Target Tries to Elude AirTran

In another move to elude AirTran Airways' hostile takeover attempt, Midwest Airlines will add economy seats to its aircraft to boost revenue and profitability.

"Our board continues to believe the [AirTran] offer is less than the value of our strategic plan going forward," said Midwest Chief Executive Timothy Hoeksema. "This gives some insight into our enhanced value going forward."

Midwest said it plans to replace its signature all-business-class, two-by-two leather seating on business routes with a mix of 40 roomy leather seats and 59 economy seats in a two-by-three layout. The number of passenger seats on typical Midwest flights will jump to 99 from 88, and executives at the Milwaukee-based carrier said they expect up to $35 million in additional annual revenue when the change is complete.

"It's a very inexpensive way to add capacity," said Hoeksema, who estimated the shift will cost $4 million.

The move is the latest in a series by Midwest to convince shareholders that it is better off independent than it would be as part of AirTran. Recently it announced a code-share marketing pact with Northwest Airlines in which the two carriers will book connecting passengers on each other's flights, adding up to $20 million in annual revenue.

Ironically, the seating changes diminish the differences between Midwest and AirTran, at least in terms of service approach.

AirTran has long offered 12 business class and 105 economy seats on the same size aircraft as Midwest uses.

AirTran officials disparaged Midwest's announcement on Tuesday, calling the move "desperate" and revenue projections "absurd."

"It's a desperate attempt to distract people from the weakness of their stand-alone plan," said Kevin Healy, AirTran's vice president for planning. "They've got a very poor record on execution, and they're terrible at forecasting results. They're playing a sort of shell game."

About 56 percent of Midwest's shareholders backed AirTran's $389 million tender offer on May 16, but Wisconsin law gives Midwest extensive anti-takeover protections. AirTran extended its hostile bid, and the two sides are preparing for a proxy fight at Midwest's June 14 annual meeting.

AirTran plans to elect three hand-picked directors to Midwest's board, and Midwest is backing its own candidates.

AirTran has sought to merge with Midwest since late 2005, when AirTran CEO Joe Leonard offered $4.50 a share for the company. Midwest rebuffed the offer, and AirTran launched a hostile bid for $11.25 a share in December. The Orlando-based discounter has twice raised the offer to $13.25 and now $15 a share.

AirTran wants a hub outside Atlanta, where two-thirds of its flights originate. From Milwaukee, AirTran's growing fleet of Boeing 737s could easily reach both coasts, and Milwaukee is within easy driving distance of Chicago's affluent northern suburbs. AirTran tried but failed to establish a hub at Chicago's Midway Airport three years ago.

AirTran has said it will add flights and jobs in Milwaukee if it succeeds in buying Midwest. AirTran's Healy mocked Midwest's "Best Care In The Air" motto on Tuesday, saying it's intentionally keeping its seat count at 99 because federal regulations require an additional flight attendant at 100 seats.

When the change is complete in 2009, the same number of Midwest crew members would be responsible for additional passengers on every flight. "The best care in the air just got a bit worse," Healy said.

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