To $345 million, story to come

Here's the AP press release:
http://biz.yahoo.com/ap/070111/airtran_midwest_air.html?.v=1

ORLANDO, Fla. (AP) -- AirTran Holdings Inc., parent of low-fare airline AirTran Airways, on Thursday raised its bid for Milwaukee-based Midwest Air Group to $345 million in cash and stock from about $290 million.

Midwest rejected the initial bid in early December, and said Wednesday that offer undervalued the company and didn't reflect the long-term opportunity inherent in Midwest Air's strategic growth plan. The Milwaukee-based carrier maintained it is better off as a standalone company.

AirTran is now offering to pay $13.25 per Midwest share, based on AirTran's Monday closing stock price on the New York Stock Exchange. The amount is $2 per share more than AirTran's October offer, and represents a 61 percent premium to the 30-day average closing price of Midwest stock at the time of the initial proposal.

The new bid consists of about $6.63 in cash and 0.5884 shares of AirTran common stock for each Midwest share.

"We are committed to bringing these two great airlines together to form an even better airline based on our conviction that it is in the best interests of Midwest and AirTran shareholders, the employees of both companies and the communities the air carriers serve," Leonard said in a statement.

AirTran is making the offer through its newly formed subsidiary, Galena Acquisition Corp. The exchange offer is set to expire on Feb. 8 unless extended.
---------
Edit: Here's the PR from AirTran, it has some more details and direct quotes:
http://biz.yahoo.com/prnews/070111/nyth048.html?.v=83

[Edited 2007-01-11 13:14:11]

[Edited 2007-01-11 13:14:37]

Well, that should about do it.

Looks like Airtran got favorable feedback from the shareholders. They will deal directly with them in order to bypass Midwest's management if I am reading this correctly.

Webcast at 10:00 a.m.

Happy flying!!!

RJ

This is becoming very interesting. I didn't think Joe Leonard and company would back down from this.

Will investors make the board consider this or will the cookie tower close the doors again?

How much more will AirTran go up on the bid if need be? How much cash on hand do they have, anyone?

Has anyone in the MKE authority made any comments one way or another?

This is five million dollars under the price that I said it would take to get YX. Let's see if I was in the right ballpark. Hopefully YX will listen a bit more now.

An article from Jsonline.com http://www.jsonline.com/watch/?watch=1&date=1/11/2007&id=17117

filler

Carol Skornicka, Midwest's senior vice president of corporate affairs, said the company's board "won't be engaged directly in responding" to the offer. She said it "was somewhat surprising that they would go directly to shareholders at this stage."

"We expected that they would do something. They said they would be back. This is kind of an accelerated process," she said.


I guess FL did not want to mickey-mouse with the board anymore and just wanted things to get rolling.

Sounds like YX corprate is a little suprised, maybe they were planning on dragging things out like before in hopes of FL backing out once again. I guess Joe wasnt lying when he said "we will not be approaching this in the same manner as previous offers."

http://pressroom.airtran.com/phoenix...l-newsArticle&ID=949384&highlight=

January 11, 2007

Board of Directors
c/o Mr. Timothy E. Hoeksema
Chairman, CEO and President
Midwest Air Group Inc
6744 South Howell Avenue
Oak Creek, WI 53154

Dear Members of the Board:


AirTran Holdings, Inc. today is announcing an exchange offer for all of the outstanding shares of Midwest Air Group for $13.25 per share, based on the closing price of AirTran common stock on January 8, 2007. The offer consists of $6.625 in cash and 0.5884 shares of AirTran common stock for each Midwest share. The total equity value of the exchange offer is $345,000,000.

In our October 20, 2006, proposal to you we indicated that we were prepared to enhance the value then offered $11.25 per share for all of Midwest's outstanding shares if you were to permit us to do some limited due diligence to better understand your company. We emphasized that same point when on December 13, 2006, we disclosed our proposal to your shareholders with an expectation that you would permit us to go forward on that basis. Since we have heard nothing from you during the ensuing month, you gave us no choice but to bring our offer directly to the owners of the company.

