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A Little Turbulence
General Mitchell International Airport was taking off for new heights. So how did it end up in a holding pattern, and where will an unorthodox downsizing plan leave Milwaukee travelers?

Photos by Adam Ryan Morris

In a spacious maintenance hangar at General Mitchell International Airport in early spring 2010, a top executive of Frontier Airlines’ parent company spoke reassuringly to a large audience of nervous local dignitaries and airline employees. Gathered with a swarm of media, they were learning of the carrier’s plans to grow its service in Milwaukee.

Frontier was about to absorb Midwest Airlines, Milwaukee’s iconic hometown carrier, which once enjoyed a market share in excess of 50 percent. It was beloved among travelers during its heyday for wide, leather seats and a host of free amenities, including wine, champagne, gourmet meals and baked-on-board chocolate chip cookies.

The merger would create a bigger and stronger airline, claimed Bryan Bedford, CEO of parent company Republic Airways Holdings. It would also provide an immense opportunity for sustainable and profitable growth in Milwaukee. He pledged to shift 800 jobs to the Milwaukee area, an effort to grow Frontier’s local hub operations as well as the Republic presence. (Republic had its own airline brand, based in Indianapolis, before buying Frontier and Midwest in separate 2009 deals.) Frontier even went so far as to decorate one of its jets with the image of a badger dubbed “Buddy,” a Wisconsin-themed addition to its group of “spokesanimals” – characters that adorn planes and star in ad campaigns. It was a sign of Frontier’s purported commitment to the Milwaukee market.

But the plan went awry. In less than two years, Frontier would go from being Mitchell’s busiest airline to holding just a tiny presence in the market.

Shortly before Frontier and Midwest began the process of merging in 2010, Southwest Airlines, the country’s largest discount airline, made a long-awaited arrival in Milwaukee. Add into the competitive mix AirTran Airways, which earlier failed in a hostile takeover attempt of Midwest but quickly grew on its own to take over the top market share at Mitchell. And don’t forget Delta Air Lines, which had purchased market stalwart Northwest Airlines. Business at Mitchell took off, and in short order, it became one of the most competitive airports in the United States.

The battle to attract passengers in the face of intense rivalries led to deeply discounted airfares, and the low prices boosted Mitchell’s  passenger counts to unprecedented heights.

“We had two heady years,” says Barry Bateman, the airport’s director.

But the record-breaking run turned out to be something of a fluke. The forces that created it had never been seen in the Milwaukee market, and they’re unlikely to be seen again for a long time, if ever. A key component of this perfect storm: two airlines – Frontier and AirTran – operating hubs in Milwaukee, a highly unusual circumstance for a market this size.

“We’re not a large market, but there we were with two hubbing airlines,” Bateman says. “We had these two airlines flying to the same cities, sometimes wingtip to wingtip, competing mightily. Then Southwest entered the market and added to the competition. Inside the industry, we all realized that this could not be sustained.”

 

Hear more about Mitchell Airport on WUWM’s “Lake Effect” Feb. 11 at 10 a.m.
To be exact, Mitchell recorded 21 consecutive months of record-breaking passenger traffic. The streak ended in June 2011, and turbulence from changes in Mitchell’s competitive situation started taking hold. Five months later, Mitchell’s passenger counts began a rapid descent as Frontier reneged on promises for the Milwaukee market. Claiming it could no longer afford to fly the smaller regional jets that served many of the routes from Mitchell, Frontier shifted focus to its original Denver hub and began making dramatic service cuts in Milwaukee. Frontier’s daily Mitchell departures dipped from 91 in October 2010 to about 70 one year later, then down to a mere seven by the latter part of 2012. Frontier’s market share at Mitchell, which once stood well above 30 percent, fell to about 6 percent by early fall 2012.

The decline in Mitchell’s passenger traffic, mainly as a result of Frontier’s cuts, is glaring. In the first nine months of 2012, about 5.87 million passengers used the airport, compared with 7.41 million and 7.45 million for the same periods, respectively, in 2011 and 2010.

Competition at Mitchell softened further when Southwest bought AirTran for $1.4 billion. The deal was announced in September 2010 and closed in May 2011. That merger began to take off just as Frontier implemented its cuts. And Frontier’s fate was sealed.

“Here’s a very well-capitalized, dominant, nationwide, large-market airline competing against a very undercapitalized, very small nationwide airline that was struggling,” Bateman says. “It’s not rocket science. Somebody was going to cry uncle. Frontier had to make that decision. This was going to be tough to begin with, but when Southwest and AirTran began merging, that was really a game-changer.”

