Midway Airlines Corp., an ailing regional carrier that serves mostly the East Coast, filed for Chapter 11 bankruptcy protection, laid off half its workers and stopped service yesterday to major airports, including Dulles International.
The Morrisville, N.C.-based carrier blamed a "calamitous" drop in business travel coupled with slowed air traffic growth and high fuel prices for its restructuring. The company, whose hub is at Raleigh-Durham International Airport, will lay off 700 employees immediately, including about 183 pilots, 99 flight attendants, 91 customer service agents, 126 baggage handlers and 201 other staffers.
Midway will also reduce its fleet by 17 aircraft and cut service to nine cities, including Buffalo; Dayton, Ohio; Pittsburgh; and Rochester, N.Y. Midway flights to Reagan National Airport are unaffected by the filing, but the airline discontinued its four daily flights to Raleigh-Durham from Dulles.
Midway will end flights to Los Angeles on Sunday, to Birmingham on Monday, and to Providence, R.I., and San Jose on Aug. 31.
The company said it had assets totaling $318 million and liabilities of $232 million as of June. The company lost $7 million in the second quarter, and $15 million in the first half of this year.
Midway chief executive Robert Ferguson said scaling back should help boost the company's sagging operations. The airline was hurt by the spending cutbacks of technology firms near its hub in North Carolina, and its rapid growth led to higher fuel and labor costs.
"We are confident we will return to profitability by reorganizing and reducing our route network to traditionally profitable routes," Ferguson said in a statement.
Some of the airline's corporate clients have recently cut travel budgets by as much as 90 percent, said Midway marketing director Karen Wing.
The airline called employees Monday night to notify them that their jobs were being cut. Wing said the workers were still waiting for their last paychecks, and it is unclear whether they will receive severance packages.
"There are some benefits that they're going to be offered, but I don't know all the details," Wing said. "All of those employees are being mailed packets with full information."
Trading of Midway's shares was halted following the company's bankruptcy announcement. The last trade was at $2.75 a share on the Nasdaq Stock Market, down from a 52-week high of $6. The airline's stock has fallen 46 percent in the past 12 months.
Raymond Neidl, an analyst with ABN Amro Inc. in New York, said Midway operated in an increasingly competitive market with low-fare carriers, such as Southwest Airlines Co. and AirTran Airways. Smaller airlines can consider filing for bankruptcy protection to survive in the languishing economy, Neidl said.
"You may see small airlines doing it, but the large airlines are in pretty good economic shape for the slowdown," Neidl said.
Midway joins a list of carriers who have recently sought protection from creditors. Trans World Airlines filed for Chapter 11 reorganization in January and was later bought by AMR Corp., parent of American Airlines. National Airlines Inc., filed for Chapter 11 in December, as well as Dallas-based Legend Airlines. Legend was later liquidated.
An earlier company named Midway Airlines filed for bankruptcy and was dissolved in 1992. A group of investors bought the airline's name and started the current Midway. The airline began service in 1993. In 1995, Midway moved from Chicago to North Carolina. The airline had flights to 35 cities in 19 states.
Midway struggled with the same problems as the rest of the airline industry, primarily sluggish sales to business travelers and increasing fuel and labor costs, said Deborah C. McElroy, president of the Regional Airline Association, a trade group based in the District.
"Business travelers make up more than 65 percent of regional airline traffic, so we have been affected in many markets by the economic slowdown," McElroy said. "You're experiencing the very significant increase in labor costs at the same time that your revenues are down. As a result, it makes it even more difficult to operate profitably. These issues have made it very difficult to operate profitably as an airline."