Airlines catering for luxury travellers have often gone to the wall. Midwest Express, however, is thriving.
Paul Seidenman/MILWAUKEE
Since US airlines were deregulated, a few carriers have tried to offer a single-class service catering to the demands of high-fare business travellers. Generally, these luxury operations have been unsuccessful. MGM Grand and Air One both offered a single-cabin first-class service but failed to attract the necessary customer base. Air One went out of business, while MGM Grand ceased scheduled operations.
An exception has been Midwest Express. Last June, the airline, based at Milwaukee's General Mitchell International Airport, marked its fifteenth year of operating a single business-class product featuring two-by-two leather seating and luxury dining. The carrier, which started out as the corporate flight department for US forest products giant Kimberly-Clark, became a separate, stand-alone scheduled airline in 1984. It continued to be operated through Kimberly-Clark's one-time subsidiary KC Aviation until September 1995, when the carrier was spun off into an independent, publicly held company.
"When we became a scheduled airline, we looked at the industry and realised that there were many customer service needs that were not being met. We decided to focus strongly on those needs by offering a superior product," says Tim Hoeksema, Midwest Expresss chairman, president and chief executive.
Hoeksema, a rated pilot on the Lockheed JetStar and the Cessna Citation I, who served as Kimberly-Clark's corporate flight department manager, noted that the carrier's strong business plan assured its ultimate success.
Demand for non-stop flights
"We basically combined our superior cabin operation with non-stop service from Milwaukee, which offered few non-stop flights to major North American business centres," he says. "We knew there was a lot of demand for that, and it was not being met by our competitors - and that is why we have succeeded. The other airlines that tried to operate an all-first or business-class service did not properly define their markets."
Coupled with this, Hoeksema stresses, was Midwest Express' strategy to base its service on the use of aircraft properly sized to the market.
The airline operates an all-McDonnell Douglas (now Boeing) fleet of DC-9s and MD-80s. This includes eight 60-seatMcDonnell Douglas DC-9-10s, 16 84-seat DC-9-30s, three 116-passenger MD-81s, three 116-seat MD-82s, and two 112-seat MD-88s. All the aircraft, except the two MD-88s -originally slated for delivery to another carrier - were purchased used, and all have been deployed in what Hoeksema called "more mature markets" that are, in some cases, slot-controlled and require larger capacity.
"This allows us to deploy the DC-9-10/30s into other markets where we can increase frequency or start new service," he adds.
Hoeksema confirms that, while Midwest Express is studying replacement options for its DC-9s, a formally defined programme - with decision times and order placement dates - is not in place. And he quickly brushes aside earlier industry speculation that the carrier would announce an order for the Boeing 717.
"I can tell you that - right now - we are looking to replace both the DC-9-10 and -30, but we are studying this very carefully," he says. "As well as Boeing, we have had discussions with Airbus, particularly about the A319 and A320. I would like to add that the Fairchild 728JET and 928JET are also of interest. But, right now, no contracts have been signed. When the time comes to make a decision, we will be sure that we will have made the right choice," he adds.
For now, the carrier is concentrating on adding to its MD-80 fleet. The most recent acquisitions were announced in August, when Midwest Express signed a letter of intent to procure four more MD-81s, now operated by SAS. Those aircraft will begin entering the airline's fleet next September, with the last delivered by the final quarter of 2001.
In addition, two more MD-81s - the last of a total order of eight from Japan Air System (JAS) - will be delivered to the airline by the end of this year. That order included one delivered in August.
Also in August, Midwest Express took delivery of the first of five Fairchild 328JETs. The 32-passenger aircraft is operated by Astral Aviation, the carrier's regional airline subsidiary which does business as Skyway Airlines, under the brand "Midwest Express Connection", operating under Midway's YX code. All five are due to be delivered by the end of the year. Options for another 10 can be exercised after January 2001.
"The 328JET was selected because regional airline customers would rather fly on jets than turboprops, and we have to face the fact that the industry is changing in that regard," Hoeksema says. "Also, there are some market opportunities that the aircraft will open - mainly in the 300-500nm [550-925km/h] range - that are not large enough to justify even a DC-9-10."
