Southern Airways Express is never one to be shy about pulling the trigger on an acquisition that makes sense. In fact, the press release announcing Southern’s takeover of Air Choice One notes that this is the airline’s fifth acquisition in the last 8 years. Why on Earth would Southern bother with an airline that has dwindled down to serving one Essential Air Service (EAS) destination? It’s all about positioning to take over the EAS routes SkyWest is abandoning.
Southern has come from small beginnings less than a decade ago to where it is today with 35 airplanes and a lot more on the way. Its first acquisition was Executive Express to pick up its certificate. The airline then went on to start EAS flying, later acquiring Sun Air Express to get the airline’s Pennsylvania-based EAS routes. A couple years later it picked up Mokulele in Hawai’i and followed that up with the other local Hawaiian operator, Makani Kai. At that point, Southern had built a route map only a mother could love, but one that it has been able to sustain.
The airline has growth plans on its own, but there is also now a huge opportunity in front of the airline. With SkyWest abandoning 29 EAS markets due to the pilot shortage, Southern wants to be ready to pounce.
Southern certainly can’t scale quickly enough to take all 29 of those cities. Even if it could, there’s no way the DOT would award them all to Southern. But, operating 9-seaters means Southern can fly under Part 135 rules, and it has better access to pilots than SkyWest does. And these new cities? Let me remind you what’s up for grabs in the red dots below.
You can sure see a lot of those fitting nicely into the airline’s Pennsylvania/New England network as well as Colorado and the Memphis-based grouping. So, how can Southern ramp up quickly enough to be able to make this happen? Find an airline with a lot of spare capacity.
Enter Air Choice One. Air Choice One started doing EAS work more than a decade ago, before Southern was even born. At one point, Air Choice One had the EAS contract in Burlington, Fort Dodge, and Mason City in Iowa; Decatur in Illinois; Ironwood in Michigan; Kirksville, in Missouri; and Jackson in Tennessee. It has lost all of those, now clinging on to life with a single contract in Jonesboro, Arkansas which it flies from St Louis and Nashville.
You’d think a track record like this would raise alarm bells and prevent anyone from wanting to buy the airline, but Southern took a longer look under the hood and wasn’t scared off.
For Air Choice One, the issues seems to be less about operational reliability or anything like that. It’s more about what is doesn’t have to offer… something that Southern has. A look at the docket in Burlington shows the airport requested Cape Air because “Cape Air’s internal reservation center, codeshare with American Airlines, and its interline and baggage agreements.” Air Choice One just doesn’t have those things, and it’s too small for any of the big guys to pay attention.
The same can’t be said for Southern, which has interline arrangements with Alaska, American and United. Southern can take over Air Choice One, put everything under the 9X code, and instantly open up Jonesboro to the world. Problem solved.
That, however, is not why Southern wants to buy Air Choice One. What Southern really wants is those 7 Grand Caravans that Air Choice One owns along with some pilots who these days must be sitting around not doing much. With only Jonesboro to serve, all those extra Grand Caravans mean instant expansion capacity. The pilots at Air Choice One, meanwhile, must be thrilled that they’ll have more flying to do.
With all these new airplanes, Southern has the ability to ramp up and take over some of these markets that SkyWest is abandoning. Though I don’t know the purchase price, it couldn’t have been much. And in exchange, Southern is ready to grow again.
