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 http://phx.corporate-ir.net/preview/phoenix.zhtml?c=78947&p=irol-govBio&ID=136195 )

Shit Or Get Off The Pot: Post-bankruptcy Majors Said to be Merger Sniffing Again

As reports surfaced today that Delta Air Lines is once again in the merger market, who among us felt a rather nauseating case of déjà vu? One need only Google the words “Delta merger” to see just how much ink has been wasted on the “will they/won’t they” debate (arguably first started when US Airways made an ultimately failed bid for Delta). Is anything different this time around? Possibly!

First of all, if reports hold true, Delta has whittled its choices down to two other post-bankruptcy US majors – Northwest Airlines and United Airlines (hey, at least they all have something in common). The former is a partner with Delta in the SkyTeam alliance, and has been rumoured to be a likely match for quite some time.

Star Alliance member United, on the other hand, is the same United that Delta CEO Richard Anderson rejected as a would-be partner in November.

“There have been no talks with United regarding any type of consolidation transaction and there are no such ongoing discussions,” Anderson said at the time, following calls by common shareholder Pardus Capital management for the two US carriers to consolidate.

Delta’s pilots feel pretty convinced that management is seriously considering a merger this time around. The Delta chapter of the Air Line Pilots Association (ALPA) has written a veritable treatise to members discussing just how calmly they’re going to handle the news - open a strike operations center and mobilize the strike preparedness committee.

Should anyone assume that Delta’s pilots are flatly against a merger, the union assures that “the flexible nature” of the strike preparedness committee will also allow union officials “to task them in support of a consolidation effort - but if and only if it is the right consolidation, a merger opportunity that provides the Delta pilots with the protections and equity we have communicated so clearly and unambiguously from the outset”. Well that’s a mouthful indeed. But the message seems rather clear – you’re not doing anything without our stamp of approval.

It’s a message that American Airlines’ pilots union, the Allied Pilots Association, made loud and clear to management in December 2006. At that time, APA officials approved a resolution to oppose any future company merger that would integrate another pilot group into the employee group’s seniority list. American in April 2001 acquired TWA’s assets. Merging the two carriers’ pilot seniority lists proved a thorny issue during the integration.

Merging the flight attendants’ lists proved a disaster. Thousands of former TWA flight attendants lost their seniority after American acquired the carrier and were furloughed after September 11.

Hoping to ensure that this never happens again, US Senators Claire McCaskill and Kit Bond last month secured a provision to the Senate’s omnibus spending bill – since signed into law - to provide air carrier employees with a base level of protection during mergers. This provision would make it harder for one airline or union to add the employees of another airline or union to the bottom of the seniority list.

Interestingly, the APA did not support the measure. “While this legislation is no doubt well-intentioned, APA does not favour legislative branch involvement in any aspect of labor negotiations,” said APA president Lloyd Hill in a recent statement.

Mega-pilot union ALPA, meanwhile, supports the law, which only applies to mergers going forward. “The legislation does not have any impact on US Airways and America West,” notes an ALPA spokesman. You’ll recall that even though US Airways and America west merged in September 2005, their major labor groups continue to work under terms of transition agreements reached after the merger. You want to talk about thorny!

But despite all the possible headaches stemming from mergers, it seems that major US airlines are hell-bent to come together.

Should Delta merge with current-partner Northwest, it would have access to, among other things, some very nice Boeing 787 delivery slots, some new Airbus narrowbodies and widebodies and a crop of old McDonnell Douglas DC-9s (some as old as 40 years – see one of my first blogs “40 Years Old But Still No Virgin”).

Should Delta opt for a merger with United, it.....SHEESH I'm worn out. Let's tackle this another time. I need a Guinness. Who's with me?

(Photo above right from Delta ALPA portal at http://crewroom.alpa.org/dal/DesktopDefault.aspx?tabid=2421)