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 Though cuts by the nation's largest airlines have grabbed the most attention, two smaller, privately held carriers are also planning cuts in hopes of surviving sky-high oil prices.
Mendota Heights, Minn.-based Sun Country Airlines, a discounter owned by funds controlled by Twin Cities businessman Tom Petters, said Monday that it lost $8.3 million in the first quarter on sales of $88 million. The first quarter is typically Sun Country's strongest, spurred by flying Minnesotans to warm weather destinations like Mexico and Florida. For the full year ending in March, the airline lost $43 million on sales of $243 million, according to data filed with the Transportation Department's Bureau of Transportation Statistics. Sun Country is under new management, having hired one-time AirTran Holdings Inc. CFO Stan Gadek in March. According to the Minneapolis Star-Tribune, Gadek was hired by Petters, CEO of investment firm Petters Group Worldwide, in hopes of getting control of the airline's costs and stemming losses. But with high fuel costs sending nearly every airline into the red, there appears to be limits to what Gadek can do to trim losses. Industry watchers warn that Sun Country could join Aloha Airgroup Inc., ATA Airlines Inc. and Skybus Airlines Inc. and cease operations should Petters decide enough is enough and throw in the towel. Another privately held carrier, Midwest Airlines, is also taking steps to cut costs. Midwest, which avoided a hostile bid by AirTran last summer when it agreed to be acquired by a consortium led by TPG Capital, has hired aviation consultancy Seabury Group to help craft a restructuring plan. Oak Creek, Wisc.-based Midwest could announce service and job cuts within weeks, company chairman and CEO Timothy Hoeksema said in a memo to employees. The airline in April said it would trim its schedule and cut 109 employees. In his memo Hoeksema said that "our situation, driven by rapid and unpredictable spikes in oil prices, worsened. So we are accelerating the development and execution of a comprehensive restructuring plan." As with Sun Country, Midwest's fate appears tied to how long its private owners are willing to fund losses. A restructuring should slow cash burn, but the airline can't shrink its way to profitability. Should an economic slowdown eat into Midwest's core business customers -- flyers in the past who have shown a willingness to pay a little more for the service Midwest offers -- no amount of cutting may be enough to keep the airline aloft. - Lou Whiteman See Dealwatch: Airlines Categories Deal Video
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