n917me
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The Future Of The New "Midwest"

Fri Aug 17, 2007 6:25 pm

With most of the drama behind us now, I am curious as to what other think about the future of YX...


I am sure there will be changes... TPG has a proven track record for being in it for the long haul and growing companies. Yes, NWA is involved.. however, they are a minority partner. TPG put up the majority off the cash and will write the checks... so TPG will be the ones calling the shots. NWA primarily invested as a strategic move to keep FL from expanding in MKE. YX has proven many times that MKE belongs to YX and will defend it. Even when YX was knocking on deaths door, they were still able to fend off NWA.

I see the MD 80 replacement program being accellerated, but continued slow steady growth which has proven successful.
 
davidlc3
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 7:25 pm

I think it will be interesting to see what they do with the product. Will they go forward with the plan to transition to a "traditional" two-class cabin by add Signature and Saver to every aircraft?

Over the past few years they have moved so much work over to Skyway (ramp, etc.) I'm hoping they'll reverse this as it is like the tail wagging the dog.
 
n917me
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 8:35 pm

TPG appears to be very commited and again they proved that last night with raising the bid. I am sure some type of restructuring may take place. I do feel that TPG is in it for the long haul, and I am sure there will be YX haters that will try to convince the world that this is the beginning of the end of YX., and Joe and Co. will release something stating that YX employees better fear for their jobs.. this deal won;t work because of anti trust issues...etc....

It would be awsome as hell to have the original "Midwest Express" back with the china, wine, etc... unlikely, but hell, I am allowed to dream.
 
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ERJ170
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 8:58 pm

My thoughts on the new Midwest...

Name: Midwest Airlines and Midwest Connect will stay..

Aircraft: 737-700 (mainline), E90 (Mainline), E70 (Skyway), CRJ via Skywest, B1900 vis Big Sky or Great Lakes (goodbye MD80s, FRJ)

Hubs: MKE, MCI, +1

Destinations: Welcome Mexico, Caribbean, Canada, Long Haul International via NW/KLM

Pricing: Relatively the same, maybe up 5%

just some thoughts I had...
Aiming High and going far..
 
KarlB737
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 9:14 pm

Press Release Source: Midwest Air Group

Midwest Air Group Board Executes Definitive Merger Agreement With TPG Capital
Friday August 17, 12:11 am ET
Agreement Provides for $17 per Share in Cash for Midwest's Shareholders

MILWAUKEE, Aug. 17 /PRNewswire-FirstCall/ -- Midwest Air Group (Amex: MEH - News), parent company of Midwest Airlines, today announced that it has signed a definitive merger agreement to be acquired by an affiliate of TPG Capital, L.P. in a transaction valued at approximately $450 million. The merger agreement was unanimously approved by the Midwest Air Group Board of Directors.

Under the terms of the agreement, each outstanding share of Midwest's common stock will be converted into the right to receive $17.00 per share in cash. On December 12, 2006, the last trading day before the public announcement of AirTran's indication of interest in acquiring Midwest, the per share price of Midwest's common stock was $9.08. Midwest has approximately 26.6 million shares outstanding, including shares subject to options, restricted share awards and outstanding warrants.

"This is a significant milestone for Midwest," said Timothy E. Hoeksema, chairman and chief executive officer. "The agreement preserves the airline's status as Milwaukee's hometown airline and the popular Midwest Airlines brand for Midwest's loyal customers and employees. TPG shares our commitment to quality and truly understands the value of a differentiated product. We're looking forward to a long-term relationship with TPG, and benefiting from their strength and experience."

Richard P. Schifter, partner, TPG Capital, added, "TPG is excited about the opportunity to invest in Midwest Airlines, which has managed to preserve a quality of service to its passengers rarely seen today. We look forward to working with management and its highly motivated workforce in driving growth and creating more value. We hope that our industry experience, together with an expanded alliance with Northwest Airlines, will lead to a bigger and better Midwest."

The transaction is expected to be completed in the fourth quarter of 2007. All financing for the transaction is in the form of equity and has been committed. No debt financing is required. The transaction is subject to approval by Midwest's shareholders, as well as other customary conditions, including anti-trust approvals.

The agreement with TPG came at the conclusion of a process in which TPG and AirTran were each asked to submit a "best and final" offer by noon Central time on August 16, 2007. At that time, TPG submitted its $17.00 per share proposal.

The TPG proposal was weighed against a proposal from AirTran of $16.27 per share in cash and AirTran stock. More specifically,


* AirTran proposed to pay $10.00 in cash plus a fraction of a share of
its stock having a value of $6.27 based upon an average market price
during a specified period leading up to closing ("valuation period"),
so long as (i) AirTran's stock averaged between $9.32 and $11.39 during
such period and (ii) AirTran was able to obtain at least $150 million
of debt financing at an interest cost not exceeding 13.5% per annum.
AirTran's debt commitment letters were subject to a "market out"
condition.

