Message from CEO Tim Hoeksema
The Whole Story
I’d like to share additional information about our current situation and future plans, as some of the information being disseminated today, particularly about our alleged “outsourcing” of work, paints an incorrect and incomplete picture.
As you’re aware, from an economic standpoint, this has been the most challenging year in our 24-year history. To remain viable as an ongoing business in the face of record fuel prices and other economic challenges, and to build a platform for future growth, we’ve undertaken a major restructuring plan. Several components of this plan are already complete, including a reduced schedule that focuses on business destinations, and pay reductions for non-represented employees, with the most significant reductions taken by me and my senior staff.
Our agreement with Republic Airways includes three elements that are also key to the success of this restructuring:
1. Additional Capital
We are not in a position today where we can afford to turn down additional investment in our business when the credit markets, particularly for airlines, are extremely tight. Our agreement with Republic provides some of this necessary capital, and in turn Republic quickly began operating 12 Embraer 170 aircraft for us as Midwest Connect. We consider this to be permitted in the scope of our labor agreements, not “outsourcing,” and the plan currently is that it will be a temporary arrangement.
We currently plan to be able to bring the Republic aircraft on to our own operating certificate, to be flown by Midwest crews, who would be recalled from furlough to resume work. Completing this process requires two things:
• Eight to 12 months, a time period common for airlines bringing planes on to their own FAA certificate.
• A cost structure that allows us to remain competitive, including new collective bargaining agreements with our pilots and flight attendants – agreements that reflect market-competitive rates for employees operating aircraft of this size. This is a fair quid pro quo in our plan to build a platform for viability and future growth.
We continue to have active discussions with both of our unions as we work toward reaching these agreements, but choose to keep these discussions behind closed doors.
2. Fuel Efficiency
The 12 Embraer 170s provide a more fuel-efficient complement to our flying – the plane is five percent more fuel efficient to operate than a Boeing 717 – significant for airlines whose costs are so fuel intensive. While oil prices, and consequently jet fuel prices have relented from their record highs this summer, no one can really predict where prices will go. We’re erring on the conservative side and insulating ourselves from further price volatility with more fuel-efficient aircraft.
3. More Effective Capacity During Today’s Economy
The Embraer 170, with a capacity of 76 seats as opposed to the 99-seat Boeing 717, will help us more effectively manage the overall capacity of our airline during the current economic slowdown. We have already proactively reduced much of our long-haul schedule to leisure markets, which are the first to contract in a down economy. Strategically managing our overall capacity is another important measure to take in uncertain economic times.
We continue to serve more than 30 cities nationwide, including 28 nonstop destinations from Milwaukee, still far more than any other airline. Our 33-aircraft fleet includes:
• Nine 99-seat Boeing 717s, featuring Midwest Class with a choice of seating
• 12 76-seat Embraer 170s, with two-by-two seating throughout the cabin
• 12 50-seat Canadair regional jets
Most important, our commitment to customer service has never wavered, and the operators who fly on our behalf are held to the same high standards. You can continue to book Midwest flights with confidence and expect the same level of service you’ve enjoyed for 24 years.
Ours is a culture built on service to you – our customer – and the community as a whole. Our employees have built this airline and I want them to be flying our planes. They have been through incredibly difficult times this past year, but have demonstrated professionalism and a commitment to service. That’s one of the reasons I believe that constant demonstrations and newspaper ads are unproductive as we work through our restructuring plan.
I understand the difficult impact on employees and their families during this time of change for Midwest Airlines. It has been painful for us to have had to make hard choices in reducing our workforce. Those of you who know our culture recognize the difficult position we have been put in. But we’re doing this – making the hard choices – for the future of our airline, so that we can continue service to the customers who fly us and to the communities we serve. The loyalty of our customers and the support we receive from the community gives me hope for the future.
Thank you.
Timothy E. Hoeksema
Chairman, President and CEO
Midwest Airlines
October 14, 2008ekAjaxTransform Error