February
2007
AirTran Deal Not Bad for Milwaukee
For months I’ve quietly listened to the folks from Midwest Airlines thump their chest over how they’re better prepared to serve the Milwaukee market than AirTran.
But let’s look at some of the facts.
Midwest Airlines (MEH) has seen its stock tumble and only recently, with the announcement of the AirTran offer and its subsequent increase in their offer price, has Midwest Airlines seen a rise in their stock. Today, their stock dipped, closing at $13.30 — just 5 cents more than the AirTran offer.
The problems with MEH aren’t just that the CEO, Tim Hoeksema and their other honcho, Carol Skornicka haven’t performed for the company — the problems are that they are focused on things other than their core business. Skornicka, a former Republican Governor Tommy Thompson appointee has dragged the company into politics, joining with Republicans to bash Democrats when the Republicans were in power of both the Governors mansion as well as the State Senate. CEO Tim Hoeksema has done his part too and a quick search of campaign finance reports shows that he’s been a big contributor to Republicans.
Midwest has lined up for years asking for handouts from Wisconsin also. Are we to now believe that this has been a good thing? We have used out tax money to help Midwest.
AirTran, if they do succeed in taking over Midwest, today promised they would increase destinations, service and increase jobs. That’s not a bad thing and in fact, it would be good for Milwaukee and the metro Milwaukee community.
But it seems that our community leaders are wed to saving a floundering airline. Just a few weeks ago the Chairman of the Milwaukee County Board of Supervisors, Lee Holloway, suggested that Milwaukee County should invest in the stock to help prop up the value and keep Midwest here.
Let’s take a quick look at what Midwest has done though in the past few years. Carol Skornicka pushed the failed “Blue Shirt” public art project only to have it implode in a public relations frenzy. Skornicka silently faded into the limelight and no one even knew she was part of the committee that suggested it. During a massive layoff masterminded by Skornicka and Hoeksema, they chose as their first department to axe, the quality improvement department. They then axed many other experienced employees and greatly reduced the amount of planes they fly that had their wide leather seats which made them a passenger favorite. They eliminated meal service, instead opting for a pay-per-meal option and kept only one of things that made them popular — the in-flight chocolate chip cookies. They’re also had major labor disputes.
So with all of these problems, the public is supposed to believe that Midwest Airlines, under the leadership of Hoeksema and Skornicka, is a better bet than AirTran?
If the AirTran deal goes south, wise investors should look at the track record of MEH and if they’re got at least a moderate risk profile, consider doing some short selling. Without AirTran, the Midwest stock is back on its way down.
Jim McGuigan
Jim McGuigan
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I’m calling BS, for several reasons. One, all the things you lament have been lost at Midwest–from wide seats to meals–are things that AirTran never had. You still get the wide seats on non-regional flights, and even their regional flights are being upgraded to bigger planes (I fly Midwest Connect pretty regularly).
Two, there is value to having a hometown company. AirTran wants Milwaukee as a hub, not as its headquarters, which means it will beg for money (as much, I bet, as Midwest did) without giving back to the community as much as Midwest has. Airtran sees its acquisition of Midwest as a tool; Milwaukee sees Midwest as a neighbor.
Is there current management the best it can be? Probably not, but, three, what do you really know about AirTran? They used to be ValueJet, who couldn’t be bothered with basic safety precautions, and changed their name for PR purposes after a deadly crash made that all too clear. Their conrtibutions are 90% Republican (see http://www.buyblue.org/node/157/view/summary ). (I can’t get WDC’s page to open to check the percentages on Midwest, and they’re not listed at BuyBlue.)
Stock price isn’t everything. As I said, there’s a value to having a hometown company to provide a service–which they do very well at a competitive price.
Yeah, this post reads more like someone with a grudge rather than a fair analysis.
I call Shenanigans.
Folblum and John: Wake up. Midwest has for years asked for nothing but handouts from the Milwaukee County board and the state, while working behind the scenes to strip Milwaukee County of any authority over the airport that it owns. Also, the inside word from Midwest is that they are looking to expand in Kansas City, not Milwaukee. In addition, the new jobs they’ve “created” with their recent “expansion” are scab short-flight hops that have the pilots’ union up in arms.
Wake up. Midwest is not what any progressive would define as a good employer, and, as Jim pointed out, is laying in bed with Republicans and notorious Republican interests to do exactly what Republicans and business conservatives like to do: take as much from the public trough as possible, then work to eliminate any sort of public accountability.
