Midway Airlines was an airline in the United States based in Chicago, Illinois. It was incorporated on October 13, 1976, by Kenneth T. Carlson, Irving T. Tague and William B. Owens, filing with the Civil Aeronautics Board (CAB) for an airline operating certificate. Although it received its operating certificate from the CAB prior to the passage of the Airline Deregulation Act in 1978, it was viewed as the first post-deregulation start-up. The airline commenced operations on November 1, 1979.

The airline was notable for breathing new life into Chicago Midway Airport, which was almost deserted when Midway started operations. The carrier was also notable for pursuing at least three distinct business models during its existence, starting as a discount carrier, then transitioning to an all business-class airline before evolving into a more conventional hub carrier.

Midway was never highly or consistently profitable, but unlike many bigger and/or more prominent airlines (e.g. Braniff, People Express, Western Airlines and Piedmont Airlines) which disappeared through bankruptcy or mergers, it survived the 1980s. Unfortunately, the carrier collapsed soon after attempting to grow substantially by purchasing the Philadelphia hub of bankrupt Eastern Air Lines, filing Chapter 11 bankruptcy in March 1991. A deal was struck to sell the company to Northwest Airlines, which backed out at the last minute, leading to Midway's ultimate shutdown in November 1991.

A group of investors, including Carlson, bought the airline's name (for $20,000) and started another Midway Airlines, which flew from 1993 to 2003.Founder of Midway Air Recycling Name, Chicago Tribune, August 11, 1993

History

June 1976: Representative Fary and Lamar Muse In June 1976, Lamar Muse, founding president of Southwest Airlines, testified to Congress. Representative John G. Fary, whose district contained Midway Airport, asked if Muse had any ideas how to revive the airport, then “virtually a ghost town”. Muse said, in part, “…you could do exactly the same thing at Midway that Southwest has done at Love Field in Dallas…” Muse said he discussed this idea in the offices of airline consultants Simat, Helliesen & Eichner (SH&E), where partner John Eichner was a friend of Muse. Two other SH&E consultants took the idea to former Hughes Airwest executive Irving Tague and incorporated Midway Airlines (October 13, 1976)Opencorporates record of Midway Airlines incorporation to be first in line with the CAB with this idea. Founder Kenneth Carlson was in fact an SH&E vice president immediately prior to starting Midway Airlines. In response, Muse created a subsidiary, Midway (Southwest) Airway Co., which also applied to the CAB. Muse wanted to connect Midway Airport to 15 cities about 200–500 miles from Chicago, while Midway Airlines took a smaller list of six cities to the CAB.

Midway Airport was a flashpoint for critics of airline regulation because the CAB-regulated industry failed to resuscitate the airport, a priority for the City of Chicago and the Illinois congressional delegation. Muse said in July 1977 Congressional airline deregulation hearings (when total airline service at Midway was two Delta flights/day) that, based on its experience in Texas, Southwest would, within a year, carry five million passengers per year through Midway with 92 737 departures/weekday (79 per day on weekends). But Southwest's board of directors was not supportive and Midway became a focus of Muse's feud with Southwest founder Rollin King, which led to Muse's resignation from Southwest in March 1978. This helped clear the way for Midway Airlines. Muse accurately predicted Midway's future importance to Southwest: as of March 5, 2024, Southwest scheduled up to 249 departures per day at Midway.Southwest Airlines City Facts for Chicago (Midway), accessed April 2, 2024 Midway Airport reached Muse's predicted five million annual passengers/year in 1987.

1976 – November 1979: extended gestation Midway Airlines' progress from concept to reality reflected the progress of US airline deregulation, for which the inflection point was the high-profile 1975 Senate hearings on the CAB by Senator Ted Kennedy. Prior to these, certification of significant new airline was unthinkable, it hadn't happened in decades. After the hearings, there was a sense of possibility, which is why, in 1976, the idea of Midway Airlines was plausible. In 1977, President Jimmy Carter appointed economist Alfred Kahn to run the CAB with a mandate for reform, changing the nature and tempo of CAB decisions. The Carter administration and Congress were in favor of opening up Midway Airport to low-cost air travel.Cut-rate Midway flights OKd by U.S. Chicago Tribune, December 3, 1977 The CAB announced in August 1977 that it would decide the Midway airport proceeding by August 1978, incredibly fast by prior CAB standards.

The August 1978 CAB ruling (against a backdrop of the Airline Deregulation Act going through Congress) was good news/bad news for Midway Airlines; it got what it wanted but so did everyone. Midway argued to the CAB that it deserved (as the self-proclaimed innovator) Midway Airport to itself, at least for a time, to become established. But the CAB noted Southwest might be the innovator (see prior section) and projections showed Southwest to be the low-cost applicant. Nonetheless, Midway, Southwest and local service airline North Central each got all six routes and Northwest and Delta got the select Midway routes they asked for. In addition, Midway and the Southwest Midway subsidiary were both given economic certification as well. Further, the CAB opened another proceeding for another 24 Midway Airport routes. Given what looked like substantial future service at Midway Airport, there were serious doubt Midway Airlines would attract sufficient investment.Midway Airlines can’t get backing, Chicago Tribune, December 17, 1978

