Well, That was Fast...

Just a day after announcing that it planned to buy out Frontier, opening the door for a possible exit from bankruptcy, Republic Airways decided to purchase a second carrier, Midwest, from TPG Group for the princely sum of $31 million. This was down just slightly from the roughly $450 million TPG and its partners (including Northwest) paid for Midwest less than two years ago. And then today, Frontier announced that it will make schedule changes, adding mainline frequencies to several mostly leisure markets, as well as frequencies on Lynx to Salt Lake City, Omaha, and Albuquerque. Service to El Paso and Grand Junction, however, will be discontinued in September. This latter move is welcome, and a possible sign that the market may have bottomed or is coming close to bottoming. For an airline to add new flights during the fall months, let alone in the midst of a recession, is impressive. Obviously, it's anyone's best guess as to whether the new flights will be successful, and the stiff competition they will certainly face from Southwest can't help.

But let's examine the first move more closely. Republic essentially bought what has quickly become an airline in name only. Midwest is rapidly retiring its 717s, and plans to continue to do so even after yesterday's announcement. Instead, Midwest will use E-170s and E-190s operated by a little-known carrier called Republic, an arrangement in place well before yesterday's buyout. So why bother buying Midwest? Aside from being able to exert greater control over their lift, and being able to purchase a well-respected brand for a bargain price, there doesn't seem to be as much point to this move as there did with Frontier. At least Frontier is a well-regarded carrier which has managed to hold its own, if not expand (the announcement above notwithstanding), in the face of Southwest. Although it has adopted a more proactive attitude towards charging for services, Frontier hasn't taken away seat pitch, assigned seating, or onboard television, which are its signature amenities. But Midwest, although it has a well-respected brand, has significantly cut back on its amenities and service as a way to compete, adding more seats to its planes and drastically reducing its onboard food service.

At the end of the day, unfortunately, Midwest simply can't cut it against a strong Delta/Northwest and a nimble carrier with extremely low costs, AirTran. Midwest is bleeding money, unlike Frontier which has reported some small, but significant, profits. Republic's purchasing of Midwest will do little to change the situation at that carrier. Republic has not announced any major operational or strategy changes, and I fear that the end could be near as a result. Service will continue to suffer in the wake of cost cuts, and smaller jets will become uncompetitive in the marketplace since they have higher ASM costs than the larger 717s and 737s which AirTran operates. Many of the routes Midwest services have competing AirTran service, which is cheaper for customers and actually makes money. Midwest should have died long ago, absorbed as part of AirTran. But that opportunity has come and gone, and now it's time to recognize that Midwest, no longer what it once was, will end its days as a small, regional operator before eventually being shut down, with the jets likely going to other airlines Republic contracts with.