Midwest Gets Another $12 Million
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By Andrew Compart
Midwest obtained another $6 million in debt financing each from majority owner TPG Capital and repeat lender Republic Airways, and will replace SkyWest with Republic for the rest of its regional flying.
The deals, at least regarding its fleet, are not likely to be the last for a carrier that has dramatically reshaped its structure over the past year. But the loans provide an immediate financial boost for a carrier that seemed to be under financial stress. Just last month, for example, Republic disclosed in an SEC filing that it was monitoring Midwest’s financial condition after it delayed $3.3 million in payments to Republic, which it planned to pay in three installments last month instead.
SkyWest President and COO Russell “Chip” Childs said in a letter to employees June 8 that Midwest and SkyWest “mutually decided” to end their relationship after Midwest asked for more cost-cutting concessions than SkyWest was willing to give.
“You are all aware of the difficulties facing Midwest over the last 18 months, and we have been closely evaluating our options to ensure our operation remains secure,” Childs said. “They have continued to ask for concessions, and while a healthy partner is clearly best for SkyWest, we decided the best option for both airlines was to end our partnership.”
SkyWest, which currently is operating a dozen 50-seat Canadair regional jets for Midwest as Midwest Connect, will remove two from Midwest service this summer and use them as spares throughout its system, Childs said. The remaining 10 will be removed from October through January; a SkyWest spokeswoman said the airline “anticipates placing them in other service.”
The SkyWest phase-out will be concurrent with the phasing in of a dozen 37- to 50-seat Embraer jets operated by Republic. Republic already flies 12 76-seat Embraer E-175 aircraft for Midwest in connection with the deal reached last fall for $25 million in loans from Republic. (TPG also provided $35 million in financing at that time.)
In May, in a deal described as an “initial order,” Midwest amended that air services agreement to add two Republic-operated 100-seat Embraer E-190s. They are scheduled to go into service in August and September, probably to fly nonstop to the West Coast from Midwest’s Milwaukee hub (DAILY, May 27). Midwest has not been able to do that since it got rid of its 12 remaining MD-80s last year.
Questions remain about the future of Midwest’s nine remaining 99-seat Boeing 717 aircraft — the only ones still operated by its own crews. Midwest returned the other 16 717 aircraft it was operating as part of a fleet restructuring when it reached the deal with Republic last fall.
Ever since Mexicana signed a deal with Boeing Capital in March for 25 717s for its low-cost Click unit — 16 of which were to come from the returned Midwest aircraft and nine from an undetermined source — the rampant speculation has been that the remaining nine also will come from Midwest.
A Midwest spokesman said June 9 that “we have nothing to announce on either the E-190 order or the 717s. We continue to look at various fleet options, but will continue to fly the 717s until we have something definitive to announce.”
Photo: Joseph Pries
