Programs: Midwest Miles, Northwest World Perks, Alaska Air Mileage Plan, VX eleVAte, Airtran A+Reward
Posts: 1,039
Quote:
Originally Posted by knope2001
Without the backing of TPG, I doubt they have way to pull this off. With a capital infusion from TPG, it is hardly out of the question.
Have you noticed there are no details yet on layoffs? All the media reports of layoffs are *assumptions* based on parking the M80's, and some pundits (incorrectly) calculate estimated layoffs based on parking 45% of the fleet. (This is incorrect because several of the fleet are not in scheduled service now.) If there are no M80 replacements, it's an absolutely certainty that there will be widespread layoffs. But the official company word is that it is too early to talk about layoffs. That fits the possibility of M80 replacement.
These are probably both areas that the Midwest business plan needs to find improvement in before TPG will commit to further Midwest investment.
Here's what I think it comes down to. I thnk we can all agree that Midwest is suffering significant losses, just as nearly everyone is. But beyond that, I think the recent news items and events don't necessarily point the way one might think.
***Events, and Common Assumptions from those Events***
Event: Midwest announces their plan to park M80's
Assumption: Midwest is losing so much money with every M80 flight that if the don't park them ASAP they'll run out of cash.
Alternate Scenario: Midwest has no prospect of ever breaking even with the M80's unless fuel plummets, so they have no place in the plan to turn around Midwest. Park them when the current peak season ends. Delaying the inevitable is pointless.
Event: Midwest asks employees for major wage cuts
Assumption: Midwest is losing so much money that they need to cut wages 65% to have any hope of surviving.
Alternate Scenario: Midwest's business plan presented to TPG includes has identified several places where cost improvements are sought. Reducing labor cost sifnificantly (although we do not know how much) is part of that plan
Event: Midwest states plans to renegotiate lease terms with Boeing and the contract with Skywest
Asumption: Midwest is losing so much money that they need to save money on existing contracts to have any hope of surviving.
Alternate Scenario: Midwest's business plan presented to TPG includes has identified several places where cost improvements are sought. Reducing costs for 717 leases and CRJ capacity purchased are part of that plan.
Event: Midwest mentions bankruptcy as a possibility if concessions and renegotiations are not successful.
Assumption: Midwest is in such immediate precarious shape that unless everything comes right into place, chapter 11 is the only way they could buy some time.
Alternate Scenario: Midwest needs the backing of TPG if they want to turn things around long-term, and to get it they must find the cost improvements detailed in their business plan. If they cannot achieve these cost improvements in a way satisfactory to TPG through negotiations, they will use the bankruptcy court to do so.
Event: Midwest states "We may look at other fleet options for direct flights from Milwaukee or continue to serve the west coast markets via Kansas City with Boeing 717s. We're in the process of nailing down the schedule and these decisions.
Assumption: Huh?? What are they talking about?
Alternate Scenario: If Midwest is able to achieve the cost points of the business plan presented to TPG, TPG will provide the necessary cash infusion to acquire M80 replacement aircraft. If not, they have no choice but to offer west coast service via Kansas City on the 717.
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I'm still agreeing that Midwest is losing a lot of money
And I'm still saying things are very criticial at Midwest, but primarily becuase this is what they must do ASAP to demonstrate to TPG that they should invest further with Midwest...and lack of this investement will lead Midwest to stagnate at best. The "standard" assumption is that things are very critical at Midwest because they have burned through all their cash, which is not very likely at this point.
The more I think about this, the more I think this makes sense. What else would they be talking about when they say that TPG is willing to invest captial into Midwest if they can demonstrate their business plan? Just giving Midwest money to cover ongoing losses is pointless. Those financial resources instead need to be used to improve Midwest's financial outlook. And what is most needed for this? M80 replacement.
Knope you are another glass is half fuller while I respect that I disagree with your assertions. TPG/NWA overpaid for Midwest Air and now Midwest is in the red. Why would they invest more money into Midwest Air? When is enough enough? What is the point? Midwest air like all other airlines is not going to suddenly turn around and be profitable. I don't buy it.
Knope you are another glass is half fuller while I respect that I disagree with your assertions. TPG/NWA overpaid for Midwest Air and now Midwest is in the red. Why would they invest more money into Midwest Air? When is enough enough? What is the point? Midwest air like all other airlines is not going to suddenly turn around and be profitable. I don't buy it.
Well, TPG would have never bought Midwest unless they have a plan to turn it over for some profit. Even when they owned Alltel for such a short time, they still got some sort of return on it. They sure didn't lose money on them and I suspect they don't plan on losing money with Midwest. So they have no choice but to infuse money into the business and secure financing down the road for the MD80 replacement. I never implied they were going shopping for new aircraft tomorrow. I assume that if Midwest was able to stop the red ink in their books, that TPG would move forward on capital improvements in the company. Maybe 9 - 12 months down the road they can secure financing. Meanwhile, AirTran probably will try to keep MKE to the West Coast going. They have a plan right now... something Midwest does not have. Looks like TPG is in the process of making Midwest produce a plan.
Programs: Delta Gold Medallion,AA,USairways,Midwest Airlines, National Emerald Club
Posts: 1,438
Quote:
Originally Posted by flyYX
Well, TPG would have never bought Midwest unless they have a plan to turn it over for some profit. Even when they owned Alltel for such a short time, they still got some sort of return on it. They sure didn't lose money on them and I suspect they don't plan on losing money with Midwest.
What's missing here is the concept of risk. Risks are something that every business must consider. Hurricanes, snowstorms, floods, economic downturns, high fuel (or any other cost). Who knew that oil was going to +$140 barrel. Losses sometime happen and even a smart player like TPG can get burned. You don't consider your sunk cost and that is TPG's point is that before they sink another dime, they have to see a workable plan from Midwest.
Air Tran suggested that Midwest managment's go it alone strategy was high risk, and they have been proved right.
Quote:
Originally Posted by flyYX
So they have no choice but to infuse money into the business and secure financing down the road for the MD80 replacement. I never implied they were going shopping for new aircraft tomorrow. I assume that if Midwest was able to stop the red ink in their books, that TPG would move forward on capital improvements in the company.
TPG has no plan. The onus is on Midwest to come up with a plan. Notice how TPG has promised nothing? Of course TPG has a choice, they could just sell off assets. and write-off the loss. BTW TPG did not make much on the Alltel deal.
At this point any suggestion of new aircraft is ludicrous. If they inteneded to introduce a new fleet, don't you think they'd offer this as a carrot to the pilots? TPG is asking the pilots to take it in the shorts afterall.
What does the disposal of the old aircraft have to do with the ability to acquire new aircraft?
The only way Midwest has even a shot at acquiring M80 replacement is with the backing of TPG. Plain and simple. Without it, no go. With it, it's definitely dooable.
I'm merely pointing out that the bleeding must be staunched before any new capital (or lease obligations) will be invested. And according to the news reports, it is still not clear how many 717s they want to keep. (The M80s are obviously done with. But the 717 analysis certainly has to do with their estimates of long term potentially profitable routes that Midwest can sustain. Hard to know without knowing the price of oil among other things.)
TPG would have to be foolish to invest more in Midwest at this point in time. M80 replacements are not going to be what saves this airline. Shrinking to eliminate the most unprofitable routes and lowering costs through employee/lease concessions will. Only then does it make sense to think about whether it is necessary to have nonstop service from MKE-west coast.
I may be wrong. Perhaps Midwest is in better financial shape than I think. But I doubt it. Look at all the other airlines parking planes. The only thing different about Midwest is that it is also seeking significant wage concessions from its employees. That should tell you something. None of the other airlines (most of whom pay better than Midwest as is) are asking for concessions, but Midwest is.
Perhaps they are thinking that codeshare with NW through MSP would pick up some of the lost capacity and range associated with parking the MD80. Midwest would still generate some revenue, as would NW.
There would be no outlay of funds by TPG for replacement aircraft .
When the NW/DL merger completes, I believe that MSP will remain a major hub for the combined operation.
I don't understand the speculation of acquiring new aircraft at this point. Where would they fly? It's been well documented in this thread that the long haul routes have terrible yields. Does the combination of higher seating capacity and fuel efficiency actually make these routes profitable again?
Then again, oil closed at nearly $8 above the $135 level they need for the new plan to be profitable. Might not even matter.......
Perhaps they are thinking that codeshare with NW through MSP would pick up some of the lost capacity and range associated with parking the MD80. Midwest would still generate some revenue, as would NW.
There would be no outlay of funds by TPG for replacement aircraft .
When the NW/DL merger completes, I believe that MSP will remain a major hub for the combined operation.
Exactly what Northwest wants. They wanted to put a choke hold on MKE ever since the merger with Republic Airlines back in the 80's. On several occasions MKE was a sizeable focus city for Northwest. But now days Northwest enjoys siphoning traffic from MKE to their hub cities. Not good for MKE if you ask me. MKE needs to remain a hub in some form in order to attract businesses to Milwaukee and the surrounding area. No other airline was interested in MKE, so Midwest had to grow into it on their own. Midwest relies heavily on O&D from MKE to survive. Nobody wants to fly from MKE to DTW, MSP or MEM and that is why Midwest has such a huge following in Milwaukee.
Programs: Delta Gold Medallion,AA,USairways,Midwest Airlines, National Emerald Club
Posts: 1,438
Quote:
Originally Posted by flyYX
Exactly what Northwest wants. They wanted to put a choke hold on MKE ever since the merger with Republic Airlines back in the 80's. On several occasions MKE was a sizeable focus city for Northwest. But now days Northwest enjoys siphoning traffic from MKE to their hub cities. .
That is so 80s/90s. I don't think NW is quite as interested in Milwaukee anymore.
Quote:
Originally Posted by flyYX
Not good for MKE if you ask me. MKE needs to remain a hub in some form in order to attract businesses to Milwaukee and the surrounding area. No other airline was interested in MKE, so Midwest had to grow into it on their own. Midwest relies heavily on O&D from MKE to survive. Nobody wants to fly from MKE to DTW, MSP or MEM and that is why Midwest has such a huge following in Milwaukee.
The market need a little creative destruction. Perhaps one of the best things that could happen is that Midwest disappears. Milwaukee will have more service from Northwest, Air Tran, and possiblly there will be some entry from Jet Blue and Southwest. General Mitchell airport was built with taxpayer dollars for the benefit of taxpayers, not for the benefit of Midwest Airlines.
I heard a rumor that Midwest is lobbying to lower its gate lease payments. How is this good for Mitchell Airport? Can the Aiport still be viable with lower lease payments? If the airport lowers Midwest's gate payments, does it have to equitably lower other airlines leases?
I heard a rumor that Midwest is lobbying to lower its gate lease payments. How is this good for Mitchell Airport? Can the Aiport still be viable with lower lease payments? If the airport lowers Midwest's gate payments, does it have to equitably lower other airlines leases?
As a Milwaukee County Taxpayer, I would have a problem with that. Especially when county transit is in poor shape as it is. Milwaukee gate leases are low to begin with so they are going to have to look somewhere else to save money IMHO.
[quote=hazelrah;9959018At this point any suggestion of new aircraft is ludicrous. If they inteneded to introduce a new fleet, don't you think they'd offer this as a carrot to the pilots? TPG is asking the pilots to take it in the shorts afterall.[/QUOTE]
If M80 replacements are in the works, I think it is absolutely likely that this is indeed being offered as a carrot to the pilots.
Notice that the pilots union has been very silent after their initial outburst of largely second-hand, somewhat-conflicting wage cut claims?
If M80 replacements are in the works, I think it is absolutely likely that this is indeed being offered as a carrot to the pilots.
Notice that the pilots union has been very silent after their initial outburst of largely second-hand, somewhat-conflicting wage cut claims?
Plus the media has backed off too. Part of the reason is, there is no new news to report. But they have also returned to reporting only the MD80's are being parked. Time will tell of course. Sit back and watch the show.
General Mitchell airport was built with taxpayer dollars for the benefit of taxpayers, not for the benefit of Midwest Airlines.
I heard a rumor that Midwest is lobbying to lower its gate lease payments. How is this good for Mitchell Airport? Can the Aiport still be viable with lower lease payments? If the airport lowers Midwest's gate payments, does it have to equitably lower other airlines leases?
Yes, Milwaukee County would have to lower lease payments to ALL airlines, not just Midwest.
Yes, Milwaukee County would have to lower lease payments to ALL airlines, not just Midwest.
Another question that comes to mind. Doesn't Midwest have a different lease rate because of Concourse D improvements they required back in the 90's? I am sure they had to pay for the improvements somehow and it probably is part of their lease agreement. I am not exactly sure how that works. Maybe someone here knows???
Programs: United 1k, Midwest Miles, VX eleVAte, Hilton Diamond VIP
Posts: 1,219
Quote:
Originally Posted by flyYX
As a Milwaukee County Taxpayer, I would have a problem with that. Especially when county transit is in poor shape as it is. Milwaukee gate leases are low to begin with so they are going to have to look somewhere else to save money IMHO.
Good thing your tax dollars aren't going to fund the airport. Mitchell Field relies on revenue collected from the airlines, concessions, parking, etc. to pay for operations and capital improvements.
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There is no doubt that all of this negative publicity will hurt Midwest, especially with advanced bookings. That's unfortunate. However, they'll get through this crisis and will be a stronger airline as a result. I'm actually happy that they're returning to their roots and will once again dedicate themselves to the business traveler. If that means turning away someone who feels ripped-off if they have to pay more than $200 for a plane ticket so be it.
As far as going back to the business traveler, that's great with me, and probably anyone else who used to fly back when meals were served on actual plates. Although those fancy services aren't going to resurface any time soon (probably ever), the seating is what counts. It's a lot nicer not having to be shoved into an under-padded MD80 seat across the aisle from the UCB (Ubiquitous Crying Baby) and a row full of kids kicking the seat back from behind. While my twice a week air commuting days are over for the time being, but that doesn't mean that I'm going to book a bargain fare on XYZ airlines to save $150 to fly myself back and forth to PHX, then have to pay $30 to check one bag. I'd rather focus on a nicer ride than a small cost savings.
If Midwest can keep their business fares within reason, they should have no problems filling flights in and out of Milwaukee. I also agree that some vacationers will simply be forced to seek out other, more cost effective options, especially when purchasing tickets for the whole family instead of just one or two people.
Of course, the 2x2 seats are available in the front of the MD80s for the time being, but I have this thing about not paying for upgrades. I've exhausted the courtesy upgrade coupons I got. Besides, on the so-called leisure flights, even the MME pre-board means waiting for 30 children, strollers, and the enormous "carry-on" luggage. By the time you pre-board, half the plane is full anyway. I'd take a business flight any day of the week.
Last edited by 43north87west; Jun 30, 08 at 11:24 am.
Reason: grammar
