Midwest Restructuring
 

Posted on JS Online:

FRIDAY, June 13, 2008, 10:53 a.m.
By Tom Daykin
Midwest Airlines plans restructuring

Oak Creek-based Midwest Airlines Inc., facing record prices for jet fuel, is working on a comprehensive restructuring plan.

Midwest has hired aviation consulting firm Seabury APG to help create the plan, according to a memo to employees from Chairman and CEO Timothy Hoeksema. He told employees the restructuring work will be completed within several weeks.

"I remain confident that we are up to this challenge," Hoeksema said.

Company spokesman Michael Brophy said details of what Midwest is considering would not be released at this time.

Midwest, like other carriers, is reducing routes and trimming its work force because of soaring fuel costs. In April, Midwest said it would cut 109 employees, amounting to a 3.5% work force reduction.

Like all carriers, Midwest is going to have to come up with additional ways to bring in revenue. Hopefully they will be more creative than some of the other carriers. The next six months or so will be very interesting.

I wonder how drastic this restructuring will be? I think they will pick on the least performing Midwest Connect routes and they may even ground all MD80 flights.

A number of carriers have parked their MD80 aircraft. Guessing that this will become a very common practice in the industry, including at Midwest. The reconfiguration of the 717 will increase capacity, while reducing fuel expense, over the MD80.

If YX does park the MD80 fleet, they will in essence concede much of the MKE west coast/leisure traffic to AirTran, at least for nonstops this summer.

Additional info:

http://www.biztimes.com/daily/2008/6...ructuring-plan

It might make sense to dump the MD80 and rebuild the West Coast with more fuel efficient B737 aircraft in late 2008 or early 2009. I tend to believe there is that type of aircraft available to lease in the market today. AirTran is scaling back MKE after Labor Day anyway, so I don't see them as a big threat right now. But if Midwest doesn't get their act together for the 2009 spring/summer season, then AirTran will come back and put the final nail in the coffin.

$2.00 per cookie maybe.:D:D:eek:

I don't know if Midwest is in a position to take on any new aircraft at all at this point.

It would seem pretty unlikely that YX would stop serving the West Coast nonstop from Milwaukee, but if it came down to doing that to save the airline, they'd have to do it and let AirTran handle the lower-yielding leisure traffic anyway. With no YX service to the west coast, AirTran could change their minds and keep some service around post-Labor Day.

We'll have to see what they decide to do. 717 service out west from MKE would be nice, but the loads and the headwinds would have to be light if they plan on having reliable nonstop service. Travelers wouldn't like routine fuel stops in DEN, SLC or LAS. During strong headwinds, heavily loaded MD80s can't even make it to the left coast nonstop.

It was not that long ago that NW had nonstop service between MKE and LOS, LAX, PHX, LAS...maybe they will resurrect some of the service, utilizing the code share agreement with YX.

Oh great...I'm taking my family of 5 (3 first-time flyers) on a MKE-SEA non-stop flight from 6/27-7/5 and have spent tons of money on nonrefundable accomodations and travel reservations. I'm just praying that they don't cancel the MD80 flights....we don't need another fiasco!

Relax everyone. Midwest has not done anything yet. The only year round non stop west coast flight out of MKE is LAX. Big deal. If cutting LAX will save Midwest, I say that it is well worth it. I doubt that Midwest will cut more flights out of MKE as long as other carries threaten to add service. They may cut flights out of Kansas City though. Midwest Air will get through this. ^

On a side note I am flying to MKE tomorrow on FL can anyone tell me if the new C concourse is nice?

This is the Midwest forum, we wouldn't know about Concourse C, Traitor!

Would you stop being such a tool.

Overall it's fairly nice. Where they did goof is not significantly improving food service(that also could be said for concourse E). At the heart of it Milwaukee and the state needs to consider a new terminal.

Additional info from June 14th edition of Milwaukee Journal Sentinel:

http://www.jsonline.com/story/index.aspx?id=762013

MKE has just approved the construction of two new Concourses F & G but it is dependent on passenger growth as to what year construction would start.

The County Board has approved a new food and concession contract, so you will see some additional vendors within the next year. There will be a mix of local and national vendors, including Bartolotta's, Alterra, Baja Fresh and others.

The airport has adopted a master plan for two additional concourses, an expanded parking structure and an additional runway. While those items are in the plan, no timetable has been set. Depending on passenger traffic (which in the current environment will probably not rise as fast as projected), the expansion may never happen. But, if traffic continues to increase, the projects could be started within the next 10 to 20 years. No major expansion projects are in the near future for MKE.

I believe they'll be replacing the carpet within the main concession mall and ticketing/baggage claim areas later this year, for what that's worth ;)

Blehnman, you need to come out from your multiple identities you hide behind here at Flyertalk.

So Midwest hired the same firm that NW used for their restructuring?

Shocking.

Tool bag :D:D

This could get interesting. I wonder if Midwest will stop non stop service from MKE-LAX? They could add 1 or 2 717's to LAX from MKE with a stop in Kansas City. I doubt the frequent fliers would care that much. Maybe Midwest can codeshare that route with NWA and let them take that route over. Either that or Airtran, Delta or United will pick up the slack.

