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Airtran-Midwest getting closer to a deal?

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Citrusflyer

Well-known member
Joined
Nov 25, 2001
Posts
252
It's no pie in the sky: AirTran-Midwest merger talk looks serious

Goldman Sachs on board as financial adviser

December 28, 2006
BY MARY WISNIEWSKI Business Reporter
Midwest Air Group's hiring of Goldman Sachs as its financial adviser shows that the low-cost Milwaukee airline is seriously considering a $290 million merger proposal from AirTran Holdings, and may try to increase it. "I wouldn't be surprised if they're trying to up the offer," said Marisa Thompson, an AirTran specialist at Morningstar.
She said Midwest will likely use the adviser to get as much value out of the offer as possible without giving away too much proprietary information. "It's going to be a song and dance," said Thompson.
Earlier this month, Midwest refused an $11.25 per share offer from Orlando, Fla.-based AirTran. Midwest's share price has soared since the offer became public Dec. 13, with Midwest closing Wednesday at $11.88.
Midwest, which has increased its marketing in the Chicago area, said the company wants to stay independent.
AirTran made its offer public in the hope of swaying Midwest shareholders. The high-pressure courtship has continued, with AirTran announcing last week that its labor unions support the deal.
"We have said publicly that we would increase the offer if they could demonstrate additional value," said AirTran spokesman Tad Hutcheson. "We want them to say yes. It would make two great airlines even better."
A Midwest spokeswoman said hiring Goldman Sachs gives the airline a "number of options to consider" in its financial strategy and provides counseling on a number of fronts, including the AirTran offer.
"Our current position is that the offer is inadequate," said spokeswoman Carol Skornicka. "We haven't heard anything since then."
"Goldman Sachs will help us with another offer if it should come forward, but so far there hasn't been anything," said Skornicka.

Last week, Midwest said it had reached an agreement with SkyWest Airlines to operate 50-seat regional jet service beginning in April. SkyWest will operate between 15 and 25 planes for Midwest, adding new destinations and increasing frequency of existing routes.
Brian Nelson, who covers Midwest for Morningstar, said Midwest wants to analyze its stand-alone plan as well as its potential for a merger.
"We do think this deal is going to get done," Nelson said. "This is going to be a great deal for Midwest."
The combined companies would be worth $3 billion, and grow to $3.5 billion over the next couple of years, according to AirTran.
Midwest's share value has risen nearly 31 percent since AirTran announced the merger offer and nearly 148 percent in the last year
 
ChuckYogurt/Chuckie/Einstein/Lizard/TexasCrotchrot/Snake seems to have been struck speechless. . . .


.
 
What are they waiting for?

If AirTran wants this I don't understand why they are waiting to make an offer that has a chance to succeed. They are giving MEH time to put defenses in place and put up roadblocks like the 50-seat subcontract. If they give MEH enough time they might engineer some kind of private buyout or order Airbuses or more MD-80's or something to drive up the stock and minimize MEH's value to AirTran. Also, if MEH has a profitable Q4 and year end profit it will indicate the start of a trend (3 consecutive quarters) and may drive up the stock price and support the MEH argument that they are better off alone. When AirTran went public with the offer and the Head Honchos came to Milwaukeee they had MEH management on the defensive and off balance; they had momentum. They are losing the element of surprise. As any good boxer knows; when you got 'em on the ropes finish 'em off; you may not get another chance. Time to land the knockout punch or leave the ring in defeat.
 
There is no "element of surprise" in a takeover of a company from the state of Wisconsin....too many regulations preventing that sort of thing are in place there.

Joe and Bob wont pay more for something than what it's worth (i.e. MDW gates) so if Midwest does some irrational things to move the price higher they'll probably bail and wait to see how Midwest pays for the new toys all by themselves (I highly doubt the revenue stream is enough to support new Airbus). Read: Vultures waiting for the cow to die. Plus, their stock is currently at a high because of the profit takers from the merger proposal. If it falls through then the stock will cycle back to it's more realistic value. From where I sit it's a good thing that they haven't made a quick counter proposal. GS will most likely find the best price that both parties are willing to settle for and the deal will be done.

As for Chuck/Einstein.....he's probably huddled wet and naked shivering in the back of his closet.
 
so what are this weeks winning lotto numbers citrus?
 
Just a question for the AirTran guys:

1) What is the crew/plane ratio? I'm trying to find out how long upgrade would be if I get on in 07, and this Midex deal is done.

2) With the relatively small size (only 380 or so pilots) in Midex, how bad would that do to the junior or new hire airTran FO that hopes a quick upgrade? (less than 4 years)

Curious mind wants to know...
 
