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Midwest 'racing' to avoid bankruptcy filing
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Pressure appears to be mounting on Midwest Airlines. The Wall Street Journal (subscription required)says the company "is racing to craft a restructuring plan to avoid a bankruptcy-court filing." Midwest has already said it will ground 12 of its 37 jets, retiring its fuel-guzzling MD-80 aircraft. Midwest CEO Timothy Hoeksema also has warned of layoffs and has called on the many airline's remaining frontline workers to take pay cuts of up to 65%, according to the Milwaukee Journal Sentinel. Hoeksema's call seems to have some urgency, according to the Journal. He calls the airline's situation "critical" and warns the airline's restructuring plan must be put into action within 30 days "to make sure we have the cash level necessary to operate."
The Journal writes "Hoeksema said TPG (Capital) has agreed to provide support in the interim, but won't invest in a restructuring plan unless Midwest's vendors, business partners and employees also agree to sacrifices." TPG became Midwest's majority owner earlier this year (53%) after outbidding AirTran, which was in the midst of a hostile-takeover attempt of Midwest. Northwest signed on as a passive investor (47% stake) as part of that bid. A Northwest spokeswoman would only tell the Journal that "as a passive investor, we are assessing the situation."
Meanwhile, the Journal Sentinel writes some pilots union officials have received reports that Midwest executives may also have "plans to phase out five of its Boeing 717s. Combined with the elimination of the MD-80 jets, those additional aircraft cuts would reduce the airline's fleet by about half." Midwest spokesman Michael Brophy says the company has not made a final decision on how many jets it will cut.
"We have been transparent in communicating to our employees that there are sure to be reductions in work force and benefits through most parts of the organization, but that they will be fair and equitable," Brophy says in a statement quoted by the Journal Sentinel. "Obviously, Chapter 11 is not our most desirable destination. That's why we're working on this restructuring plan, so we can avoid that scenario."
Meanwhile, the airline's unions have so far balked at the proposed pay cuts, which would top out at around 65% for pilots and 56% for flights attendants, according to the WISN TV of Milwaukee. Jay Schnedorf, head of the Midwest pilots union, tells the Journal Sentinel that one wage-cut scenario would drop some pilots' pay from around $120,000 to a figure into the low-$30,000 range. "It's a catastrophic impact on the families," he tells the paper. Dory Klein of Midwest's flight attendants union adds: "We've sacrificed so much. We really don't have much more to give."
The Journal Sentinel goes on to suggest that Midwest's latest flight cuts could give a new opening for AirTran in Milwaukee. Without its MD-80 jets, Midwest will no longer be able to fly to some of its West Coast destinations with its remaining Boeing 717s. At least one industry consultant -- Vaughn Cordle of Airline Forecasts –- says he thinks its possible outcome for Midwest is that its reduced operation could simply be folded into that of passive investor Northwest. "It appears to me that the Midwest fleet is no longer needed," Cordle says to the Journal Sentinel. But officials at Delta, which would take over NWA's 47% share in Midwest if the proposed Delta-NWA merger goes forward, say they intend to keep Midwest flying as a standalone carrier.
But officials at Delta, which would take over NWA's 47% share in Midwest if the proposed Delta-NWA merger goes forward, say they intend to keep Midwest flying as a standalone carrier.
This seems to be one of the most important statements of the posting.
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Quote:
Originally Posted by Tim34
Meanwhile, the airline's unions have so far balked at the proposed pay cuts, which would top out at around 65% for pilots and 56% for flights attendants, according to the WISN TV of Milwaukee. Jay Schnedorf, head of the Midwest pilots union, tells the Journal Sentinel that one wage-cut scenario would drop some pilots' pay from around $120,000 to a figure into the low-$30,000 range. "It's a catastrophic impact on the families," he tells the paper. Dory Klein of Midwest's flight attendants union adds: "We've sacrificed so much. We really don't have much more to give.".
It's quite a haircut to ask the unions to take. I've tried to consider the end game, and it's clear in my mind that if the unions refuse the wage concessions, then TPG, Hoeksaema, NW whoever is in charge there at Midwest will take it Chapter 11. Then YX will ask the BK court to abrogate the union contract and impose even greater wage cuts, and they throw the pension responsibilities on the gub'mint.
Now it's just a PR game. If the union refuses to budge, management can say "we tried to work something out with unions" and the unions get the blame. I suppose that if the unions agree, maybe they get to keep their pensions, very sad.
