Midwest Air Group, Inc. (MEH) expects to make a decision shortly on the responses to its request for proposals for operate 50-seat regional jets. It plans to start the new service in 2007 to right size markets and as a vehicle for route and frequency expansion.

It reported third quarter results for its Midwest Airlines and Skyway Airlines/Midwest Connect operations, citing broad marketing initiatives that increased passenger traffic and an improved fare environment. The second consecutive profitable quarter for the airline resulted in an operating revenue increase of 23.4% to $168.6 million. Operating income improved to $0.4 million from a $27.1 million loss in the third quarter of 2005, while net income improved to $1.7 million from a $26.9 million loss. In addition, it has seen a shift in booking patterns to closer to departure date which continued into October and contributed to yield growth of 9.3 percent in the third quarter. The company reported that bookings for the future already exceed capacity.

The revenue increase reflects a 16.8% increase in passenger traffic, owing to strong customer demand in response to competitive pricing, as well as schedule and service enhancements. A 6.7% increase in revenue yield was driven by a reduction in industry capacity, a series of fare increases by a number of airlines including Midwest, and improvements in the company's yield management processes. Total operating expenses increased 2.7%, owing to the 9.8% increase in capacity and increased flight operations at Midwest Airlines, which led to increases in salary, wages and benefits; fuel expense; station rental, landing and other fees; commissions; and aircraft rentals. Fuel expense increased $13.4 million, or 27.8% -- of which $10.0 million was related to price increases. Year to date, operating revenue increased 30.5% to $496.2 million. Operating results improved to a $1.3 million loss from a $51.2 million loss in 2005, while net income improved to $1.8 million from a $51 million loss in the first nine months last year.

Midwest posted sizeable gains in market share in its Milwaukee and Kansas City hubs. In August 2006, Midwest Airlines and Midwest Connect had 50.7% of the Milwaukee market, up from 48.0% in the same month a year earlier. In Kansas City, Midwest Airlines market share rose to 10.8% for August from 8.2% in the same month a year earlier.

The company ended the quarter with $91.3 million in unrestricted cash, up from $76.2 million on 2005 and down from $99.0 million at December 31, 2005. Capital spending resulted in a cash outlay of $6.5 million year to date for one Fairchild 328JET and Boeing 717 spares.

(1) Non-GAAP measurement. Source: Midwest Air Group, Inc.

Note: All statistics exclude charter operations except the following: Total Available Seat Miles ("ASMs"), Total Cost per Total ASM, Total Cost per ASM (ex-fuel cost), Into- plane Fuel Cost, Number of Employees and Aircraft in Service. Aircraft acquired but not yet placed into service are excluded from the aircraft in service statistics.

Numbers in this table may not be recalculated due to rounding.