The decision to take this step and initiate a process that is governed by SEC regulations and a fixed timetable was one that was taken after very careful thought. I should add that the decision to unilaterally increase, by $2 per share, or nearly 18 percent, the consideration we are now willing to pay over the already fair and full offer we first proposed to you on October 20, 2006, (which in itself was a 37 percent premium to the value then being accorded Midwest by the investment community and an 89 percent premium over the six months average price of your company's stock) was also not an easy decision for us to make. However, we are willing to take this step because we fully believe that a combined AirTran and Midwest, whose shareholder base will consist of holders of both of our companies, will generate the value needed to justify our increased offer.

Aside from the financial benefits that we see emanating from this transaction for our respective shareholders, the combination will also provide value to your other stakeholders as well. Namely, a combined AirTran and Midwest will materially expand service to Milwaukee and the other communities that you presently serve and the new company will provide an overall net increase in jobs and bring added job security and growth opportunities to your employees.

Now that we have put into motion a process that has a definite timetable,
we hope we can negotiate a definitive merger agreement. We look forward to
hearing from you shortly.

-------------------------------------
This letter sure is a lot more aggressive than previous ones.

Quoting AirTran737 (Reply 4): Hopefully YX will listen a bit more now.

The onus now falls on the shareholders to evaluate whether their investment will yield more with their money in the hands of FL or YX.

Leonard was on 620TMJ this morning, drawling on about how he was "stonewalled," by the BOD...

This just keeps getting more interesting everyday. Joe did say this morning he guarantees everyones job except of course upper management. I still would like to know how that part is going to work. He also said that Midwest was just copying AirTran by putting some 2 by 2 rows into the MD-80's. I thought that was kinda funny.

Quoting Sideflare75 (Reply 9): He also said that Midwest was just copying AirTran by putting some 2 by 2 rows into the MD-80's. I thought that was kinda funny.

Seems like the truth though doesn't it?

I do have to say that FL handled the delays with the extreme weather in ATL last week fairly well. I had to get to Smyrna on the morning of the 6th, so I left MKE Friday night on FL.

There appeared to be bedlam, as US and YX had sent a huge number of cruise pax over to FL. While I was admittedly hiding in the WC  , when I came out, in spite of the chaos, the GA was exceptional.

Unfortunately, the positive soft-product was not enough to overcome, IMHO, the substandard hard product  

Quoting Sideflare75 (Reply 9): except of course upper management

Carol Skornicka with her sharp tongue will be the first cardboard box on Howell Avenue. I think I saw Joe @ Office Depot this morning buying the box.

Done deal boyz,

Craig
MKE

The board at Midwest still needs to waive the poison pill -- until then this deal is far from done.

Quoting Vivavegas (Reply 12): Done deal boyz

I also see this as a done deal. I just hope that YX realizes this and does not try to smear FL's image during the process. Doing so could would hinder FL public image in MKE and cause possible problems for FL when they start up, ultimately effecting the YX/soon to be FL employees the most.

Eventhough FL/Yx have not formally engaged in talks, I hope they do soon so the outcome can be the best for all that are willingly or unwillingly involved.

From an FAQ on the AirTran website:

7. What are the Terms and Conditions of the Offer?
There are a number of standard and regulatory terms and conditions included in our tender offer. Of particular importance in this situation is that the tender offer is contingent on the Midwest Board of Directors disarming their "poison pill" provision and that all provisions of the Wisconsin Control Share Act and Wisconsin Business Combination Statue have been met.


I find it very funny that two conditions of the offer are (a) that Midwest willing disarm the poison pill provision which they inplemented to stop just this sort of takeover, and (b) Midwest accept this offer as a non-hostile-takeover so that similar anti-takeover measures which the State of Wisconsin has enacted will not apply.


