Citrusflyer
Well-known member
- Joined
- Nov 25, 2001
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[FONT=arial, helvetica]An opinion from something other than the AJC or MJS........
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[FONT=arial, helvetica]Transportation[/FONT]
[FONT=arial, helvetica]Midwest Air: It's Not Such a Wonderful Life
[/FONT] [FONT=arial, helvetica]By Ted Reed
TheStreet.com Staff Reporter[/FONT]
[FONT=arial, helvetica]5/2/2007 12:02 PM EDT[/FONT]
[FONT=arial, helvetica]URL: http://www.thestreet.com/newsanalysis/transportation/10354161.html
America loves nothing more than an underdog, and that's exactly what Midwest (MEH) is. The Milwaukee-based airline is a Jimmy Stewart kind of company, run by nice Midwestern people, ingrained in its community, battling the big guys on principal, and known for the chocolate chip cookies it bakes on its planes. But baking cookies is antithetical to an industry where Delta, in the mid-1990s, cut the lettuce leaf liner from its salad plates and saved $1.4 million a year, and where American CEO Bob Crandall liked to brag that he saved $40,000 a year by eliminating olives from salads. Now, the harsh realities of the airline business may be catching up with Midwest as it battles a takeover effort by AirTran (AAI) . In the first quarter, domestic operating conditions worsened throughout the airline industry, as capacity increased and competition mounted. Midwest, in response, reduced its full-year guidance to between $1.30 and $1.50 a share, down from $1.70, because of the impact of weather, an engine overhaul and industry trends. AirTran, meanwhile, was a bright spot. It beat estimates, reversed a year-ago loss and said its costs are falling as it adds new fuel-efficient aircraft. Midwest reported first-quarter net income of $8 million, or 31 cents a share, compared with a loss of $8.7 million, or 49 cents a share, a year earlier. But the company's accounting raised questions. Two analysts surveyed by Thomson Financial had estimated a loss of 41 cents a share, evidently after including the impact of fuel hedging. Had Midwest excluded fuel hedging, it would have reported an operating loss of $13.2 million, or 51 cents a share, AirTran opined in a prepared statement. Midwest spokeswoman Carol Skornicka acknowledged the 51 cent per share loss represents a reliable calculation, but said the company followed generally accepted accounting principles. AirTran CEO Joe Leonard said on a conference call that the carrier is getting a good response as it solicits votes for its tender offer, which expires May 16. "We have a significant number in the box with a month to go," he said. Among AirTran's backers is Richard Hurowitz, CEO of Octavian Advisors, a year-old hedge fund that owns about 6% of Midwest. "Airtran's earnings increased, and Midwest's earnings decreased, and [Midwest] still won't talk to them," Hurowitz said in an interview. "It's unusual to get an offer that is as compelling as what AirTran has put on the table, and to refuse to even talk to them." Hurowitz said, based on his conversations with Midwest executives, he concluded "there's a disconnect between what they want and what their shareholders want." "They should allow shareholders to have the ability to enter into a value-enhancing proposition," he said. Hedge funds like Octavian are short-term investors that "put pressure on us and on AirTran as well," Skornicka said. And regardless of the outcome of the AirTran tender offer, she said, control of Midwest will remain in the hands of its board. Skornicka said the offer is a "straw poll." Even with support from a majority of shareholders, AirTran's offer cannot be enacted unless the board waives a shareholder rights plan and meets other conditions. But Midwest's viability may be threatened even if the offer falls through. It seems clear that AirTran will continue to boost Milwaukee service. AirTran serves Atlanta, Orlando and Tampa from Milwaukee. Next week, it will suspend Tampa flights and add Baltimore. In August, it will add Las Vegas, as well. On Wednesday, AirTran sent another message, saying it will also increase service this year between Florida and Kansas City, a focus city for Midwest. With higher costs than AirTran and a near-absolute dependence on the Milwaukee market, Midwest -- for all its hometown charm -- would be severely challenged by a battle for its hub with its rejected suitor. [/FONT]
