The Failed Red Way Experiment Won’t Stop Lincoln Airport’s Quest To Land More Flights

Sep. 3—The sun rose Friday morning and Lincoln Airport — with a sparkling new terminal and an appetite to lure more air service to Nebraska's Capital City — was pretty much where it was three months ago.

Albeit, about $3 million lighter.

The Red Way Airlines experiment, which came to an end Thursday, was an abject failure. There's not a more subtle way to describe it. And no one involved dares to try to soften that statement.

"I've tamped down the anger to disappointment," said John Olsson, chairman of the Lincoln Airport Authority Board of Directors.

In just two months, Red Way tore through the vast majority of American Rescue Plan Act dollars — $1.5 million each from the city of Lincoln and Lancaster County — and as the final invoices trickle in, it's likely there won't be much ARPA cash remaining.

Red Way used more than $928,000 in the first month and followed up that by tapping the fund for nearly $1.4 million in the second month.

Dave Haring, Lincoln Airport's executive director, knew in early August what that meant.

"I (didn't) see how this continues," he said.

A week later, Red Way pulled the plug.

Nebraska Auditor Mike Foley has notified the Lincoln Airport Authority that he plans to audit the use of federal COVID-19 stimulus funds on a failed airline. It's a move Haring welcomes.

"We had already been on record saying that we were doing an audit," Haring said. "Everybody is just concerned and frustrated by the whole scenario."

Most new businesses lose money at the outset. Given more time and money, Red Way might have found a way to make the leisure travel model work in Lincoln, some say.

"We either needed more time in the beginning or more money," Haring said. "If this had been $5 million, as opposed to $3 million, and again, hindsight being what it is, could you have gotten to October and made the decisions necessary to tweak the program?"

Maybe, he says, understanding that comment might cause some to cringe, that throwing more money into Red Way was somehow the panacea for its failures.

"This concept didn't work for us," Haring said, admitting his knee-jerk reaction upon hearing Red Way's announcement on Aug. 23 that it was ceasing operations at the end of the month was to determine he would never again work with a startup company.

And yet, upon further consideration, he changed his mind, knowing that these are dicey times in the air industry — especially in small and mid-size cities, which are fiercely competing with each other to bring airlines to town.

That requires creative thinking and taking some risks. And, that said, the Red Way fiasco was a chance Lincoln had to take, Haring said.

No one — not Nick Wangler, the overly optimistic Red Way CEO, not Haring, charged with being a steward of the federal funds, and not the elected officials from the city and county who approved allocating the funds — planned on losing $3 million so quickly.

In hindsight, there were some red flags everyone will be more mindful of the next time, they all say.

Lincoln Airport "took a risk to try and do this, and I do appreciate thinking outside of the box," said Lancaster County Commissioner Christa Yoakum. "And that's probably what it's going to take for us to get to attract some air carriers here."

That said, there will be more risks, which are becoming more commonplace in the aviation industry's economic climate, Haring said. The days of Delta Airlines, American Airlines and Southwest Airlines setting up shop in every city are long since over.

"While Lincoln may have encountered a setback, they should not lose sight of the determination and partnership it took to attempt new solutions that could enhance connectivity and accessibility for Nebraska residents," said Martin Lenss, chairman of the Air Service Committee for the American Association of Airport Executives. "Small community air service is facing immense challenges and communities willing and able to attempt creative problem solving will be successful in the long term."

But in order to learn from the past, you first must study it to draw an understanding of just where things went wrong.

The mistakes made with Red Way might be charted back to late March, when the deal between Red Way and Global Crossing was made, said airport authority board member Chris Stokes.

"The numbers never made sense to me," said Stokes, a commercial pilot, who was elected to the board in May.

In providing the Airbus A320 aircraft, Global Crossing required Red Way to fly a minimum of 200 air hours each month.

Flights cost about $6,650 an hour to operate. That's from a passenger's check-in to when they retrieve their luggage. Airfares and all other passenger revenue — from baggage charges to alcohol sales — go toward that hourly cost.

The 200-hour mandate accounted for the lion's share of Red Way's expenses and ensured that the company would jump into the deep end from the start.

It launched in early June with two flights each week to Las Vegas and Orlando. Over the next two weeks, flights to Atlanta; Austin, Texas; Dallas, Minneapolis; and Nashville, Tennessee, followed.

