Trip7
Well-Known Member
http://www.jsonline.com/business/48120217.html
Many Midwest flights aren't Midwest at all
Increasingly, Republic Airways and its crews fill the schedule
There's a growing chance that the next Midwest Airlines flight you take will actually be on a jet owned and operated by Indianapolis-based Republic Airways Holdings Inc.
Republic already is flying more than a dozen commuter jets for Midwest under a contract that started last fall. Two more are coming in August, when Midwest will restore nonstop flights to Los Angeles using Republic jets and crews. And later this year, Republic will take over some shorter routes that Midwest now outsources to SkyWest Inc.
If Midwest eventually replaces the last nine Boeing 717s in its own fleet with Republic jets, as Midwest's unions fear may happen this fall, Midwest could become what industry analyst Helane Becker calls the nation's first "virtual airline."
The Midwest brand name would survive. Also, Midwest - which turns 25 years old this month - presumably would continue to have ground employees at Mitchell International Airport and other airports, and would continue operating its Oak Creek reservations center. But the flight crews and aircraft maintenance employees would be from Republic.
It's possible that the Boeing 717s used by Midwest will be turned over to a Mexican airline. Boeing Capital Corp. has agreed to lease 25 Boeing 717s to Mexicana Group. In recent years, Midwest's main fleet consisted of 25 Boeing 717s, but it returned 16 jets to Boeing in September to cut costs.
The September return gave Boeing Capital options to require Midwest to return the remaining nine 717 aircraft with varying notice periods, according to Securities and Exchange Commission filings.
"They're definitely going away," said Bryan Jandorf, spokesman for the Midwest chapter of the Air Line Pilots Association. "It's just a matter of when."
Republic pilots earn about 30% to 50% less than their Midwest counterparts, Jandorf said.
"That's what this is all about," said industry consultant Vaughn Cordle, who operates Airline Forecasts LLC in Arlington, Va.
Midwest spokesman Michael Brophy declined to comment on the airline's future. Brophy has said Midwest plans to continue to operate the Boeing 717s for now, while considering its options for other aircraft.
Midwest also says it would offer its union flight crews positions on the Republic jets, but only if the unions take major pay concessions that Midwest says are needed for the airline to be competitive. The unions have opposed those pay cuts, which they say would gut their labor contracts.
$25 million loan
Republic's role at Midwest, which has 1,640 employees, has been growing since last fall, when Republic lent financially troubled Midwest $25 million.
That loan, which helped Midwest avoid Chapter 11 bankruptcy, comes due in September, according to Republic's annual report. It was tied to the first Midwest-Republic contract, with Embraer 170 jets replacing 16 Boeing 717s, leading to a layoff of 240 Midwest employees.
With last week's expanded contract, Republic lent an additional $6 million to Midwest. It was later disclosed that Midwest will pay SkyWest $4 million to get out of its contract with SkyWest. That payment is guaranteed by Republic.
Also, Republic recently intervened in a federal lawsuit filed against Midwest by Wells Fargo Bank and Polaris Holding Co. The suit said Midwest had fallen behind on jet and jet engine lease payments. Midwest later acknowledged that it owed $4.2 million.
On May 5, a judge ordered Midwest to pay that amount to Wells Fargo and Polaris. But on May 18, that judgment was changed to say that the money was instead owed by Midwest to Republic.
Midwest accounted for about 5% of Republic's regional airline services revenue prior to the recent contract expansions. Republic in 2008 reported total revenue of $1.48 billion and posted net income of $84.6 million. It flies regional routes for larger carriers, such as United Express for United Airlines Inc.
Republic's revenue and profits have grown steadily since it became a publicly traded company in 2004. Its largest customers for flying regional routes include Delta Air Lines Inc., US Airways Inc., United Airlines, Continental Airlines Inc. and American Airlines Inc. Republic carries a lower cost structure than those larger airlines in part because Republic's pilots earn less money, and because Republic isn't burdened with a heavy pension liability, Cordle said.
