Midway Airlines

Midway Airlines was a Chicago-based passenger airline created during the transition from regulated to deregulated air transportation in the United States. The company was incorporated on October 13, 1976, by Kenneth T. Carlson, Irving T. Tague, and William B. Owens, and pursued certification for scheduled service from Chicago Midway Airport. Although its certificate was issued before the Airline Deregulation Act of 1978, Midway is commonly regarded as one of the first post-deregulation start-ups. It began flying on November 1, 1979, linking Midway with Detroit, Cleveland, and Kansas City. The airline’s central strategic importance was its role in restoring Chicago Midway Airport, which had become nearly deserted after commercial traffic shifted toward O’Hare. Midway adopted a low-fare, no-frills model influenced by Southwest Airlines. It initially operated small Douglas DC-9 aircraft, offered fares below those available from O’Hare, and generally did not provide onboard catering. Promotional pricing, including occasional penny-return offers, helped stimulate traffic but sometimes produced disruptive crowds. The approach produced a profitable 1981, the strongest full-year operating margin in the company’s history, although the airline remained financially uneven over its lifetime. Midway changed direction in 1982 under chairman and chief executive Arthur Bass and president Neal Meehan. The company attempted to make Midway Airport a business-oriented alternative to airports such as New York LaGuardia and Dallas Love Field. Its Metrolink service used an all-business-class configuration with four-abreast seating, upgraded airport facilities, jetways, and a dedicated business center. The concept failed to generate sustainable results, and Midway’s financial performance deteriorated in 1983 and 1984. The airline then expanded into Florida through the acquisition of the remaining operations and assets of bankrupt Air Florida. The acquired service initially operated under the Midway Express name and provided seasonal balance, airport slots, and access to markets that performed better than the Metrolink operation. Florida flying was profitable before the merger was completed, while Midway’s all-business-class strategy was losing money. Midway discontinued Metrolink in 1985, reduced its workforce, and returned to a more conventional two-class airline model under David Hinson. From the mid-1980s, Midway operated as a hub carrier centered on Chicago Midway. It served both business and leisure destinations, acquired McDonnell Douglas MD-87 aircraft for longer routes, and established Midway Commuter to connect smaller communities with Chicago. The airline also retained a Miami maintenance base and developed training infrastructure. By June 1988 it scheduled more than 100 mainline arrivals at Midway on a weekday, while its commuter affiliate added service from additional cities. Its traffic reached a peak in 1989. The company’s final expansion proved unsustainable. In June 1989, Midway bought Philadelphia gates, routes, aircraft, and related assets from financially troubled Eastern Air Lines for approximately $210 million. The transaction was intended to create a second hub and overcome the limits of Midway’s Chicago growth. It required substantial spending on aircraft refurbishment, personnel, facilities, and marketing. The Philadelphia operation was launched as the airline was entering a difficult period for the United States airline industry, and the additional fixed costs weakened Midway’s finances. Midway filed for Chapter 11 bankruptcy protection in March 1991. An agreement was reached to sell the company to Northwest Airlines, but Northwest withdrew at the last minute. Midway ceased operations in November 1991. A later investor group, including Kenneth Carlson, acquired the name for $20,000 and established a separate airline using the Midway Airlines name from 1993 to 2003; that later company is outside this dossier’s canonical subject.

Midway Airlines emerged from the policy and commercial changes that preceded United States airline deregulation. Its founders incorporated the company in 1976 with the objective of restoring scheduled airline service at Chicago Midway Airport. The airport had lost most of its traffic to O’Hare and was widely viewed as a nearly abandoned facility. Midway’s proposal drew on the low-cost airport model associated with Southwest Airlines and benefited from the growing political movement toward competition in domestic aviation. The Civil Aeronautics Board granted Midway an operating certificate before the 1978 Airline Deregulation Act, but deregulation removed many of the barriers that had previously limited route entry. Midway raised $5.7 million from private investors in August 1979 and began operations on November 1 of that year. Its initial fleet consisted of small DC-9 aircraft, and its initial service covered Detroit, Cleveland, and Kansas City. The airline offered lower fares than the established carriers at O’Hare and avoided many traditional amenities. Its promotional pricing, including penny-return campaigns, generated attention and helped fill aircraft during weaker periods. Midway achieved a profitable 1981, but management and strategy remained unsettled. In 1982, the company moved away from its original discount identity. Arthur Bass became chairman and chief executive, while Neal Meehan became president. They developed Midway Metrolink, an all-business-class product intended to attract corporate passengers and make Midway a convenient alternative to larger airports. The program included four-abreast seating and investment in airport facilities, but it did not produce acceptable financial results. The airline lost heavily in 1983 and 1984, and an attempted helicopter operation known as Chicago Airlink also generated a write-off. Midway sought diversification through the remains of Air Florida. The transaction provided access to Florida markets, airport slots, aircraft, and a route structure that complemented Chicago’s business traffic with leisure and winter demand. The service, initially branded Midway Express, performed better than Metrolink. In 1985 the company abandoned the all-business-class concept, reduced costs, and reorganized under David Hinson. A proxy challenge from former founders was defeated, and Midway committed to becoming a more conventional airline. The revised strategy produced several years of survival and moderate profitability. Midway converted its aircraft to two-class layouts, expanded from Chicago to business and leisure destinations, and acquired MD-87 aircraft capable of operating longer routes from Midway’s relatively constrained runways. Midway Commuter supplied regional service and fed mainline flights. The company also retained operational facilities in Miami and expanded its maintenance and simulator capabilities. At its 1989 peak, Midway carried substantially more traffic than it had during its early years and had become an important operator at Chicago Midway. The attempt to establish a second hub in Philadelphia marked the company’s decisive turning point. Eastern Air Lines, weakened by a strike and bankruptcy, sold its Philadelphia gates and associated assets to Midway in June 1989. Midway paid approximately $210 million for the transaction, including aircraft and other assets, and invested further in staffing, refurbishment, facilities, and advertising. The expansion increased the airline’s scale but also its financial exposure. Midway entered Chapter 11 in March 1991. Northwest Airlines agreed in principle to acquire the company but withdrew before completion. Without a buyer, Midway ended flying in November 1991. The Midway Airlines name was later purchased by investors who launched a separate airline in 1993. That successor operated until 2003 and should not be confused with the 1976–1991 company documented here.

