Co-founder recalls birth of an airline - East Valley Tribune: Business

Co-founder recalls birth of an airline

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Posted: Sunday, September 25, 2005 6:22 am | Updated: 8:57 am, Fri Oct 7, 2011.

Michael Roach received a letter from the California attorney general a little more than a week ago. He opened it and found he still owns seven shares of America West Airlines stock.

One of co-founders of the carrier, Roach had no idea he still had a stake in the airline he calls his baby.

The letter said "we have found at the lost property office seven shares of America West that have your name on them," Roach said. "So, I filled out the letter and sent it in and eventually, presumably, I’ll get seven shares of something . . . I haven’t even checked the price, but they’re worth not much I don’t think."

Actually, the stock is worth about $56.

While Roach’s financial stake is miniscule, his emotional attachment to the airline remains as strong as ever. He was the founding president of America West, having worked with former chairman and CEO Ed Beauvais to start the company in late 1981.

Roach reminisced about the past and commented about the latest turn of events for the airline in an interview with the Tribune last week.

First, he’s saddened management will drop the America West name and go with the US Airways name following the merger of the two companies. "The airline I was associated with was America West, and although the company is really the survivor here, it really doesn’t look that way, and people will forget that over time," he said.

Still, Roach, an airline consultant, is rooting for CEO Doug Parker, who gambled and combined with a troubled airline that is three times the size of America West.

"It’s a very dicey proposition, but Parker believes ... that staying as they were was a dicey proposition as well," Roach said. "There weren’t any other obvious good alternatives other than sell the company to Southwest or something. He sought out the best opportunity that’s available."

Roach had been a lawyer with the federal government working for airline deregulation under presidents Gerald Ford and Jimmy Carter before he joined Beauvais to start an airline based in the Valley. With regulation of the airline industry lifted, the two thought the growing area was perfect for a start-up. Plus Southwest Airlines was no where to be found.

Beauvais had worked for Bonanza Airlines in Phoenix and knew the Valley was ripe. The duo weren’t the only ones who saw the potential of running an airline that wouldn’t have prices and routes set by the federal government.

"The early 80s was the first time in many, many years when it was possible to start an airline," Roach said. "During regulation from 1938 to 1978, it was essentially impossible ... to get a certificate or license an airline. Several groups of people were much faster off the mark than we were. Midway, PeoplExpress, New York Air ... all got started in late 1980 and early 1981."

Wall Street was excited about the potential of new low-cost airlines based on the Southwest model, and Beauvais and Roach thought they’d do the same. Rumor had it Southwest, the Dallas-based company and industry leader, planned to go to eastern states, including Florida. At that time, Southwest had just begun to fly outside of Texas, which it could not do before deregulation, and its western routes ended in El Paso, Texas, and Albuquerque, NM., Roach said.

"We thought we had land (in the West) that we could claim as our own," he remembered.

But President Ronald Reagan almost did the airline in even before it got off the ground. Just days after the two started working on the project full-time, air traffic controllers went on strike. Reagan fired them all, leaving only those willing to cross the picket line. For the most part, only those airlines that had been flying the previous year, under deregulation, were allowed airport slots. Because of that, Wall Street’s enthusiasm for new airlines evaporated, Roach said.

"There were roughly a dozen what we call paper airlines, America West being on of them, where we had an idea and some people, but no money, no planes, nothing," Roach said. "Some of them were founded and sponsored by people with paper qualifications far greater than mine and Mr. Beauvais’. One of them was the ex-president of Pan Am. Eventually, they all gave up and we persevered. It took us 18 months to raise the money."

Meanwhile, the arch nemesis moved in — and never left.

"Southwest surprised us and came to Phoenix and on to Los Angeles, the very markets that we intended to serve," Roach said. "That made it much harder to raise the money and put us not on a playing field with just legacy carriers, but with the toughest of them all of the new generation airlines. America West has always been under the shadow of Southwest in Phoenix and Las Vegas, and it has made it tougher to fly than it otherwise would have been."

America West offered its stock publicly in 1983. The company raised $23 million, and five months later it was in the air with its first flight from Kansas City, Mo. It landed in Colorado Springs, Colo., went on to Valley and lastly to Los Angeles.

"The public responded very strongly, and the company was reasonably successful but quickly began to outgrow its capital structure," Roach said. "It got too many planes too soon and began to deviate from the business plan."

Roach was fired just months after America West began flying. He and Beauvais came to disagree regularly during their two-year effort to raise money. Management hired in anticipation of flying left, and tentative airplane deals dried up while they looked for equity.

"I was shot in the head by my colleagues," Roach said. "Not literally. It was one of those ugly things that happen in the board rooms of America ... It was a very tense time."

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