* If AirTran's debt financing had not been available on such terms,
AirTran would have had the option of reducing the cash component to as
low as approximately $4.35 per share and issuing a fraction of a share
of its stock having a value of $11.92 based upon an average market
price during the valuation period, so long as AirTran's stock averaged
between $9.32 and $11.39 during such period. In such instances,
depending upon the number of AirTran shares to be issued, the
transaction would have been conditioned upon approval by AirTran's
shareholders.

* If the average stock price during the valuation period were outside the
$9.32 and $11.39 collars, the amount of AirTran shares issued no longer
floated but became fixed. The per share value at closing of the total
consideration could then have been less or more than $16.27 per share.


The Midwest board carefully considered the differences in value, closing conditions and other terms between the TPG and AirTran proposals and unanimously approved the TPG proposal.

Samuel K. Skinner, chairman of the board's special review committee established in connection with the board's exploration of strategic and financial alternatives and former Secretary of the U.S. Department of Transportation, noted that "the board's process was carefully designed to maximize value and the committee received best and final offers from both bidders."

Northwest Airlines Corporation will be a minority passive investor in Midwest Air Partners, LLC, the entity formed to acquire Midwest.

Goldman, Sachs & Co. is acting as financial advisor and Godfrey & Kahn, S.C. and Sidley Austin LLP are acting as legal advisors to Midwest Air Group in connection with the transaction.

Citigroup Global Markets Inc. is acting as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to TPG in connection with the transaction.

About TPG Capital

TPG Capital is the global buyout group of TPG, a leading private investment firm founded in 1992, with more than $30 billion of assets under management and offices in San Francisco, London, Hong Kong, New York, Minneapolis, Fort Worth, Melbourne, Menlo Park, Moscow, Mumbai, Shanghai, Singapore and Tokyo. TPG Capital has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, joint ventures and restructurings. TPG Capital's investments span a variety of industries including travel, technology, retail/consumer, media and communications, industrials, financial services and healthcare. Please visit http://www.tpg.com.

About Midwest Airlines

Readers of Travel Leisure named Midwest Airlines "Best Domestic Airline" in the magazine's 2007 World's Best Awards competition. The airline features jet service throughout the United States, including Milwaukee's most daily nonstop flights and best schedule to major destinations. Catering to business travelers and discerning leisure travelers, the airline earned its reputation as "The best care in the air" by providing passengers with impeccable service and onboard amenities at competitive fares. Both Skyway Airlines, Inc. -- a wholly owned subsidiary of Midwest Airlines -- and SkyWest Airlines, Inc. operate as Midwest Connect and offer service to and connections through Midwest Airlines' hubs. Together, the airlines offer service to 53 cities. More information is available at http://www.midwestairlines.com.

Midwest will file a Current Report on Form 8-K with the Securities and Exchange Commission (the "SEC") regarding the merger agreement and attach to the filing a copy of the definitive agreement. All parties desiring details regarding the transaction are urged to review the definitive agreement when it is available on the SEC's Web site at http://www.sec.gov.

In connection with Midwest's solicitation of proxies with respect to the meeting of shareholders to be called with respect to the proposed merger, Midwest will file with the SEC, and will furnish to shareholders of Midwest, a proxy statement. Midwest's shareholders are urged to read the proxy statement when it is finalized and distributed to shareholders because it will contain important information. Shareholders will be able to obtain a free-of-charge copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC's Web site at http://www.sec.gov. Shareholders will also be able to obtain a free-of-charge copy of the proxy statement and other relevant documents (when available) by directing a request by mail or telephone to Midwest Air Group, Inc., 6744 South Howell Avenue, Oak Creek, Wisconsin 53154, Attention: Investor Relations, Telephone: 414-570-3954, or from Midwest's Web site, http://www.midwestairlines.com.

Midwest and certain of its directors, executive officers and other members of management and employees may, under the rules of the SEC, be deemed to be "participants" in the solicitation of proxies from shareholders of Midwest in favor of the proposed merger. Information regarding the persons who may be considered "participants" in the solicitation of proxies will be set forth in Midwest's proxy statement when it is filed with the SEC. Information regarding certain of these persons and their beneficial ownership of Midwest common stock as of March 26, 2007 is also set forth in the Schedule 14A filed by Midwest with the SEC on May 16, 2007.

Statements about the expected timing, completion and effects of the proposed merger and all other statements in this release, other than historical facts, constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. Midwest may not be able to complete the proposed merger on the terms described above or other acceptable terms or at all because of a number of factors, including the failure to obtain shareholder approval or the failure to satisfy the closing conditions. These factors, and other factors that may affect the business or financial results of Midwest are described in the risk factors included in "Item 1A. Risk Factors" in Midwest's "Annual Report on Form 10-K" for the year ended December 31, 2006.

