Air Florida was an American low-cost carrier that operated under its own brand from 1972 to 1984. During the period from 1972 to 1978 Air Florida was an intrastate airline. Until a high-profile 1982 aircraft crash in Washington DC, Air Florida was considered an early success story of U.S. airline deregulation, having expanded rapidly from its original Florida network, including internationally to Europe and Latin America. After the crash, the airline struggled for over two and a half years before finally succumbing to bankruptcy in 1984.
After being grounded for three months in Chapter 11 bankruptcy, Air Florida flew again for 10 months in 1984 and 1985 under contract to Midway Airlines using the brand "Midway Express", with Midway selling the tickets and doing the marketing. In 1985 it was sold to Midway.
History Intrastate origin Air Florida was based at Miami International Airport. Air Florida was initially organized as an intrastate airline by a group including Miami native Eli Timoner as chairman, Bill Spohrer as president, Jim Woodman as VP, Robert Bussey as Secretary and Reed Cleary as chief pilot. The inspiration was Pacific Southwest Airlines, the long-established California intrastate airline. Spohrer came from Convair 990 operator APSA, which may account for Air Florida's initial focus on a 149-seat Convair 990 as an aircraft, to be leased from Modern Air Transport. Later the focus changed to an Eastern Air Lines DC-8 before settling on a Pan Am Boeing 707 purchased for $1.1mm. The inability to settle on an aircraft delayed Federal Aviation Administration (FAA) approval and thus start of the carrier.
FAA approval was needed for operational authority. As an intrastate airline, Air Florida had no need to obtain the approval of the Civil Aeronautics Board (CAB), the now-defunct federal agency that then tightly economically regulated almost all US air transportation (e.g. as to where an airline could fly, how much it could charge, etc.). Prior to 1972, there was no economic regulation of intrastate carriers in Florida. Such regulation started October 1, 1972. Air Florida, by first flying September 27, was grandfathered, but thereafter, so long as it remained an intrastate airline, Air Florida would be regulated by the Florida Public Service Commission (PSC) as to matters like route entry and fares.
Ted Griffin, a former marketing director of Eastern Air Lines, became operational head from mid 1972, eventually taking the president title. The airline operated its first flights on September 27, 1972, offering twice-daily service in Florida between Miami (MIA), Orlando (MCO) and St. Petersburg (PIE) on "triangle" routings of MIA-MCO-PIE-MIA and MIA-PIE-MCO-MIA with a one way introductory fare of $12.00.http://www.sunshineskies.com/, Airlines, Air Florida By May 15, 1973, the airline acquired three Lockheed Electra turboprop aircraft, replacing the Boeing 707.
Acker group investment
Air Florida was unprofitable for most of its intrastate existence. In 1972 it attempted a $3.2mm initial public offering, but the market was unfavorable and it had to withdraw. The airline was acquired by a Timoner-controlled publicly listed company, Investment Property Builders (IPB) as a way to give it a stock price. IPB became Air Florida System, Inc, explaining why Air Florida's holding company had a 1955 date of formation. In 1975, the U.S. Securities and Exchange Commission accused Timoner and a Swiss bank (among others) of manipulating the IPB stock price in 1971. The airline was chronically underfunded and unable to upgrade to jets, which caused some travelers to avoid Air Florida, leaving Timoner scrambling for funds."The Airline that can't Leave Florida," Miami Herald (Tropic Magazine), August 17, 1975 - Clipping at Newspapers.com.
In December 1976, an investor group led by Ed Acker, previously a Braniff executive but at that time at an insurance company, led a recapitalization of Air Florida. Acker's group put in $1.5mm, some creditors agreed to take stock in exchange for $2mm in debt, other creditors agreed to a standstill, allowing Air Florida to acquire DC-9 jets."Air Florida Plans Sale of Big Block to Texans," Orlando Sentinel, December 10, 1976 - Clipping."Air Florida pins hopes on DC-9s," Orlando Sentinel, May 16, 1977 - Clipping. Three DC-9s were financed by Carl Lindner's American Financial Corp, which bought them from Air Canada and leased them to Air Florida in exchange for low-priced stock and warrants that, in early 1980, provided Lindner with a substantial payoff."Firm Cashes-in On Air Florida Gamble," Miami Herald, February 22, 1980 - Clipping at Newspapers.com. In mid-1977, Acker became CEO and chairman, Timoner became president and COO, and Ted Griffin left the company."Of Special Interest in Florida," Miami Herald, July 15, 1977 - Clipping By February 1978, a turnaround was evident. The fleet comprised five DC-9s, with three more on the way. A company tag-line emphasized the change: "All jet. All the time." September 1977 passenger traffic was up 400+%, in October up 600+%, for November 1977 thru January 1978, up over 350%. Year over year call center volume increased over 100%.Profits Make Air Florida a 'Born Again' Airline, Miami Herald, April 2, 1978 - Clipping of first and of second page at Newspapers.com.
+ Air Florida System, Inc. Financial Results, 1976 thru 1980YE July 31YE December 31USD 0001976197719781979198019791980Operating revenue4,8777,81421,50744,234114,28562,794161,175Operating expense5,2309,77221,25941,025107,82958,304151,771Operating result(353)(1,958)2483,2096,4564,4909,404Operating margin -7.2% -25.1%1.2%7.3%5.6%7.2%5.8%Net income(748)(2,145)(109)2,4135,0703,6245,708Net margin -15.3% -27.5% -0.5%5.5%4.4%5.8%3.5%
Post intrastate
In 1978, Congress passed the Airline Deregulation Act, which phased out Federal economic regulation of the airline industry starting in 1979. The CAB relaxed its stance in advance of the effective date and allowed Air Florida to fly to Washington, D.C., and, in the Bahamas, Rock Sound and Nassau by year-end 1978.Air Florida gets Bahamas route, Miami News, October 16, 1978New Flights Coming into South Florida, Miami Herald, December 3, 1978 - Clipping at Newspapers.com.
