Midwest, AirTran what's the right price?

[Eagle757shark]

You're not out of wack Fam. What you're seeing when folks post "...i'll enjoy my 3 year upgrade..." or whatever drivel, is what HAS been happening.

You are correct in your analysis. When the deliveries stop or slow, upgrades will be strictly tied to retirements and attrition.

Airtran will likely only grow to a point, due to competition. That's a given. So you are spot-on in that if AAI only grows to 200 airframes or so, the bottom 300 to 400 pilots on property will be FO's for quite a long time.

AAI FO pay reaches its max at 8 years. And that rate, based on guarantee, annual pay equates to 66K a year.

This is why it is important that FO pay be addressed during this contract negotiations. The FO pay after 2nd year are nowhere close to what they should be. I tend to believe upgrades will probable slow down after this year. If this merger doesn't go through and the company is forced to slow down the 737 deliveries further, there won't be 3 year upgrades. As you mentioned FO pay caps out at 8 years when most airlines go a lot longer than that. AirTran has a young pilot group so retirements aren't as large as some other carriers. With the age requirement about to change in two years, that pipeline will be even slower. Now attrition may see some FOs leave in the next 3 years. Particularly those FOs that were furloughed from legacy carriers. Several United furloughees have already accepted recall. I imagine in the next couple of years others may return to their former carrier if the pay is greater there and upgrades become limited. Delta, Continental, Southwest, and Fedex are all hiring and will draw pilots from the FO ranks of AirTran.

 

[fam62c]

Thanks for the information, sorry to hijack the thread.

 

[TV9Driver]

My W2 for my second year at AirTran was $65K - and that included 2 1/2 months of first year pay (I was a March hire). Second year pay is $56/hr. My point being, since you fly more here at AAI, your pay is ALWAYS higher than garauntee.

Having said that, I agree with Eagle757, FO pay must be addressed with the next contract. If FO pay doesn't make into the 6 figure area, we're gonna see a lot of FO's jumping ship when the music stops.

 

[Lear70]

My W2 for my second year at AirTran was $65K - and that included 2 1/2 months of first year pay (I was a March hire). Second year pay is $56/hr. My point being, since you fly more here at AAI, your pay is ALWAYS higher than garauntee.

Having said that, I agree with Eagle757, FO pay must be addressed with the next contract. If FO pay doesn't make into the 6 figure area, we're gonna see a lot of FO's jumping ship when the music stops.

True Dat!

 

[Eagle757shark]

Investors bet Midwest will give in

By DAVE HIRSCHMAN
The Atlanta Journal-Constitution
Published on: 02/14/07
Large investors appear to be betting that AirTran Airways will persist in its 2-month-old buyout bid for Midwest Airlines, perhaps by sweetening its offer once again.
The price of Midwest stock climbed when AirTran launched its hostile takeover effort in December, and again when AirTran made a tender offer directly to shareholders in January. Since then it has remained close to, or even above, the $13.25-a-share offer.