He adds that Skyway Airlines will continue to operate its 15 19-passenger Raytheon Beech 1900Ds, with no immediate phase-out planned.
"The jets will go into some of Skyway's markets that are running at capacity, and now justify a 32-seat aircraft," he says. "But the jets will also allow the turboprops to go into new markets." For example, a Milwaukee-Moline (Illinois) service was introduced in October, using 1900Ds.
Still, as Hoeksema says: "We know that, over time, some decisions will have to be made about the future of the turboprops."
Fleet planning
At Midwest Express, an integral part of the fleet planning and support process includes the capability to make extensive modifications and upgrades to the numerous pre-owned aircraft that the airline operates. All major maintenance is carried out at Milwaukee in a two-hangar complex with 17,570m² (189,100ft²) of floor space. The complex employs a technical service staff of 340, of which 134 are airframe and powerplant (A&P) technicians, 22 are in avionics repair, and 24 are inspectors. Another 31 A & P mechanics at Milwaukee are dedicated to line service. The total number of staff employed at Midwest Express, as of 1 August, was 2,576.
"At Milwaukee, we do complete structural, avionics and aircraft systems work on the DC-9 and MD-80 families," says Wayne Jamroz, Midwest Express director of maintenance. "This includes all airframe checks from A to E, along with some engine work."
Major engine inspections and overhauls are outsourced, Jamroz says. However, the Milwaukee maintenance base performs change-outs of the C1 and C2 fans, as well as the combuster can. Thrust reversers and engine nose cowls are also serviced.
The Midwest Express maintenance centre has evolved into a DC-9/MD-80 specialist. Three of the MD-81s acquired from JAS were put through a structural modification at Milwaukee to upgrade them to MD-82 configuration. But the most extensive work on the former Japan Air System MD-80s involves an intensive interior and flightdeck modification programme.
"We are doing a total upgrade that will include the installation of a complete MD-90 interior, under a supplemental type certificate [STC] from C & D Aerospace of Huntington Beach, California, which supplied the MD-90's interior [to McDonnell Douglas]," he says. "This will involve the installation of 16g seats, new sidewalls and overhead bins, as well as a new forward lavatory. We are also installing new galleys that will allow us to prepare a full meal."
The interior work includes the installation of AT&T airborne telephones. "At some future date," he adds, "all passenger seats will be equipped with a provision for laptop computer hook-ups."
To comply with fire safety standards, the modification will include a cargo hold fire warning and suppression system. (This is being installed on all of the carrier's equipment under a US Federal Aviation Administration air-worthiness directive). Perhaps the most comprehensive modifications involve the MD-80s' cockpit upgrade. According to Jamroz, the aircraft going through the programme will emerge with a digital avionics suite comparable to that now available from Boeing as a factory option for the MD-80 family. The upgrade is being done under an STC developed by Midwest Express, and approved by the FAA last year.
"To our knowledge, no other airline is doing a modification on the MD-80 cockpit - in house - to the extent that we are," Jamroz says.
The upgrade's centrepiece is the installation of a standard MD-80 electronic flight instrument suite from Honeywell. This, explains Jamroz, will be all-digital, with the exception of the engine instrumentation, which will remain analog. The Honeywell suite will include dual flight management systems and flight guidance computers, along with satellite navigation equipment and a Rockwell Collins WXR 701 colour weather radar system incorporating predictive wind shear.
Cockpit upgrade
Jamroz reports that the complete upgrade programme costs an average of $5-8million per aircraft. The four aircraft being acquired from SAS will also go through the cockpit upgrade following delivery to Midwest Express. The carrier has not yet decided whether to install the MD-90 interior on those aircraft.
Other modifications in progress include adding wing heater blankets to the entire MD-80 fleet and hushkits on the DC-9s to bring them into compliance with Stage 3 noise standards. The ABS-built hushkits will be fitted to all the DC-9s by year-end.
