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."

FMI: www.midwestairlines.com, www.alpa.org, www.republicairlines.com