Republic Airlines Pt2: 1984-1986 - Wolf to Northwest

​The first five years of Republic Airlines existence had not been kind. This was largely due to the disastrous Hughes Airwest takeover, but Republic had also been assaulted in its East-coast markets by deregulation startups and failed to innovate. That cost the existing CEO his job and would see the employment of Stephen Wolf who would take drastic measures to keep the airline afloat.

For Republic Airlines Pt1: 1979-1984 Bigger Is Better? Click here

Stephen Wolf would come to be known as a turnaround specialist (although not one who was always a friend of his staff) and the start of this reputation would be forged at the failing Republic Airlines. Republic was by 1984 the USA's 5th largest passenger airline but had lost a huge $225 million in the period 1980-83 and was hamstrung with hundreds of millions more of Hughes Airwest old debt.

On February 20, 1984 the board lost patience with the existing management and installed Wolf, a young (42 years old) but experienced executive who had served his time at American, Pan Am and briefly Continental too. Wolf was dynamic, decisive and could work well with unions. 

Republic Airlines Douglas DC-9-51 N768NC (Aeroclassics 1:400 Scale)

Wolf brought in his own team and started negotiations with the employees. Within six months of his arrival he'd secured agreement for a 15% paycut and wage freezes in exchange for profit sharing, 15% stock ownership and the hiring of new staff on lower wages. This was an impressive achievement for a unionized airline like Republic.

Douglas DC-9-15 at St Louis in 1985. Jon Proctor (GFDL 1.2 or GFDL 1.2 ), via Wikimedia Commons

It was also the end of any pretensions Republic had had to become a huge nationwide airline. The number of stations had already been shrinking, as smaller destinations were cut, but now the axe was taken to the network. Formerly there were large scale operations at the former North Central hubs of Minneapolis St Paul, Milwaukee, Chicago O'Hare and Detroit, the Southern hubs of Atlanta and Memphis, and the Hughes Airwest hubs at Las Vegas and Phoenix. This number of hubs was simply unsustainable.

Republic Airlines Boeing 727-200 N274WC (Aeroclassics 1:400 Scale)

By the end of 1984 the number of destinations had been reduced from 179 to under 100 and by April 1985 the entire route network had been revolutionized. Gone where the network of point to point services and the multitude of small hubs. In their place all that remained where three mega-hubs based at Minneapolis St Paul, Detroit and Memphis. 

The closure of the extra East-coast hubs like Atlanta (where Delta and Eastern had strong hubs) and Chicago (American and United) made sense however what is obvious looking at the 1985 route map is that Hughes Airwest's old network had almost entirely ceased to exist.

Above: One of the first timetables, from October 1984, featuring the new Republic identity

Considering the vast sums of cash Airwest had cost Republic in interest payments and debt, plus the costs of assimilating the airline into itself, cutting effectively the entire airline was a brave and no doubt painful decision. Nevertheless, given the dire circumstances it was necessary. All up the Hughes Airwest mis-step must have cost Republic and its employees close to a billion dollars! Republic was still $800 million in debt.

With these cuts in place Republic had a streamlined network from which it could use its presence to create fortress hubs as bulwarks against low-cost competition. The success of the new strategy came quickly and in May 1985 traffic increased by 35% on only a 7% increase in capacity. Other marketing initiatives also assisted in the turnaround. These included better yield management, an improved first-class product offering, an enhanced loyalty programme called 'Perks', a new distribution strategy and lastly a new image.

The last was a little controversial but probably necessary. Herman the Mallard had characterized the airline for decades but the new image reduced him to a small logo near the passenger doors. Instead the new scheme, dubbed the 'Mary Tyler Moore' scheme as its font type matched closely to the titles of the popular TV show, introduced a more restrained and business-like look with subtle grey and dark red highlights. 

​The new Republic worked hard to empower its staff and promoted internally the mantra: Consistency, Quality, Productivity, Change. The new hub strategy also enabled Republic to add flights easily and to take advantage of one of the other major changes of the 1980s - commuter airlines to feed its hubs. Republic Express was formed in June 1985 and several small third level operators began operating under its name using the new BAE Jetstream 31s and Saab 340s (Simmons Airlines for example served as Republic Express out of Detroit).

