AirTran's Midwest Merger Presentation

[bvt1151]

Found the powerpoint version of AirTran's Investors Presentation. Since neither of these companies is in bankruptcy, this is going to have to be accepted by Midwest to happen. Some highlights
:

• $11.25 per share offer
• Claiming $60 million in synergies ($40 million in Network and $20 million in cost)
• Q1 2007 timeframe

AirTran's Investors' Presentation

 

[EX_CV580FR8Dawg]

Lots of Pretty Colors!

 

[Kenney G]

Notice only 1 net gain in airframes in 2007. all 737 deliveries will replace md-80s.

 

[EX_CV580FR8Dawg]

Executives lament possible Midwest Airlines acquisition
The Business Journal of Milwaukee - December 15, 2006
by Business Journal staff

Milwaukee-area business executives who travel frequently were adamant that Midwest Airlines should remain independent in the face of an acquisition offer by AirTran Holdings Inc.

"Anytime a smaller company is taken over by a bigger company, it seems to lose its local charm," said Ken Klein, an account executive with Cardinal Health, Wauwatosa, who flies with Midwest Airlines to Minneapolis at least twice a month. "I just hope the shareholders are smart enough to realize that Midwest should stay in Milwaukee."

Jim Brindley, president of Health Payment Systems, Milwaukee, flies on Midwest Airlines regularly to Washington, D.C., and other destinations. He travels Midwest out of a sense of duty to local companies, but said Health Payment Systems is willing to pay extra for better service and amenities, which he said control by AirTran Airways would jeopardize.
"It's pretty clear to me that if (a takeover) were to happen, there would be a significant change in culture," Brindley said. "It sounds like they're one of these value-driven, do-it-on-the-cheap, 'here's your bag of pretzels' cattle cars."

Other business travelers said their key concern is whether a merged airline would maintain Midwest's high level of service, including its two-across leather seating, chocolate chip cookies and Midwest Club for executives.

"Right now I'm willing to pay a little more to fly Midwest because of the quality of the service," said Barbara Boxer, a partner at Milwaukee law firm Reinhart, Boerner Van Dueren S.C. "I would not be willing to pay more for AirTran's service."

Boxer flies at least 30 times a year, and uses Midwest for the majority of her business travel, she said.

"I would be very disappointed with that type of merger," she said. "I think if AirTran makes Midwest like AirTran, Midwest loses it's competitive advantage and no longer is a hometown airline, which matters to the city."

Hometown advantage
Grant Killoran, a health care attorney at Michael Best & Friedrich L.L.P., said Milwaukee-area businesses derive value from Midwest Airlines because of the number of direct flights the airline offers.

"Besides the obvious potential for relocating, there's the elimination of direct flights for business destinations as well as losing the business-friendly seating," Killoran said. "Unlike many airlines, Midwest allows you enough space to conduct business from your seat."

Midwest's supply of direct flights to the East Coast make cross-country business relatively easy from Milwaukee, Killoran said.

"When Northwest moved its hub away from (Milwaukee), we lost some direct flights, and you had to go through other hubs," Killoran said. "That could easily be another two hours, and depending on which way you're flying, with or against the clock, that could have a sizable impact on the business day."

Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, said he had "strong concerns whether the quality of service we've gotten used to with our hometown airline would be met."

"A lot of the economic drivers in our community rely on good air service, and Milwaukee currently has air service in excess of its peers," he said.

But, John Potter, a portfolio manager at Cortina Asset Management in Milwaukee, said for most business travelers, convenience, flight availability and price are key drivers in deciding what airline to travel, not the name on the airplane. Potter makes about 25 to 30 round trips a year, about 10 of which are on Midwest Airlines, he said.

"I'd be hard pressed to see something negative here," he said. "I'm much more concerned when I see Midwest cutting routes and I go down from two carriers to one."

Community impact
Having Midwest Airlines based in the Milwaukee area is important to the region's national image, said Julia Taylor, president of The Greater Milwaukee Committee.

"The brand for this region, that blue brand is a very important part of our regional identity," she said. "It's unusual for a city our size to have an airline that has that type of hub here. It's a very important business attraction, particularly for our global companies."

Jim Roemer, associate managing director of The PrivateBank, Milwaukee, compared the proposed acquisition to the Sears, Roebuck & Co. takeover of Lands' End a few years ago.
"Sears did nothing for Lands' End and it doesn't sound like AirTran will do much for Midwest Airlines," he said.

