It all happened very quickly. City by city, Kuolt's modest plans broadened in scope. He was like a wolf turned loose in a sheep fold, who -- once there -- finds his appetite suddenly growing.
There were, he discovered, other small airlines operating a few planes on limited routes throughout the Northwest. For the most part, they had been created by wealthy investors who bought the planes and then leased them back to the airline for the cash flow and investment tax credits. Horizon soon acquired two of these airlines of Utah Inc., adding more planes and cities to its system.
In part, the determination to grow reflected the heightened competition throughout the industry, brought on by deregulation. "We were hell-bent on generating revenues and developing market share," says William S. Ayer, 31, Horizon's vice-president of scheduling and planning. "That was the name of the game for the first three-plus years. I'm not saying that was wrong. You've got a certain window with deregulation, and you've got to jump, or somebody else is going to beat you to it. So you jump when you can and figure out what you're doing later on."
After nearly two years of heavy start-up expenses, Horizon finally became profitable in the quarter ending September 1983 and, for the next four consecutive quarters, reported rising net income. Then, suddenly, the profits not only stopped but turned into steep losses. Horizon, barely three years old, was fighting for its life.
The major obstacle to Horizon's continued progress was a company called Cascade Airways Inc., based in Spokane, which had been in the business since 1969. Cascade had been flying head-to-head with Horizon on certain routes almost from the beginning, and had shown no signs of tiring. "I began to realize," Kuolt says, "that the two of us cannot survive. One of us is going to have to go.I say to myself that we've got to make the moves that will eliminate one of us -- either suicide or murder. You've got to run yourself into bankruptcy or run the other guy into bankruptcy, one of the two."
Cascade itself had signaled the onset of mortal combat in the fall of 1984, when it announced the introduction of five recently purchased BAC1-11 Jets, small planes capable of carrying 79 passengers. Kuolt and his managers, who had been considering a similar move, were both stunned and relieved. Granted, the jets represented a potentially significant competitive advantage, but they were also unusually expensive to maintain and operate. From what Kuolt knew of Cascade's financial condition, the company would be unable to support the combined weight of operating expense and debt service on the planes unless the jets were immediately successful.
Horizon rose to the challenge, mobilizing itself to keep Cascade from realizing its advantage. "It was exactly like a war between two opposing generals," Welsh says. "Kuolt was one and the president of Cascade was the other." Once again, Horizon's officers entered the fray with the family-style initiative that had characterized the company's entire brief history. Ayer, for one, became so obsessed with the jets that he drove out to Walla Walla, Wash., where they were being refurbished, and skulked about, surreptitiously writing down each plane's identification numbers. Then, for six months, he spent most of his lunch hours at Cascade's gates in the Seattle-Tacoma airprt, noting the competition's flight frequency and passenger count, and comparing them with Horizon's.
Meanwhile, Horizon was countering with an assortment of defensive strategies. It offered discounted fares. It held special promotions with travel agents. Above all, it increased its number of flights. When, for example, Cascade introduced 3 jet flights a day on the route from Seattle to Portland, Eugene, and Medford, Ore., Horizon responded by offering 12 flights a day along the same route.
The battle raged intensely for about six months, and then it was over. Cascade withdrew its jets. Soon afterward, Kuolt reached an agreement with Cascade's principals to acquire his major competitor. "I suppose we could've let it go under," he says, "but this way it's done once and for all. You know, dead airlines have a strange way of coming back to life." As it was, Cascade filed for Chapter 11 protection soon after agreeing to the acquisition.
The triumph over Cascade marked the end of a period of Herculean accomplishment for Horizon. In less than five years, it had grown exponentially by nearly every measure in the book -- number of passengers carried, number of stations opened, flights per day, cities served, number of employees, fleet size, revenues. In addition, the company had negotiated three acquisitions and made two public offerings. Along the way, it had clearly established itself as the dominant airline in the Northwest.
And yet most of Horizon's managers remember their victory as an unexpectedly anticlimactic event -- one, moreover, for which they had paid a steep price. "Chasing [Cascade] got very tiring," says Ayer. "You felt like it wasn't a productive way no spend time, but -- if you didn't do it -- they'd get an advantage. It was like we were playing a little game that was important, yet it wasn't."
