Midwest Air Warns On Profit, Cites Weak Fares

[Eagle757shark]

NEW YORK, June 12 (Reuters) - Midwest Air Group Inc. (MEH.A: Quote, Profile , Research), which is trying to fend off a hostile takeover by AirTran Holdings Inc. (AAI.N: Quote, Profile , Research), said on Tuesday that second-quarter earnings would fall below analysts' expectations and possibly year-earlier profit because of weak fares.
Midwest, whose shares declined 1.6 percent, said the expected earnings shortfall was primarily due to industrywide pricing weakness that may continue for some time. Analysts on average were expecting quarterly profit of 67 cents per share, according to Reuters Estimates. Year-earlier earnings were 39 cents.
Reuters Pictures

Editors Choice: Best pictures
from the last 24 hours.
View Slideshow



if(!CMSB_ID){var CMSB_ID=""} CMSB_ID+="061107_MIDART_editorschoice,";document.write('');


Midwest said the pricing weakness would probably affect full-year earnings, but said it was unable to determine the impact. It therefore suspended its previous 2007 earnings forecast of $1.30 to $1.50 per share.
The analysts' average forecast for 2007 is $1.22 per share, according to Reuters Estimates.
The second and third quarters, boosted by spring and summer travel, are traditionally strong periods for the U.S. airline industry.
Midwest has spent more than $2.6 million defending itself against AirTran.
AirTran said the warning was evidence that Midwest's plan to remain a stand-alone airline is flawed, and it renewed its call for Midwest management to begin merger talks.
On Monday, AirTran said it had extended its takeover offer of $15 a share until Aug. 10. Midwest shares were down 24 cents at $14.67 in afternoon American Stock Exchange trade, while AirTran was down 22 cents, or 1.9 percent, at $11.31 on the New York Stock Exchange. (Additional reporting by Kyle Peterson)
© Reuters 2007. All Rights Reserved.

So much discussion about the pilot TA, this is really going to make this week a very interesting week. I find it interesting that Midwest released this information just prior to its shareholder meeting and vote for board members this Thursday. I imagine we will see more flights in and out of MKE by AirTran to put more pressure on Midwest's pricing. Hang on everyone involved, the ride is just beginning.

 

[Lear70]

Yes, very interesting timing... I wonder why they did that? Quite possibly they believe it might not matter anymore, as AAI already has enough shares tendered to probably get proxies for most of them and vote their BOD members in anyway.

Can't do anything if the BOD still won't agree to sell after that, except wait for next year's BOD meeting or just drop the offer, let the stock tank, then use their tendered shares to purchase the stock outright this time, poison pill and all, and duke the takeover out in court.

Either way it's not looking to be much fun for anyone involved.

 

[Propsync]

That excuse is B.S. Midwest has no competition in MKE, little in KC. Their revenue management is one of the few things I thought the company did well. They were full all last summer, I don't see how this year would be any different. And the company did well if I remember correctly in Q2+3. The problem is getting an expensive 50 seat program up and running while having Skyway cancel between 10-40 flights a day due to lack of crews. I'm sure the misconnect, reaccomodation, reposition, and cancellation costs are through the roof. Bet nobody loses their job over it, either.

 

[Lear70]

It doesn't help that the 50-seater is, historically, a money-loser for a "mainline" company.

The feeders that operate them make money because they're being paid a set "fee per departure". Unless you can connect that marginal feed to a high margin international flight, they're simply useless.

That's why you don't see any other LCC using them, why Frontier went with larger RJ's and a 90-seat Turboprop, and why AirTran has stated they're not interested in any RJ's with fewer than 70 seats.

Midwest's "growth" plan isn't going to work; that much is certain.

 

[gt1900]

Well... With Midwest doing poorly and AAI weathering the storm, it seems to me like the BOD of Midwest and Timmy are running out of excuses.. Midex's new business model seems to be tanking yet AAI's seems to be working fairly well.... What kind of things are Timmy and Carol gonna come up with next to bash AAI...



CHICAGO, June 13 (Reuters) - AirTran Holdings (AAI.N: Quote, Profile , Research), parent of low-cost carrier AirTran Airways, has not seen the softening in domestic travel demand that some carriers have predicted, the chief executive said on Wednesday.
Speaking at a Merrill Lynch investor conference, Joe Leonard said second-quarter demand has been strong.
"We have not seen softness in our demand in April or May," Leonard said on a Webcast of the conference. "We have seen a little softness going into June on near-term bookings."
The airline industry has been on the mend following a years-long slump. Industry experts warn, however, of weakening domestic revenue in 2007 due to excess capacity.
Orlando, Florida-based AirTran has its hub in Atlanta, where it competes directly with the newly restructured Delta Air Lines (DAL.N: Quote, Profile , Research) on East Coast routes.
AirTran hopes to expand its reach by merging with Midwest Air Group (MEH.A: Quote, Profile , Research). AirTran, which has issued a hostile takeover proposal for Midwest, this week extended that offer until Aug. 10.
AirTran shares were down 7 cents at $11.20 in early trade on the New York Stock Exchange.

 

[metroplex]

not trying to defend midwest, but is it not an industry trend , to lower your earnings forecast(continental, Southwest, united...).Airtran got downgraded, saying their yield will be 4% lower.

 

[CitationLover]

Well... With Midwest doing poorly and AAI weathering the storm, it seems to me like the BOD of Midwest and Timmy are running out of excuses.. Midex's new business model seems to be tanking yet AAI's seems to be working fairly well.... What kind of things are Timmy and Carol gonna come up with next to bash AAI...

it hasn't even been ramped up yet. give it some time. no nwa codeshare yet. no seating config change yet. only a few of the rj's are out and they are still announcing routes.

you should be more concerned with your crappy TA than this merger. the MEH pilots are the only ones in this merger who do not want to screw you.

besides latest rumor is southwest to buy you guys.

 

[Lear70]

besides latest rumor is southwest to buy you guys.

That rumor's been floating around for about 3 years before I got here... pretty much ever since AAI got that sweet deal on the 737's.

Not expecting fireworks tomorrow, but anything's possible.

 

[CitationLover]

That rumor's been floating around for about 3 years before I got here... pretty much ever since AAI got that sweet deal on the 737's.

Not expecting fireworks tomorrow, but anything's possible.

well let the politicking begin. those directors who have been paid $40g's by Joe will make it a vote of 6-3 so nothing really has happened except a listening of their plan.

we will see what develops. as a new FO i implore you to please stay strong on the TA.

 

[737 Pylt]

re:
Midwest Air Warns On Profit, Cites Weak Fares

Oh where, oh where is chuck/einstein/lawman/clyde frog/400ahole when you want to rub it in his face!?

737