March
2007
Midwest Airlines Stock Drops like a Sack of Rocks
Good vibrations are apparently not enough to keep the Midwest Airlines (MEH) stock in the air.
After rejecting Airtran’s (AAI) offer for a takeover, Midwest stock started to take a plunge. Yes, they used to be the best care in the air, and yes, they’re a home grown airline, but all warm and fuzzies aside, Airtran is better positioned to expand coverage. Apparently stockholders agreed with that assessment as the stock dropped from $14.15 a share to a just $11.60 when this article was written.
The problem here is that Milwaukee area travelers love the company so much that they’re blinded by the fact that the bosses running the company have done a pretty miserable job over the past few years. Midwest CEO Tim Hoeskema and VP Carol Skornicka have focused on several issues not related to the airline which have been more of an excercise in ego than in providing their core business.
I’m anticipating Midwest dipping below $10 within the next month or so. Let’s see if the people who are so pro-Hoeksema will be snapping up the shares as they continue on their downward tumble.
Jim McGuigan
Jim McGuigan
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And AirTran’s trading at $10.13 right now, down from near $13.50 last quarter. Your point?
Look at the outstanding shares.
AirTran (AAI) has 91.33 Million shares outstanding
Midwest (MEH) has 24.03 Million shares outstanding
If AirTran had as few shares as Midwest, the cost per share would be about $40 per share.
You don’t sound like somebody who knows what is talking about.
AAI stock has dropped from $18 to $10 in the last few months. MEH stock has gone up from $4 to $11 in the last few months - $9 before the merger announcement.
AAI has a huge dedt and planes coming with no cities to put them. MEH has almost no dedt and every plane flying is packed. There are more coming.
MEH might not give free wine and steaks anymore but the service is far superior still than other airlines. Their cost per ASM is only 7 cents…try matching that with the two by two leather sitting.
If Tim Hoksema is right about the $1.70 per share for 2007, the stock will be worth over $30 by the end of the year. AAI stock…watch and see as it tumbles.
Get your facts straight or go and make another sandwich and stop advising about stocks you got no clue about.
Let’s drop it Jim and move on.
Actually this comes down to a classic battle of progressive values. Why shouldn’t a town fight to keep the business it wants here against some egotistical corporate pig - Joe Leonard in this case — who wants to ruin a good thing so he can pick up a few gates in Milwaukee. We progressives should be all over this.
Not good for Milwaukee. He would renege so fast on his promises it would make your head spin.
And last year at this time the price was $1.50. So yes, Jim, what is your point.
KR -
Midwest is a progressive company? That’s news. They’re a hedgehog business in a federally regulated commodity - US airspace. Airline industry experts said in a recent JS story by Tom Daykin that everything negative Hoeksma has put out there about Airtran (and reported locally) is a “red herring.” The smallness of Midwest makes every statistical measure of the performance of the two companies apples to oranges.
Does it occur to everyone that the rise of Midwest stock share price has coincided with Airtran’s interest in buying that stock? It’s no coincidence.
Airtran’s interest and offers have basically set Midwest’s stock value.
JD:
Huh? Do you have a reading impediment?
Just a bit put off by the use of the word “progressive” in context of Midwest Airlines. There is nothing progressive about the company or its Mayberry-like business vision. And it’d be nice if a company named “Midwest Airlines” could put you on a flight to Detroit, or get you on a plane out of Chicago for that matter. Not you personally, or course.
This seems like a good time to remind our readers about comment protocol policy, which means lets keep comments centered on topics.
Again, since I never mentioned anything about Midwest being progressive per se, I nevertheless feel compelled to answer your point. If Midwest is not so progressive as you maintain, why is is winning all those travel awards.
I love your last sentence about the protocol policy when you didn’t really read what I wrote in the first place and then go off half cocked.
So here’s my point and read carefully. I posit that it is indeed progressive to push for local self-determination when it comes to maintaining local ownership of a leading company like Midwest.
This company portrays a very positive image for Milwaukee, which is good for business. Loose that company and the local image takes a blow.
Worse, AirTran is everything we progressives dislike — arrogant, with an executive that is way overpaid.
Obviously you have some issue with Midwest that underlies your argument.
KR, There is no underlying issue with either JD or myself.
Emotion has entered into the discussion here and the Midwest management has been the beneficiary of it. What is different here at Watchdog Milwaukee is that we’re not forgetting the blunders of Midwest over the past decade.
Don’t forget that Midwest is a stock company and not truly locally owned. It may be locally located but ownership is a completely different animal.
In the column I wasn’t claiming that AirTran would be any sort of panacea. What I was pointing out is that they have made commitments that Midwest is either unwilling or unable to make. AirTran could expand service and increase jobs. Despite that fact, people are enamored with Midwest — I’m starting to think it has more to do with chocolate, flour and butter than logic.
Your comment about another writer having a reading impediment crossed the line and was in poor taste.
JD- Midwest stock was almost 8 times what it was the previous year before Air Tran made it’s offer. The stock was trading at $1/$1.25 last year and before the Air Tran offer it was trading at almost $10. That shows the growth of the company and the faith investors have in Midwest’s long term financial plan. The fact that Air Tran has had to extend the offer not once, but twice shows that as well.
Because Airtran said they will expand out of Miwaukee and increase jobs, we are supposed to raise the flags and cheer about it? Lets do some research and find out who Airtran really is, some of you will be surprised what you find out.