--------------------------------------------------------------------------------
Source: Midwest Air Group
 
PHLBOS
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 9:14 pm

Quoting ERJ170 (Reply 3):
Aircraft: 737-700 (mainline), E90 (Mainline), E70 (Skyway), CRJ via Skywest, B1900 vis Big Sky or Great Lakes (goodbye MD80s, FRJ)

Aren't you forgetting the 717? Big grin
"TransEastern! You'll feel like you've never left the ground because we treat you like dirt!" SNL Parady ad circa 1981
 
sxf24
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 9:21 pm

I wouldn't be surprised to see MKE-MSP/EWR service to disappear in the near future, as a result of NW, and more outsourcing.

TPG already invested a lot of money in YX so its doubtful they'd inject more. Funding for a new aircraft order or expansion will come from leveraging the Company.
 
davidlc3
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 10:45 pm

Quoting Sxf24 (Reply 6):

actually MSP has been a good route for YX and with NW's problems these days- they may actually relinquish a few trips to YX so as to use their unreliable assets in other markets....with NW's code on the YX flights of course.
 
n917me
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 11:02 pm

Why are people so sure that NW is going to tell YX when and where they will fly. There is absolutly nothing stating that. No facts....just people assuming..

Quoting Davidlc3 (Reply 7):

actually MSP has been a good route for YX

You are correct. Now if YX could join SkyTeam.
 
sxf24
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 11:03 pm

Quoting Davidlc3 (Reply 7):
actually MSP has been a good route for YX and with NW's problems these days- they may actually relinquish a few trips to YX so as to use their unreliable assets in other markets....with NW's code on the YX flights of course.

MSP is NW's cash cow and they will do anything to protect market share and pricing power.
 
daus
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 11:13 pm

A few things:

I can't imagine TPG would get into this game without having a national strategy for Midwest. There is very little upside for them to flip the same company they bought (at what may now be an inflated price) 5 to 7 years down the road because they are now flying to Bozeman, MT and Rochester MN and have more efficient airframes.

TPG has said on a couple occasions that they perceive the market moving towards higher service offerings.

Northwest needs to fit in here somewhere, and I just don't buy they are in it to restrain Midwest. TPG wouldn't allow that, it would harm their investement unless there is a backdoor deal to compensate TPG for gains at NWA. As best as I can tell TPG does not currently hold a significant ownership in NWA.

So hear is my guess.... I know it's crazy but it might work....  Smile Signature service comes to Minneapolis and Detroit, flying to all major, business oriented, NWA destinations.

Fire away!
 
n917me
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 11:32 pm

Quoting Daus (Reply 10):
So hear is my guess.... I know it's crazy but it might work.... Signature service comes to Minneapolis and Detroit, flying to all major, business oriented, NWA destinations.

I like the idea.. however I would like the "Old" Midwest Express days back.. china, linen, wine..... (Just dreaming)

I think TPG may be thinking something like Virgin America... set us apart.
 
daus
Posts: 232
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 11:39 pm

Quoting N917ME (Reply 11):
however I would like the "Old" Midwest Express days back.. china, linen, wine..... (Just dreaming)

Agreed. For it to work, and to properly differentiate from mainline NWA flights you would need to take the service level back up to pre-911 levels. Not sure the lobster will ever make it back, but a decent steak and little red wine?

[Edited 2007-08-17 16:40:04]
 
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ERJ170
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RE: The Future Of The New "Midwest"

Fri Aug 17, 2007 11:40 pm

Hmm.. I see NWA involvement in such a way that NW gets an automatic codeshare focus city at MKE and codeshares on all YX flights out of MKE and probably MCI.. that way they can keep their planes flying where they want.. and still have the opportunity to have the MKE focus city that they disbanded a while back.. keep themselves in the heartland.. I could see perhaps an international flight or two out of MKE on NW metal with a YX codeshare (CUN, NAS, or perhaps even AMS).. but that's about it..

Midwest Express would be great.. perhaps as the Regional carrier.. but leave the main airline as Midwest Airline.

I don't think we will see a great big overhaul of much.. Signature service will probably stay.. Saver service is just normal. Cookies will definitely have to stay. The CRJs will stay. The MD80s, FRJ, and probably the B1900 will probably go by the wayside in my opinion..
Aiming High and going far..
 
Indy
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 1:07 am

NW may have absolutely no influence in order to keep the government out of it. If they start to influence operations it could raise red flags.
Indy = Indianapolis and not Independence Air
 
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mke717spotter
Posts: 1948
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 1:55 am

Like I've been saying in the other threads...Time to order some 737-800s and some ERJ-145s!!!



