Midwest Airlines announces progress on restructuring plan
MILWAUKEE, WI (September 3, 2008) - Midwest Airlines today announced significant progress in its voluntary restructuring plan and $60 million in additional financing, including commitments from TPG Ca
MILWAUKEE, WI (September 3, 2008) – Midwest Airlines today announced significant progress in its voluntary restructuring plan and $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 chief executive officer, 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. Midwest’s restructuring has focused on a strategy to serve its core business markets, cost reductions necessary to address high jet fuel prices and a soft economy and revenue enhancement actions.
“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. He added that under the agreement, Northwest Airlines will continue its codeshare and frequent flyer programs with Midwest.
As part of the financing agreement, Republic has entered into an airline services agreement with Midwest to operate 12 Embraer 170 jets under the Midwest Connect brand. Republic will operate the 76-seat Embraer 170s until Midwest can transition the fleet under its own FAA operating certificate. The new Embraer 170 service will be introduced into Midwest Connect’s schedule throughout the fall, beginning October 1.
Additionally, Midwest said that it had reached an agreement in principle with Boeing Capital Corporation on renegotiated leases for its fleet of Boeing 717s. Under the terms of the agreement, Midwest will continue to fly nine of the original 25 Boeing 717s it had under lease for its mainline fleet, returning 16 to Boeing this fall.
“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. But our strategy of offering nonstop service to key business markets and giving our customers what they have always valued about the Midwest brand – what we were built on – will not change.”
Revenue enhancement actions that are part of the restructuring include the introduction of Midwest Class seating on the airline’s Boeing 717 fleet, which was announced last week, as well as a $15 fee for first checked bag and an increase in the second checked bag fee from $20 to $25. Those fees will apply to tickets purchased on or after Thursday, September 4, 2008 for travel October 21 and beyond. Active members of the US military and Midwest Miles Executive members are exempt from the fees. Wheelchairs, walkers, strollers, child car seats and other mobility-assistive devices are also excluded.
The airline said it plans to continue negotiating with the unions representing its pilots and flight attendants on concessions necessary to align its labor costs to the marketplace, in order to meet one of the final goals of its restructuring plan. It also said that the airline services agreement with Republic would result in additional furloughs for Midwest pilots, flight attendants and maintenance staff until Midwest can operate the Embraer 170 fleet on its own FAA operating certificate. The airline said it expected this process, which includes training for its flight crews and maintenance staff, would take eight months to a year.
“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.”
Seabury Group LLC is advising Midwest Airlines on its restructuring plan and advised the airline on securing and structuring these financial commitments, as well as on restructuring the Boeing Capital Corporation agreement.