If Midwest Airlines is merged into another company and the area loses another corporate headquarters, Roemer said there is a corresponding loss of charitable donations and civic-minded corporate behavior.

Several community leaders said Midwest Airlines is one of the more active Milwaukee-area companies in the community. Taylor praised Midwest's management for its commitment to the region and business savvy.

"When a lot of airlines chose to go bankrupt, they took on the role of managing their assets, reducing debt and becoming profitable," she said. "They've done it the hard way, and it speaks volumes about the quality of the company and its management."

AirTran: A brief summary
AirTran Airways describes itself as a low-fare airline designed for business travelers.

The Orlando, Fla., airline provides 700 flights a day to 50 destinations. It's hub is at Hartsfield-Jackson Atlanta International Airport, where AirTran is the second-largest carrier.
The company was established in 1993, but it first gained national attention in 1997 when it merged with ValuJet, which suffered financially after a ValuJet DC-9 carrying 109 people crashed in the Florida Everglades.

The current AirTran management team, led by Joseph Leonard, took over in 1999. At the time, the company had about $10 million in cash-on-hand, which is "about a snowstorm away from going out of business," said Kevin Healy, AirTran's vice president of planning and sales.

Since then, the airline has built its fleet and its destinations. AirTran survived the passenger downturn after the 9-11 terrorist attacks in part by winning voluntary wage cuts from its three major unions, Healy said.

Revenue has increased at a healthy clip the past three years, but operating income and cash flow have decreased.

During the third quarter ending Sept. 30, AirTran reported a net loss of $4.3 million compared with a net income of $1 million a year earlier. The airline's management said the loss was due in large part to revenue not growing enough to cover increased jet fuel prices. AirTran also experienced a slowdown in demand following the changes in airline security protocols in London after terrorist activity was thwarted there.

The company's stock hit its 52-week low in September of $9.06 but had rebounded in the weeks leading up to the disclosure of AirTran's bid for Midwest Air Group.
Its stock closed on Dec. 13 at $12.82 per share.

-- Rich Kirchen

 

[appendix]

AirTran please come and save us from SkyWest!

 

[RIDETHELIGHTING]

I wonder if skyway is excited about this deal?

 

[ultrarunner]

I wonder if skyway is excited about this deal?

I can't imagine they are excited about anything right now...oh wait, they're getting two more Do-jets. Never mind.

 

[EX_CV580FR8Dawg]

I can't imagine they are excited about anything right now...oh wait, they're getting two more Do-jets. Never mind.

real classy .....

 

[EX_CV580FR8Dawg]

I wonder if skyway is excited about this deal?

not so much we can do about this but supposedly hey have done their homework and this is the fastest way to expand the Midwest Connect brand. The startup costs to do it on our own would take mre than YX is willing to shell-out at this point? We are supposed to learn the new fleet type for YX 1st quarter '07. Gotta love this business!

p.s. i think we will have seperate crew rooms for us syxers and the skw pilots.

 

[ultrarunner]

I wonder if MEH will subsequently negotiate for some of the 90 seat flying Skywest will put in Atlanta. Gottta be TONS cheaper to run that 90 seat CRJ than an 88 seat 717.

Will the Skywest deal, will they finally use jet bridges. Could never figure out why MEH, and how they promote that brand, has you walking outsite when it's 30 freaking below out. The king air's I can understand, and I suppose maybe the Dojet, but since the CRJ is jetbrige capable, I would think you'd want to use those at a real gate.

 

[EX_CV580FR8Dawg]

Im sure they will ultra....not too fond of MEH it seems?

 

[ultrarunner]

Im sure they will ultra....not too fond of MEH it seems?

Not at all. Great product, great folks. I just don't think the product is viable in today's market place, in it's current form.

Over that last several decades, airline revenue load factors have averaged about 55%. You just can't make consistent money flying around with half the seats filled. Look how quick it caught up with legacy carriers. And flying around a 110 seat airplane with 80+ seats in it REALLY means you have to charge a premium fare. But in MKE you have a dwindling population and those which are left are very price sensitive.

Regardless of the spin you read, if MKE becomes an LCC base, they will do well both on the business side and the leisure side.

Midex just can't tolerate excessively high costs for any significant period of time. They can only beat up the working groups so much.

