Economic Challenges

Unless you have been hiding under a rock, it is obvious that the aviation industry, like so many others, is experiencing a “perfect storm” brought on by the combination of rollercoaster fuel prices, the sub-prime market meltdown, and subsequent credit crunch. It appears that the weather is always threatening to be stormy for the aviation industry.

The dramatic economic meltdown in the financial and housing markets in the United States and other global economies has made a major impact in the market for aerospace products and services, affecting all segments of our industry. It appears that throughout 2009, and possibly beyond, the major airlines and the associated regional airlines will continue reducing capacity due to the global economic recession and the continued weakening demand for air travel. As a result, the airlines are closely inspecting all the links in their value chains for ways to reduce cost of operations. As tends to happen, these cost-cutting measures will start to travel upstream to large and small service providers.

Across almost every segment, there is agreement that it appears the shakeout in the aviation industry is accelerating and that the forecasts range from significant revenue loss to contraction and restructuring.

Lions, tigers, and bears
It is safe to note that “change and churn” is the nature of our industry. This is not to make light of the current economic situation, as these times are scary and challenging for both the new hire and the ready-to-retire grey beards. However, these types of industry cycles always bring many opportunities as well as challenges.

In the August 2008 edition of AMT, Bill O’Brien wrote a poignant letter to high school seniors about choosing a career in aviation maintenance. In that article Bill stated that one thing that he had learned in his 45-year career was that “for better or worse aviation is joined at the hip to the world’s economies” and that we need to prepare for and weather these cycles, which is part of being a contributing member of the free market economy.

The Skyway Airlines story
Skyway Airlines provides an example of how the industry can prevail in the face of adversity. Skyway began flight operations in the spring of 1989 as a division of Phoenix, AZ-based Mesa Air Group. Mesa’s Skyway Airlines division operated Beechcraft 1900 Cs and provided service to customers at Midwest Express Airlines in Milwaukee as well as in Rockford, IL.

In 1994 Midwest Express purchased the Skyway division from Mesa. It reincorporated the airline as Astral Aviation Inc., doing business as Skyway Airlines. (Astral) Skyway was a wholly owned subsidiary of Midwest Express Airlines. At its peak, Skyway operated a fleet of 15 Beechcraft 1900Ds. These planes connected Milwaukee with other communities in multiple states beyond Wisconsin and Illinois, including Michigan, Iowa, Indiana, Ohio, Nebraska, Missouri, Arkansas, Tennessee, and Kentucky, including flights to Toronto, Canada.

In 1999 Skyway became the world-launch customer for the Fairchild Dornier 328JET. It acquired 12 of these 32-seat jets and provided new service to cities as far as Hartford, CT; New York City; Washington, D.C.; and Raleigh-Durham, NC.

In March 2003 Midwest Express Airlines reincorporated yet again, changing its name to Midwest Airlines Astral Aviation Inc. Skyway Airlines also reincorporated and changed its name to Skyway Airlines. In 2006 Midwest Airlines announced that it would obtain additional regional customers from Sky West Airlines, an independently owned airline based in St. George, UT, which operated Canadair regional jets. The SkyWest aircraft would also bear the name “Midwest Connect,” and SkyWest and Skyway would be operating side-by-side.

At the same time, and to add more spice to the Skyway story, Midwest, the parent company, had been fighting a two-year hostile takeover attempt by Air Tran. Air Tran was actively pursuing Midwest in an effort to expand beyond its main hub in Atlanta.