Royal West Stalled

Bakersfield financial consultant Michael Farringer was enthusiastic when he first heard about Royal West Airlines. “They had a great business plan. . . . I thought it would work,” says Farringer, who invested money in the airline and also persuaded his friends to do so.

Even though several bigger airlines--Western, PSA, Sunworld and America West--serve Las Vegas, Royal West’s backers thought there was room for the little airline. Its marketing research showed that 4 million Southern Californians drive to Las Vegas each year. “Our plan is to get people out of their cars and out into airplanes,” Patrick J. Stevenson, Royal West’s marketing vice president, said when the airline started service last June. “We don’t have to take business away from existing carriers to be successful.”

What Farringer really liked about Royal West were the deals it had with seven tour operators that had agreed to buy $60 million worth of tickets over four years. According to a financial profile prepared by Royal West’s investment bankers, Laidlaw Adams & Peck, that revenue would cover Royal West’s operating costs.

It wasn’t long before Las Vegas-based Royal West--like dozens of start-up airlines before it--ran into severe turbulence. A big tour operator that had agreed to buy $35 million in tickets went out of business. Then the engines in Royal West’s three jets repeatedly overheated, causing flight delays. In January, six pilots walked off their jobs in a dispute over seniority, and Royal West canceled flights for three days.

Grant G. Murray, Royal West president, says he “spent most of (his) time” hunting for money. In a letter that Murray sent to Royal West creditors, he blames the airline’s investment banker for not raising enough money for the carrier, even though it paid Laidlaw $620,000. Laidlaw didn’t respond to a request for comment.

Farringer, the investor, says he’s disappointed with the way things turned out. So is Ralph Seligman, owner of Holiday Express, a San Francisco tour operator that had an agreement with Royal West. Seligman says he bought 5,000 tickets on Royal West before it stopped operating in February.

“It was a good airline, for a start-up, until the end there, when they kept switching starting times,” says Seligman, who lost $2,000 on prepaid tickets when Royal West failed. “We would have lost more money,” he says. “But we pretty much stopped using them at the end.”