Atlantic Coast Airlines vs. Mesa

Windchill

Well-Known Member
Just wanted to let everyone know if they haven't seen it, USA Today had a big to-do article about the possible takeover in yesterday's paper . . . in case anyone was curious as to what it said.

While I'm relatively new to the industry, I've read quite a bit of bad things about Mesa, yet the article seemed to favor their owner/CEO Ornstein.
 

Derg

Cap, Roci
Staff member
USAToday is more than just a title of a newspaper, it's also indicative of the length of time they research anything airline related.
 

MissedApproach

Well-Known Member
Yeah, here's the article:

PHOENIX -When Jonathan Ornstein was blackballed by a University of Pennsylvania fraternity in the mid-'70s - because he's Jewish, he says -he found a way to go where he'd been told he did not belong.

Jonathan Ornstein, CEO of Mesa Air Group, during an interview in his Phoenix office.

By Jason Millstein for USA TODAY

"A friend who was a member stood up for me. He couldn't get me into the fraternity," Ornstein says with a devilish wink. "But I went to a lot of their parties as his sister's date."

"They couldn't keep me out," he says, laughing.

"They" still can't. For most of his professional life, the intense, fast-talking CEO of Mesa Air Group has gleefully played the role of the bright but impatient outsider defying convention and trying to prove he belongs anyway. Now he's embarked on the almost unthinkable: a hostile takeover of another airline, Atlantic Coast Airlines Holdings. The last person to try the tactic -Donald Trump, who briefly made a run at AMR, parent of American Airlines, in 1989 -lost tens of millions of dollars in the process. But Ornstein, whose company has been one of the top performers in the profitable regional sector of the airline business, has never worried about being unconventional.

On those days when he chooses to drive a car instead of riding one of his 15 motorcycles, he tools around Phoenix in a Mini Cooper. Though he does not have a pilot's license, he keeps a vintage 1960s two-seat military trainer jet in a hangar near his house. And while other CEOs relax on the golf course or at the beach, the 46-year-old Ornstein unwinds, if you can call it that, on the basketball court, banging bodies with players half his age. Though under 6 feet, he is as fierce a competitor on the court as he is in the office, one who expects a lot of his teammates and even more of himself.

"There is no doubt that I have a strong personality and that I'm a very aggressive guy," says Ornstein, casually dressed for an interview in his sun-drenched office overlooking Phoenix Sky Harbor airport. "I know that I rub some people the wrong way. I don't try to. But I am who I am. As I've gotten older, I've tried to do a better job of controlling my aggressiveness. But I am very determined to get things done."

Ornstein's airline history reads almost like a storybook. Its chapters include:

-1989-94. Helps build tiny Mesa Airlines into a successful independent regional carrier through multiple acquisitions and restructurings.

-1994. Engineers the purchase of then-bankrupt America West Airlines by an investment group that includes Mesa, financier David Bonderman's Texas Pacific Group, Fidelity and other investors.

-1994-96. Plays a pivotal role in Continental's turnaround after it emerges from its second bankruptcy reorganization. As president of Continental Express, Ornstein is the first to implement the elements of what becomes Continental's successful "Go Forward" plan. And as senior vice president overseeing airport services at Continental, a position he holds simultaneously with his Continental Express job, Ornstein is a strong internal advocate for extending the changes to the big airline.

-1997. Launches a low-cost, low-fare European carrier, Virgin Express, for billionaire Richard Branson.

-1998. Returns to a nearly bankrupt Mesa and rebuilds it into an industry powerhouse through more acquisitions, restructuring, financial dealmaking and hard-nosed bargaining with labor leaders.

Now he is making his biggest, boldest play yet.

A takeover of Atlantic Coast Airlines, based at Washington Dulles airport, could more than triple Mesa's annual revenue to $1.8 billion. It also would put Mesa in position to be the United Express carrier at United's Washington hub after United completes its bankruptcy reorganization next year. Atlantic Coast wants to end its relationship with United as that airline's regional partner at Dulles. That would cripple United at Dulles, because Atlantic Coast owns the rights to 16 gates that any new United Express carriers would have to use.

Atlantic Coast has neither accepted nor rejected Mesa's stock-swap offer. Last week, it advised shareholders to take no action in response to Mesa's announcement that it is seeking Securities and Exchange Commission approval to nominate a slate of presumably pro-Mesa directors to Atlantic Coast's board.

Atlantic Coast's plan is to convert itself into a low-cost, low-fare airline flying mostly regional jets under its own name. Ornstein calls that "suicidal." "You can't make a profit providing point-to-point, low-fare service with equipment that's not well-suited for that mission," he says, referring to regional jets.

The motive?

Acquiring Atlantic Coast would propel Ornstein into the exclusive club of major airline CEOs, where he could rub shoulders with Continental's Gordon Bethune. In 1996, Bethune forced out Ornstein after internal corporate wrestling over who deserved credit for Continental's "worst to first" turnaround in the mid-1990s.

So, is Ornstein pursuing Atlantic Coast just to prove a point to Bethune and other detractors?

He would like you to think a showdown with Bethune is water under the bridge. He even hired Bethune's nephew as an analyst and stationed him at a desk just a few feet outside his office door. "The sins of the fathers shouldn't hurt the sons," he explains.

