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Midwest Proxy Filed - Northwest Investment Details

Thu Sep 13, 2007 10:37 pm

The preliminary proxy statement for Midwest's merger with TPG/Northwest has been filed, and in it they disclose the breakdown of how much TPG and Northwest are investing. The unconfirmed word before was around 40%, and it turns out that it's not far off. This is taken from page 30 of the proxy (Edited to make the table easy to read):

Quote:
Financing

We estimate the total amount of funds necessary to complete the merger and the related transactions to be approximately $ million, which includes approximately $451.8 million to be paid to our shareholders and holders of stock options, warrants and restricted stock issued by Midwest and the remainder to be applied to pay related fees and expenses in connection with the merger and the related transactions.

The Equity Providers have delivered equity commitment letters in the following amounts:

Equity Provider--------------------Commitment Amount
TPG Partners V, L.P.--------------$ 238,111,703
Northwest Airlines, Inc.-----------$213,250,000

Total-------------------------------------$ 451,361,703

So, it appears that Northwest is providing approx 47.2% of the total investment.

The full proxy can be found here:
http://www.sec.gov/Archives/edgar/da...45/000119312507200002/dprem14a.htm

There should be some other good tidbits in there as well.
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daus
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RE: Midwest Proxy Filed - Northwest Investment Details

Thu Sep 13, 2007 11:18 pm

The chronology of it all starts on page 11. Good stuff... A brief excerpt of when things got moving following the election of the 3 AirTran board members. Tim Hoeksema appears to be beating the bushes pretty hard.  Smile
.
.
.Also on June 14, 2007, the annual meeting of our shareholders was held and adjourned until June 26, 2007. We issued a press release announcing that based on a preliminary review of the proxies voted at the annual meeting, it appeared that our shareholders had elected Dr. John M. Albertine and Messrs. Jeffrey H. Erickson and Charles F. Kalmbach, the three individuals nominated by AirTran, to our board of directors. The press release also announced our board’s determination to permit AirTran to make a presentation to the board regarding AirTran’s revised offer.

On or about June 22, 2007, Mr. Hoeksema, following up on a call he had placed in early June, called Mr. Steenland. During that call, Mr. Hoeksema and Mr. Steenland discussed Northwest’s interest in exploring a possible transaction with us.

On June 26, 2007, following the adjourned annual meeting, we issued a press release confirming that our shareholders had elected the three individuals nominated by AirTran to our board of directors.

On July 13, 2007, Mr. Hoeksema called Mr. David Bonderman, Managing Partner of TPG Capital. During the call, Mr. Hoeksema and Mr. Bonderman discussed whether TPG Capital would have an interest in exploring a possible transaction with us.
 
daus
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RE: Midwest Proxy Filed - Northwest Investment Details

Fri Sep 14, 2007 12:11 am

The only token effort by AirTran's nominees appears to be thier voting to allow one more round of offers before final decision. It was voted down along party lines. Midwest Board Members against, AirTran Board Members for.
 
quickmover
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RE: Midwest Proxy Filed - Northwest Investment Details

Fri Sep 14, 2007 12:43 am

Isn't it ironic that Sen Kohl wanted a stern anti trust review regarding the Airtran bid, but wants a quickie review for Northwest?
 
MKENut
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RE: Midwest Proxy Filed - Northwest Investment Details

Fri Sep 14, 2007 12:55 am

Quoting Quickmover (Reply 3):
Isn't it ironic that Sen Kohl wanted a stern anti trust review regarding the Airtran bid, but wants a quickie review for Northwest

It's called "looking out for your constituents". I have no doubt Kohl was contacted by a significant number of constituents that were against the AirTran deal.
 
CMHSRQ
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RE: Midwest Proxy Filed - Northwest Investment Details

Fri Sep 14, 2007 2:19 am

Funny how NWA has $213,250,000 to help invest in another airlines but at the same time is telling it's employees that they don't have money for raises or to hire additional pilots.

I would GUESS that YX will be gone in 5 years, swallowed by NWA.
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MKENut
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RE: Midwest Proxy Filed - Northwest Investment Details

Fri Sep 14, 2007 7:08 am

I was dead set against the AirTran merger but in light of this latest information I am almost equally against this merger with TPG/NWA.  Sad
 
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JBo
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RE: Midwest Proxy Filed - Northwest Investment Det

Fri Sep 14, 2007 7:29 am

Quoting MKENut (Reply 6):
I was dead set against the AirTran merger but in light of this latest information I am almost equally against this merger with TPG/NWA.


Care to share why? I haven't seen anything yet where Northwest's involvement spells inevitable doom.