Let's show the folly of this with an anaology.

I want you to marry me. You don't want to marry me.

I try to convince you to change your mind, but you don't budge.

Then I try to convince you harder to marry me, but I say "if you don't dress prettier and buy me a new car, I won't marry you"

If you don't want to marry me in the first place, WHY would you dress prettier and buy me a car??


Anything is possible, and I'm sure Midwest doesn't want to have to fight off hoards of unhappy shareholders. It would take a few years to vote out the board if there are enough angry ones. But I don't see how AirTran can possibly convince the BoD to remove the poison pill unless they convince the BoD to accept the offer. What other cards does AirTran have to play?

Quoting RJ (Reply 2): Looks like Airtran got favorable feedback from the shareholders. They will deal directly with them in order to bypass Midwest's management if I am reading this correctly.

Do you possibly think that AirTran would spin this any other way?? We have zero way of knowing this. Midwest of course claims that shareholders broadly believe an independent Midwest is in the best interest of shareholders, employees and the community.

Joe Leonard isn't doing this for the employees or the communities or the shareholders. He's doing it because his company is in trouble and he's running out of good options. Pressure is growing on him to DO SOMETHING because things are trending the wrong way.

Quoting Mainland (Reply 13): The board at Midwest still needs to waive the poison pill -- until then this deal is far from done.

I am not sure, but the way I read the news the release, the deal is structured so it can not be greatly affected by the poison pill. Hopefully someone could elaborate on this since I am not a M&A expert.

Quoting Mlsrar (Reply 11): do have to say that FL handled the delays with the extreme weather in ATL last week fairly well. I had to get to Smyrna on the morning of the 6th, so I left MKE Friday night on FL. There appeared to be bedlam, as US and YX had sent a huge number of cruise pax over to FL. While I was admittedly hiding in the WC , when I came out, in spite of the chaos, the GA was exceptional. Unfortunately, the positive soft-product was not enough to overcome, IMHO, the substandard hard product

Wish you would have told me you were flying the Tran, I could have made a phone call and gotten you a comp upgrade. Oh well, maybe next time.

Quoting Vivavegas (Reply 12): Carol Skornicka with her sharp tongue will be the first cardboard box on Howell Avenue. I think I saw Joe @ Office Depot this morning buying the box. Done deal boyz,

I fully agree. A couple years ago we had to take he as a non-rev on one of our flights and she was a rag, just a bad attitude. She was peeved that we didn't throw her a comp upgrade.

I do feel sorry for some of those in the Cookie Palace. Mary Blundell is a good friend, I have know her daughter for years, and would stop by her house from time to time to talking about our respective companies. She is a very dedicated YX employee who has been there since the beginning, but FL has Jack Smith and won't need another VP of Customer Service. One of the many corporate casualties no doubt.

Whether you agree with it or not the shareholders are getting a premium for MEH. IF Airtran decides to pull the offer you will see lots a lawsuits and a lot management being fired. Shares will go down to the 7's. Thats a lot of money left on the table because of ego's.

At this pooint, would it not be in the best interest of YX's BoD to sit down with FL and try and iron out a deal?

If nothing else to keep their jobs.

After reviewing their presentation, AirTran is officially full of shit.

Quoting AirTran737 (Reply 10): Quoting Sideflare75 (Reply 9): He also said that Midwest was just copying AirTran by putting some 2 by 2 rows into the MD-80's. I thought that was kinda funny. Seems like the truth though doesn't it?

Are you freaking kidding me!? Thank you AirTran for pioneering a 2-class system. Ridiculous.

Quoting Knope2001 (Reply 15): Let's show the folly of this with an anaology. I want you to marry me. You don't want to marry me. I try to convince you to change your mind, but you don't budge. Then I try to convince you harder to marry me, but I say "if you don't dress prettier and buy me a new car, I won't marry you" If you don't want to marry me in the first place, WHY would you dress prettier and buy me a car??

I agree with you, but I think YX will agree if they really care about their employees and community. If FL is going to take YX hostile and they use the pill, it will make it very difficult for FL to become stable in MKE which will cause problems for the city and employees. Some times its just better to wave the    as much as you may not want too, and let things have a better chance at working out than make it harder for the workers and the city.

Quoting JpetekYXMD80 (Reply 21): Are you freaking kidding me!? Thank you AirTran for pioneering a 2-class system. Ridiculous.

Taking a low fare model (Saver Service) and putting business class seats in it. Woo was first do it? AirTran. TZ then copied it, followed by NK, and then YX. So yes, YX copied it.

Quoting AirTran737 (Reply 18): Wish you would have told me you were flying the Tran, I could have made a phone call and gotten you a comp upgrade. Oh well, maybe next time.

Yeah, I carry no ID to be made out as a a.netter (Flyertalk on the other hand...), but maybe you helped me score an exit-row when I checked in? Either way, I remember the look on whoever's face was behind the counter when the flood of people from US and YX came over...

Quoting AirTran737 (Reply 18): I do feel sorry for some of those in the Cookie Palace. Mary Blundell is a good friend, I have know her daughter for years, and would stop by her house from time to time to talking about our respective companies. She is a very dedicated YX employee who has been there since the beginning, but FL has Jack Smith and won't need another VP of Customer Service. One of the many corporate casualties no doubt.

Wouldn't the corporate culture at FL, as it is in other merger situations, dictate that, at least in some C/V-level jobs, you have to re-interview to keep/retain your job in order to put the best person in the position?

Quoting AirTran737 (Reply 18): Mary Blundell is a good friend, I have know her daughter for years, and would stop by her house from time to time to talking about our respective companies. She is a very dedicated YX employee who has been there since the beginning, but FL has Jack Smith and won't need another VP of Customer Service. One of the many corporate casualties no doubt.

Maybe Jack should retire and let her be VP of customer service. She may actually do some good and needed customer service improvments on the Airtran side.

Quoting BH (Reply 22): If FL is going to take YX hostile and they use the pill, it will make it very difficult for FL to become stable in MKE which will cause problems for the city and employees.

Make it damn near impossible is more like it -- here's some analysis on the poison pill from one of the older threads. I'll need to rework the math now that we know a definative cash/stock offer. Nonetheless, the overall effect remains the same. I'll be listening in on the webcast to see if they mention anything directly about how to deal with this poison pill.

Quoting Mainland (Reply 65): Regarding the poison pill, not quite. Here's the lingo for Midwest's poison pill from their 10-K filing: "The Company was party to a rights agreement that expired by its terms on February 13, 2006. On February 15, 2006, the Board of Directors adopted a new rights agreement and declared a dividend of one Preferred Share Purchase Right (“Right”) on each outstanding share of the Company’s Common Stock that was distributed to each shareholder of record of the Company’s Common Stock on February 16, 2006. The Rights are exercisable only if a person or entity acquires 15% or more of the Common Stock of the Company or announces a tender offer for 15% or more of the Common Stock. Each Right initially entitles its holder to purchase one one-hundredth of a share of the Company's Series A Preferred Stock at an exercise price of $21.00, subject to adjustment. If a person or entity acquires 15% or more of the Company’s Common Stock, then each Right will entitle the holder to purchase, at the Right’s then-current exercise price, Company Common Stock valued at twice the exercise price. The Board of Directors is also authorized to reduce the 15% threshold to not less than 10%. The Rights expire in 2016." The poison pill does not require a stock split, or a bank to finance the offering. Rather, once either one of the two triggering events occur the rights automatically come into play -- thousands of shares of this Series A Preferred Stock will be issued. The preferred stock presents two barriers for AirTran. 1. Each share of preferred stock is entitled to 100 votes in common stock. 2. Each share of preferred stock is entiled to receive 100 times the amount offered for common stock. Sourcing from the SEC filing from Feb 22: "Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation." "Finally, in the event of any merger, consolidation or other transaction in which common stock is exchanged, each share of Series A junior participating preferred stock will be entitled to receive 100 times the amount received per share of common stock." Obviously barrier #2 is more troubling for AirTran. Lets do some math.... 18,604,442 (YX shares outstanding) x .01 (Conversion rate into preferred stock) = 186,044 (Maximum preferred outstanding) $11.25 (AirTran's offer) x 100 = $1,125 x 186,044 = $209,299,500 Given the current offer, AirTran would need to pony up, at most, an additional $209 million just to pay off the affects of the poison pill. Ouch! Needless to say, the way -- perhaps the only way -- to get this deal done is to get the Midwest board of directors to waive the poison pill. They don't seem inclined to doing that. A proxy vote/battle, a la taking the case directly to the shareholders as has been discussed here, wouldn't seem to do much good itself since it doesn't take care of the underlying fact that the poison pill needs to be waived. I'll add to that it would seem, IMO, Midwest's board of directors would be under no breach of fidcuary duty to their shareholders by rejecting the proposal from AirTran. Sure, some shareholders may be mad for not taking the $11.25 on the table -- but price is only one of many factors. I have to believe the board has taken all the factors into consideration and still decided to reject. Nonetheless, Midwest would seem to be the one in control over this merger.

I'm crossing my fingers for this merger. I fly AirTran frequently between BOS-ATL, and I think that this will make them a more profitable and, overall, better airline. My hope is that they will use some of the Midwest aircraft w/ all Business Class interiors on select flights between major financial centers.

Scott

Knope2001:

I believe that AirTran must have gotten enough feedback from investors that they think that they could pull off this deal. Why else would they entertain such an offer?

Your analogy is flawed. Look at this as an arranged marriage.

I want you to marry me. You don't want to marry me.

I try to convince you to change your mind, but you don't budge.

Then I try to convince you harder to marry me, but I say "if you don't dress prettier and buy me a new car, I won't marry you"

If you don't want to marry me in the first place, WHY would you dress prettier and buy me a car??

But her parents say you must marry him, because we told you so. In other words, if AirTran owns the majority of Midwest's stock, they can control the shots.

Welcome to AirTran

RJ

AirTran's assessment of the MKE market in their presentation should win a Pulitzer prize for fiction.

I see no committment to, or understanding of, the Milwaukee market in the slightest.

Quoting AirTran737 (Reply 10): Quoting Sideflare75 (Reply 9): He also said that Midwest was just copying AirTran by putting some 2 by 2 rows into the MD-80's. I thought that was kinda funny. Seems like the truth though doesn't it?

I meant he made it sound like AirTran invented the concept of two class service. Besides adding this to 8 MD-80's out of a fleet of 36 airplanes isn't exactly copying. When they make the 717's 3 by 2, then maybe. I just thought the way he said that was funny.

He also talked about out-sourcing like it is the worst thing in the world and you are screwing your employees due to the Skywest deal. AirTran does it with their maintenance and that's OK though right? If you really feel that way how about bringing all the heavy maintenance in house and we will do it for you here in MKE. That would be good for the employees no?

I just find it hard to believe this guy sometimes.

Quoting Flyingchoirboy (Reply 27): My hope is that they will use some of the Midwest aircraft w/ all Business Class interiors on select flights between major financial centers.

Yeah, right. I hope Santa brings me a pony for Christmas.

Quoting RJ (Reply 28): Welcome to AirTran

No thanks. I'll just fly United all the time then, and many people here will do the same with NW, UA, etc. We fly Midwest when we can for an experience upgrade, not a downgrade.

[Edited 2007-01-11 16:04:48]

Quoting Sideflare75 (Reply 30): AirTran does it with their maintenance and that's OK though right?

Yes but they have their own MX personal for almost everything else, They have not furloughed hundreds of mech. to bring in outsourced mech. for line MX.

Quoting Sideflare75 (Reply 30): If you really feel that way how about bringing all the heavy maintenance in house and we will do it for you here in MKE.

I actually see this happening. With more planes coming I'm not sure they will be able to rely on their current heavy MX contractors to keep up with the pace.

Quoting RJ (Reply 28): I believe that AirTran must have gotten enough feedback from investors that they think that they could pull off this deal. Why else would they entertain such an offer?

Wow. I hardly know how to respond to that. If you think there isn't a huge amount of spin you're remarkaly naive.

It is *possible* that significant numbers of Midwest stockholders are in favor of this and have expressed that opinion to AirTran. However we have zero way of knowing that from public statements of either company. It's called propaganda.

Quoting RJ (Reply 28): But her parents say you must marry him, because we told you so. In other words, if AirTran owns the majority of Midwest's stock, they can control the shots.

If it were that simple than this would be true. However it simply isn't.

Both Midwest's poison pill and Wisconsin state statutes make it difficult and prohibitively expensive for an unwanted suitor to make a hostile takeover. AirTran's only hope is for enough pressue to be made on the Board of Directors to accept the offer as non-hostile and remove the poison pill. That's a much harder task than simply once again doing a PR blitz.

Quoting Sideflare75 (Reply 30): He also talked about out-sourcing like it is the worst thing in the world and you are screwing your employees due to the Skywest deal. AirTran does it with their maintenance and that's OK though right? If you really feel that way how about bringing all the heavy maintenance in house and we will do it for you here in MKE. That would be good for the employees no

You guys did your own heavy mx and got outsourced after 813 came online. AirTran has never done their own heave mx therefore there have never been jobs lost due to outsourcing, just jobs that were never created.

Quoting BH (Reply 32): Yes but they have their own MX personal for almost everything else, They have not furloughed hundreds of mech. to bring in outsourced mech. for line MX.

I'm not sure if you are insinuating that YX did this but they didn't.

Quoting AirTran737 (Reply 34): You guys did your own heavy mx and got outsourced after 813 came online. AirTran has never done their own heave mx therefore there have never been jobs lost due to outsourcing, just jobs that were never created.

What exactly is the difference there? It sounds like we are splitting hairs. We had it but got rid of it to save money -VS- we never had it to save money.
The only reason YX got rid of the heavy checks was we just didn't have enough work to keep all the people busy. Heavy checks on 11 MD-80's takes up less than 6 months. What were we going to do the rest of the year? Hey nobody was affected by that decision more than me but it was the correct one given the circumstances. It doesn't mean that Midwest screwed over the mechanics it was just a smart business decision.

Quoting AirTran737 (Reply 4): This is five million dollars under the price that I said it would take to get YX. Let's see if I was in the right ballpark. Hopefully YX will listen a bit more now.

I'm going with $400M as the breaking point for Timmy and his goons.

The board of Midwest has a fudiciary responsibility to now accept the offer. It should move forward quickly.

How ironic that the son of the Co-Pilot of flight 191 is a long time employee of Midwest Airlines.

Quoting Sideflare75 (Reply 41): How ironic that the son of the Co-Pilot of flight 191 is a long time employee of Midwest Airlines.

Remotely at best.

-Mike

AirTran’s presentation seems very geared now at two things

(1) Revenue is concentrated in top 20 markets

AirTran claims that Midwest is exceptionally vulnerable because about 58% of their revenue comes from their top 20 markets. That compares to AirTran and Alaska both with 30% of their revenue from top 20 markets and Southwest with 16% from their top 20 markets.

Ummm, hello…Midwest mainline only flies 29 year-round nonstop city pairs and three more seasonal ones. Of COURSE a lot of Midwest’s revenue is in their twenty top city pairs. Twenty is an arbitrary number to divide by. If you compared how much of total revenue came from the top three markets, or the top fifty markets, or the top 100 markets, the comparisons would look very different. Depending on what you want your results to look like, just pick your divisor and you can skew things your direction.


(2) Low-fare competition will come to Milwaukee and kill Midwest
Exact quotes from the call include:

“Very, very, very susceptible to competition”
“Very unprepared to deal with it.”

When you think about it, this is almost funny.

AirTran is quick to tell you how they are among the premier low-cost carriers in the country, about how they have enviable low cost structures, are well-positioned for growth, etc, etc. Well, in the nearly five years since they first rolled into Milwaukee with big promises for Milwaukee, they have done poorly here. Milwaukee-Atlanta is usually near the weakest Atlanta markets, their on/off/on/off/on Milwaukee-Florida flights are most months among the emptier planes at Orlando and Tampa, and we all know how Milwaukee-Baltimore turned out. Twice. Over this same period Midwest adapted to better compete against low-cost carriers, to better match cost structure to fare environment, and to be more focused on their core markets.

If AirTran is indeed the aggressive, successful, agile, premier low-cost carrier that it claims to be, then it seems to me Midwest has proven they can survive low-fare competition. So either Midwest can succeed with low-fare competition, or AirTran isn’t a worthy foe. Which is it, Joe?

If AirTran didn’t have it hard for Midwest and Milwaukee, they would have cut their losses in MKE years ago.

As for the threat of Southwest, it’s amusing to hear them paint Southwest as the inevitable killer of Midwest. Which airline started a new city pair and then quickly cowered out of it when Southwest announced it was joining in this past summer? It wasn’t Midwest. AirTran’s attempted buildup in Baltimore and Chicago Midway pretty much ends where Southwest’s route system begins and that’s not coincidence. Other than a handful of high-volume Florida markets (some of which are dropped in the off-season) AirTran avoids Southwest like the plague. When it makes strategic sense, Midwest does not shy away from Southwest. In their growth at Kansas City Midwest chose four city pairs where Southwest was the long-establish incumbent and they appear to be doing just fine there. I’d venture to guess that two of those markets, MCI-LAX and MCI-MCO, are probably among the top 20 Midwest markets that Joe is so worried for Midwest about low-fare-carrier incursion.

I’m not saying Southwest poses no threat to Midwest if they come to Milwaukee, but this is 2007, not 1997. Midwest’s costs and competitiveness are in much better shape than they were then. Low fares are widespread already, and Midwest does not rely on large numbers of high-fare coach passengers to make money, especially not with mainline.

A final amusing point. In today’s presentation they again used the Milwaukee population figure of 2.3 million in the calculation to show how horrible underserved MKE is. Then a few slides later they show Milwaukee’s metro population of 1.5 million. Amazing how many people left the area in the time it took for just a few slides.

[Edited 2007-01-11 18:32:01]

Highlights from the conference call:

-AirTran generally feels Midwest has a very weak business plan. They feel MKE is an underutilized hub, YX is built around old planes, adding signature service to the 80's is foolish, 2x2 seating is not sustainable, adding CRJs is not up to signature service par, and over all signature service is being diminished. The overall plan was called "schizophrenic"

-Leonard harped again and again toward YX building their growth on outsourced labor -- and that the merger would create internal growth, good for employees.

-Also focused on the relative weakness of YX financially -- Midwest has not made money since 2000, while AirTran has. They admit that while YX may be profitable this year, their weak plan going forward doesn't mean sustainable profitability.

-Midwest's specific weakness is its concentrated revenue. 58% of revenue comes from its top 20 markets. Further, 25% of Midwest's daily revenue is in just 5 markets, and 23% of revenue comes on routes with a high risk of low cost competition (NYC/BOS - MKE/MCI at 14.5% and PHX/LAS - MKE at 8.5%)

-In response to an analyst question on YX growth, Leonard said Midwest has done nothing to address these weaknesses and called the current MD-80/RJ plan "bizzare". He further added that the only reason YX is currently profitable is because competition has drawn away from MKE.

-A price comparison was made between MKE and MDW. AirTran claims MKE fares are 40% higher on average to MDW -- they can bring similar savings to MKE.

-Remember that insane 2.3 million poplulation area for MKE AirTran has thrown around? Well, that apparently comes from "population within 45 miles of the airport". This extends, as many thought, fairly well into northern Illinois.

-Leonard seemed to be quite pleased that this transaction would finally give AirTran a hub to defend, rather than to fight for every inch like they have in the past.

-They claim they receved "very considerable interest at $11.25"

-YX stand alone is nothing more than a regional hub.

The call should be archived on AirTran's website, there's also powerpoint slides available that went along with the presentation. The poison pill was not brought up at all.

Quoting DAYflyer (Reply 40): The board of Midwest has a fudiciary responsibility to now accept the offer. It should move forward quickly.

They have no such duty to accept the offer. A $2 increase in the offer price does not automatically warrant acceptance.

Boy you YX lovers are grasping for anything now aren't you? You know the end of YX is near don't you. I am all for selling my 200 shares of YX to FL. Gives me a little change in my pocket.

Quoting AirTran737 (Reply 47): I am all for selling my 200 shares of YX to FL. Gives me a little change in my pocket.

HEHEHE...I hear you loud and clear. Sooo yeah....the Midwest name died with the end of Midwest Express.

Keep Midwest my Midwest !

If this goes through YX / FL lose my business to Northwest.

Quoting AirTran737 (Reply 23): Taking a low fare model (Saver Service) and putting business class seats in it. Woo was first do it? AirTran. TZ then copied it, followed by NK, and then YX. So yes, YX copied it.

I believe America West was the pioneer of Low Fare, Full Service operations. Airlines like AirTran copied that from HP.

Quoting Northwestewr (Reply 50): If this goes through YX / FL lose my business to Northwest.

Oh, and if Southern merges with North Central Airlines to form Republic then they are going to lose your business.

And if Republic merges with Northwest then they are going to lose your business.

Oh, and if Northwest merges with Delta, then who are you going to fly?

WHYYYYYYY? WHYYYYYY?

http://www.jsonline.com/watch/?watch=1&date=1/11/2007&id=17138


THURSDAY, Jan. 11, 2007, 11:57 a.m.
By Tom Daykin

UPDATE: Midwest asks for time to respond
Midwest Air Group Inc. (MEH) wants its shareholders to delay acting on AirTran Holdings Inc.'s (AAI) latest takeover offer until Midwest's board of directors has a chance to recommend a response.

Midwest Air, which rebuffed an earlier offer of $11.25 a share from AirTran, is obligated to consider today's new offer of $13.25 a share, said Carol Skornicka, senior vice president of corporate affairs.

Skornicka said the board will review the offer, probably some time next week, in consultation with Goldman Sachs, the investment banking firm hired last month to advise Midwest on ways it can maximize shareholder value.

Under securities regulations, Midwest has up to 10 business days to issue a recommendation to its shareholders, Skornicka said. That deadline was triggered because AirTran is making the new offer directly to shareholders, instead of going through Midwest's board.

Meanwhile, securities regulations prohibit Midwest from commenting on the latest offer until that recommendation is issued, she said.

Quoting DeltaDAWG (Reply 52): Quoting Northwestewr (Reply 50):If this goes through YX / FL lose my business to Northwest. Oh, and if Southern merges with North Central Airlines to form Republic then they are going to lose your business. And if Republic merges with Northwest then they are going to lose your business. Oh, and if Northwest merges with Delta, then who are you going to fly? WHYYYYYYY? WHYYYYYY?

I fly YX for their superior service and when FL destroys that by taking them over then I'll go back to my other carrier of choice.
My family and I have friends that work for NWA so we're very loyal to Northwest. If DL takes over NW I'll have to decide if I want to transfer that loyalty to DL and I don't think I will.