Air Wisconsin Airlines Corporation Business Information, Profile, and History

Company Perspectives:

Built on a foundation of exceptional quality and reliability, Air Wisconsin Airlines Corporation prides itself on the strength of its customer service and the dedication to excellence by its employees. With a continued focus on those strengths, the company looks optimistically to the future.

History of Air Wisconsin Airlines Corporation

Air Wisconsin Airlines Corporation is a leading regional airline in the United States. It operates 325 United Express flights a day to 45 destinations from hubs in Denver and Chicago, and in 2002 began flying feeder routes to Atlanta for AirTran Airways. The company expected to raise its regional jet fleet to 95 by the end of 2003, when it would be operating 100 flights a day for AirTran.

Origins

Air Wisconsin was created in August 1965 to provide an air link to Chicago from its hometown of Appleton, Wisconsin. The company went public in 1970 and was consistently profitable for more than two decades after.

Air Wisconsin grew rapidly to become a premier regional airline. In some ways it revolutionized the industry. Its pioneering code share arrangements created a new marketing tool that eventually would come to be used by nearly all scheduled airlines of any size around the world.

By 1985, Air Wisconsin had become the country's largest regional airline. In July 1985, the carrier became a United Express affiliate of United Airlines. The arrangement gave Air Wisconsin access to United's all-important computer reservations system. Before working with United, it had a marketing agreement with American Airlines.

Early Regional Jets in the 1980s

The workhorse of Air Wisconsin's fleet was the 50-seat de Havilland of Canada DHC-7, or Dash 7. Air Wisconsin also pioneered, in the mid-1980s, the regional jet concept--i.e., using smaller jet aircraft, in this case the 100-seat British Aerospace BAe 146, to replace turboprops on short routes. This efficient jet was also quiet enough to allow Air Wisconsin to reinstate jet service to noise-sensitive communities such as New Haven, Connecticut, one of its first routes to the East Coast. The jets also boasted high enough performance to operate from high-altitude airports with runways too short for larger airliners, like Aspen.

Mississippi Valley Airlines (MVA) merged with Air Wisconsin in 1985. The two had combined annual revenues of $115 million and together served two million passengers a year. Both airlines had mutually complementary schedules centered on Chicago's O'Hare airport. Air Wisconsin had 700 employees before the merger, and MVA had 530. There was no commonality in the fleets, with MVA operating a mixed bag of turboprops, and Air Wisconsin adding another jet type, the BAC 111. MVA brought additional maintenance capacity to the merger.

Air Wisconsin had a disappointing year in 1989, and blamed United Airlines for taking its most profitable routes, such as Milwaukee-Chicago. Air Wisconsin attempted to diversify by expanding into the Washington, D.C. market.

Changing Ownership in the 1990s

The 1990 acquisition of Aspen Airways (for an estimated $9 million) made Air Wisconsin one of the country's largest regional airlines. Aspen offered seasonal routes to the ski destination from a handful of departure cities.

The first Gulf War and the following recession soon strained the airline industry. Air Wisconsin lost more than $31 million in 1991. In 1992, United Airlines bought Air Wis Services Inc., Air Wisconsin's parent company, for more than $300 million in cash (about $74 million) and assumed liabilities. American Airlines had offered to pay Air Wis $150 million for its landing slots at O'Hare. Most of the slots were unrestricted, allowing the owner to fly any size aircraft to any destination. United prevailed in spite of an antitrust suit by American.

Air Wisconsin's Chicago turboprop operations were sold to a regional affiliate of TWA, and other turboprops were transferred to other United Express carriers, making Air Wisconsin an all-jet operation. It also sold Air Wisconsin's Dulles-based operations to Atlantic Coast Airlines, Inc., another United Express affiliate.

In 1993, CJT Holdings, Inc. bought Air Wisconsin's jet operations, which then amounted to a dozen BAe 146 jets, for about $6 million. The O'Hare landing slots were not included in the deal. The Denver hub would be the chief source of the company's growth in the next few years.

