The Oak Creek, Wis.-based airline, which struck a deal last August to be acquired by a consortium led by TPG Capital for $450 million, confirmed in a letter to employees it is putting together a restructuring plan with the help of recently hired consultancy Seabury Group but provided few details. Company CEO Tim Hoeksema in a video message to employees warned that the changes will be "very painful," but said they were necessary given that Midwest expects to spend $300 million more on fuel this year than it did in 2007.
It is unclear whether Midwest will eliminate any destinations. However, the older MD-80s expected to be retired have a better range than the more efficient Boeing 717s in Midwest's fleet and are currently used to fly long-haul destinations including Los Angeles, San Francisco and Phoenix. Airline watchers warn that Midwest risks shrinking its way to irrelevance if the cuts force loyal passengers onto other carriers including AirTran Airways, which since losing a hostile battle to buy Midwest last year has been ramping up service at the airline's Milwaukee hub.
This is the second round of cuts for Midwest, following an April announcement it would trim more than 100 employees and ax some frequencies to save cash. A pilot spokesman on Friday told a local radio station in Milwaukee that the cuts could spell the end for upwards of 25% of remaining crew members, with a similar number of cuts among flight attendants and other staffers expected.
The cuts are bad news for TPG, which surely would have thought twice about committing funds to Midwest last year had it known where fuel prices were headed. TPG and partner Northwest Airlines Corp., which has a passive 47% stake, outlasted AirTran in a bidding war for Midwest. Though both TPG and Northwest are likely in the red so far, at least Northwest can take solace in the strategic element of their participation: keeping discounter AirTran from establishing a stronghold in its backyard. - Lou Whiteman
See TheDeal.com story on TPG's acquisition of Midwest
See Dealscape post on Midwest hiring Seabury
See Hoeksema's message to employees
See WTMJ Milwaukee radio report
Private equity-owned Midwest Air Group Inc. told employees Friday it intends to cut 12 of its 37 planes and reduce service as it struggles to cope with soaring fuel prices.
