DATE: Tuesday, September 9, 1997            TAG: 9709090223

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL  

SOURCE: BY DEBBIE MESSINA, STAFF WRITER 

DATELINE: NEWPORT NEWS                      LENGTH:  101 lines

CORRECTION/CLARIFICATION: * CORRECTION ValuJet Airlines will retain service at either Norfolk International Airport or Newport News/Williamsburg International Airport as it consolidates with AirTran. A headline in Tuesday's Business News implied otherwise. Also, rates and charges at Newport News/Williamsburg are competitive with, not lower than, Norfolk's. A Newport News/Williamsburg spokesman said she misspoke. Correction published Wednesday, September 10, 1997, page D2. * VALUJET MAY LEAVE AREA LOCAL AIRPORTS COULD LOSE OUT IN THE PLANNED AIRTRAN BUYOUT

ValuJet may eliminate air service at Norfolk International or Newport News/Williamsburg International airports in its planned buyout of AirTran.

M. Ponder Harrison, ValuJet senior vice president of sales and marketing, told the Mayor's Airport Blue Ribbon Commission for the Newport News/Williamsburg airport Monday that the merged airline will consider operating from only two of the three airports in Eastern Virginia.

ValuJet Airlines now runs four daily flights between Newport News and Atlanta.

AirTran Airways operates one daily flight from both Norfolk and Richmond International Airport to Orlando.

Harrison said that because of the proximity of Norfolk and Newport News airports, it's most likely that Hampton Roads service will be consolidated.

Neither airport has a competitive advantage for hosting the airlines, he said.

``We've always had a great relationship with Newport News/Williamsburg,'' Harrison said. ``The area has really supported us. But times change and we're having to take a very, very hard look at our operations.''

Newport News/Williamsburg has the most to lose. ValuJet commands 30 percent of all air traffic at Newport News.

AirTran, meanwhile, flies about 2.5 percent of Norfolk's air travelers.

``We're optimistic we will be gaining more service,'' said Suzanne Wilson Houck, spokeswoman for Newport News/Williamsburg. ``We're concerned, but we realize that we've got lower rates and charges than Norfolk. We've accommodated (ValuJet) over the past three years and have enjoyed their service.''

At Norfolk International, the possible consolidation was surprising news to airport officials.

``We've understood there would no change,'' said Kenneth R. Scott, airport executive director. ``This is interesting. We're going to have to watch this one.''

(Last month, the Norfolk airport lost Air South, another low-fare carrier, which grounded its planes and filed for bankruptcy protection.)

In the long run, overall air service in Hampton Roads could increase.

``This area could definitely increase over time,'' Harrison said.

While the airlines are looking closest at Hampton Roads service, Richmond is not immune from change, he said.

The merger of the two budget airlines is expected to be approved by shareholders by early November, Harrison said. And operating plans should be final by the end of the year.

Since the crash of Flight 592 in the Florida Everglades last May, killing all 110 people aboard, ValuJet has been struggling - with finances as well as its public image.

The airline became the subject of an intense safety review after the crash and was grounded by the FAA for more than three months.

Investigators believe improperly packed oxygen generators fueled a fire in the cargo hold and brought down the plane. The National Transportation Safety Board is supposed to release its final report on the crash later this year.

Hoping to erase its poor reputation, ValuJet is buying smaller, low-fare carrier AirTran for $66.3 million worth of stock and is taking over its name. ValuJet, which serves 21 cities with 31 jets, will be named AirTran Airlines and operate as a sister carrier to AirTran Airways.

ValuJet - which once had the biggest profit margin in the industry - lost $41 million last year. The company has been drawing on a $250 million cash balance it had before the crash to stay in business.

Harrison boasted that ValuJet had $150 million in cash at the close of the second quarter, which he said could keep the airline afloat for a number of years.

AirTran serves 24 cities from Orlando with 11 aircraft; it carried more than 1 million passengers last year. The company reported it lost $6.9 million last year.

Harrison told the mayor's commission that the new airline is positioning itself for the future. It's ordered 50 state-of-the art Boeing jets for delivery beginning July 1999 at a cost of $1 billion.

It's also considering providing new amenities like a business class, seat assignments and advance check-ins.

``We'd like to move the product more into the mainstream,'' Harrison said, while maintaining low fares.

Still, new jets and new services cannot clear the ValuJet name. The only way to do that is to dump the name.

``One of the biggest issues ValuJet faces and continues to face is our customer perception,'' Harrison said, despite its improved record and complete overhaul of its planes.

The company could spend millions of dollars on advertising promoting its recent good performance ``and it would not move the needle an inch,'' he said. ``I have not seen anything like this in my life. ILLUSTRATION: [Color Photo]

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