The newly independent company, which employed about 550 people, was named Air Wisconsin Airlines Corporation (AWAC). Geoffrey T. Crowley, formerly of Presidential Airways, the Trump Shuttle, and Northwest, led the buyout group and became AWAC's president and CEO. The AWAC buyout was complicated somewhat by the buyout of United by its employees, which happened about the same time.

Some big things happened for AWAC in 1998. That April, it took over several United Express routes out of Denver from Mesa Air Group, which was dropped by United for alleged poor service. AWAC acquired Mountain Air Express (MAX) shortly after, again adding turboprop planes (four Dornier 328s) to its fleet. AWAC paid $1.5 million for MAX, formerly a unit of bankrupt Western Pacific Airlines.

AWAC also was introducing a new regional jet, the Canadair RJ. It ordered four in June 1998 for $84 million; the first two arrived in December. Company president Geoffrey Crowley noted that these were Air Wisconsin's first brand-new aircraft. The new RJs were smaller than the four-engine BAe 146s the company continued to operate, and they had a greater range (1,000 miles) and were more comfortable than turboprops.

In negotiating a new agreement between Air Wis and United, Crowley, who formerly managed Northwest's relations with regional carriers, changed the payment arrangement so that Air Wis received a fixed fare for each passenger carried, rather than a percentage of the total fare based on the passenger's ultimate destination, which could be quite small if the passenger were connecting to a long flight on United. The new arrangement was seen as beneficial for both carriers. Revenues were $140 million for 1998, producing income of $3.5 million. The airline carried about two million passengers that year.

Optimism, Uncertainty Beyond 2001

In 2001, AWAC gave Bombardier its largest regional jet order to date, placing 51 firm orders, 24 conditional orders, and options for another 75 Canadair RJs. The deal, made with the help of Canadian government financing, was valued at $2.4 billion.

Air Wisconsin's 105,000-square-foot maintenance hangar in Appleton, Wisconsin was traded for a much smaller one owned by Gulfstream Aerospace Corp. in late 2001. Air Wis was planning a $6 million maintenance base for its RJs at Mitchell International Airport in Milwaukee. The company was also the anchor tenant for a new pilot training center near Denver International Airport.

Like most airlines, Air Wisconsin was affected by the drop in air travel following the September 11, 2001 terrorist attacks on the United States. Passenger traffic was halved in the next couple of months, and the company cut 10 percent of its workforce of 3,000 employees.

In September 2002, AWAC announced a new marketing campaign to provide feeder traffic to Atlanta for budget carrier AirTran Airways under the name AirTran JetConnect. Air Wis planned to be operating 100 flights a day for AirTran by the end of 2003.

The future of United Airlines, which filed for bankruptcy protection in December 2002, was certain to influence the course of Air Wisconsin and other United Express carriers. United asked for court permission to lower its payments to the regionals; matters such as these were still being decided into the spring of 2003.

At the same time, Air Wisconsin's Fairchild Dornier 328 turboprops were being phased out. As late as 2001, the company had been operating 23 of the planes. United contracted Mesa Air Group to replace Air Wisconsin's turboprop service on affected Denver-based routes.

Principal Operating Units: AirTran JetConnect; United Express.

Principal Competitors: Atlantic Coast Airlines, Inc.; Frontier Airlines; Mesa Air Group, Inc.; Midwest Express Airlines; Rocky Mountain Airways.

Chronology

• Key Dates:
• 1965: Air Wisconsin is formed to link Appleton hometown with Chicago.
• 1970: The company goes public.
• 1985: Air Wisconsin merges with MVA, becoming a United Express affiliate.
• 1990: Aspen Airways is acquired.
• 1992: United Airlines buys Air Wisconsin.
• 1993: Air Wisconsin jet operations are spun off as a private company (AWAC).
• 1998: AWAC buys MAX; the company begins operating Canadair Regional Jets.
• 2001: AWAC gives Bombardier a $2.4 billion RJ order.
• 2002: AWAC begins flying for Air Tran; main client United files for bankruptcy.