Midwest sharply cuts fleet
A dozen MD-80 jets being phased out; flight cuts, layoffs likely next
By TOM DAYKIN
Posted: June 20, 2008
Milwaukee air travelers will see fewer nonstop flights, and Midwest Airlines Inc. employees will see more pink slips, as Midwest parks its large — and gas-hogging — MD-80 jets.
Hammered by high fuel costs, Midwest will phase out a dozen MD-80 jets used for charter service as well as regular passenger service to leisure destinations and West Coast cities, Chairman and Chief Executive Officer Timothy Hoeksema said Friday.
The end of the MD-80s, which make up roughly one-third of Midwest’s fleet, is part of a larger restructuring plan. Midwest also is seeking wage concessions from its employees, and is negotiating for revised terms with its creditors and vendors.
It’s the latest twist for Midwest, which once thrived on providing high-end service, but has been forced in recent years to scrap some of its trappings of luxury to better compete for price-sensitive fliers.
Company executives haven’t ruled out a Chapter 11 bankruptcy reorganization filing, company spokesman Michael Brophy said. Midwest in 2003 came close to a Chapter 11 filing, in which a company reorganizes its finances under court supervision.
Midwest, which is owned by investment group TPG Capital and Northwest Airlines Corp., hopes to avoid Chapter 11, he said.
The main culprit is soaring oil prices, which “have gone crazy,” Hoeksema said. Oak Creek-based Midwest is paying nearly double for jet fuel compared with a year ago.
The airline hopes to maintain at least some of the routes served by the MD-80s. Midwest’s main fleet consists of 25 Boeing 717 jets, which are much more fuel-efficient. Some of those Boeing jets can be shifted to replace the MD-80s, Hoeksema said.
But the Boeing aircraft don’t have the range of the MD-80s. And that means current nonstop departures from Milwaukee to Pacific Coast cities such as Seattle, San Francisco, Los Angeles and San Diego could be replaced with routes that stop along the way at the Midwest hub in Kansas City, Mo. — for both fuel and more passengers.
Revised routes not set
The route system is still being tweaked, Hoeksema said. The revised routes will likely take effect from mid-August through mid-September, he said.
But, he added, “The (Boeing) 717 cannot make it nonstop from Milwaukee to Los Angeles. But it can go from Kansas City to Los Angeles. So, we’ll still provide the service, but not nonstop to the West Coast.”
As the Boeing jets are shifted to replace MD-80s — which Midwest also uses to fly from Milwaukee to Phoenix and Orlando, Fla. — some routes will likely be dropped, and that means fewer pilots and flight attendants, said Greg Uselmann, vice chairman of the Air Line Pilots Association’s chapter at Midwest.
Uselmann said 108 union pilots are assigned to the MD-80s. Hoeksema said it was too soon to discuss any possible job cuts as a result of the move.
Midwest and other carriers are already reducing routes and trimming jobs because of soaring fuel costs. In April, Midwest said it would cut 109 employees, amounting to a 3.5% work force reduction. Most of the service cuts are scheduled to take place after the peak summer travel season.
Also, Midwest management is seeking “significant concessions” from its pilots, according to a statement from union leaders. The union has requested financial information, and additional meetings with Midwest management are planned for early next week.
Hoeksema, in a videotaped message sent to Midwest employees, said the restructuring by Midwest is “going to be very painful.” He also said the restructuring plans must be done quickly because the company’s cash reserves are being eaten up by high fuel costs.
“We don’t have a lot of time. This is urgent,” Hoeksema said.
The company’s business plan for 2008 assumed it would be profitable with the price of oil at no more than $115 a barrel.
The restructuring plan, Hoeksema said in an interview, will put Midwest in a position to be profitable with oil at $135 a barrel. Those changes, he said, will allow Midwest to survive.
Other airlines are also feeling the pain. Northwest Airlines, which owns a 47% stake in Midwest; Delta Air Lines Inc., which is buying Northwest, and AirTran Holdings Inc., which tried last year to mount a hostile takeover of Midwest, are among those that have announced plans to cut back on routes.
Collectively, U.S. airlines may ground around 1,000 airplanes, which could eliminate more than 80,000 jobs, according to a recent report prepared for the Business Travel Coalition by AirlineForecasts LLC. The nation’s 10 largest airlines could lose as much as $9 billion over the next 12 months if the price of oil remains at current levels, the report said.
Hoeksema, in his message to employees, said the restructuring will help Midwest emerge from the current turmoil as a stronger company.
“Every time we’ve gone through difficult times, we’ve come out stronger,” he said.