TPG knew that Midwest was on the downswing financially when they purchased Midwest.
TPG knew that to make a profit on the Midwest purchase, they'd need to inject captial into the company. TPG has done this several times before, and they know their ownership alone doesn't turn an airline around. It takes further invesement.
TPG has told Midwest that they didn't purchase them to be charitiable, and before TPG will sink another dime into Midwest, Midwest needs to show a plan on how further investment by TPG will produce a stronger company with more value to TPG.
Midwest has been working on this plan as a prerequisite to obtaining more captial from TPG. As fuel has gone up, creating the plan has becomre more difficult. The plan includes significant cost savings in several areas, including wage cuts and renegotiated leases and contracts.
Without meeting the specifics of their plan presented to TPG, Midwest won't see the captial infusion from their owners. And that's why this is so critical...not because they are down to their last $$, but because they don't have much of a future without TPG's help.
Are you with me so far?
So let's take this to the next step...say Midwest meets the specifics of the plan they have presented to TPG (with or without chapter 11). Is TPG going to say "Okay, here's some money for you to burn through". No, that's pointless, and TPG did not become the powerhouse they are doing that sort of thing. No, the captial investment would need to do something to improve Midwest's long-term value.
I don't see any more valuable thing than replacing the M80's and retaining Midwest's long-haul route system with an aircraft that can make money in those markets.
Is there a logic fault to this line of thinking?
I understand the arguement that the price of fuel has made TPG's plans unworkable, and they might eventually just take the loss and bail out of Midwest. That's always possible...although I'd like to see some evidence that TPG is at that point rather than just "feeling" it.
Beyond that arguement, however, what's wrong with the logic of this?
A lot of people have posted here and elsewhere from the position "knowing" Midwest is nearing the end based on the reported large wage concessions and the parking of the M80 fleet. And their logical next step is to think "there's no way this airline is getting new planes...they're lucky if the doors aren't padlocked by February."
Conversely, I don't think the wage concessions or the parking of the M80's signal immediate dire straits. I think they are two key points in the Midwest business plan which TPG is demanding before they'll invest further. What's dire about this is that if they fail and there is no TPG infusion, then the clock starts ticking faster and faster. Midwest essentially can't afford for this to fail, and if they need to use chapter 11 to meek the business plan for TPG, they'll do it.
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Quote:
Originally Posted by BlueHorseShoe2000
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.
Yes, BUT, could not lowered lease payments effect operations and capital improvement plans?
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Quote:
Originally Posted by knope2001
Conversely, I don't think the wage concessions or the parking of the M80's signal immediate dire straits. I think they are two key points in the Midwest business plan which TPG is demanding before they'll invest further. What's dire about this is that if they fail and there is no TPG infusion, then the clock starts ticking faster and faster. Midwest essentially can't afford for this to fail, and if they need to use chapter 11 to meek the business plan for TPG, they'll do it.
Well, you are right, there is a dearth of information and transparency. I suppose this is to be expected given that we are dealing with a private and not a publicly traded entity. It's only natural for folks to be curious however and all the outward indications are fairly negative. We'll have to disagree on the parking of the M80s and the wage concessions, I think it does indicate, maybe not immediate, but dire straits.
And to be sure, we are only hearing one side of this and that it the union side. Anytime union negotiations are taking place, there is an element of gamesmanship involved on both sides. Management is no exception and taking it to the wire is one tactic, and don't be fooled that dangling the pensions is a tactic too. Withholding information about fleet replacements I suppose could be one as well, albeit a risky one. On the one hand mangement doesn't want the union to smell cash, on the other, a replacement fleet could be a powerful incentive to accept the cuts, so I don't know.
I would not expect the pilots however to move forward without the companies financial statements, which they asked for last Thursday?
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.
Thanks but I already know about this. I am concerned about the loss of revenue if Midwest is able to have their gate lease payments lowered. I would like to see improvements continue at MKE and lower revenue may postpone those improvements.
I don't see any more valuable thing than replacing the M80's and retaining Midwest's long-haul route system with an aircraft that can make money in those markets.
Is there a logic fault to this line of thinking?
Yes -- the assumption that new aircraft will mean that Midwest makes money in the longer haul market. At current oil prices, there are very few domestic routes that are profitable for any carrier. I seriously doubt that new aircraft will make those routes profitable. If that were true, then why wouldn't NW just put a couple of A320s on the route?
Yes -- the assumption that new aircraft will mean that Midwest makes money in the longer haul market. At current oil prices, there are very few domestic routes that are profitable for any carrier.
I don't share your opinion that nearly all domestic markets are money losers even with fuel this high...rather it raises the bar for all routes so that the ratio of money makers to money losers has tipped solidly to the red. Certainly fewer routes are in the black than a year ago.
But let's go with your hyposis for a moment....very few domesitc routes make money in the current environment. Unless all carriers shut down burried by their losses and we end up with Ameriflot (or AirTrak? AmLine?), some carriers *will* emerge on the other side of the current crisis with significant domestic service.
If Midwest is going to emerge on the other side...and this has to be TPG's goal if they hope to reap much on this investment...then Midwest needs the M80 replacement for that emergence. Just turning over these high-volume leisure markets to the competition is a step backwards for them, and if they hope to grow at MKE there is benefit to them avoiding this.
So essentially even if the M80 markets are not cash cows with a 737-800 today, Midwest will be better positioned to emerge after the current crisis by having them, And by having held on to their position in these markets rather than dumping them.
Quote:
Originally Posted by TechBoy
I seriously doubt that new aircraft will make those routes profitable. If that were true, then why wouldn't NW just put a couple of A320s on the route?
We may well see NW in some of these markets if Midwest does not maintain them. However in the long term, that does nothing to enhance the viability or value of Midwest for TPG down the road. The only point of NW doing this would be as a placeholder. And from NW's perspective, if nobody serves MKE-LAX nonstop they are bound to gain a good flow of MKE-MSP-LAX passengers, so their incentive here is less.
We may well see NW in some of these markets if Midwest does not maintain them. However in the long term, that does nothing to enhance the viability or value of Midwest for TPG down the road. The only point of NW doing this would be as a placeholder. And from NW's perspective, if nobody serves MKE-LAX nonstop they are bound to gain a good flow of MKE-MSP-LAX passengers, so their incentive here is less.
I certainly foresee Airtran maintaining the West Coast destinations. They are already offering seasonal non stops.
F9 and YX are merely going through the motions at this point in time. I expect both airlines to be dead within a year, valiant efforts notwithstanding.
I certainly foresee Airtran maintaining the West Coast destinations. They are already offering seasonal non stops.
If Midwest does not backfill much of their M80 capacity one way or another, it would surprise me not to see AirTran increase MKE flights to Vegas and Florida this winter. West coast is not nearly as certain, as those markets do dry up quite a bit in the offseason. Having a monopoly alone isn't enough. For example, a couple years back AirTran did not restore IND-SFO in winter even after Northwest pulled IND-SFO for the season and AirTran could have had a monopoly.
AirTran has cut more than two dozen nonstop Florida city pairs this winter compared to last (including all their MCI-Florida nonstops) and they are going into hunker-down mode like most everyone else. So that makes it less likely in my mind that they will cover Midwest's west coast routes from Milwaukee this winter. They have specifically said they will evaluate the situation when they see Midwest's schedule.
If Midwest does not backfill much of their M80 capacity one way or another, it would surprise me not to see AirTran increase MKE flights to Vegas and Florida this winter. West coast is not nearly as certain, as those markets do dry up quite a bit in the offseason. Having a monopoly alone isn't enough. For example, a couple years back AirTran did not restore IND-SFO in winter even after Northwest pulled IND-SFO for the season and AirTran could have had a monopoly.
AirTran has cut more than two dozen nonstop Florida city pairs this winter compared to last (including all their MCI-Florida nonstops) and they are going into hunker-down mode like most everyone else. So that makes it less likely in my mind that they will cover Midwest's west coast routes from Milwaukee this winter. They have specifically said they will evaluate the situation when they see Midwest's schedule.
Knope, If I recall from one of your previous posts, didn't LAX have a 80% load factor year round. Might that be enough to cover LAX year round?
I think all of us here are waiting to see the new Midwest schedule also.
Knope, If I recall from one of your previous posts, didn't LAX have a 80% load factor year round. Might that be enough to cover LAX year round?
LAX issue isn't generally loads...it's weak yield which makes it hard to make money even with nearly full aircraft.
Onboard loads MKE-LAX and LAX-MKE for Midwest in 12 most recent months:
92.8% april 2007
92.5% may
97.2% june
92.1% july
91.2% aug
64.8% sept
79.8% oct
67.3% nov
73.9% dec
73.2% jan 2008
79.2% feb
89.7% mar
Quote:
Originally Posted by RSVP
I think all of us here are waiting to see the new Midwest schedule also.
