Air merchant: Mercury Aviation, heir to the Flying tigers tradition, is on a steep ascent with Seymour Kahn at the controls.

With a Dean Martin drawl and cool demeanor reminiscent of the flying aces who spawned his firm, Seymour Kahn has in 22 years grown Mercury Air Group Inc. from a $2 million a year operation to one with 1996 revenues of $225 million. Based at Los Angeles International Airport, Mercury provides fueling, mechanical and cargo loading services to small airlines that lack their own ground service crews, such as Siberia's Kraz Air, Fiji's Air Pacific and China Eastern Airlines. The company maintains regional offices in Asia, Central and South America and Europe. In 1996 Mercury was recognized by Fortune Magazine as one of the nation's 100 fastest growing companies. Kahn spoke with the Business Journal about Mercury and the aviation industry from his Westchester office.

Q: Where did Mercury come from?

A: Long before you were born there was a bunch of Americans that went to China and to Burma known as the American Volunteer Group. They went there to fight the Japanese, who were raiding China.

These fellows were there flying around, knocking out Japanese airplanes, and were very effective. Then wouldn't you know it, in 1941 we were attacked by Japan at Pearl Harbor, and many of these volunteers went into the military and became part of the Air Force. A large number of those people became known as the Flying Tigers and grew extremely famous because they continued their success.

Anyway, they came back from the war famous, and of them a group of 12 formed an organization called the Flying Tigers Airline. In 1956 three of those men decided there was a need for a service company and they formed this company that's in existence today. In 1972 I purchased the company from these three men.

Q: What did you pay for it?

A: Not very much. About $750,000. At that time the company was doing a little bit less than $2 million a year, and was principally in the ground handling business, which is something we're totally unrelated to now. It took us 20 years - to 1994 - to reach $100 million in revenue. At that time I met with my staff and said we need to double it in the next two years. And in 1996 we broke $225 million. Now our objective again is double that once more in two years.

Q: Where does the extra business come from?

A: How many airlines do you think there are in this world? Would you believe 1,300? We sell fuel to 112 airlines, so there's a wide gap to expand into. We recently opened an office in London because open skies will take place pretty soon as a result of the European Community.

Q: What's the significance of that?

A: We expect to sell to a lot of customers that don't come to Los Angeles now. You'll see more airlines, and more airlines going to different locations. Take an international airline that flies, say, Los Angeles-New York-London. Now they can't pick up a passenger in Los Angeles and drop them off in New York, or pick up another person up in New York and take them on to London. With open skies that'll change. There will be no restrictions whatsoever.

Q: How has the aviation industry changed since you got involved in it?

A: Our government changed the aviation industry materially in the 1980s in that it's not a regulated industry anymore. When that happened it opened up the opportunity for other people to come into the business. So it expanded the activity considerably.

Our profit margins have held pretty much over the years. The only time our margins get squeezed is when the barrel goes up in price.

Q: Is L.A. handling the expansion of LAX well?

A: Their thought in the matter has been extremely good. Without a master plan such as this one in place, there's no way this airport could possibly handle the increased traffic we expect. And from my perspective, as it relates to Mercury, the Pacific Rim is extremely important. We happen to be in probably the most important airport in the United States as far as the Asian market is concerned. We have more international carriers here in Los Angeles than JFK International Airport has in New York.

Q: Doesn't the Internet and the development of global telecommunications reduce the need for air travel and air shipping?

A: Are you following Federal Express or UPS? They're doing great. You and I are shipping more documents than ever before. And these are small packages, little envelopes and letters, and the companies are getting enormous rates for them.

Q: Do you see avenues left to explore within your industry?

A: We're certainly looking to expand our existing businesses - cargo, fuel and fixed base operations. And recently we've looked to agriculture, which is an area most people are not even aware of. But as the population continues to grow the need for agriculture becomes greater. Aviation plays an important role in that, providing the planes that do the insecticide spraying and fertilization. Also, selling of those airplanes, maintenance of those planes, component part sales. It happens to be a fragmented industry at this time. It'd be nice for someone like ourselves to put that industry into one groove.

Q: How will the building of the Alameda Corridor affect your business?

A: Only enhance it. One of the programs we have is what's called a sea-air program. Where economics dictate, instead of flying cargo that's not sensitive to time, cargo is shipped to our port here in Long Beach, off-loaded, put onto a truck, and then brought to Los Angeles, to the airport. There we off load it, palletize it, and continue to send it on to its destination.

The Alameda Corridor is a need that's long overdue. I think it's going to enhance cargo shipments into this part of the world more so than ever before.

Q: Was Clinton right to intervene in the American Airline labor negotiations?

A: I had hoped that American Airlines would go out on strike. It would have been very beneficial to our company in particular, and to our customers as well. The rationale for that is that if American Airlines went out on strike, there'd be such a surplus of jet fuel that the price would fall. And when prices fall our margins get enhanced. The other aspect is that our customers, our airlines, would be paying a lot less for fuel. And finally, if passengers couldn't go on American Airlines - according to them they in-plane 200,000 people a day our - customers would get those passengers.

Selfishly speaking, I am very unhappy about Mr. Clinton's actions.

Snapshot

Seymour Kahn

Company: Mercury Air Group Inc. Title: Chairman, CEO Born: New York, 1927 Education: Attended City College of New York Hobbies: Skiing, swimming and aviation Turning point of career: When at 47 he took over operations at Mercury Personal: Wife, Monica, father of six children and grandfather of eight