It appears that Lincoln, Nebraska’s longshot play to get more air service has now failed.. and remarkably quickly. The creative but risky Red Way operation has announced it will shut down at the end of this month. There is going to be a lot of anger and finger-pointing in Nebraska.
I got much deeper into the Red Way saga than I ever expected after talking to both the Lincoln Airport (LNK) and the organizing founders. I’ll admit that I was fascinated by the whole plan. The local governments and LNK wanted more air service, but they couldn’t get it. So, they used some of their COVID money to stand up a public charter (yes, Part 380!) operated by a third-party carrier to fly from Lincoln to several leisure destinations a couple of times a week.
David Haring, Executive Director at LNK, contracted with what became Fly Next LLC — created by former Allegiant planner Nickolas Wangler — to put this whole structure together. The $3 million in COVID money was meant to be a backstop to support the airline in the (obviously very likely to everyone outside of Lincoln) case that it wasn’t profitable on its own.
With no risk for Fly Next, this was an easy sell, but Nick was confident in the model. He told me back in April that the “model that we’ve built out says we shouldn’t have to touch that money.” That was very clearly an inaccurate model.
Apparently, Fly Next took down $900,000 of that money in the first month alone and then it needed more in the second month. With at least $2 million of the $3 million burned in such a short period of time, Fly Next decided to pull the plug on the whole operation. The agreement had a 30-day out for either party to cancel, but it looks like Red Way only gave a week’s notice that it would shut down on August 31.
So what happened?
Red Way gave little information about exactly why it was shutting down so quickly, but it did give some clues. In the statement that was emailed to me by Red Way, there was this:
However, we face insurmountable challenges as a small startup in our industry, and the compounding of costs and lack of resources have made it impossible for us to sustain operations. It is our hope that other carriers see the incredible potential, and with their economies of scale, are able to provide Lincoln with the service it is so worthy of.
In an email, the person running the day-to-day for Fly Next, Sarah Riches, told me:
Demand existed in Lincoln for expanded air service, however as a small player the economies of scale were not there to make the cost side of the equation work as revenues built.
This would suggest that revenues were perfectly fine but the costs were the issue… but it’s hard to imagine how that’s true. Sarah did say that they flew over 19,000 passengers, so let’s do a little math, shall we?
After combing through ops data, it looks like Red Way has flown 130 departures from Lincoln for a total of 260 flights roundtrip. If we divide that by 19,000, we get just over 73 passengers per departure. Let’s call it 75 since the airline did say “more than” 19,000.
It looks like N281GX operated these flights, and that airplane was configured with 150 seats. So, the airline was operating half full.
Now it’s entirely possible that there were some diamonds in the rough here. Red Way did end Atlanta, Austin, and Minneapolis/St Paul earlier than planned for the summer season, so we can assume those were the worst performers. Maybe Orlando and Las Vegas were rock stars, but we just don’t know. All we know is that if you’re going to fly your airplanes around half-full, you aren’t going to make money.
If Orlando and Las Vegas were solid performers, then that would certainly help explain what Fly Next was saying when it said that it hopes other airlines with economies of scale take over. Those are both prime Allegiant markets. Allegiant isn’t exactly growing these days and hasn’t shown interest in Lincoln in years, but it would undoubtedly have lower operating costs than Red Way.
This looks like an enormous failure on the surface, but we can’t know that for sure just yet. I would say that if any airline steps into LNK to fly to a couple of these destinations, then Red Way did its job in proving that a market exists. Was it worth the $2+ million? That’s a question for the people of Lincoln, but if that doesn’t happen then it will certainly have all been for naught.
32 comments on “Red Way Goes Away”
The problem was that everything was socked in from Salt Lake to Lincoln. Surprised BRK hasn’t found a way to fund service to Lincoln.
BRK? I feel like I’m missing an obvious acronym or reference…
Never mind, figured out that you meant Berkshire Hathaway…
Good reference…but Berkshire Hathaway is based in Omaha. Warren didn’t get where he is by throwing money at bad business models, and Omaha has solid service for a city its size.
Oh, I agree but you would think even Warren would come up with a way to make it work. BTW I just checked & Lincoln is under 60-miles from Omaha & therefore the solution maybe “Landline” to Omaha & not wasting on air service with half full plains.
