Reviving Midwest Express
Industry experts say bringing airline back will be ‘uphill climb’
If planes could fly on good wishes, fond memories and chocolate chip cookies, Midwest Express would be up and running by the end of the week.
The reality, airline industry experts say, is much murkier, not to mention much more expensive: Bringing back the beloved airline, as two Wisconsin businessmen are proposing, will be extremely difficult.
“Nothing is impossible, but it would certainly be an uphill climb,” said Dave Emerson, partner and leader of the global Airline Practice at management consulting firm Bain & Co.
Business partners Curt Drumm and Greg Aretakis are seeking to restore the Midwest Express brand as an operating airline, Drumm said this past week.
Drumm’s LinkedIn page lists him as an aviation consultant at Lakeshore Aviation in Manitowoc. Aretakis is listed as principal at Air Advising Services based in Brookfield and a
former Frontier Airlines and Midwest Airlines executive.
Other than confirming that they have begun working to bring the airline back, Drumm said he couldn’t comment. Aretakis couldn’t be reached.
Still, news of the effort has quickly created a buzz, not only in Wisconsin but in airline circles across the U.S. Nearly all the sentiment is positive.
“I think it’s an interesting idea,” Emerson said. “I’ll be interested to see if they gain any traction.”
On social media, former customers of the Milwaukee-based airline, whose reputation for firstclass treatment of passengers and cookies baked fresh in flight extended far beyond its small national market share, were excited about the prospects of a rebirth.
“Best airline I ever flew ... ,” read one of the hundreds of Facebook comments about the news. “What can we do to make this happen!?!?” another said.
The effort to bring back Midwest has an advantage in that the brand
doesn’t have to be created from scratch, said Steve Laughlin, executive chairman of Laughlin Constable, an ad agency with offices in Milwaukee and Chicago.
“From beginning to end, that brand had a very loyal following,” Laughlin said. “If the Midwest Express brand were to come back to the market delivering against the same expectations that were created by the old brand, I think it would be welcomed with open arms. People loved that airline.”
Just to get off the ground, though, a new airline needs more than love and a great brand. It needs money — lots of it.
“Boeing generally recommends airline startups have roughly $5 million to obtain an airline operating certificate (from the federal government, which can take years) and $100 million or more in investor capital to move from the startup phase to full commercial operation,” Tom Kim, a Boeing spokesman, said in an email.
The Chicago-based aerospace company has a division called Startup Boeing that offers guidance to startup airlines.
Competition, fuel prices, government regulation, politics and the weather are all things that airlines can’t control. And all those things could potentially wreck an airline’s financial performance.
Consider fuel. Back in the summer of 2008, the price for a barrel of crude oil hit $145. On Friday, the price closed at just under $49 a barrel. Such extreme volatility adds to uncertainty surrounding any airline, let alone a startup.
The attempt to revive the Midwest Express brand, though, has some expertise behind it, suggested Barry Bateman, retired director of Mitchell International Airport in Milwaukee, who now operates an airport consulting business.
“Greg (Aretakis) is a smart man and knows his way around the industry,” Bateman said. “He’s coming in eyes wide open. It’s not like he’s naïve about this stuff, because he’s not.”
There are skeptics, though, and not just because startup costs and risks would be so high. A business model like that of the old Midwest Express, which assumes fliers would be willing to pay more for a higher level of service, might need to be re-thought in today’s travel environment, said Peter Belobaba, director of the Global Airline Industry Program at the Massachusetts Institute of Technology.
“Over and over and over again, people say they’d be willing to pay more for more leg room ... they’d be willing to pay more for better service, and over and over and over again, it has been shown that they are lying,” Belobaba said.
With the advent of the internet and the price transparency that it has provided, “People will buy a $10 cheaper option and incur, easily, $100 of pain for that cheaper option,” Belobaba said.
Bateman said he saw that type of consumer behavior during his time as airport director.
“I can’t tell you how many times people would say, ‘Barry, I love Midwest Airlines. I just love them. But Delta was 60 bucks cheaper, so I flew them,’” Bateman said.
The major airlines today are well aware that price is driving consumer choices, Emerson said.
“The big players have become very sophisticated and aggressive about matching all prices in the market,” he said. “When United is matching Spirit and Frontier head up, you know they are going to match anybody.”
That means any new version of Midwest Express would need to come to the market with a business plan that keeps costs to a minimum.
“When a new competitor comes in, you can expect that their fares are going to be heavily matched by the existing players and if that new competitor comes in with much higher costs, it becomes a very difficult equation,” Emerson said.
“As much as your customers might love your service, it’s proved a difficult sell to get people to pay higher prices.”
Regardless, he and others said it’s impossible to dismiss the effort to bring back Midwest.
“The thing that would be in somebody’s favor is, the U.S. airline business is in the best shape it’s been since deregulation,” in the early 1980s, Emerson said. “Airlines are making more money and are more successful than they have been post-deregulation.
“You could point to that and say the market is very healthy and would have space for another competitor.”