New twist for Mesa and ACA

[big dog1]

New twist for Mesa and ACA
Some in Congress seek scrutiny of Mesa Air bid
Mon November 10, 2003 08:10 PM ET

By John Crawley
WASHINGTON, Nov 10 (Reuters) - A handful of U.S. House and Senate lawmakers have asked the Bush administration to closely examine Mesa Air's proposed hostile takeover of Atlantic Coast Airlines Holdings Inc. (ACAI.O: Quote, Profile, Research) , raising potential competition concerns.

Reps. Joe Wilson, a South Carolina Republican and assistant majority whip, and Sen. Gordon Smith, an Oregon Republican and Commerce Committee member, are among the lawmakers who have expressed concern recently in letters to senior officials about Mesa's plans.

"I respectfully request that you investigate Mesa Airlines' hostile takeover of Atlantic Coast Airlines," Wilson wrote to Transportation Secretary Norman Mineta.

Wilson said he was concerned Mesa Air Group Inc. (MESA.O: Quote, Profile, Research) will derail Atlantic Coast's plan to offer low-fare service from Washington D.C.'s Dulles airport in competition with United Airlines.

Lawmakers have also contacted Transportation Department Inspector General Kenneth Mead, an agency and industry watchdog who is conducting a separate review of competition on regional airline routes.

Atlantic Coast said in July it planned to end long-standing ties to UAL Corp.'s United Airlines (UALAQ.OB: Quote, Profile, Research) to start a low-fare carrier based at Dulles. Analysts have called the plan risky.

Mesa has launched a takeover bid, which would create the nation's largest regional airline. The carriers have sued each other over the takeover proposal.

A spokesman for Mineta said the agency was monitoring the situation and would not comment further. A spokesman for Mead said that he was also reviewing the correspondence and would not comment.

Justice Department antitrust enforcers and transportation regulators are expected to review any potential impact of any merger on domestic routes, ticket pricing and service to small communities.

But a source close to the matter said it was "a stretch" at this point to say that the Bush administration had any immediate concerns as some have claimed.

Atlantic Coast has said that Mesa's bid would prevent it from establishing an "economically viable" low-cost airline.

A representative from Mesa had no immediate comment.

Many members of Congress, especially those from rural areas, are sensitive to the impact that airline mergers have on service to their communities.

Fierce congressional lobbying, mainly over competition concerns in the eastern U.S., helped to derail United's plans to buy US Airways (UAIR.O: Quote, Profile, Research) in 2001.

© Reuters 2003. All Rights Reserved.

 

[Heavy Set]

Could it be any clearer? MESA is attempting to block new LCC competition from its two largest partners - UAL and USAirways - both of which could be adversely impacted by MORE low-cost competition in the area - as if Southwest, JetBlue and AirTran weren't enough... MESA wants to protect its investments and contracts. UAL is concerned about feed implications at IAD - MESA may not be able to cough up the feed quickly enough...

It is obvious that Washington-area fliers would BENEFIT from more LCC seats - the proposed MESA takeover would not benefit local consumers given that airfares would likely stay high or potentially rise on monopoly routes out of IAD. It's pretty clear to me... Wake up and smell the coffee Mineta!!!!!!

 

[Catbird]

Heavy Set-"Could it be any clearer? MESA is attempting to block new LCC competition from its two largest partners - UAL and USAirways ".

You hit the nail on the head. Unfortunately the Royalty in Washington dictate in matters such as this with a simple agenda. This agenda is dictated by Dollars. Yours and mine into there pockets or there buddies. He who has the gold makes the golden rules has never been more prevalent. Look at the number of individuals who have or will spend hard time for the Enron, Worldcom, or Tyco Intl. fraud. Bush has 200 million in the bank for his re election bid. You don't believe Johnny O would stoop to donating a little "Soft Money" would you? Ornstein reputation and SEC record speaks for itself. I bet Mineta and Ornstein will be hunting Quail together this season or hopping over to Salzburg for a little skiing before this deal is finalized.

 

[w4mch]

I agree with your assesment of politicians Catbird, but while Mineta and JO may be quail hunting, George W may AGAIN be using ACA's hangar in CAE for a political rally this coming election, just like he used it the last time. He might also take a call from one of ACA's present board members that is a big republican heavy hitter and Regan cabinet member. The SC congresman that started the letter writing is only the assistant majority whip in congress. So, politics cuts both ways catbird, and our guys have been making the 30 minute drive downtown for quite a few years. How far is DC from PHX?

