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LIVE MOSAIC Town Hall (Archived): www.airborne-live.net

Fri, Jul 18, 2003

Midwest Express Detours Around Chapter 11

New Labor Contracts Saved the Day

Midwest Express Holdings, Inc. said it has now averted the necessity of filing for reorganization under Chapter 11 of the Bankruptcy Code. (Midwest Express Holdings is the parent company of Midwest Airlines; Midwest Airlines' wholly owned subsidiary, Skyway Airlines, Inc., operates Midwest Connect.)

The airline holding company said it has achieved four restructuring initiatives designed to restore it to long-term financial health. Having reached closure on these items, the company can now move forward with efforts to obtain new financing.

The restructuring efforts include:

  • Labor cost savings and productivity improvements from the company's employee unions. On Tuesday, all three of the company's represented employee groups -- the Midwest Air Line Pilots Association, the Skyway Air Line Pilots Association and the Midwest Association of Flight Attendants -- ratified agreements. The contracts are amendable after five years.
  • Identification of opportunities to enhance productivity for non-represented employees. Non-represented employee groups are currently working to develop process and productivity improvements, which are expected to be implemented by the end of 2003.
  • Renegotiation of aircraft finance agreements. The company has successfully renegotiated its existing finance agreements with 11 aircraft lessors and lenders to reflect current market conditions. The new agreements reduce the present value of the agreements by $60-$70 million but do not require the return of any aircraft.
  • Adjustment of the company's fleet plan and delivery schedules to provide for more controlled growth. In light of current overcapacity in the industry, the company has completed negotiations with aircraft manufacturers to readjust the delivery schedule of its Boeing 717 aircraft program and defer its acquisition of Embraer regional jets. Midwest Airlines will continue to accept Boeing 717s at its current rate of one each month through March 2004, when deliveries will change to quarterly. Under the new schedule, Midwest will acquire the 25 717s it has ordered by October 2006. Midwest Connect will defer its acquisition of 20 Embraer regional jets from January 2004 to July 2006, during which time the availability of long-term aircraft financing is expected to improve.

These initiatives -- along with numerous internal cost-reduction measures implemented since September 11, 2001 -- are targeted to save the company approximately $70 million annually going forward.

In return for their contributions to the company's restructuring efforts, lessors/lenders and employees will receive equity in the company, allowing them the right to purchase stock at a pre-set price over a 10-year period. Shareholders must approve the equity participation plan, which provides the lessors/lender and employee groups each 10% of the overall shares of stock.

Timothy E. Hoeksema, chairman and chief executive officer, pointed out that Midwest Airlines also continues to aggressively pursue new revenue opportunities, including:

  • Replacing its existing fleet of DC-9s with new Boeing 717s.
  • Launching new low-fare Saver Service beginning in August.
  • Joining with Milwaukee-based The Mark Travel Corporation to offer new opportunities and value to leisure travelers.
  • Significantly expanding its charter services, including contracts to provide team travel for various professional sports teams.

Being able to successfully restructure out of court is a meaningful achievement, and one that wouldn't have been successful without the support of the company's employees and the community, and the cooperation of its lenders and lessors, according to Hoeksema.

He let everybody know, "Midwest Airlines and Midwest Connect will continue to provide customers with the outstanding service they expect from us. As always, customer safety will be our number one priority, with maintenance and service remaining at the highest level."

FMI: www.midwestairlines.com

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