"They're a little bit more efficient than everybody else," Cordle said.
Small, but growing
While Midwest is one of Republic's smallest contracts, it is a growing piece of Republic's business with the recent expansions. Also, it could bring more revenue if Midwest drops its nine remaining Boeing 717 jets.
Republic spokesman Carlo Bertolini said Midwest is a valued customer with a viable business plan.
But Jandorf, of the Air Line Pilots Association, and Toni Higgins, president of the Midwest chapter of the Association of Flight Attendants, say Midwest's managers have refused to provide details about the company's future. Together, their unions represent around 230 Midwest employees.
Jandorf said the pilots association wants to negotiate a contract so that Midwest employees would fly the Republic jets. But Midwest's union pilots are being asked to take pay and benefits cuts of 40% to 60%, even as management refuses to say what planes or routes those pilots will fly.
"It's ludicrous," Jandorf said.
Midwest has faced questions about its future after record fuel price spikes and a deepening recession devastated the U.S. airline industry in 2008, causing a collective loss of $23.5 billion. Midwest cut service by 40%, among the deepest cuts by a U.S. carrier, and eliminated more than 1,200 jobs.
Midwest reported a loss of $477 million in 2008, according to Department of Transportation reports. Most of that was due to an accounting adjustment and not Midwest's operations, Brophy said last month.
Midwest began regularly scheduled jet service in June 1984. It built a reputation for excellent customer service and was focused mainly on business travelers.
But that strategy ran into trouble in the aftermath of the 2001 recession, with passengers increasingly seeking lower fares.
Midwest in 2007 fended off a hostile takeover attempt by AirTran Holdings Inc., leading to its sale in January 2008 to TPG Capital and Northwest Airlines Corp.
Fort Worth-based TPG Capital, which owns a 53% stake in Midwest, has reportedly written down by about 90% its $239 million investment in Midwest. Northwest last year wrote off its $213 million investment before Northwest was acquired by Delta Air Lines, which now holds a 47% stake in Midwest.
Many Midwest flights aren't Midwest at all
Increasingly, Republic Airways and its crews fill the schedule
There's a growing chance that the next Midwest Airlines flight you take will actually be on a jet owned and operated by Indianapolis-based Republic Airways Holdings Inc.
Republic already is flying more than a dozen commuter jets for Midwest under a contract that started last fall. Two more are coming in August, when Midwest will restore nonstop flights to Los Angeles using Republic jets and crews. And later this year, Republic will take over some shorter routes that Midwest now outsources to SkyWest Inc.
If Midwest eventually replaces the last nine Boeing 717s in its own fleet with Republic jets, as Midwest's unions fear may happen this fall, Midwest could become what industry analyst Helane Becker calls the nation's first "virtual airline."
The Midwest brand name would survive. Also, Midwest - which turns 25 years old this month - presumably would continue to have ground employees at Mitchell International Airport and other airports, and would continue operating its Oak Creek reservations center. But the flight crews and aircraft maintenance employees would be from Republic.
It's possible that the Boeing 717s used by Midwest will be turned over to a Mexican airline. Boeing Capital Corp. has agreed to lease 25 Boeing 717s to Mexicana Group. In recent years, Midwest's main fleet consisted of 25 Boeing 717s, but it returned 16 jets to Boeing in September to cut costs.
The September return gave Boeing Capital options to require Midwest to return the remaining nine 717 aircraft with varying notice periods, according to Securities and Exchange Commission filings.
"They're definitely going away," said Bryan Jandorf, spokesman for the Midwest chapter of the Air Line Pilots Association. "It's just a matter of when."
Republic pilots earn about 30% to 50% less than their Midwest counterparts, Jandorf said.
"That's what this is all about," said industry consultant Vaughn Cordle, who operates Airline Forecasts LLC in Arlington, Va.
Midwest spokesman Michael Brophy declined to comment on the airline's future. Brophy has said Midwest plans to continue to operate the Boeing 717s for now, while considering its options for other aircraft.