(Hope Jbo doesn't mind if I put his pic here!)

Quoting ERJ170 (Reply 13):
I could see perhaps an international flight or two out of MKE on NW metal with a YX codeshare (CUN, NAS, or perhaps even AMS)

NW actually flies MKE-CUN every Saturday, I'm pretty sure its seasonal though. If NW were to start MKE-AMS with a 757 that'd be awesome!!!
Will you watch the Cleveland Browns and the Detroit Lions on Sunday? Only if coach Eric Mangini resigned after a loss.
 
sxf24
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 2:15 am

Quoting Indy (Reply 14):
NW may have absolutely no influence in order to keep the government out of it. If they start to influence operations it could raise red flags.

Once NW's transaction receives government approval, they can influence the operations however they choose. Unless they have antitrust immunity, the only area the can't collude is pricing.
 
nitrohelper
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 5:08 am

How about NWA buys Midwest from about TPG about five years from now , what happens then?
 
paladin87
Posts: 122
Joined: Sat Jun 09, 2007 9:41 am

RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 5:21 am

Quoting ERJ170 (Reply 13):
Hmm.. I see NWA involvement in such a way that NW gets an automatic codeshare focus city at MKE

NWA already has a marketing alliance with MEH

Quoting Nitrohelper (Reply 17):
How about NWA buys Midwest from about TPG about five years from now , what happens then?

According to TPG that may happen even sooner.
 
nitrohelper
Posts: 406
Joined: Tue Mar 08, 2005 5:32 am

RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 5:40 am

Quoting Davidlc3 (Reply 7):
so as to use their unreliable assets in other markets....

What NWA assets are "unreliable" in your estimation ?
 
jpetekyxmd80
Posts: 3973
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 5:45 am

Quoting ERJ170 (Reply 3):
Aircraft: 737-700 (mainline), E90 (Mainline), E70 (Skyway), CRJ via Skywest, B1900 vis Big Sky or Great Lakes (goodbye MD80s, FRJ)

Where are the 717s?

I really don't see why any embraer 70/90 would be necessary with the 717 fleet.
The Best Care in the Air, 1984-2009
 
cloudboy
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 6:02 am

I don't really see how Northwest even will have much influence over Midwest. They are a minor investor, so they don't have control that way. They will not be on the board, so no management influence. I think that the Northwest issue is a bit overblown. What I think the Northwest deal is about is an option for the future in partnership.

Personally, TPG has already said they see value in a differentiated product. I don't think they are going to push to align Midwest with more traditional airlines. While they say they are still going ahead with the cabin reconfiguration, quite frankly I have my doubts about that. I think it will hurt them in attracting the average business flyer. That ultimately IS their product differentiation, and I think if they give it up someone will take their place.
"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
 
davidlc3
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 6:38 am

Quoting Nitrohelper (Reply 19):
What NWA assets are "unreliable" in your estimation ?

300 year old DC9s and a highly disgruntled work force yield an "unreliable" operation.
 
sacamojus
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 6:49 am

Quoting Cloudboy (Reply 21):
I don't really see how Northwest even will have much influence over Midwest. They are a minor investor, so they don't have control that way. They will not be on the board, so no management influence. I think that the Northwest issue is a bit overblown. What I think the Northwest deal is about is an option for the future in partnership.

NW might take a passive role on this, but they still are a large investor and could threaten to pull their share if they don't like what they see. I don't think the NW deal was about a partnership as partnership could have been formed with less money. I don't really see why NW buy a portion of an airline with no plans for control unless they want to use the "dividends" as a source of cash for growing their own airline. Who Knows?
 
cloudboy
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 7:31 am

Do we honestly know that NW's investment is large? That almost seems like an assumption everyone is making. The TPG guy even alluded to the fact that he was unsure of how big their portion was (which would not be true if it was significant), AND he was not sure it would be big enough to even warrant investigation. Which also indicated it may not be much. I think it may be more of an out for TPG in case it goes bad, and a kind of insurance policy for Northwest in case TPG wants to sell so it doesn't get scooped up by someone else. The fact that discussions about it have only been in talks for a few weeks seems kind of like it's not a major undertaking for Northwest.
"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
 
davidlc3
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 8:08 am

Quoting Cloudboy (Reply 24):
AND he was not sure it would be big enough to even warrant investigation. Which also indicated it may not be much.

I would agree with your line of thinking but if they are to have no say so, no control, why be part of the deal at all? TPG is quite capable of raising the money - they don't need NWA's cash nor do they need their "expertise." The fact that NWA is involved at all has to raise suspicion.
 
PVDCMHOZ
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Joined: Tue Jan 03, 2006 2:24 am

RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 8:10 am

My theory on the future of YX:

In about 3-5 years time, YX will be nothing more then either:

A NW Airlink partner for the "Red Tail." ala Midway II becoming a US Air Express Carrier.