"I can't think of another instance where a new airline came in and threw seven markets at the board right away," Haring said. "That would not have been our choice and there was a lot of concern about that."

In hindsight, it was too much. Too soon.

"In a perfect world, we probably want to start with something less, but that wasn't the offer before us," Olsson said.

Haring also said having just 70 days to sell tickets while also educating the community on the nuances of leisure air travel proved to be problematic.

Still, airport officials were optimistic after Red Way CEO Nick Wangler said thousands of tickets had been sold before the first flight — a morning flight to Orlando on June 8 — boarded. In addition, the price of jet fuel, a major expense, was coming in below projections.

Yoakum said Wangler, who has not returned phone calls since the company's announcement, approached the Lancaster County Commission this spring for more money to purchase jet fuel through an escrow system.

"We refused to put more funding into that," Yoakum said. "They had a $3 million guarantee that they could essentially go to the bank to get some funding on their own."

Things seemed to be going well for Red Way at the start. Wangler told the airport authority in June that a spike in ticket sales — about 6,000 airfares sold — had taken place in its first two weeks of flying — an increase of about 300%.

A month later, he announced two new winter destinations — Phoenix and Tampa.

However, in late July, Red Way announced it was pulling the plug in early August — three months earlier than scheduled — on flights to Minneapolis, Atlanta and Austin.

That announcement did irreparable harm to the brand, said Nicki Behmer-Popp, a member of the airport authority board.

"They lost all trust by doing that," she said.

The momentum the airline had generated — and the traction gained in the market — was replaced by a loss in confidence in the company.

"As things were happening toward the beginning of August, when we kind of saw this picture developing, we asked if we needed to cancel another market," Haring said. "I was told in all honesty if we canceled any other markets, I don't think we would survive because we took such a booking hit as a result of lost confidence levels from those three markets."

The $3 million was to be used as a safety net, a minimum revenue guarantee that Red Way could dip into to ensure it would meet its expenses each month.

Olsson said he was surprised to find that one month into the new airline taking flight it had already drawn more than $928,000 — roughly one-third of the total fund — to meet expenses.

"That was an awful lot of money," Olsson said. "You kind of go into alert mode."

He wasn't alone.

An emergency Zoom meeting that included Lancaster County Commissioners Yoakum and Sean Flowerday, along with city of Lincoln officials and legal staff, was called, and Wangler did his best to assuage the panic.

"We were worried that the funds were being gone through as quickly as they were," Yoakum said.

Wangler told those on the call that projections were better in the second month, Yoakum said.

"I felt like we were heard, that our concerns were heard," she said.

However, a few days later, Yoakum said she remembers seeing a Red Way advertisement that conjured up those same concerns.

"They were advertising flights for, like, $9 or $19," she said, wondering how they could stay on budget by offering airfares at such a low price. "It made me concerned with where we were and if what we were told was accurate," she said.

A few weeks later, the July invoice with a bill of nearly $1.4 million served as the death blow to the Red Way experiment.

"Going in, we knew there was some risk here," Olsson said. "So this was always a possibility, but to see it go away in just three months is hard."

So where does Lincoln Airport go next?

Last month, the airport authority rejected a proposal to raise the mill levy an additional 0.24 cents, which would generate upward of $1 million a year to create a minimum revenue guarantee fund that could help attract another air carrier to Lincoln.

It's an issue that will have to be raised again, Olsson said. Guaranteeing revenue is standard operating procedure for small and mid-level airports, Haring said.

"I think we're gonna have to go back to the drawing board and figure out how we establish another fund to go back at the next opportunity," Haring said.

Behmer-Popp agrees that the issue will have to be revisited, but approving it last month — on the heels of a large increase in property value assessments — was a case of bad timing.

"Do I think this new levy is a tool that should be used? Yes, eventually," she said.

The Lincoln Airport saw its service gutted during the coronavirus pandemic, with the complete loss of Delta Air Lines flights to Minneapolis and Atlanta. However, it used a $750,000 federal grant to entice United Airlines to start a daily flight to Houston, with service beginning about a year ago.

United also has daily flights out of Lincoln to Chicago and Denver. But with a new $56 million terminal that is going largely unused for most of the day, Olsson said the airport authority has work to do.

"I think there's probably some things that we've learned that we can apply going forward," he said. "We're going to figure out a way to come up with something different here. This isn't the end for the Lincoln Airport.

"In fact, it's a different beginning."

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