Confronted with declining prospects from their traditional customer bases, the only two publicly traded regional cargo carriers last year each altered their business plans. Columbus, Oho-based AirNet Systems [NYSE: ANS] had some immediate success while Utah-based Alpine Air Express [OTC: APLE] posted larger losses.

AirNet reversed its fourth quarter loss of $321,000, 3 cents per share, in 2002 and instead posted a fourth quarter 2003 profit of $712,000, or 7 cents per share. For 2003, the firm earned $2.7 million, or 28 cents per share, on revenue of $142.9 million. In the previous year, AirNet earned $1.5 million, or 15 cents per share, on total sales of $134.2 million.

The thinly trade Alpine Air did not release its fourth quarter numbers. Instead, it recently filed its annual report with the Securities and Exchange Commission for the fiscal year that ended Oct. 31, 2003. The company posted a $1.4 million loss, or 13 cents per share, on revenue of $10.2 million. In the fiscal year ending Oct. 31, 2002, Alpine lost $54,000, or a penny per share, on sales of $12.3 million.

Alpine has traditionally relied on the U.S. Postal Service for the bulk of its revenue. In fiscal 2003, Alpine transported 5,800 tons of cargo. Carrying the U.S. mail generated 68 percent of the revenue - and that was after losing the mail contract for five weeks. Last spring, Alpine lost a bid to continue mail service in 16 Western cities as the Postal Service established a new contracting procedure. It eventually won back the routes in July with a lower bid and contesting the procurement award. CEO Eugene Mallete noted that between the stoppage and the lower-yielding new contract, Alpine suffered a 25 percent drop in cargo revenue. The company does not break out from its income stream the revenue from postal deliveries.

To diversify its revenues, the company established Alpine Air Chile with three Beechcraft 99s flying between Puerto Montt and Chaiten carrying passengers and cargo. However, the company reported a pre-tax loss of $937,800 against $151,900 in revenues. The company has scaled back the Chile operation to one plane.

In the last six months, Alpine gained ownership of its entire fleet after purchasing 32 aircraft from companies controlled by Mallette. In the July deal, the company gained control of 14 Beechcraft 1900s and two 99s, which it had been leasing. The aircraft were valued at $16 million. Alpine paid $1.7 million in notes after canceling debts the Mallette Family LLC owed the airline. In the December 2003 deal, Alpine purchased 16 Beechcraft 99s valued at $9.9 million from CLB Corp., another firm Mallette controlled. The airline paid Mallette 1 million shares of Alpine stock. Alpine most recently reported 29 planes in service.

At a recent analyst meeting, Mallette said that Alpine anticipates making a secondary stock offering this year, which would allow it to purchase other operators in nearby states. The cashless fleet acquisition already gives it greater flexibility by freeing up $2.5 million in lease payments, he said.

While Alpine has relied on the mail for the bulk of its cargo, AirNet has relied on banks. The business will change come October when the Check Clearing for the 21st Century Act takes effect. The federal legislation enables the complete electronic processing of paper checks. In 2003, AirNet's fleet of 120 planes, including 41 Learjets, generated $103.4 million in sales by servicing the financial community.

"While overall check usage will decline over time, we will continue transporting checks and other valued shipments from financial institutions for the foreseeable future," said CEO Joe Biggerstaff. "Balancing the needs of our traditional bank customer base and our growing express customer base will be our operational challenge in 2004."

To that end, AirNet created a new subsidiary, Fast Forward Solutions, which in December struck a deal with NetDeposit to provide standard image replacement document check processing. Fast Forward plans to launch an end-to-end processing of the new substitute checks this quarter.

In diversifying its customer base, AirNet is focusing on providing the delivery of higher value cargo on an express basis. The company is phasing out low margin cargo shipments. In the fourth quarter, the express unit revenues grew from $8.9 million in the final quarter of 2002 to $10.3 million in the same period of 2003. For 2003, the unit generated $36.9 million in sales compared to $33.9 million in 2002.

For 2003, the passenger charter unit recorded $7.6 million in sales - a 76 percent increase over 2002's $4.3 million mark. More planes were dedicated to the unit in its second year.

"We are very pleased with second full year of growth in our passenger charter services business," Biggerstaff said. "With our success in this growing profitable business, we will increase the size of our passenger charter fleet." While the unit produced $2 million in fourth quarter sales, he said further sales were constrained by the number of planes available.

Late last month AirNet announced that is shifting operations in Columbus. It will lease eight acres at Rickenbacker International Airport on which it will construct a 132,000- square-foot hangar complex. The airport authority is also developing 10 acres as a parking ramp next to the new hangars. Once the new facility is completed at the end of the year, AirNet will sell its current facility at Port Columbus International Airport for $3.8 million back to the airport authority.

>>Contact: Alpine Air, (801) 373-1508; AirNet (614) 237-9777.<<