 

[eglpilot]

I fI am not mistaking... doesn't ACA OWN all the commuter gates in IAD?????

 

[w4mch]

We don't own ALL the commuter gates at IAD, just all of terminal A (36 commuter gates), 8 large jet gates right next door in terminal B (just an escalator ride away) and for now the west end of terminal T (the main terminal, under construction). We also have ticket counter space "front & center" at the middle of the main treminal. We also control the leases for 60% of the cities we now fly to. Go to www.atlanticcoast.com and click on the investors home page, download the .pdf file (38 pages) to see the whole enchalata. Nov 19th is the rollout date for the new name..

Our top guys have been planning this for quite a while, and it shows ;-)

 

[j41driver]

I fI am not mistaking... doesn't ACA OWN all the commuter gates in IAD?????

All of what w4mch says is correct. If you want to get technical I believe that MWAA owns the gates but we have leases in force until 2014 on them.

 

[Heavy Set]

Imagine the pressure on USAirways at DCA if ACA builds itself into the next AirTran... You would have ACA (or whatever it will be called) at IAD, AirTran at BWI (and all three DC area airports), ever-growing Southwest at BWI, Jet Blue at JFK and IAD, Southwest at PHL, Project Roam at PIT (new 737-700 operator), Jet Blue growing at BOS, Song growing all over the Northeast (including all 3 NYC airports - as the General would say...), and Virgin USA - most likely hitting the Northeast somewhere...

I think both USAirways and MESA are in for some very tough competition coming up soon. Time to get those EMB-170s flying...

 

[w4mch]

Heavyset,
I read a Raymond James report on ACAI in which it was reported that over 90% of our flying under "goldilocks" (sure will be glad when she gets a name) will compete with USAir. As far as competition with UAL in IAD is concerned, it will be a small amount, as UAL only uses IAD for europe, south america and coast to coast. True, we will be removing our feed from UAL, but they can easily replace that feed if they can get anybody to fly profitably for them at the rates they are offering.

This is what we have been trying to get the financial press to open their eyes & see: Before we went Fee for Departure with UAL, we had an extensive high frequency system hubbing at IAD. We ran our own yield management and market planning and were getting 15% margin. Business travelers could leave SAV early in the AM, fly through IAD to anywhere else, say BUF, do business and return home the same night (last flights left IAD at 10 to 11 PM). Close to 70% of our traffic never saw a UAL mainline flight, but UAL made $$ as we paid for resv services and handling at their stations. Under the FFD flying, we are barely flying 2 to 3 rounds a day to SAV and other spots, business travelers avoid us 'cause they don't have the frequency they need. Now close to 80% of our pax connect to mainline flight, BUT our planes sit around idle half the day. Ual goes a lot of long haul places out of IAD, but only once or twice a day to most of 'em.

UAL also has us doing silly things such as IAD-MSY-ORD in an RJ. Come on, I cant stand sitting in the capt's seat that long, and I'm getting paid to do it! I really feel sorry for Mr 3 piece suit sitting back there on a 2.5 hour RJ ride and he's paying big bucks to be squeezed next to 400 pound beula-mae and her screaming brat. These flights are always jam packed with revenue left behind at each point. Gee, think they could be making money with a 73 or short bus on those routes?

Again, when the blonde girl flies, 87 CRJ's will be going out from 30 minutes to 1.5 hours from IAD and serving small/medium cities with high frequency. Our Boeing/Bus jets will be doing the big city and long haul work with high frequency as well. No secrets here, it's all in the file I referenced in my last post. We will make money flying CRJs by charging slightly more than a true LCC, having lower trip costs and offering better frequencies that any othr LCCs flying to the smaller markets. As for our big jets, our CASM will be the same as SW & JB. We will compete on frequency, service, and on-line connecting through fares.

I've made a lot of friends at UAL & USAir over the years, I wish them well and don't want to see anybody furloughed or out of business. UAL management chose to squeeze it's suppliers while it is in bankruptcy court. ACA's management simply chose not to play their game. If there is room for AirTran to make $$ in ATL and Frontier to make $$ in DEN, then there is room for a new ACA at IAD.

 

[Heavy Set]

If UAL is able to find a new feed partner at IAD, where will they park? Is there available parking - maybe on the ramp where the international flights sit? I suppose you could use one of those lame people-movers to get people out to the MESA ERJ waiting there...