Flight Global has an interview with Bedford.
He seems pretty confident in his decisions and says Midwest is profitable except they have high costs, which they hope to decrease.
He talks about not delivering to the customers and hints to expansion.
I found this quote to be a pretty bold:
"Again, Midwest is not delivering on its consumer promise to be the carrier of choice because we don't fly where you want to go, because we can't afford it. Well now we can afford it."
One of the most things I find interesting in the article is that Republic owns 124 slots at DCA and LGA.
I'll have more time to look things over later, but I find it interesting that he flatly states Midwest is currently making money, although losses will probably return later this year and into January/Feburary.
“From an operating perspective Midwest is currently profitable, says Bedford. But Republic has advised the market that Midwest is likely to “go back into a loss-making situation for the fall and probably January and February, although we don’t think it is significantly loss making.” Once Midwest finalizes its restructuring in early 2010 Bedford predicts “We’re going to be profitable, strongly profitable, in the second quarter of next year and we’ll continue to be profitable thereafter.”
BlueHorseShoe2000
Aug 26, 09, 8:24 pm
There was definately some surprising and interesting information coming out of the interview with Bedford. They include:
1) Los Angeles is the second best market Midwest has. Really?!?! It's ahead of New York, Washington, or Dallas?
2) Republic plans to serve all destinations year-round (this will include swapping the A319s with E190s in the off-season. I guess this is a decent clue that routes like SEA, SFO, and RSW will be served year-round. These routes might be more viable with aircraft that seat less than 100 passengers.
3) Bedford said it's hard to be the carrier of choice when you don't serve the top 35 out of 50 local O&D markets. Midwest doesn't even serve all of the top 20 destinatinations from MKE. Sounds like more expansion is on the way.
Based on these statements, I think we'll see Midwest reinstate STL and even start MKE-SAN to better compete with AirTran and perhaps push them from the markets.
The one item that didn't surprise me was that Midwest is currently operationally profitable. As I stated earlier this year, things were not nearly as bad at Midwest as some thought. Without revealing too much, things really began to pick-up in March and have been pretty good during the summer despite the increased competition. While red ink will probably begin flowing come this September, these results will surprise many (and disappoint a few) on this board.
mke9499
Aug 26, 09, 8:45 pm
There was definately some surprising and interesting information coming out of the interview with Bedford.
The one item that didn't surprise me was that Midwest is currently operationally profitable. As I stated earlier this year, things were not nearly as bad at Midwest as some thought. Without revealing too much, things really began to pick-up in March and have been pretty good during the summer despite the increased competition. While red ink will probably begin flowing come this September, these results will surprise many (and disappoint a few) on this board.
Investors must have some confidence in Republic. Since the successful bid on Frontier, Republic stock has been steadily creeping up in value. Today, RJET and LUV (Southwest) both closed at 8.60. Until quite recently, Southwest value per share was about 25% greater than Republic.
knope2001
Aug 27, 09, 8:53 pm
3) Bedford said it's hard to be the carrier of choice when you don't serve the top 35 out of 50 local O&D markets. Midwest doesn't even serve all of the top 20 destinatinations from MKE. Sounds like more expansion is on the way.
Here are the top markets from MKE based on 2008 actual stats, with the top 50 focused upon. These stats are not perfect since some airlines seem to be missing periodically. Continental Express in particular missed some quarters, so I did some extrapolation to get a more accurate figure on Newark, Clevleand, and Houston.
Midwest currently serves 25 of the top 50 nonstop, and two more via MCI.
Number listed is total (outbound + inbound) local passengers between MKE and the destination listed per day, averaged for the entire year. Destinations in the top 50 not served nonstop by Midwest are in caps.