At least with this merger, the smaller cities are more likely to keep their service ... which was my biggest argument against the AirTran offer.

[Edited 2007-09-14 00:52:50]
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MKENut
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RE: Midwest Proxy Filed - Northwest Investment Details

Fri Sep 14, 2007 8:14 am

Quoting JBo (Reply 7):
Care to share why? I haven't seen anything yet where Northwest's involvement spells inevitable doom.

I am worried that NW will exercise the option to buy YX from TPG in the future. If that's the case, it is only prolonging the inevitable demise of YX.

Quoting JBo (Reply 7):
At least with this merger, the smaller cities are more likely to keep their service ... which was my biggest argument against the AirTran offer.

For now it is status quo and I am happy that Skyway will still be around to service smaller markets. That also was my main concern if AirTran took over.
 
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JBo
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RE: Midwest Proxy Filed - Northwest Investment Details

Fri Sep 14, 2007 9:03 am

Quoting MKENut (Reply 8):

I am worried that NW will exercise the option to buy YX from TPG in the future. If that's the case, it is only prolonging the inevitable demise of YX.

I'm going to remain optimistic. Anything can change 5 years from now ... that's the nature of the industry. There's no use worrying about it.
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MKENut
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RE: Midwest Proxy Filed - Northwest Investment Details

Fri Sep 14, 2007 9:49 am

Quoting JBo (Reply 9):
I'm going to remain optimistic. Anything can change 5 years from now ... that's the nature of the industry. There's no use worrying about it.

Sorry... I guess it comes from not trusting NW. I still remember Republic Airlines and the promises of how much better a combined Republic/NWA would be. It wasn't good for MKE IMHO. For the most part I will be optimistic about the TPG Deal.
 
Cubsrule
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 1:13 am

Given that NW has two enormous hubs on either side of MKE, it's doubtful that NW would ever want to grow MKE larger than IND is at present. The key question, therefore, is what that level of service from NW and the absence of YX would mean for MKE. I think it would entice B6 to come to MKE and maybe induce F9 (who apparently feels they can compete successfully with NW) to grow a little. I honestly have no idea what it means for FL. Their growth plan defies logic (and has for the past 5 years at least). Maybe WN would even come to MKE. And while I like flying YX as much as any of the rest of you, I don't see it being bad for MKE. It would be different, sure, but not bad.

I'm not sure it would really harm the smaller cities in MI and WI either. XJ would likely pick up what EAS contracts there are, and XJ/9E/DH would likely add service to MSP and/or DTW to most of these cities. Service to a larger hub with (in most cases) a larger local market seems like a winning proposition... unless you really like cookies.
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daus
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 1:28 am

Quoting Cubsrule (Reply 11):
I think it would entice B6 to come to MKE and maybe induce F9 (who apparently feels they can compete successfully with NW) to grow a little.

I think the whole "NWA is going to sweep away Midwest in a couple years" just doesn't make any sense. Not only would it be detrimental to the $200+ million it just invested, it would damage NWA as a whole. What Northwest has learned over the years is that Midwest makes MKE a dead zone for just about every carrier out there. Too much loyalty to a unique product set that they are not willing to duplicate to defeat. At the end of the day what Northwest has discovered is that dead zone works out pretty darn well for them. The only viable hub that could do damage the NWA national business model is in MKE, which is why FL so desperately wanted it to go to war with NWA. Oddly, MKE in it's current state with a dominant YX, was an asset to it's business, and all they have gone and done now is monetize that asset as well using the credit line for Morgan Stanley.  Smile

You want to go to war with NWA, guess what? You have to pay THEM the premium to do it.
 
Cubsrule
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 1:51 am

Quoting Daus (Reply 12):
I think the whole "NWA is going to sweep away Midwest in a couple years" just doesn't make any sense.

I agree completely with you, actually. But if NW did sweep YX away, I'm not sure that would lead to the doom and gloom that so many around here are predicting.
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vivavegas
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 1:55 am

Tell me how "passive" NWA will be with a 47% stake in a company.....

Fool me once....

Craig
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daus
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 2:06 am

Quoting Cubsrule (Reply 13):
But if NW did sweep YX away, I'm not sure that would lead to the doom and gloom that so many around here are predicting.

Well, in the context of all the choices of things to occur, I do think an NWA with an intent to de-hub MKE and funnel everyone through Minneapolis and Detroit would be far worse than an FL hub scenario.... I just don't think that would happen.

If NWA wants to fly all the current YX routes with NWA metal someday, I guess that would be a step ahead of the FL scenario given that most MKE are already dual citizens in the YX/NWA travel programs but it sure would be less than the ideal.  

