For nearly two decades, Midwest Airlines prided itself on catering lavishly to business travelers.
Its small customer base–representing 0.3 percent of the U.S. airline market–came to know the carrier for its wide leather seats, free champagne and shrimp scampi served on china.
Midwest offered first-class-style service to customers in all its seats, at prices that beat its competitors’ first-class fares. And it often matched coach fares on non-stop routes from its base in Milwaukee to such business destinations as New York, Los Angeles and Washington, D.C.
Its business model kept the airline turning an operating profit even during the early 1990s, when other carriers languished.
But the focus on business passengers became almost lethal to Midwest as the economy has continued to struggle, and the resulting dearth of corporate travel drove the carrier to the brink of bankruptcy last year.
In an industry that has posted domestic operating losses of roughly $21 billion since the economy began to slip in early 2001, Midwest has been forced to take on a different shape. Last year, management took a major step by adding a lower-fare service for leisure markets.
“They’ll survive, but it won’t be the Shangri-La it used to be. It will be a different model,” said Darren Bagwell, a transportation analyst at Thrivent Financial.
Passengers now must pay for meals served on cardboard trays, and champagne is not on the menu. And the leather chairs are missing on Midwest’s leisure flights, which officials expect to eventually comprise up to half of Midwest’s business.
“Certainly, I’d prefer to serve shrimp scampi and still make money as we did,” said Tim Hoeksema, who has run the airline since it was launched by Kimberly-Clark Corp. in 1984.
“But instead of saying, `Ain’t it awful?’ we’ve said, `Let’s do the best we can for customers,'” Hoeksema said.
Remedies included renegotiating worker and airplane contracts, securing $11.4 million in federal aid and obtaining from Milwaukee County guarantees for $14.3 million in economic development bonds.
Changes accepted
Passengers seem to be taking the changes in stride.
“My first reaction was, `Oh, heck, I’m not going to get free food anymore,'” said Christine Rodriguez, vice president of state and community relations for Rockwell Automation in Milwaukee.
“But as a business person, I totally understand the decision. And the food is good,” Rodriguez said of the $10 dinner she sometimes buys. Breakfast aboard Midwest runs about $7, and snacks about $5.
Midwest’s 2003 operating loss totaled $30.5 million, narrower than its $54.2 million loss in 2002 and the $38 million lost on operations in 2001.
Operating costs were down 14 percent in 2003, but passenger service revenue was down as well, by about 13 percent.
Midwest’s stock trades at about $4 a share, down sharply from its $20 range shortly before Sept. 11, 2001. Even in late 2001, shares traded around $13.
Hoeksema, who owns 3.9 percent of the stock and took a 14 percent salary cut in 2003, said it will be crucial for Midwest to maintain strong, if not luxurious, passenger service to win customers back as the industry rebounds.
Workers brought back
Toward that end, Midwest has recalled more than 1,000 of the 1,300-some workers it laid off after Sept. 11, and it now employs about 3,000 people at its mainline, leisure and regional services.
“As a small airline operating in an industry of giants, the only competitive weapon we have is great customer service,” Hoeksema said.
He collects tales of employees who offered more than they had to, including the Appleton, Wis., worker who let a passenger borrow his suit and tie when a piece of baggage was misdirected.
He also brags about a gate agent who mailed chocolate-chip cookies to the homes of customers who were rerouted onto other airlines and complained about missing out on the cookies that Midwest bakes and serves on nearly all its flights.
Other stories are shared among employees.
One told how James Bradley, the best-selling author of “Flags of Our Fathers” and “Flyboys: A True Story of Courage,” missed a Midwest connection in Milwaukee when he was touring for his first book in 2000.
Midwest Capt. Wesley Hakari, who was headed north on his way home, drove Bradley to Appleton rather than let the writer wait for the next flight.
Bradley, a native of Antigo, Wis., who lives in New York, flies Midwest whenever he can.
A quick look at the airline’s route map shows flights emanating mainly to and from its Milwaukee headquarters, with a few batches of flights from Omaha and Kansas City, Mo.
That means Bradley uses the airline mainly for trips home to Wisconsin, although he said, “If I could fly it all the time, I’d prefer it. It’s a first-class feeling.”
Midwest officials consider Milwaukee and Kansas City their major growth markets, but they also have advertised in Chicago and say about 6 percent of their business comes from northern Illinois.
Broadening its base
The airline hopes to attract customers from a wider geographic and demographic base with its new leisure service introduced in August. The Saver Service replaced existing routes to business markets that also happen to be leisure destinations, including Tampa, Las Vegas and Phoenix.
On the leisure flights, passengers sit on blue cloth seats that are arranged five abreast, giving the airline 25 percent more seats per airplane than its traditional configuration of four seats to a row.
“One of our concerns was whether the longtime business customers would like the change,” said James Rankin, who is in charge of the leisure operation.
But the flights have met Midwest’s financial expectations, which he would not disclose, and “we don’t get many complaint letters,” Rankin said.
Midwest workers say it is too early to know whether the concessions they made, which varied by employee group but included pay cuts and work-rule changes, will give the carrier what it needs to stay competitive in the long run.
“Our pilots are looking for certain things out of that restructuring. They’re not getting it yet, so there is frustration, which I think is a little premature,” said Capt. Mike Rabbitt, a union leader for Midwest’s mainline pilots.
A separate group represents the airline’s regional service pilots.
Contract changes and the airline’s new capitalization kicked in last fall, just before the airline industry entered a seasonal slump, Rabbitt pointed out.
“This is clearly not the time to raise the flag and say, `Where’s leadership?'” he said.
Hoeksema has run Midwest since Kimberly-Clark Corp. founded it out of frustration with the airline industry.
“Our thinking was that we could do it better,” said Hoeksema, who began his career at Kimberly-Clark in 1969 as a pilot for its in-house executive carrier.
When Midwest was spun off as its own public company in 1995, he went with it.
Although the airline has grown slowly, Hoeksema has made changes.
In early 2003, he oversaw the carrier’s name change from Midwest Express–a name that people outside Wisconsin associated with regional carriers–to Midwest Airlines. Its regional carrier is called Midwest Connect.
One thing Hoeksema has not changed amid all the cost cutting and turmoil of recent years is a Midwest trademark: its chocolate-chip cookies baked and served in flight.
Susan Hilgers, who has been a Midwest flight attendant for 15 years, is grateful for that.
It was hard to stop serving the gourmet meals on china, but things could be worse, she said: “If we took away the cookies, we’d be in trouble.”