-or-

NW will keep the Midwest name (mainly in part to NW;s massive geographic concentration in that area) and start a non-union low cost carrier (ala Frontier Horizon) for flights to or from DTW, IND, MEM, MSP or to counter the likes of the other LCCs who operate from the midwestern US to points in Florida or Mexico.

Anyway you slice it, and regardless of how you feel about NW, it was a brilliant strategic move on their part! They wipped out a competitor and increased their revenue with a codeshare agreement. I also think NW will adopt some of YX's customer service polocies and procedures- who wants to be the first to be offered a warm cookie on NW ?  Smile
 
jmc1975
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 8:48 am

Quoting N917ME (Thread starter):
I see the MD 80 replacement program being accellerated, but continued slow steady growth which has proven successful.

Since they are now in bed with Northwest, I can see all the 717s moving over to the NW operation, while giving all the DC9s back to YX and eventually letting it die and be a part of history. Northwest is not looking out for Midwest.....AirTran would've been much better for all!
.......
 
N822ME
Posts: 83
Joined: Mon Jul 02, 2007 3:31 am

RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 9:00 am

Quoting Jmc1975 (Reply 27):
Since they are now in bed with Northwest, I can see all the 717s moving over to the NW operation, while giving all the DC9s back to YX and eventually letting it die and be a part of history. Northwest is not looking out for Midwest.....AirTran would've been much better for all!

Northwest isn't even a big enough part of this to warrant a seat on the new board. I think you're just talking out of your nether-regions here. And what would NW want with 25 B717s, a plane that isn't even made anymore? And the YX 717s aren't even the higher gross weight versions, plus are leased and not owned (many NW DC-9s have been owned since the Carter administration, and probably have depreciated down to next to nothing). I don't see how anything you've said would be to Northwest's benefit.

Quoting Davidlc3 (Reply 25):
I would agree with your line of thinking but if they are to have no say so, no control, why be part of the deal at all? TPG is quite capable of raising the money - they don't need NWA's cash nor do they need their "expertise." The fact that NWA is involved at all has to raise suspicion.

Northwest doesn't want, or need, any part of Midwest. What NW does need is a "friendly" sitting in the last relatively untapped major city in the middle of its hubs. All speculation (as is most of what people have said about NW's involvement) but I could see Northwest approaching TPG (they've worked together before) and saying we'd like you to buy Midwest. The purpose of the contribution is likely similar to what rights remain for NW in Continental-land...... a possible veto power in any sell situations or other mergers. Northwest doesn't need a little 30-something plane operation like Midwest to be part of its own. What it wants though is the ability to say "No" to a sell-out to someone a la AirTran.
 
N822ME
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 9:02 am

Quoting PVDCMHOZ (Reply 26):
They wipped out a competitor and increased their revenue with a codeshare agreement.

You forgot another side to this: The revenue to YX via this codeshare isn't anything to balk at..... selling YX tickets through to intl destinations probably involves a lucretive payment to YX.
 
paladin87
Posts: 122
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 9:26 am

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bizjournals.com
Deal allows for Northwest to own Midwest
Friday August 17, 3:14 pm ET


Northwest Airlines Corp. eventually could take full ownership of Midwest Air Group Inc. using one of the potential exit strategies envisioned by the private equity firm that has signed a deal to buy Midwest.
ADVERTISEMENT


"It is contemplated that Northwest could acquire Midwest in the future, but nothing is certain," said Richard Schifter, a partner at TPG Capital LP, a private equity firm based in Fort Worth, Texas, that on Thursday entered into a definitive agreement to buy Midwest (AMEX: MEH - News) for $17 a share in a cash deal with an estimated value of $450 million

Does this sound like NWA is a passive investor?
 
cloudboy
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Joined: Mon Jan 26, 2004 12:38 pm

RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 9:28 am

Quoting Davidlc3 (Reply 25):
I would agree with your line of thinking but if they are to have no say so, no control, why be part of the deal at all? TPG is quite capable of raising the money - they don't need NWA's cash nor do they need their "expertise." The fact that NWA is involved at all has to raise suspicion.

Simple - it's not just raising the capital, it's putting capital at risk. NW's investment simply reduces the amount of capital TPG has to put up front (anotherwords - put at risk), while in this agreement TPG retains most of the control. NW, meanwhile - makes sure that the local competition is a) not bought out by a competitor and b) They get some share, if very little, of the success. Kind of a hedging of their bets. Plus, this agreement essentially gives them first dib if TPG decides to sell out in a reasonable amount of time. We don't even know how much stake Northwest has - it might be quite small.

