mesaba2425
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From the Star Tribune:
Analyst predicts NWA will keep Avros
Liz Fedor, Star Tribune
Published January 15, 2004 MESA15
Will Northwest Airlines keep the four-engine Avro regional jets that are flown by its Airlink partner Mesaba Airlines?
An airline analyst predicted Wednesday that Northwest will retain the Avros, notwithstanding Northwest's announced plans to reduce Avro flying and possibly replace the planes altogether. Those plans were an issue in the recent contract negotiations between Mesaba and its pilots union.
Eagan-based Northwest said in October that it might replace the Avros with two-engine jets. The Avro routes provide 40 percent of Mesaba's revenue.
"Northwest Airlines is on the hook for this aircraft whether it uses it or not," said Robert Ashcroft, a UBS Investment Research analyst based in Stamford, Conn.
He estimated that Northwest has $494 million tied up in the financing of the 36 Avros, which were brought into Mesaba's fleet between 1996 and 2000.
Northwest leases 25 of the Avro RJ-85s and owns 11 of them.
"The likely revenue Northwest could expect from leasing [the Avro] out of the Northwest system would be unlikely to cover more than about half of what Northwest pays in rent and debt service," Ashcroft said in a report released Wednesday.
Northwest declined comment Wednesday on its pending Avro decision and on Ashcroft's report.
The Avro was built to seat 85 passengers, but Mesaba has been flying the jets on Northwest's regional routes with 69 seats. Northwest's contract with the Northwest unit of the Air Line Pilots Association (ALPA) prohibits Northwest's regional partners from flying aircraft with 70 or more seats.
In October, Northwest executives said they might terminate their contract with Mesaba to fly the Avros. They agreed to defer a final decision until December, and then postponed the decision until February to give Mesaba management time to focus on a labor agreement with its pilots.
Mesaba ALPA leaders will meet with their members next week to explain the tentative contract agreement announced early Sunday morning. A ratification vote will be conducted in late January.
If a simple majority of the 844 pilots approves the agreement, it's unclear what kind of planes the pilots will be flying.
The Mesaba fleet now consists of 66 Saab turboprops and 31 Avro jets.
In October, Northwest CEO Richard Anderson said: "The operating costs of the Avro are significantly higher than other aircraft that could operate in similar markets. The original revenue assumptions that we used back when we made that decision in '96 have changed significantly, particularly after 9/11." Anderson has talked about soliciting bids from multiple carriers to fly the Avro routes.
Mesaba executives have continued to provide Northwest with financial information about the cost of flying the Avros.
"We still think it is a viable airplane and we have attempted to show Northwest how we can operate it at a reduced cost," Mesaba spokesman Dave Jackson said Wednesday.
"Our belief has always been that if we have a competitive cost structure and a good operating performance that there will be an airplane for us to fly, whether that's the Avro or another aircraft," Jackson said.
When Northwest agreed to postpone the decision on the Avro, Mesaba agreed to take five planes out of its fleet. Jackson confirmed that five Avros have been parked in the Phoenix area, and they will be returned to active flying if Northwest chooses to continue Avro flying with Mesaba.
By the end of September, Memphis-based Pinnacle Airlines, Northwest's other regional partner, was flying 70 twin-engine Canadair Regional Jets (CRJs) that seat 44 and 50 passengers.
Pinnacle is scheduled to get 59 more CRJs, which are on firm order through Northwest. The airline also has options to acquire 175 more CRJs, and the new Mesaba pilots' contract includes pay scales for flying the CRJ.
The Mesaba pilots' union and management have said repeatedly that they want to compete for additional CRJ flying through Northwest.
Mesaba executives have a better handle on their labor costs now that they have reached a tentative agreement with the pilots.
Shares of Mesaba's parent, MAIR Holdings, have reached 52-week highs in the days leading up to Friday's strike deadline. And Ashcroft, the UBS analyst, pointed out Wednesday that the stock price has risen by more than 30 percent since October. MAIR stock closed Wednesday at $7.59 a share, down 66 cents or 8 percent. Shares hit a 52-week high of $8.30 on Monday.
Ashcroft said he thinks MAIR stock is overvalued and he downgraded his rating from neutral to reduce. "While Northwest has incentives to give any new regional jet allocations to MAIR, that says nothing about when, if ever, that might occur or what it would be worth to MAIR if it did," Ashcroft wrote.
