In analyzing its network for its three mainline partners, Mesa (MESA) found it is too heavy in the Northeast which hurts its financial and operational performance given the intense weather and air traffic control restraints. “We are continuing to work with United (UAUA) to help us there,” said CFO Peter Murnane, who spoke recently before the Merrill Lynch Global Airline Conference. While its US Airways (LCC) operation is performing well, United  and Mesa are working on the program by increasing ground time at O’Hare, which began this month and will continue in July.
“At O’Hare, 62 percent of flights have less than a 35-minute turn time,” he said, adding that anyone going out of Chicago with United has a completion factor five points lower than the rest of the system. “When you are talking about 98 or 99 percent, five points is huge. At our other stations only 20 percent have less than a 35-minute turn time. Increasing the amount of ground time has been helpful. We have also reduced back-to-back type turns. Other United partners are not so closely scheduled so they have more time to recover from ATC or weather problems.”
The frustration with United’s program has resulted in a pilot attrition rate for that program four times higher than the airline’s Delta (DAL) or US Airways programs, Murnane said. “If things were scheduled the same way as our other partners, we would have seen less pilot attrition,” he said, noting the United operation was profitable before it brought in 30 additional aircraft. The operations in the northeast has made that part difficult.” Mesa was forced to write of $30 million in incentive payments.
He also said the airline is set to launch its joint venture with Shenzhen Airlines in September and expects to have 20 50-seaters in operation in China by the June 2008 Olympics, some of which will likely come from its United operation with the remaining 10 coming from either Mesa or sourcing them on the used market. The question is, he said, if Mesa takes 10 from its partners, how many larger aircraft can it put in? The business plan calls for 100 aircraft in the China operation after five years including both 70- and 90-seat aircraft. Its at-risk operations, including China, means the airline has the ability to grow organically without relying on bids. Mesa is responsible for supplying aircraft and captains while Shenzhen supplies the first officers and flight attendants.
He said the company was very optimistic about the prospects for its new company given the partner is the largest privately owned airline in the country the fact it has been profitable almost since its inception 14 years ago.
Murnane noted that 62 percent of every dollar cost at Mesa is direct pass-through to its major partners and half of the 38 percent it controls is related to maintenance given its older fleet. Some 10 percent relates to administration and another 38 percent of what it controls relates to pilot and flight attendant costs.
It is taking out 11 de Havilland Dash 8s from its JFK Delta Connection operation with those pilots, as well as pilots from its Air Midwest 19-seat operation, funneling into the rest of its system. It also has a large pilot pool in training. Mesa announced last month it filed to eliminate all EAS markets from its system citing the lack of profitability. It blamed the old contracts and increasing costs. Its goal this year is to increase profitability either by gaining better EAS contracts or selling off its Beech 1900s to airlines serving its EAS markets.