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Midwest Facing Pay Cuts, Fleet Cuts, Layoffs

It's not a good time to be a little guy in the airline industry. One by one, those airlines without much size have disappeared. Aloha, ATA, and Skybus are all gone. Frontier is in Chapter 11 protection, and Midwest is now making some ominous rumblings about its future, or lack thereof. There likely is one airline that's happy about that last point . . . AirTran might be jumping for joy right now.

Midwest has said that it will ground its 12 MD80 aircraft, and there are reports that 5 of the 717s will be phased out as well. That leaves them with 20 717s, so this would be a reduction of 45% in terms of the number of aircraft flying and more than 50% of seats. (This doesn't include their contracted Connect operations.)

Naturally, you can't shrink that much without firing a ton of people. About half of the pilot and flight attendant workforce is said to be in danger (400 people), but they may have the better deal here. They can move on with their lives while those who remain have to face a painful pay cut of at least 34% and up toward 65% in some cases.

So how does an airline like this survive? Well, it very likely may not. You remember how this started don't you? AirTran wanted to buy Midwest and get itself a nice foothold in Milwaukee. Midwest's chief Tim Hoeksema fought it hard with the "Save the Cookie" campaign and eventually sold out to a private equity firm and a minority investment from Northwest. At the time, I thought this was a great deal for Hoeksema but a bad deal for everyone else at Midwest. It appears that was right.

With all those MD-80s leaving, they can't keep their long haul routes anymore. Will Northwest pick them up? Maybe. And maybe Northwest will just pick up the other pieces as well. They have plenty of excess aircraft now that every airline is downsizing. They could launch a few Milwaukee routes and watch Midwest disappear completely.

And what about AirTran? Well they weren't happy when they first lost out on buying Midwest, but they're probably the biggest winners of all here. They've been slowly building up in Milwaukee anyway, and it turns out they didn't need Midwest. AirTran can build this thing on their own and watch Midwest slowly disappear.

Who loses? The Midwest employees. They would have at least had employment opportunities for an airline with a brighter future. Now they are either losing their jobs or half their pay. That's not exactly something to look forward to. Hoeksema may be happy that he got his payday and his airline for a little while longer, but it's looking like an awfully selfish decision right now.

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