Mesa Freefall

[Lampshade]

Plane Business has Mesa on Death Watch!!

An excerpt from the PlaneBusiness Banter - 04/04/08

The Titanic Watch Gets Really Busy

Editor's Note: I was going to re-edit this, given the events of Friday night, but hey, after re-reading it, I figured it was better to leave things as they were.

This industry now finds itself in one sad state of affairs. And hey, listening to Lehman Brothers' analyst Gary Chase didn't help my mood much last week out in Phoenix as he made the statement that "With [the effect of] fuel, it's like this is three recessions at once," he said. "And then, we also have a recession."

Great.

Needless to say, between the time I first mapped out our revival of our "Titanic Watch" two weeks ago and this week, some of the airlines on the list couldn't wait. They just went ahead and hit the ocean floor with a sickening thud.

There's really no secret in trying to figure out what is important in this current environment. As we have written here before -- it's cash. But right behind cash is an airline's fuel burn, and/or the airline's aircraft ownership costs.

This point was made clear a few weeks ago when Merrill Lynch analyst Mike Linenberg put together his chart showing just which two airlines would still be profitable with oil at $110 a barrel. That odd couple? Southwest Airlines and Allegiant. Yes, Allegiant. The airline that flies those gas guzzling MD-80s.

Why? Because right now Southwest has the drop-dead fuel hedges and Allegiant has the low aircraft ownership costs. Or to put it another way, if you don't pay much for an airplane, you can run through a lot of fuel before you get up to the same ownership costs of a brand spanking new Boeing 737.

As Gary Chase also pointed out last week (and we talk more about in our column this week), if you have older aircraft, it's much easier to manipulate your capacity because you can park them. You can cut utilization. It's not like you're parking new expensive metal. So as the cost of fuel goes up you can pull back on capacity fairly easily.

But if you have a lot of nice new "fuel efficient" aircraft -- you have to keep flying the hell out of them to cover your costs of ownership. And well, that then causes you to burn more fuel, and here we go.

I thought about this when I read a long story in MarketWatch Friday in which the traditional argument was made that the airlines that have higher maintenance costs, older aircraft, and higher fuel costs were the ones that had potentially the biggest problem -- in a high fuel environment. But as Gary reminded me last week, the other side of that argument, obviously, is how much is the airline paying for the airplane?

So before another list member decides to leave us, it's time to unveil the PlaneBusiness Titantic Watch. Note: List members are not necessarily listed in the order in which they could find themselves having to ask for third party support, i.e., bankruptcy.

As was the case in the past, by placing an airline on this list, we are saying that financially, the airline has issues that put the continued operation of the airline at risk.



Mesa Air Group

Okay, I assure you I have my bifurcated hat on here.

Given the news this week that Delta Air Lines is going to cancel its contract for approximately 19% of Mesa's current fleet, and the fact that those aircraft are going to be hard to re-place; given that the airline seems intractable on its money-losing Hawaiian escapade; and given the airline's financial results during 2007--for these reasons alone Mesa merits inclusion on the list.

But there are other issues.

The biggest of which is the fact the airline has an approximately $37 million convertible note payment coming due in June. The airline now has a market cap of about the same amount. In the last earnings call, CEO Jonathan Ornstein talked about how the airline would probably 'go to the markets' in an attempt to raise more cash.

With the stock below $2 a share and no major regional contracts out there to replace what Delta is pulling out -- you have to believe that 'going to the markets' at this point in time is going to be a) very expensive and/or b) not possible.

 

[WalterSobchak]

The free market will prevail on this one.

ALPA allowed the pos contract that MESAhas today - They signed off on it!
Pax will pay more for a ticket and DEMAND more service than before, hence the fact that MESA has no place in this industry anymore. SkyWest pilots seem alot happier than MESA people - ask yourself why ?????
It's not about union/non union - I used to think it was. It's about mngt and whether they are in it for the long run, or if they are only interested in running a sweatshop.

Finally, someone gets it.

 

[rickair7777]

You guys are really screwing this one up.

The pilots at Mesa are union members.

Most likely their slack will be picked up by non-union Skywest: A pilot group which has been the beneficiary for many years of ALPA induced profession raising improvements. A pilot group that refuses to contribute to the profession. In short, a bunch of professional freeloaders.

The Mesa pilots certainly have their own list of problems and have allowed themselves to be manipulated to management's benefit, but their actions pale in comparison to the pilots of Skywest.

Be careful who you are rooting for and against.

RIIIIIIGHT....

That's why there's so many ex-SKW pilots at mesa...actually there are none, unless they got fired by SKW for flying drunk.

I've worked at MAG and SKW (voted yes btw), but this is the most ridiculous statement I've heard on FI in a very long time (that's no small thing).

So you'd rather work at MAG than SKW, 8 days off, 35% less pay (-1.9%), total crap treatment, no rules, crap Mx, etc, etc. Yeah, right.

 

[buscap]

RIIIIIIGHT....

That's why there's so many ex-SKW pilots at mesa...actually there are none, unless they got fired by SKW for flying drunk.

I've worked at MAG and SKW (voted yes btw), but this is the most ridiculous statement I've heard on FI in a very long time (that's no small thing).

So you'd rather work at MAG than SKW, 8 days off, 35% less pay (-1.9%), total crap treatment, no rules, crap Mx, etc, etc. Yeah, right.

I never said I would rather work at Mesa. Skywest is a better airline and a better place to work by every measure.