As for Chuck/Einstein.....he's probably huddled wet and naked shivering in the back of his closet.

Maybe you guys can have a welcome "blanket party" for 400ahole/chuck/lawman/einstein/texas crotch rot!
Of course, I wouldn't piss on him if he was on fire!

737
 
with only one net gain in aircraft next year if the deal passes, and at least one year to upgrade. thats with a full staple. anything else will delay upgrage even longer
 
with only one net gain in aircraft next year if the deal passes, and at least one year to upgrade. thats with a full staple. anything else will delay upgrage even longer

I thought airTran is getting like 15 737 in 2008? Is that a firm order or just an option?

Even if a straight staple (highly unlikely), a more systematic integration would put pretty much most (~70%) of Midex's FO above any junior (<2 yr AirTran FO). Would you guys agree with that?

Just trying to gauge the growth at AirTran if this deal goes thru, and seems like it just wait for the "Price is right"..
 
From what Im hearing there will be a 1-4 intergration, and a fence. So as long as there is a fence that will protect the upgrade for the fo`s on property now. No facts, just rumored.
 
The plan on the merger presentation from the web show the md80's to be gone by the end of the year. I belive they will take 14 737s and get rid of 13 80's
 
The plan on the merger presentation from the web show the md80's to be gone by the end of the year. I believe they will take 14 737s and get rid of 13 80's
Bingo.

The management bigwigs want to replace the MD80's ASAP. That would mean almost ZERO upgrades for at least one year (attrition only which is 2-3 a month historically from what I can see).

THEN if you do a 1 for 4 seniority integration (which is a HUGE windfall to the Midwest F/O's), and you put 15 more 737's online in 2008 means about 1/3 of the (now) 2nd year guys get to upgrade with our current delivery schedule the rest would be Midwest F/O's who were anywhere from a few months to a few YEARS away from upgrade.

Then the music stops.

If you have hired on here in the last two years and this deal goes through, you will NOT see Captain for the next 5-7 years unless we buy more planes. Period. Our attrition just isn't that high, especially on the CA side.

If you hire on here in the next 6 months, you will likely be stuck as an F/O for up to a decade and at least 1 year on reserve, possibly longer, again unless we buy more planes.

It's really very simple math - I made a LOT of money base-hopping at my last job by being able to determine seat vacancies based on aircraft deliveries and this one should scare the bejeezus out of any F/O who has less than 2 years on property with AAI.

If the deal goes through and we don't staple, anyone who isn't already a CA or isn't CURRENTLY at AAI within 4-6 months of upgrade won't see the left seat with the current delivery schedule. Everything hinges on whether or not you believe the company will continue to buy new planes after this delivery schedule ends.

The only exception to all of this would be if they create the fences so as to lock the Midwest F/O's out of contention for upgrades (fenced them into their current seat and domicile). If they did this, the AAI F/O's who are currently within 2 years of upgrade would be OK. Otherwise,,,
 
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Just a question for the AirTran guys:

1) What is the crew/plane ratio? I'm trying to find out how long upgrade would be if I get on in 07, and this Midex deal is done.

About 12 pilots per plane, if you include mngmnt, mil leave, training, etc.
 
airtran currently has something like 65 firm orders for 737's. even if they get rid of the 11 md80's that midwest has that leaves 54 more to be dilivered over the next 4 yrs. So I don't know where you think that there will be no movements for 5-7 years. .. I agree with a merger it may delay the current fo's upgrade up to another year. but with 65 more aircraft coming it hardly stops. I beleive a ratio and some kind of 2-3 yr.fence would be fair.
 
if there is a fence, yeah it would be fair. But, if there isn't then a percentage of the captain slots that would have gone to Airtran f/os would then be going to Midwest f/os - effectively shutting the door on Airtran f/os that originally would have had those slots. I've been here just under 2 years, so this is of big concern to me. Let me say this though, I'm not a fan of the staple. There needs to be a fair integration (ie we don't take any of their slots and they don't take any of ours). I think a 3 year fence might do that.

Also, lest you think a 1 year delay in upgrade is insignificant, it would mean a difference of about $55-60K in pay. That's basically double f/o's make now.
 
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I've been here a little more than a year and this deal concerns me greatly. I am working on putting my flight time into a legit logbook and considering applying elsewhere. I don't like the uncertainty of what this deal/integration might do to my potential to upgrade with AirTran.
If the FO pay rates were brought up - then it would not be so bad to accept the delay in upgrade.
 
