Alpine Air Express, a regional air cargo operator, will acquire its currently leased aircraft during 2003 in order to eliminate lease payments as well as lease excess capacity to a non-competitive air-cargo operator, according to Chairman and CEO Gene Mallette.

In a recent message outlining the airline's strategy for growth this year, Mallette said the aircraft would be purchased from the two current leasing companies, both of which are owned by the Mallette family. The airline has 32 aircraft consisting of Beech 99s and Beech 1900Cs.

Alpine Air is also in the process of purchasing the two leasing companies. Mallette told C/R News that in order to "stave off a shareholder revolt and avoid even the appearance of any wrongdoing, we have requested a fairness opinion to support this proposal from Wells Fargo Securities, the airline's new investment banker."

In discussing the year's growth strategy, Mallette noted that over the past 10 years, the airline has posted 40 consecutive quarters of profitability. This is attributed to "careful decision making and a clear cost conscious effort to provide superior on-time service to our customers," he said.

The airline is looking at acquiring additional Beech aircraft in the coming year, but will only acquire them as needed, Mallette said. "As a general principle, we bring on aircraft assets as we can put them to work and generate revenue for the company and its shareholders and not before. Through careful tracking of our aircraft, we expect efficiency increases. With these increases, reduced operating costs are expected. However, with the assistance of Wells Fargo, we are ready to procure aircraft as needed." Along with purchasing the two leasing companies, the airline is looking at the acquisition of additional companies during the year. Mallette said that they are planning to acquire "synergetic businesses," that will provide prudent "growth through acquisition." A subsidiary company, Alpine Air Chile, based in Santiago, began operations last month and Mallette is already considering expanding that operation.

In a Form 8-K filing with the Securities and Exchange Commission, the airline said that its future revenue will be questionable pending a final decision by the U.S. Postal Service on its Air System-Regionals (ASYS-R) contracts. The USPS had announced that it was canceling its ASYS-R contracts (C/R News, Oct. 21/Nov. 4, 2002), which would have effectively eliminated Alpine Air's single largest customer. In its filing, however, Alpine Air noted that the USPS had backed away from those plans, but could still require additional equipment, including scanning equipment to track the mail, be installed by air carriers operating under the ASYS-R contract. The USPS has now indicated that while it plans to cancel the ASYS-R contracts, it will continue air service to rural areas. It is holding meetings on Jan. 13 with anyone who carries mail invited to attend in order to discuss requirements of the new contract.

As a result of that uncertainty, the Alpine Air board has approved a diversification program to alleviate concentration on any one customer, including the Postal Service.

>>Contact: Eugene Mallette, telephone: 801-373-1508<<