Eagle757shark
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Be wary about Midwest's takeover by Northwest
By JAY SORENSEN
Posted: Jan. 6, 2008
I believe within four years, Midwest Airlines will cease to exist as an independent entity. Northwest Airlines did the math and found it was cheaper to buy a small competitor than to risk the entry of AirTran Airways as a low-cost carrier smack in the middle of its so-called Heartland market area.
In this case, Northwest is strategically incapable of being a passive investor with TPG Capital. The experience at Duluth, Minn., may highlight why passivity is already a myth.
Midwest announced new flights to Duluth early in its takeover battle. The service was designed to connect Duluth with the Midwest network. Northwest had a lock on daily service prior to Midwest's three daily round trips. One other airline served Duluth, and it only operated flights on Wednesdays and Saturdays to Las Vegas.
Midwest began the Duluth service on March 4, 2007. The takeover involving Northwest was revealed on Aug. 12. On Oct. 19, Midwest announced it would drop Duluth. The city's business newspaper didn't mince words: "Northwest ownership likely affected Midwest decision to exit Duluth."
The following describes snippets of dialogue that could occur in Northwest's boardroom during the next four years:
Question: Why do we and Midwest have full staffing at these airports?
Answer: Let's look at merging operations and laying off some Midwest staff.
Question: Why does Midwest offer its own frequent flier program? Would we not achieve greater marketing power with WorldPerks as the only program for Milwaukee?
Answer: Of course, eliminating the Midwest program would give WorldPerks dominance.
Question: Why is Midwest competing with us on routes where we traditionally have dominated?
Answer: We can start by having Midwest drop Boston and Seattle and see how it goes. I think Milwaukee travelers really don't have a better choice than Northwest.
The final act of this play will be the de-hubbing of Milwaukee and the death of the Midwest brand - and here's the quote that will justify the move: "We tried over the years to keep Midwest as a standalone airline and to preserve its unique product. However, the financial challenges of the airline industry simply prevent us from maintaining this. But rest assured, Northwest is committed to the Milwaukee market."
I think we need to remind ourselves: Northwest has an unfortunate history of abandoning Milwaukee.
Glance at a map of the United States and decide for yourself. Does Northwest really want a fourth hub between Minneapolis, Detroit and Memphis? I think not. And if it merges with Delta (that's the rumor), you can add Cincinnati to the Heartland map.
Don't fool yourself. The leadership at MillerCoors already has connected the dots when comparing Milwaukee's aviation future with that of Denver (it has two hub airlines).
Sadly, we are in grave danger of losing the great economic engine of an airline hub in Milwaukee. I hope Milwaukee's leadership awakens to the fact that vital economic interests are at stake. Watching, waiting and hoping does not make a place great.
Jay Sorensen of Shorewood is an aviation consultant and a former Midwest Airlines marketing manager.
By JAY SORENSEN
Posted: Jan. 6, 2008
I believe within four years, Midwest Airlines will cease to exist as an independent entity. Northwest Airlines did the math and found it was cheaper to buy a small competitor than to risk the entry of AirTran Airways as a low-cost carrier smack in the middle of its so-called Heartland market area.
In this case, Northwest is strategically incapable of being a passive investor with TPG Capital. The experience at Duluth, Minn., may highlight why passivity is already a myth.
Midwest announced new flights to Duluth early in its takeover battle. The service was designed to connect Duluth with the Midwest network. Northwest had a lock on daily service prior to Midwest's three daily round trips. One other airline served Duluth, and it only operated flights on Wednesdays and Saturdays to Las Vegas.
Midwest began the Duluth service on March 4, 2007. The takeover involving Northwest was revealed on Aug. 12. On Oct. 19, Midwest announced it would drop Duluth. The city's business newspaper didn't mince words: "Northwest ownership likely affected Midwest decision to exit Duluth."
The following describes snippets of dialogue that could occur in Northwest's boardroom during the next four years:
Question: Why do we and Midwest have full staffing at these airports?
Answer: Let's look at merging operations and laying off some Midwest staff.
Question: Why does Midwest offer its own frequent flier program? Would we not achieve greater marketing power with WorldPerks as the only program for Milwaukee?
Answer: Of course, eliminating the Midwest program would give WorldPerks dominance.
Question: Why is Midwest competing with us on routes where we traditionally have dominated?
Answer: We can start by having Midwest drop Boston and Seattle and see how it goes. I think Milwaukee travelers really don't have a better choice than Northwest.
The final act of this play will be the de-hubbing of Milwaukee and the death of the Midwest brand - and here's the quote that will justify the move: "We tried over the years to keep Midwest as a standalone airline and to preserve its unique product. However, the financial challenges of the airline industry simply prevent us from maintaining this. But rest assured, Northwest is committed to the Milwaukee market."
I think we need to remind ourselves: Northwest has an unfortunate history of abandoning Milwaukee.
Glance at a map of the United States and decide for yourself. Does Northwest really want a fourth hub between Minneapolis, Detroit and Memphis? I think not. And if it merges with Delta (that's the rumor), you can add Cincinnati to the Heartland map.
Don't fool yourself. The leadership at MillerCoors already has connected the dots when comparing Milwaukee's aviation future with that of Denver (it has two hub airlines).
Sadly, we are in grave danger of losing the great economic engine of an airline hub in Milwaukee. I hope Milwaukee's leadership awakens to the fact that vital economic interests are at stake. Watching, waiting and hoping does not make a place great.
Jay Sorensen of Shorewood is an aviation consultant and a former Midwest Airlines marketing manager.
