RJET Flies for Midwest, Pilots Angry

A new, 10-year contract, including financing, between Republic Airways Holdings and Midwest Airlines to fly 12 76-seat Embraer ERJ 170s as a Midwest Connect starting October 1, has raised the ire of Midwest’s pilots who said the new service would replace all but nine of Midwest’s Boeing 717s. The agreement includes one-year, term loan to Midwest in the amount of $15.0 million, with an additional loan commitment of $10.0 million, based on the achievement of certain milestones. The loans is collateralized by all of Midwest's unencumbered assets and generally be senior to other lender's security position.
The last of the 12 aircraft is scheduled for deployment by November 15. With the cancellation of Republic’s contract to fly as a Frontier Jet Express, the aircraft were set to be sold or placed with other airlines. Related Story
The move raises the number of Midwest pilots who are out of work to approximately 300 of some 400 pilots who were employed before Midwest was bought by TPG Capital and Northwest Airlines, said the pilot group.
"Midwest pilots are outraged that management is using such underhanded tactics and further decimating this airline,” said Captain Jay Schnedorf, chairman of the Midwest Airlines unit of the Air Line Pilots Association (ALPA). “We are putting management on notice that they cannot hold a gun to our heads and deal with our pilot group in this manner. We strongly believe that management's actions are a repudiation of its contract with us, and we are exploring all of our options to protect our pilots and hold management accountable for the deal it made with us in 2000 and the concessions we made during our company's restructuring in 2003.”
Meanwhile Midwest Airlines announced significant progress in its voluntary restructuring plan and $60 million in additional financing, including commitments from TPG Capital and Republic Airways Holdings, an Indianapolis-based airline holding company.
Timothy E. Hoeksema, Midwest Airlines chair and chief executive officer, said $40 million of the additional financing has already been funded, with an additional $20 million committed to be funded upon completion of certain milestones in the airline's voluntary restructuring plan. Midwest's restructuring has focused on a strategy to serve its core business markets, cost reductions necessary to address high jet fuel prices and a soft economy, and revenue enhancement actions.
Under the Airline Service Agreement, Midwest will purchase all capacity at predetermined rates and will directly pay or reimburse Republic for industry standard pass-through costs. The contract could change owing to an option Midwest has to convert the agreement into a long-term aircraft lease any time prior to June 1, 2010. The 12 E170's would be leased from Republic for the remaining duration of the agreement and operated on the Midwest Airlines operating certificate. Fuel will be purchased by Midwest but will not be charged back to Republic.