RTFP (Read The Freaki'n Post)

It is better for the profession if a company with a unionized pilot group is successful as opposed to one without a union. It's that simple and that's my point.

 

[Cuban B.]

You guys are really screwing this one up.

The pilots at Mesa are union members.

Most likely their slack will be picked up by non-union Skywest: A pilot group which has been the beneficiary for many years of ALPA induced profession raising improvements. A pilot group that refuses to contribute to the profession. In short, a bunch of professional freeloaders.

The Mesa pilots certainly have their own list of problems and have allowed themselves to be manipulated to management's benefit, but their actions pale in comparison to the pilots of Skywest.

Be careful who you are rooting for and against.

Hmmm..."ALPA induced profession raising improvements?" You mean like that lovely contract we had at Beagle?

 

[XPOO]

June can't roll around fast enough.

 

[asa rat]

Mesa removed from S&P Smallcap 600 index

www.planebuzz.com

S&P Kicks Out Mesa From SmallCap 600 Index


This afternoon, after the close of trading, S&P announced that it was removing Mesa Air Group from the S&P SmallCap 600 Index. Aftermarket Technology Corp. (Nasdaq: ATAC) will replace Mesa Air Group.

As those of you who are market watchers know -- being included in an index encourages institutional buyers to buy a stock -- as institutional buyers attempt to mimic the underlying ownership mix of a particular index fund. When S&P selects a stock for inclusion in a fund, institutional investors usually flock to the stock, as they attempt to mimic the underlying stocks in a particular index.
Conversely, when a stock is bumped from an index, you tend to see institutions bail out of the stock. We'll see what happens tomorrow.
Meanwhile, Mesa had yet another rough day today on Wall Street, as shares ended the day down 13%, closing at 1.23. The stock collapsed last week -- losing 41% of its value, closing Friday at 1.41. Trading in Mesa shares was extremely heavy again today.
S&P noted in its release this afternoon that Mesa's market cap is now down to $33 million.
Ticker: (Nasdaq: MESA)
Posted by Holly at 7:05 PM | Permalink | Comments (0)

 

[JustaNumber]

It is better for the profession if a company with a unionized pilot group is successful as opposed to one without a union. It's that simple and that's my point.

Not quite accurate. It's better for the profession if ANY pilot group is successful, regardless of union affiliation. Consider, that when XYZ Airlines is renegotiating pilot compensation, the average for the rest of the industry, unionized or not, is a critical factor.

That being said, I understand your point that, generally speaking, unions are primarily responsible for attempting to raise that average, so most rational pilots are happy to see union groups succeed.

 

[Nevets]

Oh, BTW, DO NOT LISTEN TO THE MEC! These guys will lead you down a path to nowhere! ALPA serves up plenty of koolaid of it's own making. Just put yourself and your family's interests first and get out ASAP!

The last letter didn't seem like koolaid to me. Seem to be an honest assessment.

http://forums.flightinfo.com/showthread.php?t=110991&highlight=mesa+mec+letter

 

[Nevets]

ALPA allowed the pos contract that MESAhas today - They signed off on it!
Pax will pay more for a ticket and DEMAND more service than before, hence the fact that MESA has no place in this industry anymore. SkyWest pilots seem alot happier than MESA people - ask yourself why ?????
It's not about union/non union - I used to think it was. It's about mngt and whether they are in it for the long run, or if they are only interested in running a sweatshop.

ALPA had to use up most of their negotiating capital to reign in Freedom. That is how they ended up with their current contract. That was not ALPA's fault. Like you said, it depends on management more than anything. This is why companies with unions at a well managed airlines are successful, like SWA, and companies with bad management require unions to protect its pilots. In this case JO decided to start up an alter ego and ALPA got rid of it (unfortunately to the pilots, at a high expense to their QOL).

 

[TAWS]

Trust me. ALPA will try to help MAG mngt save the carrier, to the detriment of the industry. As MAG slips further down the toilet bowl, their MEC will tell the junior guys anything but the hard truth.
Watch what is happening in the markets. You could be the best carrier out there, but if you can't raise capital, your performance is moot.
MAG is the worst carrier in any category you could possibly measure. The most senior people have a huge interest in keeping the carrier alive - who wants to start again at another regional?
Now MAG has started to aggressively recoup their training agreements from those who dared to jump ship! The one good thing I could give ALPA was that when XJ mngt started this, they called them out in the press and publicly embarrassed them into stopping the practice (different circumstances).
The only decent thing that the union could do here, is let the carrier burn and educate the newbies, before they sign up.
I know this sounds like anti ALPA rhetoric, but if you watch what they do when carriers falter, it's the same time and again. They try to hold on for as long as possible, instead of telling their people to jump ASAP!

 

[crusader 22]

I remember when their MEC signed off on their current POS contract and then one of them went crying on the ALPA web board that atleast they "live to fight another day". No doubt, any mesa pilot that has done a lateral move to another regional carrier is now living with lower wages brought on by that POS contract.

 

[ex j-41]

Of course ALPA will help Mesa.
Think of how much money is dues are paid.

 

[satpak77]

Long story short, the stock freefall is indicative of major investors selling shares, why we don't know, but obviously a reason exists.

The stock has been in a gradual decline for two years now, but some "trigger event" occurred on/about APRIL 2, and definitely APRIL 4, which caused the stock to crash.

Maybe company employees can shed some light.