ValuJet Loses $21.9 Million in Third Quarter

Web posted November 13, 1996

 Valujet Online

By PATRICIA J. MAYS
Associated Press

ATLANTA (AP) - Despite posting a loss of $21.9 million for the third quarter, ValuJet Airlines said Tuesday it expected to return more aircraft to the skies by the end of the year.

ValuJet was grounded for all but one day during the July-September period, in which it incurred another $23 million in expenses related to the crash of Flight 592 in the Florida Everglades on May 11.

The third-quarter figures, released Tuesday, amounted to a 40 cents per share loss, compared with a profit of $22.7 million, or 38 cents a share, in the same quarter a year ago.

``It would be unreasonable for us to expect profitability at this state simply because we're only operating 15 airplanes,'' said ValuJet Chairman Lewis Jordan. ``But we're incurring the costs of some 45 with all of the infrastructure and overall operating expenses that we have as we bring all the airplanes back into service.''

In all, the Atlanta-based airline has reported $54.7 million in costs associated with the crash.

ValuJet was grounded by the Federal Aviation Administration for 15 weeks starting June 17 because of safety concerns following the crash, which left 110 dead. ValuJet resumed flying Sept. 30, the final day of the third quarter.

After being shut down for the busy summer travel season, the discount airline has depended on a substantial cash reserve to continue offering flying and offering low fares.

ValuJet had about $254 million in cash reserves before the crash of Flight 592. The carrier said Tuesday it had $179 million in cash reserves remaining.

``The main reason ValuJet is able to make it through is the tremendous capitalization they have in terms of their size,'' said Lee Howard, an airline industry consultant in Atlanta. ``I think it will only be a matter of months until they're up to operating at the same level they were prior to the accident.''

In an effort to lure passengers back, the airline last month offered ultra-low introductory fares, including some one-way flights for $19. The airline said it flew 154,292 passengers during its first full month back in the skies and that its planes were 72.1 percent full.

``They have to reestablish themselves in the marketplace and that's a very good way of doing so, but ... they can't afford to continue that forever,'' Howard said.

Jordan said he expects ValuJet would have to fly 30 aircraft before it could expect to turn a profit. The company plans to add 10 to 15 aircraft between mid-December and January. However, he said the company has only had preliminary discussions with the FAA and has not submitted a formal request.

Industry analysts said ValuJet's financial report is a pretty good indication that the airline is on the road to recovery.

``It appears they've done what they needed to do to turn the airline around - new maintenance, new management,'' said Mike Boyd, an airline consultant in Golden, Colo., and a frequent critic of ValuJet. ``I don't think we'll see a repeat of what happened.''

Revenues for the recent quarter were $311,000, compared with $109.3 million in the same period last year.

For the first nine months of this year, ValuJet lost $20.9 million, or 38 cents per share, compared with a profit of $48.6 million, or 82 cents share, in the same period last year.

Nine-month revenues were $191.5 million, compared with $257 million in the same period last year.

ValuJet stock, which is traded on the Nasdaq Stock Market, opened at $10.75 Tuesday morning and was up to $11 by midday.

Meanwhile, Jordan has filed notice with the Securities and Exchange Commission of his plans to give about 131,000 of his shares of ValuJet Inc., worth about $1.4 million, to an unidentified charity.

The shares are to be put in an irrevocable charitable trust. Jordan still controls about 5.2 million shares of ValuJet Inc., the carrier's holding company.

Here is a look at ValuJet Airlines before and after the May 11 Flight 592 crash in the Everglades:

Before May 11