(2) President/CEO Marion Lamar Muse founds Muse Air Corporation on October 27, 1980. The veteran official assumes the chairmanship, leaving his son Michael to be president/CEO.
On April 30, 1981, a public stock offering raises the sum of $35.3 million, which allows the ordering of five aircraft. Even before the first flight, the new entrant makes history by announcing on June 25 that it will introduce the industry’s first “no smoking” policy. It is also noted that only first-class flights will be offered, complete with leather-covered seats.
With a pair of McDonnell Douglas DC-9-80s (MD-81s) leased from their manufacturer, Muse (which certain pundits have labeled “Revenge Air”) inaugurates single-class flights between Dallas (DAL) and Houston (HOU) on July 15 in direct competition with Southwest Airlines (2) in a new Texas airline fare war.
Despite the PATCO air traffic controllers’ strike during August and subsequent ATC restrictions, the carrier flies 177,782 passengers on its long route by year’s end. The strike and start-up costs bring a net loss of $3.96 million.
Airline employment in 1982 stands at 440. The airline acquires two more MD-80s in January and on May 16, launches service between Midland and Odessa and Tulsa, following this with an extension from Houston to Los Angeles on October 1.
Muse, which meanwhile has added another pair of MD-82s, flies 863,940 passengers during its first complete year and earns revenues of $33 million.
Although expenses climb to $37 million and an operating loss of $4.7 million is taken, a net profit of $11.5 million is posted, an unusual feat for a new air transport firm in the era of deregulation. This accomplishment is made understandable when one considers income from the sale of tax benefits on four MD-80s.
The million-mark in annual enplanements is passed by the 740-employee Muse in 1983.
Muse boards 66.5% more customers (1,438,700) than it did a year earlier. Revenues rise 120.6% to $72.92 million and costs climb 80.8% to $68.31 million. Although the carrier generates gross income of $4.61 million, it suffers a net loss of $1.96 million.
Disaster via overexpansion nearly overcomes the carrier in 1984, even though enplanements rise by 37.6% to 1,979,651. New routes are opened to New Orleans, Las Vegas, San Jose, and Ontario, California, three more MD-82s are added, and the carrier advances into the ranks of the nation’s national airlines. The routes to Ontario and Lubbock are later discontinued. Lamar Muse departs in May, promoting Michael to the chairmanship; he, in turn, brings in former Southwest Airlines (1) executive Samuel Coats as chief operating officer.
On the year, Muse’s expenses rise 54% and it takes an operating loss of $3.3 million and a net loss of $17 million on revenues of $101.9 million. In December, bankruptcy is avoided through an arrangement with Dallas financier Hal Simmons; as a condition, the senior Muse is required to take over the company from his son, who is forced to resign his posts.
At the beginning of 1985, founder Muse orders the schedule revamped and service started to the Lower Rio Grande Valley. An order for four MD-80s is cancelled, as eight less-expensive-to-operate DC-9-51s are purchased abroad. On March 11, Muse negotiates a sale of itself to rival Southwest Airlines (2), although, by terms of the sale, it will become a wholly owned subsidiary and allowed to retain its previous identity.
The Muse Airlines acquisition is consummated on June 25; Southwest Airlines (2) pays $40 million in cash and $20 million in stock for its rival. Following stockholder approvals at both carriers, application is made to the government for approval. Chairman Muse orders additional innovations, including a reduction of the number of business-class seats, a shift of routes to longer segments, an end to the no-smoking policy, and a realignment of schedules and fares with those of Southwest Airlines (2). Meanwhile, the DOJ advises the DOT that the possibility for monopoly in certain Texas markets exists if the merger is completed.
Customer bookings for the year jump 19.7% to 2,743,866. Revenues jump 29.4% to $278.1 million, costs rise 17.4% to $123.55 million, and the operating profit grows to $8.29 million. The net loss improves to minus $8.73 million. In February 1986, Muse is renamed TranStar.
World History
