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Northwest Reorganization Could Lead to Flight Cuts at Milwaukee Airport

Posted on: Friday, 16 September 2005, 18:00 CDT

Sep. 16--Northwest Airlines Corp. might eventually drop some of its flights from Milwaukee's Mitchell International Airport as part of the company's bankruptcy reorganization, a move that would benefit Oak Creek-based Midwest Airlines Inc., industry observers said Thursday.

Eagan, Minn.-based Northwest, which announced the Chapter 11 filing Wednesday, is the second-busiest carrier at Mitchell, where it operates 35 daily departures, including those flown through its Northwest Airlink regional service. Midwest Airlines and its regional service, Midwest Connect, offer 142 daily departures from Mitchell.

Northwest, in its filing, said it wants to reduce the number of aircraft it operates, raising the likelihood that some routes will be dropped. But the carrier isn't ready to say where those route changes would occur.

Company spokesman Kurt Ebenhoch said a large portion of Northwest's customers who fly out of Mitchell fly through the airline's hubs to international destinations not served by other airlines that fly out of Mitchell. Schedule changes will be based on many factors, he said, including customer demand and the availability of aircraft.

"We would hope they will do some shedding in Milwaukee," said Carol Skornicka, senior vice president of corporate affairs for Midwest Air Group Inc., which operates Midwest Airlines and Midwest Connect. "But we have no way of knowing what their plans will be."

Northwest offers more than twice the number of departures from Mitchell compared to three years ago.

In 2002, before Northwest began expanding at Mitchell, it offered 16 daily departures. By this spring, that number was up to 38 daily flights, part of Northwest's "heartland strategy" of offering more flights from Midwest destinations such as Milwaukee and Indianapolis.

But the departures from Mitchell have since declined slightly. Some observers believe that Northwest might continue to reduce flights from Mitchell.

"We don't know what Northwest Airlines is going to do with its heartland strategy," said Pete Stettler, a senior director at Fitch Ratings.

The ratings agency downgraded its bond ratings for Minneapolis-St. Paul International Airport and Detroit Metropolitan Wayne County Airport, where Northwest operates hubs, out of concern that the airline might significantly reduce its flights. Fitch maintained its negative bond rating for Memphis International Airport, where Northwest operates a hub.

While Northwest might reduce flights at Mitchell, those moves aren't likely to create any big opportunities for Midwest Airlines, said Michael Boyd, president of Boyd Group Inc., an aviation consulting firm based in Evergreen, Colo.

Boyd said Midwest Airlines faces bigger challenges, including questions about whether it should continue to stick with its two-by-two seating configuration on most of its flights. Those flights, known as Midwest's "signature service," carry higher fares and focus on business travelers, while the airline's "saver service" offers lower fares and focuses on leisure destinations.

High jet fuel prices present another big challenge. Midwest Air Group's fuel costs per gallon are up 34 percent through August compared to the same period in 2004, and that's eating up cash even as it draws more passengers. As a result, the company's losses have widened this year, and in July it received notice from the New York Stock Exchange about a possible delisting.

Under the exchange's new criteria, a company can face delisting if either its shareholder equity or market capitalization fall below $75 million. Midwest Air Group said Thursday it has submitted a plan to the exchange detailing its strategy to meet those criteria. If accepted, the company would have up to 18 months to implement the plan.

Midwest Air Group stock closed at $2.40 a share, down 5 cents. Northwest closed at 88 cents, down 99 cents.

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NWAC, MEH,

Source: The Milwaukee Journal Sentinel

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