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New Ambassadair owner drops dues, brings back charters

September 11, 2006

The new owner of Ambassadair travel club has eliminated membership fees and will add a flurry of charter flights in January under a plan to revive an Indianapolis institution that shuttled thousands of Hoosiers around the globe for 34 years.

The course set by Grueninger Travel Group is also intended to capture members who took flight after Ambassadair's former parent, ATA Holdings Corp., filed for Chapter 11 bankruptcy in late 2004. ATA sold the club to Grueninger last November as it shed assets to focus on rebuilding its core airline business.

Jettisoning the membership concept--the words "Travel Club" have been deleted from Ambassadair's formal name--is not without risks, though. Grueninger's new business is forsaking millions of dollars in membership-fee income. Members paid $200 or more to join the club, which had an estimated membership of 25,000 last fall.

"You say, 'We're turning away all this money.' Well, you are, but you're not making money if the trips don't sell," said Michael Grueninger, president of Ambassadair and of Grueninger Travel.

He describes the old Ambassadair as a membership club that traveled, while "we are a travel company that sells travel ... we are able to open up the market to more people."

Whatever it's called, the new Ambassadair faces a number of challenges. For one, the travel club no longer enjoys virtually free access to aircraft owned by its former sister division, ATA Airlines Inc.

That cost advantage allowed the club to book nearly all its flights as charters--creating the atmosphere of one big on-board party. Today, Ambassadair buys blocks of seats on scheduled airline flights.

Severing ties with ATA also eliminated a valuable incentive for membership: a 10 percent discount on ATA's scheduled service flights. That more than paid for club membership for those who frequently flew ATA.

Ambassadair also isn't as visible; the departure of ATA scheduled service from Indianapolis hasn't helped.

When 13-year Ambassadair veteran Bill Sharp tells people where he works, the response often is, "Oh, are they still around?" said the Ambassadair product development manager.

And then there's the angst of Ambassadair members who'd bought long-term memberships before the sale.

In 2002, at age 52, John C. Johnson of Valparaiso, bought a "lifetime" membership in Ambassadair for $1,500, "anticipating that my wife and family and I would continue to use Ambassadair for years to come."

Johnson had been a member since 1977, a couple of years after Latvian immigrant and pilot J. George Mikelsons founded the club.

"We were one of the early joiners, often holding George Mikelsons' baby while he flew and his wife was a flight attendant," Johnson recalled.

But once the club was sold to Grueninger, "there were no dues, apparently, to utilize the Grueninger program--there was no value. Anyone could participate. I felt that I was owed a pro rata share of my dues."

Johnson filed an administrative claim against ATA in U.S. District Bankruptcy Court for $1,339--joining at least five others who tried legal means to recover their dues.

Attorneys for ATA argued successfully that administrative claims filed before the airline's October 2004 Chapter 11 filing amounted to general, unsecured claims. Translation: Johnson and other former club members would be lucky to get a few pennies.

ATA counsel argued that Grueninger did not assume liability for paid memberships. Grueninger said ATA held onto the membership fees that were paid previously.

Database the key

Grueninger didn't get any aircraft or membership revenue from its $300,000 purchase of Ambassadair, but it got 73 computers, 76 phones and enough office partition panels to stack to the height of an 18-story building.

The club's faded blue office partitions clashed with the sultry red and yellow decor of Grueninger's Meridian Tower offices at 201 W. 103rd St.

But there was gold among Ambassadair's assets in the form of records on 70,000 former and current Ambassadair travelers.

Ambassadair has been mailing them its travel magazine, Journey, loaded with profiles and photos of trip destinations to make the travel aficionado drool.

The reaction so far: "It's like, 'I haven't traveled with you for three years, but I love your magazine,'" Grueninger said. "We really have to grow it as a lifestyle magazine."

Lifestyle and adventure are buzzwords for the reconstituted Ambassadair. For example, it has scheduled a sport fishing trip next July in Alaska.

"Travelers now are looking more for experience rather than [just] a destination," Grueninger said.

"We're trying to give them different experiences that they couldn't get on their own," said product development manager Sharp.

The loudest cry among some past customers has been for a return of charter flights. Starting in January, Ambassadair will offer a number of charter trips to warm-weather destinations such as the Caribbean. While Ambassadair doesn't have the inexpensive ATA fleet at its disposal anymore, many will pay for a nonstop flight from Indianapolis that puts them on the beach that afternoon.

Ambassadair is contracting both with ATA, which will fly Boeing 757s to the Caribbean, and with Republic Airways Holdings, the Indianapolis-based parent of Chautauqua Airlines.

One way to make charter flights more affordable is by filling empty seats with passengers of other Grueninger businesses, such as its corporate and group tour travel division. That way, Ambassadair doesn't have to guarantee 150 seats to secure a charter aircraft.

Grueninger Travel Group's other operations include tours and cruises, which provide escorted travel for groups such as associations and alumni associations. A music tour unit sends high school bands and choirs to the Rose Bowl and other events. Grueninger's meetings and incentives arm handles corporate travel needs.

Mikelsons connection

Michael Grueninger's father, Othmar, started the privately held Grueninger family travel empire in 1954. A German exchange student at DePauw University, Othmar figured he could make some money offering student tours to Europe.

In the 1960s, Othmar served on the board of Indianapolis travel club Voyager, where the young George Mikelsons was a pilot.

With that longtime connection in mind, the Grueningers threw their hat in the ring for Ambassadair last year. The club also drew interest from Waveland Investments LLC, a Chicago private equity group. With Waveland's potential to wave around millions of dollars, "we just backed off," Grueninger said.

But by September, Waveland was out of the hunt and Grueninger made a deal.

With its own staff of two dozen people, Grueninger didn't need all of Ambassadair's 60-person staff. It hired about 20 of them.

Ambassadair's president, Sally Brown, resigned to pursue full-time work as the head of Ambassadors for Children, a not-for-profit she founded in 1999 that provides "voluntourism" opportunities to help children around the world with medical and educational needs.

Brown said the decision was made easier when she realized that "Ambassadair would never be the club it once was" outside of ATA.

Perhaps not, but Ambassadair lives on. Grueninger declined to discuss financial numbers for Ambassadair or of his family's other travel entities. Ambassadair officials had said the club was consistently profitable under ATA.

The new Ambassadair also has a ways to go in catching up in the number of annual trips once offered: More than 300 departures were scheduled in 2005 while 200 are slated for this year. Grueninger said the growth is deliberately slow to ease the transition.

Even some of those who sought refunds of their memberships may warm up to the new travel firm. Linda Kmetz and husband Thomas wanted ATA to fork back $225, upset that charter flights went away. Now, with the planned return of charter, "I'm looking at a flight now to Ixtapa [Mexico], she said."

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