Troubled Midwest wins new backing

Washington DC
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Midwest has exhausted an investment by Northwest and is losing the co-operation of its unions as it slashes further

Milwaukee-based Midwest, famed for its baked-on-board chocolate chip cookies, has arranged a $60 million cash infusion, but one condition of the package is that it cuts its mainline fleet further and lays off more staff. Midwest went private in January when Northwest was joined by Texas Pacific Group to buy it out. But Northwest, citing the "financial deterioration" of Midwest, says it has written off the $213 million investment that gave it a 47% stake.

Midwest has ended the jobs of more than half of the 3,400 employees it had in early 2008, has halted service to eight cities from its 50-airport route map and is now about to return all but a dozen of its core fleet, its Boeing 717s, to their owners after grounding its MD-80 fleet. This will lead to layoffs and because Midwest seeks further concessions from its workers, it is dependent on their good will.

midwest boeing 717 andy martin/airteamimages.com
 © Andy Martin/AirTeamImages.com

The crisis comes as Midwest signed a package for $60 million in a new financing deal with TPG and with Republic Airways Holdings, a former contractor. Republic will make as much as $25 million available to Midwest - as long as the carrier agrees to allow Republic to fly a dozen Embraer 170s for it. These jets have 76 seats while Midwest's 717s have 99 each. Midwest sees smaller aircraft as vital to its future, and is adding seats to its 717s to reduce the number of its once-trademark wide leather seats.

Even though Midwest could lease the Embraers from Republic and fly them with its own pilots, it says it will furlough all but 125 of its 400 pilots, and this has infuriated the pilot union. Captain Jay Schnedorf, head of the Air Line Pilots Association at Midwest, says: "They have officially sounded the death knell of this airline." Schnedorf says Midwest's chief executive, Tim Hoeksema, "stated publicly that the deal with TPG/Northwest would 'be good for our airline, the employees, and the community'. Make no mistake: with this latest deal, Mr Hoeksema, TPG, and Northwest have revealed their complete disregard for this airline and its employees." The local union won a pledge of $2 million in support from ALPA, but it may not be able to strike.

Hoeksema says it is Midwest's intent to train the airline's own pilots so that they can be certified on the Embraers and then to lease the aircraft from Republic, but this could take time. He says that for the time being the airline needs its pilots "to come to the table on cost reductions so we can obtain certification and bring the jobs back to Midwest".

For more on the domestic capacity cuts in the US airline market, go to: flightglobal.com/uscapacity