Originally Posted by REVBedford
Weekly Letter from Bryan Bedford
For the week ended 1-15-10
Good afternoon. We are all watching the tragedy of the Haitian earthquake and the difficult relief
effort with much concern. The devastation in Haiti and the impact on an already impoverished
community is beyond heartbreaking. I have received hundreds of emails from concerned
employees who want to do something tangible to help in the “on the ground” relief effort. We
share your concern and, like with Katrina, we want to help. Wayne Heller our COO has been
working with several agencies to help transport doctors, nurses, equipment and supplies to Haiti
on our aircraft; however, we are encountering numerous obstacles to our operation of relief
flights. Nonetheless, he and his team continue to work toward launching our first relief flight this
weekend. Given the airport infrastructure problems, lack of aviation fuel and chronic airport
closings due to capacity limitations, it is almost impossible to “schedule” something like this, but
again we are engaged and working on tangible ways we can offer our support for the people in
Haiti. Meanwhile, please pray for the families who have lost loved ones and have been made
homeless from this disaster. I will be in touch with you to share our progress on our relief efforts
and other ways we may be able to contribute to the welfare of the people of Haiti.
In another shake up closer to home, Sean Menke, our EVP and CMO, has tendered his
resignation effective at the end of March. I am sure our co-workers in Denver are saddened and
disappointed by this development and I personally share that disappointment. I understand and
respect Sean’s decision and wish him well in whatever endeavors he decides to pursue in the
future. However, we have a serious amount of hard work ahead of us to execute the transition
program and we have 11,000 co-workers depending on us to deliver results. So in spite of our
collective disappointment, we need to remain fully focused and committed to the difficult work at
hand to move forward on the integration project and support our employees in the field so they
can continue to take great care of our passengers.
Sean’s departure undoubtedly raises questions and concerns for our Frontier employees. I wish
we didn’t have to take on this distraction at this critical point in the integration process; however, I
can assure you Republic is just as committed to this undertaking today as we were in September
when we won the Frontier bankruptcy auction. Our vision for the integration and development of
the branded business has not waivered. Our belief that we have great people, great products
and great opportunities to develop the branded business beyond Denver and Milwaukee has not
diminished. However, before we can move forward with the exciting work of extending the brand
into new territories, we have to work through the very difficult tasks of combining the leadership
teams, the technology and the brands.
As for the leadership team; there’s no getting around it, Sean’s unexpected departure throws
some doubt into the management team. As Winston Churchill said “Belief is power and doubt
cramps energy.” Sean’s departure creates doubt but we are going to have to “dig deep” and
move past this. Walking around the corporate offices in Denver, it is becoming clear that we have
some “trust issues” between the Frontier management team and the Republic management team.
Frankly I’m a little disturbed by this. During the bankruptcy process, we worked very closely with
Sean and Ted to define the combination synergies (also known as the elimination of redundant
overhead functions) we could expect to obtain were we the successful bidder for Frontier. It was
never a secret we intended to reduce duplicative administrative overhead functions and that
those functions would be consolidated in Indianapolis. And it should go without saying that the
final outcome of the integration program with Republic will be vastly superior for preservation of
Frontier jobs in Denver (and everywhere else for that matter) than the alternative Southwest was
offering.
While in Denver this week, I’ve heard some conversations along the line that “Frontier was
profitable before these guys bought us why does anything have to change?” Yes Frontier was
profitable in 2009 when the price of oil was under $60. At $80 oil, Frontier’s cost of fuel will be
$100 million higher, and despite what we might wish, the fares in Denver (and Milwaukee) are
just not going up. Whether you trust me or not, I can assure you we need all the synergies we
jointly defined before the merger and then some to offset the increased cost of fuel.
The good news is we are getting the synergies we identified and we do think there is more benefit
to be created as we complete the integration process. I am sincerely sorry for the burden our
consolidation of back office functions and heavy check maintenance is causing for our people in
the Denver corporate offices and on the maintenance heavy check line. We are doing our very
best to ease the transition burden but there is no way to offset the emotions people feel when
given a choice between moving to another city or finding another job in Denver. I do understand
that, but our employees out on the line still need to be supported and that means as long as you
work here I really need (and expect) you to give them your very best effort. We all have an
obligation to support our co-workers and our customers.
As for the vision, this has not changed. Two years ago we saw a future where there would be
legacy carrier consolidation and elimination of marginal hubs. This is still a work in progress, but
we’ve seen US Airways eliminate PIT and LAS as a hub. Delta and US Airways have a
transaction pending Department of Justice approval to swap LGA for DCA slots so they can
consolidate their presence in those markets. We see American Airlines close their hubs at STL
and RDU and reduce the scope of their BOS operations in order to build up their fortress hubs in
DFW, ORD, MIA, JFK and LAX. We hear a lot of chatter about a possible merger of United and
Continental and what would be the domestic ramifications of that merger? Finally, we are only
now starting to see Delta fine-tuning its network after the merger with Northwest: what will fall out
of that integration? My point being there will be opportunities to extend our wings if, at the end of
our own integration process, we have a highly reliable, cost efficient operating platform with a
good customer service value proposition to offer. I sincerely believe that we have a unique
opportunity to fuse the best product attributes of both Midwest and Frontier into a combined
carrier that is even more relevant to our customers' travel requirements than either brand was
independently before the merger. However, that all depends on how well we can all work
together to make it happen - including those who may choose not to stay with us long term but
who are on the team today.
As for the brand question, this opens a very thorny set of issues as both Midwest and Frontier
employees (and equally important their customers) are rightfully very invested in their respective
“hometown” brands. We want to respect those feelings and help coach both sides to a mutually
beneficial yet unified brand solution. I don't have all the answers today but we are doing the hard
work to get the information we need that will allow our employees and our customers to decide
the product attributes they want for the merged brand. Again a very delicate situation but we
have to address the issues, drive consensus and move forward. Technology is a major pacing
item in this process and we are depending on the east and west IT teams to work together for the
best common platform. Again there is a lot of emotion involved in making these selections, but
we need to focus on the long term opportunity and make the best decisions for the common good
of all our employees and ease of use for our customers.
What I hope is not lost in all this is our company is moving forward. New aircraft, new routes and
getting our furloughed flight crews back to work continue to build momentum. We had two very
successful service launches from OKC and OMA this morning, each with new twice weekly
service to MCO and TPA. These are the only non-stop Florida options in these communities and
this is another way to extend our brand and develop new opportunities with limited downside risk.
I’m not saying everything we try will be successful, but at least now we have the resources to
make the effort.
I’ll be on the road in Denver next week and I look forward to seeing you out in the field.
May God continue to bless you, our families and our airline.
Bryan