AirTran has extended the tender offer deadline to March 8, after it was unable to lock up a significant amount of Midwest stock in the first few weeks. As the original early February deadline neared, AirTran had commitments from shareholders to sell just 38,000 of more than 19 million outstanding shares.
By bidding up the value of Midwest stock, investors are betting either that AirTran will be back with another offer, or that Midwest's plan to boost revenue and profits will succeed — a prospect some financial analysts doubt.
"AirTran and Midwest are a perfect match," said Vaughn Cordle, chief financial analyst at AirlineForecasts, a Virginia consulting firm. "The Midwest shareholders would be foolish to turn it down."
Cordle said Midwest's most profitable routes between its Milwaukee hub, New York and Boston are vulnerable to new competition from JetBlue, Southwest or a revived Northwest Airlines.
At the same time, AirTran needs to expand beyond its Atlanta hub, which accounts for two-thirds of the Orlando-based carrier's capacity.
"They'd be better off merging," Cordle said of Midwest, "and AirTran is an excellent fit geographically and with complementary aircraft fleets. There's really no alternative suitor."
AirTran and Midwest both fly Boeing 717s as their short-haul workhorses.
AirTran officials say their current tender offer is as generous as the company is willing to be without access to detailed financial information and operational details that Midwest has been unwilling to provide.
Midwest has rebuffed AirTran overtures since June 2005, when AirTran offered $4.50 a share for the company.
The two are battling in court over access to Midwest's shareholder list, but AirTran officials say that list is becoming less relevant as institutional investors buy up Midwest shares.
"Institutions used to own about 40 to 45 percent of Midwest," said Richard Magurno, AirTran's general counsel. "Now, that appears to be changing. A New York hedge fund is now the largest shareholder."
A list of Midwest ownership filed with the Securities and Exchange Commission this month shows the Milwaukee-based Heartland Fund as the largest stockholder with 8.9 percent.
Heartland officials didn't return calls for this article. But fund managers have steadfastly backed the Midwest board by complying with the board's request not to tender shares.
Midwest officials have described AirTran's buyout offers as "opportunistic," "disadvantageous" and "inadequate." They insist the company can do better on its own with its premium, all-business-class seating configuration and fresh-baked, chocolate chip cookies served in flight.
"The offer does not fully reflect the long-term value of Midwest's strategic plan, including its strong market position and its future growth prospects," the company said in a recent SEC filing.
"This strong [2006] performance, combined with Midwest's successful cost reduction efforts, generated a $66 million improvement in operating income."
Midwest stock had already jumped 66 percent from its post-9/11 low when AirTran launched its takeover effort two months ago.
Richard Aboulafia, aerospace analyst at the Teal Group, said Midwest's response hints at a possible deal.
"When you say you're undervalued, it implies a transaction is possible at the right price," he said.
Midwest was profitable in 2006 for the first time since the terror attacks of 2001, and it has issued bullish forecasts.
But consultant Cordle cautions Midwest against overplaying its hand, and he says AirTran would be unwise to pay too much.
"Remember Independence Air?" he said of the now-defunct carrier.
"They had a chance to merge with Mesa Airlines for $12 a share. But they destroyed $1.5 billion in market value by insisting on going it alone. Midwest should keep that in mind."
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[Steeler Fan]

Actually, what HAS been happening is 2 and 2 1/2 year upgrades. The last upgrade vacancy final had four 2 1/2 year guys in it.

For the most part, you're absolutely right. 75M and I were at 3yr, 3 months --but that was an anomaly, due to a 6 mnth hiring freeze while FL was parking the DC-9s and setting up the 737 training Dept/program.

People told me 2-2.5 yrs. (I added a year to that and planned upgrade based on a conservative estimate).

 

[Lear70]

They were telling us 2 1/2 years in training. We didn't buy it, just looking at the delivery schedule and (then) attrition rate.

Figure it will be somewhere around the 3 1/2 year mark, give or take 6 months for any hiccups, notwithstanding the above Midwest deal still looming.

Throw that in the mix and we can kiss upgrade goodbye for an extra 3-4 years if the integration doesn't have a 4-5 year fence in it.

If the acquisition happens, any contract without a 20% bump or more in F/O pay (10% is COLA alone) and six figures within 10 years has my immediate no vote unless there is a combination of trip/duty rigs that accomplishes the same goal utilizing our current schedules as the basis for computation.

If people get stuck as F/O's, the company's gonna have to pay up or suffer the attrition that's coming with the legacies gearing up hiring again.

 

[gt1900]

Yep.. I see the upgrade going up to 4 years pretty quick. The only reason it dropped was because of the hiring freeze. I have never seen a 2 year upgrade, a few at 2 1/2 but never 2. The only reason it dropped to 2 1/2 was because the hiring freeze, before that it was going around 3 years. Guys who got hired in the last couple months are gonna see probably a 4 or 5 year upgrade at the least. Right now AAI has around 120 planes with only 60 more to go. They are planning on hiring around 180 for 2007 (straight from SG's mouth last week) and that isn't much. I was hired in 05 and sit somewhere around 1000 out of about 1500. They would have to hire another 300 probably for me to make Capt. That's gonna put my upgrade somewhere around 3 to 4 years.. My 2 1/2 years will be around Oct of 07.. And there is no way I'm gonna see upgrade anywhere close to then..

 

[Lear70]

Never say never.

180 will cover attrition. It won't cover attrition plus growth.

I don't think anyone's clued SG in on the numbers we've started seeing leave in the last 2-3 months.

We're gonna get into the summer and suddenly be understaffed again. You heard it here first.

I predict 250 total for 2007 in new-hires, with a big surge in hiring late summer again.