Analyst predicts NWA will keep Avros
Liz Fedor, Star Tribune
Published January 15, 2004 MESA15
Will Northwest Airlines keep the four-engine Avro regional jets that are flown by its Airlink partner Mesaba Airlines?
An airline analyst predicted Wednesday that Northwest will retain the Avros, notwithstanding Northwest's announced plans to reduce Avro flying and possibly replace the planes altogether. Those plans were an issue in the recent contract negotiations between Mesaba and its pilots union.
Eagan-based Northwest said in October that it might replace the Avros with two-engine jets. The Avro routes provide 40 percent of Mesaba's revenue.
"Northwest Airlines is on the hook for this aircraft whether it uses it or not," said Robert Ashcroft, a UBS Investment Research analyst based in Stamford, Conn.
He estimated that Northwest has $494 million tied up in the financing of the 36 Avros, which were brought into Mesaba's fleet between 1996 and 2000.
Northwest leases 25 of the Avro RJ-85s and owns 11 of them.
"The likely revenue Northwest could expect from leasing [the Avro] out of the Northwest system would be unlikely to cover more than about half of what Northwest pays in rent and debt service," Ashcroft said in a report released Wednesday.
Northwest declined comment Wednesday on its pending Avro decision and on Ashcroft's report.
The Avro was built to seat 85 passengers, but Mesaba has been flying the jets on Northwest's regional routes with 69 seats. Northwest's contract with the Northwest unit of the Air Line Pilots Association (ALPA) prohibits Northwest's regional partners from flying aircraft with 70 or more seats.
In October, Northwest executives said they might terminate their contract with Mesaba to fly the Avros. They agreed to defer a final decision until December, and then postponed the decision until February to give Mesaba management time to focus on a labor agreement with its pilots.
Mesaba ALPA leaders will meet with their members next week to explain the tentative contract agreement announced early Sunday morning. A ratification vote will be conducted in late January.
If a simple majority of the 844 pilots approves the agreement, it's unclear what kind of planes the pilots will be flying.
The Mesaba fleet now consists of 66 Saab turboprops and 31 Avro jets.
In October, Northwest CEO Richard Anderson said: "The operating costs of the Avro are significantly higher than other aircraft that could operate in similar markets. The original revenue assumptions that we used back when we made that decision in '96 have changed significantly, particularly after 9/11." Anderson has talked about soliciting bids from multiple carriers to fly the Avro routes.
Mesaba executives have continued to provide Northwest with financial information about the cost of flying the Avros.
"We still think it is a viable airplane and we have attempted to show Northwest how we can operate it at a reduced cost," Mesaba spokesman Dave Jackson said Wednesday.
"Our belief has always been that if we have a competitive cost structure and a good operating performance that there will be an airplane for us to fly, whether that's the Avro or another aircraft," Jackson said.
When Northwest agreed to postpone the decision on the Avro, Mesaba agreed to take five planes out of its fleet. Jackson confirmed that five Avros have been parked in the Phoenix area, and they will be returned to active flying if Northwest chooses to continue Avro flying with Mesaba.
By the end of September, Memphis-based Pinnacle Airlines, Northwest's other regional partner, was flying 70 twin-engine Canadair Regional Jets (CRJs) that seat 44 and 50 passengers.
Pinnacle is scheduled to get 59 more CRJs, which are on firm order through Northwest. The airline also has options to acquire 175 more CRJs, and the new Mesaba pilots' contract includes pay scales for flying the CRJ.
The Mesaba pilots' union and management have said repeatedly that they want to compete for additional CRJ flying through Northwest.
Mesaba executives have a better handle on their labor costs now that they have reached a tentative agreement with the pilots.
Shares of Mesaba's parent, MAIR Holdings, have reached 52-week highs in the days leading up to Friday's strike deadline. And Ashcroft, the UBS analyst, pointed out Wednesday that the stock price has risen by more than 30 percent since October. MAIR stock closed Wednesday at $7.59 a share, down 66 cents or 8 percent. Shares hit a 52-week high of $8.30 on Monday.
Ashcroft said he thinks MAIR stock is overvalued and he downgraded his rating from neutral to reduce. "While Northwest has incentives to give any new regional jet allocations to MAIR, that says nothing about when, if ever, that might occur or what it would be worth to MAIR if it did," Ashcroft wrote.