No longer confined to its home state, Air Florida under Ed Acker was aggressive: Air Florida grew quickly, to the Northeast US, Caribbean, Central America and Europe. European routes required long-haul aircraft, such as DC-8s or DC-10s. By January 1981, the fleet included four DC-9s, 21 737s and a DC-10. The financial turnaround continued, with 1979 and 1980 showing solid profits. 1980 revenues were over five times those of 1978 (see nearby table). Air Florida initiated three attempted takeovers of other carriers, two of them materially larger than Air Florida. This was not unusual for the time. Frank Lorenzo's Texas Air was another small carrier that made bids for much larger airlines in the late 1970s and early 1980s.
On August 27, 1981, Ed Acker left Air Florida to take up the CEO position at Pan Am.Air Florida chief to head Pan Am, Miami Herald, August 27, 1981 - Clipping of first and of second page at Newspapers.com.Man in the news: At the controls of Pan Am, New York Times, August 28, 1981 Timoner again became chairman and CEO.Air Florida founder is flying solo again, Miami Herald, January 11, 1982 - Clipping at Newspapers.com.
+ Air Florida attempted acquisitionsTargetTimeframeDispositionPiedmont AirlinesJune 1979-March 1981Bought 4.9% of Piedmont, which refused to engage.Air Florida buys interest in Piedmont, Miami Herald, Nov 7, 1979 - Clipping at Newspapers.com. Sold stake to help finance Air California bidAir CaliforniaOctober 1980-May 1981Bought investor interests in to-be-reorganized Air California parent company, Westgate-California Corporation (WCC), then operating in bankruptcy, giving Air Florida a 26% stake.Air Florida may raise bid for Air California, Miami Herald, April 3, 1981 - Clipping at Newspapers.com. Won a bidding war for WCC, but the other bidder launched a bid for Air California itself, which Air Florida lostAir Florida loses bidding war, Miami News, May 13, 1981 - Clipping at Newspapers.com.Western AirlinesJuly 1981-November 1982Bought stock in Western in part with WCC proceeds.Air Florida makes bid for Western, Miami News, July 7, 1981 - Clipping at Newspapers.com. Air Florida sold the stake at a $10mm loss in 1982.12 years of turbulence grounds 'pioneer' , Miami Herald, July 3, 1984 - Clipping at Newspapers.com.
Flight 90 and aftermath
On January 13, 1982, Air Florida suffered a fatal crash in Washington DC, with a Boeing 737 aircraft hitting a bridge and ending in the Potomac River. Video of rescue efforts were widely broadcast, as was an iconic image of the broken tail of the Air Florida aircraft being pulled from the river. Air Florida reservations dried up. Later in the year the National Transportation Safety Board investigation blamed the crash on the Air Florida pilots.Safety Board Asserts That Air Florida Pilot Could Have Averted Fatal Crash, New York Times, August 11, 1982
Air Florida's fortunes turned for the worse even before the crash. A substantial financial loss in the fourth quarter of 1981 was driven by fierce fare wars,Air Florida Reports $19.3 million loss in 4th quarter, Miami Herald, March 6, 1982 - Clipping at Newspapers.com. including by Pan Am now run by Ed Acker.Airlines study Pan Am's cut rate fares, Miami Herald, September 9, 1981 - Clipping of first and of second page at Newspapers.com. Heavy losses continued into 1982, but even after the crash, Air Florida management continued to consider mergers, this time with Braniff, in distress as it headed towards a May 1982 bankruptcy and grounding.Air Florida weighs offer to Braniff, Miami Herald, April 23, 1982 - Clipping of first and of second page at Newspapers.com. The economy was in trouble and airlines particularly so.The Great Stagnation, New York Times, October 17, 1982 In July, Timoner suffered a debilitating stroke, with Donald Lloyd-Jones becoming CEO. Lloyd-Jones was an American Airlines veteran who lost the heir-apparent competition at American to Bob Crandall and had joined Air Florida as president.Anatomy of a stroke: The case of Eli Timoner, Miami Herald, November 8, 1982 - Clipping at Newspapers.com.
+ Air Florida(1) Financial Results, 1979 thru YE3Q83(2) (USD mm) 1979 1980 1981 1982 YE3Q83 Op revenue 60,047 161,262 302,962 281,770 214,433 Op profit (loss) 3,965 9,495 (12,070) (33,480) (16,309) Net profit (loss) 3,383 5,631 (4,122) (78,507) (50,941) Op margin 6.6% 5.9% -4.0% -11.9% -7.6% Net margin 5.6% 3.5% -1.4% -27.9% -23.8% (1) Solely the airline, as filed with the CAB (2) Air Florida did not file with CAB 4Q83 and after
Two years of struggle
Central to Lloyd-Jones's recovery strategy was shrinking Air Florida. From June 1982 to May 1984 the fleet dropped from 29 to 11.Air Florida plans to lay off hundreds, Miami Herald, June 30, 1982 - Clipping of first and of second page at Newspapers.com.Air Florida puts its crisis on hold, Miami Herald, May 27, 1984 - Clipping of first and of second page at Newspapers.com. Air Florida shrank but did not simplify. It continued to fly to Europe, despite financials that showed Europe to be the worst of the three Air Florida geographies: US, Europe and Latin America (Latin American operations were consistently close-to-break-even or better). Indeed, even after it collapsed, the first operation Air Florida sought to resuscitate was its London route,Air Florida pilots agree to pay cut, Miami Herald, July 14, 1984 - Clipping of first and of second page at Newspapers.com. yet it was the domestic 737 operation that survived the bankruptcy.