By now you’ve all heard that Midway Airlines (the second), citing a “calamitous” drop in business traffic, higher prices of jet fuel and low-fare competition has filed for Chapter 11 bankruptcy. What’s unusual about this story is the speed in which it all happened.
Only a few months ago things were business as usual at this airline, which had relocated itself from Chicago’s second airport. They were even trumpeting their new frequent-flyer relation with Continental and Northwest. But there can now be little doubt that the problem with Midway was directly related to the airline’s dependence on the flow of business flyers from American Airlines – and the AAdvantage program in turn was the keystone.
The details of the separation of Midway from this toll road of frequent flyers has an unusual twist. Back in 1997, The Allied Pilots Association (APA), who represented over 11,500 American Airlines pilots during contract negotiations, struck a deal to have veto power over any renewal of the American AAdvantage program with both Reno Air and Midway Airlines. The feeling then was that, beyond the scope of seniority and other arrangements in code-sharing and merger situations, American would never risk the revenue benefit of the AAdvantage program.
Well, that’s really what happened. When the AAdvantage agreement recently came up for renewal, APA exercised its option and vetoed the deal, forcing American to terminate its arrangement with Midway. According to the Chairman of the Communication Committee for the APA, Karl Schricker, the veto decision was made because the Midway relationship was taking jobs from American pilots. From the APA’s point of view, when American removed their hub from Raleigh-Durham and allowed Midway to cover those routes instead, American pilots lost out on all of those routes.
While there is sure to be finger pointing from both sides, this demonstrates how these frequent flyer programs have become so entrenched in the entire airline business. While Midway quickly jumped to Continental and Northwest, neither of these programs had a deep enough business-traveler customer base in the region to save the airline. Bottom line, it wasn’t the economy or the high cost of fuel that killed Midway. Midway was done in by the very same thing that had helped the airline rise to prominence – a reliance on the AAdvantage program. Now you know the rest of the story.