5-7 years is the number for AirTran pilots currently on the bottom 1/4 of the seniority list to upgrade IF the deal goes through with a 1 for 4 seniority integration with NO fences to protect the F/O's.

63 aircraft still on firm order, but delivery dates have been deferred. ALL 13 aircraft next year to replace the MD80's means no upgrades or movement for one year (or very close to zero, attrition only). That means if you're on reserve, you're gonna be on reserve for another year PLUS however long it takes to move the list (a much bigger list) and hire more people.

That leaves 50 aircraft to be delivered.

I believe the number is 15 deliveries in 2008. Haven't heard a firm 2009 / 2010 delivery schedule yet, so I can only go on what I KNOW for FACT we will be taking delivery of.

We have approximately 1500 pilots on the list at AAI now. Assuming approximately 380 Midwest Pilots makes a combined seniority of about 1,880 people.

Assuming half of their pilots (or close to it) are CA's, half are F/O's, with a 1 for 4 seniority integration their most junior CA would be equivalent to our pilots at around the 760 CURRENT AirTran list range, combined list 950.

With that seniority mix, you'd stick approximately 75-100 F/O's on the list AHEAD of AirTran F/O's who have been here 2 1/2 - 3 years and are about to upgrade.

15 deliveries in 2008 staffing at 6 crews per aircraft = 90 CA slots plus attrition at 2 CA's per month = 114 CA slots for 2008.

IF deliveries continue at the same pace, you get yet another 114 slots for 2009 which just barely takes us through the top 1/4 of the nearly 1,000 F/O's on a combined list at the time of merger.

You'd then put yet another 75-100 Midwest pilots in front of the AirTran pilots hired in the last 2 years. Yet another 2 years of upgrades to get through those guys which is 2009 and 2010.

THEN,,, that's the end of deliveries currently on order. Period. WILL they purchase more? Depends if the company is doing well. If they are, then probably so. If not... :(

Even if more deliveries come at about the same pace, we have yet another 75-100 Midwest pilots in front of the AirTran pilots hired in the last year (which includes me about to hit my 1st year anniversary). Same aircraft delivery schedule, upgrade some time in 2011 or 2012, about 5 years from now.

If you're a F/O about to hit your 3rd year and upgrade, you can look at another year to year and a half in the right seat at quite possibly the lowest paying major in the country. Midwest guys who weren't expecting to upgrade in the next 1-2 years will be upgrading ahead of you.

If you're an F/O about to hit your 2nd year and were expecting to upgrade in the next 12-18 months, you can count on about 3 years instead. Midwest guys who weren't expecting to upgrade in the next 3-4 years will be upgrading ahead of you.

If you're an F/O just coming up on your 1st year anniversary and were expecting to upgrade in 2 years or so can now count on 5 years instead. Midwest guys who weren't expecting to upgrade in the next 5-6 years will be upgrading ahead of you.

That's a pretty big windfall to a pilot to have his upgrade time cut in half while it's a pretty big slap in the face to tell someone their upgrade time is now doubled.

I understand that aviation is never a certainty, but this isn't a market force or a 9/11 set of events, it's a CREATED set of circumstances that wouldn't occur if the company didn't buy Midwest. The company bears the responsibility to either protect their CURRENT employees or compensate us for the lost upgrade opportunities.

All that is based on having no fences. They put up a 4-5 year fence and protect my upgrade that I signed on to this company for, then I have no beef with it. If they don't, I'm hosed, as are several hundred other junior F/O's, and will continue to drop as many days as they will let me so I can continue to work on my side jobs to earn a REAL income for my family.
 
Oh, incidentally, for someone like me who is looking at 5 more years on F/O pay instead of upgrading in 2 more years per a projected delivery schedule without a merger, that's a direct cost to my pocketbook of 3 years missed CA's pay, adjusted for today's dollars of approximately $175,000.

Now do you get the picture why I'm so concerned?

There HAVE to be fences to protect our upgrades or there will be a mass exodus by many F/O's who aren't interested in trying to live on the worst pay scale in the majors for more than half a decade (at HOW much cost to the company to train and replace an F/O?)

A lot of us are already putting the apps in elsewhere to hedge our bets.
 
Yeah, it $ucks. At least if you had some kind of representation, you could put up a brave fight. But you gotta admit there's something to be said for a strong pilot group, and the Midex pilots have worked hard for that. I said before, they will win big time if this meger goes through. They will take and take until they've had their fill...that's a big price to pay, but should be beneficial to all about 10 years down the road. Just bad timing for the Tran pilots with less than five years seniority.
 

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