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AirTran vs. Midwest: Save the Cookie or Save a Buck?

| Monday May 21st, 2007 | 25 Comments

airtran-midwest.gif
Here’s an interesting puzzle of priorities. AirTrain airlines, a discount carrier based in Atlanta is attempting a hostile takeover of Midwest Airlines, a premium-service carrier based in Milwaukee. The story is getting downright fascinating.
AirTran, the reincarnation of ValuJet, is known for cheap fares, but not a whole lot else. Midwest, although a far cry from what it used to be, is still know as “the best care in the air” offering first class seating on most of its flights, along with their trademark baked-in-flight chocolate chip cookies. Mmmm…
AirTran has been trying for months to take over Midwest, citing fleet commonality and complimentary route structure as well as new destinations and low fares among the benefits it purports to be bringing to stakeholders. Midwest management and employees have been fighting tooth and nail to resist the takeover. Midwest customers and many members of the Milwaukee business community are also up in arms for fear of being stuck with what they see as a second-rate airline, bad for business and community spirit, not to mention local jobs.
Midwest stock is up from $8 to $15 since the take over efforts began, and AirTran recently announced they’ve managed to get the support of 57% of Midwest Shareholders (Midwest dismisses this as a ‘straw poll’). So is this a no-brainer for sharholders? What’s slowing things down? And what would you do?


Takeovers like this sometimes conjure emotion that would make Milton Friedman roll over in his grave. But is there more to the equation than emotion and community pride? And what’s the value of that anyway?
Having flown on both airlines, there’s no question that Midwest offers a vastly superior product. So superior in fact that I’ve often paid as much as $50 more per ticket to fly them since I’m convinced it’s worth it as are many other loyal customers. But are they really good enough that they make the difference in successful business relationships in Milwaukee? Does a crummy flight to your meeting make or break it? Either way, if I were a Midwest shareholder, it would take some serious convincing to turn down nearly double my money in a matter of months, and based on recent news, it sounds like the sale is tipping in AirTran’s favor. But there’s one more catch – Wisconsin law allows for a special provision to prevent hostile takeovers. The so-called “poison pill” plan allows a company based in WI to dump shares onto the market in event of a hostile takeover to spoil the suitor’s plans. This battle has gotten heated enough that it might come down to such a measure. It’s going to be fun to watch.
The additional business argument against the takeover is this: $15 a share is way too much. Once the takeover is complete, the price will crash. The customer base of Midwest is loyal because it is a premium product. Once the premium is gone, AirTran will be viewed as just another cut-rate offering little advantage over competitors. AirTrain will dry up in the new markets and no one, except those who dumped their shares at the peak will be any better off. In fact many will be worse off.
Is this an unavoidable symptom of short-term thinking? Would taking the poison pill option be better for most people in the long term? Including shareholders? It’s a tough call!

Read more debating here
. Read Midwest’s Take on the matter here. And AirTran’s Here.


▼▼▼      25 Comments     ▼▼▼

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  • Walter Unglaub

    The only ones who would benefit from a merger, are LARGE VOLUME investors such as HEDGE fund operators, who are into this for a QUICK return in their investments. Investors who are interested in making money, and have absolutely no interest in the quality of service, that the company that they are investing in provides. The people who would gain from a merger, have no interest in the comfort, convenience or quality of services, that AIR TRAN would provide. Comparing the quality of service that AirTran provides and that wich Midwest Airlines provides, is like comparing a stripped down Chevrolet, to a luxery equiped Cadillac! The two airlines serve two completely niches of customers. AirTran is there to serve people who are satisfied with barebones, get me from point A to point B, and Midwest serves a clientel that wants A-1 quality service and ammenities, from a company that is willing to go that extra mile for them. The only similarities that AirTran and Midwest have in common, is the fact that they fly jet passenger airliners.

  • Zack Rules

    Folks who love Midwest can pay to fly in Airtran’s Business class. Hopefully, they will revamp their business class to be more Midwest-esque. That’s what Airtran needs to do. They need to add more buiness class seats. In their 737-700′s they need to take out about 3 rows of economy seats on each side of the plane so that they could have 16 business class seats and 108 economy ones.
    PS I’ve flown Airtran before from BUF-ATL and was pleasantly surprised. I didn’t expect service as good as say Southwest but it was pretty close. Though the seats on the 717 were a bit cramped, it was still a fantastic flight and they even arrived 10 minutes early in ATL and 21 minutes early at BUF! I also purchased an Asian salad on they way down and it was excellent. I’d love to fly Airtran again!

  • TC in DC

    I’ve never flown Midwest, but I thought Airtran was a pretty good ride for a discount air carrier (certainly better than Southworst; sorry, I’m not a fan); and that was *before* they installed XM Satellite Radio. And as “Zack Rules” pointed out, the Midwest customers who don’t seem to care about price can pony up for Airtran’s business class, which matches any legacy carrier’s first class these days.

    My only question on what would stay vs. what would go would be Midwest’s lift providers, giving them connectivity to smaller cities like Madison. Like other discounters, Airtran doesn’t contract small jet providers for secondary market connections.

    As for Midwest customers feeling all this home-town pride about “best care in the air”: how do they explain Midwest inking a codeshare agreement with Northwest–possibly the “worst care in the universe?” If it was really all about the cookies, they’d be screaming just as loud about that, I think.

  • Chonto

    Good points TC – although the NW code-share is arguable good for Midwest customers since it allows them to reach destinations that Midwest doesn’t serve while preserving their frequent flyer status – albeit in a lot less comfort!

  • Bobby

    Lets be realistic AirTran is a discount carrier like a grayhound bus. Reguardless how they treat their passengers in business class they are not Midwest. If you have ever flown on eaither airline you would understand how bad this idea really is. Midwest provides service that I have never seen in the $ as a deciding factor on what they should do. If you live in Wisconsin you should have pride in the airline that is Wisconsin and support it. There should be no one in Milwaukee flying on AirTran. It just should happen and shame on anyone who does. You are just showing how ignorant you are by supporting an airline that has no ties to the community nor any reason to stay here once they aquire Midwest. If AirTran succeds in their purchase Milwaukee and Wisconsin will see over a 50% loss in air carrier traffic which means tickest will go WAY UP in price. AirTran is just looking for the aircraft and the gate space at places like LaGuardia and DCA they could care less about Milwaukee. Fight the good fight and support Midwest.

  • Walter Unglaub

    Message to “ZACK RULES”. I’d like to know where you purchased an ASIAN SALAD on an AIRTRAN flight?? AIRTRAN DOESN’T OFFER ANY FOOD SERVICE.

  • Walter Unglaub

    AirTran already has Boeing 717′s coming, for which they have don’t have adequate airport gates or routes. NOW AirTran has announced that they have ordered 15 Boeing 737 aircraft. WHY would any intelligent airline management order more aircraft on top of the already surplus 717′s? An airline alreadu has more aircraft than they can presently utilize, so they go out and purchase even more aircraft???

  • http://www.todbrilliant.com tod brilliant

    But . . .we can’t fly. It just isnt’ sustainable. Period. No ifs, ands, or buts. We have to learn to teleconference, to vacation locally. The aviation industry DWARFS the auto industry, in terms of contribution to climate change – and there is no way to change this.

  • Kato

    Does aviation really drwarf autos? I’m a little skeptical… any references?

  • Walter Unglaub

    So how do we get to Hawaii, The Orient, Asian Countries, and Europe, without Aviations? Do all of our overseas travelling, exporting and importing of good vial ships? No aviation would also mean an end ot Air Mail service. I guess TOD BRILLIANT, isn’t so BRILLIANT after all!!!

  • http://www.todbrilliant.com tod brilliant

    Walter – we DON’T do our traveling. We use ships for mail. I know this sounds ‘back-to-the-stone-age’ but there are going to be some inconveniences encountered if we truly do give a damn and want to stabilize co2 and other contaminant PPM in the atmosphere.
    Kato – From George Monbiot’s HEAT (FotE is the source + Tyndall Centre and you’ll have to extrapolate the auto-comparison from the numbers below as they include all auto-related activity):
    Regarding ‘more efficient’ airplanes -
    . . . in 2005 Friends of the Earth asked the Tyndall Centre to determine what impact (projected air travel) growth would have on greenhouse gas emissions. The results were staggering . . . If we tried to stabilize them at 450 parts, flying would produce 101 per cent of the carbon the entire (UK) economy was able to release. If carbon emissions were multiplied by 2.7, to take into account the full impact of aviation on the climate, the figure would be 272 per cent. The researchers assumed that the fuel efficiency of aircraft will improve by 1.2 per cent a year throughout this period. This could be optimistic.”
    Further -
    “Our moral dissonance about flying reminds me of something a Buddhist once told me when I questioned his purchase of unethical products. ‘It doesn’t matter what you do, as long as you do it with love.’ I am sure he knew as well as I did that our state of mind makes no difference either to the expoloitation of workers or to the composition of the atmosphere. Thinking like ethical people, dressing like ethical people, decorating our homes like ethical people makes not a damn of difference unless we also behave like ethical people. When it comes to flying, there seems to be no connection between intention and action.”

    • Address the Press

      Go drink some more of that kool-aid pea brain.

  • Walter

    Tod, So we ship our mail and packages across and around the US, via Diesel exhaust belching tractor trailers. Ships are also diesel powered now-a-days. I think that we are getting off tack here. This forum is about saving MIDWEST AIRLINES. Whether you or I like it or not, AIRTRAN or MIDWEST will be with us either way, as will Northwest, United, Jet-Blue, and the rest. As long as we cruise around in gas guzzling pleasure boats, race around on our snowmobiles, run our snow blowers, out ATV’s, race our Indy and stock cars, non of which use anti pollution devices. Unless we revert to riding horses and stagecoaches, we will always be polluting the air in some manner, shape or form. Air conditioners cause pollution, heating your home generates polllution, generating electricity produces air pollution. So hop onto your non-polluting horse, and ride off into the sunset Tod, as you save our planet. In the end we will all die, regardless of what we try to do about it. LONG LIVE MIDWEST!!! Midwest offers QUALITY, AIRTRAN provides flying people moving cattle cars. Milwaukee and South east Wisconsin will suffer in the long run, if AIRTRAN is successful in it’s takever. “HOSTILE” takeover doesn’t mean friendly takover. AIRTRAN is in this for the $$$$$$ NOT to help the people of Milwaukee. They could care less, past their stock portfolio.

  • Walter

    Tod, So we ship our mail and packages across and around the US, via Diesel exhaust belching tractor trailers. Ships are also diesel powered now-a-days. I think that we are getting off tack here. This forum is about saving MIDWEST AIRLINES. Whether you or I like it or not, AIRTRAN or MIDWEST will be with us either way, as will Northwest, United, Jet-Blue, and the rest. As long as we cruise around in gas guzzling pleasure boats, race around on our snowmobiles, run our snow blowers, out ATV’s, race our Indy and stock cars, non of which use anti pollution devices. Unless we revert to riding horses and stagecoaches, we will always be polluting the air in some manner, shape or form. Air conditioners cause pollution, heating your home generates polllution, generating electricity produces air pollution. So hop onto your non-polluting horse, and ride off into the sunset Tod, as you save our planet. In the end we will all die, regardless of what we try to do about it. LONG LIVE MIDWEST!!! Midwest offers QUALITY, AIRTRAN provides flying people moving cattle cars. Milwaukee and South east Wisconsin will suffer in the long run, if AIRTRAN is successful in it’s takever. “HOSTILE” takeover doesn’t mean friendly takover. AIRTRAN is in this for the $$$$$$ NOT to help the people of Milwaukee. They could care less, past their stock portfolio. AITRAN is promising more service increase to Kansas City’s airport, than all of the airlines serving Kansas City combined, offered in 2006. Airtran is makeing promises for kansas City, and Milwaukee, which will be impossible to keep.

  • http://www.todbrilliant.com tod brilliant

    Walter, I bow to your $en$ibilitie$.

  • Tracy F

    tod,walter, I think you guys are having two different conversations. We definitely need to do something about the pollution generated by flying, but I don’t think realistically we’re just going to stop doing it.

  • Walter

    If Air Tran is such a good airline, why is their stock so stagnant? They are forever approximately $3.00 per share behind Midwest. As per the July Consumer Reports magazine, Midwest ranked #2 behind Jet Blue, and AirTran ranked #10. These ratings are out of a group of the 18 surveyed Airlines. Consumer Reports surveys are unbiased surveys, as they are not influenced by any particular lobby group, advertisers, etc. AIR TRAN is a BUDGET “FLYING GREYHOUND, PACK EM IN” Airline, and Midwest is NOT. Comparing the two is like comparing apples to oranges. They both serve different niches of travelers.

  • Walter

    Here is what I predict for the Midwest AirTran merger. AirTran will be successful in buying out Midwest. After the merger, AirTran stocks value plunges. Air Tran expands ome flights out of Milwaukee, the eliminate short distance flights to places such as Madison, Green bay, etc. They eliminate all of the on board services that Midwest now offers. Support for the downtown Midwest Airlines Center ends. AirTran finds out that they cannot adequaltely fill the airliners that are a part of their expanded service plans, and drastically cuts back on service, and eventually pull most of their departures out of Milwaukee, as they now have what they wanted so badly, Midwest out of their way, and have aquired Midwests no longer available Boeing 717′s. Milwaukee will then be without any First Class quality air carrier. Hedge fund operators will have made their profits, from the deal.

  • Krayston

    and I might add, the only reason JetBlue ranks ahead of Midwest is that more people know about JetBlue since their hub is in New York.

  • rebecca

    This past June was my first time flying Midwest Airline. I was a little hesitant because a co worker suggested the airline and I have to say they are the best. I have had the Delta, US Air, American, Southwest, Airtran experiences and they just dont come close to Midwest. The service and food was fantastic and they get an extra star for the yummy cookies.The gourmet food was reasonably price and it was delicious. I really hope Air Tran does not buy out Midwest because I dont think they could match the service of Midwest

  • Walter

    I am making my vacation plans for 2008. As per the local newspapers, I can now see the handwriting on the wals. MIDWEST WILL BE SUCCESSFULLY BOUGHT OUT, by somebody. It may take me three days to drive to Florida, rather than 3 hours to fly, but at least I will be comfortable, and have access to food service along the way, rather than fly in AirTrans’ cramped three by three seating, and no food service at all. BTW, if one wants to fly in the BUSINESS CLASS seats of AirTran, it would cost me over $400 to fly in that class. Midwest never charges nearly that much, unless you book your flight at the least minute. GOODBYE MIDWEST, it was a nice ride!

  • luvmidest

    This completely sucks. I hate mergers. I fly a lot and feel very comfortable with Midwest. From time to time I have had to fly Delta or Airtran. By the way you all know what Delta stands for? Don’t Expect Luggage To Arrive! It’s true, it never does. Somehow it’s always lost! I don’t like traveling without Midwest unless it’s a chartered flight. Previous posters are right, if you have flown with Midwest and Airtran there is no question as to which is better. I really wonder what will happen IF Airtran buys them out. Will they take the mentality and model of Midwest or will they stay the same? Well I guess that’s only guessing for now, so I will wait and see. What a bummer!

  • laidbackzach

    Just a note for those who don’t know Airtran’s plans for expansion: Airtran has 65 more planes coming in by 2012 and probably about available gates for about 10-20 of those. Do you know what that means? Yes, they need a new hub (why not MKE), Midwest and Airtran share alot of similarities, plus Midwest has 13 gas hogs (MD-80′s) that need to be replaced right off the bat. For those who think Airtran plans on cutting and running, get real, they need gates and an established business with old planes just makes sense. I do have a feeling some smaller markets could be cut, but more destinations will be added (that means lower fares and more jobs for MKE).

  • D. T.

    I’ve never actually flown airtran (and don’t intend on), but I’m a Milwaukeean, and like Midweest.
    Midwest has superior service, good food, plenty of room, and decent rates. I can’t say much about Airtran, and am fine that way.

  • http://quenchonline.com Quench water coolers

    Airtran doesn’t have enough power already in the number of planes and flights, NOW AirTran has announced that they have ordered 15 Boeing 737 aircraft. They already have too many planes and they go out to buy more?