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Mesaba & MAIR unholy twosome

WTF-Over

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a bit
When will they admit that Mesaba & MAIR are one in they same. I can't belive that this is not illegal. WTF-Over



Mesaba filing casts doubt on MAIR ties
Liz Fedor, Star Tribune

October 24, 2005


When Mesaba Airlines filed for bankruptcy on Oct. 13, its president, John Spanjers, took the hot seat to answer dozens of questions from reporters about how the airline would use Chapter 11 to slash costs and survive the bankruptcy of its only customer, Northwest Airlines.
Notably absent from that session was Paul Foley, the 53-year-old president and CEO of MAIR Holdings, which owns Mesaba and has relied on the airline for most of its revenue and all of the profits that MAIR reports to shareholders.
Foley's silence wasn't lost on some Mesaba employees, who long have criticized what they say is an expensive corporate structure that provides little benefit to the airline or MAIR shareholders.
"I don't know of anybody who can tell me what Paul Foley does on a day-to-day basis at MAIR Holdings," said Tom Wychor, a 16-year Mesaba pilot and chairman of the airline's pilots union.
Through a spokesman, Foley declined numerous Star Tribune interview requests for this story. Though he speaks with Wall Street analysts on a regular basis, Foley rarely meets with reporters.
Pierson (Sandy) Grieve, a MAIR Holdings board member, described Foley as "a very effective operating executive and a good communicator."
Grieve, former CEO of Ecolab Inc., said Foley's leadership is an important reason why "Mesaba has been recognized as a leading airline in terms of safety and efficiency."
Foley was a vice president of operations for a cargo carrier, Atlas Air, when he joined Mesaba in 1999 as its chief executive. At the time, Mesaba Holdings, as it was known then, had one main operating segment -- Mesaba Airlines. But in late 2002, Foley hailed the $3.2 million acquisition of Big Sky Airlines, a small carrier based in Billings, Mont.
"Big Sky is a good example of the type of opportunity we are seeking," Foley said in a news release. "It is an efficiently run company with an excellent safety record and a cost structure that positions it well in the highly competitive regional airline marketplace."
Piling up losses
But Big Sky failed to become the growth vehicle that Foley envisioned. Mesaba accounts for about 97 percent of MAIR's revenue, and Big Sky has piled up almost $11 million in pretax operating losses in three years.
Some Mesaba employees, facing the double-whammy of pay cuts and job losses, said they're tired of paying for a failed airline and redundant corporate overhead. MAIR has agreed to provide Mesaba up to $35 million in bankruptcy financing, but Mesaba employees noted that the only reason MAIR can afford to do so is because of the existence of Mesaba.
"The pilots very clearly see MAIR Holdings and Paul Foley as an expense that we can't afford at this time," Wychor said. Mesaba must "restructure ourselves out of being the only airline supporting two management teams [MAIR and Mesaba] and another carrier's losses."
MAIR's corporate offices are in downtown Minneapolis, far from Mesaba's headquarters in Eagan. Minnesota Twins owner Carl Pohlad is MAIR's chairman and is paid $300,000 a year.
Foley, named CEO in late 2002, has a close relationship with Pohlad and sometimes can be seen in Pohlad's suite at Twins baseball games.
Northwest, which owns 29 percent of MAIR's stock, typically occupies three slots on the board of MAIR Holdings. Grieve, a former chairman of the Metropolitan Airports Commission, holds one of the Northwest seats. The other two recently were vacated by Northwest CEO Doug Steenland and Mickey Foret, former president of Atlas Air and former Northwest chief financial officer.
The remaining board seats are held by Foley; Bob Pohlad, CEO of PepsiAmericas and Carl Pohlad's son; and Donald Benson and Raymond Zehr, executives for Pohlad companies. MAIR's directors are each paid $40,000 a year.
Foley was given a four-year employment contract with MAIR in fall 2004. It included a $500,000 signing bonus.
In fiscal 2005, which ended in March, Foley was paid a $350,000 salary and a $350,000 bonus. His total cash compensation exceeded that of Northwest's Steenland in 2004, who was paid $473,000 during his tenure as president and later chief executive of a company more than 20 times the size of MAIR.
When Foley's compensation package was reported last year, Wade Slagle, a leader within the Aircraft Mechanics Fraternal Association (AMFA) said, "They are more interested in keeping Paul than their mechanics. All we hear in negotiations is how bad things are."
During the six years Foley served as the top executive at Mesaba Airlines and later as the CEO of MAIR Holdings, he has maintained his permanent residence on the East Coast.
A regulatory filing shows that Foley received about $75,000 each of the past three years for living and travel expenses. The company said Foley would continue to get that $75,000 annual cash benefit as long as he kept his legal residence in Westin, Conn., or another city far from Minnesota.
"His living and travel expenses exceed most of our captains' annual pay," said ALPA's Wychor.
Grieve said Foley recently sold his home on the East Coast. "He just moved here," Grieve said. "He's moved into a home in the last couple of weeks. That will change his ability and time to be involved in [community] affairs beyond purely Mesaba."
Foley probably will have regular contact with Mesaba on MAIR's debtor-in-possession financing. A hearing will be conducted on that financing package on Nov. 29.
As of Sept. 30, MAIR had cash and investments worth about $118 million, according to a regulatory filing. MAIR is willing to make $35 million in financing available in two parts, and $20 million of the funding requires Mesaba to produce an "acceptable five-year business plan" by Jan. 31.
The pilots' Wychor sees an artificial separation between the MAIR and Mesaba businesses.
"MAIR fundamentally acts as a vacuum cleaner taking cash from the right pocket of Mesaba," Wychor said, and uses some of that money to "fund a separate suite of executives."

Liz Fedor • 612-673-7709


Copyright 2005 Star Tribune. All rights reserved​
 
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