TPG deal will leave Milwaukee stranded

While the Greater Milwaukee Committee and the Milwaukee media seem to think TPG Capital’s purchase of Midwest Airlines is a good deal – keeping the headquarters in Milwaukee with the same management team continuing to serve chocolate chip cookies – I believe it’s the shortsighted view.

This deal was a relatively low-risk, low-cost defensive move by Northwest Airlines to protect its two nearby mega-hubs in Minneapolis and Detroit. In its present condition, Northwest can ill afford additional competition, no matter if it’s from a small airline like Midwest or in a slowly shriveling city like Milwaukee. And this was a small price to pay to be able to eventually take control of and then remove an annoyance that is siphoning traffic from its hubs. With Midwest out of the way, Northwest will offer Milwaukeeans two options: flights to Minneapolis or flights to Detroit, from which they’ll connect – assuming the flight hasn’t been cancelled – to their final destinations.

(Milwaukee to Memphis will be another Northwest option, but that hub isn’t as close to Milwaukee as Minneapolis or Detroit.)

But, you say, Northwest is merely a minority partner in TPG so it can’t call the shots. Not yet perhaps. And let’s not be naïve. TPG is strictly a front for Northwest, like an opening act is for the main attraction. And in the not too distant future, Northwest will have the right to acquire TPG’s interest in Midwest.

AirTran’s offer, on the other hand, represented an offensive move that would have raised Milwaukee’s image and put it at least a step closer to big-league status. Milwaukee would have become AirTran’s second largest market behind Atlanta and bigger even than AirTran’s headquarters city of Orlando. The number of daily flights would have gone from the approximate 140 offered by Midwest to just over 200. New nonstop destinations would have included San Diego, New Orleans, Miami, and Montreal, among others. More important, AirTran has a presence among travelers and travel planners nationally and internationally that Midwest doesn’t have. That alone made a merger with AirTran the more logical and sensible choice, even though AirTran could have taken over Midwest only to find that Milwaukee wasn’t what it thought it was and then left town. Nevertheless, I’ll take my chances with a successful and growing airline like AirTran than with an erratic and unreliable performer like Northwest.

And why was the decision made to go with TPG rather than AirTran? Well, you’d have to ask Midwest CEO Tim Hoeksema. But I would guess that somewhere along the line giant-sized egos entered into this: “This is my airline and I’ll make the decision who gets my airline.” History is littered with businesses killed off by egos. That’s especially true in the high-profile, seemingly glamorous world of commercial aviation. Eastern and Pan Am come to mind immediately.

But why approach an airline like Northwest? Not only does it have no incentive to see Midwest prosper much less survive, but Northwest at one time owned about 30% of AirTran Corp., a relationship in which there apparently was no love lost. (AirTran Airways subsequently was spun off.) So Northwest probably has a greater than normal competitive interest in seeing that airline founder as well. It just doesn't make sense, especially when Hoeksema says how much he cares about Milwaukee's future. Of course, ego has a way of trumping logic, common sense, and civic pride.

If you’re one who judges an airline by the cookies it serves, the TPG deal will be good for Milwaukee. After all, Hoeksema jubilantly proclaimed, “The cookies stay,” when announcing the TPG deal. That’s nice because I believe this deal leaves Milwaukee headed for another big bruise to its image and a half-empty airport. Rather than giving Hoeksema a standing ovation as the Downtown Milwaukee Rotary Club did the other day after his speech about the TPG deal, I'd be giving him the thumbs down.