By David Wise and Brian E. Clark
Milwaukee officials had mostly negative reactions on Wednesday to news of a hostile takeover attempt of Midwest Air by discount carrier AirTran Holdings.
They said they feared layoffs, loss of a corporate headquarters and a decline in airline service to the region.
During a Milwaukee Press Club luncheon, Peter Beitzel, vice president of the Metropolitan Milwaukee Association of Commerce (MMAC), he was not happy about AirTran’s hostile takeover attempt.
“As far as the quality of service goes, there would definitely be a negative impact on Milwaukee and it’s unlikely that the long-term non stop flights we enjoy with Midwest would continue, at least at the rate they provide now,” Beitzel said.
Beitzel’s biggest concern, however, is the possible loss of a major corporate headquarters for the area. “This isn’t the first offer Midwest has gotten, and I’m sure it won’t be the last,” Beitzel said.
“Unless someone makes a very good offer that the stockholders really want to accept, I don’t think we have to really worry about this issue,” he said.
Despite assurances from AirTran that the company would create jobs, Rep. Jeff Stone (R-Greendale) warned of the possibility it would close Midwest’s maintenance facility here, eliminating those positions.
Stone said Midwest knows the market well here, and that if AirTran took the helm it “would lose the focus that having a hometown airline gives to our market.”
Stone put Midwest on par with Harley-Davidson as a high-quality signature company. He said the sale would have long-term negative impacts.
Milwaukee County Sup. James White, chair of the board’s transportation committee, said the offer speaks to the attractiveness of the airline, which he said the county helped after the terrorist attacks on Sept. 11 and a subsequent fare war by backing its credit to keep it financially viable.
“This is a dynamic industry and there have been mergers, acquisitions and bankruptcy filings too numerous to count all over the country.,” White said.
“Midwest bounced back second-to-none and Milwaukee County played a significant role in assisting Midwest in getting over that financial hump.”
In an interview afterward, White said questioned the business plan behind the offer. “I can’t believe that adding new jobs and keeping the level of service is going to be the formula.” White said.
“Today’s formula for saving money is to slash salaries, slash jobs, slash service, slash, slash slash.”
Milwaukee Mayor Tom Barrett also weighed in and said he supports Midwest Airlines, its workers and customers.
“I have had good conversations with executives from both Midwest Airlines and AirTran,” he said. “ I intend to support an outcome that is in the best interests of the residents and travelers in southeast Wisconsin and the employees of Midwest Airlines.
“We love having a hometown airline and my support for it remains strong. Midwest is a solid company and, under the leadership of Mr. Tim Hoeksema, continues to be an exemplary corporate citizen. Its presence is very important to Milwaukee.
“I pledged to work with Mr. Hoeksema and Midwest Airlines so that the outcome is one that is in the best interests of the company, its employees and Milwaukee.”
Orlando-based AirTran announced yesterday that its October offer of $11.25 per share was spurned in an apparent attempt to put pressure on Midwest management. Midwest’s shares finished at $11.10 on Wednesday, a whopping gain of 22.5 percent over Tuesday’s close.
The $288 million offer was rejected by the Midwest Air board on Dec. 6. In a letter to AirTran head Joseph Leonard, Midwest Air Group CEO Timothy Hoeksema politely thanked Leonard, but also gave him a firm “no.”
“While the Board has a great deal of respect for AirTran and for your leadership, it has concluded that it would not be in the best interests of the Company, our shareholders and other stakeholders, including customers, employees and the communities we serve, to pursue a transaction with AirTran under the current circumstances,” he wrote.
“The Board feels that the Company’s strategic plan and remaining independent hold the best promise for continued growth and increased shareholder value going forward,” he added.
Leonard responded testily and said his company’s offer was fair and “compelling” because it proposed a 37-percent premium for shareholders.
“We have been trying to privately negotiate a merger between our separate companies for some time. More than a year ago, you declined our initial proposal to acquire Midwest Air Group and you have had our proposal of Oct. 20, 2006, for more than seven weeks. Yet, despite our efforts, and without the benefit of directly discussing with us or our advisors the proposal in detail, our offer was declined on Dec. 7, 2006.
“Because we believe that the proposal is such a compelling opportunity and offers such significant benefits to your constituents, we feel obligated to make this proposal known and are therefore making public this letter and the supporting financial analysis.
“In conclusion, we believe AirTran Airways and Midwest Airlines will be much stronger as a combined force than either are as independent entities and that together we can provide substantial value to our respective shareholders, employees, customers and the communities in which we operate. We hope that you will reconsider our offer and enter into negotiations with us to effect a definitive merger agreement.”
Airline industry analysts said they expect AirTran to continue its efforts to buy Midwest and grow in this region.
But Carol Skornicka, senior vice president of corporate affairs of the company, told Small Business Times that future talks with AirTran would likely not result in a sale.
“We’re disappointed that they decided to go public and not advise us in advance,” Skornicka said. “I heard about it first from outside sources. I hope that we’ll be able to persuade them that this won’t be good for them either.
“I believe the community would not welcome losing Midwest. We’re returning to profitability, we’re growing and we’ve got record-high passenger counts. We have great prospects for the future. I believe the Milwaukee community, based on the support we’ve received in the past, would be reluctant to see us go away.”