Midwest Eyes Flight, Job Cuts

Oak Creek-based Midwest Airlines Inc. is the latest airline looking at additional flight and job cuts in the face of record jet fuel prices, the Milwaukee Journal Sentinel reported Saturday.

The paper said Midwest has hired aviation consultant Seabury Group to help create the comprehensive restructuring plan, according to a memo to employees from Chairman and CEO Timothy Hoeksema. He told employees the restructuring work will be completed within several weeks.

Midwest and other airlines "are facing extremely difficult times," Hoeksema said in the memo.

Airline spokesman Michael Brophy said Friday that details of what Midwest is considering would not be released at this time, the paper said.

"Just like every airline in America, we're having to take a look at everything in our operations," Brophy told the paper.

In April, Midwest said it would cut 109 employees, amounting to a 3.5 percent work force reduction. Most of the service cuts are scheduled to take place after the peak summer travel season.

Hoeksema, in his memo, said Midwest began dealing with fuel price increases several months ago. "We had a good plan in place at that time, and we made initial progress," Hoeksema said, the paper reported. "But our situation, driven by rapid and unpredictable spikes in oil prices, worsened. So we are accelerating the development and execution of a comprehensive restructuring plan.

"I remain confident that we are up to this challenge. But it requires an ongoing commitment to execution and a sense of urgency among each and every employee when it comes to customer service, operations and every area of the airline," he said.

New York-based Seabury Group provides investment banking, financial advisory, restructuring and other consulting services for the transportation and logistics industries, according to the firm's Internet site.

In the restructuring area, Seabury's record includes serving as investment banker and principal restructuring adviser to Northwest Airlines Corp. from 2005 to 2007 in its restructuring and emergence from Chapter 11 bankruptcy. Northwest owns a 47 percent stake in Midwest Air Group Inc., the corporate parent of Midwest Airlines, with investment firm TPG Capital owning the majority stake.

Seabury also was an adviser to US Airways Corp. in its emergence from Chapter 11 and merger with America West Airlines in 2005.

The Seabury plan for Midwest could include a negotiation for lower lease rates on Midwest's aircraft, aviation industry consultant Scott Hamilton told the paper. Midwest's main fleet is leased from aircraft maker Boeing Co.

Also, there will likely be additional service cuts, particularly Midwest flights to less profitable leisure destinations, said Hamilton, who operates Leeham Co. of Issaquah, Wash.

Midwest may not have much room for additional flight cuts, Capt. Jay Schnedorf, chairman of the Air Line Pilots Association's Midwest unit, told the paper.

"The airline has already downsized," Schnedorf told the paper. "I have serious concerns as to their ability to downsize much further and realistically expect to remain a viable operation. You can't shrink to profitability."

The pilots union has asked for detailed financial information to prepare for a presentation by Seabury, Schnedorf said. But Midwest executives haven't been willing to provide that information, he said.

The company wants to suspend its contributions to the pilots' pension plan for at least one year and impose a wage freeze, Schnedorf said.

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