1 …….. 996 Orlando
2 …….. 910 Las Vegas
3 …….. 780 LaGuardia
4 …….. 761 Atlanta
5 …….. 699 Phoenix
6 …….. 497 Denver
7 …….. 488 Los Angeles
8 …….. 478 Tampa
9 …….. 454 Boston
10 …… 437 Washington National
11 …… 426 Dallas/Fort Worth
12 …… 345 BALTIMORE
13 …… 343 SAN FRANCISCO
14 …… 338 Fort Myers
15 …… 334 Newark
16 …… 318 Minneapolis
17 …… 308 Philadelphia
18 …… 280 FORT LAUDERDALE
19 …… 270 SEATTLE
20 …… 226 SAN DIEGO
21 …… 191 Kansas City
22 …… 187 CHARLOTTE
23 …… 183 Cleveland
24 …… 164 HOUSTON BUSH
25 …… 134 RALEIGH/DURHAM
26 …… 125 Nashville
27 …… 125 DETROIT
28 …… 123 SAN ANTONIO
29 …… 122 Columbus
30 …… 121 PORTLAND
31 …… 117 Pittsburgh
32 …… 116 HARTFORD
33 …… 112 ST LOUIS
34 …….. 90 JACKSONVILLE
35 …….. 89 NEW ORLEANS
36 …….. 86 SALT LAKE
37 …….. 85 Omaha
38 …….. 84 ORANGE COUNTY
39 …….. 83 ALBUQUERQUE
40 …….. 80 MEMPHIS
41 …….. 77 SACRAMENTO
42 …….. 76 MIAMI
43 …….. 73 Indianpolis
44 …….. 68 Flint
45 …….. 67 SAVANNAH
46 …….. 66 Dayton
47 …….. 64 AUSTIN
48 …….. 59 RICHOMOND
49 …….. 57 CHARLESTON
50 …….. 56 Louisville
The first ten or so have a pretty decent shot of working, but the viability starts to drop off pretty quickly after the top 10 or 15. For what it's worth, at its peak YX served 33 of these top 50 destinations, but traditionally it was about the top 25-30 or so. Markets like SEA, HOU, BWI, CLT and SFO were relatively new and/or short-lived. (Even SFO did not have nonstops for a few years.)
One potential fly in the ointment is that with Southwest taking two gates on the south hammerhead, Midwest could run out of gate space quickly as destinations are added, especially space for RJ's.
flyYX
Aug 27, 09, 9:09 pm
If Bedford's goal is to serve at least 35 of the top 50 from MKE, that's 10 more to go. If I had to rank them in likely order, it's probably this:
I think it is time for Midwest to try PDX as a seasonal route. Now DTW would really tick off Delta. I am surprised AirTran hasn't tried DTW yet.
knope2001
Aug 27, 09, 9:26 pm
I think it is time for Midwest to try PDX as a seasonal route. Now DTW would really tick off Delta. I am surprised AirTran hasn't tried DTW yet.
I'd love to see MKE-PDX myself. The Pacific NW is not usually a cheap place to fly, and PDX is worse than SEA. I've used SEA and schlepped down I-5 more than once. The 99-seat E190 brings something to Midwest they have long lacked...an aircraft that can serve the west coast nonstop that doesn't need to put 110+ people onboard to break even. Year-round service to SEA, SFO, LAX, SAN all seem reasonable and potentially profitable. For once.
I rank Detroit fairly low because (1) MKE-DTW on Delta earns YX miles, and (2) Midwest serves a decent amount of Detroit-bound traffic via FNT. For every 100 local MKE-DTW passengers, there are about 55 MKE-FNT locals. A lot of that is almost certainly headed down to Pontiac, Novi, Farmington, Troy, and farther in. So putting DTW on the Midwest map is more of an outside shot in my mind.
BlueHorseShoe2000
Aug 28, 09, 8:47 am
I'd love to see MKE-PDX myself.
I also think MKE-PDX would be a good route to try on a seasonal basis. It would be perfect with an E190. Any idea how much traffic declines during the fall/winter months?
As you've said before, MCI remains the wildcard in Republic's plans. Both Frontier and Midwest have decent operations and well known brands there so it would seem natural some expansion would occur. If that's the case, routes like PDX could be flown seasonally from MKE but still served year-round via MCI (similar to how SEA and SFO have been handled in the past).
One route I've always wondered about was ABQ. Could Midwest support year-round service with an E170?
Republic has changed its tune on expansion somewhat in recent weeks. Bedford has stated on several occassions that he plans to return the Midwest route structure back to where it was in January 2008. But if you listen to some of the new Midwest radio spots, they not only talk about restoring dropped markets but adding new ones as well. Hmmm....
It's beginning to sound like Republic wants to ramp-up MKE as quickly as possible and make things difficult for AirTran and Southwest.
BTW, thanks for pulling all of this data together knope!
Tim34
Aug 28, 09, 10:57 am
I guess that I am not willing to conclude that Midwest can make the west coast routes profitable year round. Here is why?
