Last week, I had the chance to sit down with Bryan Bedford, CEO 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)

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 you.
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.

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.

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.

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].

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

Republic has made its branding decision. Fortunately, Frontier lives and Midwest dies. Midwest was kind of like your great, great uncle who has been barely hanging on with life support for a long time. The brand had deteriorated to the point of being unrecognizable, so it was time to pull the plug.

Last week, I wrote this over on BNET:

So if I were a betting man, I’d put my money on Frontier surviving, taking only the fresh-baked chocolate chip cookie from Midwest. And that would be the right move.

I’m very glad to hear that they’ve listened to me. Actually, I’m just glad that CEO Bryan Bedford made the right decision here. I wasn’t so sure that would be the case.

Frontier will be the surviving brand, and the livery and logo won’t be changing. That’s good, because major brand changes can cost a lot of money. They’ll avoid many of those issues by sticking with what they’ve got. The only thing that will be kept from Midwest? The cookie. Once the transition is complete, you’ll get a cookie on every flight.

And when will that transition be complete? Thanks to an incredibly simple and completely unnecessary graphic that was likely created by some former consultant, we know that the operational integration will be complete by November with branding completely done by October 2011. You can follow along at the new website, FrontierMidwest.com. Seriously. Kind of funny that their killing off the Midwest name yet they stuck it in the transition url, huh?

What else do we know about this deal? Well, all planes will be painted in Frontier colors and they’ll get their own animal tails. The first one to get painted will arrive by the end of April and it will appropriately be painted up with a badger. The badger is the state animal of Wisconsin and mascot of the University of Wisconsin-Madison. People in Wisconsin will get to name the badger. It’s a nice gesture.

More importantly, the customer experience will start becoming more consistent here. In the media kit, the FAQ talks about Frontier’s plans for inflight entertainment.

The TVs installed in our Airbus fleet will stay. We are still exploring other in-flight entertainment options and plan to have some form available in each of our aircraft by 2011.

I’m glad to see the TVs sticking around, but I’m wondering what’s coming on the rest of the fleet. I would hope that they’d put TVs on their Embraer 170/190 fleet since those go pretty long distances. But the way this is worded makes me think that their version of inflight entertainment may very well just end up being inflight internet. We’ll have to see.

In the end, this branding decision isn’t big news. It’s exactly what was expected and it’s the right thing to do. The big news is that the team at Republic made the right decision. That’s good to see.

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Republic, overlord of Frontier, Midwest, and a bunch of regional flying, made headlines last week by placing an order for 40 CS300 airplanes. These are the “C-Series” airplanes that Bombardier has been putting together to compete with the Boeing and Airbus narrowbodies. If it actually works as advertised, then that’s great news. But there’s a big “if” here. This order shows some confidence in the airplane, but more importantly, it also gives us some insight as to where Republic is taking its branded product.

For Republic, this was probably a pretty easy decision to make. The order for 40 planes with 138 seats each is worth $3.1 billion at list prices, but that means they probably paid $29.95. Like Airbus when it first tried to break into the US market, Bombardier must have been willing to give a sweetheart deal to anyone who would take a chance.

The C-Series is the first non-Boeing/Airbus airplane in the 100-150 seat category to get an order in the US since Douglas back in the day. So maybe it’s fitting that the interior of the cabin looks remarkably like the MD-80. Try to ignore the hilarious rainbow of colors strategically placed by Bombardier in this shot (Asian, black, white, Indian, young, old, bald, gray hair, blah, blah, blah) and you’ll see that it actually looks like a vast improvement over the MD-80:

The seating is 2×3 across, just as in the MD airplanes, but you can see that the windows are nice and big, and, most importantly, so are the overhead bins. They show roller bags being placed wheels-in, so these should be just like what you’ll find on a new 737 or A320, just with only one middle seat per row instead of two.

The other thing that isn’t like the MD-80 is that the engines are slung under the wings, so you won’t be stuck in row 32 staring at an engine casing. The engines are really what have the chance to make this thing succeed. After heading toward the junk heap of formerly important aviation-related companies, Pratt & Whitney has decided to make a comeback with its Geared Turbofan. This is a complex engine that has never been able to be produced reliably for commercial operations before. (They can do it for military.) Pratt thinks it will make it work, and that means a 20% reduction in fuel burn. If it works, that’s huge, and this airplane will fly long before Boeing or Airbus even get close with their next generation airplane. If not, well, this plane may not fly at all.

So what will Republic do with this? Well, the plan is to put them into service in the branded operation – that means Frontier and Midwest. They don’t have much of a choice here. If any airline decided to outsource its 138-seat flying requirements, then there would be an absolute revolt from the front lines. Most airlines don’t have the ability to do it now anyway.

In the branded world, they won’t say if it’s going to be a Frontier or a Midwest product, but let’s be honest. By the time these things show up in 2015, I’ll put money down there’s really only one brand left (if any, I suppose). But there are some clues in the press release about where they’re taking their product.

The airplane will be configured with 138 seats. The first five rows will be in STRETCH configuration with a few inches more legroom and nothing else. That tells me that Midwest’s Signature Service days are numbered. They’ll end up standardizing with STRETCH as the premium option.

Will these airplanes end up replacing the Airbus fleet? It wouldn’t surprise me if that happens one day, but the C-Series can’t really offer the A320-size capacity that Frontier might want to continue to have at the upper end. For what it’s worth, Republic says that no retirements are planned because of this. Well yeah, it’s still 5 years away.

To sum it up, the planes must have been really cheap, and they won’t be delivered for 5 years. Might as well get in on the action now with the hope that this thing works as advertised. If it doesn’t, then I’m sure they can just walk away. If not, then they’ll be in a good place.