Chicago Midway: low-cost is good

This story is sourced from Airline Business
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Dwarfed by giant O'Hare, little Midway handles only 20% of Chicago's flyers but is the clear favourite of the region's bargain hunters. Unlike its big brother, Midway has grown and attracted investor interest - enough to make it a privatisation candidate

Very few competitors like to boast "we're number two", but it's a point of pride for Chicago's Midway, a distant second in size and scope to O'Hare, where the internal train line alone is 2.5mi (4km) long. Mile-square Midway grew in 2007, while the big hub actually shrank in traffic. Midway also had a better on-time record. And Midway can boast that someone actually wants to buy it. That's certainly a sharp contrast to the big airport in this Midwestern metropolis known as the "Second City".

The Second City's second airport has carved itself a niche as more than just the alternative to O'Hare: it has established itself as the low-fares centre for "Chicago Land" and its population of 10 million, and indeed for the swath of the Midwest that stretches from Northern Indiana's former steel centres around Lake Michigan and up to ­Milwaukee, 90mi north.

Midway is like other airports abandoned by large network carriers: it attracts a new carrier, and that carrier is usually Southwest Airlines. The network giants moved to O'Hare in the 1960s and while some have experimented with Midway services over the years none of these have worked.

Chicago Midway: A $750 million upgrade has revitalised the airport

The original low-fares player at Midway, ATA or American Trans Air, had been suffering as its older fleet and patchy reputation for service kept it from getting a strong share of the business there. By late 2004, it was in bankruptcy and the two other low-fares players at Midway, AirTran and Southwest, saw this as an opportunity. Although Southwest had been at the airport for more than 15 years, it entered a bidding war against AirTran for ATA gates and assets, and won.

Midwestern presence

The Southwest victory denied AirTran a major Midwestern presence, though AirTran has continued growing at Midway and is now the second largest carrier at the airport. But it has a way to go to catch up with its rival's dominance at the airport, where Southwest has seen double-digit growth in boardings. So formidable is Southwest that when JetBlue decided to launch Chicago service, it avoided both Midway and Southwest and chose O'Hare.

Midway's strength as a low-fares point has made it difficult for secondary or "alternative-alternative" airports to lure low-fare players. For instance, the Gary, Indiana airport, about 25mi east of Midway, has repeatedly tried to establish itself as an easy-to-reach airport for bargain hunters. But airlines have started and pulled out. The latest newcomer is Skybus which plans flights between Gary and Greensboro, North Carolina, starting in March.

Indeed, Southwest's strength at Midway has given it near veto-power in Chicago's plans to privatise the airport through a long-term lease to an infrastructure investors group. The airline has agreed in principle to a deal that could raise as much as $3 billion for the city, but has not pushed aggressively for the deal.

Under the tentative pact, airlines at Midway would receive 25-year leases, with fees and other charges frozen for the first six years. Airlines would fund only those capital projects they approve, although the airport has recently completed a $760 million improvement project. Other carriers at Midway must support the plan, and it faces hurdles.

Midway's future has another great strength, and one that is characteristically Chicagoan: it is a major source of blue-collar jobs in a part of the city that needs jobs badly. As such, it has strong political patrons, strong enough that even if politicians agree to build a third Chicago airport another 30mi south of Midway, the Second City's second ­airport will not disappear.