Ted Striker would’ve found a way to make this work.
Good luck. We’re all counting on you.
The cornfields, Ted, the cornfields!
Rex Kramer would find a way to make this work., Steve Mccroski on the other hand… I don’t know as he was at Chicago air control.
Really gotta wonder what the charter rates were from GlobalX and what premiums came in along the way from the various other parties. Burning through $2mm on 260 flights is about $7,700 per flight in subsidy. Maybe another $7,500-10,000 in passenger revenue per flight (~$100ish per pax) and that still probably isn’t enough to cover reasonable operating costs just for the charter company ($10k/hour for an A320 seems low to me). Adding in booking overhead and whatnot and it falls apart pretty quickly.
time for some mathesiss..
Depending on how the ACMI worked – lets figure $200k/mo for the plane.
2.5 hour trip:
Estimate 650 gallons/hour for plane. $4.00/gallon + $100 into plane fees, so we’re at MINIMUM $6,600.
Flight Crew: $750
Cabin Crew: $375
Engine reserves: $800
Insurance: $350
Turn fees: Lincoln – $500 Hub: $700
Catering/mis: $250
Admin Fees: $750
Without the airplane lease, we’re at $11,075 per leg. Assuming $6,500/day for the plane – 4 legs a day, we’re at $1625 – so $12,700 per leg.
$84.66 seat cost with 100% load. $171.62 seat cost based on 50% load.
Yeah, this was gonna be a hard one to make work short term…
What’s “engine reserves”?
The money you sock away for when your engines outlive their useful life and you have to replace them. Unlike car engines, airplane engines (including small piston engines) do not live as long as their airframes.
Now the State of Nebraska is reviewing the whole thing.
https://www.ketv.com/article/state-auditor-look-million-dollar-lincoln-airline/44914927
Thanks for the link.
I have no connection to the Lincoln area or Nebraska, but I agree that on the surface something about this whole thing doesn’t quite make sense or smell right, and never really did… The fact that it appeared to be a longshot from the start is not to say that there is illegal/unethical activity going on (some longshots do work, and conventional wisdom isn’t always right), but I can definitely see why state/federal authorities would want to take a closer look.
That said, whenever the government auditors get involved, even for seemingly legitimate reasons, you can’t help but wonder about what kinds of “inside politics” are at play behind the scenes.
The ability of people to find financing for harebrained airline schemes is just crazy. Where are these people with money to set on fire when I want some?
It didn’t make sense as a business to me when they announced this back in the Spring and it still doesn’t make sense to me now. I thought they would at least fly into the Fall some to try and capture football gameday traffic.
How is Northern Pacific and their once-a-week ONT-LAS doing? Maybe they have the capacity and piles of cash (to set on fire) to fly Lincolnites to Sin City.
They’re backed by Ravn Alaska, so they likely have (slightly) more cash than Red Way
On-time performance has continued to be (very) mixed, at best, almost like a roll of the dice (pun intended).
7H777/RVF777 is the flight to LAS and 7H888/RVF888 is the flight back to ONT if you care to search for additional details.
Oddly, just received Airport Improvement magazine today that has a six-page spread on how great Red Way is, and how it is a model for other small communities. Oops.
https://airportimprovement.com/article/lincoln-airport-takes-creative-route-adding-new-leisure-service
Probably covered in earlier articles, but LNK has United Express service to DEN, ORD, and IAH.
TBH, given that a lot of smaller airports only have one connection to a single airport, they honestly should be happy, especially given that OMA is an hour drive and has access to the US3, AS, WN, G4, and SY which will get you a direct flight to most of the major metro areas in the US..
Its almost like small airports don’t want to accept their role in the world isn’t to get their passengers on a direct flight where they want to go, but instead to keep them connected into the national aviation network.
Good points. Lincoln is in the same boat as cities like Toledo, Trenton, Wilmington DE, Allentown, and Macon, cities big enough to warrant their own service but only an hour or so from a much larger airport.
Downtown Lincoln is an hour from Eppley, only 20 more minutes than my drive to DFW. Reality in 2023 is that you aren’t going to get much service.
