It appears that Lincoln, Nebraska’s longshot play to get more air service has now failed.. and remarkably quickly. The creative but risky Red Way operation has announced it will shut down at the end of this month. There is going to be a lot of anger and finger-pointing in Nebraska.
I got much deeper into the Red Way saga than I ever expected after talking to both the Lincoln Airport (LNK) and the organizing founders. I’ll admit that I was fascinated by the whole plan. The local governments and LNK wanted more air service, but they couldn’t get it. So, they used some of their COVID money to stand up a public charter (yes, Part 380!) operated by a third-party carrier to fly from Lincoln to several leisure destinations a couple of times a week.
David Haring, Executive Director at LNK, contracted with what became Fly Next LLC — created by former Allegiant planner Nickolas Wangler — to put this whole structure together. The $3 million in COVID money was meant to be a backstop to support the airline in the (obviously very likely to everyone outside of Lincoln) case that it wasn’t profitable on its own.
With no risk for Fly Next, this was an easy sell, but Nick was confident in the model. He told me back in April that the “model that we’ve built out says we shouldn’t have to touch that money.” That was very clearly an inaccurate model.
Apparently, Fly Next took down $900,000 of that money in the first month alone and then it needed more in the second month. With at least $2 million of the $3 million burned in such a short period of time, Fly Next decided to pull the plug on the whole operation. The agreement had a 30-day out for either party to cancel, but it looks like Red Way only gave a week’s notice that it would shut down on August 31.
So what happened?
Red Way gave little information about exactly why it was shutting down so quickly, but it did give some clues. In the statement that was emailed to me by Red Way, there was this:
However, we face insurmountable challenges as a small startup in our industry, and the compounding of costs and lack of resources have made it impossible for us to sustain operations. It is our hope that other carriers see the incredible potential, and with their economies of scale, are able to provide Lincoln with the service it is so worthy of.
In an email, the person running the day-to-day for Fly Next, Sarah Riches, told me:
Demand existed in Lincoln for expanded air service, however as a small player the economies of scale were not there to make the cost side of the equation work as revenues built.
This would suggest that revenues were perfectly fine but the costs were the issue… but it’s hard to imagine how that’s true. Sarah did say that they flew over 19,000 passengers, so let’s do a little math, shall we?
After combing through ops data, it looks like Red Way has flown 130 departures from Lincoln for a total of 260 flights roundtrip. If we divide that by 19,000, we get just over 73 passengers per departure. Let’s call it 75 since the airline did say “more than” 19,000.
It looks like N281GX operated these flights, and that airplane was configured with 150 seats. So, the airline was operating half full.
Now it’s entirely possible that there were some diamonds in the rough here. Red Way did end Atlanta, Austin, and Minneapolis/St Paul earlier than planned for the summer season, so we can assume those were the worst performers. Maybe Orlando and Las Vegas were rock stars, but we just don’t know. All we know is that if you’re going to fly your airplanes around half-full, you aren’t going to make money.
If Orlando and Las Vegas were solid performers, then that would certainly help explain what Fly Next was saying when it said that it hopes other airlines with economies of scale take over. Those are both prime Allegiant markets. Allegiant isn’t exactly growing these days and hasn’t shown interest in Lincoln in years, but it would undoubtedly have lower operating costs than Red Way.
This looks like an enormous failure on the surface, but we can’t know that for sure just yet. I would say that if any airline steps into LNK to fly to a couple of these destinations, then Red Way did its job in proving that a market exists. Was it worth the $2+ million? That’s a question for the people of Lincoln, but if that doesn’t happen then it will certainly have all been for naught.