Republic CEO Bryan Bedford On the Branded Strategy (Across the Aisle)

Last week, I had the chance to sit down with Bryan Bedford, Republic Airways HeadquartersCEO of Republic, in the carrier’s northwest Indianapolis headquarters. (It’s that building on the right, in the shadow of the odd-looking pyramid buildings.) You may not know the name Republic, but you know some of its brands: Frontier, Midwest, Chautauqua, Shuttle America, and Republic Airlines.

Our hour-long conversation was just downright fascinating covering topics from religion, to integration with Frontier and Midwest, along with bundling vs a la carte pricing and more. When we first sat down, Bryan immediately asked about me. We spent nearly ten minutes on my background before getting into the airline talk, which is where we begin today. I’ve broken this across the aisle interview down into three parts. Today, we start with the airline’s recent expansion and go into the strategy and now-discontinued multiple brand strategy. (Part 2 on competition and fees, Part 3 on religion)

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ON THE RESULTS OF FRONTIER’S RECENT EXPANSION

Bryan: Where are you living now?
Cranky: Long Beach, actually, and I’m flying you back on Monday.
Bryan: Thank yAcross the Aisle from Republic Airwaysou.
Cranky: Gotta make sure we keep you there.
Bryan: Of all the new markets that we’ve opened that’s the one that’s really struggling. We’re trying some targeted advertising in Denver, because a lot of folks in Denver don’t know where Long Beach is. We’re trying to figure out how to get people to understand that it’s the Southern California alternative.

We’re opening 15 new markets and that is the only one that’s not hitting its revenue forecast. Some are just barely making it, like Santa Barbara is just, but some, like Branson, what a shocker.

Cranky: I was gonna say, you’ve already added capacity there.
Bryan: It’s blowing the doors off. The only reason we went there was because we had a really high revenue guarantee.
Cranky: I guess you won’t need the revenue guarantee right now.
Bryan: No, it’s going to be very profitable.

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ON THE INITIAL REASON FOR BUYING FRONTIER AND MIDWEST

Cranky: So the strategy seems to be now more find the right markets for the Embraers.
Bryan: Step back a bit and look at a higher level. We’ve had great growth, great expansion through 2008. Then the fuel shock happened and we learned a couple of things. One, airlines are very jaundiced about adding capacity, and two, consolidation is on everybody’s mind and a lot of people’s lips. . . . Quite frankly it’s happened slower than I would have thought. I think the first go around with Continental and United should have been done . . . when United’s market cap was $600 million instead of $3.6 billion.

As the operator, consolidation is good since it makes your partners stronger . . . but the fact is that when they combine, if 70% of their passengers are flow, they can flow them through anywhere they want. So they can operate larger capacity planes by funneling more flow over a specific hub. Dehubbing becomes a very serious option.

Cranky: Shrinking pie for regionals
Bryan: Shrinking pie for regionals and certainly shrinking pie for smaller regional jets. We have to acknowledge there’s just not a lot of growth opportunities. There’s the opportunity for market share to move around, but having alternatives is healthy. We never wanted to be so big with one airline so that the loss of that partner would be an extinction model for us. But now, the fact that our core business is at risk for virtually no growth if not contraction, if there’s one area that can benefit from the capacity reduction and consolidation, it’s the LCC side.

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ON REGIONAL CONSOLIDATION

Cranky: Do you expect consolidation on the regional side?
Bryan: There’s a lot more discussion about it. The Wall Street analysts love transactions, you know? It’s hard to consolidate because most of the contracts that we all have have change in control provisions that in some cases allow partners to cancel deals or at least renegotiate deals.

Cranky: Could be something like a Mesa in bankruptcy?
Bryan: I won’t say that it’s impossible. Nothing is impossible. I won’t even say it’s implausible, because when there’s a will there’s a way. . . . We’re all looking for the same thing. Where can you take out non value-add expenses to become more cost effective. I just think it’s hard because the seller is not necessarily controlling the revenue stream.

