Lincoln, Nebraska, is losing an airline at the end of summer.
Red Way, a budget startup that some saw as an ill-fated attempt to revive commercial airline service in Nebraska’s capital, is ceasing operations on Aug. 31, the startup announced in a Facebook post on Wednesday.
The startup lasted just over two months at Lincoln Airport (LNK), operating its inaugural flight on June 8.
Red Way said it faced mounting challenges as a small startup solely focused on Lincoln, as “compounding costs and a lack of resources” made it impossible for the airline to sustain its 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,” the Facebook post read.
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Sarah Riches, chief marketing officer of Red Way, declined to comment further to TPG on the matter, saying, “Our focus is on ensuring customers receive prompt assistance.”
Red Way alerted Lincoln Airport officials earlier this week that its service had run into trouble, according to the Lincoln Journal Star.
“The Lincoln Airport Authority Board is disappointed by the ultimate outcome of Red Way’s service in Lincoln,” Lincoln Airport Authority chairman John Olsson said in a statement.
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Lincoln Airport did not respond to a request for comment by the time of publication.
Without Red Way, Lincoln Airport is down to only United Airlines for carriers that service the airport. United flies to its hubs in Chicago, Denver and Houston from Lincoln.
Red Way first made headlines in March, receiving extensive coverage in local news outlets and airline industry blogs for betting big on Lincoln, one of many small U.S. cities that have fallen victim to declining commercial air service caused by the persistent pilot shortage and other operational pitfalls coming out of the coronavirus pandemic.
The startup did not operate flights but instead acted as a “virtual airline,” handling bookings and sales on its website, while Florida-based charter operator Global Crossing Airlines operated the flights.
Red Way originally planned to sell flights to a total of seven U.S. cities, ranging from popular leisure destinations like Orlando and Las Vegas to other cities like Atlanta, Dallas and Minneapolis.
Currently, Red Way’s website appears to only sell flights to Dallas, Las Vegas, Nashville and Orlando — with no service listed beyond Aug. 31.
Red Way’s business model got off the ground thanks to a revenue guarantee from a $3 million COVID-19 relief fund that Lincoln received through the American Rescue Act. A revenue guarantee is when an airport or a community pledges a minimum amount of revenue a carrier will earn once it launches service. If a carrier does not meet that revenue guarantee, the airport or community then has to make up the difference between what was earned and what was guaranteed as the minimum.
In the case of Red Way, the startup swiftly burned through the $3 million, according to the Lincoln Journal Star. Within the first month of service, Red Way used up $900,000 and then withdrew even more funds the next month, the newspaper reported.
Red Way CEO Nickolas Wangler was optimistic about Red Way’s prospects in an interview with TPG in April, saying that he believed Red Way could increase travel out of Lincoln Airport.
“We’re not building a market that isn’t there. We’re simply just trying to recapture some of what we’re losing every day anyway,” he said at the time.
However, others were skeptical about Red Way’s long-term viability in Lincoln, which sits about 60 miles away from a busier airport in Omaha, the state’s largest city.
Henry Harteveldt, a travel industry analyst and founder of advisory firm Atmosphere Research Group, said in April that airlines don’t operate many flights out of Lincoln because of the low passenger traffic coming out of the city.
“Naming the airline ‘Red Way’ makes sense, as I expect the airline will hemorrhage money,” Harteveldt said previously.
The name Red Way was a nod to the University of Nebraska, the flagship state university that has a dominant presence in the capital and is known around the country for its red-clad Cornhuskers sports teams.
Red Way said in the Facebook post that it would fully refund any flights booked past Aug. 31.