Shuttle America seeks to borrow to remain in air

By Davis Bushnell, Globe Correspondent, 4/8/2001

EDFORD - Shuttle America, the regional startup airline that got off to a flying start at Bedford's Hanscom Field in September 1999, is saddled with considerable financial baggage and is seeking to borrow more than $2 million to keep operations alive.

In a dramatic turnaround, Shuttle America recently cut the number of round-trips six days a week between Hanscom and LaGuardia Airport in New York City from six to one and its Trenton, N.J.-Buffalo, N.Y. service from three flights to one. The total number of daily flights by the Windsor Locks, Conn.-based company is now down to 56, 13 from Hanscom.

The privately held airline, which was formed in November 1998 and had revenues of $33 million last year, gained from serving more than 600,000 passengers, attributes its financial woes to two factors: its inability to find replacements for two aircraft undergoing major maintenance checks and last winter's storms, which disrupted service, according to company spokesman Mark Cestari.

To try to make ends meet, Shuttle America is shopping around for a lender to pony up between $2 million and $3 million and, at the same time, is scanning the radar screen for possible alliances with other airlines, Cestari said.

Meanwhile, he said, it owes Trenton Mercer Airport in New Jersey more than $100,000 in back rent. Its payments to the Massachusetts Port Authority, owner-operator of Hanscom Field, are current, an authority spokesman said.

Despite setbacks, Shuttle America said it has no layoff plans. There are currently 375 employees, 135 of whom live in Massachusetts.

Leaders of local grassroots groups that have opposed Shuttle America's Hanscom service from the outset, claiming that it adversely affects the area's historic landmarks, said the handwriting may be on the wall for the demise of commercial flights at Hanscom.

''Although it's too early to tell, we're hopeful that this is the beginning of the end'' of Shuttle America's operations at Hanscom, said Peter Enrich, a Lexington selectman and chairman of the Hanscom Area Towns Committee, made up of selectmen from Lexington, Concord, Lincoln, and Bedford.

Anna Winter, executive director of the Save Our Heritage group, which has offices in Concord, added, ''Commercial aviation has failed before [at Hanscom], and now it appears to be failing again.'' Before Shuttle America arrived, Mohawk Air flew out of Hanscom from 1988 to 1991.

An appeal filed last November by Save Our Heritage and others against the Federal Aviation Administration and its favorable ruling on Shuttle America's LaGuardia service is still pending in the 1st US Circuit Court of Appeals in Boston.

Speculation about Shuttle America's packing up its bags and leaving Hanscom is off the mark, spokespersons for Massport and the airline said.

''Small carriers typically are looking for more money because they face bigger challenges than the majors. But Shuttle America has a proven record of making money from its Hanscom routes,'' said Massport spokesman Jose Juves, declining to get into specifics.

Cestari would only say, ''We've been making money on an operating basis since last summer.''

However, the airline took a big hit when its aircraft leasing firm, Bombardier of Toronto, reneged on a promise to roll out two planes to replace two others undergoing FAA- required, periodic maintenance checks, Cestari said, adding that the airline has had to make do with four 50-seat turboprop planes. The planes are each leased for more than $1 million a year.

''But we expect to be back to a full schedule in mid-May, when we'll have a new source of replacement aircraft,'' Cestari said.

The airline is even considering plans for the launch of a Trenton, N.J.-Washington service by summer, he said.

However, Shuttle America is clearly a carrier in transition, Cestari said, acknowledging that he, too, is at a crossroads.

He now wears two hats: marketing communications vice president for Vanguard Airlines Inc., based in Kansas City, and spokesman for Shuttle America, of which he is an investor-owner.

Asked whether Shuttle America is about to link up with Vanguard, which has 14 jet aircraft and operates routes from coast-to-coast, Cestari replied, ''Shuttle America is looking at various possible partnerships, but nothing has been formalized yet with Vanguard or any other carrier.''

Vanguard, though, is also in the red, said an airline analyst who asked that his name not be used. Cestari admitted Vanguard has its own financial problems.

In seeking to get cash flowing again, Shuttle America has knocked on several lenders' doors, including the Connecticut Development Authority, which previously granted the airline $3 million in loans.

''Shuttle America has let us know that they're looking for additional funding. But we probably wouldn't have an appetite for accommodating them, in light of our other projects. And we don't want to have too big an exposure with any organization,'' said Donald Reed, a senior vice president of the authority.

The Erie County Industrial Development Agency, a quasi-public entity in Buffalo, has a 5 percent equity stake in Shuttle America. But its chief executive, Ronald Coan, did not return calls concerning the airline's search for additional loans.

The FAA and its parent, the Department of Transportation, are monitoring Shuttle America developments but have not taken any action, according to their spokespersons.

''We have three inspectors assigned to Shuttle America full time, and that's routine,'' said James Peters, an FAA spokesman for the Northeast. ''If there's any indication that the airline's going through tough times, our inspectors will look at their operations.''

DOT, which issues flight operations certificates to airlines based on their aviation competence and financial health, gets involved ''only when it comes to our attention that a carrier is having financial difficulty,'' spokesman William Mosley said. ''If that proves to be the case, then we advise a carrier on what it has to do to get things in order from our standpoint.

''However, we never reveal which airlines we're reviewing for financial fitness,'' he added, noting that the ultimate penalty is revocation of license. There are show-cause hearings, he said, before a license is revoked.

Whether or not Shuttle America makes a comeback, the essential point is that ''Hanscom is a difficult environment for commercial aviation to thrive, and that's a good thing'' for the four surrounding towns, said Sara Mattes, a Lincoln selectwoman who heads the Hanscom Field Advisory Commission.