As far as strategy goes, you have to stop thinking in terms of passengers as cargo. That is why TPG is in this deal, and they are not going to let Northwest go ahead and screw up their investment. If anything, Northwest is probably interested in using Midwest as a premium product. They already have enough cheap seats out there. Midwest's operation isn't going to gain them anything as a low cot carrier - they aren't low cost, and their market is not as price driven. Instead, this will allow Northwest to move down market, where it really does better, and still retain the business service to link up with their international service.
"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
 
Boeing7E7
Posts: 5512
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 12:08 pm

Quoting ERJ170 (Reply 3):
737-700 (mainline), E90 (Mainline), E70 (Skyway), CRJ via Skywest, B1900 vis Big Sky or Great Lakes (goodbye MD80s, FRJ)

737-800 and 717-200

CRJ 200 - OO
 
MCOflyer
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 12:11 pm

I hope they get new planes. They need to retire those MD80's and replace them with 737's.

Hunter
Never be afraid to stand up for who you are.
 
sllevin
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 12:28 pm

I think what NW's done is buy enough influence to keep YX working with them in something they see as valuable, and has garnered the ability to keep YX from falling into competitor's hands.

Steve
 
HermansCVR580
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 12:38 pm

Northwest 1986 + Northwest 2007= Northwest
Northwest 2007 + Midwest 2007 = 2007 version of 1986 Republic

Midwest is the modern version of Republic. Plain and simple
The right decision at the wrong time, is still a wrong decision. "Hal Carr"
 
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knope2001
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 12:45 pm

Quoting Paladin87 (Reply 30):
"It is contemplated that Northwest could acquire Midwest in the future, but nothing is certain," said Richard Schifter, a partner at TPG Capital LP, a private equity firm based in Fort Worth, Texas, that on Thursday entered into a definitive agreement to buy Midwest (AMEX: MEH - News) for $17 a share in a cash deal with an estimated value of $450 million

Does this sound like NWA is a passive investor?

It doesn't say a thing either way. Until the point...which may never come...that NWA buys Midwest, their investment in Midwest can be just as passive as it is described. We don't yet even know what NW's share is.

These are essentially points I have made in other threads, but the "NW is sure to kill MEH" theme is pretty common in several threads.

There's every possibiliity that Northwest could indeed buy Midwest down the road. TPG is not likely to simply hold Midwest forever. But let's not jump too far ahead at this point.

(1) First TPG has no incentive to sell Midwest anytime soon. They have the incentive to increase MIdwest's performance and value so that they can eventually sell their stake at a higher value. Gutting Midwest will not increase the value of their investment. Strengthening Midwest will. That will take some time.

(2) When it comes time for TPG to divest, Midwest will be a stronger, more valuable company. (That's the point of TPG's investment). They may well go public, and if so TPG is likely to time their divestiture to a time when an airline public offering would be well-recevied.

(3) Northwest's involvement at the time of TPG's eventual divestiture is a big unknown. If TPG finds that USAirways wants to buy Midwest outright in 2011, does NW have the right to block that? Does NW have any obligation? We don't know yet. It would seem to me that the most likely outcome of TPG eventually divestiture would be a sale of their portion to Northwest or a public stock offering. That assumes NWA doesn't bail out before then.

(4) At the time when TPG divests, would Northwest have an incentive to purchse the rest of Midwest? That doesn't seem nearly as clear. Is there a compelling reason today why Northwest *would* want to acquire and merge in Midwest? They did not make a separate, independent bid as far as we know. It seems their interest -- at least today -- wasn't to absorb Midwest into NWA but simply to block a serious competitive threat. Now if TPG's divestiture a few years down the road is to unload Midwest to someone like AAI, perhaps Northwest has a big reason to buy the rest of Midwest and stop it. But short of that, I'm not sure Northwest really has a reason...from today's vantage point...to buy and merge Midwest in. Even if by that point the long-talked-about mega mergers take place, adding Midwest to the NW fold is a drop in the bucket compared to something like UA+CO.

Certainly a lot can and will change between now and the time TPG divests. But I don't see any compelling reason..at least not today...why Northwest would want to go through the additional cost and hassle of a merger with Midwest at that point. Midwest may well be a stronger, profitable company then, but so are other companies. If there were today some big reasons why NWA would want to absorb MEH, well, then maybe this TPG passive investment is a way in the back door for them. But I don't see any more of a reason than simply to block AirTran and preserve their partnership with Midwest. They don't need to buy out TPG and merge MEH in to do that.

I just don't see a compelling reason at this point for NWA to want to buy Midwest.
 
n917me
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 9:11 pm

Quoting Jmc1975 (Reply 27):
Since they are now in bed with Northwest, I can see all the 717s moving over to the NW operation, while giving all the DC9s back to YX and eventually letting it die and be a part of history. Northwest is not looking out for Midwest.....AirTran would've been much better for all!

