Midwest Air Group Reports Fourth Quarter

Midwest Air Group, Inc. today reported financial results for its Midwest
Airlines and Skyway Airlines (dba Midwest Connect) operations. Company
management will discuss the results in a conference call with industry
analysts and institutional investors at 1 p.m. Central time on Wednesday,
January 28. The discussion will be available simultaneously in a
listen-only mode and for at least the following 30 days at
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=MEH&script=2100 ..

“Although we did not report a profit in the fourth quarter, we achieved
significantly improved results. It was truly a turning point for us,” said
Timothy E. Hoeksema, chairman and chief executive officer. He cited the
completion of private placement financings, ongoing benefits from the
company`s cost reduction efforts, and the successful introduction of
Midwest Airlines` new low-fare Saver Service as important milestones in
the company`s efforts to return to financial health.

Comparing fourth quarter 2003 to fourth quarter 2002, operating revenue
decreased 4.8% to $98.1 million. Operating results improved to a $1.9
million loss from a $10.1 million loss, while net loss improved to $1.6
million from $6.7 million in the same quarter a year ago. Per share
results improved to a $0.10 loss from a $0.44 loss in the fourth quarter
of 2002. Fourth quarter 2003 results include charges of $0.7 million
(pre-tax) associated with the distribution of stock options to employees
as part of the company`s restructuring and $0.3 million (pre-tax) in costs
resulting from the disposal of aircraft.

For the full year, operating revenue decreased 10.1% to $383.9 million.
Operating results improved to a $30.5 million loss from a $54.3 million
loss, while net loss fell to $13.3 million from $10.6 million. Results per
share fell to an $0.85 loss from a $0.72 loss in 2002. 2003 results
include $8.9 million (pre-tax) in expenses related to aircraft disposal,
$2.8 million in professional services restructuring costs and $11.4
million of other income associated with security-related reimbursements
from the federal government. 2002 results include a $29.9 million
(pre-tax) impairment charge, other income of $39.5 million (pre-tax)
associated with an arbitration settlement and $0.3 million (pre-tax) in
federal grants.
At Midwest Airlines, revenue per scheduled service available seat mile
decreased 9.6% in the quarter; a 4.5 percentage point increase in load
factor could not offset a 15.8% decrease in revenue yield. Load factor
improved despite a 2.1% increase in capacity, while yields were affected
by lower business fares, increased competition from other airlines, the
overall depressed pricing environment, and the airline`s new low-fare
Saver Service. Saver Service positively impacted load factor with
increased traffic stimulated by the lower fares.

Midwest Airlines` per-gallon fuel costs increased 8.5% in the quarter from
a year earlier. Into-plane fuel prices were $0.08 more per gallon,
resulting in a $1.4 million (pre-tax) unfavorable price variance and
increasing per share loss by $0.05.

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Cost per available seat mile (unit costs) at Midwest Airlines decreased
13.5% (15.0% holding fuel price constant) compared with fourth quarter
2002, due in large part to a 20.1% reduction in labor costs. Companywide
cost- reduction initiatives lowered costs related to labor, distribution,
dining services and maintenance.

At Midwest Connect, revenue per scheduled service available seat mile
increased 17.5% in the quarter. Capacity decreased 17.8% as schedule
changes were implemented to reduce average flight lengths on the regional
jet aircraft and better align capacity with demand. These changes were the
primary drivers of a 1.6 percentage point improvement in load factor and
an 11.2% increase in revenue yield. Cost per available seat mile increased
2.9% (1.9% holding fuel price constant) compared with fourth quarter 2002
as cost reduction initiatives were offset by the impact of the capacity
decline. Midwest Connect into-plane fuel prices were $0.08 per gallon more
in the fourth quarter, generating an unfavorable $0.2 million (pre-tax)
price variance and increasing per share loss by $0.01.

Note: Cost per available seat mile holding fuel price constant is an
industry measurement that provides management and investors the ability to
measure and monitor company performance absent fuel price volatility. (See
reconciliation table.)
The company ended the quarter with $88.3 million of unrestricted cash.
During the quarter, the company completed its financing plan with the
issuance of the remaining $10.0 million of a total of $25.0 million in
convertible notes; the sale of $8.0 million in common stock; and the
sale/leaseback of the company`s headquarters facility, netting
approximately $10 million. Capital spending in the quarter totaled $2.7
million, and was $16.7 million in 2003. Most of the spending was
associated with spare parts provisioning for the Boeing 717 fleet and
modifications to eight MD-80 aircraft that were converted to Saver Service.

In the fourth quarter:—Midwest Airlines launched nonstop Signature
Service between Kansas City and Orange County—with one-stop or
connecting service from Milwaukee and connecting service from cities
throughout the Midwest.—Midwest Airlines expanded its low-fare Saver
Service to Ft. Lauderdale, Ft. Myers and Tampa, Florida, coinciding with
the resumption of the airline`s popular nonstop seasonal service to the
three cities. Seasonal service operates daily through April 25, 2004.—
Midwest Airlines placed three Boeing 717 aircraft in service, bringing the
total number of 717s in its fleet to 11. In the first quarter of 2004:—
On January 1, Midwest Express Holdings, Inc.—the parent company of
Midwest Airlines—officially changed its name to Midwest Air Group, Inc.
MEH, the company`s ticker symbol on the New York Stock Exchange, remains
the same.—Midwest Airlines will add three additional Boeing 717
aircraft to its fleet.
With the company`s financing efforts concluded and its cost restructuring
providing ongoing benefits, Hoeksema said the company believes it has
taken “the steps necessary to return to profitability and sustained
growth. Despite an extremely competitive industry and challenging
environment, Midwest Airlines and Midwest Connect are now positioned to
move confidently into the future.”

Midwest Airlines features nonstop jet service to major destinations
throughout the United States. Skyway Airlines, Inc.—its wholly owned
subsidiary—operates Midwest Connect, which offers connections to
Midwest Airlines as well as point-to-point service between select markets
on regional jet and turboprop aircraft. Together, the airlines offer
service to 50 cities. More information is available at
http://www.midwestairlines.com/ .

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