The airline began to turn the corner and was for the first time since 1982 able to order new aircraft. Late in 1985 it ordered six new Boeing 757-200s from Boeing (with a further six options). The first aircraft was scheduled to arrive in December (with two others) followed by two in May 1986 and the last in June. This was not only a shot in the arm for Republic but also for Boeing, for whom the 757 had been proving a slow seller. The deal was priced at $240 million with Republic choosing the Rolls-Royce RB211-535E4 engine over the Pratt & Whitney option. The 757s were used on heavily trafficked routes to Florida and the West Coast and would be the largest type ever operated by Republic.

Republic Airlines Boeing 757 N602RC (NG Models 1:400 Scale)

​Further additions to the fleet included six second-hand DC-9s and three 727s. Within two years Republic had been transformed into the USA's 2nd most profitable airline (in 1984 Republic made nearly $30 million) and its stock price had risen from $3 a share in 1982 to $14 a share. This was partly as the new Republic was a hot takeover prospect in the era of mega-mergers. For many airlines bigger was still better. In fact, as early as mid-1985 Wolf had begun secret talks with Northwest's new CEO Steven G. Rothmeier. During the year there was much discussion that either American or Delta would launch a takeover bid and it is said that Wolf himself was even tempted at a reverse takeover of the larger Northwest Orient Airlines.

​In the end Northwest struck first and on January 23, 1986 it was announced that Northwest would acquire Republic (still the USA's 7th largest airline) for a whopping $884 million ($17 a share). This would create the USA's 5th largest airline behind only United, Eastern, Delta and American. By this time the cat had been out of the bag for a while as Rothmeier had stated that Northwest would be forced to acquire a major domestic airline if United was allowed to acquire Pan Am's Pacific network. The new international United would otherwise have provided too strong a force against Northwest’s long-haul Pacific network fed as it was by its huge domestic route system. 

Republic's 15.2 million domestic passengers would provide Northwest the domestic heft to compete. For Northwest the merger made a lot of sense. It already shared with Republic ​Minneapolis St Paul as its headquarters and in fact together they had a 90% marketshare from the hub. Republic had three large domestic hubs and could feed Northwest's Pacific gateways of Seattle, San Francisco and Los Angeles. 

Given the synergy, indeed near monopoly, between Republic and Northwest you would expect that the deal would have struggled to get permission, however with the free-market Reagan White House this proved little difficulty. The merger was approved on July 31, 1986 and at the same time Northwest dropped Orient from its name. Long before the official merger date of September 30 Republic began painting its fleet in hybrid colours and indeed several of the new 757s never wore the full Mary Tyler Moore scheme. 

Republic Airlines Boeing 757 N604RC in the Northwest hybrid scheme (NG Models 1:400 Scale)

Wolf resigned his post as president, CEO and director of Republic on August 5, 1986 and would go on to undertake similar turnarounds at Flying Tigers, United and USAir, although as with Republic the airlines would never be the same, or always indeed survive, after he had turned them around. He had certainly saved Republic, turning it into a lean hub and spoke style modern airline, but at the same time in saving it he had doomed it as an independent carrier.

Northwest Airlines (Republic hybrid) Douglas DC-9-51 N777NC (Aeroclassics 1:400 Scale)

​The merger with Northwest would not prove to be a smooth affair but the result was that Northwest was for many years able to weather competition using its fortress hubs and strong international network. The combined airline operated around 312 aircraft and it is perhaps fitting that Northwest kept on the vast majority of the Republic fleet well into the 2000s. Certainly the end for Republic was better than for many of its peers.

Of all the Republic fleet somewhat ironically it was the newest fleet members, the 757s, that left the fleet first (even before the ancient Convair 580s, which were retired by November 30, 1988). Northwest's own 757 fleet was powered by Pratt & Whitney engines rendering the 6 Republic aircraft orphans. All six were sold to America West in mid-1987 and made it through the mergers into the fleets of US Airways and then American Airlines.

References
 
1985, October. Boeing hoists in sales. Flight International
1986, January. Northwest to Buy Republic. New York Times
1986, August. Wolf Quits Republic Airlines Posts. Chicago Tribune
Britten, R. 2017, June. Airline Mergers Don’t Work Without the Right Leadership: The Case of the Former Republic Airlines. Eno Transportation Weekly
Jones, Geoff. Northwest Airlines: The First Eighty Years