Friday, December 20, 2002 6:27AM EST
Midway will fly again, sort of
Its agreement with US Airways appears to be sorted out at last. Flights start in January
By DUDLEY PRICE, Staff Writer
MORRISVILLE -- For Midway Airlines, which has been reborn five times since the 1970s, Life No. 6 will begin Jan. 1.
The Morrisville carrier's newest reincarnation, as a commuter affiliate for US Airways, was made possible Thursday when a bankruptcy judge approved a financing arrangement with the nation's seventh-largest airline. Midway, which once operated 115 daily departures from Raleigh-Durham International Airport, will return to the skies with three flights to Washington's Reagan National Airport. And instead of the carrier's former yellow-and-blue colors, the new Midway will fly the blue and gray of US Airways Express.
But Midway has growth plans. A fourth flight to Reagan National is to be added later in January. And Midway plans to begin three flights between RDU and New York's La Guardia on Feb. 9.
The financing agreement approved Thursday will allow Midway, which has been grounded since July 17, to begin preparing for that schedule by leasing six 50-seat regional jets.
We're pleased, Midway chief executive Robert Ferguson said. We did it, and the people who hung on at Midway are to be congratulated.
The main beneficiaries of Thursday's court approval will be the hundreds of creditors who have been waiting since Midway filed for Chapter 11 bankruptcy protection Aug. 13, 2001, to begin collecting debts.
The deal with US Airways, which also is in bankruptcy, is expected to be the cornerstone of a reorganization plan Midway promises to file by late January. As part of the plan, Midway must file a disclosure statement showing how much money it owes creditors and how it plans to repay them.
Creditors will vote on the plan and, if it is confirmed by the court, the plan becomes a contract between the airline and its creditors that remains in effect even after Midway leaves Chapter 11 protection.
Currently, Midway's liabilities are unknown by the bankruptcy administrators. The carrier listed assets of $318 million and debts of $232 million when it entered bankruptcy, but since then has sold off hundreds of thousands of dollars in equipment and reached agreements with creditors that eliminated debt.
Aviation experts say the deal with Midway makes sense for US Airways, which is cutting costs through new union agreements and by shedding older planes. The airline also is replacing larger jetliners with smaller regional jets such as the ones Midway will operate.
The deal requires US Airways to pay Midway's operating costs, plus a profit.
It's a good deal in that it keeps a company [Midway] that otherwise would go out of business in business, said Michael Boyd, president of the Boyd Group, an Evergreen, Co.-based aviation consulting firm. At the same time, US Airways needs additional small jet lift -- several dozen more small jets in its system -- and Midway is part of that solution.
US Airways will fund Midway's aircraft security lease agreements for up to $7 million and provide an additional $2.4 million for startup costs. In return, Midway agreed to have at least one jet in service by Jan. 1 and as many as 18 planes operational by mid-2003.
The agreement is a revision of an earlier deal the two airlines announced in July with plans to launch the new service in October. But Midway missed two deadlines to secure a $5 million loan for beginning operations and leases for 18 planes.
Midway apparently no longer needs the loan under the revised agreement. In return for its financing, US Airways will get equity in the reorganized Midway.
Midway has reinvented itself before. First formed after federal deregulation of the airline industry in the late 1970s and based in Chicago, Midway ran out of cash in 1991 and shut its doors.
In 1993, a group of investors led by Chicago financier Sam Zell bought the rights to Midway's name and operated a few flights out of that city's Midway Airport.
In 1995, Midway began its third life when it moved to RDU, picking up dozens of routes left by American Airlines' decision to close its hub at the airport.
Two years later, the co-founders of Cary-based SAS Institute, Jim Goodnight and John Sall, bought a controlling interest in the carrier.
They brought in Ferguson, a former Continental Airlines chief executive, who took the company public and set it on an ambitious growth track. At its peak, Midway was the busiest carrier at RDU and employed 2,700 workers.
Midway No. 4 shut down after business travel dropped in 2001 and the September terrorist attacks caused bookings to evaporate.
Midway No. 5 cranked up last Dec. 19 after receiving a federal airline bailout grant, but by July was again out of cash.
Now Midway No. 6 is about to take off, but the carrier that billed itself the hometown airline, now has fewer than 40 local employees and virtually no control over its destinations.
Midway is not an airline now, Boyd said. It's a small jet provider for US Airways, and US Airways will put those jets in service where it wants.
Staff writer Dudley Price can be reached at 829-4525 or email@example.com.