American Airlines announced the termination of their capacity purchase agreement with Air Wisconsin. The agreement will conclude in April 2025, prompting Air Wisconsin to realign its business strategy to focus on Essential Air Service (EAS) Program markets and expand its charter operations. Similar to how Contour Airlines currently operates.
Termination of Capacity Purchase Agreement by American Airlines
American Airlines has decided to end its capacity purchase agreement with Air Wisconsin. The airline has begun reducing its schedule operated by Air Wisconsin starting in March, with the final Air Wisconsin-operated flights for American scheduled for April 3, 2025.
In a statement, American says this decision is part of American’s ongoing evaluation of its regional network to optimize operations and enhance customer service. American Airlines expressed gratitude for the contributions of the Air Wisconsin team over the past two years, acknowledging their instrumental role in supporting Americans’ regional operations. American Airlines also emphasized its commitment to minimizing disruptions for customers and working closely with regional partners during this transition.
Air Wisconsin’s Strategic Restructuring
In response to the termination of the capacity purchase agreement, Air Wisconsin is shifting its focus towards federally subsidized EAS routes. These routes are essential for providing air connectivity to rural and underserved communities, offering vital transportation links that might otherwise be unavailable.
Air Wisconsin’s fleet of sixty 50-seat CRJ-200 aircraft will be used for EAS markets. The aircraft provide the necessary capacity and operational flexibility to meet the unique demands of these routes.
Expansion into the Charter Market
Alongside its focus on EAS, Air Wisconsin is also expanding its charter operations. The airline has seen growing demand for its CRJ-200 aircraft, particularly among NCAA sports teams. The realignment of major athletic conferences has increased travel distances for teams, both during the regular season and post-season tournaments. Air Wisconsin’s fleet is well-equipped to cater to the needs of collegiate teams and other private and group charter customers seeking customized travel solutions.
Financial Stability and Future Outlook
Air Wisconsin recently retired all remaining debt on its aircraft, providing the airline with enhanced financial flexibility. This financial stability positions Air Wisconsin to effectively navigate its new strategic direction and continue delivering reliable air travel solutions.
Robert Binns, President & CEO of Air Wisconsin, commented, “This restructuring underscores our adaptability and commitment to delivering customized air travel solutions where they are most needed. As we diversify into EAS and grow our charter operations, we remain dedicated to providing safe, efficient, and quality service to every community and customer we serve.”
This strategic restructuring marks a new chapter for Air Wisconsin as it adjusts its operations to focus on areas where it can deliver the most impact, following the conclusion of its partnership with American Airlines.
Analysis
This is not good news for small cities across the country that depend on air service. These communities have already been hit hard by service reductions, and it seems that trend will now continue. In this analysis, I’ll speculate on what might happen next and briefly discuss Air Wisconsin’s restructuring plans.
American Airlines currently wholly owns Pacific Southwest Airlines (PSA), Piedmont Airlines, and Envoy. It also contracts with SkyWest and Republic Airways under the American Eagle brand, both of which are independently owned.
My hope is that no cities lose routes and that instead, frequencies are reduced. Additionally, some reshuffling among the regional airlines could help fill the gap left by Air Wisconsin’s departure. However, I admit this is wishful thinking. It is more likely that some cities will lose service. While other cities get upgraded to larger aircraft. We’ll have to wait and see what decisions are made at Skyview. Either way, this isn’t great news for small towns that depend on regional service. Something else to note is American previously retired the CRJ – 200 only to bring it back into service. Now American is retiring them again.
As for Air Wisconsin, I’m not optimistic about their long-term survival. I certainly hope I’m wrong, but the CRJ-200 isn’t the most efficient aircraft. The problem with focusing on EAS routes is that there are very few of them, and more (smaller) airlines are now competing for these routes. Additionally, if an airport leaves the EAS program, it cannot re-enter. Air Wisconsin could start flying scheduled service under its own brand, but this would likely put them in competition with stronger carriers. ExpressJet tried this with AHA! several years ago and had to cease operations. The CRJ-200’s lack of fuel efficiency is a significant disadvantage.
I believe the only viable path forward for Air Wisconsin is its charter operations. Even SkyWest has a charter division. I do wish Air Wisconsin had invested in newer aircraft from either Embraer or Airbus (such as the A220). However, scope clauses with legacy airlines severely limit their expansion possibilities. Therefore, Air Wisconsin’s long-term survival remains in question. I wish them the best of luck!
