When Midwest agreed with Great Lakes to take over their BE1 flying back in February, Skyway still submitted bids for the four EAS markets of Escanaba, Ironwood, Manistee and Iron Mountain to cover any interim flying between the end of the current contract (5/27/07) and the actaul date Great Lake started up. These proposals are pretty detailed in both cost and revenue. Great Lakes has still not set a date to take the flying over, and those proposals can give us a good indication of how that delay is affecting Midwest's financial results.
A common misperceptioni s that EAS flying is guaranteed profitable. There's no guarantee. You bid your projected costs and revenue, and the contract builds in a 5% profit. But if actual revenue is less or actual costs are higher, they can be losers.
Here are details, with stats for all four cities lumped together and are shown per day:
159.9 pax per day
$10,181 revenue per day
$19,670 cost per day
$10,458 subsidy per day
$969 profit per day
The 159.9 pax per day was based on last year's traffic plus a margin of growth smilar to recent years. (Midwest has seen solid growth in these markets.) Instead, traffic fell well short of those projections, and actually dropped signficantly at ESC, IMT and IWD, just as trafffic has fallen at the bulk of Michigan airports year-over-year.
In addition, the DoT filed an adjustment to their subsidy, basically saying that they'd only subsidize the interim Skyway service at the same rate that Great Lakes bid for. So they are getting less subsidy than they requested for this interim period, too.
Using actual traffic fromt the 3rd quarter and actual subsidy, here's how the four EAS markets look instead:
119.7 pax per day (actual 3rd quarter)
$7,633 revenue per day
$19,670 cost per day
$8,693 subsidy per day (actual based on modified DoT ruling)
$3,344 loss per day
On the basis of reduced traffic and reduced subsidy alone, the EAS flying lost Midwest over $0.3m in the 3rd quarter. That of course assumes costs and revenue were unchanged between February (when they filed this proposal) and now. Any changes in those areas could have made that $300k loss on EAS flying higher or lower.
We don't know what sort of profit or loss the other BE1 flying returned for Midwest in the quarter, but as the BE1's continue to be retired the EAS flying is the majority.
The EAS bids are an unusual opportunity to see specifics on cost and revenue for the BE1 flying, and the numbers do not look very favorable. The longer it takes for Great Lakes to take over, the more it appears to be hurting their bottom line.