Clash of Cultures: Priorities differ at AirTran, Midwest

AirTran managers are doggedly pursuing what would be the first hostile takeover among low-cost carriers


As difficult as AirTran's yet-unfulfilled quest to buy Midwest Airlines has been, the complex transaction could be the simple part.

If AirTran wins its takeover battle in the coming weeks, airline and labor experts say it will face far more daunting tasks in melding two airlines with disparate histories, cultures and customer service philosophies.

"Merging corporate cultures can be much more problematic than any other aspect of airline mergers," said Dean Headley, a Wichita State University professor who studies the airline industry. "Labor problems can make mergers untenable in certain locations. In Midwest's case, employees will feel completely let down by any buyout."

AirTran managers are doggedly pursuing what would be the first hostile takeover among low-cost carriers with its proposed $389 million acquisition of Milwaukee-based Midwest.

AirTran and analysts that back the deal point to the logic of expanding AirTran's base beyond Atlanta, where two-thirds of its flights originate. Both carriers fly Boeing 717s, and their route networks have almost no geographic overlap.

But even consensual airline mergers have gone awry in the past with workers feeling shorted, faulty technology integration and the burdens that come with heavy debt loads.

Airline experts say a hostile airline takeover will invite labor troubles in an industry that requires close cooperation among many work groups.

"Midwest's hallmark has always been an extraordinarily high level of customer service," Headley said. "AirTran has always focused on low prices. Those two cultures are going to be extremely difficult to reconcile and blend successfully."

Midwest managers have launched a vocal drive against an AirTran takeover and lined up grass-roots support for local ownership as well as extensive political support in their home state of Wisconsin. More than 38,000 Midwest customers signed an electronic petition against the AirTran takeover.

AirTran's $15-a-share offer for Midwest attracted 57 percent backing from Midwest shareholders as of May 16, in a tender offer that continues into June. AirTran is gearing up for a proxy fight at Midwest's annual meeting on June 14, hoping to install three sympathetic directors on its board.

Wisconsin law gives Midwest broad anti-takeover measures, however, and the company appears ready to use them to resist an AirTran takeover.

AirTran officials said Midwest workers will gain from generally higher pay, and AirTran said it intends to boost operations in Milwaukee with more flights and additional employment. In a regulatory filing, AirTran said it plans to add 74 daily flights in Milwaukee, 29 new destinations and 1,100 more jobs.

"We intend to flood the market with low fares, stimulate demand and create new opportunities for employees," said Tad Hutcheson, an AirTran spokesman. "There's a tremendous amount of work to be done. But the actual integration of the two airlines should be fairly smooth."

Carol Skornicka, general counsel at Midwest, characterizes Midwest employees as loyal and steadfast with strong traditions and deep community ties.

"We have a saying that culture eats strategy for lunch," she said. "We've got a very unique culture in which pilots stay on the planes and help flight attendants clean up the cabin and get ready for the next flight.

"Our CEO does the same thing. We've gone through some tough times together, and people feel our success is their personal accomplishment."

When US Airways launched a hostile takeover bid for Delta Air Lines last year, Delta employees spearheaded the airline's strident and ultimately successful resistance. Delta pilots vilified US Airways Chief Executive Doug Parker as an opportunist and corporate vulture, and creditors cited the hostility of Delta line workers as a reason to reject the combination.

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