A new code-share contract signed last month by St. George, Utah-based SkyWest to fly from Milwaukee and Kansas City as Midwest Connect stands as the centerpiece of Midwest Airlines’ strategy to fend off a hostile buyout overture from AirTran Airways. The deal, scheduled to take effect in April, calls for SkyWest to fly 25 Bombardier CRJ200s, the first 15 arriving by this November. The airline plans to use some of its existing CRJs and acquire the rest from a growing collection of now inactive used airplanes. The five-year capacity purchase agreement calls for automatic two-year extensions, activation of which either airline may cancel for any reason.
The SkyWest deal would account for a big part of Midwest Airlines’ plan to increase capacity by 15 percent this year and 30 percent over the next three years. The Milwaukee-based airline said it plans to use SkyWest to add new destinations, increase frequency on existing routes and replace Beech 1900 turboprop service on “several” routes now flown by wholly owned regional subsidiary Skyway Airlines. Midwest places the annual revenue opportunity for SkyWest at $8 million to $10 million per CRJ.
Meanwhile, Midwest plans to add another Fairchild Dornier 328Jet to Skyway’s fleet of 11 of the 32-seat RJs by the middle of the year and add another two McDonnell Douglas MD-80s to the mainline fleet. It has also announced the March 4 launch of new Skyway/Midwest Connect service between Milwaukee and Duluth, Minn., and the upgrade of existing Milwaukee-St. Louis service to all- 328Jet service.
All told, the expansion would result in the addition of at least six destinations and as many as 12 new routes this year.
In an investor presentation filed with the SEC, Midwest Airlines Holdings said that the AirTran Airways proposal its board of directors rejected in December “significantly undervalued Midwest and did not reflect the long-term opportunity inherent in its strategic growth plan.” In response, AirTran raised its bid last month from roughly $295 million to $345 million but this time it took its offer directly to shareholders, bypassing the Midwest board.