[Edited 2007-09-14 19:07:13]
 
Cubsrule
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 2:10 am

Quoting Daus (Reply 15):

If NWA wants to fly all the current YX routes with NWA metal someday, I guess that would be a step ahead of the FL scenario given that most MKE are already dual citizens in the YX/NWA travel programs but it sure would be less than the ideal.

Thing is, FL's hub wouldn't have worked (and NW trying to construct a huge hub wouldn't work either). My feeling is that either the YX hub or a NW focus city, which actually wouldn't be that much different, is better than no hub. Remember that NW did fly CRJs to places like STL last time around.
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DCA-ROCguy
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 2:21 am

Oddly, MKE in it's current state with a dominant YX, was an asset to it's business, and all they have gone and done now is monetize that asset as well using the credit line for Morgan Stanley.

Northwest simply faced reality. Their attempt to kill Midwest a couple of years ago, and gain complete control of the Upper Midwest market, failed. So AirTran's bid for Midwest left them with two choices.

--Stay aside, let AirTran win (which was becoming more or less inevitable) and try to fight them off by competitive onslaught. Which involves uncertainty as well as cost. It's a battle NW might well have lost, though I think FL would still have had trouble accomplishing what they claimed they could at MKE.
--Or, NW could buy Midwest as a placeholder--but in an arrangment that didn't quite give them control, probably so they wouldn't face DOJ scrutiny and minimize the likelihood of employee reaction. (Whatever Sen. Kohl's desires, so far it seems to have been cases when legacy carriers try to buy a competitor/ gain too much market share that draw DOJ scrutiny, and not cases when LCC's try to buy a carrier with which they have almost no competitive overlap.)

The bean counters at NW seem to think that $250 million to buy in was the less expensive, and likely much easier, option. Both of which counts are probably true.

So now Midwest has a cozy existence as long as TPG is involved. At least break even, which they seem to be able to do, don't step on NW's toes by expanding too much, and the sugar daddies will be happy. A lot of airlines would probably like to have that existence.

After TPG sells, the question is what's cheaper for NW? I'd guess simply buying the 2.6 percent of shares necessary to get control, and keep Midwest around as a buffer. Again, a nice existence to have if an airline can get it.

Jim

[Edited 2007-09-14 19:23:13]
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daus
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 2:30 am

Quoting DCA-ROCguy (Reply 17):
Whatever Sen. Kohl's desires



Quoting DCA-ROCguy (Reply 17):
simply buying the 2.6 percent of shares necessary to get control

Agreed, except for the 2.6% thing.

Two very valid things the "NWA will do away with Midwest" camp should consider.

1. What Herb Kohl gives, he can take away (DOJ approval)  Smile
2. TPG will never just sell the 2.6% It will be all or nothing, or their remaining investment is nearly worthless. TPG enjoys the position of having this over NWA's head quite a bit and won't let that go for peanuts. If NWA wants control of YX they are going to have come up with the full nut.
 
Mikey711MN
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 2:58 am

Quoting Cubsrule (Reply 16):
FL's hub wouldn't have worked

Of course, that's speculative. However, in the face of that, NWA thought of 213,250,000 reasons to believe that it would. As Jim appropriately put it...

Quoting DCA-ROCguy (Reply 17):
So AirTran's bid for Midwest left them with two choices.

--Stay aside, let AirTran win (which was becoming more or less inevitable) and try to fight them off by competitive onslaught. Which involves uncertainty as well as cost. It's a battle NW might well have lost, though I think FL would still have had trouble accomplishing what they claimed they could at MKE.
--Or, NW could buy Midwest as a placeholder--but in an arrangment that didn't quite give them control, probably so they wouldn't face DOJ scrutiny and minimize the likelihood of employee reaction. (Whatever Sen. Kohl's desires, so far it seems to have been cases when legacy carriers try to buy a competitor/ gain too much market share that draw DOJ scrutiny, and not cases when LCC's try to buy a carrier with which they have almost no competitive overlap.)

The bean counters at NW seem to think that $250 million to buy in was the less expensive, and likely much easier, option. Both of which counts are probably true.

On another note...

Quoting Daus (Reply 18):
If NWA wants control of YX they are going to have come up with the full nut.

...I would tend to disagree. They have the level of control they need now over YX as buying the proverbial cow (read: the entirety of YX) may draw some antitrust concerns while getting the proverbial milk (read: relatively high yields by virtue of keeping a non-threatening competitor in the midwest) for free.