Midwest is synonymous with corporate welfare, and the community would be better served with a more serious employer doing business in the area.
JD Morgan- Ahh, so short sided.
1. Midwest gives a lot to Dems as well, particularly Skornica who for some reason Jim has an ax to grind. In fact Airtran is more Republican than Midwest.
2. It is perfectly legitimate to want to shift the airport to an airport authority. You can legitimately argue against it as well, but wanting to do this is not some grand conspiracy.
3. It is perfectly legitimate to want some tax breaks to help the airline pull out of the post 9-11 airline crises. Besides it worked, they are much more stable now then they were and are actually growing.
4. So what they want to expand in KC. The company is growing and actually have been adding a lot of flights the past couple months.
5. Midwest has a stake in the community, AirTran does not. Why would you want to get rid of a hometown company that is growing in favor of an out-of-state one?
6. Airtran is an airline that has had some problems as of late, and is using expansion as a way of bailing them out (just like USAir).
7. Airtran does not care about Milwaukee, they want the gates (close to Chicago), planes (cheaper to acquire the new planes Midwest has bought lately), and cash (Midwest is very cash heavy right now because they have been maneuvering the company to long term stability and growth as well as paying down the debt early.
I don’t suspect at all that Jim has an axe to grind in regards to Skornicka. Recall that Jim was on the County Board for many years and has seen the Skornicka act many, many times. It ain’t pretty. This is a company that has acted and behaved as though they own the airport, and, last year, signed on to — or, I should say, instigated — a proposal by Jeff Stone, Mark Honadel and Jeff Plale to strip the county board of its authority to oversee property that Milwaukee County owns. Midwest wants regional authority to do what? Create more nonunion jobs?
The expansion so fawned over in the local media is short-sighted in comparison to AirTran’s plans, and it involves expansion of the company’s “train service” jumps, which are being flown by private contractor pilots outside the collective bargaining agreement with its pilots.
This is not a company that gives much of a care about real expansion or genuine economic impact, and they won’t be expanding in Milwaukee (a fact that seems to escape notice in Milwaukee media coverage of the AirTran takeover). AirTran has guaranteed jobs and guaranteed expansion here, more service, and more direct flights.
What’s not to like? Allegiance to Midwest seems a Mayberry type attitude that local media propagates and is detrimental to real growth in the Milwaukee area.
Remember when Hoeksema took the airwaves to bash those who didn’t want to give them corporate welfare? Do you remember what he said? He said he would still expand but it would be elsewhere.
So to get back at a local company you want an out of state airline that has a worse record of hiring union labor and are bigger republicans? Jim and JDM, I see that you guys do not like Midwest, but come on, you are just short sighted on this one.
John,
AirTrans growth plan is more expansive, and increases service out of Milwaukee. The company has also promised that its growth will create bargaining unit jobs for pilots, flight attendants and grounds crews. Midwest cannot say the same as it is already contracting out in-flight jobs; its growth plans are rinky dink in comparison to the more longterm plans of Airtran.
We’re talking about federally-controlled resources here (the airways). There’s a built-in amount of economic benefit – at one time this was fixed and the small-scale vision of Midwest was in response to that. This will always exist as a baseline – so what difference does it make who manages it? Very little risk w/ an AirTran takeover. Airtran is simply looking at the big picture – the megalopolis rapidly growing north from Lake County in Illinois – and wants to position air service out of Milwaukee to meet these new market realities. This is the sort of national mentality that is badly needed in these parts.
More Mayberry, we don’t need.
Has everyone forgotten that Airtran is the old Valuejet Airlines with a new name? My god, they still even have the same color scheme. I suggest that anyone who thinks Airtran taking over Midwest Express should look at Valuejets…aka Airtrans’ track record and ask themselves if they honestly believe that Airtran would be better suited to serve Milwaukee. Do a simple Google search. I have NEVER and WILL NEVER fly Airtan and if they do succedd in their takeover of Midwest, I will gladly do all my flying out of O’hare.
Midwest in February just added service to Seattle. February 2007. What took ‘em so long?
The answer is that Airtran is pushing Midwest to finally start acting like a real airline.
True, true, folks in SE Wisconsin are already all-too familiar with that drive to O’Hare.
JD- that route has been in the works for a long time. It has nothing to do with Air Tran since they do not even fly there from the midwest. You do realize that Air Tran and Midwest serve two different consumer groups. That is why this merger makes no sense.
