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Lack of landings, funding stall JetAmerica's departures

Steve Schoen, chairman of JetAmerica, expects the airline to refund more than $1 million to all 10,000 customers by Monday.

SCOTT KEELER | Times

Steve Schoen, chairman of JetAmerica, expects the airline to refund more than $1 million to all 10,000 customers by Monday.

The e-mail to Steven Schoen gushed over his hot, new aviation venture called JetAmerica.

"Congratulations!'' wrote Jeff Clauss of St. Petersburg-Clearwater International Airport, among dozens of small airports hungry for new flights. "It looks like your announcement has caused quite a stir around the US!''

The late May launch of Jet­America, a public charter operator Schoen created, grabbed national attention for its $9 fares between small Midwest and Florida cities and Newark Liberty International Airport.

Jay Leno noted the cheap tickets in his Tonight Show monologue, ending with the punch line: "The bad news is you wind up in Toledo or Newark.'' The company claimed to have sold more than 20,000 tickets the first week.

But before carrying a single passenger, JetAmerica last month canceled its entire schedule of flights. By Monday, the company should finish refunding more than $1 million to all 10,000 customers, Schoen said last week.

So, what happened? The last straw came when JetAmerica couldn't secure reservations — called slots — needed to fly at congested Newark International.

But insiders and airline professionals say JetAmerica executives made strategic blunders as well.

JetAmerica strayed from its original game plan to fly vacationers from cold northern cities to Florida. The publicity splash brought too much attention to an operation that planned to start with one jet and 34 flights per week. Schoen, chairman of the privately held company, also may have pushed to launch JetAmerica too quickly.

"Too much, too soon, too fast,'' said JetAmerica CEO John Weikle, founder of ultra-low-cost carrier Skybus Airlines, which folded in 2008 after one year of operations. "I made the recommendation several times (to) postpone this thing.''

• • •

JetAmerica's roots reach to brainstorming sessions Schoen held a year ago in a small, rent-free office behind a ticket counter at St. Petersburg-Clearwater International.

Schoen brought a long history in the local travel business. In the late 1980s and early '90s, he co-owned a Pinellas travel agency, Anchors Away Cruises, with a former wife. Schoen also ran Casino Airlink, which sold air and hotel packages to Floridians who wanted to gamble along Mississippi's gulf coast. He sold the business in 1996.

His last venture, Southeast Vacations, sent him to bankruptcy court in 2007 with $900,000 in debts. He blamed the trouble on loans never repaid by the airline he contracted with to buy seats and package them with hotel rooms.

Bankrolled by two investors, Schoen incorporated a company called Sun America last summer. He and lieutenant Brian Burling set out to copy the playbook of Allegiant Air.

The profitable no-frills airline, with headquarters in Las Vegas, connects smaller northern cities and sunny vacation destinations, including the Tampa Bay area, through the Clearwater airport.

Schoen and Burling's early plan followed the blueprint, with proposed flights to Clearwater from Gary, Ind., Newburgh, N.Y., and Detroit Metro Airport, plus service between Atlanta and the casinos in Tunica, Miss.

While launching an airline can cost tens or hundreds of millions of dollars, starting a public charter like Sun America could be put together for as little as $1 million, says Schoen.

Public charters typically only market and sell airline seats. Their name is on the plane, but it's leased from another airline, which also supplies the crew and fuel. The public charter pays contractors to staff airport ticket counters, gates and bag handling.

Sun America's biggest expenses: the $200,000 bond required by the Department of Transportation and a $200,000 deposit with charter airline Air Miami International to reserve a Boeing 737.

Still, the company operated on a shoestring. Local airport officials eventually leaned on Schoen to sign an office lease. After missing November and December rent totalling $4,400, the airport threatened to kick him out. Schoen paid, consistently late, before moving to new space nearby in March.

The company never had more than a dozen employees. Schoen had family members and his daughter's friend on the payroll.

He veered away from the original plan. Schoen joined with an airline veteran in a startup public charter called Air Azul. Instead of catering to sun-seeking tourists, Air Azul sold flights linking cities such as Toledo, Ohio, and Lansing, Mich., to Newark and Baltimore.

Air Azul folded in April before making its first flight. Executives pulled the plug after receiving a threatening letter from JetBlue Airways. The popular discounter said the name — azul means "blue'' in Spanish — could confuse customers.

• • •

Schoen turned to Weikle, who'd been trying without success to start an airline called JetAmerica. He adopted the name and grafted it onto Air Azul's route map.

Weikle's short-lived Skybus airline had received tons of good press by offering $10 fares. For JetAmerica, he revived the marketing trick with a $9 one-way price for the first nine to 19 seats. Not long after taking the job, Weikle was contacted by the boss of the public agency that runs Toledo Express Airport.

Small airports desperate for more flights often cut sweetheart deals with startup airlines, eagerly waiving landing fees, ticket counter costs and office rent. Many dangle cash to market new routes, often from federal grants.

Toledo boss Michael Stolarczyk was blunt: What would it take for JetAmerica to come to Toledo? Weikle replied that he was looking for a lead investor.

Stolarczyk agreed to look into whether the airport could put a $1 million investment into Jet­America. He wanted JetAmerica to bring Toledo nonstop daily flights to the New York area.

Lawyers for the airport eventually concluded Ohio's Constitution didn't allow government entities to invest public money — or loan it — without collateral. JetAmerica didn't have any assets to put up as security.

JetAmerica couldn't get what it needed, but it still decided when it released its schedule in May to make two flights a day into Newark, one from Toledo.

The announcement, first reported in a national Associated Press story, created a huge buzz. Maybe too much. Bargain hunters pounced on JetAmerica's Web site. Within a week, the $9 and $19 tickets were snapped up, Weikle said.

But people weren't buying the more expensive fares, which topped out at $199. Meanwhile, fuel prices soared. "You can't go on forever like that,'' Weikle said.

Soon the Federal Aviation Administration was asking why JetAmerica was selling Newark flights without required slots. The company insisted FAA rules exempted small charter operators. But with daily flights, regulators said, JetAmerica was acting like a regular airline.

On July 2, JetAmerica canceled its first month of flights, scheduled to start July 13. The company couldn't obtain all of the slots it needed. American and Midwest Airlines owned the only ones available. And they wanted a combined $400,000 annually, says Schoen.

JetAmerica stopped selling tickets July 17 and scrapped remaining flights for August and September. All customers should have refunds, Schoen said Thursday. He hopes to patch together a new schedule and start flying in mid December.

Toledo's airport spent at least $130,000 and perhaps as much as $150,000 advertising JetAmerica's service locally, said spokeswoman Carla Firestone. Melbourne International in Florida put "no more than $25,000'' into cable television, radio and other advertising, said Lori Booker, an airport spokeswoman.

She said the airport is keeping "an open dialogue'' with Jet­America. Toledo isn't writing off the charter operator either.

"If Steven Schoen's group were to come back with another option, we'd vet it to see if it's viable,'' Firestone said.

Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.

Lack of landings, funding stall JetAmerica's departures 08/08/09 [Last modified: Saturday, August 8, 2009 5:31am]

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