Midwest also says it would offer its union flight crews positions on the Republic jets, but only if the unions take major pay concessions that Midwest says are needed for the airline to be competitive. The unions have opposed those pay cuts, which they say would gut their labor contracts.
$25 million loan
Republic's role at Midwest, which has 1,640 employees, has been growing since last fall, when Republic lent financially troubled Midwest $25 million.
That loan, which helped Midwest avoid Chapter 11 bankruptcy, comes due in September, according to Republic's annual report. It was tied to the first Midwest-Republic contract, with Embraer 170 jets replacing 16 Boeing 717s, leading to a layoff of 240 Midwest employees.
With last week's expanded contract, Republic lent an additional $6 million to Midwest. It was later disclosed that Midwest will pay SkyWest $4 million to get out of its contract with SkyWest. That payment is guaranteed by Republic.
Also, Republic recently intervened in a federal lawsuit filed against Midwest by Wells Fargo Bank and Polaris Holding Co. The suit said Midwest had fallen behind on jet and jet engine lease payments. Midwest later acknowledged that it owed $4.2 million.
On May 5, a judge ordered Midwest to pay that amount to Wells Fargo and Polaris. But on May 18, that judgment was changed to say that the money was instead owed by Midwest to Republic.
Midwest accounted for about 5% of Republic's regional airline services revenue prior to the recent contract expansions. Republic in 2008 reported total revenue of $1.48 billion and posted net income of $84.6 million. It flies regional routes for larger carriers, such as United Express for United Airlines Inc.
Republic's revenue and profits have grown steadily since it became a publicly traded company in 2004. Its largest customers for flying regional routes include Delta Air Lines Inc., US Airways Inc., United Airlines, Continental Airlines Inc. and American Airlines Inc. Republic carries a lower cost structure than those larger airlines in part because Republic's pilots earn less money, and because Republic isn't burdened with a heavy pension liability, Cordle said.
"They're a little bit more efficient than everybody else," Cordle said.
Small, but growing
While Midwest is one of Republic's smallest contracts, it is a growing piece of Republic's business with the recent expansions. Also, it could bring more revenue if Midwest drops its nine remaining Boeing 717 jets.
Republic spokesman Carlo Bertolini said Midwest is a valued customer with a viable business plan.
But Jandorf, of the Air Line Pilots Association, and Toni Higgins, president of the Midwest chapter of the Association of Flight Attendants, say Midwest's managers have refused to provide details about the company's future. Together, their unions represent around 230 Midwest employees.
Jandorf said the pilots association wants to negotiate a contract so that Midwest employees would fly the Republic jets. But Midwest's union pilots are being asked to take pay and benefits cuts of 40% to 60%, even as management refuses to say what planes or routes those pilots will fly.
"It's ludicrous," Jandorf said.
Midwest has faced questions about its future after record fuel price spikes and a deepening recession devastated the U.S. airline industry in 2008, causing a collective loss of $23.5 billion. Midwest cut service by 40%, among the deepest cuts by a U.S. carrier, and eliminated more than 1,200 jobs.
Midwest reported a loss of $477 million in 2008, according to Department of Transportation reports. Most of that was due to an accounting adjustment and not Midwest's operations, Brophy said last month.
Midwest began regularly scheduled jet service in June 1984. It built a reputation for excellent customer service and was focused mainly on business travelers.
But that strategy ran into trouble in the aftermath of the 2001 recession, with passengers increasingly seeking lower fares.
Midwest in 2007 fended off a hostile takeover attempt by AirTran Holdings Inc., leading to its sale in January 2008 to TPG Capital and Northwest Airlines Corp.
Fort Worth-based TPG Capital, which owns a 53% stake in Midwest, has reportedly written down by about 90% its $239 million investment in Midwest. Northwest last year wrote off its $213 million investment before Northwest was acquired by Delta Air Lines, which now holds a 47% stake in Midwest.