It's quite a haircut to ask the unions to take. I've tried to consider the end game, and it's clear in my mind that if the unions refuse the wage concessions, then TPG, Hoeksaema, NW whoever is in charge there at Midwest will take it Chapter 11. Then YX will ask the BK court to abrogate the union contract and impose even greater wage cuts, and they throw the pension responsibilities on the gub'mint.
Now it's just a PR game. If the union refuses to budge, management can say "we tried to work something out with unions" and the unions get the blame. I suppose that if the unions agree, maybe they get to keep their pensions, very sad.
Given that these massive cuts supposedly allows profitability up to $135/barrel oil and yesterday it closed at $142 are they simply delaying the inevitable at this point?
As a frequent business traveler on YX who has about a six month break from travel this year it is hard to believe that it is possible I have already taken my last Midwest flight. It always seemed like a point of pride that our fair city has a little airline to call our own.
Given that these massive cuts supposedly allows profitability up to $135/barrel oil and yesterday it closed at $142 are they simply delaying the inevitable at this point?.
Inevitable meaning going out of business or actually charging a fare that will turn a profit? Fares will have to rise sometime, so stop the ancillary stuff and just do it.
Quote:
Originally Posted by codejockey
It always seemed like a point of pride that our fair city has a little airline to call our own.
I feel the same way. People from outside of Milwaukee and Wisconsin don't seem to understand that feeling. I think if comes from a lot of loss in industry in the 70's and 80's here like Allis Chalmers. All we have left is a burb named after the company called West Allis. We would like to have something of our own, be proud of it and share it with the rest of the country. What is wrong with that?
Last edited by flyYX; Jun 27, 08 at 10:48 am.
Reason: typo
Inevitable meaning going out of business or actually charging a fare that will turn a profit?
I meant bankruptcy and possible liquidation. One can always argue that a 50% wage cut is better than a 100% wage cut but I'm not so sure that's always true. Is there a level at which, as an employee, one decides that you are better off somewhere else? Think of it this way... say you are facing a 50% wage cut right now no matter what you do. Would you take that wage cut at the company that is asking for it in the first place or take the wage cut by starting over someplace else that might be around longer?
My biggest concern is that their restructuring plan is for $135 oil, which is basically betting the farm on calling a top in the oil market right now. It really sucks it has all come down to this.
I have found Midwest to be extremely competitive on advance purchase fares over the last year or two, but significantly higher on last-minute bookings, which usually price out at refundable fares. Unfortunately, this means that the business traveler is paying the premium. It could be that the only seats remaining at the time of a late booking are the C or Y fares.
Last minute is the only time I can say with confidence that WN almost always is a better deal. Especially considering fees and surcharges.
I meant bankruptcy and possible liquidation. One can always argue that a 50% wage cut is better than a 100% wage cut but I'm not so sure that's always true. Is there a level at which, as an employee, one decides that you are better off somewhere else? Think of it this way... say you are facing a 50% wage cut right now no matter what you do. Would you take that wage cut at the company that is asking for it in the first place or take the wage cut by starting over someplace else that might be around longer?
My biggest concern is that their restructuring plan is for $135 oil, which is basically betting the farm on calling a top in the oil market right now. It really sucks it has all come down to this.
I'd say their plan is already flawed because oil is going up as we speak and it doesn't seem to have a ceiling at this time. Oil is at $142 per bbl and projected to hit $150 soon. Is this a bubble or the sign of the times? If it is the sign of the times, then a lot more airlines will disappear and the ones left will be able to command a better pricing structure to cope with the high fuel prices. I don't know how an airline can survive today by charging the same fares or less than what they charged in the 80's. I remember paying $300 to $375 RT FLL - MKE in the mid 80's. I thought it was expensive, but then I was making a lot less money at the time. Back then flying was more of a luxury to middle class people too. Things are going to change fast.
I cannot believe YX- they should have retired the Super 80's a LONG time ago. YX can use their 717's on routes from MKE-MCO, I flew on one and it was around Christmas 06, and it was about 100% load factor. Thankfully I am able to go to sleep because almost every night at 7:30 I hear MD-80 YX arrivals from the west coast roaring down to 7R @ MKE (I Live Near MKE).
I cannot believe YX- they should have retired the Super 80's a LONG time ago. YX can use their 717's on routes from MKE-MCO, I flew on one and it was around Christmas 06, and it was about 100% load factor. Thankfully I am able to go to sleep because almost every night at 7:30 I hear MD-80 YX arrivals from the west coast roaring down to 7R @ MKE (I Live Near MKE).