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[FONT=arial, helvetica]Transportation[/FONT]
[FONT=arial, helvetica]Midwest Air: It's Not Such a Wonderful Life
[/FONT] [FONT=arial, helvetica]By Ted Reed
TheStreet.com Staff Reporter[/FONT]
[FONT=arial, helvetica]5/2/2007 12:02 PM EDT[/FONT]
[FONT=arial, helvetica]URL: http://www.thestreet.com/newsanalysis/transportation/10354161.html
America loves nothing more than an underdog, and that's exactly what Midwest (MEH) is. The Milwaukee-based airline is a Jimmy Stewart kind of company, run by nice Midwestern people, ingrained in its community, battling the big guys on principal, and known for the chocolate chip cookies it bakes on its planes. But baking cookies is antithetical to an industry where Delta, in the mid-1990s, cut the lettuce leaf liner from its salad plates and saved $1.4 million a year, and where American CEO Bob Crandall liked to brag that he saved $40,000 a year by eliminating olives from salads. Now, the harsh realities of the airline business may be catching up with Midwest as it battles a takeover effort by AirTran (AAI) . In the first quarter, domestic operating conditions worsened throughout the airline industry, as capacity increased and competition mounted. Midwest, in response, reduced its full-year guidance to between $1.30 and $1.50 a share, down from $1.70, because of the impact of weather, an engine overhaul and industry trends. AirTran, meanwhile, was a bright spot. It beat estimates, reversed a year-ago loss and said its costs are falling as it adds new fuel-efficient aircraft. Midwest reported first-quarter net income of $8 million, or 31 cents a share, compared with a loss of $8.7 million, or 49 cents a share, a year earlier. But the company's accounting raised questions. Two analysts surveyed by Thomson Financial had estimated a loss of 41 cents a share, evidently after including the impact of fuel hedging. Had Midwest excluded fuel hedging, it would have reported an operating loss of $13.2 million, or 51 cents a share, AirTran opined in a prepared statement. Midwest spokeswoman Carol Skornicka acknowledged the 51 cent per share loss represents a reliable calculation, but said the company followed generally accepted accounting principles. AirTran CEO Joe Leonard said on a conference call that the carrier is getting a good response as it solicits votes for its tender offer, which expires May 16. "We have a significant number in the box with a month to go," he said. Among AirTran's backers is Richard Hurowitz, CEO of Octavian Advisors, a year-old hedge fund that owns about 6% of Midwest. "Airtran's earnings increased, and Midwest's earnings decreased, and [Midwest] still won't talk to them," Hurowitz said in an interview. "It's unusual to get an offer that is as compelling as what AirTran has put on the table, and to refuse to even talk to them." Hurowitz said, based on his conversations with Midwest executives, he concluded "there's a disconnect between what they want and what their shareholders want." "They should allow shareholders to have the ability to enter into a value-enhancing proposition," he said. Hedge funds like Octavian are short-term investors that "put pressure on us and on AirTran as well," Skornicka said. And regardless of the outcome of the AirTran tender offer, she said, control of Midwest will remain in the hands of its board. Skornicka said the offer is a "straw poll." Even with support from a majority of shareholders, AirTran's offer cannot be enacted unless the board waives a shareholder rights plan and meets other conditions. But Midwest's viability may be threatened even if the offer falls through. It seems clear that AirTran will continue to boost Milwaukee service. AirTran serves Atlanta, Orlando and Tampa from Milwaukee. Next week, it will suspend Tampa flights and add Baltimore. In August, it will add Las Vegas, as well. On Wednesday, AirTran sent another message, saying it will also increase service this year between Florida and Kansas City, a focus city for Midwest. With higher costs than AirTran and a near-absolute dependence on the Milwaukee market, Midwest -- for all its hometown charm -- would be severely challenged by a battle for its hub with its rejected suitor. [/FONT]
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