1) While Midwest competes well against Airtran in markets like LGA and DCA, LAX, SFO and SEA are different. Midwest really does not have a lot of loyalty on the west coast. Most of us coasters have never heard of Midwest or thought to fly them. I experienced this at LAX a couple of years ago when none of the United gate agents seemed to have heard of Midwest. While Airtran is not big on the west coast either they are a much larger airline and have more loyalty on the east coast which can help create connecting traffic.
2) Midwest has broken a lot of promises cut a lot of routes and fired a lot of employees. I am not sure that we have the evidence to suggest that customer loyalty in Milwaukee has not been effected by Midwest's actions
3) Airtran's name in Milwaukee is not as bad as it use to be. They are making inroads in the market. I am not convinced that they will back down to either Midwest or Southwest. I think that they are here to stay. I believe that they would fight for those west coast markets.
BlueHorseShoe2000
Aug 28, 09, 11:36 am
I guess that I am not willing to conclude that Midwest can make the west coast routes profitable year round. Here is why?
1) While Midwest competes well against Airtran in markets like LGA and DCA, LAX, SFO and SEA are different. Midwest really does not have a lot of loyalty on the west coast. Most of us coasters have never heard of Midwest or thought to fly them. I experienced this at LAX a couple of years ago when none of the United gate agents seemed to have heard of Midwest. While Airtran is not big on the west coast either they are a much larger airline and have more loyalty on the east coast which can help create connecting traffic.
Yet, Bryan Bedford states that LAX is Midwest's second best market.
Midwest has always been about focusing on the big O&D markets out of MKE and to a lesser extent MCI and OMA. That's where the real money is made.
2) Midwest has broken a lot of promises cut a lot of routes and fired a lot of employees. I am not sure that we have the evidence to suggest that customer loyalty in Milwaukee has not been effected by Midwest's actions
For sure, Midwest has had its share of bad PR in the last year. While some customers have turned to other airlines, there's no evidence that Midwest has lost its drawing power. In fact, Midwest has conducted numerous surveys since last fall and the Midwest brand still remains very strong.
I've said this before and will say it again: as routes are restored out of MKE, Midwest will begin recapturing much of the traffic they left on the table last fall. We've already seen this with the new flights to LAX and how good bookings have been so far.
3) Airtran's name in Milwaukee is not as bad as it use to be. They are making inroads in the market. I am not convinced that they will back down to either Midwest or Southwest. I think that they are here to stay. I believe that they would fight for those west coast markets.
I don't think anyone said AirTran has a bad name in Milwaukee.
They've done well in the Florida and Vegas markets. The West Coast routes have done well so far because AirTran had a monopoly on most routes. Then we have the other routes which really aren't doing that well and will most likely fly a lot of empty air this winter.
If Midwest becomes very aggressive in MKE with new/restored routes, frequency increases, and the proper mix of aircraft capacity they will be a force to be reckoned with. That doesn't mean there won't be a place for AirTran in MKE. However, I think the plans for having 40 to 80 flights per day might begin to evaporate.
knope2001
Aug 28, 09, 12:36 pm
I also think MKE-PDX would be a good route to try on a seasonal basis. It would be perfect with an E190. Any idea how much traffic declines during the fall/winter months?
One route I've always wondered about was ABQ. Could Midwest support year-round service with an E170?
Here are the quarter-by-quarter average daily pax to+from MKE for 2008, so show the seasonality of both:
Portland
Q1 77.4
Q2 133.7
Q3 167.0
Q4 104.4 (Q4 2008 was recession, Q4 of 2007 was 116.4)
Albuquerque
Q1 72.4
Q2 109.6
Q3 88.4
Q4 62.4 (Q4 2008 was recession, Q4 of 2007 was 79.2)
A few things to keep in mind:
(a) Not all local traffic would fly on the Midwest nonstop, of course
(b) Adding a nonstop will generate more traffic for the city pair (for multiple reasons)
(c) Midwest would carry connecting traffic as well as local traffic
(d) Having Frontier already in these cities means it's much easier and less costly to start ABQ-MKE or PDX-MKE even if just 1x/day or seasonal.
(e) Because the Frontier brand known in ABQ & PDX, that gives some added credibility to the unfamiliar parnter name Midwest
(f) Having Frontier as a partner means the city pair has more than 1 flight per day because of connecting options. So if the Midwest nonstop doesn't operate at a desirable time, or if the city is seasonal, there are still options.
So I do think that PDX can definitely support seasonal, and perhaps even year-round service, although it would be nice if the E170 could do MKE-PDX in winter. (It is well within the published range of the E170, but it may not be in the practical range, especially westbound in winter.) Even if Portland does not run 01/05 through 4/18, there are Frontier code-share flights during the down period, and that aircraft could be used to boost Florida frequencies.
ABQ is one I've thought a lot about, and it seems like a solid potential candidate for 1x/day E170. The schedule could dovetail nicely for reasonable connections to MSN, LGA, BOS, GRR, GRB, etc.
Lv MKE 8:55am
Ar ABQ 11:00am
Lv ABQ 11:40am
Ar MKE 3:25pm
Of course there are desitnations much higher on the list than Albuquerque. But for the first time I think there's a reasonable shot this would work if they choose to do it. The E170 is small enough, efficient enough, comfortable enough, and long-ranged enough to make MKE-ABQ workable. And the presence of Frontier in the market offers cost-effective ground handling and a certain amount of credibility to Midwest. I won't exactly bet the farm on MKE-ABQ happening, but it really isn't out of the question, either.
As you've said before, MCI remains the wildcard in Republic's plans. Both Frontier and Midwest have decent operations and well known brands there so it would seem natural some expansion would occur. If that's the case, routes like PDX could be flown seasonally from MKE but still served year-round via MCI (similar to how SEA and SFO have been handled in the past).
MCI really is a unknown. Combining YX with F9 (which flies the very important DEN market out of MCI) does bring them back up to #3 in the market, behind WN and DL, without any expansion. Routes to the east are too important and too profitable (so it would seem) for any notion of just letting MCI waste away. I do think MKE is job 1 for Republic, but it would surprise me to see nothing new out of MCI. As MKE gets their own nonstops to SFO and SEA, perhaps PDX and/or ABQ could be on tap. I'm very curious to see if they bring back any of the RJ markets and planned RJ markets at Kansas City such as Pittsburgh, New Orleans, Jacksonville, San Antonio, etc. And while we're thinking of MCI as a bridge west for YX, it could be a bridge east from DEN to places like JAX, RDU, and MSY, plus the east coast.
Republic has changed its tune on expansion somewhat in recent weeks. Bedford has stated on several occassions that he plans to return the Midwest route structure back to where it was in January 2008. But if you listen to some of the new Midwest radio spots, they not only talk about restoring dropped markets but adding new ones as well. Hmmm....
If I were a betting man I'd go with SAN all the way. Not new to Midwest, and technically they did have some occasional nonstops back in the mid-90's for tehcnical schedule reasons (MKE-SAN-LAX-MKE for example). But MKE-SAN would probably be called "new".
Tim34
Aug 28, 09, 1:44 pm
We will see Blue. I think that times are changing in MKE. MKE is becoming a very competitive market. I think that Airtran is hell bent on developing a secondary hub in MKE and they may be well on their way to doing it. Their is room in the Milwaukee market for two airlines to have a major presence. With Southwest entering the market as well things could get interesting. Bottom line I do not see Airtran giving up on it's MKE west coast routes. Those are money for them. Airtran needs to have more west coast flights anyway. Using MKE as an east west hub makes since for them. While southwest is starting with only 12 flights a day who is to say that they don't jump into the MKE-SEA, SAN , OAK market as well. They have opportunities for connections on the west coast. That is something that both Midwest and Airtran lack. The days of Midwest dominance in MKE are numbered. Other carriers smell blood. That is why Airtran and Southwest have been so aggressive.
As for PDX, SAN and ABQ Those sound like great markets for MCI but not for MKE. SAN does well in the summer as Airtran knows but it is probably dead in the winter. ABQ is a very small market for MKE. That is like saying lets add ANC. It does not make since. Same with PDX. I would just feed people through Denver on Frontier.
On a side note:
TPG like Republic made a lot of promises about what they were going to do with Midwest and they fell through. Midwest's track rec is subject to say the least. Airtran made a lot of promises and they have for the most part delivered on them. Airtran has also been a good corp citizen. They have donated to local charities and created jobs. When was the last time Midwest added a significant number of jobs in MKE? All Midwest has done in the past year is outsource jobs. They also have terrible relations with their unions. Midwest is an airline in "paint job" only. Their is nothing left. How often do you hear a flight attendant state this flight is operated by a "Milwaukee based flight crew" anymore.
