Posted on 12/18/2006 10:10:25 AM PST by RockinRight
AirTran Airways is expected today to announce a $288 million hostile takeover bid for Midwest Airlines in what would be the first major acquisition by an American discount carrier.
AirTran is making a run at quirky Midwest — long known for its roomy leather seats and chocolate chip cookies baked on board — after two previous offers were rebuffed by Midwest management, according to people familiar with AirTran's plans.
If successful, AirTran would gain a second major hub, Milwaukee, and some redemption after its unsuccessful bid in 2004 to obtain enough gates to establish a hub at Chicago's Midway airport. Midwest, which is headquartered in the Milwaukee suburb of Oak Creek, is about one-third the size of AirTran.
AirTran's move now puts both of Atlanta's major airlines in the midst of takeover battles, although from opposite ends.
Managers at Atlanta-based Delta Air Lines are expected today to begin presenting their rebuttal to US Airways' month-old, $8.7 billion takeover bid at a meeting with creditors in New York. Much like AirTran, US Airways announced its hostile bid for Delta after Delta's management rejected previous overtures.
Meanwhile, managers at Orlando-based AirTran, the second-biggest carrier at Atlanta's Hartsfield-Jackson International Airport, are expected to begin unveiling details of their offer for Midwest in a 9 a.m. teleconference call, according to those people familiar with the offer.
AirTran decided to go public with its bid after Midwest's board of directors on Dec. 7 rejected an offer of $11.25 a share, according to those people. Midwest was approached by AirTran in October, although AirTran had attempted to buy Midwest in mid-2005 but was turned away.
If the latest takeover bid succeeds, AirTran is expected to convert Midwest's Boeing 717 jets, which are currently all business class, to two-class cabins with 117 seats. Those familiar with the bid say AirTran probably would retain the warm cookies and a few of the airline's other refinements in business class.
At Tuesday's closing price of $9.08 for Midwest shares, AirTran's offer represents almost a 24 percent premium.
The deal would be attractive to AirTran because it would stitch together its largely East Coast network with Midwest's network in the Great Lakes area. AirTran has desired a Great Lakes presence for some time.
In 2004, AirTran offered $87 million to buy 14 gates at Midway from bankrupt ATA Airlines. However, its attempt was thwarted when it was outbid by Southwest Airlines for most of the gates. AirTran now operates from four gates at Midway.
People familiar with AirTran's offer for Midwest said the proposed merger is not expected to run into opposition from federal regulators. They said there is relatively little overlap between the two networks, with only four overlapping nonstop routes connecting Milwaukee to Atlanta, Orlando, Tampa and Ft. Myers, Fla.
The proposed combination would make AirTran the nation's 10th-largest carrier, based on passenger traffic. It is currently 11th, with $1.45 billion in 2005 revenues and nearly 8,000 employees.
Midwest is the 15th-largest carrier, with 2005 revenues of $523 million and about 3,300 employees. It was founded in 1948 when Kimberly-Clark Corp. launched its own charter flights to move executives and engineers from its Wisconsin headquarters to mills across the country.
When U.S. airlines were deregulated in 1978, the company launched scheduled passenger service. It took on the name Midwest Express in 1984 and flew DC-9 aircraft, mainly from a hub in Milwaukee to business destinations in the central and eastern United States.
The airline was steadily profitable for 14 years and became known for roomy two-by-two seating, lots of legroom and cookies on every flight. The company started its own regional subsidiary, Midwest Express Connection, in the early 1990s, and Kimberly-Clark spun the airline off in a pair of public stock offerings in 1995 and 1996.
But Midwest Express began losing money after the 2001 terrorist attacks and curtailed its high-end service in a makeover aimed at bringing it more in line with low-cost carriers. It scrapped leather seats in favor of cloth ones and moved to two-by-three seating in coach cabins and eliminated most in-flight meals. The cookies stayed, however.
Russell Grantham and Dave Hirschman write for The Atlanta Journal-Constitution.
If it happens I will never be travelling Midwest again. By far the best flights I have ever had. A true luxury if you have Midwest as an option.
Airtran's not bad either.
Midwest doesn't have any real presence around here, so I wouldn't know.
You're not the first to say that though.
This isn't entirely true. They started offering two levels of service, maintaining the 2-across leather seats on their "signature service."
Unfortunately, it's inevitable that Midwest will be gobbled up by AirTran.
I'll miss Midwest. Not necessarily for the food or the seats, but for the non-stop flights. It was worth an extra 75 - 100 dollars to avoid a three-hour layover in Detroit, Newark or Minneapolis.
From what I've read Airtran plans to keep all of Midwest's routes. The main reason they want it is to have the additional routes and planes, plus Midwest's hub.
No...say it ain't so!!! I LOVE Midwest and fly it everytime I can. Unfortunately, I fly to Newark alot and Midwest goes to LaGuardia.
It would be a huge loss to those seeking comfortable flights at a reasonable price.
Don't knock Airtran though. I've flown them several times and while they don't quite do as good a job with regards to helping you make connecting flights as one would like, they're not bad at all.
I will be unhappy if Midwest disappears. It eases the pain of having to travel to Milwaukee.
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