Merger Mania Continues Even Among Budget Carriers

ANN REALTIME REPORTING 12.13.06 1430 EST: US Airways's bid for Delta rocked the airline industry last month, and serious talks between United and Continental prove merger talk isn't just a few crazy executives selling snake oil. Now it's not just the biggies involved; Budget carrier AirTran said on Wednesday it's offered to buy rival airline Midwest.

AirTran's offer is a serious one. Its $290 million bid amounts to $11.25 per share in cash and stock and represents a 24% premium over Midwest's closing price on Tuesday.

In its offering, AirTran says a merger would create an airline boasting $3 billion in revenue in 2007. It also says Airtran and Midwest could save as much as $60 million between them.

AirTran's CEO Joe Leonard told Reuters his airline first made an offer for Midwest in late October. Midwest showed no enthusiasm for the idea at the time.

On Wednesday, Leonard sent a letter to Midwest reiterating its October offer saying it was prepared to "sit down and enter into serious discussions and, following that, consider in our offer any enhanced values that may be demonstrated."

Industry observers see mergers as inevitable in a market flooded with a plethora of carriers at the end of a bad economic cycle. Many carriers have gone through the pain of reorganization and hold the debt to prove it. That makes them ripe targets for a hostile bids.

Merger offers are rampant around the world. Ryanair in Ireland has bid seriously for Aer Lingus, and Qantas has had offers from several interested investment groups.

AirTran's Leonard said he hopes Midwest will reconsider his airline's offer and enter serious negotiations.

FMI: www.airtran.com, www.midwestairlines.com