WHAT???? Where did you get your crack?? NW does not need or want the 717's. If they did, then the 717 would still be rolling off the Long Beach assembly line, because NW has a hell of a lot of DC-9's to replace...
 
justplanenutz
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 9:52 pm

Knope as usual deconstructs things pretty well. 3 things I would add:

1) TGP was brought in this by NW and will most likely get out of it by NW. You can say NW is only passive, but TGP is no fool--they will manage their investment to maximize its value to their most likely buyer. And they will sell.

2) This deal is a great little insurance policy for NW. Though YX is relatively small, combined with FL's current midwestern routes and future growth, it could have been a big problem. Now, NW gets effective control over YX (and don't tell me a buy/sell agreement isn't control) while NW sorts out its problems and YX converts to a compatible 2-class carrier.

3) I wouldn't spend too much time drawing YX 737's.
 
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knope2001
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 10:54 pm

Quoting JustPlaneNutz (Reply 38):
1) TGP was brought in this by NW and will most likely get out of it by NW. You can say NW is only passive, but TGP is no fool--they will manage their investment to maximize its value to their most likely buyer. And they will sell.

I'm not so sure we know this. I think it's likely that TPG was approached by Midwest. As it became clearer that AirTran was succeeding in their tenacious takeover attempt, Midwest knew finding another buyer was the only way to keep the company intact. TPG is a willing and able investor.

Why then the NW aspect? Well, here's my suspicion.

Let's say that Midwest's reasonable value to outside investors was $15 per share. That's an ellusive number, but let's just simplify it for the sake of illustration and say $15 was the value. AirTran, however, would probably be willing to pay more...perhaps overpay...for Midwest for a number of reasons.

A bid from a capital firm, or private investors, or a local consortium, or Skywest, or whomever, wouldn't go above $15 because that's all MEH would be worth to them. So Midwest had to find a way to increase their value to a non-AirTran party if they wanted to outbid them.

That's where NW comes in. It is worth something...something significant...to them to prevent AirTran to set up shop in the heart of their hearland. That's where the added value came in.

Without the NW participation, MEH wasn't worth enough to anybody else to outbid AirTran.

So I suspect that NW did not initiate this. It's possible, but I think it is much more likely it played out the way I described. If NW's intent was to buy MEH and merge them in, they could have done so.
 
SkyyMaster
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 11:14 pm

Quoting HermansCVR580 (Reply 35):
Northwest 1986 + Northwest 2007= Northwest
Northwest 2007 + Midwest 2007 = 2007 version of 1986 Republic

Midwest is the modern version of Republic. Plain and simple

Huh? Republic was the amalgamation of three old "local service" carriers. I'm not sure what you mean here. Care to elaborate? As stated, your post really makes no sense.
 
N911YX
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RE: The Future Of The New "Midwest"

Sat Aug 18, 2007 11:25 pm

Quoting JpetekYXMD80 (Reply 20):
The fact that NWA is involved at all has to raise suspicion.

I have a suspicion that NWA may not be around in 5 years, having been absorbed by another in a large consolidation. More than likely though will be their (NWA ) demise propagated by their lack of customer service and labor issues.
The airline biz needs a Quantum Physic
 
cloudboy
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RE: The Future Of The New "Midwest"

Sun Aug 19, 2007 12:32 am

Again, I think the NW investment is a lot smaller than a lot of people are making it out to be. They won't say who contacted who, but we know TPG was looking at Midwest before Northwest came along. That was a recent development. I have a feeling that TPG was looking at the deal, realized AirTran was a little too willing to overbid, and they were reluctant to increase their bid because they saw no exit strategy. Northwest I think knew TPG was looking, thought them a better alternative than AirTran getting Midwest, and figured they would see how they could help. So now, Northwest is an exit strategy for TPG. They don't have to front a large amount of money to buy Midwest upfront, and can let TPG do all the work getting the money from the investment. And Northwest gets some value form growth at Midwest to replace what it looses. Now, if Midwest turns around and succeeds, then Northwest has the option to buy Midwest first. Doesn't mean they have to, but they know they have first dibs and don't need to get into a bidding war. If it doesn't work out, then they have not lost much.

In some ways, too, I think you are right N911YX about NWA worried about it's future. They simply don't seem able to break out of their mold. Midwest might be a survival means - they can always move their more profitable international flights to Midwest and ditch the domestic service.
"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
 
N908AW
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RE: The Future Of The New "Midwest"

Sun Aug 19, 2007 12:47 am

Quoting Daus (Reply 10):
I can't imagine TPG would get into this game without having a national strategy for Midwest. There is very little upside for them to flip the same company they bought (at what may now be an inflated price) 5 to 7 years down the road because they are now flying to Bozeman, MT and Rochester MN and have more efficient airframes.

I'm confused. Did I miss an announcement? As far as I know, YX isn't flying to either RST or BZN.
'Cause you're on ATA again, and on ATA, you're on vacation!
 
