AirTran Airways has intensified an already heated competition with Midwest Airlines through a feeder deal with US regional SkyWest Airlines in Milwaukee designed to capture traffic from smaller markets where Midwest currently deploys its own batch of smaller aircraft.
It is the latest salvo by AirTran against Midwest at its Milwaukee base, and comes as Midwest's new owner Republic Airways Holdings is attempting to return Midwest to profitability this year.
AirTran is partnering with SkyWest to operate five 50-seat Bombardier CRJ200s in markets where Midwest largely operates 37-50seat Embraer ERJs."At this point our Milwaukee focus city isn't big enough to support the level of frequency in some of these markets that is necessary to compete effectively with Republic Airlines/Midwest," says AirTran senior vice-president of marketing and planning Kevin Healy.
SkyWest plans to operate the aircraft independently, and when all the CRJs cycle into operation by Februaryit will operate 18 daily roundtrip flights to six cities. Healy says it will supplya new source of revenue and contribute to the success of its Milwaukee hub. "It gives us access to smaller markets which would not otherwise be economically feasible to serve," he says, including Omaha, Nebraska, Des Moines, Iowa and Akron-Canton, Ohio.
SkyWest Airlines president Chip Childs says the regional jets enable AirTran to right size frequency in some markets andit allows AirTran to add frequencies in Indianapolis, Pittsburgh and St. Louis-where it currently deploys Boeing 717s and 737s.
Unlike typical capacity purchase agreements between US regionals and their major partners, AirTran and SkyWest willeach provide service under their respective brands, with eachassuming economic risk for the portion of flying they provide. "Working together, we can generate revenue for each company that neither would get on their own," stresses Healy.
In 2004 AirTran ended a feeder deal with Air Wisconsin after decidingit could fly routes flown with CRJ200s more efficiently with its own 717s. Healy says its marketing partnership with SkyWest differs from that earlier arrangement in a number of ways. "This new revenue will be shared on a pro-rated basis and we will work together to create cost efficiencies in operations," he says.
AirTran is also confident it has the cost structure to compete with both Republic and Southwest, who inaugurated service from Milwaukee in November. Healy also touts AirTran's superior product with wi-fi on every flight, and an opportunity to make in-roads in the local market while Republic restructures Midwest.
Republic's management has acknowledged Midwest's historical cost challenges, and chief executive Bryan Bedford admits, "Milwaukee is going to be a drain for everybody that is operating there."But he believes the carrier continues to produce a double digit unit revenue premium to its competitors in Milwaukee.
Bedford expects once restructuring and integration headwinds from Midwest and Republic's other subsidiary Frontier subside, "we are going to be sitting in a pretty strong position to be a cost leader in the back of 2010".