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W. R. Howard; Thank you, Mr. Davis.
At last year’s meeting, I devoted my
time to two subjects: deregulation, and
a new route development program which
we had underway. I’d like to go back
now and pick up the threads of each of
those subjects to see what really evolved
in each since we last spoke. First of all,
deregulation. You will recall that last
year we predicted that the Senate would
soon pass a deregulation bill; later on in
the year the House would pass a some
what less objectionable version of the
bill; and along toward the fall there
would be a compromise of some sort, so
that before year’s end we would wind
up with an airline deregulation bill. As
you know, that’s exactly what did hap
pen. On October 24th the President
signed into law the Deregulation Act of
1978. Now, we’re not here today to con
demn or commend that particular piece
of legislation. In fact, it’s too early to
really sit in judgment on it. The jury
isn’t in and probably won’t be for several
years. If you talk to people today in
Akron, or Canton, or Clovis, or Hobbs,
or Asheville, or Danville, or Greenville
or Charlotte, or Norfolk, or Knoxville,
or Wheeling, or Columbus, Ohio, or
Columbus, Nebraska, or Charleston, West
Virginia, or Charleston, South Carolina,
or a hundred other cities in the nation,
they will tell you it’s been very bad for
their local area. They would tell you
they’ve lost air transportation they
sorely needed and that the deregulation
act isn’t working out as they had hoped
it would.
On the other hand, the citizens of Reno,
or Denver, or Los Angeles, or San
Francisco, or a few others, will tell you
that they have obtained a flock of new
air routes that they sorely needed, very
much wanted, and which would have
taken years to obtain under normal CAB
procedures. They would conclude that
deregulation is working very well, in
deed, and as a result new air transporta
tion is flowing where it is most needed.
It is clear that there’s considerable
clamor on the hill and concern across the
country about what deregulation is doing.
It’s totally clear, of course, that deregula
tion is making it much easier for airlines
to obtain new routes, and somewhat
easier to get rid of routes that you do
not want to serve.
There are some valid observations that
could be made at this time about de
regulation as it applies to Piedmont.
First, the opportunities seem to heavily
outweigh the exposure. We’re quite com
fortable, I think, with the answer I gave
a year ago to the question about whether
Piedmont could cope with deregulation
if it came. The answer at the time was
yes, we could cope with it. We thought
we could compete in the open market
place and we could do fairly well. We feel
very comfortable with that conclusion
now. What we have seen is that the
large trunks, rather than invading the
smaller route structures, as some had
feared and suggested, have instead begun
to back out of many medium-sized cities.
As a result, those medium-sized cities
and medium-sized markets are creating
opportunities for us that far outweigh
any exposure that we have experienced
thus far. At this point no significant
route of Piedmont’s has become the tar
get of a large carrier. We have seen
very few inroads from the commuter
level, although undoubtedly some of that
will come as time goes on. The opportu
nities seem to be excellent. We need, for
the next several years, to be aware that
we’re operating in a very dynamic en
vironment. We realize that we must
adapt to it; and we will. We will need to
respond to opportunities, and recognize
and correct any errors. I can assure you
that our route development program is
designed with those flexibilities and that
prompt reaction time in mind.
This is a map of our routes as they
existed twelve months ago. At that time,
we talked about where we would go
under deregulation and suggested that
we would not plan to serve large city
pairs such as New York-Chicago, or
Atlanta-Chicago. That really isn’t the
sort of head-to-head, toe-to-toe competi
tion that we should get into if we can
avoid it. We told you we were working
on a by-pass philosophy that would en
able us to take our good Piedmont area
customers directly to their ultimate
destinations, by-passing some very dif
ficult connecting points. Our rationale
was based, at least in part, on the theory
that a passenger, while preferring a
nonstop, which we would provide in many
cases, would also prefer a one-stop flight,
if that was necessary, as compared to a
connection in New York, Washington,
Atlanta or Chicago. I told you a year
ago today that we had a Miami-Charles-
ton application that we were very
enthused about, that we hoped would
come to fruition. It did, not long after
our meeting. So, on June 15th, Piedmont
inaugurated service from Miami to
Charleston. The flight operates Greens-
boro-Charleston-Miami and, of course,
for both of those cities is the best service
to Miami.
On October 25th, we moved into the
Pittsburgh-Roanoke market. We’re espe
cially proud of that operation. Very
briefly. Eastern had suspended service
in the Pittsburgh-Roanoke market, and
both Piedmont and Allegheny both
decided they wanted it. We offered two
flights a day where Eastern had one,
and Allegheny made the same ofl’er. The
CAB, in its wisdom, said, “Fine. Both of
you go ahead.” The result, of course was
four roundtrips a day in a market that
previously had just one. Questionable
economics to be sure. Our flights did
surprisingly well, and we were pleased
that week-after-week ours did increas
ingly better than Allegheny’s. We were
particularly pleased when Allegheny an
nounced that they were going to get out
of that route altogether. So, we’re by
ourselves with two flights a day and
we’re running with a high 60s load factor;
a very, very satisfactory operation.
Then, on December 1st, we entered the
Boston route that we had been talking
about. We connected Boston to Rich
mond and Boston to Greensboro, by-pass
ing New York or Washington connec
tions. Fifteen days later, we added a
third service, Boston-Norfolk.
