Midwest Air warns on profit, cites weak fares

NEW YORK (Reuters) - Midwest Air Group Inc. MEH.A, which is trying to fend off a hostile takeover by AirTran Holdings Inc. (AAI.N), said on Tuesday that second-quarter earnings would fall below analysts' expectations and possibly year-earlier profit because of weak fares.

Midwest, whose shares declined 1.6 percent, said the expected earnings shortfall was primarily due to industrywide pricing weakness that may continue for some time.

Analysts on average were expecting quarterly profit of 67 cents per share, according to Reuters Estimates. Year-earlier earnings were 39 cents.

Midwest said the pricing weakness would probably affect full-year earnings, but said it was unable to determine the impact. It therefore suspended its previous 2007 earnings forecast of $1.30 to $1.50 per share.

The analysts' average forecast for 2007 is $1.22 per share, according to Reuters Estimates.

The second and third quarters, boosted by spring and summer travel, are traditionally strong periods for the U.S. airline industry.

Midwest has spent more than $2.6 million defending itself against AirTran.

AirTran said the warning was evidence that Midwest's plan to remain a stand-alone airline is flawed, and it renewed its call for Midwest management to begin merger talks.

On Monday, AirTran said it had extended its takeover offer of $15 a share until August 10.

Midwest shares were down 24 cents at $14.67 in afternoon American Stock Exchange trade, while AirTran was down 22 cents, or 1.9 percent, at $11.31 on the New York Stock Exchange.

(Additional reporting by Kyle Peterson)