Frontier’s last hope was that prices would climb in the aftermath of the merger.

“AirTran had low fares, and they were actually lower than Southwest,” Bateman says. “Frontier was thinking that there’d be some fare rationalization, and that all ships would rise with the tide, and things would be OK. It didn’t happen. Frontier couldn’t make a profit against those fares, so they decided to put all their eggs in the Denver basket. That’s the way it goes. They didn’t dupe us. Competition has a way of doing things.”

Republic was eligible to earn up to $27 million in income and payroll tax credits as well as other incentives from Wisconsin, but only if it had met the job and workplace investment goals it laid out for the Milwaukee area. The airline initially brought new jobs to the region, including some call-center employees, but never came close to meeting its pledge.

Soon after Frontier’s cuts, Concourse D at Mitchell became a virtual ghost town. Most of Frontier’s check-in counters at the airport went dark, and restaurants and concession stand operators in the concourse experienced a crushing dip in business.

“We were bucking a trend for a while,” Brian Taffora said two months before leaving his post as director of economic development for Milwaukee County, which runs the airport. “And now, it has caught up to us.”

Still, despite cuts in service and the corresponding decrease in passenger traffic, Bateman insists that Mitchell remains a healthy, competitive airport, particularly when compared with other similar-sized airports. Service is often nonstop, prices are competitive, and plans are developing to improve Mitchell’s competitive outlook. Or at least the way it’s perceived by travelers.

For starters, Bateman says, 68 percent of passengers who board flights at Mitchell still reach their destinations via nonstop service. “Most people aren’t going to Keokuk. They are going to Los Angeles, Boston and Seattle. Most people can get on direct flights. But can you get to your plant in Bentonville, Ark.? No, not without a connection.”

Direct flights are an essential part of appeasing business travelers and bolstering economic development initiatives, Bateman says. So he’s fielded more complaints from travelers who can no longer reach smaller markets via direct flights. “I am hearing from businesspeople saying, ‘I can’t get to Akron anymore, I can’t get to Columbus anymore,’” he concedes.

It’s no surprise the local business community has voiced some of the loudest concerns about the changes. “Clearly, there has been a reduction in the quality of air service for Milwaukee,” says Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce. “Time is money to the business flyer. They will have to adjust to the realities of air service.”

But prices remain a bright side of that reality, according to the most recent figures from the U.S. Department of Transportation’s Bureau of Labor Statistics. Mitchell’s average airfare is $57 lower than the national average and $65 lower than Chicago O’Hare International Airport. Mitchell has the 16th-cheapest average airfare ($328) among the country’s top 100 airports, but that figure represents a 6.1 percent
increase from the previous year. Cincinnati/Northern Kentucky International Airport has the most expensive average airfare ($535), while Atlantic City International Airport has the cheapest ($166).

“We’re still much cheaper and much more efficient than O’Hare,” says Milwaukee County Executive Chris Abele. “I don’t think that will change anytime in the near future.”

The reduction in Mitchell’s number of direct flights hasn’t altered a long-standing marketing effort to attract more travelers from northern Illinois. Abele says that’s a key component of the airport’s future health.

“In 2009 and 2010, when we had such fabulous growth,” Bateman says, “we generated enough trial from travelers from Lake County, McHenry County and Rockford that we think usage of Mitchell will continue. That served as one of the greatest trial motivators that we could have had. We had all of that service at rock-bottom fares.”

The addition of Southwest to Mitchell’s menu of flights has also played a role in attracting northern Illinois residents. Many of them want to fly Southwest, but they don’t want to travel to Midway International Airport on Chicago’s South Side, where Southwest has a major presence.

“We had a pop in northern Illinois patronage when Southwest came to town,” Bateman says. “In the end, the airport can’t control fuel prices and other business factors, but we can do what we can to drive demand. That is what’s going to impress an airline. One of the places where we can get more demand is from the northern Illinois market.”

Mitchell has taken a multifaceted approach to attracting that market’s residents during the past 25 years. Airport spokeswoman Pat Rowe says efforts have included print advertisements, billboards, direct mail and even an athletic sponsorship.


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Noodle Posted: 2/1/2013 1:18:48 PM
 8   14    

It's pretty awesome that we went from having an airline with the reputation of the best customer service (Midwest), to one that is notorious for it's horrific service (Southwest). I'd rather pay extra to be treated like a human being, than save a few bucks and be sneered at by the most unpeasant staff in air travel.
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