However, only Midway Airlines made subsequent moves toward Midway Airport, because as of January 1979, deregulation opened up the entire United States to airline competition.Midway budget flights in spring, Chicago Tribune, November 13, 1978 While Southwest continued to participate in Midway CAB cases, it took no practical steps towards service: Southwest would not enter Midway until 1985. Even with the way relatively clear, Midway Airlines found it hard to raise money, Chicago investors were generally uninterested.Lot of groundwork preceded first flight of new airline, Chicago Tribune, October 31, 1979 On August 2, 1979, Midway announced it had raised $5.7mm from 16 private investors, allowing the airline to head towards a November 1, 1979 launch.New airline to offer low-cost rates from Midway to 3 cities, Chicago Tribune, August 3, 1979 In September 1979, the CAB gave 15 airlines the right to fly those other 24 routes from Midway. One was Federal Express, having obtained Boeing 737-200QC aircraft with which it wanted to fly packages at night and passengers during the day. This was FedEx's “Project Torso”, in which FedEx founder Fred Smith briefly considered the idea of passenger service. At the time, FedEx had a highly profitable monopoly on overnight delivery growing at 40% per year.Federal Express Seeking Expansion Area Memphis Commercial Appeal, September 10, 1978 Ultimately, none of the 15, other than Midway, used this broad new authority.

+ Midway Airlines Financial Results, 1980 thru 1990 (USD mm) 1980Air Transport Association 1981 Annual Report 1981Air Transport Association 1982 Annual Report 1982Air Transport Association 1983 Annual Report 1983Air Transport Association 1984 Annual Report 1984Air Transport Association 1985 Annual Report 1985Air Transport Association 1986 Annual Report 1986Air Transport Association 1987 Annual Report 1987Air Transport Association 1988 Annual Report 1988Air Transport Association 1989 Annual Report 1989Air Transport Association 1990 Annual Report 1990Air Transport Association 1991 Annual Report Op revenue 25.0 73.9 94.7 103.3 148.0 193.4 261.4 340.7 388.0 463.0 614.8 Op profit (loss) 8.8 4.5 (12.3) (13.0) 0.9 11.1 25.0 13.5 (13.5) (84.5) Net profit (loss) (5.0) 7.6 0.3 (15.0) (22.0) (3.6) 9.0 19.8 6.5 (21.7) (139.2) Op margin 11.9% 4.7% −11.9% −8.7% 0.4% 4.2% 7.3% 3.5% −2.9% −13.7% Net margin −20.2% 10.2% 0.4% −14.5% −14.8% −1.9% 3.5% 5.8% 1.7% −4.7% −22.6%

November 1979 – July 1982: original no-frills business model Midway started on November 1, 1979, on three routes: Detroit, Cleveland and Kansas City. Midway's original business model remained inspired by Southwest, but instead of Southwest's 118-seat 737s, Midway started with three 83-seat DC-9-10s.Midway will run with 3 leased DC-9s, Chicago Tribune, October 31, 1979 Midway's fares were below those of conventional competitors at O’Hare, and no onboard catering was offered. In 1980, it expanded to five DC-9-10s.Midway flaps wings harder, Chicago Tribune, June 1, 1980 The airline ran unconventional offers such as penny sales, offering the return trip at a penny with the outbound at the usual fare to fill up off-peak days.Midweek penny sale, Chicago Tribune, August 3, 1980 At times this caused chaos as customers rushed to the airport to buy such tickets.‘Penny’ fares bring stampede, Chicago Tribune, January 29, 1980 Still, the strategy worked; Midway was solidly profitable in 1981 (see nearby table), in only its second full year of operation. The 1981 operating margin was the highest full-year operating margin Midway would ever attain.

Early Midway was marked by significant management turnover. Some founders (like Carlson) were gone by 1980 and in early 1982, Irving Tague took a leave of absence for “personal reasons,” with David Hinson becoming acting chair.Midway Air chief takes leave, Chicago Tribune, March 9, 1982 Gordon Linkon, formerly of Frontier Airlines, was made President in 1980,He takes a gamble on Midway, Chicago Tribune, August 20, 1982 embracing the low-cost ethic. Midway went public in December 1980, 850,000 shares at $13.50.Midway offer sold out, Chicago Tribune, December 5, 1980 But the board was dissatisfied by the airline's discount image and some of those promotions. Chicago was particularly badly affected by the extended disruption caused by the August 1981 air traffic controllers strike. United Airlines grounded 50 aircraft, and Midway found itself unable to fully employ eight DC-9-30s it acquired from Ansett Australia.O’Hare could lose ‘busiest’ status, Chicago Tribune, March 18, 1982 A new Boston route failed in the face of severe competition.Midway feeling growing pains, Chicago Tribune, March 17, 1982 Consequently, results for the first quarter of 1982 were poor, as with the rest of the industry. In a long-planned move, directors fired Linkon in July 1982,Ex-Federal Express Boss to join Midway, Chicago Tribune, July 30, 1982 shortly after Midway achieved a profitable second quarter, one in which most of the industry made a loss.Midway Chairman Appointed After a Search of Three Months, Omaha World-Herald, August 5, 1982

July 1982 – Spring 1985: Metrolink and Midway Express