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The spectacular 2 1/2-year rise of ValuJet Inc. was something of a corporate fairy tale. After the crash of Flight 592 into the Florida Everglades, the airline is dearly hoping the story isn't coming to an end.

Its stock value is plummeting and there are deep cuts in its flight schedule as federal inspectors examine all ValuJet planes. A lengthy investigation into the cause of the crash and congressional hearings loom ahead. The discount airline's long-term outlook is uncertain."They're in serious trouble," said Mike Boyd, president of Aviation Systems Research Corp., a consulting firm based in Golden, Colo. "I don't believe it's a lethal problem, but I do believe it's serious."

ValuJet's future depends on whether the crash investigation gives consumers more reasons to worry about the airline's safety, Boyd and others said.

Already, ValuJet has been pegged as having a high accident rate, although officials have not suggested the crash was caused by wrongdoing on the part of the airline.

"The amount of difficulty they'll have depends on the outcome of the whole thing," said Lee Howard, president of consulting firm Airline Economics International Inc.

Until the May 11 crash, ValuJet enjoyed the accolades that came with being one of the decade's top business success stories.

"Fun and friendly," the ValuJet slogan goes.

And profitable. Started in the backyard of Delta Air Lines, which dominates the Atlanta market, tiny ValuJet used cheap fares and brilliant marketing to get noticed quickly.

Start-up funding came from its founders: former Atlantic Southeast Airlines Inc. executive Robert L. Priddy and WestAir Holding Inc. founders Maurice J. Gallagher Jr. and Timothy P. Flynn.

They recruited Continental Airlines president Lewis H. Jordan to run day-to-day operations. Jordan, the ValuJet president who favors polo shirts and khaki pants to business suits, has been the public voice of the company since the crash.

ValuJet was built on low costs. It assembled its fleet mainly from old DC-9s, some formerly used by Delta. Taking advantage of a labor pool created by layoffs at larger carriers, it proudly paid its pilots and other employees far below industry averages - cockpit captains, for example, earned about $42,000, compared with more than $100,000 a year at some airlines.

The company targeted its no-frills product to people who don't usually fly - those who ordinarily drive, say, from Atlanta to Disney World or who stay home because airlines are too expensive.

Travelers responded to ValuJet's quirky approach - a grinning cartoon plane logo, whimsical "Capt. Value" radio ads and ticketless reservations are part of the mix - and its fares, as low as $39 one-way.

ValuJet's larger rivals also responded, slashing fares in competitive cities and taking steps to form low-fare subsidiaries.

From a few Southern destinations, ValuJet began to expand, eventually reaching 31 airports, including Boston, Chicago, Detroit and LaGuardia Airport in New York.

When ValuJet went public in June 1994, its stock was a big success. In 1995, adjusting for splits, the stock's price appreciated by 366 percent before increased competition caused it to slip in recent months.

Its earnings were a big draw for investors: ValuJet turned a profit of $20.7 million in 1994, its second year in operation, and $67.8 million last year.

But the company was not without problems. Tired of low pay, flight attendants voted to unionize last year. Pilots and mechanics remain nonunion.

More worrisome was the extra surveillance of ValuJet undertaken by the Federal Aviation Administration earlier this year after a series of minor accidents. The only major accident prior to the crash was an engine explosion last June at Hartsfield Atlanta International Airport in which several passengers were injured.

With 110 ValuJet passengers dead under murky waters in Florida, Jordan said last week his focus now is on investigating the crash and reassuring travelers the airline is safe. On Friday, the airline appointed retired Air Force Gen. James B. Davis, who now works for a Washington consulting firm, The Spectrum Group, as a "safety czar" to oversee ValuJet's maintenance, training and other operations.

The airline was also trying to placate customers frustrated by late or canceled flights. ValuJet cut its schedule in half with planes and safety procedures are scrutinized.

But Jordan insisted ValuJet's financial health has not been threatened by the turmoil. He also said he was not alarmed by the drop in ValuJet stock following the crash. ValuJet closed May 10, the day before the crash, at $17.871/2 a share on the Nasdaq market. The stock began falling Monday and closed at $13.121/2 a share on Friday, a 26.6 percent decline for the week.

"A number of people have decided that they would just as soon sell based upon the uncertainty until this investigation is complete, but dozens and dozens of people have told us that they have a lot of confidence in ValuJet, and they have chosen to buy at this time," Jordan said.

ValuJet's largest single stockholder is the New York investment firm Gilder, Gagnon, Howe, which owns 8.2 million shares, or 15 percent, in customer accounts and in accounts owned by the firm's partners or their families.

Executives including Jordan, Priddy, Gallagher and Flynn also hold large stakes.

Airlines have endured after suffering major crashes. But "ValuJet is under enormous scrutiny as a low-cost carrier, which puts them in a different category than American, Delta or United," consultant Boyd said. "There's a lot of innuendo about whether they're safe.

"The longer this stays in the press, the more trouble they're going to have."

Howard, however, said such concerns could disappear if the cause of the crash turns out to be something beyond ValuJet's con-trol.

"Normally, an accident does not ruin an airline financially," he said. In due course, people continue to fly - unless there is something unusual that points a finger directly at ValuJet."



ValuJet Inc. at a glance:

Founded: October 1993

Headquarters: Atlanta

Top officers: Robert L. Priddy, chief executive officer; Lewis H. Jordan, president

Cities served: 31

1995 revenues: $367.8 million

1995 net income: $67.8 million