11/02/12, 23:34:47 EST

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Midwest CEO fears merger would take away airline's charm

gazetteextra.com

The head of Midwest Airlines, target of a hostile takeover by AirTran Airways, said he fears a merger with the low-cost carrier would result in his airline losing its charm.

AirTran envisions a merger that will create a large, low-cost national airline, said Tim Hoeksema, CEO of Midwest Air Group, told The Associated Press. But that would require more seats, less leg room and giving up perks such as Midwest's trademark chocolate chip cookies, he said. "I think their vision, based on what you read, is to convert it to a commodity carrier that does not have the focus on service that we do and to make it into a high density, low-cost product, eliminate some of the things that we offer ... and turn it into AirTran," Hoeksema said. The $345 million offer from AirTran Holdings Inc., parent of AirTran Airways, to Midwest shareholders expires March 8. Midwest Air Group's board of directors has turned down three offers from Orlando, Fla.-based AirTran. In January, it called the latest offer "inadequate" and recommended shareholders not sell their stock to AirTran. The board knew what it was doing in the summer of 2005, Hoeksema said, when it quietly declined AirTran's first buyout offer of about $78 million, or $4.50 a share. "So one can say, 'Oh boy, that was about twice what the share price was,' but our board of directors knew what we were doing, what was coming, what our strategic plan was and obviously in retrospect made the right decision," he said. Shares of Midwest closed Tuesday down 50 cents, or 3.76 percent, to $12.80 on the American Stock Exchange. Shares of AirTran fell 27 cents, or 2.51 percent, to close at $10.48 on the New York Stock Exchange. The board prefers to expand Midwest on its own, Hoeksema said. The Milwaukee-based airline plans to add six new destinations this year and 12 new routes, including a direct flight from Milwaukee to Seattle/Tacoma announced Tuesday. Midwest Air Group, with 3,500 employees and more than 340 flights a day, plans to serve 49 cities in the next few months. AirTran currently operates more than 700 flights a day to 56 cities and has 8,000 employees. A combined company could reach 1,000 departures a day in 74 cities, AirTran CEO Joe Leonard has said. Hoeksema said that's just not feasible. AirTran said Monday in a filing with the Securities and Exchange Commission that it wants to add 29 destinations from Milwaukee to cities such as San Juan, Puerto Rico and Rochester, N.Y. But there won't be enough passengers out of Milwaukee to justify that, Hoeksema said. He also disputed AirTran's claim that it would add more than 1,100 jobs to the Milwaukee area with a merger. That won't happen after overlapping jobs are eliminated, Hoeksema said. Midwest may be small - it carries less than 1 percent of all U.S. passengers - but it has done well by carving its own niche, he said. "We want to maintain that uniqueness and that specialness so people do pick us and that's what it's all about," he said. AirTran could have gone into Milwaukee and competed directly, but it wants to work out a deal, said Tad Hutcheson, AirTran's vice president of marketing. The company has promised to keep serving cookies, he said, and passengers who want more service can always fly business class. "We don't want to destroy Midwest," Hutcheson said. Hoeksema would not speculate on whether Midwest would consider offers from companies other than AirTran or engage in its own takeover efforts. "We're probably in the strongest position we've ever been in from a competitive point of view in terms of low cost and good service," he said. "And that, I think, is the secret for success going forward."

 Printable Version  | published Feb 28, 2007