Airline Secures $60 Million In Funding... But At A High
Price
Midwest Airlines announced Wednesday "significant progress" in
its ongoing quest to remain in business. The Milwaukee-based
airline said it has secured $60 million in additional financing,
including commitments from TPG Capital and Republic Airways
Holdings, an Indianapolis-based airline holding company.
Timothy E. Hoeksema, Midwest Airlines chairman and CEO, said $40
million of the additional financing has already been funded, with
an additional $20 million committed to be funded upon completion of
certain milestones in the airline's voluntary restructuring
plan.
"This commitment of additional financing provides us the best
opportunity to preserve what our customers and communities have
always valued from our airline, while positioning us for a return
to sustained profitability and future growth," Hoeksema said,
adding that under the agreement, Northwest Airlines will continue
its codeshare and frequent flyer programs with Midwest.
As part of the financing agreement, Republic has also entered
into an agreement with Midwest to operate 12 Embraer 170 jets under
the Midwest Connect brand. Those planes will replace mainline
aircraft; Midwest also announced Wednesday it plans to return 16 of
25 Boeing 717-200s the airline now operates by the end of the year
-- essentially trading out the 76-seat planes for the 88-seat
717s.
"Operating a more fuel-efficient, flexible mix of aircraft makes
good economic sense in this new energy environment for the airline
industry," Hoeksema said. "We have had to make difficult decisions
as part this restructuring that have resulted in change for our
airline."
The airline had previously announced the retirement of its
oldest MD-80 series planes by the end of 2008... leaving only the
nine 717s in Midwest's mainline fleet. That will mean
more furloughs, and cutbacks.
"We recognize the difficulty this presents to our flight crews
and maintenance staff, who will experience additional temporary
furloughs," Hoeksema said. "We informed union leadership of our
plan and advised them that this was the best option to keep our
airline viable and that in the best interests of our employees,
customers and communities, we need them to come to the table on
cost reductions so we can obtain certification and bring the jobs
back to Midwest."
Understandably, that news was not received well by the Air Line
Pilots Association... which called the announcement "catastrophic"
for Midwest's mainline pilots.
"Management's plan to replace all but nine of our B-717s with
EMB 170s and replace Midwest pilots with Republic pilots will have
a devastating impact -- raising the number of Midwest pilots who
are out of work to approximately 300 of the some 400 pilots who
were employed before TPG/NWA purchased the airline earlier this
year," said Captain Jay Schnedorf, chairman of the Midwest Airlines
unit of ALPA.
"Furthermore, management restated its continued intent to wring
drastic, draconian concessions from our pilots, holding our very
jobs hostage as part of its deal with Republic."
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