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Midwest Connect Gains Cash in Lease of a Dozen Aircraft

September 30, 2008

By TOM DAYKIN

Starting Wednesday, Midwest Connect customers will be flying on new aircraft that come with badly needed cash for the airline’s corporate parent.

The first group of a dozen Embraer 170 jets, leased from Indianapolis-based Republic Airways Holdings, will begin flying Midwest Connect routes. The airline on Monday provided a sneak preview of the new aircraft, which will be phased into the flight schedule through Nov. 15.

Republic, to secure the 10-year lease, is providing a one-year, $15 million loan to cash-strapped Midwest Airlines Inc., which also operates Midwest Connect. Republic has a separate loan commitment of another $10 million for Midwest if the company achieves certain financial goals.

Republic’s $25 million in financing is part of up to $60 million in new cash for Midwest. The airline said the new cash, including commitments from majority owner TPG Capital, could help the company avoid a Chapter 11 bankruptcy filing.

But the Embraer 170s are replacing some Boeing 717 jets that Midwest Airlines uses, which is leading to layoffs of 270 Midwest employees. The Midwest pilots union has filed a grievance, claiming the company’s hiring of Republic to operate the jets violates their labor contract.

Company executives say they believe the outsourcing doesn’t violate the contract. The company’s plan is to rehire the furloughed flight crews and maintenance workers after they’re trained on the new jets. That process will likely take eight months to a year.

The Embraer 170s are smaller and do not offer the signature wide seats the Boeing 717 jets have. But the Embraer 170s don’t have the cramped interior of many regional jets. The ceiling height is 6 feet 7 inches in those jets, compared with 6 feet 1 inch in the Bombardier CRJ200s, the other regional jets used by Midwest Connect.

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