Plus, if Airtran wants to expand out of Milwaukee why don’t they just do it on their own? What is holding them back? There are plenty of gates available and the airport would love to have more cities serviced out of here.
There is no comparison now with Midwest’s management 5 years ago. Tim Hoksema has replaced almost everybody. The new leader, Sct Dickson is doing a great job and the results are showing now. Only those in denial refuse to see the growth.
By the way, about the MEH stock. The February numbers were reliesed a few days back. Midwest is leading the airline stocks in traffic, loads and yields. This is going to be a great year for Midwest and as soon as that Airtran bug goes away you could see the results in the stock performance too
Politically supporting a company that instigated a proposal to set up a regional airport authority that would strip Milwaukee County of the direct oversight it currently has over property [the airport] it owns is not progressive. This is also a company that will expand, if it does indeed continue to expand, in Kansas City, not Milwaukee. As Jim noted, there are no underlying issues here, only some very real top surface issues.
As for AirTran’s interest and offerings, let’s not forget that AirTran approached Midwest a year-and-a-half ago, perhaps even before that. There was at least a year of behind-the-scenes talks before AirTran went public and signalled that they were done talking to Hoeskma. My point was that Midwest’s stock began to rise when the talks started, not when AirTran went public.
I’m with Jim on our basic point: Milwaukeeans have bought into this “hometown company” perception of Midwest, and I think it reflects a major flaw in how Milwaukee views itself and the economy as a whole. As a metro area, we are held hostage by this smalltime, Mayberry-like attitude. The outsiders are “bad.” The homeys are “good.” There’s nothing progressive about this mentality or argument. It’s, in fact, regressive.
I’ll reiterate what I’ve written on our earlier posts. Midwest’s current growth plan is along their past path of what the company calls “market differentiation” - short little flights to various smaller cities in the Midwest, for which they have hired a private, nonunion flying company. The progressive thing to do would have been to expand with the Skyway pilots union bargaining unit. However, Midwest decided to privatize, undermining their own pilots and industry standards.
AirTran has said it’s expansion will be with union jobs. Airtran is also playing a different game than Midwest in the market. While Midwest tries to differntiate by providing what I like to call “train rides,” Airtran wants to compete with the big brand airlines in the industry - American, Southwest, Northwest and JetBlue. Northwest controls O’Hare. Airtran plans to appeal to the north suburbs of Chicago (which are ever expanding north) to offer an alternative to O’Hare in Milwaukee, which, for many to the south is an hour or less away. It’s an expansive plan that recognizes the pattern of economic growth that is the future of Southeastern Wisconsin.
And yes, it’s a far better plan for everyone than Midwest’s. Midwest does not want to compete - it wants to differentiate from others by small-sizing the concept of air travel.
We would be well-served in Milwaukee to simply not take the Midwest cookie.
Or drink the Midwest kool-aid.
JD-
1. Every new route announced by Midwest this year (and there have been several) have been in Milwaukee and with the exception of the Superior routes are long haul flights.
2. Milwaukee is one of the few airports not to have an airport authority. You can make an argument against one, but it is not out of the norm and not some grand conspiracy.
3. There was a $5-$6 spike in the Midwest stock after the Air Tran announcement, but that followed an $8 rise over a year of Midwest stock ($1.50-$9) that was a result of Midwest getting its finances in order and putting forward a long term plan.
While the local vs outside does play some role in my opposition to this merger, I am more concerned with the fact that this is not a good fit for either Milwaukee. Airtran only wants the gates and planes, not the service for Milwaukee. It does not make sense to merge two airlines which are totally different. We are going to end up on the short end of the stick.
John,
1) This month they trumpeted (internally) more lines through Kansas City, increasing use of KC as a hub. Many, many Midwest flights out of Milwaukee run through KC, and remember, Hoeksma’s never promised Milwaukee expansion. In fact, he recently threatened to leave, as Jim has reminded us.
2) No conspiracy. Midwest did, in fact, instigate the Plale-Stone legislative proposal for the authority. Apparently, the company doesn’t like County Board oversight, though it is not clear why. The county has done an excellent job managing the airport.
3) AirTran went public late last fall, true. But they approached Midwest a year prior to that. Remember, Midwest renewed their state anti-hostile takeover stock option last spring after AirTran began its overtures. Midwest has acknowledged in newspaper reports and company memos that much of what it has done in the last couple of years has been designed to fight off AirTran by showing its shareholders that the company is serious about growth, including new flight lines such as the one to Seattle. Midwest getting its act together, and the stock achieving its value, is, again, directly related to AirTran’s interest in buying the airline.
Lastly, AirTran has promised growth in Milwaukee. True, we are talking about a finite resource here - the airways, and about a certain amount of service level that is fixed. The airline industry is not so much of a free market as it is a fixed commodity that has growth limits. There’s a limit to how much service can go out of Milwaukee, a limit to its status as a hub, etc. Our main point is that we should not be concerned too much about a nonhometown company managing this commodity, especially one that wants to grow its share of the market well beyond the vision of Midwest. AirTran has promised Milwaukee growth to the city, the county, the unions and to the stockholders. Only Midwest is denying that it can or will be done in the way that AirTran says it will be done.
Don’t take the cookie! (And don’t drink the kool-aid either).