Midwest Air to cut pay, CEO to take 40 percent cut

MILWAUKEE – Midwest Air Group Inc. is cutting pay for many employees, including its chief executive, who announced Wednesday he would take a 40 percent pay cut.

The airline must make changes as it continues to try to absorb rising costs, such as fuel, Tim Hoeksema told employees in a memo. He said the company needs to cut back because its costs are much greater than those of others its size.

"Our best choice is to fix this disparity so our costs better match our revenues, (or) file for Chapter 11 and try to fix it there, or ignore it and fail as a business," he said.

Hoeksema said he will take a 40 percent cut to his total pay, including salary and bonuses. The Milwaukee-based company did not disclose his pay. Since its takeover by TPG Capital, it has been privately owned and does not have to make public its salaries.

The news came as rival AirTran Airways announced it would cut its overall employee pay by about 10 percent, also to help offset rising fuel costs. The company said the plan was to reduce pay for six months and then look at the situation again.

The company didn't say exactly what pay cuts it was seeking from its pilots and flight attendants, whose unions will have to vote on the matter. But it said it wanted them to approve cuts that would bring their salaries in line with others in the industry.

Hoeksema said Midwest's best paid pilots make 32 percent more than pilots who fly similar planes for other airlines, while the cost of their pensions, health and other benefits is 45 percent more than average.

Flight attendants at top scale make about 23 percent more than their counterparts elsewhere.

Midwest spokesman Mike Brophy said the company was not disclosing the cuts it was seeking due to ongoing negotiations with the unions.

The union had little reaction to the announcements Wednesday, said Jay Schnedorf, chairman of the Midwest Airlines unit of the Airline Pilots Association International. Members hoped to get more information before voting on the pay cuts, he said.

Schnedorf said the union felt badly for the employees whose cuts were already solidified.

Midwest announced those other cuts that won't be subject to union approval.

Maintenance technicians will see their pay reduced by 10 percent, while some professional staff members will lose 5 percent. Those cuts will go into effect when the cuts for pilots and flight attendants do, the company said.

Senior management also will see their pay cut. Senior vice presidents will see their total pay drop by 25 percent, vice presidents by 17 percent and directors and senior managers by 11 percent, Hoeksema said.

Senior managers and Hoeksema's pay cuts will be effective July 15.

Midwest was still unsure how many positions it would cut outright, beyond the pay cuts, Hoeksema said. Executives are evaluating positions and functions within the company. Hoeksema said it wasn't possible to be more specific yet.

The company has been taking steps to shrink costs as fuel prices rise. Last month, it said it would ground its dozen gas-guzzling MD-80s to save on fuel costs. The airline also has 25 Boeing 717s.

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Midwest Airlines: http://www.midwestairlines.com