elements that we think are important to our customers. The free beer and wine onboard, the a la carte service … so all of those elements stay the same. It’s really just getting that visual brand recognition and the brand halo from the customer perspective.

Cranky: I find myself wondering how many people even know the Horizon brand outside of the Pacific Northwest.

Glenn: I would say where we have a fair amount of name recognition is in Idaho, Montana, Eastern Washington, and Oregon. Those are traditional Horizon locations, the small cities, where Alaska hasn’t had a presence. That was what we were trying to capture by keeping Horizon on the side of the airplane. Places like Missoula, Montana see Horizon as their hometown carrier and we still want them to have that same sense of pride and ownership in the airline even though we’ve got a new name on the side of the airplane. By contrast, when we are down in California flying from LA to Loreto or La Paz on behalf of Alaska or go up to the State of Alaska, it makes no sense to me to try to propagate it and promote two brands.

Cranky: So the assumption on your part is that there’s enough brand benefit by consolidating with Alaska to pay for the cost of painting the planes?

Glenn: Yep, and to that extent we’ve said it’ll take 12 months or longer to get everything painted. We have 8 new airplanes coming over the next 6 months so those will all be painted in the new colors, of course, and then we’ll take a period of time to paint the existing airplanes. We’ve held off on painting so there’s a bit of a backlog because we knew this decision was pending. And we have 8 airplanes with special liveries – the university airplanes and the green airplane – that will just be a simple change by painting Alaska with the script instead of Horizon. There’s not a huge amount of incremental cost because it’ll be done largely in the course of business.

Come back tomorrow for more on the recent deal Alaska made to outsource some flying to SkyWest as well as future growth opportunities for Horizon.

Within a couple days of my post on Vision Airlines last week, I found myself on the phone with David Meers, Senior Vice President of the airline. As I said before, I had a lot of questions for him, and now I’ve had the chance to ask him directly. I’m still very skeptical of the viability of the Louisville route, but as David says, it’s such a small part of the company that it’s not going to make or break the airline. I’ll reserve judgment on the Florida stuff until we see what it actually is in the next couple months.

Cranky: It seems like you’re dipping your toes in a lot of different places right now, so is there an overall strategy, is it more of a transition, or is the goal just be in a bunch of different places?

David: We’ve always had a diversified revenue stream for our company but this is the logical next step for us. . . . As I mentioned in another article, it’s hard being in Las Vegas to ignore what Allegiant’s done. We like their business model. There’s really no barrier of entry to us. In fact, we feel like we have a great product, and we feel like we can deliver tremendous value to the consumer. So moving into scheduled service into underserved markets, particularly in leisure destinations, is a logical next step for Vision Airlines.

Cranky: I guess I’m a little confused about how Louisville fits into that.

David: Well Louisville – Atlanta is something we looked at as long as 6 or 7 years ago in terms of setting up a corporate shuttle for UPS. There’s been a need for a very long time. We’re probably personally familiar with it as a company because we have offices in Atlanta and a maintenance facility and offices in Louisville, Kentucky. So we as a company have experienced the high fares and limited service on that route. We’ve heard from other companies that there’s a need for low cost travel between those two city pairs so for us to start initially into Louisville and Atlanta made a lot of sense. There’s only one carrier on that route nonstop, Delta Air Lines, and if you look at Delta’s fares, they’re high. That was a very easy decision for us to make but in the long range most likely we’ll focus primarily on leisure destinations.

Cranky: So this is sort of a one-off opportunistic look?

David: Initially it’s a one-off but I could see us looking at other markets that are underserved that might connect to business centers. That’s not out of the question.

Cranky: Is there any sort of subsidy on this route?
David: Well, not unlike numerous airports around the US, they have incentives for new routes, new carriers, but in terms of any revenue subsidy or anything like that, there is no revenue subsidy.

Cranky: You had mentioned in Today in the Sky that you were hoping or expecting that UPS or Home Depot, large companies like that would come. The way that the legacy airlines structure their corporate agreements, I imagine it’s going to be very hard for them to shift business your way in a place like Louisville. Is this something you think you can get around?

David: I don’t want to comment on specific negotiations with specific companies, but with that said I think it’s safe to say, being a Louisville native, I know there is a large number of folks that will fly on Southwest from Louisville to Birmingham, rent a car and drive to Atlanta simply because of the high fares. I don’t expect us to cut into Delta’s market share. Delta isn’t our target. We’ll probably encourage folks to fly versus drive or fly to Atlanta instead of flying to Birmingham and then driving. I think Delta is probably not concerned with Vision Airlines with 32 seats per departure 2 times a day. Our threshold for success is very very low, so we’re pretty confident that we’re gonna be in this market for a long time.