The maintenance programme is supporting a fleet that was built between 1965 and 1989. The oldest aircraft are the 34-year-old DC-9-10s, while the DC-9-30s, produced in 1979/80, are among the youngest of that model. Jamroz says that, for the DC-9 fleet as a whole, the average number of airframe hours is 50,000. However, at an average of only 35,000 cycles, those aircraft are comparatively low time.
"The MD-81s and -82s were built in 1981, and now average in the low 30,000h and mid-30,000 cycle range," he says. "And our MD-88s - which were purchased new in 1989 - average 36,000h and 13,000 cycles." The DC-9s, with 50,000h, are still comparatively low cycle for their age, which averages 35,000h.
And, while the DC-9 fleet is ageing, Jamroz points out that they were among the lowest-cycle aircraft of their type available when Midwest Express acquired them.
"When we brought them into our fleet, they averaged between 23,000 and 26,000 cycles, which was about half the 50,000 cycles a typical DC-9 averaged at the time. Most DC-9s today are in excess of 100,000 cycles, but our oldest has around 70,000." Across the fleet, the average age of Midwest Express's aircraft is about 24 years, he adds.
The expanding fleet is servicing a schedule that, as of 1 August, encompassed 28 cities extending across the USA from Boston to Los Angeles, and from Milwaukee to Fort Lauderdale, Florida. The 28 cities, which account for 147 daily departures systemwide, include one Canadian destination, Toronto, which is served from Milwaukee. Of the carrier's destinations, four - San Francisco, and the Florida cities of Tampa, Fort Myers and Fort Lauderdale - are served on a seasonal basis.
As a result of the recent MD-80 deliveries, capacity is projected to increase by 25% by year-end. But, despite that increase, Midway's Hoeksema reports that the business traveller remains the airline's primary focus.
"They account for about 60% of our customer base, and will continue to be our primary niche," he says. "But this is not to say we don't want the leisure traveller. In fact, we offer a full range of fares including those that cater to passengers who can plan ahead."
Competitive market
In that regard, he points out that Midwest Express is, after all, a single player in a competitive market. He also notes that, despite the strong command of the Milwaukee market, where Midwest Express flew 59 daily departures in July of this year - and held a dominant 26.64% market share in 1998 - the airline considers "everybody" to be a competitor.
"Milwaukee is a 'spoke city' for several hubs of major airlines and, for that reason, we are constantly competing with other airlines on price, even where the business traveller is concerned," Hoeksema says. "Many companies insist that their employees fly at the lowest available fare."
While Midway's Milwaukee operations are more oriented to an origin and destination business, Hoeksema says that it is evolving into something resembling a traditional hub, thanks to the feed by Skyway Airlines. Skyway accounted for 64 daily departures from Milwaukee in July. As of 1 August, the carrier served 24 cities - mainly in the upper Midwestern portion of the USA - and accounted for 151 departures systemwide.
The Milwaukee focus has benefited Midwest Express in another respect: it draws customers that might have been driven to Chicago-O'Hare International Airport. "About 6% of our traffic through Milwaukee is coming from the northern Illinois suburbs of Chicago," says Hoeksema.
"At the same time, we have captured a lot more of the passengers from the Milwaukee area who might have flown out of O'Hare. In fact, when we began scheduled service 15 years ago, 23% of the total airline passengers living in south-eastern Wisconsin would drive to Chicago O'Hare. That percentage has dropped to about 10% today."
But, while Milwaukee continues to be Midwest Express's primary focus city, the carrier has been seeking opportunities to build its presence elsewhere.
Since May 1994, the airline has been building a second "focal city" at Omaha's (Nebraska) Eppley field, and, according to Hoeksema, a new focal city is likely to be announced at the end of next year. The combination of the business travel niche and Milwaukee focus have spelt financial success. Maintaining the momentum will be based on enhancing service, with controlled expansion into new markets.
But even these new markets, Hoeksema indicates, will centre on business destinations within the USA. "We are not looking to fly to Europe. Our growth strategy continues to be on the business traveller to principal business destinations. That is what we do best."
Source: Flight International
