Performance of Elite will be key to relaunch of Midwest Express

Midwest Express airplane
Midwest Express airplane

Last updated on March 17th, 2020 at 01:34 pm

BizTimes associate editor Lauren Anderson wrote about how companies like Midwest Express generate a cult brand following. Read her cover story here.

The success or failure of the new Midwest Express Airlines will largely depend on the operation of an airline based in Maine.

When Midwest Express launches its service, the planes, flight crews and maintenance operations will be provided by Portland, Maine-based Elite Airways LLC.

Midwest Express plans to have its reservation system up and running by Christmas, and hopes to launch its first flights in January, president Greg Aretakis said. Aretakis was vice president of market planning for Midwest Airlines from 2005-‘09.

“We are continuing to make progress,” he said. “We are testing (the reservation system) right now. We’re trying to get everything done and ready to go.”

It’s easier to get a startup airline off the ground by using a third party to provide the aircraft and handle the operations, according to airline industry analyst and consultant Robert Mann, owner of Port Washington, New York-based R.W. Mann & Company Inc. He estimates that Midwest Express has raised about $10 million to begin service and would need to spend another $2 million and take another 18 to 24 months to get certified by the federal government to fly its own aircraft.

So it is less expensive and faster to start an airline with a third-party operator, but for the new Midwest Express to be successful, it is critical that Elite Airways operate reliably, Mann said.

“If it runs fine then everyone will do just great, assuming the costs are right and there are no unexpected developments,” he said.

But if Elite does not perform well for Midwest Express, it could cause huge headaches for the new airline. If the arrangement doesn’t work out it would be extremely difficult to find another operator to replace Elite, Mann said.

“You need to make it work,” he said.

Elite had 13 planes as of 2018, including four that were not operational, according to U.S. Department of Transportation data. Among the operational planes, four have 50 seats and five have 70 seats, for a total of 550. The Elite fleet has an average age of 17.7 years. Elite has capital leases on four of its planes and operating leases on the other nine, acquiring them between 2012 and 2018.

By comparison, in 2006, Midwest Airlines had 36 planes across its fleet with more than 3,600 seats. Midwest Connect, its regional airline subsidiary, had another 19 planes and more than 500 seats, according to SEC filings.

The difference in workforce between the two companies also paints a stark difference. In 2006, Midwest had 2,327 employees, plus another 1,115 at Midwest Connect, while Elite had 173 last year, according to SEC filings. Midwest had nearly 380 pilots and copilots while Elite had 47, according to DOT data.

With more planes and more employees, it is no surprise Midwest was generating more revenue than Elite. The Milwaukee airline had operating revenue of $664.6 million in 2006, compared to $133 million for Elite in 2018. Midwest had an operating profit of $592,000 in 2006 while Elite had an operating profit of $8 million last year. Around two-thirds of Elite’s operating expenses went toward flying operations, with another 15%, roughly $19 million, spent on maintenance.

Nearly 82% of Elite’s revenue last year came from charter passengers; about 16% came from scheduled passenger service.

Midwest Express executives are confident Elite Airways is the right partner to launch the new airline.

“(Elite Airways) are great operators,” Aretakis said in August. “We’re excited to share them with our hometown people in Milwaukee.”

“When Greg first approached us about working together, we looked at everything and we thought, ‘What an incredible match this would be,” John Pearsall, president of Elite Airways, said in August. “We think it’s going to be a great partnership.”

In August, Aretakis announced the new Midwest Express will begin with nonstop service between Milwaukee and Cincinnati; Omaha, Nebraska and Grand Rapids, Michigan. Midwest Express executives have talked to numerous Milwaukee business leaders about what destinations they would like to see added at Mitchell and those three come up the most often, Aretakis said.

Milwaukee business travelers are eager to see direct flight service restored that was lost here with the demise of Midwest Airlines. In 2005 the airline flew 150 flights a day out of Mitchell International to dozens of destinations, providing 53% of the flight service at the airport, Aretakis said. Most of that service in Milwaukee has not been replaced by other airlines, he said.

If Elite Airways operates reliably, if there is enough demand for the service and if Milwaukee travelers patronize it, the new Midwest Express should be a success, Mann said.

Many Milwaukee area travelers continue to have a cult-like loyalty to the Midwest Express brand and the new airline hopes it will have the support of those customers.

The cult brand following for Midwest Express was fostered by the old airline’s two-across, wide leather seats, gourmet meals, warm chocolate chip cookies, direct flights to numerous destinations and a high level of customer service.

The new Midwest Express will be different. It has promised to offer a high level of customer service and chocolate chip cookies. It will place an emphasis on legroom over seat width, Aretakis said. Lack of fees and flexibility for customers will be important, he said. But the gourmet meals from years ago are not coming back, and it will be using smaller aircraft.

“This is not going to be the legacy Midwest Express,” Mann said.

The aircraft for the new Midwest Express will be 50-seat Bombardier CRJ-200 planes, which are used by regional carriers like United Express and American Eagle.

The CRJ-200 planes can be tight when full and generally are not preferred for flights longer than two hours, Mann said. Grand Rapids, Cincinnati and Omaha are all short flights, Aretakis points out. The small planes will give Midwest a competitive advantage, allowing it to provide service to regional business destinations that larger airlines are not serving and can’t justify with larger aircraft, he said.

“I suspect there are other routes that are in the short business-oriented zone that (larger airlines are) also going to pull out of,” Aretakis said. “Because the planes have gotten bigger and they can no longer justify the service.”

The CRJ-200 planes have less storage room in the overhead bins and don’t have Wi-Fi. These are “first world problems,” Mann points out. But Midwest Express will be competing with other airlines that offer more of these “soft touches.” Some travelers might be willing to layover on their trip to enjoy better amenities on another airline, he said.

“Everything is a trade-off,” Mann said. “The first rule of airline economics is people get the service they are willing to pay for. If they are not willing to pay for it, you’re not going to get it.”

But if travelers do support the new Midwest Express, the airline could in time again grow a significant Milwaukee hub, he said.

“If local interest is there, it will be built over time,” Mann said.

“If you give (customers) good flight times and you fly where they want to go and you don’t insult their intelligence with the price, you build your own competitive advantage,” Aretakis said. 

— Staff writers Arthur Thomas and Brandon Anderegg contributed to this report. 

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Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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