Topic of the Week: Frontier Shrinks Milwaukee

I consider Frontier and Midwest employees to be the least lucky in the industry. A lot of bad, avoidable things happened to their companies, largely because people (both inside and outside the company) made dumb and dubious decisions.

Midwest’s problems stem from the insanely stupid and seemingly hubristic decision of former CEO Timothy Hoeksema to fight an Airtran takeover. Imagine how much better off the Midwest employees would have been had they been Airtran employees this year! (Whether this would have been better off for Milwaukee, of course, is quite debatable, as Southwest doesn’t need Milwaukee).

Frontier itself was mostly screwed over by outside forces instead of management failures. Their bankruptcy was essentially caused by a stupid and unexpected decision from their credit card processor to unnecessarily demand more cash holdback during the 2008-9 financial crisis. Without adequate liquidity, Frontier filed Chap. 11, and that eventually led to the Republic purchase (which they’re now trying to unwind).

Frontier was also screwed when Southwest decided to focus their considerable resources at DEN, for reasons that are entirely debatable from a business judgment standpoint (why does DEN need Southwest if it has United and Frontier, and how successful is Southwest likely to be there?).

I guess you could argue that the drawdown in MKE is Frontier getting “back to its roots.” My understanding is that, eventually, they’re again supposed to be an independent company based in DEN (there’s a tentative deal between Frontier pilots and Republic for Republic to sell a majority stake to so-far-unidentified and probably unknown parties). Of course, you could argue that DEN isn’t likely to be a “better” market than MKE due to Southwest’s focus in DEN. And that Frontier might not survive until that day. I’m not sure, but I am sure that Frontier/Midwest employees have the worst luck in the industry.

Well said Wayne. I love MKE….the city and the airport, both are very user friendly. The MidwestExpress>Midwest model was built of meeting the O&D needs of a large-ish medium sized city that was abandoned when the legacies went to duke it out in larger, richer markets. That model worked (sort of) in the economic reality of the 1980s and most of the 90s…not so much today. The Frontier experiment built on that outdated model and added connectivity to the mix. Chamber of Commerce types predicted massive biz travel leakage from Chicagolands wealthy North $hore Kane, McHenry and Lake counties. That did not happen on the scope they anticipated.

At the end of the day…there is no meaningful connectivity a MKE hub brings to the table that is not already in place in Denver. This drawback is noting more than a return to the original MidwestExpress roots…backfilling major business O&D markets. I hope the right-sizing of aircraft makes it viable…but given the current fuel and economic situation…I have my doubts.

I think Frontier’s biggest problem at MKE is the lack of proper aircraft. It’s almost impossible to fly small RJs profitably in a LCC model. The E-170s might have worked in a lower fuel cost environment, but not in this one. They’re simply too small.

I do think Frontier will continue to fly its more established ex-Midwest routes but not much else short term. Once more E-190s arrive, their lower unit costs may make expanded Milwaukee service viable.

A lot of Frontier’s future in Milwaukee will depend on Southwest’s moves. I feel both can survive long term if each exploits its own niche. In any event, Milwaukee’s capacity will have to get to a more sustainable level.

While part of me is pulling for Frontier to make it as a stand alone carrier, I really wonder if a sale to United (and the attendant rationalization of Denver and Milwaukee’s capacity) wouldn’t be a better long term solution to all of this.