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Soaring Paper Airplane: Midwest Express Grows Under Parent Kimberly- Clark

June 20, 1989

MILWAUKEE (AP) _ When a Midwest Express Airlines jet crashed in September 1985, many people predicted doom for the tiny carrier, which at the time was 15 months old and had just lost a third of its three-plane fleet.

The airline not only has survived, but by catering to business customers with luxury service, it’s expanded each year and now competes directly with Northwest Airlines on major routes from Milwaukee.

The success of Midwest Express is considered unusual because it comes amid consolidation in the airline industry, as larger carriers have taken more control of the skies.

What makes Midwest Express more unusual is that its owner has little stake in the airline industry - paper giant Kimberly-Clark Corp.

Midwest Express President Timothy Hoeksema says, however, his company does not aspire to become a major airline, and analysts warn the carrier can lose some ″niche″ status the more it competes with Northwest.

″It’s like a shopping mall,″ said Sherman Chao, an investment analyst who follows Kimberly-Clark for Salomon Brothers Inc. in New York. ″You have Macy’s on one end and a little boutique on the other.″

The roots of Midwest Express start with the corporate jet service Kimberly- Clark operated to shuttle employees between operations in Wisconsin, Dallas and Roswell, Ga.

″(Kimberly-Clark) figured if they’re going to be flying, they might as well take a cost-center and turn it into a profit-center,″ said Bonita Austin, another analyst who follows Kimberly-Clark for the New York investment firm of Wertheim Schroder & Co.

Midwest Express started flying in June 1984 to Dallas, Boston and Appleton, Wis., which is minutes away from Kimberly-Clark’s operation in Neenah. Less than a year later, the airline added flights to Atlanta.

But on Sept. 6, 1985, a Midwest Express jet crashed on takeoff from Milwaukee, killing 31 people. Officials later determined that one of the jet’s engines failed, although the National Transportation Safety Board said the pilots should have been able to fly the plane with one engine.

″Certainly an accident like that is a tragedy which no one forgets,″ Hoeksema said. Ridership dropped after the crash.

But otherwise, he said, the crash had little effect on the airline, and in fact, Midwest Express expanded service about a month later with flights to Washington.

Since then, the airline has added flights to New York, Philadelphia, Detroit and Denver, with seasonal service to Florida.

At the same time, Midwest Express has expanded its presence at Milwaukee’s Mitchell International Airport, growing from a less than a 1 percent share of the passenger traffic in 1984 to 9.4 percent last year, ranking third behind Northwest and American Airlines.

Through 1986, Midwest Express lost more than $3 million, Department of Transportation figures show. But the company then started soaring into the black, and the latest DOT figures, for the 12 months that ended Sept. 30, 1988, show Midwest Express earned $4.4 million.

″I think they’re a formidable competitor,″ said Alan Muncaster, a spokesman for Northwest. ″Just because we are a major airline does not mean we can drive them out.″

Hoeksema says a key to Midwest Express’ success is ″the extra measure of customer service.″

The DC-9 fleet has been refitted with rows of four wide leather seats, roomier than the standard five or six. Flight menus range from beef Wellington to shrimp cocktail, plus free wine.

While these amenities translate into less seating capacity and food costs that are nearly three times the industry average, they also help the airline gain a hefty dose of business travelers.

The airline offers reduced coach fares, but business travelers tend to pay higher rates.

″In general, a business traveler doesn’t plan a month ahead of time and doesn’t stay over the weekend,″ Hoeksema said, noting that approximately 70 percent to 75 percent of the airline’s customers are business travelers.

Harley-Davidson Inc., based in Milwaukee, uses Midwest Express about 70 times a month to send employees on business trips, mainly to Dallas and Atlanta, said Trish Haudricourt, corporate travel manager for the company.

Haudricourt, who often flies the airline to arrange meetings for the company, said she enjoys in-flight pampering, but most important is the availability of nonstop service.

″An executive’s time is not well-spent in Memphis,″ she said, referring to a transfer hub in the Northwest system.

Midway Airlines, based in Chicago, tried a similar venture in the early 1980s but scrapped the idea.

″We lost $40 million in less than two years,″ said Midway spokeswoman Sandra Allen. ″It was an experiment that didn’t work.″

One problem was that the airplanes, with reduced seating, had to turn away customers during the peak morning and evening rush.

Hoeksema said Midwest Express tailors schedules to business traffic, which means few weekend flights.

He also said Midwest Express has filled a void by offering nonstops that weren’t available from Milwaukee to other major cities.

In the past year, however, Northwest has designated Milwaukee a ″mini- hub″ and added nonstops to some of the same cities, such as Boston and Washington. Northwest already had flown nonstop to New York.

″When you are just trying to offer a different product but going to the same places, then your niche is not as well defined,″ said Robert Decker, an airline analyst with Duff & Phelps Inc. in Chicago.

Hoeksema disagrees.

″The niche isn’t the fact that you’re simply flying certain routes,″ he said. ″The niche is whole product that you provide.″

End adv for Sunday June 18

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