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ACA pilots deride Mesa offer
by Lou Whiteman
Updated 03:50 PM EST, Dec-3-2003
Although investors question a plan by Atlantic Coast Airlines Holdings Inc. to reinvent itself as an
independent carrier, the company's employees remain solidly behind ACA and its efforts to thwart a hostile bid.
Dulles, Va.-based ACA's July announcement that it was ending a contract with bankrupt United Airlines Inc. that accounts for 85% of its revenue in favor of launching its own low-fare service sent its shares plummeting 25% in one day. Analysts also have expressed concern that ACA, which flies regional jets, is ill-fitted to operate as a discount airline and worry that competition from United will eventually drive the company out of business.
Such concerns have warmed ACA investors to an unsolicited proposal by Mesa Air Group Inc. to buy the company. ACA executives have rejected that proposal, which would restore the company's relationship with United.
By contrast, ACA employees are expected to rally at Washington's Dulles International Airport Thursday, Dec. 4, in support of their company's low-fare spawn, called Independence Air. They have even set up a Web site belittling Mesa and its CEO, Jonathan Ornstein, to advance their cause. ACA's pilots also have agreed to a new salary structure that would result in a significant pay cut should Independence Air move forward.
At first glance it would appear surprising that ACA employees would be so adamant in support of a plan analysts fear could leave the company in financial ruin. But they insist their support is based on rational analysis and not just a blind mistrust of Ornstein, as some industry experts have suggested.
"Our employees are very savvy, and they understand the risks involved with Independence," said George Force, chief pilot at the airline. "But they see the Mesa deal as strapping the company to the deck of the Titanic."
The employee rally is not organized or sponsored by ACA, and the pilots interviewed stressed that their viewpoint does not represent that of the company.
Force said employees worry that Mesa is underestimating the risk of United failing to emerge from Chapter 11, adding that investors have miscalculated the potential market for Independence Air.
"You can hardly walk through the terminal at Dulles right now because it is so crowded with people," he said. "When we look at the two alternatives and the risks involved in each, employees are saying they are willing to go down swinging for this cause."
Still, industry watchers widely expect Mesa to succeed in forcing an overhaul of ACA's board of directors despite employee objections. Even if the employees fail to sway the vote, their importance in determining the success of a merger cannot be understated.
"The last thing United wants is disgruntled employees dealing with their customers," one ACA worker said. "Employees are really excited about Independence Air, and it would only be natural for them to be disappointed should it not go through."
One pilot said investors are too focused on ACA's current lucrative deal with United. That agreement is scheduled to be voided in bankruptcy court, and pilots insist United's replacement proposal was nothing like the original.
"Working with United in the future requires its regional carriers to take on a lot more risk and gives United the right to replace us if someone else comes along with a cheaper alternative," the pilot said.
Mesa officials have not detailed the arrangement they negotiated with United, but have said repeatedly it is separate and unrelated to the contract United offered ACA.
David Cox, a 17-year ACA captain, said he is backing the company because he believes in the management team, led by CEO Kerry Skeen. ACA is known as a trendsetter among regionals, and Cox said he is convinced management knows what it is doing.
"In 1997 when we first bought regional jets, everyone said it was risky, and eight months later we looked like geniuses," Cox said. "In 2000 when we worked out the first fee-for-departure contract, the same questions were asked, but it set the standard."
Cox admitted that he had some trepidation upon hearing that management intended to relaunch the company as an independent. But he insists a move to preserve ties to United, which could continually threaten to take its business elsewhere, is a bigger risk.
"You become the guy who paints houses for a living, where the only thing that matters is who can do it for the least amount of money," he said. "To me that doesn't provide much job security."