Mesa Air Group

Mesa Air Group
Private
Industry Aviation
Founded 1980
Headquarters Phoenix, Arizona, United States
Key people

Jonathan G. Ornstein, Chairman & CEO
Michael J. Lotz, President & CFO Paul F. Foley, Executive Vice President & COO

Brian Gillman, Executive Vice President, General Counsel and Secretary
Revenue Increase$1.4 billion USD (2007)
Number of employees
 ~2,500(2011)
Website www.mesa-air.com

Mesa Air Group, Inc. is a Nevada Corporation[1] commercial aviation holding company with headquarters in Suite 700 at 410 North 44th Street in the Camelback East area of Phoenix, Arizona, United States.[2] The company operates one regional airline subsidiary: Mesa Airlines which operates as American Eagle, US Airways Express and United Express under contractual agreements with American Airlines and United Airlines respectively. As of April 2015, Mesa operates 97 aircraft with approximately 420 daily system departures to 94 cities, 38 states, the District of Columbia and Mexico. The company, founded in Farmington, NM in 1980 and purchased by Larry and Janie Risley in 1982, has approximately 2,500 employees. In terms of revenue, Mesa Air Group at one point would be considered a major airline carrier as it has over $1 billion annual revenue earnings, however it does not qualify for major status because its aircraft seat fewer than 100 people. At its peak during September 2007, Mesa Air Group operated 201 aircraft.

On January 5, 2010, Mesa Air Group filed for bankruptcy.[3] The company emerged from bankruptcy on March 1, 2011.[4]

Subsidiaries

Airlines

Former airlines and subsidiaries

History

Mesa began in 1980 when JB Aviation, a fixed-base operator at the Four Corners Regional Airport in Farmington, New Mexico, established a charter flight department and Mesa Air Shuttle with scheduled commuter airline service from Farmington to Albuquerque, NM using a five-seat single engine Piper Saratoga aircraft. A nine-seat Piper Navajo was later added for new service from Farmington to Denver. In late 1981 the Denver flights were discontinued and a new route from Farmington to Grand Junction, CO and Vernal, UT was briefly added. In 1982, using $140,000 in capital, Larry Risley, an A&P mechanic with JB Aviation, and his wife Janie,[5] purchased the airline and by mid 1983, acquired its first 14-seat Beechcraft 99 airliner. New service from Albuquerque to Durango, CO began with the arrival of the second Beech 99 later that year. More Beech 99's were acquired and the company continued to expand from Albuquerque to other cities throughout New Mexico as well as Lubbock, TX.

During its first few years, Mesa found itself in a very competitive environment. Six other carriers competed against Mesa: Air Midwest, Sun West Airlines, Pioneer Airlines, Trans-Colorado Airlines, Airways of New Mexico, and JetAire. As fare wars erupted between the carriers, Mesa was able to survive due to its low cost structure. It performed maintenance in house, many of Mesa's employees performed multiple duties: pilots and mechanics doubled as gate agents and ramp agents.

In 1984, the Civil Aeronautics Board awarded Mesa its first Essential Air Service (EAS) contract, to serve Roswell, Hobbs, and Carlsbad, winning the contract from Air Midwest. A second round of EAS bidding resulted in Mesa winning contracts to serve Silver City, Alamogordo, Las Cruces, Clovis, and Gallup.

By late 1985, Mesa acquired its first Beechcraft 1900 turboprop and began the first scheduled air service to Telluride, CO as that aircraft had the performance to serve the cities' airport which sits at more than 9000 feet above sea level. Service was also added to high altitude Angel Fire, NM a year later.