The shift is happening. Think about it, they are growing the airline by contracting out the flying. Do you think that some of SkyX flying won't be replaced? I think it will. And if MEH replaces SkyEX flying with contract work, is there any reason not to replace unprofitable MidEX flying with the same?

Good topics for discussion.

 

[EX_CV580FR8Dawg]

Point taken Ultra.....Yes I agree, a very good topic for discussion. Well if anything, our load factors are up and I think when we do get the next fleet type at MEH there will be a two- class configuration albeit a more comfortable one than what you see at AirTran. If you want to believe the schpiel that YX is giving us SYXers is that this is currently the fastest and most economical way to grow SYX short term (5yr contract) without using their own funds. Which they need in anticipation of the new fleet type. Now as you probably can tell by my previous posts, I don't know sh!t so if someone knows what they are talking about, please expound!

 

[appendix]

Uncle Tim said he will sell at the right price. They hired Goldman Sachs to figure out exactly how much MEH is really worth.

MEH has to make a deal with AirTran, shake hands and be friends or else AirTran will pour millions of $ into MKE flying and put MEH out of bussiness in a couple of years (hostile) anyway.

For the Skyway pilots, the AirTran deal is a life saver and a well deserved growth opportunity for the pilots and FAs who have worked so hard for so many years with so many empty promises (analysis paralysis by magmt)!

 

[pilotmyf]

For the Skyway pilots, the AirTran deal is a life saver and a well deserved growth opportunity for the pilots and FAs who have worked so hard for so many years with so many empty promises (analysis paralysis by magmt)!

Mmmmm Koolaid!!!!!!

 

[pilotmyf]

I can't imagine they are excited about anything right now...oh wait, they're getting two more Do-jets. Never mind.

Don't be a dick

 

[EX_CV580FR8Dawg]

Midwest hires Goldman Sachs as adviser

The parent company of Midwest Airlines said today it has hired an investment banking firm to provide strategic advice, one week after it was disclosed that the company had rejected an unwanted takeover offer from AirTran Airways.

Midwest Air Group Inc. (MEH) announced that it has hired Goldman, Sachs & Co. (GS) as a financial adviser. The announcement came at 3:30 p.m., after trading closed. Midwest stock closed at $11.07 a share, down 4 cents.

Midwest Air will "be working with its financial adviser to further develop the company's strategy to grow its business and maximize shareholder value," said a statement from the Oak Creek-based company. The statement provided no other information on the decision to hire Goldman, Sachs, and a Midwest spokeswoman couldn't be reached immediately for comment.

However, the hiring of an investment banking firm like Goldman, Sachs is often done by companies that are evaluating business strategies, as well as considering acquisition offers.

"I think that Midwest might have realized there was a little more value it could unlock as a company. And they are just exploring it," said Chris Armbruster, a research analyst for Al Frank Asset Management Inc., which owns a 1.3% stake in Midwest.

By hiring Goldman Sachs, Midwest can better determine its value to a company that might want to acquire it, Armbruster said.

AirTran (AAI) disclosed last week that Midwest had rejected its $290 million offer. AirTran made the announcement in hopes of bringing shareholder pressure to bear on Midwest's board of directors to reconsider the offer.

That offer was at $11.25 a share, which some analysts have said is too low. AirTran Chairman and CEO Joseph Leonard said AirTran would be willing to pay more if it could review Midwest's proprietary financial data, and determine whether the company had additional value beyond what was reflected in the initial offer.

Midwest's ongoing strategic growth plan, which includes a new regional jet service that launches in April, has a "significantly higher" value than the AirTran offer, Timothy Hoeksema, chairman, chief executive officer and president, said this week.

That plan forecasts 10% annual passenger capacity growth - and even higher profit growth - over the next three years. It was formerly detailed on Thursday, but drew little reaction from the stock market.

Hoeksema also told reporters that the company's board would have a duty to shareholders to review any "credible" offer.

Hey appendix...you also forgot to add that they are working with GS to further their growth strategy. Funny how you leave key points out of your statement? How's the Tranny Koolaid tastin'?

 

[RIDETHELIGHTING]

That dude looks like he is almost dead holding that sign in your avart. Maybe he needs a cookie?

 

[FlyWolf]

That dude looks like he is almost dead holding that sign in your avart. Maybe he needs a cookie?

lol..