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ON THE NOW DISCONTINUED MULTIPLE BRAND STRATEGY

Cranky: So now you’re in the [low cost carrier] LCC space. You started bringing Midwest and Frontier together. The question I asked you in Phoenix is “are you regretting it yet?”
Bryan: [Laughs]
Cranky: It’s been an interesting road. I’m particularly curious. It seems like at the beginning you had this plan to operate multiple brands, get the operational efficiency of running them behind the scenes. Clearly there’s been a change to go toward the Frontier brand after a few months of this. So what have you seen? Is the multiple brand thing something that just doesn’t work for a single airline?
Bryan: When we started looking at the possibilities of these acquisitions, we went outside the airline industry. Avis and Budget was a good example of the model where, here’s a company that’s in the rental car business where they have the premium Avis brand and the discount is Budget. And they seem to coexist well. And that was really sort of the example of a model where we were going to go after.

Cranky: Where Midwest would be the premium brand and Frontier . . .
Bryan: . . . the discount brand, yeah. We learned quickly. The education that we got was in 2009 we bought these brands at the trough of the recession and there was no demand for premium anything. So the Midwest response, even before we bought them was to make less premium available . . . so there was a lot of experimentation out of desperation to try and figure out a model that would allow that airline to work. Everything was working against them.

Cranky: Especially in Milwaukee
Bryan: Yeah, so we did start the customer research process not necessarily to pick one brand or not but just to measure brand health and try to figure out what resonated with customers. What we discovered was the Milwaukee community wanted the same thing as everyone else. They wanted affordable fares, nonstop service. In their own ways, each one of these airlines are trying to provide that.

A lot of what we learned is the Midwest brand had this perception of what it was back then. Customers would revisit the airline and there would always be disappointment. “That’s not what I remember Midwest to be.” And they were right, it wasn’t.

Cranky: They were lobster and fine china back in the ’90s.
Bryan: The Milwaukee community loved it but as soon as the economy soured, budgets went from buy first to buy coach. But sorry, you can’t buy that on Midwest. After all the struggles they went through, they still enjoy lots of hometown customer support. That underdog role that they took on with AirTran, people wanted them to succeed. But they really weren’t fulfilling the need of the customer at the end of the day. Shrinking service from the west coast, abandoning the west coast. Huge, huge mistake. Then again, the MD80s burned so much gas and the 717s couldn’t make it to the west coast. They had few choices and they were all bad.

Cranky: And now you have Frontier. Have you seen the acceptance levels, is there anything different now that Midwest is gone from Milwaukee?
Bryan: Interestingly enough, one, Frontier actually has great customer service. The inflight experience is actually very complementary. Having TV on the airplane is a new amenity for folks in Milwaukee and they really like it. We thought there was a need to try to bridge between what was Frontier and what was Midwest and the answer to that is Stretch [extra legroom seating].

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I’ll post the rest of the interview over the next week or so.


25 Responses to Republic CEO Bryan Bedford On the Branded Strategy (Across the Aisle)

  1. Jason H says:

    Might want to fix Bryan’s answer to your first question in the Multiple Brands strategy… it’s blank.

    Good interview so far. I look forward to the rest of it.

  2. John B. says:

    Cranky: So now you’re in the [low cost carrier] LCC space. You started bringing Midwest and Frontier together. The question I asked you in Phoenix is “are you regretting it yet?”
    Bryan:

    Did Bryan not have an answer, or is this a typo?
    Very interesting interview, I am looking foward to the continuation of it.

  3. Nimitz says:

    It looks like maybe Brian’s answer was a terse, “It’s been an interesting road.” Then Cranky’s next question begins, “I’ve been especially curious…”

  4. CF says:

    Whoops, I messed up the tags there. He simply laughed when I repeated the question and wasn’t terse at all. He was very friendly and candid the entire time.

  5. Dan says:

    Yeah, you also messed up on the “shrinking pie for regionals”. You wrote “shrinking pie for regionals” which really isn’t a question.

    BTW, I looked at flow statistics on 2007 data awhile back, and at the time, no airline had that much flow. Combined, Northwest and Delta had the most flow, and it was just a tad over 50%.

  6. Very interesting that a CEO starts an interview with an honest but negative tone, that LGB is struggling and SBA is barely making it. But it’s refreshing to hear that instead of some (fake) positive B.S. that other CEO’s give during an interview.

    I hope they aren’t pushing Santa Barbara as being north Los Angeles. SBA is a world of it’s own and it’s not even close to being thought of as L.A..