By 1987, Mesa had grown from six employees in 1982 to 187 employees: from a single Piper Saratoga in 1980 to one Piper Chieftain and three Beechcraft 99s in 1984 to five Beechcraft 99 and four Beechcraft 1900 turboprops. Of the six competing air carriers, none remained to challenge Mesa in New Mexico by the end of 1987. The airline had built up its Albuquerque hub to 45 departures per day serving 17 cities and providing hourly service to Farmington.[6]

Mesa continued to grow in 1987. It listed on NASDAQ: MESA with an initial public offering of 865,000 shares of stock at $7.50. While it was now operating to all the primary cities in New Mexico, it then expanded outside of the state by acquiring routes in Wyoming, Utah, and Colorado from Centennial Airlines as well as adding nonstop flights from Roswell, NM to Dallas/Fort Worth, TX. Mesa then acquired a pair of 9-seat Cessna Caravans to serve even smaller cities in New Mexico and established new routes from Albuquerque to Taos and Ruidoso.

To provide a pool of trained, qualified pilots, in 1989, Mesa established an ab-initio flight training program with San Juan College, a local community college. By the end of the 1980s Mesa poised itself for future growth and expansion.

Acquisitions and mergers

Starting in 1989, Mesa embarked on a series of acquisitions and mergers over the next six years that would known by the airline industry watchers as "Mesa's a deal a year growth."

In February 1989, Mesa negotiated its first codeshare agreement with Midwest Express and established Skyway Airlines in Milwaukee. In July 1989, StatesWest Airlines attempted to take over Mesa by making an offer to purchase all of the common operating stock of Mesa, which was rejected.

In February 1990, Mesa acquired Aspen Airways' United Express Denver hub, routes and assets, and negotiated a codeshare agreement with United Airlines. Using these newly acquired routes, Mesa set up a Denver hub flying as United Express. Aspen Airways' BAe 146 and Convair 580 aircraft and its Denver-Aspen route were sold to Air Wisconsin.

Mesa had many changes in 1991; acquiring Air Midwest, its Kansas City hub and a codeshare agreement with USAir Express in July, starting FloridaGulf Airlines serving Florida, South Carolina, Georgia, Alabama, Arkansas, and Louisiana from its Tampa hub under a USAir Express codeshare in December. It was also in talks to acquire WestAir Commuter Airlines.

In 1992, Mesa completed acquisition of WestAir Commuter Airlines and its hubs in San Francisco, Los Angeles, Portland, and Seattle as well as its United codeshare. In October 1992, Mesa negotiated a codeshare agreement with America West for its Phoenix hub to be operated as America West Express.

In 1993, Mesa's codeshare with Midwest Express expired. Midwest Express kept the name Skyway for its future regional of the same name. Using the aircraft from the former Skyway operation, Mesa established Superior Airlines with a Columbus hub operating as America West Express. Mesa created CalPac (California Pacific) with a Los Angeles hub operating as United Express. Both Superior and CalPac were short-lived operations, with both airlines being folded back into Mesa Airlines United Express operations.

In 1994, Mesa acquired Pittsburgh-based Crown Airways. Using the assets from Crown Airways, Mesa set up Liberty Express Airlines with a Pittsburgh hub operating as USAir Express.

In March 1995, Mesa took delivery of its first two regional jets, the Fokker F70, which is a smaller version of the Fokker F100 jetliner. Mesa created Desert Sun Airlines and operated the two jets from a Phoenix hub to Des Moines and Spokane as America West Express.

Reorganization

As Mesa acquired air carriers or expanded by creating new airlines, it grew in a seemingly haphazard manner. From 1989 through 1995, Mesa had grown from one airline with hubs in Albuquerque, Denver, and Phoenix to six separate airlines with hubs throughout the country, though it had as many as eight airlines prior to 1995.[7] Rather than integrating each new acquisition and airline into one integrated company, Mesa continued operating each individual airline independently, with separate labor groups, separate flight, maintenance, and marketing operations, and separate codeshare agreements. This resulted in an unwieldy corporate structure.

In 1992, Mesa created Mesa Holdings Corp to manage the existing Mesa Airlines and its acquisitions. It resulted in the following subsidiaries:

In 1995, Mesa Holdings Corp was renamed Mesa Air Group, and Mesa Airlines was renamed Mountain West Airlines. Mesa Air Group now consisted of the following six airlines and subsidiaries:

In 1996, further company reorganization consolidated the separate flight dispatch functions of Desert Sun, FloridaGulf, and Mountain West airlines into one location in Farmington. All flight training facilities and human resources were centralized in Fort Worth. Since the mergers had created a diverse mix of aircraft types, Mesa proceeded to simplify the number of aircraft types operated from six (Short 360, British Aerospace BAe Jetstream 31, Embraer EMB-120 Brasilia, Beechcraft 1900, de Havilland Canada DHC-8 Dash 8, Fokker F70) to three (B1900, Dash 8, Canadair CRJ). Mesa relocated aircraft to place all airplanes of the same type in a base, with the Jetstreams and Brasilias flying in the West, 1900s flying elsewhere. This also allowed the consolidation of maintenance facilities, since the facilities no longer needed to service all the different types of aircraft Mesa operated. To replace the Fokker aircraft, Mesa signed an agreement with Bombardier to purchase 16 Canadair Regional Jets (CRJ) with options for 32 more.

The six pilot groups had voted to unionize in 1994. In 1996, the pilot groups of the six airlines were merged into one common seniority list, and under the Air Line Pilots Association (ALPA) representation, the pilots and Mesa negotiated and ratified a five-year collective bargaining agreement.

When Mesa started taking deliveries of the CRJ in 1997, it returned to two Fokker 70 jets and placed the CRJs in service in Phoenix. Mesa started an independent hub providing CRJ service from Fort Worth Meacham to Houston, San Antonio, Austin, and from Colorado Springs to Nashville and San Antonio. This effort proved to be unsuccessful and the service from Fort Worth ended in less than a year.[8]

Difficulties and loss of the United codeshare

Mesa and United entered into discussions in July 1997 to renew WestAir's codeshare agreement, which was due to expire in May 1998. Mesa and United could not agree on new terms. As negotiations delayed into the summer, United started awarding WestAir's routes to SkyWest Airlines. Finally with negotiations at an impasse, United announced in November 1997 that it would not renew the codeshare with WestAir. Mesa attempted to reengage United and ask United to reconsider to no avail.

Mesa experienced many customer complaints regarding its Denver United Express operation. The level of complaints resulted in a Congressional inquiry of the airline's performance. Mesa experienced increased costs the Denver hub as a result of moving from Denver Stapleton airport to the new Denver International Airport and as a result of a decrease in the average fare Mesa received from United. In efforts to reduce its exposure to the high costs and mounting losses, Mesa announced that it would reduce and terminate service from its Denver hub in September 1997. United charged that the reduction and termination of service was a material breach of the codeshare agreement. Naturally Mesa disagreed. Again, as with WestAir, agreement could not be reached and United and Mesa mutually agreed to terminate the codeshare.

The effect of the codeshare termination with WestAir and Mesa was immediate. The termination put 87 (21 Jetstreams, 29 Brasilias, and 37 Beech 1900s) of Mesa's 184 aircraft out of service or 47% of its total aircraft. Mesa took immediate steps, parking the Jetstreams and Brasilias. It sold 10 Brasilias to Skywest. Mesa exercised the option to purchase 16 additional CRJs and traded in the remaining Brasilias to Bombardier for CRJs. Mesa sold 24 Beech 1900s to Great Lakes, and returned the remaining Beech 1900s to Beechcraft/Raytheon. WestAir ceased operations in 1998.

Mesa experienced difficulties with its other two codeshares as well. Flight crew shortages and scheduling problems resulted in the cancellation of many flights. From October 1997 to January 1998, Mesa parked aircraft and canceled flights to alleviate the crew shortage problem. Part of the crew shortage problem was related to the consolidation of flight operations in Farmington, and the training associated with transitioning the air carrier from a Part 135 operator to a Part 121 operator as required by a FAA mandate. America West canceled its codeshare with Mesa in 1997.

Turnaround

In 1998, Jonathan Ornstein was appointed CEO of Mesa Air Group. Ornstein had been Risley's assistant from 1989 to 1995 during Mesa's initial expansion. Larry Risley remained on Mesa's board of directors. All corporate officers were replaced and the company headquarters was relocated from Farmington to Phoenix. The flight training and human resources departments were also moved to Phoenix. Its plan to return to profitability focused on several fronts: its aircraft, its codeshares, and customer service

One of Mesa's problems during the turnaround was that it operated over 180 turboprops. It began consolidating all of its remaining Beechcraft 1900 turboprops into Air Midwest, completing the consolidation in 2000. It embarked on a plan to reequip with jet aircraft. In 1999, Mesa arranged to purchase 36 Embraer 145 jets with options for 64 additional ERJs. In 2001, Mesa arranged to purchase 20 CRJ-700s and 20 CRJ-900s with options for 80 additional CRJ-700/900s. Five of the CRJ-700 orders were subsequently converted to CRJ-900s. As Mesa took delivery of the larger CRJ-700s and CRJ-900s, scope restrictions with US Airways prevented Mesa from operating the larger aircraft in its Mesa Airlines subsidiary. Mesa created a separate subsidiary, called Freedom Airlines to operate these aircraft. As the scope restriction at US Airways was removed during US Airways' bankruptcy reorganization and after Mesa settled with its pilot union regarding operating Freedom as a separate air carrier, Freedom's aircraft and pilots were merged back into Mesa Airlines in 2003.

As Mesa completed its restructuring, it proceeded to reestablish it codeshares. In 1998, it negotiated a new codeshare with America West and expanded its codeshare with USAir. In 2001, Mesa reestablished a codeshare agreement with Midwest Express for its Air Midwest Kansas City hub. Also that same year, Mesa negotiated an agreement with Frontier to operate as Frontier JetExpress out of Denver. The Frontier codeshare ended in 2003. In 2003, Mesa reestablished a codeshare agreement with United, operating as United Express. In 2005, Mesa negotiated a codeshare agreement with Delta for Freedom Airlines to operate as a Delta Connection carrier.

By 1999, Mesa returned to profitability. Mesa acquired CCAir and its USAir Express codeshare in 1999. It continued to operate CCAir as a separate operation. By 2002, CCAir ceased operations due to high costs and its assets and employees were absorbed into Mesa. The latest merger attempt was in 2003, when Mesa offered to acquire Atlantic Coast Airlines. Its offer was refused, and ACA went on to operate independently as Independence Air and later ceased operations in January, 2006. In 2006, Mesa began operating in Hawaii under the brand go! and established a codeshare agreement with Mokulele Airlines, where Mokulele will operate as a go! Express carrier.

In 2004, Mesa Air Group met with Hawaiian Airlines and Aloha Airlines, both in bankruptcy at the time, and reviewed operational records and forecasts, but ultimately decided not to acquire or invest in either carrier. In 2006, after Mesa announced plans for its "go!" sub-branded airline in Hawaii, Hawaiian Airlines sued to block the launch, claiming that Mesa had violated a confidentiality agreement.[9] Aloha Airlines filed a similar suit against Mesa later that year.[10]

In September 2007, the CFO of Mesa Air Group was placed on administrative suspension as irregularities were investigated during the Hawaiian Airlines case. In an announcement, Mesa Air Group CEO Jonathan Ornstein assured shareholders and investors that "the alleged misconduct does not involve the financial controls, financial statements or operations of the Company."[11] The judge overseeing the Mesa go! case, however, ruled Mesa destroyed evidence.[12] and ordered Mesa Air Group to pay an $80 million interest bearing settlement with interest, along with legal fees, to Hawaiian Airlines.[13]

Aloha Airlines ceased operations in March 2008,[14] and the Aloha Airlines suit was settled in November 2008. Mesa agreed to pay $2 million, 10% of Mesa's common stock, and provide travel benefits on go! for former Aloha employees.[15] Initially the settlement agreement included a provision whereby Mesa Air Group could license the Aloha name, but a federal judge rejected that agreement on the basis of Mesa's alleged misconduct in the Hawaii market.[16]

Mokulele acquisition

In October 2009, it was announced Mesa Air Group's subsidiary "go!" would be taking over all of the Hawaii flying done by Mokulele Airlines and R.A.H.'s Shuttle America. The combine operation was rebranded as go! Mokulele. Mokulele operated a fleet of 4 Cessna Caravan aircraft that were retained in the combined operation, but the Embraer 170 aircraft operated by Shuttle America on behalf of Mokulele were removed from Hawaii service.[17]

Bankruptcy filing

On January 5, 2010, Mesa Air Group filed for Chapter 11 bankruptcy protection in a New York City bankruptcy court. The company indicated that it will continue operations as normal. The company's Go! Mokulele subsidiary was not included in the filing,[3] Per bankruptcy records, upon Mesa Air Group's exit from bankruptcy, US Airways Group will own a 10 percent stake in the operation. The company emerged from bankruptcy protection on March 1, 2011, as a privately held company with a new board of directors and having eliminated 100 excess aircraft.[18]

Mokulele divestiture

In December 2011, it was announced Mesa Air Group had divested itself of Mokulele's Cessna Caravan aircraft and operations. In June 2012, Mesa began the process of dropping the "go! Mokulele" name and reverting to "go!".[19]

Labor groups

Mesa Air Group labor groups are represented by several labor organizations:

Mesa Angels Foundation

Mesa Air Group, Inc. sponsors the Mesa Angels Foundation which provides financial assistance to those Mesa employees and immediate family members in critical financial need due to extraordinary circumstances such as medical emergencies, natural disasters or other unforeseen life-changing events. Mesa Angels Foundation also supports charitable organizations through donations in the communities Mesa serves.

References

  1. ↑ "Form 10-K (2006)". Retrieved 2007-09-05.
  2. ↑ "Contact Us." Mesa Air Group. Retrieved on January 30, 2009.
  3. 1 2 Maxon, Terry (2010-01-05). "Mesa Air goes into bankruptcy court". The Dallas Morning News. Retrieved 2010-01-05.
  4. ↑ http://www.businessweek.com/ap/financialnews/D9LMMAQ81.htm
  5. ↑ http://www/mesa-air.com, About Mesa, History
  6. ↑ Mesa Airlines timetable, October 15, 1987
  7. ↑ Timetables from Mesa Airlines, United Airlines, and US Air
  8. ↑ American Express Skyguide, March 1998
  9. ↑ "Hawaiian Airlines sues Mesa". USA Today. February 15, 2006.
  10. ↑ "Aloha Airlines sues Mesa Air Group". Pacific Business News. October 13, 2006.
  11. ↑ "Mesa Air Group News Release". September 21, 2007.
  12. ↑ "Judge rules Mesa destroyed evidence". Pacific Business News. September 27, 2007.
  13. ↑ "Mesa Air ordered to pay $80M for misusing confidential info". AzBiz.com. November 2, 2007.
  14. ↑ "Aloha shuts down service". Maui News. Retrieved 2010-10-16.
  15. ↑ "Mesa Air Group Settles Aloha Lawsuit and Agrees to Enter Long Term Licensing Agreement". Mesa Air Group. Retrieved 2010-10-16.
  16. ↑ Daysog, Rick (May 16, 2009). "Mesa can't use Aloha name". The Honolulu Advertiser. Retrieved 2010-10-16.
  17. ↑ Archived July 20, 2011, at the Wayback Machine.
  18. ↑ "Mesa Air Group emerges from Chapter 11". Phoenix Business Journal. March 1, 2011. Retrieved March 2, 2011.
  19. ↑ Segal, Dave (June 21, 2012). "Airline's parent sheds less-than-sleek name and returns to 'go!'". Honolulu Star-Advertiser.
  20. ↑ "Mesa Pilots Ratify New Contract with Significant Gains". Air Line Pilots Association. Retrieved 2010-10-16.
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