Thursday, 14 February 2008

Mesa CEO Jonathan Ornstein Admits "Biggest Mistake" of Career

Say what you will about Mesa's top guy, Jonathan Ornstein, the man speaks his mind. In a candid interview with me today, Ornstein admitted that Mesa's decision not to invest in US Airways during the Star Alliance member's 2005 exit from Chapter 11 bankruptcy protection and merger with America West Airlines was a big ole mistake.

"Clearly the company would be in far different shape if we had in fact invested in US Airways," says Ornstein.

He adds: "I would say probably the single biggest mistake in my career was not making that investment..."

A number of outside investors were involved in the US Airways/America West deal, including Air Wisconsin, which, as one insider puts it: stayed in business, got a new contract and on top of that, made a handsome return on its investment.

There is also no doubt that Mesa has had a rocky time of late. Its profitability has taken a hit, and its reserves have depleted after being ordered to post a $90 million bond as security for a judgment against the company in favor of Hawaiian Airlines (you'll recall how things got rather ugly in court with Hawaiian accusing Mesa's former CFO Peter Murnane of spoiling evidence and the Phoenix-based regional arguing that he was deleting pornographic content from work computers).

Lest you start counting Mesa out, however, the company is vigorously defending itself and feels confident it will eventually prevail. Remember also that Mesa boasts feeder deals with Delta, United and US Airways (it does admit that 50-seat flying for United has been "significantly unprofitable").

To be fair, things haven't been all sweetness and light since US Airways exited bankruptcy. Merged labor deals continue to appear out of near-term reach for US Airways. And the carrier has faced quite a lot of negative press about operational disruptions, etc (especially in Philly). But let's give credit where credit is due. That was one sweet honey-pot of a merger deal.

(Ornstein photo from official bio at )


Scott Hamilton said...

Whoa, Runway Girl! Listen to Mesa's earning report today (it's short, just 30 minutes). Mesa has only $91m in free cash, $138m in debt due this year, the ability to finance spare parts at what Ornstein says will probably be 50 cents on the dollar and--when your read the 10Q (it's not in the earning call), the free cash was generated by selling $104m in securities.

Mary Kirby said...

Hey there Scott,
There is no doubt that Mesa has had much better times. This morning's financial statement, the company's subsequent earnings call (of which I listened and wrote two articles for ATI) and a follow-on interview with Jonathan made that crystal clear. Hindsight is 20/20 but I found it profoundly interesting that Ornstein was willing to share his thoughts on not having been a player in the US Air deal.

no more lies said...

While Judge Faris did not award Hawaiian "future damages" he did leave the option open for Hawaiian to file future claims against Mesa if they did not raise ticket prices.

Yucaipa's Aloha on the other hand has been fruitlessly trying to negotiate with Mesa as their win before judge Ezra this October in Honolulu is all but assured.

Yucaipa and Aloha do not want to bankrupt Mesa with the courts, then they will get nothing anyway.

Aloha has a much stronger case than Hawaiian and will probably have a strong win in October, finally ending Ornstein's game permanently.

Aloha is trying to give Ornstein a graceful way out but JO alters negotiations with ludicrous "after the fact" stipulations and demands and only lays down another layer of paint from the tight corner in which he now resides.

Read for more information. This is the website JO tried to shut down by suing the Aloha pilot. JO failed in that gamble also.

Anonymous said...

FWIW, word from inside the company is that Ornstein doesn't consider Aloha's case to have merit. According to my last sim instructor Ornstein was the only person to handle Aloha's information, and "knows he didn't do anything wrong." Right. And attrition is at a survivable level.

Mary Kirby said...

Oh how I wish for the days that MesaHub allowed non-employees to participate. :)

Anonymous said...

Ornstein also said (and still says) Hawaiian's case didn't have merit. But let's take Johnny's other statement that he was the only one to handle the information. If that's true, where was the rest of his executive officer corp? Where was the board of directors and their fiduciary duty? Remember that the Big O testified in Hawaiian that he was the only guy to make the decisions and the judge said he didn't believe the Big O's testimony.

Anonymous said...

Hang in there Scott - do you know Ornstein's background?

And "No more lies" - JO's been playing the hindsight game for 2 decades that I know of.

As for "the biggest mistake [he] made in his career..." Ask him about Bear, Stearns in the mid 80's. He had been insanely shorting the healthiest bear market in decades, losing a great deal of $ for his clients along the way. When the "crash" occurred, he immediately lept to his feet, shouting at those of us in the trading room "I told you! I knew I was right!" Unfortunately, those of us in management who couldn't keep him on a short leash paid for his mistakes with our own careers. Having been no more than 10 feet from him at that time, I would think what he did then was the biggest mistake in his combined careers. Interesting that his bio says nothing about his years (or days, depending on how you count) as a stockbroker, accent on "broke". I wonder if he still chews his nails down to the flesh until they bleed?