Flying where others have fallen.

Flying where others have fallen

All first-class MGM Grand Air turned a profit in just its third year of operation behind the leadership of airline president Charles Demoney. But, he concedes, 1990 is shaping up to be a much more difficult year.

This isn't an easy time to be a president of an airline, particularly if it targets only a small segment of the traveling public: There are predictions of a recession, travel is down, businesses are cutting back, airline stocks have fallen and fuel costs have gone up 50 percent.

Add to that a major capital expansion program that was planned before things started to slow down.

"But I'm optimistic. All you can do is the best you can," said Charles Demoney, president and chief executive officer of MGM Grand Air, the Los Angeles-based niche airline that offers luxury service between Los Angeles and New York.

The airline is at least the third to try such service during the last decade and so far it has succeeded, at least in terms of longevity.

Last year, for the first time, MGM Grand Air earned a profit, albeit a small one, of about $400,000, after losing $4 million its first year and $5 million in 1988.

In 1989, the company had revenues of $30.2 million compared to $22.2 million in 1988.

Demoney, in an interview at the airline's terminal at Los Angeles International Airport, declined to reveal the company's projections for 1990 but said it will probably not be an easy year.

"We started seeing some softening in our bookings back in May. A lot of that had to do with the savings and loan debacle, the problems on Wall Street, junk bonds. We lost some big customers, (particularly when Drexel Burnham Lambert closed down).

"Businesses started traveling less back then but now there is the Middle East crisis that has raised fuel from 60 cents a gallon to 97 cents. I think people are a little nervous. And there might be a fear of a self-fulfilling prophecy that we are in for a tough winter," he said.

But the carrier isn't pulling back. It recently took delivery of three DC-8s, doubling its fleet to six aircraft. And it has ordered two 757s, which will be delivered in the mid-1990s.

One of the main reasons for the new aircraft is to boast the carrier's charter business, which has gone from about $500,000 in revenues in 1988 to a projected $5 million this year, said Demoney.

The airline, a subsidiary of MGM Grand Inc., which owns and operates hotels and casinos in the United States, also just recently started a new "coach" class and is negotiating with aviation officials in England for certification of service to London.

"Since we started grand class coach service our advance bookings have been improving. We are aggressively promoting through travel agents, more of whom will probably be selling us because of the new service."

The airline said the new coach service is comparable to first class service on other scheduled carriers. The $623 one-way fare is comparable to the highest unrestricted coach fares of other scheduled carriers, according to the company.

The airline's grand class service is priced at $1,067, one way between New York and Los Angeles. Service includes gourmet meals, expensive wines, a stand-up lounge, in-flight telephones for every two seats, big seats and video monitors throughout the cabin. There are also two sleeping cabins.

The carrier's load factor last year was 74 percent, up from 63 percent in 1988. In 1988, the airline carried 27,000 passengers on its scheduled flights. Last year the number grew to 32,000.

Although Demoney is hopeful the 1990 passenger volume exceeds the 1989 level, he also knows the ups and downs of the travel industry, which he entered while still a high school student in Adams City, Colo., which is now called Commerce City, a suburban community north of Denver.

"A friend of mine's father worked for United Airlines and we used to go to the airport and something just clicked and I decided that's what I wanted to do."

He worked for awhile as a baggage handler and then after graduating from high school Demoney enrolled in a travel-trade school.

In 1958 he started with Frontier Airlines, the Denver-based carrier that was eventually folded into Continental Airlines. Demoney earned $240 a month when he started at Frontier and held 19 different positions with the carrier before he left in 1984 as senior vice president of marketing, with responsibility for 3,600 employees.

In 1984, Frank Lorenzo, then chairman of Texas Air Corp. persuaded Demoney to move to New York Air as senior vice president of that airline, a carrier in the Northeast that was also eventually folded into Continental.

When Lorenzo decided to take the airline private, which limited Demoney's stock-option package in the carrier, Demoney said he decided to leave.

After a failed attempt to buy a travel school in Texas, Demoney became president and chief executive officer of Pioneer Airlines, a commuter carrier based in Denver that is now also affiliated with Continental. "My wife and I were also operating three travel agencies and I had also bought a printing plant in Denver that was doing quite well. I got a call from a friend who said he had met with some people who were in need of management people for an airline."

Two weeks before the first MGM Grand flight, in August 1987, Demoney began his job as president and CEO of the airline.

Demoney said he has had only two goals -- to be making $10,000 by the time he was 30 and to be the youngest executive officer in the history of Frontier Airlines.

"I can't say I every had a burning desire to be president of airline but I must say I am driven and career oriented. For instance, on our last vacation in Hawaii I made sure there was a fax machine in our room so I could keep up on correspondence and reports."

Demoney said he works about 60 hours a week, takes regular vacations but really doesn't have any outside interests, other than his family, which includes a wife and four children that range in age from 14 to 30.

"My responsibilities are of course to keep the company profitable but at an airline you have to be very concerned with safety and adherence to aviation regulations.

"I'm also responsible for customer service, which includes everything from reservationists to curbside check-in. And because of my background, I would say I spend half my time on marketing."

Selling MGM Grand is different than marketing another large carrier.

"We clearly know who our customers are. They come from the financial community, legal, entertainment and the garment and fragrance industries. Three-quarters of our customers are business travelers."

MGM Grand, with 325 employees, has two roundtrip flights a day between Los Angeles and Kennedy Airport in New York.

"Clearly, what we try to do in our marketing is to get people to try us. We are after the first-timer, who we believe will come back to us after they've tried us. We want to tell people `See what you are missing.'"

The new class of service will hopefully expand MGM Grand's marketing reach, he said.

"There are about 5,700 travel agents in the Los Angeles and New York City areas but before we had the coach service only about half of them were selling us. I think we will now be able to reach more agents, who do most of our bookings."

With the economy turning downward and fuel prices going up, the stocks of major airlines have fallen precipitously. What is the future of the industry and MGM Grand?

"Globally, the airline industry will always grow with an increase in more seats. There will always be a few dominant carriers and I think there will always be a place for niche carriers like us that serve a particular market."