While I realize that some disagreed with me in previous threads, I believe that these numbers show that the combined price paid for YX is far greater than its "market value". TPG paid ~$238M, a value I believe to be much closer to YX's actual value, to essentially fully control the airline while NW paid the remaining ~$213M "premium" to hedge the bet against FL's bid. And NW's non-explicit-participation moving forward proves that out.

Because both NW's and TPG's motivations are the same, i.e. to realize returns in a small niche carrier, NWA does not need anyone to actively participate on the Board. Otherwise, anyone who thinks that putting up that kind of money to own that percentage of a company and not participate in day-to-day operations is deluding themselves.

-Mike
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daus
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 3:15 am

Quoting Mikey711MN (Reply 19):
...I would tend to disagree. They have the level of control they need now over YX as buying the proverbial cow (read: the entirety of YX) may draw some antitrust concerns while getting the proverbial milk (read: relatively high yields by virtue of keeping a non-threatening competitor in the midwest) for free.

NWA's primary concern is that FL (or anyone else) not take over the MKE market. To absolutely assure that, they would need to buy TPG out, which TPG won't do piecemeal. All or nothing I would imagine for the reason I mentioed earlier.

TPG could in theory sell YX tommorow to B6 and the whole thing would start all over again. What I as hoping to find in the documents was detail as to what restrictions TPG has as to a short term sale (within 5 years) of YX. The TPG guy eluded to something on the conference call but no one on the call followed up on it and it has not been published yet.
 
RJNUT
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 3:26 am

I sat next to Steenland at lunch this week and he seems very adamant about YX doing their own thing..They just want to be able to reign in the World Perks members that are in the MKE area and keep them on YX..WIth Airtran, they were going to lose a lot of that base..

NW is VERY focused on building their existing hubs, fleet replacement and mending labor issues and then adding some Heartland- focused point to points and then International expansion with the introduction of 787s. He is not interested in mergers (blasted the US Airways pilot situation) . Medling with YX is of no interest.. They like the high yield traffic they bring and will share those passengers on some code-share flights!

I felt NW was the most focused they have ever been and I am satisfied with the NW/YX arrangement!
 
MKENut
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 3:33 am

Since we are now talking about money I think YX has about 172 Million in unrestricted cash. Where does that money go after the sale to TPG/NWA? Educate me.  Smile
 
Cubsrule
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 4:16 am

Quoting Mikey711MN (Reply 19):

Of course, that's speculative. However, in the face of that, NWA thought of 213,250,000 reasons to believe that it would.

If you can make a coherent case for the hub that FL was proposing, I'd be curious to hear it. No one on here did when FL's bid was on the table.
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Mikey711MN
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 5:05 am

Quoting Cubsrule (Reply 23):
If you can make a coherent case for the hub that FL was proposing, I'd be curious to hear it. No one on here did when FL's bid was on the table.

Of course, those discussions went round and round, and everyone stood steadfast in their opinions of the veracity of FL's proposed hub.

My point being that NWA apparently thought that their exposure to such a hub caused them to shell out > $200M to protect themselves. That, if not indirectly, suggests that FL's proposed hub in MKE had significant merit.

-Mike
I plan on living forever. So far, so good...
 
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knope2001
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 5:38 am

Quoting Cubsrule (Reply 23):
Quoting Mikey711MN (Reply 19):

Of course, that's speculative. However, in the face of that, NWA thought of 213,250,000 reasons to believe that it would.

If you can make a coherent case for the hub that FL was proposing, I'd be curious to hear it. No one on here did when FL's bid was on the table.

Work chaos right now doesn't even give me time to keep up on reading these threads regularly, much less joining in often. But I wanted to jump in on this.

Northwest's involvement in the MEH deal makes good sense (to them) no matter if AirTran would succeed in MKE or not:

(a) A struggling AirTran hub in MKE would hurt Northwest *more* than a successful one in the near and medium term. Successful hubs don't need $49 DTW-MKE-DFW fares to fill seats, for example, but a struggling one probably does.

(b) A struggling AirTran hub in MKE would not quickly fold because AirTran essentially was betting the farm that it would work. Though not known for tenacity in weak markets, FL's big investment in buying MEH means drastic things would need to happen before AirTran shut a MKE hub down completely. So the dragdown cause by (a) would be long, slow and painful for NW.

(c) Northwest's $213m outlay for 47%+ of MEH buys an asset with value they can recover at sale (like an IPO). Every cent lost due to a struggling AirTran hub in MKE is lost money that has no value.

Of course a *successful* AirTran hub in MKE would put a longer-lasting hurt on NW. And the "investment" in 47%+ of MEH has risk of not being worth that much if/when they would divest. But AirTran didn't need to make a success of MKE for this deal to make very good sense to Northwest.

