Republic Airways Melding Midwest, Frontier Sales, Reservations

Republic Airways Holdings this month said it continues to integrate its two recently acquired airline brands—Frontier Airlines and Midwest Airlines—with the aim of shifting to a single reservations system and integrating a single corporate salesforce by the midpoint of this year and ultimately bringing its cost structure in line with industry-leaders AirTran Airways and Southwest Airlines.

Republic Airways Holdings entered 2009 as the owner of a few regional carriers that operated affiliate service for legacy airlines through such holdings as Chautauqua Airlines and Republic Airlines. In the course of the year, the Indianapolis-based holding company added Midwest Airlines to its portfolio and bested Southwest Airlines in a bid to purchase Frontier Airlines out of bankruptcy.

The Midwest and Frontier acquisitions marked a sea change in the company's core business, adding to its legacy of fixed-fee operations for the legacy carriers an arm that operates stand-alone airline brands.

"The question is, can we look at the attributes of each one of those, pick the best of both products and get them to the entire 16 million customer base of the combined entity," said Republic Airways Holdings chairman, president and CEO Bryan Bedford. "That's really the work in progress that we have before us now."

Though Republic said it plans to maintain both brands, there is plenty of room for sharing. The company so far has combined ground operations throughout its network, initiated codeshare service and implemented frequent flyer program reciprocity.

Meanwhile, the company is shifting the executive management team to its Indianapolis headquarters and announced that former Frontier CEO Sean Menke will leave the company at the end of the quarter. "We don't have a succession plan at this point," Bedford said of Menke's departure. "The executive team under Sean is telling us they want to stay and execute the plan. Now is probably not a good time to introduce another officer in the mix and another set of opinions, and I feel pretty good about the plan we've got to pull the brands together, and finishing up doing quite a bit of customer and employee research around the brand equation."

Bedford said Republic plans to ramp up corporate sales efforts in the next month. On its approach to the corporate segment, Bedford said, "What Midwest was doing on the corporate travel side was significantly farther advanced than what Frontier was doing, so this would be an example of where we take the Midwest skill set and bring that to the Frontier network," Bedford said, invoking the carrier's business-friendly attributes that include its Signature Seats, frequency to business markets and home base Milwaukee's status of having "more Fortune 500 companies per capita headquartered there than in any other place in the country."

As such, Bedford said Republic appointed a former Midwest alum, Greg Aretakis, as vice president of marketing and sales for the two brands. "He's bringing together the Frontier and Midwest teams into one more cohesive salesforce, but before we can actually send those folks out the door to start making calls on businesses, he will define for them what the product is and give them the tools to go out and sell it," Bedford said. "We're getting the team pulled together and getting that alignment, but I suspect by the first weeks of March we'll be ready to get out and start selling."

Bedford is targeting more than $60 million in new synergies and aircraft adjustments. "What we're going to be able to say with absolute certainty is that we'll have very competitive unit costs. I would suspect lower than Southwest, probably on par with AirTran, but that's a work in progress," Bedford said, comparing Republic's cost direction to the lowest in the industry.

Bedford counts those carriers not just as inspiration, but also inherits them as competition, as Southwest continues to ramp up Frontier's home market of Denver and AirTran grows marketshare in Milwaukee, home to Midwest's hub.

"AirTran and Southwest are two of the best low-cost competitors out there, so we certainly have our work cut out for us. Imitation will be the best form of flattery," Bedford said. "There are things that they do that, quite frankly, we know we need to do too. We're working on doing those things. Certainly managing our spending in ways that don't adversely impact the product is at the top of our list. Employee engagement is at the top of the list. They are obviously established brands. We're an emerging, realigning brand, so we need to spend our time and focus on what product attributes we think customers really value. We're in a unique position that it's going to be a lot easier for us to design those things and adjust our product strategy and our brand position and our proposition when the other two guys are what they are. I like the opportunity that we have, but I don't underestimate or give short shrift to the fact that we've got two terrific competitors and we're going to have to be on the top of our game."

Asked if Republic has any marketshare goals for the two carriers in their home markets, Bedford said, "This is going to sound apocryphal, but we're less interested in marketshare than we are in margin."