Milwaukee Could Look at Europe to Expand Air Service

May 05--As far as attracting new air service is concerned, it might be time for Milwaukee to launch a European tour.

With the U.S. airline industry stuck in a holding pattern -- four airlines now control 80% of the U.S. market -- there aren't many places that cities such as Milwaukee can look when seeking to land new air service.

"Is anybody expanding? That's kind of the question a lot of people are asking," said Robert Mann, a New York-based airline industry consultant who operates R.W. Mann & Co. Inc.

"The answer that comes back (from airlines) is 'we are going to be very disciplined,'" Mann said.

"So, the answer is probably 'no.'"

That has some airline industry observers asking whether Milwaukee should at least consider trying to attract European carriers to fill the void left by the smaller roster and reduced service provided by U.S. airlines.

"I keep pounding away, however lonely by myself, on the prospect of luring Icelandair, Norwegian and Ryanair to Milwaukee, but I seem to be the only one that thinks that is an attractive idea," said Jay Sorensen, a former Midwest Airlines executive who now runs IdeaWorks Co., an airline consultancy based in Shorewood.

"I'm talking about a flight from London Gatwick to Milwaukee and a flight from Iceland to Milwaukee, a flight from Oslo and a flight from Stockholm to Milwaukee," Sorensen said.

"People may laugh at that, but we have to start someplace."

Sorensen is not alone in thinking about Europe.

"The transatlantic (flights) for markets like Milwaukee, someone like Icelandic would make a lot of sense because of the way they operate -- from medium-size cities in the U.S. to medium-size cities in Europe...," said Brian Campbell, chairman of Campbell-Hill Aviation Group, an airline industry consulting firm based in Alexandria, Va. "It's an interesting model and I think they are doing it very well."

"But would you likely get British Airways to come in from London? Probably not."

The biggest players in the industry wouldn't necessarily be the target of the strategy anyway, Sorensen and Campbell said.

"You've got a lot more niche players, niche carriers in Europe growing up all the time," Campbell said. "These guys have the same problem: They are looking for markets where they are going to get some relief from competition and serving Milwaukee is that kind of a market."

Milwaukee has what Campbell says is a "geographical advantage" because of its proximity to Chicago and perennially-congested O'Hare International.

A European carrier looking at Milwaukee as an alternative to Chicago "wouldn't have head-to-head competition from anybody else," Campbell said.

At least one airline didn't dismiss the idea outright.

"Ryanair is always interested in new routes, however, transatlantic flights are still some years away due to the lack of availability of long-haul aircraft," Michelle Lowe, communications manager for the Dublin-based airline, said in an email.

Other European airlines did not respond to emails seeking comment.

Sorensen said Milwaukee would make sense for European carriers looking to fly into the Chicago region without having to deal with the congested skies there.

"I think this airport (Mitchell International) has attractive potential for being a low-cost alternative to Chicago for niche airlines like that," Sorensen said.

Of the 30 largest airports in the U.S., Chicago O'Hare and Midway airports ranked at the bottom in percentage of on-time departures in 2013, according to the U.S. Department of Transportation.

"I think they would choose Milwaukee because it's not Chicago," Sorensen said. "It would be easier to operate here."

Any expansion plans would have to be crafted carefully to make sure Milwaukee keeps the air service we have, Campbell said.

Milwaukee is already served by the Big Four -- the three so-called legacy airlines, Delta, United and American, as well as low-fare carrier Southwest, which is the market share leader at Mitchell. Delta is second. Combined, they control nearly 75% of the commercial airline market in Milwaukee.

"Listen, we had it really good for a long time when we had Midwest here and we got lazy because it just happened," Sorensen said. "Those days are gone.

"I know there a lot of corporate people who are not very happy about the service we have in Milwaukee because there are so few nonstop flights anymore."

Those unhappy folks would find a lot of company across the country. U.S. carriers in 2013 flew 1.7 million fewer domestic flights than they did in 2005 when the number of flights peaked so far this century, according to the U.S. Department of Transportation.

In Milwaukee, the number of flights originating at Mitchell dropped by nearly half to 41,316 in 2013 from 80,061 in 2005.

Elsewhere, the numbers are even rougher. In Cincinnati, the number of domestic flights dropped 75% during the same period. In Memphis, available flights dropped by 60%. Pittsburgh dropped by 50%.

Mitchell International has nonstop service to 36 destinations (five of which are seasonal) including Boston, New York, Seattle, Los Angeles, Washington, D.C., and San Francisco.

Trying to fill seats

The Big Four airlines, in general, are doing very little in terms of growth. They are putting available seats into areas where they are certain to make money. Flying nonstop routes with half-empty planes is no longer part of the business plan.

"It means you're taking the same assets and shifting them around to the highest and best use, producing the highest and best returns," Mann said. "Even Southwest has been doing this. All they are doing is taking the same 600 airplanes and finding better, more profitable homes for them.

"It's kind of a zero sum game from the standpoint of overall capacity."

That no-growth environment will almost certainly lead to start-up airlines seeking to fill the voids left behind by the shrunken industry in the U.S., Campbell said.

"As I look around and I see what changes are being brought about by the legacy carriers, a lot of it is just opening up market opportunity for others," he said.

Those start-ups, though, better have some serious money, he said.

"It's getting harder to get going not only because of regulatory delays, but also the price of poker is going up," Campbell said. "A lot of people don't want to get involved unless they have $150 million. We used to start airlines for $10 million."

A new Boeing 737-800 or an Airbus A320, both of which are medium-range, twin-engine jet aircraft considered to be the workhorses of airline fleets, have average prices starting at $90 million each. A single tank of fuel for a 737 is about $20,000.

With those kinds of fixed costs, it's no wonder that history has not been kind to start-up airlines.

"There's a sad fact which is you have had many, many communities rally to support new carrier entrants and put a lot of money they couldn't afford to lose into some of these start-ups and then watched them go defunct even before they start flying," Mann said.

"The track record just isn't good," he added. "But I guess hope springs eternal."

For now, the airline industry in the U.S. will see "very limited new capacity and it may be temporary," Mann said.

"If it works, it might stay," he added. "If it doesn't, it's going to go find another home."

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