    • CF says:

      No, they aren’t pushing Santa Barbara as being north LA. It was refreshing to hear. FWIW, I’m told that Long Beach has really picked up recently.

      • That’s one thing about a large metro area like Los Angeles, people going there who don’t know the area may only think of LAX to fly into. If they check out a map they might actually be going nearer to one of the other airports in the area. There is a whole lot of people and places around LGB to benefit from their serve into/out of LGB.

      • Rudy says:

        Any more news on how the LGB flights are doing? I looked at the seat map today for one of the DEN-LGB flights and it looked like a pretty full flight.

  7. We just flew Midwest over the weekend. Bryan is correct that it’s very much a “back in the day” experience. Still, DFW/MKE wasn’t a bad flight, despite some very adverse conditions at DFW (several hour weather delay and a lot of upset pax). Leinie on board and even The Cookie was great this flight.

    Customer service from the gate agents to the FA’s were much better than I was expecting given the circumstances. I wonder now how much of our trip was Frontier culture.

    Regardless, I’m glad I have one more Midwest boarding pass for my collection. You know, for old time’s sake….

    =M=

  8. AndrewBW says:

    I think Bryan’s analysis of Midwest as a brand really nailed it in a way I haven’t seen in print yet. They were an airline that had a very specific, “domestic luxury” niche that targeted the mid-market business customer, and rode the long economic boom of the 90s on this premise. I remember the CEO of the company I worked for at the time logged 50 flights on Midwest in one year alone.

    The next year? Zero. The economy started to wobble, and our travel profile changed to where everyone — even the CEO — had to start favoring the lowest or lower cost options, not just choosing the airline we “wanted” as long as it was “reasonable” (as had been the previous policy). Do that enough, you start to realize while flying Delta or United or American or AirTran or whomever may not have been *as* nice as the “old” Midwest, it’s not like it was so terrible you couldn’t survive a short MKE to LGA flight. So even when business started to pick up, we didn’t switch back. Midwest was always doomed, as an airline *and* as a brand.

  9. “I’m flying you back on Monday.”. Hrmm. That’ll be interesting to see Bryan sprout wings and start flapping.

    • Sanjeev M says:

      Well, Cranky likes to support the newcomers and he said sometime back about his support for Frontier in his trip to the Denver conference.

      Cranky already bought the ticket, so the only free stuff left for Bryan to woo him with would be free Stretch seating.

      (Nicholas, I might have misunderstood your comment)

      • Sanjeev, I was making a play on words. Since cranky said “I’m flying you” while he was talking to the CEO, I presumed he was flying the CEO, not the CEO’s airline..

    • CF says:

      And boy were his arms tired!

      Sanjeev – I’m pretty sure Nicholas was joking about me actually flying Bryan as opposed to his airline.

      There was no wooing offered or asked for. I bought a Classic ticket so I had the same seat I had when I first reserved it long ago. I’m flying them out of LGB again next week as well.

  10. myriam says:

    I wonder if the LGB thing will pick up kind of exponentially, as the marketing slowly kicks in and then at the same time, people start to try it and report back to their buddies in Milwaukee about how cute & retro-glam the airport is, and how close to LA and yet right next to the 405 for those family trips to Disneyland / OC beaches… I feel like LGB’s the kind of under-the-radar thing where there might be a big pay-off just in word of mouth alone – slowly but surely, gathering steam. It seems perfect to appeal to Midwesterners, to me (as a SoCal-to-midwest transplant). I don’t doubt it will pick up for Midwest/Frontier.

  11. Jay says:

    “in the shadow of the odd-looking pyramid buildings”

    Cranky, anyone who has lived in Indy, like myself, would never call the pyramids odd-looking (the moment I saw the picture, I knew exactly where you were. Then I thought, “Oh yeah, Republic IS in Indy.”) ……your in-laws must be shaking their heads….=0}

  12. Tom says:

    It doesn’t take a genius to figure there is a minimal market between LGB and DEN, especially when I have LAX and SNA to choose from. Perhaps they need to focus on the cities beyond DEN, although their connection times aren’t as good as DL or US. I have a feeling if they don’t get the traffic beyond DEN, they may not last soon in LGB. CO didn’t last long in the 80’s doing LGBDEN.

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