Midwest Airlines’ Restructuring Plan Takes Root; More Layoffs To Come
The embattled airline appears to be moving further away from a Chapter 11 filing.
September 8, 2008
Milwaukee, Wisconsin-based Midwest Airlines, the embattled airline that was among the hardest hit during the bull-run in oil prices, has revealed it's making progress with its restructuring efforts, developments that could help the company avoid a bankruptcy filing.
Most recently, Midwest secured $60 million in additional financing, which includes the commitments from its owner TPG Capital and Indianapolis-based Republic Airways Holding. Of that, $40 million of capital has already been provided, while the remainder will depend on Midwest hitting certain milestones outlined in its restructuring plan.
"This commitment of additional financing provides us the best opportunity to preserve what our customers and communities have always valued from our airline, while positioning us for a return to sustained profitability and future growth," Timothy Hoeksema, Midwest Airlines’ chairman and CEO, said in a statement.
Private-equity shop TPG Capital acquired a majority stake in the troubled airline in January after a bidding war with AirTran. As oil prices sustained their lofty levels for much of this year, Midwest was among the airlines most affected, and it announced its restructuring plan earlier this summer, a revamp that included laying off 40% of its employees.
As part of the most recent funding initiative, Republic will operate 12 Embraer 170 jets under the Midwest Connect brand until Midwest is in a position to transition the planes to its own FAA operating certificate. The planes will be integrated into Midwest’s flight schedule beginning October 1st.
The deal with Republic will result in additional furloughs for Midwest pilots, flight attendants and maintenance staff, the airline said in a statement. The process for the Republic integration is going to take approximately eight months to one year to complete.
Midwest also reached an agreement in principle with Boeing Capital in which it will be awarded the flexibility to renegotiate leases for its fleet of Boeing 717s, a deal that will allow it to continue to operate nine of the 25 jets in this particular fleet for now. Midwest hopes to be operating 16 of them by the fall.
Investment banking and advisory services firm Seabury Group is advising Midwest on the restructuring as well as in its dealings with Boeing Capital.
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