As a matter of fact, there was nothing in the public record to indicate that they were anything but a pair of hard-driving entrepreneurs. Karki, who portrayed herself as a Stanford University-educated certified public accountant, had previously worked as an accountant for a suburban Minneapolis restaurant and as a financial adviser. She had joined FTC in 1976, when the company's acronym still stood for Flight Training Center Inc. The tiny aviation school, which had operated at a loss since the day it was founded in 1968, was in need of a controller, and Karki seemed right for the job. Her role didn't begin to expand until 1977, when Russell T. Lund Jr. and Wardwell Montgomery, the two businessmen-pilots who owned the company, brought in another businessman-pilot named Bill Rubin.
At Flying Cloud, Rubin had a reputation as a boy wonder. Most pilots could recount his story: how he had quit college to become a United Air Lines flight captain while still in his twenties, and then quit the airline to make a career of investing in small, often ailing companies.
But what especially caught everyone's attention was the apparent ease with which Rubin had subsequently returned to aviation. At a time when many other charter operations were being buffeted by both a fuel crisis and an economic recession, Rubin was boasting that -- between flying gamblers to Las Vegas and playing the stock market -- he was earning enough to buy himself a new Learjet every year. He was also leasing a trainer plane to FTC, which was defaulting on its payments. Even that situation offered an opportunity, however. He was willing to forgive the leasing debts, he said, in exchange for a small consultant's fee and a crack at making something of FTC. Once inside the company, he teamed up with Karki to sell the owners on a turnaround plan.
It was a bold plan that called for transforming the flight school into a full-service aviation company. It would include a charter operation positioned as the luxury alternative for business travelers and overseas vacationers. Unlike competitors, FTC would be vertically integrated, from its company-owned fuel and parts supplies to its mortgaged (instead of leased) planes and hangars. This, the pair argued, would help minimize the impact of fluctuating fuel prices and ever-rising interest rates.
But the operative word in the strategy was luxury: FTC's passengers would be picked up by limousine and flown to their destination in a sleek, new jet with a wellstocked bar. Should a layover be necessary, FTC would supply lodging and workout facilities at any one of eight convenient, fixed-base locations, none more than 800 miles from another. Convenience aside, these satellite locations would give FTC a potent pricing weapon. Whereas most charter companies have to charge one-way passengers at round-trip rates -- in order to cover the margin-eating "dead-haul" mileage -- FTC would be able to schedule the empty plane for another trip from the nearest airstrip. The system would thus allow FTC to charge one-way passengers at one-way rates and undercut competitors' prices by as much as 40%.
Obviously, the key to implementing the plan was capital -- something in short supply at FTC. With nearly $500,000 in short-term debt and only $100,000 or so in available credit, it appeared that FTC would have difficulty finding the money to stay afloat, much less to turn itself around. If the company were to reduce its debt, and go about the business of buying and building all the facilities the plan called for, FTC would have to begin winning friends and influencing people in the investment world -- or so Rubin and Karki argued.
The board of directors bought the strategy, and Rubin, the new president, began shopping for an underwriter in early 1979, with the goal of scheduling an initial public offering by the end of the year. After being turned down by several established Twin Cities firms, which considered the deal too risky, FTC wound up with an aggressive, local investment banker named Alstead, Strangis & Dempsey. Alstead took the company public on November 30, 1979, at $3.25 per share. FTC -- which now stood for Flight Transportation Corp. -- came away with about $1 million.
In the months that followed, Rubin and Karki set about rebuilding the company. They repaid some bank notes, bought some airplanes, and launched several major projects. They began construction of a corporate headquarters at Flying Cloud. They established a fixed-base operation in Santa Barbara, Calif. They purchased some property on Grand Cayman Island, which would serve as the destination for the group charters. But most of their time and effort went into publicizing FTC through a promotional blitz that included television commercials, full-page magazine ads, and billboards. Tooling around town in a maroon limousine, Rubin and Karki plied stockbrokers, analysts, and suppliers with invitations to elegant lunches -- often in Milwaukee or in Rochester, Minn., via Learjet. They even offered free vacations at the $400,000 beach house on Grand Cayman.
As it turned out, the continuing dog-and-pony show was a warm-up for a second public offering. FTC needed additional capital for a variety of reasons, Rubin and Karki said -- not least of all to develop the now-burgeoning group-charter operation. From the second half of 1979 to the second half of 1980, the number of flights were reported to have more than doubled, from 48 to 98, and revenue was up 189%. But because FTC lacked the necessary federal certification, it had to rely on planes and crews contracted from major airlines. The proceeds of the offering would allow the company to get that certification and begin flying its own Boeing 727s.