Rant over
BlueHorseShoe2000
Aug 28, 09, 2:22 pm
Bottom line I do not see Airtran giving up on it's MKE west coast routes. Those are money for them. Airtran needs to have more west coast flights anyway. Using MKE as an east west hub makes since for them.
How do you know the West Coast routes "are money" for AirTran? I've seen quarter-by-quarter statistics for the AirTran routes since Q1 2008 and SEA, SFO, LAX, and SAN are some of their worst performers from a revenue and yield standpoint. If you rank all of AirTran's routes by profitability, these four stations are at or near the bottom.
Given that this is the first year that AirTran plans on offering these routes year round, I'm not sure we can conclude they will be successful.
As for PDX, SAN and ABQ Those sound like great markets for MCI but not for MKE.
SAN could definately work from MKE year-round, especially with the use of an efficient 99 seat aircraft during the low season. PDX and ABQ are also markets with some potential from MKE based on traffic and yields. I'm not saying these two routes are at the top of the list...or even on the list...for Republic but they could be possible additions at some point. Midwest management in the past has talked about adding SEA and PDX to the route network. Even though Midwest never had a chance to start PDX, they must have thought the route had some profit potential.
On a side note:
TPG like Republic made a lot of promises about what they were going to do with Midwest and they fell through.
Actually, TPG never made any promises about what they would do with Midwest.
What's done is done. I'm more interested in seeing what Republic plans on doing with Midwest and Frontier than rehashing events from the last two years.
knope2001
Aug 28, 09, 4:58 pm
I think that times are changing in MKE. MKE is becoming a very competitive market. I think that Airtran is hell bent on developing a secondary hub in MKE and they may be well on their way to doing it. Their is room in the Milwaukee market for two airlines to have a major presence.
By no means do I think that AirTran is destined to leave Milwaukee. However it seems pretty apparent that their aspiration was to replace a dead Midwest, and now they will face something quite different.
Midwest has a couple things going for them in the drive west:
(a) Midwest has an excellent, aggressive corporate sales team (including being nationally recognized in surveys versus the big boys), and their concentration of corporate contracts in Milwaukee far exceeds other airlines.
(b) Midwest has a great deal of regional feed in addition to feed from longer, more competitive markets. AirTran does maintain its east-west bank in MKE, but most markets like BOS-SFO, PIT-LAX, BWI-LAS, etc, have nonstop flights and a multitude of connecting options on other carriers. So price discounting is the name of the game. Midwest has similar issues with markets like BOS-SFO, but they also can serve traffic in markets like MSN-SFO and ATW-LAX where there are not nonstop flights on other airlines, there are fewer competitors and fares don't tend to bottom out as low.
(c) AirTran's only aircraft that can fly nonstop to the west coast from MKE is the 137-seat 737. That's some 38% more seats to fill than the E190. The E190 works with a lot fewer passengers, which could make a big different during slower periods or when multiple competitors chase the same traffic.
With Southwest entering the market as well things could get interesting.
This is only anecdotal evidence, but I know of people who have flown AirTran in the past who are instead waiting for Southwest to open their booking window so they can fly WN and save the bag and seat assignment fee. (No seat assignment on WN, but as long as you check in early online you can be in the first group.) It will be interesting to see what WN’s presence will do in Milwaukee for everyone.
As for PDX, SAN and ABQ Those sound like great markets for MCI but not for MKE. SAN does well in the summer as Airtran knows but it is probably dead in the winter. ABQ is a very small market for MKE. That is like saying lets add ANC. It does not make since. Same with PDX. I would just feed people through Denver on Frontier.
Why do you think SAN is dead in winter? Because AirTran doesn’t fly it in winter, then it must be dead?
Actually, MKE-SAN is some 10% bigger than MKE-SEA during the 4th and 1st quarters.
Yet AirTran plans MKE-SEA nonstop this winter, but MKE-SAN ends for the season in just over a week.
As for MKE-ABQ, it’s a lot bigger than MKE-IND. Still not in my top 10 ranking of possible market additions, however.