• 1991

  Bankruptcy and shutdown

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  Midway filed for Chapter 11 in March and ceased operations in November after a proposed Northwest transaction failed.

• 1989

  Philadelphia hub expansion

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  Midway acquired Eastern Air Lines’ Philadelphia operation and related assets in an effort to create a second hub.

• 1985

  Return to conventional airline model

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  Midway discontinued Metrolink, reduced costs, and expanded its two-class hub strategy under David Hinson.

• 1984

  Air Florida acquisition begins

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  Midway began acquiring Air Florida’s remaining operations and assets, including aircraft and valuable airport access.

• 1982

  Metrolink introduced

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  Midway repositioned itself around all-business-class service at Chicago Midway Airport.

• 1981

  First strong profitable year

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  The original low-fare model delivered the company’s strongest full-year operating margin.

• 1979

  Commercial launch

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  Midway began flying from Chicago Midway to Detroit, Cleveland, and Kansas City on November 1.

• 1978

  Deregulation changes route opportunities

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  The Airline Deregulation Act opened the domestic market and made Midway’s proposed low-cost expansion more feasible.

• 1976

  Company incorporated

  [1]Midway Airlines (1976–1991)en.wikipedia.org

  Kenneth T. Carlson, Irving T. Tague, and William B. Owens incorporated Midway Airlines to pursue scheduled service from Chicago Midway Airport.

Initially a low-fare, no-frills alternative to legacy airlines serving Chicago through O’Hare; later repositioned as a business-oriented Midway Airport carrier and ultimately as a conventional hub airline serving business and leisure travelers.

• Air transportation · 1979

  Scheduled mainline passenger service

  Midway’s core offering was scheduled passenger transportation centered on Chicago Midway Airport. The network evolved from short-haul low-fare routes to a broader hub structure serving business and leisure destinations across the United States and selected Caribbean markets.

• Business-class air service · 1982

  Midway Metrolink

  Metrolink was an all-business-class product introduced in 1982. It used four-abreast seating and was supported by airport improvements intended to make Chicago Midway attractive to corporate travelers. The concept was withdrawn in 1985 after poor financial performance.

• Florida passenger service · 1984

  Midway Express

  Midway Express was the initial marketing identity for service operated with the assets of Air Florida. It connected Midway’s Chicago network with Florida and other leisure-oriented destinations and performed better than the Metrolink operation before being absorbed into the broader Midway brand.

• Regional airline service · 1980

  Midway Commuter

  Midway Commuter served smaller communities around Chicago and connected passengers to Midway’s mainline network. A substantial majority of its passengers connected onward to Midway Airlines flights at Chicago Midway Airport.

• 1982Midway Metrolink launch campaign

  United States

  Midway promoted its conversion into an all-business-class airline and marketed Chicago Midway as a convenient business airport.

  Outcome. The positioning failed to produce sustainable results and was abandoned in 1985.

  Source
• 1980Penny-return promotions

  United States

  Midway used highly aggressive promotional pricing, including offers in which a return journey cost one penny when the outbound ticket was purchased at the regular fare. The promotions were intended to stimulate off-peak demand and reinforce the airline’s discount identity.

  Outcome. The offers generated attention and traffic but could also create severe airport crowds and contributed to management concerns about the brand’s discount image.

  Source

• 1991

  File for Chapter 11Other

  Background

  The Philadelphia expansion and broader industry pressures left Midway unable to sustain its financial obligations.

  Action taken

  Midway sought protection under Chapter 11 of the United States Bankruptcy Code in March 1991.

  Aftermath

  A proposed sale to Northwest Airlines collapsed, and Midway ceased operations in November 1991.

  Source

• 1989

  Buy Eastern’s Philadelphia hub assetsM&A

  Background

  Management believed growth at Chicago Midway was becoming constrained and sought a second hub.

  Action taken

  Midway purchased Philadelphia gates and related Eastern assets, including routes and 16 DC-9 aircraft, and invested in launching the new operation.

  Aftermath

  The expansion increased costs and financial exposure, contributing to the bankruptcy that followed in 1991.

  Transaction value. $210 million (June 1989)

  Source

• 1985

  Abandon the all-business-class modelStrategy

  Background

  Metrolink produced weak results while the Florida operation was profitable under an economy-oriented model.

  Action taken

  Midway discontinued Metrolink, reduced staffing, and returned to a conventional two-class hub airline strategy.

  Aftermath

  The revised model supported several years of operation and moderate profitability, although Midway remained financially vulnerable.

  Source

• 1984

  Acquire Air Florida assetsM&A

  Background

  Midway needed winter and leisure demand to complement its seasonal business-oriented network and sought Air Florida’s aircraft, routes, and airport slots.

  Action taken

  Midway acquired the remaining Air Florida operation in stages and initially operated it under the Midway Express identity.

  Aftermath

  The Florida operation performed better than Metrolink and became part of Midway’s conventional network.

  Source

1. 1Midway Airlines (1976–1991)en.wikipedia.org