Midwest Air: It's Not Such a Wonderful Life

AirTran CEO Joe Leonard said on a conference call that the carrier is getting a good response as it solicits votes for its tender offer, which expires May 16.

"We have a significant number in the box with a month to go," he said.

Among AirTran's backers is Richard Hurowitz, CEO of Octavian Advisors, a year-old hedge fund that owns about 6% of Midwest.

"Airtran's earnings increased, and Midwest's earnings decreased, and [Midwest] still won't talk to them," Hurowitz said in an interview. "It's unusual to get an offer that is as compelling as what AirTran has put on the table, and to refuse to even talk to them."

Hurowitz said, based on his conversations with Midwest executives, he concluded "there's a disconnect between what they want and what their shareholders want."

"They should allow shareholders to have the ability to enter into a value-enhancing proposition," he said.

Hedge funds like Octavian are short-term investors that "put pressure on us and on AirTran as well," Skornicka said. And regardless of the outcome of the AirTran tender offer, she said, control of Midwest will remain in the hands of its board.

Skornicka said the offer is a "straw poll." Even with support from a majority of shareholders, AirTran's offer cannot be enacted unless the board waives a shareholder rights plan and meets other conditions.

But Midwest's viability may be threatened even if the offer falls through. It seems clear that AirTran will continue to boost Milwaukee service. AirTran serves Atlanta, Orlando and Tampa from Milwaukee. Next week, it will suspend Tampa flights and add Baltimore. In August, it will add Las Vegas, as well.

On Wednesday, AirTran sent another message, saying it will also increase service this year between Florida and Kansas City, a focus city for Midwest.

With higher costs than AirTran and a near-absolute dependence on the Milwaukee market, Midwest -- for all its hometown charm -- would be severely challenged by a battle for its hub with its rejected suitor.