[Edited 2007-09-14 22:39:53]
 
DCA-ROCguy
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 7:10 am

Agreed, except for the 2.6% thing. Two very valid things the "NWA will do away with Midwest" camp should consider.
1. What Herb Kohl gives, he can take away (DOJ approval)
2. TPG will never just sell the 2.6% It will be all or nothing, or their remaining investment is nearly worthless. TPG enjoys the position of having this over NWA's head quite a bit and won't let that go for peanuts. If NWA wants control of YX they are going to have come up with the full nut.


That's probably correct. I just mentioned 2.6 percent because I thought that's all Northwest needs in order to get 50.1 percent and thus complete control of YX. Looking at original post again, I see my math is wrong--NW has 47.2 percent now, which means they need to get 2.9 percent more of total shares to get control. Point being that Northwest is very close to control. When TPG does sell off, I'm sure NW will happily pay whatever 'full nut' they need to to get control.

Because both NW's and TPG's motivations are the same, i.e. to realize returns in a small niche carrier, NWA does not need anyone to actively participate on the Board. Otherwise, anyone who thinks that putting up that kind of money to own that percentage of a company and not participate in day-to-day operations is deluding themselves.-Mike

Actually, I don't think TPG and NW 's motivations are the same. TPG is in it strictly, AFAICT, for the investment. NW is in it to keep what you correctly called a "nonthreatening competitor" in place. YX could probably lose small or even moderate amounts of money and NW won't complain too much (TPG probably would, but if they became dissatsified and sold off early you know who would be knocking on their doors to buy). NW needs, pardon the phrase, a non-LCC lapdog in place in MKE to prevent a serious lower-cost competitor from shaking things up in the region. That's what their 47.2 percent, with the threat of more later, bought. I'm sure Hoeksma and Skornicka are very well aware of these facts.

Fortunately for the Cookie Palace, YX seems to be breaking even and making some money, so NW will probably just let them run things. NW can claim to be 'passive' unless YX gets more than moderately unprofitable--then they will very much want to participate in day-to-day operations, probably with TPG's blessing.

Jim

[Edited 2007-09-15 00:12:58]
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bobnwa
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 9:24 pm

Quoting CMHSRQ (Reply 5):
Funny how NWA has $213,250,000 to help invest in another airlines but at the same time is telling it's employees that they don't have money for raises or to hire additional pilots.

You must have missed the fact that Northwest has been hiring new pilots for a few months after recalling all furloughed pilots. The new pilots are already in training and will number about 300 for the year
 
burnsie28
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RE: Midwest Proxy Filed - Northwest Investment Details

Sat Sep 15, 2007 11:57 pm

Quoting MKENut (Reply 8):
I am worried that NW will exercise the option to buy YX from TPG in the future. If that's the case, it is only prolonging the inevitable demise of YX

I think that NW could just make YX a wholly owned subsidary, much like Compass. That would be the smart thing for NW to do IMO. Keep Midwest their own airline (as long as they make money) but have them wholly owned by NW.
 
bobnwa
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RE: Midwest Proxy Filed - Northwest Investment Details

Sun Sep 16, 2007 1:27 am

Quoting Burnsie28 (Reply 28):
I think that NW could just make YX a wholly owned subsidary, much like Compass. That would be the smart thing for NW to do IMO. Keep Midwest their own airline (as long as they make money) but have them wholly owned by NW.

I think that is exactly what will happen, which is a pretty good idea when you think about it. It has removed a competitor, kept out AirTran and very likely will add to the bottom line.
 
cloudboy
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RE: Midwest Proxy Filed - Northwest Investment Details

Sun Sep 16, 2007 11:55 am

Maybe I misread things, but it seemed to me that giving the proxy a quick read, YX was the one who initiated contact with Northwest. And, it also seems to me that bringing in TPG was more of an issue to get Northwest to go along with the deal. So something tells me they are not interested in a takeover attempt.

I suspect that the real issue is that they were very afraid of AirTran. And I think they may have been sold on the idea that Midwest might make a good partner for Northwest. Northwest has a real image problem right now when it comes to Service. Midwest has service all tied up. I still think that Northwest is starting to see this as a compliment to their own routes - a way to retain more high yield customers.
"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
 
AlexPorter
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RE: Midwest Proxy Filed - Northwest Investment Details

Sun Sep 16, 2007 12:19 pm

Quoting Burnsie28 (Reply 28):
I think that NW could just make YX a wholly owned subsidary, much like Compass.

I was thinking a better example is like Lufthansa owning Swiss International, due to the preservation of the brand names. Perhaps in the future YX could even become a SkyTeam affiliate member, or at least codeshare with NW on several flights (they already have reciprocal FF agreements). Just an idea.
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sideflare75
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RE: Midwest Proxy Filed - Northwest Investment Details

Sun Sep 16, 2007 1:54 pm

Quoting AlexPorter (Reply 31):
I was thinking a better example is like Lufthansa owning Swiss International, due to the preservation of the brand names. Perhaps in the future YX could even become a SkyTeam affiliate member, or at least codeshare with NW on several flights (they already have reciprocal FF agreements). Just an idea.

They also will be codesharing. Starts in November.
 
Cubsrule
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RE: Midwest Proxy Filed - Northwest Investment Details

Sun Sep 16, 2007 2:01 pm

Quoting Sideflare75 (Reply 32):
They also will be codesharing. Starts in November.

That was planned and announced before the merger. It should be interesting to see where the codeshare partnership goes now that NW has a (direct) stake in YX's success.

Quoting Cloudboy (Reply 30):
I still think that Northwest is starting to see this as a compliment to their own routes - a way to retain more high yield customers.

Thing is, if that's why NW grabbed YX, they wasted their money. They've got the premium traffic in MKE pretty well tied up when those folks need to go to PDX or MSY. I think there's more to it than that.
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cloudboy
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RE: Midwest Proxy Filed - Northwest Investment Details

Mon Sep 17, 2007 2:40 am

Quoting Cubsrule (Reply 33):
Thing is, if that's why NW grabbed YX, they wasted their money. They've got the premium traffic in MKE pretty well tied up when those folks need to go to PDX or MSY. I think there's more to it than that.

Again, I could be reading it wrong, but it seemed to me the Midwest was the one who really approached Northwest with a buyout proposal, so I don't think they were actively looking to buy Midwest in the first place.

But you can't look at it as though airline routes are like canals - infrastructure that has to be built and maintained. Airline routes are fluid - a plane can in fact fly anywhere. While there are costs associated with landing fees and facilities, and you have slot issues in some locations,. there would be nothing holding back Northwest from opening p another route unless they didn't think they could attract the market share they needed.

Don't look at Midwest as an entrenched set of routes. Their routes are not nearly as valuable as their brand image. That is what Northwest and TPG are buying. I wouldn't expect to see Midwest remain only a Midwest regional airline. they are either going to expand or move to new markets. I think they will end up refocusing Midwest on high-yield business routes, while using the Northwest brand on the lower-yield but greater volume routes. And I might even expect them to explore some international services, again splitting higher yield higher service and lower yield, volume services.
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ikramerica
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RE: Midwest Proxy Filed - Northwest Investment Details

Mon Sep 17, 2007 2:45 am

Quoting Vivavegas (Reply 14):
Tell me how "passive" NWA will be with a 47% stake in a company.....

And for a mere $13 million dollar future payment (in today's dollars) to TPG, NW gains control of YX...
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Mainland
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RE: Midwest Proxy Filed - Northwest Investment Details

Mon Sep 17, 2007 8:26 pm

Quoting Cloudboy (Reply 34):
Again, I could be reading it wrong, but it seemed to me the Midwest was the one who really approached Northwest with a buyout proposal, so I don't think they were actively looking to buy Midwest in the first place.

Yep, from the proxy it appears that Midwest was the one to reach out to both Northwest and TPG to see if either was interested in a transaction. From the wording in the proxy it seems like early in the discussion both TPG and NW were in it to acquire YX whole. However, once NW indicated they did not want to acquire a controlling interest in YX the partnership between TPG and NW began.
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sxf24
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RE: Midwest Proxy Filed - Northwest Investment Details

Mon Sep 17, 2007 9:29 pm

Quoting Bobnwa (Reply 29):
It has removed a competitor, kept out AirTran and very likely will add to the bottom line.

Don't forget to add, "at the expense of local communities."
 
Cubsrule
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 2:32 am

Quoting Cloudboy (Reply 34):

Again, I could be reading it wrong, but it seemed to me the Midwest was the one who really approached Northwest with a buyout proposal, so I don't think they were actively looking to buy Midwest in the first place

I'm not sure it's terribly relevant who approached whom; NW and TPG made an offer to purchase and YX accepted. The party that initiated the negotiations would seem little more than a historic footnote. And I still think that, at least in the short run, NW will leave YX alone. YX is successful. NW is successful in MKE on a more limited level. And frankly, they don't have the aircraft for a huge expansion right now (though that will be changing in the near future).

What I do wonder is how this arrangement will affect MCI. MCI is a fairly large station for NW, but perhaps a tighter relationship with YX will mean that CR9s or 175s get deployed on some potential YX routes ex-MCI that YX lacks the aircraft for at present. I don't think it's real likely, but I think NW growth is more likely at MCI (and perhaps at OMA) than at MKE.
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Mikey711MN
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 3:19 am

Quoting Sxf24 (Reply 37):
Don't forget to add, "at the expense of local communities."

Ain't that right!

From Boyd's Hot Flash (as of 9/17/07):

Quote:
We've also revised the forecast for Milwaukee, adjusting the high forecast downward to reflect the failure of the AirTran acquisition of Midwest. Based on our projections, AirTran would have added approximately 1.75 million net new-enplanements annually at MKE.

That's about $121.86 invested by NWA per enplanement "lost" by MKE. For one year, I'm pretty sure their yield per passenger would not be dinged by that much, but after five years (~$25/pass), it would seem likely.

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knope2001
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 3:33 am

Quoting Mikey711MN (Reply 39):
Quoting Sxf24 (Reply 37):
Don't forget to add, "at the expense of local communities."

Ain't that right!

It is seens as "right" to those who believe that AirTran would have succeed in Milwaukee and Kansas City.

To those of us who just as strongly believe AirTran would have ultimately failed to live up to their big promises, no such lasting benefit would have endured.
 
sxf24
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 3:40 am

Quoting Knope2001 (Reply 40):
It is seens as "right" to those who believe that AirTran would have succeed in Milwaukee and Kansas City.

To those of us who just as strongly believe AirTran would have ultimately failed to live up to their big promises, no such lasting benefit would have endured.

In the short-term, FL would have brought significantly lower fares, more choices and increased competition to the region. A NW/YX partnership does the complete opposite - forever.
 
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knope2001
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 3:55 am

Quoting Sxf24 (Reply 41):
In the short-term, FL would have brought significantly lower fares, more choices and increased competition to the region.

Indeed it would have, until AirTran started trimming things away. If the hub were to largely fail, MKE would likely be left with notably less nonstop markets and flights -- particular year-round service aimed at business travelers -- than they have today.

Even were the hub to have succeeded here reasonably well, the promised web of regional routes with RJ's was very likely to fail. Boyd -- who in my eyes seems to make up his mind and then selectively look for facts to support his opinions -- has a strong, consistant stance that RJ's under 70 seats are fully incompatable with low-fare service. But since he decided he liked the FL/YX takeover, he totally ingnored the fact that 40% of AirTran's proposed MKE network was RJ.
 
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modernArt
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 3:59 am

Quoting Cloudboy (Reply 34):
Their routes are not nearly as valuable as their brand image. That is what Northwest and TPG are buying.

With all due respect...no they did not. They eliminated a pesky thorn in their side, something that has plagued them since the 1980s. Nothing more nothing less. Timmy, et al. saved their jobs versus a potentially huge service up tick for Milwaukee via an AirTran acquisition. Where's all the huffin' and puffin' now about Wisconsin's anti-takeover laws?

Now that NW has its paws on Midwest, the service and the traditions it built its reputation on will suffer. In short order, contrarian to what Midwest supporters think, Midwest will be a puppet on strings - puppeteers based in Eagan, MN.
 
burnsie28
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 4:04 am

Quoting Cubsrule (Reply 33):
That was planned and announced before the merger. It should be interesting to see where the codeshare partnership goes now that NW has a (direct) stake in YX's success.

Actually it wasn't to the extent that they are going to do.

Quoting Sxf24 (Reply 41):
In the short-term, FL would have brought significantly lower fares, more choices and increased competition to the region.

You think that, but just because an LCC or another airline enters the market doesn't mean that fares will drop like a walk.

Quoting ModernArt (Reply 43):
Now that NW has its paws on Midwest, the service and the traditions it built its reputation on will suffer.

With no seat on the board, I don't see that happening.
 
MKENut
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 4:08 am

Quoting Knope2001 (Reply 42):
Even were the hub to have succeeded here reasonably well, the promised web of regional routes with RJ's was very likely to fail. Boyd -- who in my eyes seems to make up his mind and then selectively look for facts to support his opinions -- has a strong, consistant stance that RJ's under 70 seats are fully incompatable with low-fare service. But since he decided he liked the FL/YX takeover, he totally ingnored the fact that 40% of AirTran's proposed MKE network was RJ.

Boyd is also quoted in an article posted here: http://www.commercialappeal.com/news.../sep/15/nwa-has-large-buyout-role/

"This shows how smart Northwest is," said Michael Boyd, aviation consultant in Evergreen, Colo. "For $213 million, Northwest kept a discount carrier from going into the Upper Midwest and blackening the skies with discount flights. They said they were going to add 60. I bet it would have closer to 80 flights."

Although Boyd agrees Northwest might want controlling interest in Midwest, he says the current situation suits Northwest fine.

"It's status quo and gives them the option for more codesharing," Boyd said.
 
sxf24
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 4:11 am

Quoting Knope2001 (Reply 42):
Indeed it would have, until AirTran started trimming things away. If the hub were to largely fail, MKE would likely be left with notably less nonstop markets and flights -- particular year-round service aimed at business travelers -- than they have today.

Even were the hub to have succeeded here reasonably well, the promised web of regional routes with RJ's was very likely to fail. Boyd -- who in my eyes seems to make up his mind and then selectively look for facts to support his opinions -- has a strong, consistant stance that RJ's under 70 seats are fully incompatable with low-fare service. But since he decided he liked the FL/YX takeover, he totally ingnored the fact that 40% of AirTran's proposed MKE network was RJ.

FL was promising lower fares and more flights. If they delivered on the promise MKE and surrounding communities would have benefited. A NW/YX partnership will almost certainly result in less competition and higher fares IN THE NEAR TERM.

No one has a crystal ball and hypothesizing about what might have happened is pointless (not mention illogical and based solely on emotions).
 
quickmover
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 4:16 am

Quoting Sxf24 (Reply 41):
In the short-term, FL would have brought significantly lower fares, more choices and increased competition to the region. A NW/YX partnership does the complete opposite - forever.

I agree 100%.

Tim and co. were only concerned about their own skin. NW has no reason at all to grow YX as this was completely a blocking move. If NW were in FL's shoes and made the first offer to buy YX, MKE and Tim and co. would have screamed "They're buying us to close us down!". Why do some people still believe that FL was looking to spend $400 mil. to close down MKE?

Doesn't make sense. FL hasn't gone through bankruptcy. You can't say they don't know how to make money and run a business (regardless of a perceived lack of service and the millions who continue to fly FL). I have a feeling that over time MKE may realize that Tim sold them a bill of goods and they passed up a good sized hub for MKE.

Incredible how FL actually talked up the potential for MKE while YX's own management talked it down. Even more incredible that the general public chose to believe the negative prospects for growth in their own community. YX management consistantly claimed MKE couldn't support the growth that FL wanted. Even if Tim was right, FL would have tried the expansion. If the expansion failed (which is doubtful), FL would have kept at least as much capacity in MKE as they had before worst case. If FL succeeded, MKE could have wound up being a Northern MDW.

[Edited 2007-09-17 21:19:53]
 
burnsie28
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 4:27 am

FL was trying to say anything so they could get their hands on more aircraft and a bigger market.
 
Cubsrule
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RE: Midwest Proxy Filed - Northwest Investment Details

Tue Sep 18, 2007 4:30 am

Quoting Burnsie28 (Reply 44):
Actually it wasn't to the extent that they are going to do.

No, you're correct. On the other hand, if YX had stayed independent, the codesharing relationship that has now been announced was still probably the likely next step. I'm just curious to see what will happen now that NW has a more vested interest in YX's success.

Quoting Quickmover (Reply 47):
If the expansion failed (which is doubtful), FL would have kept at least as much capacity in MKE as they had before worst case.

Kind of like FL's expansion plans at DFW and MDW?

Quoting Quickmover (Reply 47):
YX management consistantly claimed MKE couldn't support the growth that FL wanted.

Let's compare a few markets to MKE's southern neighbor... (disclosure: I posted this a long time ago, but it's relevant here)

ORD-YVR is served by UA (3 daily flights; 360 daily seats). AA does not serve the route, nor does AC (with its own metal). Chicago is approximately 4.5 times as large as Milwaukee, and UA has a sizable hub at ORD (and some codeshare connections available over YVR). Yet, FL somehow plans to fill 137 daily seats on the route?

ORD-HPN is served by S5 and CHQ (6 daily flights; 360 daily seats) and MQ has 9 daily flights (450 daily seats). So CHI-HPN has 810 daily seats. Divide by 4.5 and you get 180 daily seats. FL thinks they can fill twice this many despite the size of the AA and UA hubs?

ORD-YUL is 422 daily AA/MQ seats, 280 daily S5 seats, and 173 daily AC seats. That's 875 daily seats. Dividing once again by 4.5, we get 194, or about 50% of the seats FL plans to offer.
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