 

[gt1900]

I should have said they would have to hire around 300 without andy attrition for me to see capts. Even if they hire 250 with 180 leaving that only makes 70 new pilots for 07.. They would have to hire 250 this year and almost 250 next year with the way I hear attrition is going.. BTW.. I only moved up around 50 numbers in 6 months, so the huge attrition must be behind me..

 

[AFcitrus]

If you look at straight numbers then it may appear that it could take a while to upgrade however let me add something to the fray. We are adding airplanes at the same rate now as when I was hired in '02. I got the upgrade at 2 years and 8 mths. What we should be saying is that if you want to upgrade, you can in 2-3 years. You see, a large % (about 63%) to be precise of our pilots are commuters. Over the last 4-5 years (pre-Midwest offer) most commuters bypassed upgrade for a better quality of life. That being said, lower senority pilots got upgrades quicker. This may slow until the Midwest stuff settles down.

 

[FlyWolf]

I am surprised that the pilots are against it though. It would appear to be a good deal for them - more airplanes (other than md80's) more upgrade possibilities, a more secure future, no new rj's coming in to steal their flying...etc...

Good luck to everyone involved (God know's we need it)

TV9, I think I might have the answer, I would say the main reason is that the respect and good rapport we enjoy here between the pilots and the chief pilot office, we are lucky in the fact for an airline our size we were among the first to get CASS, we also managed to get unlimited j/s, full use of Flica, and so on. Granted we have our own problems but its far less than what other pilot groups are going through.

Second reason, is that a big % of our pilot group started with Midwest when they were KC Aviation, (15-20 years ago) and they are set in their ways, they know our GOM by heart and don't want to change anything, most of them live here, have a good schedule and make a good pay, while a lot of the majors lost their pensions, we still have ours.

We also have a top notch first class training dept, great checkairmen that treat you like a professional, I am yet to be treated bad by anyone at Midex.

So, if you think about it, most guys don't want to change a good thing. As I said, we do have our own problems and we are far from perfect, but who is perfect in this industry? Still, it beats the unknown.

Again, just my .02c

 

[maxblast72]

Talked to one of the crew planners in the crew lounge this morning and asked him how many more Captains we were making this year (I just upgraded and was wondering what the reserve time was going to be). He basically said we were done upgrading for the year. I asked him about all the 717 Captains that need to replaced (for the ones that are transitioning to the 737 in Feb and March) and he said that we already had the replacements in the pipeline (not exactly what I was expecting to hear).

There were about 258 people hired just in 12 months behind me (from the Jan 1 2007 seniority list). It took me 2 years 7 months to upgrade. It looks like the upgrade times will creep up to 4 or 5 years pretty quickly as our % growth slows down. FO payrates in our next contract should not be ignored as the company likes to tell FO's not to worry about FO payrates since they will be Captains soon.

 

[Lear70]

That's about right as far as moving up goes. 5-6 a month until the last two or three months at 10 a month.

I'm still confused about the math? 250 new-hires = 70 new pilots?

 

[-9Capt]

If this is indeed true then the blame should be put where it belongs, at the top because they breed this attitude in their middle managers. For everyone's sake lets hope that S.K and K.G. have their hands in this and they receive their due. Miserable humans these two are. An embarrassment to the species.

Actually, they're worst than that.

 

[MSNFlier]

what would AAI really get out of a MidEx merger?

How much does a used 717-200 that's less than 5 years old or so cost? All 717s have the same engines, correct (RR BR715s)? Ultimately, I think this is the only thing AAI is after - aircraft common to a major portion of AAI's fleet that come with a group of already-trained pilots to fly them which will instantly boost capacity. If you look at their offer, it's only 1/2 cash and the other stock in an airline that may or may not survive long-term (AAI, that is - I know, it might also be true of Midwest). Forgetting the stock portion, the cash is about what? $140-$180 million? Is that a good deal for 25 717s - way less than $10M/each?

As a mere private pilot, I guess I don't see this proposal through the prism that many of the accomplished professional pilots frequenting this board do. Also, as a native of Madison (MSN) and lifelong resident of WI, I confess to secretly hoping that AAI fails because we like our Midwest just the way it is...maybe not real profitable (going forward, that is), but profitable enough and it's our airline.

We are an odd bunch, us 'Sconnies, but we like what we like, especially our airlines and a our beer!!! :beer: