Leisure Suits USA 3000

This small Philadelphia-based low-cost carrier has found a niche as the air arm of tour arranger Apple Vacations.

By Sandra Arnoult
Air Transport World, October 2005, p.38 Buy this issue

If you want something done right, the saying goes, you'd better do it yourself. It's a maxim that the people at Apple Vacations took to heart when they were examining ways to make the air portion of their packaged holidays more reliable and of higher quality.

That was the impetus behind the creation of USA 3000, which began operations with a pair of leased A320s in early 2003 and expects to have up to 15 of the twinjets by year end. The carrier is privately held and is led by CEO John Mullen, whose family owns both companies. It does not release financial results.

"The whole concept of USA 3000 was to provide a high-quality product for our sister company Apple Vacations, moving their traffic to and from their resorts in the Caribbean and Mexico," says COO Angus Kinnear, who appears to have a fondness for the number 3000. He previously headed Canada 3000 Airlines, an unrelated company that had moderate success until an ill-starred merger with another leisure carrier, Royal Aviation, sent it into a nosedive that 9/11 made permanent.

The US edition operates out of Baltimore, Newark, Philadelphia, Cleveland, Pittsburgh, Chicago O'Hare and St. Louis providing both scheduled and charter flights to destinations in Florida, Mexico and the Caribbean. Approximately 80% of the service is scheduled, with up to 54 daily flights, according to the company.

Prior to launching the airline, Apple Vacations, which has been in the travel and tour business for more than three decades, relied on ad hoc charter operators to haul passengers for whom it booked holidays. But it often had to rely on older used aircraft, so reliability and ontime performance were issues. "The product was really a second-class operation from an aviation point of view," says the blunt-spoken Scotsman-Canadian. "The airplanes being contracted to fly the vacation packages were probably second-generationthe ones Major carriers had passed down like 727s and MD-80s. We wanted to make sure we could provide not only a safe operation but also a reliable one."

The idea of launching an airline after 9/11 would give many would-be entrepreneurs second thoughts. But, Kinnear points out, "The basic Apple Vacations business has been running for 35 years so we knew we had a basis of operation. Also, people have come to expect to be able to take vacationsit's part of everyday life."

Indeed, hard times may inadvertently have given a boost to the operation, according to Teal Group VP Richard Aboulafia, who recalls that startups during that timeframe could take advantage of available aircraft and cut-price lease rates as carriers reduced fleets, cancelled orders and pulled out of low-yield markets that had become unprofitable. "The timing was opportune. It was a contrarian move and it seems to have paid off," he tells ATW.

"We see ourselves as a leisure carrier. That's what we do," Kinnear says. That fact changes the marketing approach; leisure passengers travel only once or twice a year and do not select a carrier because of its frequent-flier awards programwhich USA 3000 doesn't offer. "The people we fly are not people who build up large amounts of mileage points flying on business every day," he explains. "Those people use their mileage points to take their girlfriends to the Caribbean rather than buying a ticket. We end up with the family and the leisure group of people going on their annual or biannual holiday."

USA 3000 has set up shop on a corporate campus in a tree-lined suburb of Philadelphia, complete with executive offices and sophisticated operations and reservation centers. Some 900 people work for the airline, which continues to add pilots and other service personnel. Around 74% of ticket sales are over the Internet, with 20% coming from the in-house reservation system and a mere 5% from travel agents. "We don't have anything to do with the traditional GDSs," Kinnear emphasizes. "We're like JetBlue and other new-age carriers that have their own booking engines and are Internet driven. GDS provides no real advantage." USA 3000 is developing an application that will allow customers to print boarding passes on home computers. Flights are between 2.5 and 5.5 hr. with average length of a sector in the neighborhood of 3.5 hr., he says. The airline is achieving nearly 12.5 hr. of daily utilization, he claims. "It depends on where the aircraft are based. The more northerly cities generate more hours than the southerly cities. An airplane in Baltimore doesn't do as many hours as an airplane in Cleveland." The flight is considered part of the vacation package, in Kinnear's estimation. Aircraft are configured with 168 seats in a single class. Passengers receive assigned seats, inflight entertainment from overhead projectors and a meal service.

The aircraft are leased from GECAS, ILFC and The Royal Bank of Scotland. "Leasing airplanes is better than owning them because you can keep your fleet young," in Kinnear's opinion. But better times for airlines have meant better returns for lessors and fewer available aircraft. "The rates have hardened significantly of late," he agrees. "There aren't too many bargains out there if you come to lease new airplanes today." Rapid growth in places like India and China contributes to the tight supply.

He is optimistic that USA 3000 is on the right course. "We will continue to join up the dots on our route map and that means we will have to add more capacity," he says. "At present I would like to mature what we already put in place. We need to gain recognition in the markets we have opened. We've got a pretty big game running at this moment."

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