traveller001

Rhinelander will be gone once Great Lakes gets a codeshare with Delta at MSP.

What I didn't get was F9 bailing out of the EAS at IWD with just a hope they could get out of RHI.. I'm guessing that EAS paid a good deal of the costs to/from RHI as well. Now they're stuck at RHI without the EAS at IWD.

knope2001

Actually, they are getting EAS subsidy to remain in Rhinelander until Great Lakes starts.

A huge swath of smaller communities are protected from losing air service under the EAS program. Many of them have (like Wausau, or Moline, for example) have ample unsubsidized service.

EAS only kicks in subsidy if nobody is willing to give those protected communities adequate unsubsidized service.

There are two ways an airline can get EAS subsidy:

(a) If nobody is willing to fly to an EAS-protected community without subsidy, the DoT opens up a community for bids. The winning bidder is locked in a two-year conract. If someone else is awarded the contract after your term is up, you're required to continue to fly there until the new airline starts.

(b) If you're the last airline in a community and you're not willing to continue to fly there without subsidy, the DoT won't let you leave until someone else comes in to offer minimally adequate service.

F9* was in Manistee and Ironwood under scenario "a". Normally they would hvae been stuck in IWD and MBL until a replacement airline came in, but the contract they bid included a six-month exit clause, where they could leave with six months notice no matter what. That's fairly common these days when an airline bids EAS with larger aircraft in hopes of stimulating the market, making it a little more us-it-or-lose-it thing.

F9* is stuck in Rhinelander because they are the last airline there, scenario "b". They are forced to stay until a replacement starts. DL* faces similar issues in places like Alpena MI right now. They would probably prefer to get out ASAP but cannot.

There's a slight difference in the subsidy, too.

When you're in scenario "a", you bid for a certain subsidy amount and agree to fly for that amount no matter how good or bad you do. Manistee did great last summer, and Ironwood did so-so. But once MKE got scaled back, IWD and MBL boardings plummeted because there were far fewer convenient, well-priced, single airline flights available. The subsidy they agreed to almost certainly fell far short of covering their losses. And so they filed to drop IWD and MBL in September, and ceased served six months later per their contract.

In this scenario it's very easy for an EAS airline to lose money on their subsidized routes. You're locked in to the subsidy you said you needed to cover your losses and keep a 5% profit. If costs are higher than you expected (like fuel skyrockets) or your revenue are lower than projected, you can still lose money.

When you're in scenario "b", as soon as you flie that you want out, you are eligible for subisidy until you can be replaced. In this case, you don't have to estimate your subsidy requirement going forward and hope you make out okay. Instead you show the DoT what your losses were for the time you were stuck there, and subsidy is based on that. It's not a cash cow, and the DoT won't just give you a blank check. But you've got a better shot at covering your actual losses because it's based on your actual results, rather than your projection for the next two years.

I'm sure they will turn the lights out for F9* the day Great Lakes starts RHI. But they will get (roughly) paid for their lactual losses. In MBL and IWD they were getting paid based on their projected loss, but because revenue was falling far short of their projections as MKE was wound down, they lost a lot more than their subsidy covered. So they pulled out as soon as they were contractually allowed.

traveller001

Thanks for the explanation.. Their EAS projected losses were based on MKE-RHI-IWN with IWD being the loser. But if they chose to stay in IWD and bailed on RHI with lower projected loss (since IWD would be covering some of it) the EAS for RHI would be less. And they'd be stuck for at least 6mos with all those connections they knew were to be collapsing?

Thinking chasing subsidies with a shrinking route map is a house of cards.

IllinoisMan

Maybe for ORD, but it only takes 15 minutes to get from the Loop to MDW on the Orange line.

jpetekYXMD80

No chance. First you'd have to walk from Union station to Quincy, and then the ride takes 35 minutes from there. Who wants to fly from MKE when you can embark on those 3 hour nightmare odysseys? How about.. anyone?

Wisconsin

Off topic I know, but I was always under the impression that the MKE Amtrak station was built to encourage northern Illinois folks to fly out of MKE, boarding at Glenview or Sturtevant even. Theoretically you could take the train south to fly out of a Chicago area airport, but it would be rough, especially with several pieces of luggage! It's a hike of several long city blocks from Union Station to the El.

MikeFromMKE

That was the intent, and in fact I've used it in the past after spending an evening in Chicago to catch a plane the next day. It is really convenient for getting to MKE and made a lot of sense when there were 2 airlines hubbing here. It's too bad there isn't an easy stop on the line at ORD.

Daze

With the ERJs being parked, what aircraft will F9 use to serve RHI? Will one E135 stay on to serve this route?

knope2001

The E135 are out fo the picture and might be of property by this point. This will still be an E145 route until they are allowed to discontinue it.

MikeFromMKE

Interesting that they are going to ferry it to MKE just to serve it...

traveller001

Which if they actually have to ferry it would indicate to me RHI is going to fall off sooner than later. Otherwise they could have kept another city or two even at one flight per day.

And they still haven't loaded the revised schedule...

MikeFromMKE

The plan is to drop it as soon as Great Lakes takes over. However, it is telling that they won't even offer seats on something to MKE and instead will report it as a loss to the FAA as part of the flight and hope to get compensated.

hazelrah

In the EAS bidding process, an airline will project its costs and will project a break-even load factor and a subsidy # for a profit. It could be 44% load factor, it could be 66%, etc. Based on those projected costs, if they board more than the break-even load factor they make money, lower they lose, so even with subsidy there is risk (fuel cost, for instance, boardings,etc.).

IWD-RHI-MKE is somewhat complicated as initially RHI was not EAS as Frontier included a stop in RHI in its bid as a part of a traditional service pattern. When Delta bailed on RHI as they have done to so many small cities, Frontier became the sole service provider. As a point of interest, when the situation arises of a sole air service provider and they notify the DoT of intent to discontinue service, the DoT basically orders the airline to continue providing service until a replacement can be found.

I believe that Great Lakes intends to provide service to MSP from RHI as a part of its bid.

mke9499

From the Business Journal:

http://www.bizjournals.com/milwaukee...flip-flop.html

http://www.bizjournals.com/milwaukee...-does-180.html

http://assets.bizjournals.com/milwau...t_flat.jpg?v=1

hazelrah

Viola, MKE is dehubbed.