Cranky: I would tend to agree that Delta’s not paying close attention but if they start seeing their big customers going other places, then they’ll notice. But if it is pulling people off the roads that’s a different story.

David: You’re right. We have 64 seats a day. Delta has 10 or 12 departures. We’re barely putting the number of seats that Delta has in the market on a regional jet. They’re the 800 lb gorilla and I’d be surprised if they respond to a 32 passenger Dornier. I’m not sure if it would be wise.

Cranky: Yeah, but rational behavior is not always the way things work in this industry.

David: I understand, and we’re not naive enough to think there may not be a response, but we’re not betting our company or betting the farm on this particular route. We have the Dorniers, we have pilots. This is not a very big risk for Vision Airlines.

Cranky: Let’s talk about Florida. When do you expect to be putting that out?

David: I imagine you’ll see an announcement in the next 45 days. We’re finalizing negotiations right now with various airports.

Cranky: This will be more along the lines of an Allegiant-style model?

David: Exactly. You’ll see us focus on point-to-point routes going from underserved cities to leisure destinations and also letting consumers buy additional services like a hotel room and a package or a car or various activities, golf, show tickets.

Cranky: Do you have a lot of those relationships set up today?

David: We’ll initially start with air seats to the destinations but we’re in the process of finalizing negotiations with a number of resorts and providing via the global distribution systems, provide the gateway for that product that we can distribute with air seats to the consumer and provide a great value. We’ve looked at the economics and the value we can deliver and we’re confident we’ll be extremely competitive.

Cranky: When we’re talking about the Allegiant model, what is it specifically that interests you most? Are you looking at a couple days a week, more frequency?
David: I think you’ll see us 3 or 4 days per week in the cities we’re gonna be announcing. It’ll be less than daily service initially. The schedules will be around the typical consumer travel patterns. A Sunday-Wednesday-Friday, Tuesday-Thursday-Saturday type of travel pattern fits with the destinations. The playbook is fairly easy to read. It’s easy to see what the travel patterns are, it’s easy to see what the other providers are doing. To emulate success is a fairly easy thing to do. Particularly when we feel like our cost structure and biz model puts us in a place to be more competitive.

Cranky: Are you looking to expand the fleet or just use the airplanes you have today?

David: Both. We’re going to start with the aircraft we have today. We have three 737-400s under contract. One’s in maintenance as we speak with the others in the next 30 days. We’re looking to add more airplanes in the spring.

Cranky: More 737s?

David: Right.

Cranky: Are you focusing more on the classic 737 because it’s lower cost or are you looking at the newer ones as well?

Cranky: For the moment, we’re looking at adding more classics. As we look into higher utilization routes, it’s not out of the question for us to add additional [next generation 737s]. You get some fuel savings, and a little more speed and more seats, but if you’re not using the airplane more than 180 hours a month, it doesn’t make sense to use the airplane.

Cranky: Are you looking at using the 767s in schedule operations?

David: Primarily we’re focused on charter with the 767s but it’s not out of the question. We’ve had some discussions already with other carriers to provide ACMI agreements. I think you’ll see the 767, we expect to have worldwide operating authority in the next 60 days and the next step would be to finish up ETOPS.

Cranky: Would you be looking at long haul low cost operations in the future?

David: Absolutely.

Cranky: A lot of airlines have tried that, not in the US as much, and it’s been a tough nut to crack.

David: I think if you look at what Allegiant mentioned with respect to Hawai’i, the only barrier to us is ETOPS. That’s a very important thing to consider.

Cranky: You guys aren’t raising money for this, this is all being funded from existing operations?

David: Right. Unlike other airlines, we’ve been around since 1994. So we’re not solely dependent on the earnings from these commercial routes. We have ICE contracts, ACMI work, casino contracts. So there’s other revenue sources for the company besides limited scheduled service. That’s what I mean when I say I think we have the business model that gives us an opportunity to be out with a low cost fare because we’re not having to support our entire company from earnings from the commercial operations.

Cranky: In terms of the product, you say you have a good product. What is it like on the airplane?

David: One of the great things, unlike the regional jets, the Dornier 328 has a 31 inch seat pitch and it’s similar to sitting in a 737 seat. I’m a pretty big guy and I’m 6’2″ and I can tell you that I can’t hardly sit in a window seat on a CRJ whereas in a Dornier 328 I can sit in a window and it’s very comfortable. The good news for travelers is that the creature comforts onboard are much better than what you get on a CRJ. We are going to offer complimentary snacks and soft drinks. Until we go long haul we probably won’t get into the meal service business. We do have a couple of ideas that we’re entertaining that would be unique. We’re just in the preliminary discussions so it would be premature to talk about it.

And that was that. So, if anyone gets a chance to fly on these guys to Louisville, please let me know. Otherwise, I’ll be back to talk more about them when the Florida announcement comes out.