In his letter to Midwest AirTran CEO Joseph Leonard said,
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.
Leonard thinks “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.”
This morning making his tv rounds Leonard noted Milwaukee fliers are paying 40% more for air travel than in Chicago. I did a quick search for prices on flights to Washington, D.C. in late February. In that case Leonard is correct. Chicago to Washington costs $98 (pre-taxes). On Midwest it’s $188. The trade off is dealing with O’Hare Airport and Midwest’s two-across seating. I’m probably willing to pay for it, but how many other travelers will? Midwest’s model has been a better level of service for a competitive price. That may not work in the new airline economy. Midwest’s strategy of increasing capacity with more regional flights to places like Duluth, MN (!) doesn’t seem as inspiring.
AirTran’s offer is on the table until 02.08.07.
“AirTran ups offer for Midwest“