Citrusflyer
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THURSDAY, Aug. 7, 2008, 11:39 a.m.
By Tom Daykin
Northwest writes off Midwest investment
Northwest Airlines Corp. (NWA) has written off its $213 million investment in the partnership that owns Midwest Airlines, a step that reflects Midwest's deteriorating financial condition.
Northwest, which owns a 47% stake in Midwest Air Partners LLC, wrote off that investment during the second quarter, which ended June 30. Northwest disclosed the write-off in its latest quarterly financial report filed with the U.S. Securities and Exchange Commission.
Northwest and majority partner TPG Capital bought Midwest Air on Jan. 31 for $451.8 million.
Based on Midwest's "financial deterioration" since then, an updated measurement of Northwest's investment resulted in the write-off, Northwest said in its quarterly financial report.
Representatives for Northwest and Oak Creek-based Midwest were not immediately available for comment this morning. A spokesman for Fort Worth, Texas-based TPG Capital declined to comment.
The write-off is "an ominous sign" for Midwest Air, said Marisa Thompson, an airline industry analyst with Morningstar Corp. Midwest, like other airlines, has been hit hard by record high jet fuel prices, and a slumping demand for air travel, she said.
But Midwest's problems are exacerbated because its non-fuel operating costs, including wages and salaries, are relatively high for a small airline, Thompson said.
Thompson and other analysts say Eagan, Minn.-based Northwest's investment in Midwest was motivated by a desire to prevent low-cost carrier AirTran Holdings Inc. (AAI) from establishing a hub in Milwaukee. TPG/Northwest outbid AirTran a year ago, ending AirTran's attempted hostile takeover of Midwest.
Midwest's current financial travails have also affected one of Midwest's chief vendors, SkyWest Airlines Inc.
SkyWest, which flies routes under contract for Midwest Connect, the regional carrier for Midwest Airlines, said Wednesday it was forced to post a $3.3 million reduction to its second-quarter revenue.
SkyWest recorded a full reserve against $3.3 million owed by Midwest as of June 30. That receivable was recorded as a reserve because of "the uncertain financial position of Midwest," SkyWest said.
Midwest has been considering a Chapter 11 bankruptcy reorganization filing, and is making 40% cuts in service and workforce by September.
Also today, Midwest disclosed declines in its business for July, one of the busiest months for airlines.
Midwest Air said its revenue passenger miles, which measures the number of passengers multiplied by the miles they fly, dropped 16.2% in July, compared to July 2007. That count was down 3% for the first seven months of the year.
The company's load factor, which measures the percentage of seats filled on flights, was 80.3% for July, down from 84.6%. The load factor for the first seven months was 75.7%, down from 79.6%.
By Tom Daykin
Northwest writes off Midwest investment
Northwest Airlines Corp. (NWA) has written off its $213 million investment in the partnership that owns Midwest Airlines, a step that reflects Midwest's deteriorating financial condition.
Northwest, which owns a 47% stake in Midwest Air Partners LLC, wrote off that investment during the second quarter, which ended June 30. Northwest disclosed the write-off in its latest quarterly financial report filed with the U.S. Securities and Exchange Commission.
Northwest and majority partner TPG Capital bought Midwest Air on Jan. 31 for $451.8 million.
Based on Midwest's "financial deterioration" since then, an updated measurement of Northwest's investment resulted in the write-off, Northwest said in its quarterly financial report.
Representatives for Northwest and Oak Creek-based Midwest were not immediately available for comment this morning. A spokesman for Fort Worth, Texas-based TPG Capital declined to comment.
The write-off is "an ominous sign" for Midwest Air, said Marisa Thompson, an airline industry analyst with Morningstar Corp. Midwest, like other airlines, has been hit hard by record high jet fuel prices, and a slumping demand for air travel, she said.
But Midwest's problems are exacerbated because its non-fuel operating costs, including wages and salaries, are relatively high for a small airline, Thompson said.
Thompson and other analysts say Eagan, Minn.-based Northwest's investment in Midwest was motivated by a desire to prevent low-cost carrier AirTran Holdings Inc. (AAI) from establishing a hub in Milwaukee. TPG/Northwest outbid AirTran a year ago, ending AirTran's attempted hostile takeover of Midwest.
Midwest's current financial travails have also affected one of Midwest's chief vendors, SkyWest Airlines Inc.
SkyWest, which flies routes under contract for Midwest Connect, the regional carrier for Midwest Airlines, said Wednesday it was forced to post a $3.3 million reduction to its second-quarter revenue.
SkyWest recorded a full reserve against $3.3 million owed by Midwest as of June 30. That receivable was recorded as a reserve because of "the uncertain financial position of Midwest," SkyWest said.
Midwest has been considering a Chapter 11 bankruptcy reorganization filing, and is making 40% cuts in service and workforce by September.
Also today, Midwest disclosed declines in its business for July, one of the busiest months for airlines.
Midwest Air said its revenue passenger miles, which measures the number of passengers multiplied by the miles they fly, dropped 16.2% in July, compared to July 2007. That count was down 3% for the first seven months of the year.
The company's load factor, which measures the percentage of seats filled on flights, was 80.3% for July, down from 84.6%. The load factor for the first seven months was 75.7%, down from 79.6%.