Yup, I think that's safe to say. We're coming on two full weeks since the M80 parking plan was made public, and yet there are no scheduled changes apparent yet. Normally when Midwest discontinues or trims a route, you often see it pulled from the schedule even before it is made public. But Midwest continues to offer for sale the full complement of M80 routes. That's another reason why I think something is up beyond a simple dropping of the M80 routes. That's no guarantee that whatever is in the works will actually come to pass, but they're apparently not yet ready to confirm the market cuts.
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Quote:
Originally Posted by knope2001
LAX issue isn't generally loads...it's weak yield which makes it hard to make money even with nearly full aircraft.
Onboard loads MKE-LAX and LAX-MKE for Midwest in 12 most recent months:
92.8% april 2007
92.5% may
97.2% june
92.1% july
91.2% aug
64.8% sept
79.8% oct
67.3% nov
73.9% dec
73.2% jan 2008
79.2% feb
89.7% mar
How much of that has to do with the fact that these routes were on super 80s?
Yup, I think that's safe to say. We're coming on two full weeks since the M80 parking plan was made public, and yet there are no scheduled changes apparent yet. Normally when Midwest discontinues or trims a route, you often see it pulled from the schedule even before it is made public. But Midwest continues to offer for sale the full complement of M80 routes. That's another reason why I think something is up beyond a simple dropping of the M80 routes. That's no guarantee that whatever is in the works will actually come to pass, but they're apparently not yet ready to confirm the market cuts.
That's just a dumb move by Midwest air. Why continue tell sell seats on plains that are not going to fly? And if you decide to fly them, why state that you are going to ground them, that is just hurting profits. But then again what do you expect from Midwest's management. I agree with fly Tim's gotta go
That's just a dumb move by Midwest air. Why continue tell sell seats on plains that are not going to fly? And if you decide to fly them, why state that you are going to ground them, that is just hurting profits.
Maybe I didn't state my point well...I'll try to lay it out differently
Fact 1: The M80's are going to be grounded
Fact 2: The routes currently served by M80's are still for sale 13 days after the M80 grounding was announced
I don't think this is an error or an inept action. I believe this supports the hypothesis that Midwest is working on a means by which they will still serve these markets with other aircraft.
Among other possibilities:
--Midwest leasing or buying M80 replacement aircraft (only possible with TPG's backing, of course)
--Midwest wet-leasing capacity from another carrier who would fly as Midwest Airlines.
--Midwest code-sharing with another carrier (almost certainly NW) who would fly routes as their own brand but also sell them as YX*
And let me restate again what really gave birth to this whole idea...the company statement:
"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"
That's hardly a firm commitment, but if they had no plans other than to park the M80's, then why make this statement?
Quote:
Originally Posted by Tim34
And if you decide to fly them, why state that you are going to ground them, that is just hurting profits. But then again what do you expect from Midwest's management. I agree with fly Tim's gotta go
If Midwest is still going to fly the markets today served by the M80, it would be dumb for them to pull them from sale only to have them restored again.
If they ultimately can only backfill the current M80 markets with 717s, the worst case has them calling passengers with schedule change information unless they oversell beyond the 717 capacity they backfill with.
Will there be route/schedule/station changes in 30 days or is that the timeline for changes to be announced? I saw the mention of the MD-80 date being "fall" but does the "30 days" mean they might do changes to the 717/CRJ flying effective in 30 days?
Quote:
Originally Posted by knope2001
The "30 days" you're speaking of from the memo is the timeframe for "this restructuring" efforts to come together, not for specific changes with immediate effects to customers such as schedule changes.
What they are targeting for 30 days is for all the necessary pieces of the restucturing plan to come together, including wage concessions from union groups, renegotiated lease rates with Boeing, and modifications to the Skywest agreement. Let's say (for the sake of illustration) that the modified Skywest agreement includes reducing the Midwest Connect flying to 15 CRJ aircraft. From that point it would take quite a few days for a new 15-CRJ Midwest Connect schedule to be devised, approved, and published for the public. And that new schedule would likely not start to take effect for several weeks.
Actually, I do see one CRJ market being discontinued before the end of July. The last day of service for the 2 AUS-MCI roundtrips will be July 19, based on the schedules posted here:
