| BUSINESSWEEK ONLINE : JUNE 28, 1999 ISSUE | ||||||||
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| NEWS: ANALYSIS & COMMENTARY
Commentary: Big Airlines Should Follow Midwest's Recipe Maybe it's the cookies. By rights, Midwest Express Airlines (MEH) should be struggling these days. Passenger traffic for the industry is growing at a paltry 2% annual clip, and Corporate America is rebelling against ever-rising fares. Instead, Midwest, the nation's 17th-largest airline and one that depends heavily on business travelers, has been flying high, with first-quarter operating profits up 20%, even though the industry's performance is off 31%. That's where Midwest's fresh-baked, still-gooey chocolate-chip cookies come in. Served on afternoon flights, they're part of a Midwest Express strategy to win business customers by offering the kind of flier-friendly service that other airlines advertise but don't always deliver. Each morning, there's free coffee and newspapers at Midwest's gates. At dinner, there's steak and shrimp served by friendly flight attendants. And the carrier's DC-9s and MD-80s feature wide leather seats--with no more than two of them across. The result of this good service: The Milwaukee airline's load factor--the percentage of seats filled--has been rising, while the industry has suffered its largest monthly drop in six years, according to PaineWebber Inc. Midwest's stock is also outperforming its rivals' by some 20%. FULL LOADS. The airline doesn't even charge more for the extras it provides. Midwest Express matches the majors' coach fares and maintains margins by filling a larger percentage of seats with corporate commuters instead of bargain-hunting, book-in-advance leisure travelers. Because Midwest's coach service is on par with most carriers' business class, companies don't bristle at the fares. Corporate customers, like Miller Brewing Co., are penalizing Midwest far less than competitors as they scale back on flights with its competitors. The tale of Midwest Express is more than a nice little story about a small company doing well. It's a lesson for the rest of the $120 billion U.S. airline industry--one that you would think the major carriers would not still need to learn. Alas, most airlines seem to be oblivious to the need to offer better service. Last year, traveler complaints rose 26% as more bags were mishandled and more flights arrived late. ''Consumers are near the breaking point,'' says Brent Bowen, co-author of an annual airline-service ranking and director of the University of Nebraska's Omaha Aviation Institute. How has this come to pass? Desperate for profits after losing billions at the start of the decade, airlines now worry about service only for the dozen or so people in first class. The industry has jammed its planes, moving as many passengers as possible through lucrative, though often inconvenient, hubs. Meanwhile, business fares have risen steeply--and companies have responded by cutting back travel or trying to take advantage of discount fares. That frugality is a big reason why United Airlines Inc. (UAL) and US Airways Group Inc. (U) recently said their second-quarter earnings would disappoint. LOVE FEST. In contrast, Midwest Express, born 15 years ago as the corporate aviation unit of Kimberly-Clark Corp. (KMB), has stayed focused on keeping business passengers happy. Its 34 routes--all of which begin or end in Kansas City, Milwaukee, or Omaha--provide direct service for execs once resigned to the inconvenience of flying through hubs. ''We've really made a concerted effort to focus on a particular niche,'' says Timothy E. Hoeksema, Midwest's CEO since its founding. In return, customers love the carrier. ''I can't think of a bad situation I've ever had on Midwest,'' says Don Draves, Miller Brewing's corporate-service manager. Imagine saying that about any of the majors. Of course, the biggest carriers can't do everything Midwest does. They can't, for example, afford to abandon their massive hubs and start making direct flights between small cities. But they shouldn't ignore how customers have responded to Midwest's superior service. Midwest and other upstarts might never be able to challenge the giants directly. But the lesson of Midwest's success is clear: Whenever customers do have a choice, they are going to opt for the carrier that treats them right. Care for a cookie? By David Leonhardt Leonhardt covers airlines from Chicago. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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