Midwest Airlines said recently that it will drop service between Duluth and Milwaukee on Dec. 1, nine months after entering the market, leaving Northwest as the lone carrier with substantial service to that Minnesota city.
"We are extremely disappointed by Midwest's decision," said Brian Ryks, executive director of the Duluth Airport Authority. He cited statistics showing that Midwest's load factors climbed steadily through this summer before dropping a bit in September.
Midwest cited "inadequate financial returns" when it made the decision, the airport authority said. For Duluth travelers, Midwest was a money saver. "When they came in, we saw fares drop to Midwest destinations immediately," Ryks said. Also, Northwest added a second daily flight from Duluth to its Detroit hub after Midwest came in.
Some are asking whether Duluth's disappointment is a sign of things to come if Midwest is sold to TPG and Northwest.
"Northwest said, apparently with a straight face, that it will have no input into Midwest's operations," commentator Ralph Doty wrote in the Duluth Budgeteer News. "Excuse me, but I don't believe them. And if it turns out that my skepticism is correct, look for other small markets to lose Midwest-TPG's services, leaving NWA as sole vendor."
If Northwest does in fact have the power to buy out TPG at some point, other questions come into play, Waxman said.
TPG, a private equity firm, would be expected to seek an exit strategy at some point, make some money on its investment and move on to other deals. But if Northwest has some sort of preferred spot in line to buy out TPG, "is there a market out there for [TPG's] shares?" he said.
Northwest's 47 percent stake in the Midwest deal is seen as a move to keep a low-cost carrier from establishing a larger foothold in the key Midwest markets that Northwest and its regional affiliate airlines have long dominated.
But during AirTran's quarterly earnings conference call last week, it was clear the thwarted Midwest suitor hasn't taken its eye off the Midwest region.
The low-cost carrier announced Tuesday that it recently secured a deal with ATA Airlines Inc. for slots at LaGuardia Airport in New York, and will soon launch five more round trips from there. The airline also picked up a slot at Washington National Airport in the nation's capital.
By diversifying its network, and providing more access to the nation's largest business centers, "that may help us in the Midwest or wherever we choose," said Robert Fornaro, AirTran's chief operating officer.
Midwest is the largest carrier at Milwaukee's Mitchell Airport. Northwest and AirTran are a distant second and third. In July, for example, Midwest and its affiliate airlines handled 53 percent of passengers at Mitchell, Northwest had 11 percent and AirTran had 6 percent.
The competitive balance in the airline industry varies from airport to airport, and is often determined by whether one or more airlines use it as a hub. At Minneapolis-St. Paul International Airport, 80 percent of passengers are flying Northwest.
When AirTran made its bid for Midwest public in late 2006, "we suggested they should expand in Milwaukee on their own," but not with an acquisition, said Walker, the county administrator. And that's what's happening. AirTran plans to take on four additional gates in a newly remodeled area of the Milwaukee airport.
The county also likes the passenger trends it has seen at Mitchell Airport, fueled in part by more attention from fliers in Chicago and its northern suburbs. In 2005, Amtrak started serving the Milwaukee airport with its Hiawatha line. That service runs seven times a day between Chicago's Union Station and Milwaukee.
John Welbes can be reached at email@example.com or 651-228-2175.
Midwest said late Thursday that TPG will pay $17 per share, beating out AirTran Holdings Inc.'s offer that had been raised several times.
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