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 )

Three Down: Air Midwest, Big Sky and Skyway Airlines Shuttering Operations (Venerable Beech 1900 Takes A Hit)

Three small regional carriers are in the process of winding down operations, as sky-high fuel costs continue to bite.

Earlier this week Mesa Air Group confirmed it is liquidating its loss-making Raytheon Beech 1900 operator Air Midwest. It expects the wind-down to be fully completed by the end of the year.

Today, Midwest Airlines announced plans to begin closing subsidiary Skyway Airlines' Dornier 328JET flight operations in March and April (it started pulling down Beech 1900 operations last year). Skyway’s routes will be flown by Midwest’s new partner, Bombardier CRJ200 operator SkyWest Airlines; its airport services business will remain intact.

MAIR Holdings subsidiary Big Sky Airlines recently ceased operations. It operated – you guessed it – Beech 1900 turboprops.

Okay, so we’ve established a common theme here – 19-seat operations, even those that are subsidized by the US Government under the essential air service (EAS) program, are simply not profitable in today’s environment.

But I must admit I was a tad surprised by Midwest’s decision today to shutter Skyway. Midwest only just expanded the Skyway fleet in 2006, after brokering a deal to acquire two 328JETs once operated by Atlantic Coast Airlines (and its successor Flyi) for Delta Air Lines. Additionally, Midwest seemed pretty certain that Skyway would remain a member of its airline family, even after inking the feeder deal with SkyWest.

Fast-forward to today, and Midwest is citing the economics of operating the current Skyway fleet of 328JET regional jets coupled with rapidly rising fuel costs as necessitating the change in strategy.

A Midwest spokesman says Skyway's closure was by no means a "fait accompli" when the deal with SkyWest was inked. However, Midwest is staying mum on just how many CRJ200s will be added to the SkyWest deal (the original pact called for 15), and calls "speculation" any talk of additional growth for SkyWest at Midwest (above what is necessary to cover the Skyway routes).

That Skyway's fate was not set in stone at the time of the SkyWest deal might not provide a whole lot of comfort to Skyway pilots, flight attendants and mechanics now. A total 380 Skyway employees will be laid off over the new few months.