HermansCVR580
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RE: The Future Of The New "Midwest"

Sun Aug 19, 2007 12:55 am

What I meant is this is the modern version of Northwest eventually swallowing up another great airline. Republic may have been a larger airline, and was a creation of the merger of NC/SO. So it would be more like Northwest buying North Central if Republic was never formed, since Midwest and North Central are a little more similar in fleet and routes flown.
The right decision at the wrong time, is still a wrong decision. "Hal Carr"
 
justplanenutz
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RE: The Future Of The New "Midwest"

Sun Aug 19, 2007 12:55 am

I am fairly certain that I read a Schifter comment that TGP was approached by NWA, but I may be wrong. At any rate, both Knope and Cloudboy are correct that it doesn't take a huge investment by NWA to de-risk this thing for TGP. If NWA's financing is subordinate to TGP's interest, it would take a train wreck for TGP to get burned. And, that never happens in the airline industry....well......OK, it does.....but....
 
bobnwa
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RE: The Future Of The New "Midwest"

Sun Aug 19, 2007 1:55 am

Quoting HermansCVR580 (Reply 44):
Republic may have been a larger airline,

RC was not larger than NW by any by any meaningful measurement.

Quoting HermansCVR580 (Reply 44):
What I meant is this is the modern version of Northwest eventually swallowing up another great airline

What great airline would that have been. If your talking about RC, they were hardly a great airline, and severely in financial trouble.
 
CO777DAL
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RE: The Future Of The New "Midwest"

Sun Aug 19, 2007 2:17 am

I would like to see Midwest and MAXjet hookup. I think if they merged it would help both airlines. What do others think? I would also like Midwest to join Skyteam. I think Midwest would do well offerning international service. Right now I am sitting at Midwest Best in Care Lounge in MKE and only can say 'bigthumbsup' to Midwest Airlines. This is my first time fly Midwest and their service is awesome!
Worked Hard. Flew Right. Farewell, Continental. Thanks for the memories.
 
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JBo
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RE: The Future Of The New "Midwest"

Sun Aug 19, 2007 3:18 am

Quoting Mke717spotter (Reply 15):
(Hope Jbo doesn't mind if I put his pic here!)

Not at all! Share away! Big grin

Quoting ERJ170 (Reply 3):
Aircraft: 737-700 (mainline), E90 (Mainline), E70 (Skyway), CRJ via Skywest, B1900 vis Big Sky or Great Lakes (goodbye MD80s, FRJ)

I fail to see why YX would dump 717s that are, at most, not even 5 years old for another fleet of brand-new aircraft to serve essentially the same purpose.

I also am not sure I see YX dumping the FRJ's without a replacement of similar size ... They may not be the cheapest to operate, but I believe the economics of the FRJ are still better on some routes than the CRJ ... especially short-hop Beech routes that have demand exceeding that of a Beech, but not enough for a CRJ.

However, 1900s with Great Lakes is probably an eventual certainty once they are able to take over the EAS cities. When that happens, no one knows ... but I imagine once ZK is done getting STL up and running, they'll head over here. Not sure where Big Sky comes in.

Quoting Boeing7E7 (Reply 32):
737-800 and 717-200

CRJ 200 - OO

Again, I can't see the CRJ being the one - and only - component to the regional program. Not only does this show a complete absolvement of Skyway (which would not go over very well, to make an understatement) ... but again, the CRJ does not have the economics for smaller cities that can only feasibly support an FRJ at best ... many of which perform well for the company, making it foolish to drop the routes.


If anything, I see YX's future fleet makeup being the following:

Mainline: 737-800, 717-200
Connect: 328JET (Skyway), CRJ-200 (OO) or ERJ-145 (AL), Beech 1900 (ZK)

However, should the FRJs become an operational issue ... I could see YX replacing the type with either the Saab or the Dash-8-200. The Dash adds an interesting thought in that, with the 717 going to 99 seats, it opens up the capacity gap for perhaps some Q400s on the Skyway level. The Q400/200 duo could serve the regional side well.
I'd take the awe of understanding over the awe of ignorance any day.
 
N911YX
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RE: The Future Of The New "Midwest"

Sun Aug 19, 2007 5:24 am

I am convinced, convinced I tell ya, that Midwest will maintain it's slow and steady growth. The replacement of the MD-80s is nearly a certainty as Tim Hoeksema has already indicated such. The announcement of a replacement aircraft was to be made this fall and fall is only a few more weeks hence. With TPG soon to be Midwest's underwriter, there wont be a big problem obtaining replacement aircraft whether they be 320s or 737-8s or 757s, yes 757s. (for the MCI-LAX-HNL routes) Fire away gents....
The airline biz needs a Quantum Physic

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