Midwest’s back to TPG basics: AirTran to go it alone

Midwest Airline’s board announced a final, binding decision to sell out to private-equity midwest_premier_julie1.jpg giant TPG, the Texas Pacific Group, with Northwest Airlines included as a ‘passive’ investor. Their $450-million all-cash plan was preferable to Midwest than AirTran’s sweetened last, final and best offer of $445 million in cash and AirTran shares. AirTran chairman and chief executive Joe Leonard said AirTran Airways accepted the Midwest decisions. “AirTran doesn’t need to merge with any other carrier to achieve our business goals”, Leonard said. Leonard’s long-running pursuit of Midwest had presented two differing beliefs in the future of smaller carriers: AirTran insisted that a low-fares, high-growth model was the only way to survive in the competitive environment, but Midwest, noted for its leather seats, baked-on-board cookies and higher levels of service, instead that service would win the future. The airline had launched a campaign dubbed ‘Save the Cookie’ to enlist support for a stand-alone Midwest, and had wide support from flyers in the region, both the two-footed and the furrier, quadriped types.

Midwest officials said they were certain that the new owners would not change their strategy and Midwest Air Group board chairman Tim Hoeksema said, “TPG shares our commitment to quality and truly understands the value of a differentiated product”. However, Midwest has begun a plan to add more seats and sections to the cabins of most of its planes. The TPG deal still requires approval of both the competition authorities and Midwest’ shareholders but is final and definitive “as all financing has been committed and no debt financing is required”, according to TPG.

An AirTran spokesman, Dave Hirschman, said that AirTran believed that a combination with Midwest060523a_lg.jpg would have created a truly national low-cost carrier. The only carrier in this niche currently is Southwest Airlines with low-fare players such as JetBlue or Frontier still largely confined to super-regional status. AirTran’s plan for years has been to break out of the south-eastern states and out of the viciously competitive Northeast-Florida markets, where JetBlue and Southwest keep fares down. Part of this strategy has been to fly longer routes, and the airline invested in a second fleet type, the 137-seat Boeing 737-700, after experimenting with using a code-share operation to gauge the market for longer-haul service. Its fleet is now 87 of the 117-seat Boeing 717 and 50 of the larger Boeings with another 70 on order. The airline is still very much enamoured of the Boeing 717, said the spokesman. “Midwest flies the 717 and that’s one of the reasons we wanted the combination – to exploit this great airplane.”

Its longer-distance routes keep growing, and the carrier has more than tripled service to Las Vegas in August alone. It began service to the gambling, gaming, and divorce mecca from Akron/Canton, Ohio, a rival to nearby Cleveland; Bloomington, Il; Flint, MI.;, as well Rochester, NY, and the Moline/Quad Cities airport on the Illinois/Iowa border. Flyers in these small- and medium-sized markets would have to connect through a hub such as Detroit, Chicago, or Cincinnati without non-stops such as AirTran’s, even if some of these services are less than daily.

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