BlueHorseShoe2000
Aug 28, 09, 5:56 pm
This is only anecdotal evidence, but I know of people who have flown AirTran in the past who are instead waiting for Southwest to open their booking window so they can fly WN and save the bag and seat assignment fee. (No seat assignment on WN, but as long as you check in early online you can be in the first group.) It will be interesting to see what WN’s presence will do in Milwaukee for everyone.
I'd like to see Midwest drop the fee for checked baggage. It would certainly make AirTran less competitive in MKE. Unfortunately, this has become a nice ancilliary revenue stream for Midwest and I doubt they'd want to leave that cash on the table.
flyYX
Aug 28, 09, 6:30 pm
I'd like to see Midwest drop the fee for checked baggage. It would certainly make AirTran less competitive in MKE. Unfortunately, this has become a nice ancilliary revenue stream for Midwest and I doubt they'd want to leave that cash on the table.
Maybe they could lower the cost of the 1st and 2nd bag fee to compete with other airlines? I think Bryan and Sean should seriously consider it.
newsmanhoss
Aug 28, 09, 8:21 pm
(a) Midwest has an excellent, aggressive corporate sales team (including being nationally recognized in surveys versus the big boys), and their concentration of corporate contracts in Milwaukee far exceeds other airlines.
This has come up a couple times before. I'm not questioning you, but I haven't really seen any hard data on this.
As contracts come up for renewal, I wonder how many Milwaukee companies consider giving some of their business to FL. In the recent economic climate, I would think companies are looking to save on travel costs any where they can. There's nothing stopping them from having contracts with more than one airline, particularly if they can pit more than one airline against each other during the negotiating process (I assume these are negotiated for larger contracts). Knope, you may have some more knowledge on this, so reel me back in if I'm getting too far out there.
Because, as you say, there is a large concentration of contracts in Milwaukee, I wonder if FL is eyeing those and pursuing them as aggressively as YX does. Perhaps AirTran can undercut what Midwest is doing? Or is Midwest already giving big discounts on corporate travel? But if the discounts are too big, then their yields might become too depressed to the point where it isn't worth it.
Just curious to get people's thoughts on this.
newsmanhoss
Aug 28, 09, 8:56 pm
Maybe they could lower the cost of the 1st and 2nd bag fee to compete with other airlines? I think Bryan and Sean should seriously consider it.
Absolutely, especially with Southwest coming in to MKE.
Having said that, it's always funny how people will spend many hours on the internet to save just a few dollars on airfare, but don't blink an eye when it comes to dropping money on bag fees, food/drink at the airport, etc. They should really factor in the bag fees when booking a flight. Southwest could potentially have higher fares from time to time, but still be less than the competition when all factors are considered, especially for travelers checking a bag or two.
knope2001
Aug 30, 09, 10:55 am
As contracts come up for renewal, I wonder how many Milwaukee companies consider giving some of their business to FL. In the recent economic climate, I would think companies are looking to save on travel costs any where they can.
Indeed they are. The notion of an AirTran corporate contract offering extra savings would make sense if they had lower fares than that of nonstop competitors. But because airlines match AirTran fares, that advantage does not exist when it comes to negotiating corporate contracts. I am not finding the quote online which I’m recalling, but I’m quite sure a couple years back in a trade journal an AirTran spokesperson stated that they are not aggressive with corporate contracts because their low fares were better than a corporate contract. That sounds nice, but when the competition matches your fares, the lack of a corporate contract is a disadvantage.
Corporate contracts usually involve added discounts or (what are essentially) kickbacks for meeting certain sales volumes. One could say that if AirTran gets $104 for MKE-MSP, and Midwest gets $104 for MKE-MSP *and* gives a kickback, then the corporate contracts cost Midwest money. Two things about that.
--First, if the passenger flies Midwest and not AirTran, it’s not Midwest getting $98 and AirTran getting $104, it’s Midwest getting $98 and AirTran getting $0.
--Second, because Midwest has a corporate contract, they get more business in many other markets where fares may be higher. Midwest has an advantage on MKE-CLE, for example over Continental if there's no CO contract. When all of AirTran’s fares are “so low we don’t need a corporate contract”, then there are no higher-fare markets elsewhere to gain an offsetting benefit.
There's nothing stopping them from having contracts with more than one airline, particularly if they can pit more than one airline against each other during the negotiating process (I assume these are negotiated for larger contracts).
Most companies do have corporate contracts with several carriers. And when I occasionally hear who Midwest has contracts with, I’m surprised because not all of them have significant MKE or MCI operations. My company has agreements with most major airlines, and with the recent bid we added American, for years one we have not had. However a conspicuous no-show is once again AirTran. What makes this even more surprising is that we have a large staff in Atlanta (more than in MKE), part from a fairly recent acquisition of a high-profile company in Atlanta. Yet no AirTran.
Because, as you say, there is a large concentration of contracts in Milwaukee, I wonder if FL is eyeing those and pursuing them as aggressively as YX does. Perhaps AirTran can undercut what Midwest is doing? Or is Midwest already giving big discounts on corporate travel? But if the discounts are too big, then their yields might become too depressed to the point where it isn't worth it.
I do wonder if AirTran will be more aggressive with this, but like I said I was surprised that our recent rebid still did not include them. I do think they have a tough row to hoe if they don’t. Speaking from personal experience (for what it’s worth) the online travel tool my Fortune-500 company requires us to use does not even display AirTran as an option if competitors with corporate contracts match their fares. And if we deviate from using corporate carriers, even if the fare difference is up to $100, we have to explain the reasoning in a log which is audited.
newsmanhoss
Aug 30, 09, 8:50 pm
Thanks for the info, Knope. Who knows...perhaps AirTran doesn't bother with trying to sell contracts at all. Maybe this is their strategy instead?
AirTran’s A2B program does seem to be their answer to corporate contracts. With a minimum requirement to spend at least $50,000 annually on AirTran, companies have to be relatively large to hit that target. With AirTran’s average fare of $86.49, that’s about 11 tickets per week, on average, all year long.
So what does the program offer?
With A2B, you'll have the advantage of AirTran Airways' already low business fares
In other words, regular AirTran fares.
And you'll also benefit from fewer rules and restrictions, including no Saturday night stay or roundtrip purchase required.
In other words, normal AirTran fare rules. No added benefit from the program.
So what are the benefits? They are mostly things which a premium-level frequent flyer already gets at many airlines:
(a) Free upgrades to business class, but only from full coach (Y or B class). (Don’t A+ elite members get this from *any* fare class?)
(b) No-cost ticket changes or refunds, but only from high-tier coach fares.
(c) First bag fee waived (which most airlines offer their elite flyers)
(d) Free seat assignment (which most airlines don’t charge for)
(e) Priority boarding (which most airlines offer elite flyers)
(f) No fee for standby travel (still free at some airlines, and free for premium FF at some other airlines)
(g) No charge for name changes
To hit the $50,000 in annual travel, the frequent travelers at the company already become A+ elite members anyway by virtue of their flying.
So it boils down to this:
--No reduction in fares, and no kickbacks
--Perks are mostly like everyone gives elite flyers
It’s not clear if this is all AirTran offers to business clients or if there’s something else. But for what it's worth, Midwest has a small business program which accrues points for awards. It's aimed at companies generally too small for conventional corporate contracts. That program has a minimum threshold of $10,000 YX spending per year, and is only applicable up to $100,000 in annual YX spending. For clients upward of $100k, Midwest wants to be in there offering something more customized. So for AirTran’s program to start at $50k+ suggests this is aimed at sizable clients. I don't think the program says "small business" anywhere.
Corporate travel contracts are not only about getting the lowest cost. Low, competitive costs are expected, and that's because of price matching. It's more about "if I throw my business your way, what's it worth to you". The A2B program doesn't really go that direction.
knope2001
Aug 31, 09, 10:06 am
it's always funny how people will spend many hours on the internet to save just a few dollars on airfare, but don't blink an eye when it comes to dropping money on bag fees, food/drink at the airport, etc. They should really factor in the bag fees when booking a flight. Southwest could potentially have higher fares from time to time, but still be less than the competition when all factors are considered, especially for travelers checking a bag or two.
I'd like to see the bag fee go as well, but it seems the way of the world to get all the incremental, unbundled revenue possible while given the customer a base fee that seems really low. The example which is most apparent to me on how important these fees have become is AirTran's profit last quarter. Q2 is generally their strongest quarter, and they had great results. But when you factor out the one-time items (which still left them with a nice profit) the large majority of that profit came from "other" revenue. And that "other" revenue is primarily bag fees, change fees, seat assignment fees, and the like.
It would not surprise me if Southwest finds additional ways to add these sorts of fees rather than things going the other direction (meaning other airlines droping their bag fees).