On December 15th, we undertook a new,
long-haul operation, for our system, that
we’re pleased with and quite proud of.
r
We instituted service from Louisville to
Denver with one flight a day, by-passing
Chicago or Dallas. Obviously, all of these
flights are well above Piedmont’s aver
age stage length. What that means is
that the break-even load factor comes
down and it becomes easier to make a
profit. We’re doing just that.
Then came Columbia, South Carolina
to Miami. Needless to say, it’s not par
ticularly economical to run one flight a
day into cities where we must pay for
full facilities. So, on January 15th, we
added Columbia-Miami.
Then on April 1st, we instituted a new
service from Tampa to Charlotte, and on
April 29th we will add three new flights
that we are particularly enthused about.
There will be new flights from Raleigh/
Durham to Dallas, from Greensboro to
Dallas, and from Charlotte to Miami.
Those are basically the changes we
made in the Piedmont route structure in
twelve months. Changes that we are
pleased with and, changes that have,
obviously, altered the complexion of our
airline. Most importantly, they are also
changes that should materially benefit
our bottom line.
Another aspect of deregulation, of
course, is the flexibility to get out of
some cities that don’t really make sense
for our system. During recent months we
have applied for suspension at ten cities,
the result of an agonizing reappraisal of
our route structure. I think that over the
years Piedmont, perhaps more than most
airlines, has resolved marginal questions
in favor of the small city, in recognition
of the loyalty those small cities have
shown to Piedmont. The coming of de
regulation, however, will mean a highly
competitive environment, and a need to
carefully prune our route structure. As
a result, we have sought and are in the
process of obtaining suspension at ten
cities: Augusta, Georgia; Parkersburg,
West Virginia; Columbus, Ohio; Green-
ville-Spartanburg, South Carolina; New
port News, Danville and Hot Springs,
Virginia; New Bern, and Rocky Mount,
North Carolina; and London-Corbin, Ken
tucky. In the case of the first four of
those, we are out of them now and the
fifth one, Newport News, we are sched
uled to suspend on May 29th. In the case
of the remaining five, they are cities that
are not served by any other carrier. As
a result, there will be a CAB proceeding
to define “essential air transportation” for
those cities and then to assist them in
total of 232,270 shares were represented in person at this year’s an
nual shareholders meeting.
finding replacement service, presumably
commuters. Thus there will be some
delay in suspending at those five. We
have, incidentally, told our employees
in our cities throughout the system that
we have completed the reappraisal of our
route system and that these will be all
of the deletions, barring some very un
foreseen set of circumstances during
1979.
The 1979 new route program will be
somewhat more conservative than the
1978 program has been. Most of our
resources will be devoted to filling in,
beefing up and strengthening the new
route structure. We kind of have a glint
in our eye for some additional destina
tions such as Philadelphia and Houston,
and perhaps additional service to Den
ver. All in all, we are convinced that
1979 will be a very good year. Thank you.
Davis: Thank you. Bill. Mr. Ross, will
you give us your traffic report ?
K. E. Ross: Thank you, Mr. Davis.
Ladies and gentlemen, I want to welcome
each and every one of you. The 1978
annual report has provided you with
statistical information pertaining to traf
fic gains over the previous year. I’ll not
dwell on these statistics. However, I did
want to point out a few of the highlights
which resulted in increases in our total
traffic and revenue picture. Our revenue
passenger miles increased 13.71 per cent
and our passenger load factor increased
5.73 per cent. Our revenue passengers
were up 9.89 per cent. Our total available
seat miles increased only nine per cent
so the other gains were substantial. Four
new cities and newly-authorized route
segments were begun during the year
and these were covered in detail by Mr.
Howard. The traffic results in these new
markets have exceeded our expectations
and continue to improve. For example,
our Miami service is now producing a
66 per cent load factor and in our ser
vice to and from Pittsburgh, we’ve ob
tained a 72 per cent load factor so far
this month. Unfortunately, we experi
enced severe weather conditions during
January and February. February, par
ticularly, was a disaster insofar as our
total operation is concerned when we
only had a 90 per cent completion factor
of the total flights which were scheduled.
In the area of fares, we obtained two
increases during 1978, one of 3 per cent
and one of 2.5 per cent. This year we
implemented a 7/10 of 1 per cent fare
increase in January and have won ap
proval, last week, for a fare increase of
4 per cent to become effective on May
15th. In addition, we made a number of
adjustments in our authorized fare struc
ture in the middle of March, plus dis
continuing two of our largest-used pro
motional fares. With escalating costs,
we do not propose to discount our tariffs
additionally except those which will be
required to meet competition. Our pas
senger traffic thus far in April is excel
lent, due in part to United’s work
stoppage. If the trend continues, we
expect a system-wide load factor in
excess of 62 per cent. It is projected that
during June or July we’ll enplane more
passengers that we did for the entire
year of 1960. In the past three weeks,
we have set three records for daily en-
planements. The latest was this past
Monday when 20,011 passengers boarded
flights on your airline. A continuing
concern is our fuel allocation cutback,
but notwithstanding an economic reces
sion and the inability to obtain the neces
sary amount of fuel to meet our schedule
requirements, we expect outstanding
growth for the balance of 1979.
Davis: Thank you. Mr. Saunders, will
you give us your report on our flight
operations ?
H. K. Saunders: Thank you. To accom
modate the new expansion of all services
Mr. Howard spoke of and normal growth