Nick – IAH is only there because of a SCASD grant, so I expect that will disappear. But yes, they get one hub west and one east which is pretty good. Still, I think they’d be far happier with UA to DEN and DL to MSP if they had their druthers.
IAH also requires less funding than otherwise necessary because it serves Commutair rotating aircraft in/out of its maintenance base at LNK. The issue with DL last time it flew to LNK was the flight timing was kinda bad for LNK folks… late morning departure to MSP? I think you fly it at 6am to connect to everything and it would do well.
Any idea how much it would cost to subsidize DL flying LNK-MSP?
Surely less than starting a whole new airline I’d think.
Jason – I don’t think it’s even possible. There’s just too little capacity available for regionals right now to justify it.
If OMA was a high-cost airport that G4/F9 weren’t willing to touch, LNK might have a chance at pulling in one of the two. But OMA’s costs seem low enough that both airlines just fly to OMA, which means they aren’t gonna set up shop an hour away.
I wonder if LNK tried to get service from Breeze or Avelo prior to doing the Red Way thing. 2x/wk to MCO/LAS on either might work, though Breeze’s smaller E-Jets seem like they’d fit the bill better. Would probably require even more subsidies though, and LNK probably couldn’t stomach subsidizing folks going to casinos/Disney on an all-Economy aircraft.
Criminality is often not the explanation when simple stupidity and imcompentence will do, but this is jaw-dropping. I would love to understand the calculations and assumptions which suggested this was financially viable and then compare it to actual results. Certainly loads were weak in many markets but that cannot be close to the entire story. By shutdown they will have apparentliy blown through 3 million in twelve weeks. Oh but they only had a 50% load factor — if they had an 80% load factor, what it would have taken then another 7 or 8 weeks to burn the $3m?
The “oh, the economies of scale worked against us” statement is a pile of steaming crap. Certainly a big airline benefits from economies of scale, but costs should have been known up front. And *no* charter airline benefits from “economies of scale” yet somehow charters happen and charter airlines make money all the time.
It feels like the Lincoln and Lancaster County have a woody that if Sioux Falls can have flights to Vegas and Nashville and Minneapolis and Florida well then gosh darnit Lincoln must be able to support that too since they are 15% bigger AND they have $3m to back it up, and that was about as far as the research and justification went.
Has anybody checked to see if OneJet boy genius Matt Maguire had a hand in this??
I think another part of this story is how much $$ Lincoln also invested in renovating the Lincoln Airport, adding gates, and updating facilities. (As someone who used to fly through LNK regularly –it’s nice to see they can actually do a TSA Pre screening now!).It seems like the airport remodel and Red way was really following the “if you build it–will they come” hopeful dream. But did Red Way show enough viability in 2 months to be attractive to an Avelo or Breeze? Geographically this isn’t their focus (OMA or LNK).
For a modern LNK airport to thrive, you need to find a way to attract flyers out of the Omaha market down to Lincoln. Not just trying to get Lincoln fliers to fly LNK. No one comes to LNK from OMA unless it’s for football Saturday. People from LNK are used to going to Omaha for all sorts of things –so driving to the airport isn’t that out of the ordinary for an average Lincolnite.
I am not enough of an AV Geek to understand the operational math, but I do remember there was a time for the LNK airport had jet service from United, Continental, Northwest, TWA, and regional players Ozark and Frontier –all operating at the same time (it was the 80s –I was a kid and we traveled multiple times a year to see my mom’s family in the northeast).
Some things changed as airlines merged –American/TWA – they pulled out. Northwest/Delta –Delta stayed but only added ATL when it was subsidized by a grant from the city/county. I am curious when OMA started to pull away as the defacto regional airport? Anecdotally, I remember the fanfare of Southwest starting service in the 90s out of OMA. That seemed to create a notable shift– attracting flyers from Lincoln and its surrounding communities to fly Southwest for its lower cost but also direct access to leisure destinations. It also created better competition in OMA with all of the airlines.
I wonder if this is a worthy Breeze or Avelo destination.
Judging by the passenger traffic reported by the hub airports on Red Way – nothing was a Rockstar. I assume the made the assumption that nearly 100% of leaked traffic would take these flights – they didn’t.