Just consider the source. blehman aka midwestairsux.

I follow this board because Midwest needs accountability; everything Air Tran said about Midwest was spot on- this needs to be remembered.

Just as I predicted, big changes in store for Midwest before the summer is out. Hoekseama is just continuing to play games with his "study" Honestly, at this point were I Midwest management I don't know what I'd do/ CRJ-200s and MD-80s are a toxic mix.

Concourse C is nice, but it has very limited food services.

Maybe in mid 2007 they were half right. But today they are totally wrong and I suspect very happy the merger with Midwest did not happen.

What the hell is Hoekseama going to do? You can't shrink to profitability (as the article states)? They have already cut a bunch of flights. :confused:

Air Tran said that the Midwest business model was broke and would fail (survival is not enough). A regional airline catering to the Milwaukee business community can not compete against legacies; it can not compete against LCCs.

It's a shame because Midwest had some positive qualities, it can just not reinvent itself to compete.

1) Get rid of every MD-80

2) Cancel every CRJ-200 flight where 80% load factors can not be achieved.

3) Raise fares

5) Furlough employees

Sounds about right. :(

>>>>>

Here we go again, AirTran was dead WRONG from the start.

Undervalued offer.

Unsustainable plan for Milwaukee. That has become obvious with their seasonal service they are offering. Were they planning on offering 12 daily flights to ATL year round? Fly to either coast, but only do it seasonally.

Furthermore, I doubt they had the resources to close a deal.

Nope they were right about everything they said about Midwest as follows:

1) Midwest is in survival mode; while Midwest has managed to survive, pursuing a survival strategy has high-risks in the long term.

2) Midwest's turn-around plan was stalled and was already floundering.


I never said anthing about the valuation of the deal; although in hindsight it appears that all the offerors substantially overbid.

The plan was based on a total takover of Midwest. Why do you have such problems understanding this? The seasonal service is based on the continued presence of Midwest in the market.

I suppose that FL is making a lot of money now during the busy summer season in MKE. Why should they operate during the fall and winter and lose money - then they'd be Midwest.

The purchase was based mostly on a stock offer as you know. While you can quibble about the terms, there is little doubt that they could have closed the deal given that it was mostly based on stock.

Stock that is now worth less than a 1/4 of what it was at the time of the takeover attempt. You have to admit AirTran's plan and assessment was flawed to say the least. I can't remember which hedge fund Richard Horowitz managed that bought a lot of shares in MEH to pressure a sale to AirTran, but can you imagine what he'd be saying today if his fund still owned AAI stock? I know they probably would have dumped AAI stock along time ago, but they still would have lost money in the deal. I respect your opinion but this image you project of AirTran being infallible is getting old. Both YX and FL are far from perfect.

On another note, I am getting close to buying AAI stock myself. I think it is getting close to the bottom. :p

Octavian Funds.

My bet is that Octavian was doing an arb play - meaning they'd be out of the stock at or before closing. I'd also bet that they would have hedged any AAI position, meaning that the losses would be very limited in the time it took to unload the AAI stock.

Hold out for 85 cents.:D:D

Then it was Pequot that wanted to hold onto AAI stock because they thought the price would go up after the merger. They were also worried about short term capital gains tax with the TPG/NWA all cash offer. In any case, I agree that a sale of Midwest probably was the best thing for their future in light of today's economy. I think there is room in the industry for an airline like Midwest but they have to do some drastic things to survive right now. Shrinking to profitability will not be the answer! This restructuring has to include a way to cut costs without conceding routes to another airline.

how does Midwest do that?

We will have to wait until Seabury APG finishes their assessment. It doesn't matter what I think they should do. IMHO if they contract too much it is curtains for Midwest.

I've said this many times before and I will repeat it again.

The offer and proposal were flawed from Day One. Even the three bought and paid for Airtran board members could not support a sale to Airtran. The vote was unanimous. That alone speaks volumes. If you are paying someone $40,000 just to seek a seat on the board, I think you should be entitled to their support.

John Albertine, Charles Kalmbach and Jeffrey Eriickson were at least able to see through Airtran's smoke and mirrors show. It's called integrity.

After some thought this is what I would do if I were Midwest Airlines.

1. Drop the poorest performing CRJ routes immediately. Maybe reduce frequency on some of them also.
2. Ground all MD80s after the summer flying season but keep the West Coast Stations open via the MCI Hub. Use the 717s from MCI to the West Coast through the winter months and offer the MKE Frequent flyers double or triple miles if they fly to the West Coast via MCI.
3. For 2009 have lease agreements with other airlines that are reducing their fleet size or find a leasing company with newer efficient aircraft than the MD80. Return to the West Coast with these newly leased aircraft from MKE. We all know AirTran will be back in 2009 and offering the West Coast again to MKE flyers.
4. Finally have a growth plan in place and stop sitting on your hands. There is going to be a lot of opportunity out there once the shakeup of the airline industry is over. From slots opening up in restricted airports to assets that can be purchased from bankrupt airlines.

I don’t pretend to know the airline industry inside and out… but to me these seem to be obvious things you can do right now. Just my two cents.