The market talk today is airline consolidation. United (UAUA) talking to Continental (CAL) (with Northwest (NWACQ) in the background). AirTran (AAI) talking to Midwest (MEH). This is on top of U.S. Airways going after Delta. I won’t be surprised if defunct Pan-Am rises from the grave and goes after someone. And what about private equity? They’ve been buying anything like their money is burning a whole in their pockets. Let’s get to some details:
From MarketWatch on a possible United-Continental merger:
Analysts have long favored a combination of United’s Asian routes and heavy coverage of the western United States with Continental’s Latin American and European routes and its large and highly profitable hub in Newark, N.J.
On an AirTran-Midwest hookup we have the take from the Milwaukee Journal Sentinel:
A merger of AirTran and Midwest might change the nature of air travel from Milwaukee.
“Milwaukee has been extremely well served by having a hometown-headquartered airline here, and I would hate to lose that,” said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce.
“The critical thing here is the quality of the air service,” Sheehy said. “And they have given us better air service than most markets our size.”
Midwest was launched in 1984 as a spinoff from Kimberly Clark’s corporate aviation division. Midwest was founded by Timothy Hoeksema, who remains as chairman, chief executive officer and president.
Midwest competed with much larger airlines by filling a niche. It offered award-winning service, including wide, two-across seating, gourmet meals served on china, and complimentary wine and champagne. That appealed to business travelers, who were more willing to pay the higher fares demanded by Midwest.
The formula worked until the recession hit in 2000, followed by an even greater slowdown in travel after the 2001 terrorist attacks.
Midwest came close to filing for Chapter 11 bankruptcy protection in 2003. The company managed to avoid it through a large refinancing package.
The company renegotiated agreements with aircraft lessors and lenders, and arranged for about $40 million in financing. Also, unions representing pilots and flight attendants agreed to wage concessions.