By GRETCHEN EHLKE, Associated Press Writer 43 minutes ago

MILWAUKEE - AirTran Holdings Inc. raised its hostile bid for rival Midwest Air Group Inc. on Thursday by almost 18 percent to about $345 million in cash and stock after the regional airline rebuffed an earlier offer last month.
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This time AirTran, based in Orlando, Fla., took the offer directly to shareholders, bypassing Midwest's board of directors.

"We thought we would get no more consideration than we've gotten so far. We thought we'd let the owners decide," AirTran Chairman and Chief Executive Joe Leonard said during a visit to Milwaukee.

The new offer is equivalent to $13.25 per Midwest share, based on the closing price of AirTran common stock on Monday. The bid represents a premium of almost 3 percent over Midwest's closing share price of $12.90 on Wednesday.

AirTran earlier bid $11.25 per share for Midwest Air Group, but the Midwest board turned down that offer on Dec. 6.

Carol Skornicka, Midwest's senior vice president of corporate affairs, said its board will evaluate the latest offer and make a recommendation to shareholders with 10 days.

She said it was somewhat surprising that AirTran made the improved offer "directly to shareholders at this stage."

"We expected that they would do something. They said they would be back. This is kind of an accelerated process," Skornicka said.

Midwest shares rose 35 cents, or 2.7 percent, to $13.35 in midday trading Thursday on the American Stock Exchange where they earlier rose to a 52-week high of $13.39. Airtran shares rose 29 cents to $12.21 on the
New York Stock Exchange.

Midwest Air Group, which operates Midwest Airline and Midwest Connect, promotes itself as "the best care in the air," with its wide leather seats and chocolate chip cookies baked on board.

Some passengers and shareholders believe those touches might end if AirTran is successful in its hostile takeover.

But Leonard said the merger would combine the best of both airlines, including the traditional Midwest perks.

He told investors in a conference call that the merged company would have more modern equipment, coast-to-coast service with multiple hubs and be "formidable competition no matter what happens with airline consolidation."

The AirTran-Midwest proposal isn't the only airline merger being discussed.

US Airways Group Inc. said Wednesday it will increase its offer for Delta Air Lines Inc. by almost 20 percent to $10.3 billion in cash and stock. Delta had rejected the previous offer and been opposed to the takeover bid.

United Airlines' parent UAL Corp. has explored a merger with Continental Airlines Inc., though no agreements have been reached and a deal remains far from certain. That deal could hinge on the success or failure of US Airways' bid for Delta.

Meanwhile, The Wall Street Journal reported Wednesday that Northwest Airlines Corp. and Delta, both operating under bankruptcy court protection, have been talking about a deal.

The Senate Committee on Commerce, Science and Transportation has scheduled a Jan. 24 hearing on the state of the airline industry and the potential impact of mergers.

Leonard said Midwest, as a stand-alone company, operates with older, "gas guzzling" aircraft and hasn't turned an annual profit since 2000.

"We think they have a weak business model that doesn't adequately address future competition," he said.

AirTran, which owns the discount carrier AirTran Airways, made its offer through subsidiary Galena Acquisition Corp. The offer expires Feb. 8.

Leonard has said a combined company would reach $3.5 billion in revenues and have some 15,000 employees by the end of this year.