MIDWEST AIRLINES; Which deal will fly?

Aug. 16, 2007
The takeover saga at Midwest Airlines isn't over yet as AirTran once again ups its offer. But both proposals raise serious questions for travelers

So AirTran Airways won't go quietly after all. The airline on Tuesday ratcheted up its bid for Midwest Airlines to $16.25 a share in cash and stock.

Now, it's up to the Midwest board of directors, which must decide between AirTran and a competing offer announced Sunday. The board's first duty is to shareholders, but we hope the board members also keep in mind the needs of travelers and what's best for the economic vitality of southeastern Wisconsin.

We've been cool from the start to the idea of an AirTran takeover. But there is no doubt now that there will be change, and the central question is whether there is room in the airline business for a carrier like Midwest. We hope that there is.

The new AirTran proposal seeks to trump the one announced Sunday. In that deal, TPG Capital of Fort Worth, Texas, backed by an investment by Northwest Airlines, would buy Midwest for $16 per share in cash. It was a brilliant strategic move by Northwest that seeks to block an upstart rival from invading its base of operations.

Timothy Hoeksema, chief executive at Midwest, and the management team that built Midwest's reputation for high-quality service would remain in place as part of the TPG/Northwest deal, which would give Midwest a chance to make its own way.

But at least one major Midwest shareholder has balked at the TPG/Northwest offer, and there are legitimate antitrust concerns. The two airlines combined control about 70% of the Milwaukee market.

Northwest's spotty service record is a major hurdle as is the airline's on-again, off-again relationship with the Milwaukee market. This is not the stuff of which customer loyalty is made. Assurances that Northwest would be a "passive investor" and have no operational control aren't that reassuring.

AirTran is, well, AirTran, a low-cost carrier that makes no promises to keep current management in place. It has promised to expand routes out of Mitchell International Airport and to try to lure more traffic from northern Illinois. It has promised that fares would fall. Midwest management has been justifiably skeptical.

Either way, Midwest's unique culture may succumb. Already, it has been forced to make concessions to the demands of the market.

Our hope is that Midwest can yet prove that high-quality service is a competitive advantage in the airline business. That's been good for travelers and good for Milwaukee. Make no mistake: Midwest Airlines and its well-deserved reputation for quality has been one of Milwaukee's best ambassadors around the country.

It would be a shame to lose that.

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