Midwest Receives $60 Million to Restructure

Looks like Midwest has finally put together its latest restructuring package, and it appears to me that the airline has decided to move toward a regional model. With $60 million in additional investment, they might be able to pull this off, but it’s not going to be easy. Let’s look at the details.

• Midwest received $15 million from Republic Airways with an additional commitment of $10 million if they reach some milestones
• Midwest received $25 million from TPG with an additional commitment of $10 million if they reach some milestones
• Midwest will retire 16 of their 717s, leaving only 9 in the fleet
• Republic will operate 12 Embraer 170s for Midwest in the all-coach 76 seat configuration that previously flew under Frontier
• Midwest expects to end up operating those 12 Embraer 170s under their own certificate within a couple of years

The first thing that stands out for me is that Republic is making out pretty well here. Remember, Republic had 12 Embraer 170s that it was operating for Frontier before they were ditched. When Republic offered Frontier DIP financing, I figured it was a way for them to get back in, but clearly I was wrong. This investment, however, is absolutely all about getting those 12 airplanes flying again. Smart move.

For Midwest, this seems to me that it could be the beginning of their transition to a regional carrier. Those 12 Embraers are operating in a standard configuration that could easily end up flying as Delta Connection. (You can read more about this on Cranky today.) And those 717s (and their CRJ contract) could disappear pretty easily if need be. The regional space isn’t exactly a friendly environment, so I’m not sure that this is going to work, but as long as the New Delta likes what they see, then this will keep them afloat.