But colleagues, friends and competitors agree that Ornstein still feels the need to prove that he belongs in the industry's upper echelons.

"Jonathan's a self-promoter," says Scott Hamilton, a consultant and former industry newsletter editor who calls Ornstein a friend. "But being the head of a regional airline is a Rodney Dangerfield existence. You get no respect. And Jonathan very much wants the respect of the industry."

However, Hamilton adds that "the things that make Jonathan Jonathan" -his directness, self-promotion and willingness to display his intelligence -"turn off a lot of people and, therefore, he doesn't get the credit he really deserves."

Ornstein agrees that his directness at times has a costly downside: "But even people who don't like me -and there are plenty of 'em -will tell you that you always know where you stand with me. That I don't tell them one thing and do another."

Holly Hegeman, editor and publisher of PlaneBusiness.com, a Web site for airline aficionados, views Ornstein from a very different perspective. He sued her last year because he didn't like what she wrote about him in two online columns. Yet she reaches much the same conclusion.

"Jonathan is a piece of work," says Hegeman, who settled the lawsuit this summer without having to pay damages. The lawsuit, she says, "was a classic bullying tactic. He wouldn't have sued some big media organization for writing the same thing, but I'm a little guy, and he knew $50,000 in legal fees would be a lot of money."

Still, Hegeman says, Ornstein is "an excellent turnaround person. What's not proven, I think, is that he can both turn around a company and manage it for the long term. I don't think he's interested in day-to-day operations. But I'd never underestimate his ability to pull off a deal. Once he focuses intently on something, there's not a whole lot that other people can do to stop him."

The vision

The timing of Mesa's bid for Atlantic Coast is not accidental. Mesa's ties to United, strained to the breaking point five years ago, just before Ornstein's return to the company, are growing stronger by the week. This summer, it agreed to become the United Express carrier at United's Denver hub. Since then, there's been a steady stream of announcements of expanded cooperation between United and Mesa.

Ornstein sees the partnership with United as Mesa's primary growth vehicle for the foreseeable future and has acquired more regional jets to take advantage of those growth opportunities. He promised his pilots rapid career growth opportunities in exchange for their acceptance of a new contract with significantly lower pay rates than their contemporaries at other large regional airlines.

"Sure, we've got a good and growing relationship with United," Ornstein says. "But we've also got good and growing relationships with US Airways and America West and others. And we're looking for more."

His vision, Ornstein says, is to make Mesa the lowest-cost provider of outsourced regional aircraft flying to the nation's big network airlines and the biggest provider of such outsourced services. But that means Mesa must be ruthless about cutting costs, he says: "Costs are everything in the airline business and especially in the regional airline business."

If some people, particularly union leaders, are put off by his intense focus on costs: "Tough. The unions don't work for me. They don't even work for my pilots. They have their own agenda."

Officials at the Air Line Pilots Association, Mesa's principal union, declined an interview request. But ALPA sued Mesa last year and accused Ornstein of union busting. ALPA wanted to prevent Ornstein from replacing union pilots at CCAir, the Mesa-owned US Airways Express carrier at Charlotte, with non-union pilots from Freedom Air, a Mesa-owned start-up.

The lawsuit was settled when the parties agreed to a new contract. Mesa got reduced pilot pay rates at CCAir that Ornstein wanted. ALPA got a promise that all of Mesa's operating units would use union pilots. And all of Mesa's pilots were promised rapid growth that would create lots of opportunities for them to climb the career, and pay, ladder faster.

So far, that growth is happening. Thanks to contract changes that allowed Mesa to streamline the training process, the carrier added a record six new regional jets to its fleet in September. Each one means at least five new jobs for captains.

Ornstein disputes the common perception that pilots and other Mesa workers are unhappy because they're working for "some sort of ruthless neo-Lorenzo," a reference to former Continental chairman Frank Lorenzo. Lorenzo used bankruptcy laws to abrogate labor agreements and cut wages in half in the 1980s.

Ornstein's efforts to fight that perception took a blow when complicated financial entanglements between Ornstein, other senior Mesa executives and several board members became the focus of recent news reports. Those entanglements, which include fees paid to entities owned by Ornstein, senior officers or board members for services performed for Mesa, resemble the corporate structures that Lorenzo used when he ran Continental and Eastern Airlines in the 1980s.

"That's not me," Ornstein says. "Mesa Airlines and its people are my family. My job is to look out for what's best for the family as a whole, and that's remaining profitable. Without profits, we don't work, none of us. There are more than 100,000 airline workers on layoff right now, and not one of them is a Mesa employee. I'm proud of that."

Still, while he contends the board and officer entanglements are innocent, make financial sense for Mesa and have always been fully disclosed, they will have to be altered.

"In a post-Enron, post-WorldCom world, the rules have changed," Ornstein says. "So we'll make the necessary changes at our next board meeting."
 

sopdan

Well-Known Member
Let me start off by saying that I don't know a whole lot about Mesa.

Now, I find it odd that the writer would make a connection between overcoming a racial/religious barrier and the hostile takeover of another airline, I hardly think that they're similar. I personally believe that trying to take over a company that doesn't wish to merge is one of the s****iest things you can do... its even worse if you succeed. I'll stop there because I admit that I don't know every single detail.
 
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