Carrier pulls plug on route

Posted: Friday, November 10, 2000

Yet another air carrier is giving up on the Kenai-to-Anchorage run. Anchorage-based TransNorthern Aviation suspended operations Wednesday.

TransNorthern co-owner Alan Larson said the 6 percent market share his company wrested away from Era Aviation was just not enough to remain profitable.

"When we got in, we decided it would take 10 percent to break even, and our low fares didn't attract the percent of the market we needed," he said. "We tried to market our tickets at a competitive rate, but fuel costs doubled and insurance went up 30 to 40 percent."

Larson said bulk fuel prices went from 95 cents a gallon to $1.75 a gallon in the 10 months TransNorthern served Kenai.

"We spent $90,000 on avgas and jet fuel in Kenai during the last nine months," he said. "It used to be fuel was one of the least expensive things for a small carrier to worry about. Now it's getting to be a significant cost of the trip."

TransNorthern began service with a single-engine Cessna Caravan, before switching to a larger twin-engine Beech 99. He said the company lost money if it did not have at least five passengers on each leg of the trip between Kenai and Anchorage.

"We needed two passengers to pay for the fuel, another to pay for the pilot, another for insurance and another for landing fees and taxes," Larson said.

TransNorthern is not the only small carrier feeling the pinch of skyrocketing insurance costs in Alaska.

An employee at Kenai Air confirmed that the company has voluntarily grounded a portion of its helicopter fleet because of insurance costs, though owner Craig Lofstedt was out of town and unable to elaborate. Other air carriers in the state have had their insurance rates double in the past year.

The increases stem from Alaska's high accident rate, high court judgments and fewer companies offering aviation insurance.

"Here's how drastic the aviation market is: I have a client in Southeast Alaska; the fleet is the same, they have the same liability, no losses or claims, and their insurance went up from $115,000 per year in a soft market, to $300,000 per year in a hard market," said Mike Kardatzke of Aviation Insurance of Alaska in Soldotna. "What other business has that large a swing?"

Kardatzke called for tort reform as one solution to the problem. He also suggested insurance companies not try to make a profit solely on Alaska aviation and pool those liabilities with their operations in the Lower 48.

Insurance costs notwithstanding, TransNorthern also faced the problem of trying to break Era's steely grip on the market.

"Competition is pretty steep when you can only get 6 percent of the market share," Larson said. "(Era is) a very large operation."

Larson said anyone with prepaid tickets should stop by the TransNorthern counter at the Kenai Municipal Airport terminal or write the company for a refund.

"We want to thank everybody who flew with us and for helping us to get started," he said. "We also had some very good employees in Kenai."

TransNorthern had seven employees at its Kenai terminal, and Larson said he is trying to find them other jobs in the field.

This is deja vu for some employees, who suffered through Yute Air Alaska's departure from the Kenai market shortly before Christmas a year ago, before being hired by TransNorthern just before the holiday.

Larson said he has not ruled out a return to Kenai someday, if finances allow. In the meantime, he said, he is in discussions with another company about taking over the Kenai-Anchorage route. He said he was not at liberty to disclose the company.

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