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Midwest Airlines heading toward bankruptcy?


Midwest Airlines is officially on bankruptcy watch, following news it will reduce its fleet by half and lay off hundreds of employees. According to the Milwaukee Journal Sentinel, Midwest executives are hoping to restructure the airline's finances within 30 days, after which the carrier will be more or less out of cash.

Part of that restructuring will be pay cuts of up to 65 percent for employees that survive the layoffs. Some pilots could also suffer job downgrades, essentially demotions that could further reduce their pay. Midwest's staff has already endured several pay cuts (flight attendants start at a mere $6.50 an hour, just a shade above minimum wage), so it seems likely the unions will resist these new, severe pay reductions. The pilots' union has already called the proposed cuts "unacceptable."

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Fleet reductions will focus on the carrier's least-efficient planes (MD-80s) and will largely affect Midwest's flights from Milwaukee to the West Coast. Losing these itineraries could give AirTran an opportunity to increase its service there. When AirTran made a hostile takeover bid for Midwest (a move that was spurned), it vowed to increase departures from Milwaukee, and may now have its chance.

Overall, Midwest's future is murky at best. Fleet and staff reductions of this magnitude sniff strongly of desperation, and it may already be too late for management to save the airline. Plus, if employee unions fight the pay cuts, a major component of Midwest's restructuring plan will be put on hold as the two sides negotiate. Northwest has a 47 percent stake in the carrier, meaning Midwest (or some version of it) could be incorporated into a merged Delta-Northwest.

So what's a fan of Midwest (or ticketed passenger) to do? For now, pay attention to the news, and book with caution (and with PayPal—you'll get $50 off your ticket if you book by July 14). From the sound of things, Midwest is racing against the clock, and we'll have a clearer understanding of its fate within the next few weeks.

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