John,
Hoeksma acknowledged to reporters that the new Seattle service was in part to help fend off AirTran’s hostile takeover, to give stock holders more confidence in Midwest growth.
Different consumer groups? I know a Midwest ticket is more expensive, but could you explain further?
I think you misread an article. The reference I have seen to the route expansions and Airtran is that it showed that Midwest had a stable positive long term financial strategy. Expanding routes solely to fend off a hostile takeover is pretty dumb.
Fly Midwest and then fly airtran, you will see the different target consumers.
Doubt seriously there is any misreading. Hoeksma said as much r.e. the new lines in a memo to Midwest stockholders and employees. If it wasn’t in the JS, our daily newspaper isn’t giving us the whole story. (Wouldn’t be the first time).
I flew Midwest twice round trip to Bloomington, Mn., in the past few months. No complaints, but despite the leg room and the nice service (of total seats on four flights, at least one-third were empty, leaving fewer passengers to serve) I gotta admit that I find air travel extremely unsettling.
The Amtrak is easily more comfortable than Midwest. I’m a regular bus rider as well, so … Midwest’s appeal to a higher class of consumers in the midwest, if that’s what your suggesting, is pure hubris in the long run, especially when Midwest can’t put a plane in the air out of Chicago or Detroit. It doesn’t make sense, and it’s silly to anchor this type of service in Milwaukee, where income growth is among the lowest in the nation.
Look what’s happening in the flight industry – air travel is down to a new low in the post 9-11 market; it’s starting to bottom out to the point where airlines are consolidating to a handful of big brand names. That’s the game in the market now, and AirTran is playing it. Midwest is trying to fight this trend and expand slowly in its niche, contrary to the larger market, while AirTran is offering real growth in this context.
I really can’t think of one good reason why Milwaukee will not bend to these larger market forces, or why Mitchell Int’l would be unaffected by them. It’s hubris to expect Milwaukee not to bend, and kind of sad that people don’t seem to think Milwaukee should be subject to the larger market.
Obviously, many of you folks are not frequent travelers – by frequent, I mean flying between 50K and 100K miles per year.
Drop the politics and think what is best for the customers who fly a lot out of Milwaukee – and I’m not talking about the family who takes 1 vacation a year and saves $20 per ticket. While that is important to them, business travelers are the lifeblood of the airlines.
No comparison between Midwest and Airtran in terms of comfort. Midwest fares are a great deal, for what you get. Typically they are similiar in cost to AT or slightly higher. Airtran may result in cheaper fares, but at what cost? VERY uncomfortable seats – so business flyers (which are an airline’s lifeblood) will have to always upgrade to 1st class – at which Airtran will be well above Midwest prices.
Keep in mind, with Midwest, Milwaukee will always be a hub and we’ll get direct flights. Not so with AT. We’ll have to fly through Columbus or Atlanta. No thanks.
We have a jewel here….Let’s not lose it.
The market dictates that the proverbial we — this we are business travelers now? — don’t get to keep this “jewel.” Business travelers, being market savvy, should understand this.
Hmmm … What is Midwest putting in those cookies?
JD- Seriously, Airtran is the Walmart of the airlines. A bad product, bad service, and anti-union. They may be good every now and again, but I will trust the high quality, good service, invested locally, and the company that is going to offer the most flights out of Milwaukee. If you really think we are going to get more direct flights, or more flights period, from Airtran then what are you smokin.
Are we not a Walmart society? Isn’t that market trend? Should a company in Milwaukee fend off the market realities, especially when there are unions involved all around?
Midwest’s record with its employees and unions is abysmal. They are already contracting out to nonunion in-flight services.
I don’t see how AirTran could possibly be worse, and national media seems to treat this deal favorably.
I’m smokin’ Camel Lights, btw.
# Mark:
Your comments about Valujet are a based on an accident that happened over 10 years ago. The type aircraft (DC-9) that crashed in the everglades are not flown by Airtran. In fact, one of the main reasons AirTran is interested in Midwest is that they fly the same aircraft (Boeing 717). Try to focus on the facts instead of scare tactics. Just because it’s on Google doesn’t make it true.
It’s been many years, but Midwest Express also had a crash but that one was over a decade ago and it was right here at our own Mitchell International Airport.
That being said, I don’t think either airline has a bad crash record so I’m not going to make insinuations that one is better than another in that respect.
A cement mixer collided with a prison van on the Kingston Pass. Motorists are asked to be on the lookout for sixteen hardened criminals.