Mesa gets new UAL deal.....

[rightrudder]

Mama always said, just because something is cheaper doesn't mean it is a good deal.

I think UAL will get exactly what it deserves, oops, pays for.

 

[big dog1]

Some notes from Jo conference call on united expansion
Starts in Aug 03
90% of jets to be in place by middle of fiscal 2004 hope to have all 35 by end of fiscal 2004
Some of the AWA deliveries may be pushed back to accommodate united
Jets will be operated on selected routes that will be determined by united later. (I.E. Denver is just speculation).
70 seat jets operate at about 15% less per ASM than 50 seat.
Hope to have 200 million of cash on hand by year end
Training reduced 60% by pilot contract will help place more jets per month up from around 2 to as many as 4 a month.
Once all jets in service should increase rev 250 million per year (35 Aircraft)
Frontier jet express set to still operate through Jan 2004.
Contract with united is not aircraft specific (i.e. CRJ or ERJ)
Contract will insure profits of between 6% and as much as 10% with incentives kickers
Additional 25 aircraft to be optioned by united if we meet operational requirements




A letter from JO about the deal...

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Dear fellow Mesa Employees,

It gives me great pleasure to tell you we have been chosen to
significantly expand our code share partnership with United Airlines with the addition of up to 60 regional jets. As many of you know, prior to losing our United code share in 1997, Mesa was United's largest regional partner and we are delighted that we have been able to regain United's confidence in Mesa. This expansion was possible as a result of our ability to offer United the highest levels of reliability and service, in conjunction with providing an efficient, low cost operation.

In addition to the 10 Dash-8 aircraft already under contract, under the expanded agreement, Mesa will operate 35 regional jets on select portions of United's United Express service. The 35 regional jets include 20 larger 70-seat and 15 50-seat aircraft. United also has the right to add, at its option, an additional 25 regional jets. The addition of these 25 regional jets will be dependant upon our ability to operate at the highest levels of reliability while maintaining our existing low cost structure. The expanded agreement runs until December 2013.

We'd like to thank all of our employees who have worked hard to make this possible. We envision that the expansion will generate
approximately 1,500 jobs and create many opportunities for
advancement within the Company. For example, the initial 35 jets
alone will create almost 200 regional jet captain positions. Make no mistake about it, this was an incredibly competitive process in which virtually every other US regional jet operator was participating.

United thoroughly analyzed data for over a year and to date we are the only carrier chosen to be a new United Express operator, it is a tremendous credit to all of you. In addition, we would like to thank all the employee leaders who had the vision to work with us in a proactive and constructive manner. And while there are still challenges, the biggest being our ability to find financing for additional regional jets, we believe this agreement greatly
strengthens the foundation of our business and provides greater job security for all of us. Although we aren't "out of the woods yet," working together with you, we believe that we have done everything we can to ensure a successful future.

Thank you all for a job well done.

Congratulations,

Jonathan Ornstein
Mike Lotz
Peter Murnane
Michael Ferverda
Carter Leake

 

[ATR-DRIVR]

"maintaining our low cost structure".......
That pretty much says it all...

 

[Guppiedriver]

This expansion was possible as a result of our ability to offer United the highest levels of reliability and service, in conjunction with providing an efficient, low cost operation.

How was JO able to convince UAL that Mesa is a reliable product? All UAL had to do is look at Mesa's numbers in the AWA system. In May, Mesa was canceling nearly 20% of their flights in the AWA system on a daily basis. Of the flights they didn't cancel about 65% were on time. Highest levels of reliability and service? Providing an efficient, low cost operation? Well I guess one out of four ain't bad.

The 35 regional jets include 20 larger 70-seat and 15 50-seat aircraft. United also has the right to add, at its option, an additional 25 regional jets. The addition of these 25 regional jets will be dependant upon our ability to operate at the highest levels of reliability while maintaining our existing low cost structure.

Unless Mesa concentrates all of their resources on the UAL feed, (ie; robbing Peter, AWA and USA, to pay Paul), they will not get to add those 25 additional jets anytime soon.

Some of the AWA deliveries may be pushed back to accommodate united.

Finally some good news!

 

[KingAirKiddo]

I hope Mesa falls on their ugly face.

 

[Dieterly]

Is it true that UAL paid for ACA's RJ, and if so, why were they not being flown by UAL mainline?

 

[KingAirKiddo]

No, that is not true.

ACA has financed the airplanes based on their excellent balance sheet and a steady supply of equity financing from outside investors (right up until a few months ago when there started to be some uncertainty surrounding our relationship with UAL).

 

[Dieterly]

Thanks for clearing it up...

 

[the turtle]

JO posted this on our company email last nite....me thinks he's feeling a little cocky. He also said, in his webcast of the UAL deal, that UAL wanted daily to increase MESA's RJ order but finally both said "no mas".


***More thoughts from Wall Street on our deal with UAL and how it might impact other carriers. JGO***

-----Original Message-----
From: Jamie Baker [mailto:[email protected]]
Sent: Tuesday, July 01, 2003 6:28 AM
Subject: Baker/Airlines: UAL/MESA Agreement Negative For ACAI



* Mesa to fly RJs for United - As part of its Express re-allocation
exercise, United has selected Mesa Air Group to operate 35 RJs, plus
additional options. We view the selection of Mesa as a UnitedExpress
partner as a distinct negative for Underweight-rated Atlantic Coast.

* No news is bad news for ACAI - As it relates to United growth re-
allocations, we have long felt that we would hear from the winners
first and the losers last. As such, with SkyWest and Mesa having
affirmed 83 RJ deliveries between them, we are growing increasingly
skeptical as to incremental growth opportunities for ACAI, above and
beyond its handful of deliveries scheduled for this year and next.
Furthermore, the finalization of SKYW/Mesa departure rates applies
further pressure for ACAI to reduce its cost of regional feed.
Recall that ACAI entered the negotiation process seeking a rate
increase, clearly inconsistent with the stated goals of United.

* ACAI pilot concessions do not restore arbitrage - As part of UAL's
labor concessions, the arbitrage between its pilots and those at ACAI
has been reduced by half, or roughly $75/hr per senior captain. With
ACAI pilots agreeing to a 7.5% wage cut from their prior $75/hr
level, about $6/hr of arbitrage has been restored. We view this
amount as largely inconsequential. Put differently, we calculate
ACAI pilots would have to work for free in order to restore the full
breadth of UAL's pre-Ch11 labor differential.

* No change to estimates - There is no change to our Street-low
2003/2004 estimates of $0.57/$0.75, vs. Consensus $0.72/$1.08. Given
the apparent lack of progress between United and ACAI, and United's
apparent preference (thus far) for SKYW and Mesa, we continue to
suggest investors underweight their holdings in ACAI.

Jamie Baker
(212) 622-6713