Big Sky, MAIR Folding

In a serious about face, Big Sky Airlines, the principal subsidiary of MAIR Holdings, Inc., announced that its east coast operations will cease service on 86 daily East Coast flights at midnight January 7 owing to “enormous, unsustainable financial losses” on its eight-month-old Delta Connection service in the Northeast, a region that has also seen the loss of CommutAir this year. CommutAir, a Continental Connection, consolidated its operation at Continental’s Cleveland hub.
Big Sky lost $1.3 million in November alone. Its agreement with Delta has been terminated although, at Delta’s request, service continues throughout the holiday season. The airline, which also code shares with Horizon, Alaska, US Airways and Northwest, cited disappointing revenue, unusually bad weather causing numerous flight cancellations and record-high fuel prices in its decision.
The announcement set into motion a cascade of events that culminated in MAIR announcing it would liquidate its assets as soon as possible and distribute the proceeds to shareholders. MAIR CEO Paul Foley noted that assets include $38.5 million in cash, seven Beech 1900 aircraft worth $18.9 million and about $3 million in spare parts.
In its second quarter briefing to investors in November on how it sees its business going forward, Foley said the company expected Big Sky to reach profitability by Q4 of its FY2008, some two quarters hence. In addition, it expected to settle the remainder of the Mesaba Liquidating trust as well in that quarter and planned to make distributions to shareholders at that time.
Foley told investors at the time, the company consists of three assets – Big Sky, cash and the remaining equity distribution from its Mesaba Liquidating Trust. It is also awaiting the settlement of suits brought by Saab and Goldman Sachs.
In February, he said, the board decided on expansion of Big Sky as the only way to maximize the value of its business. In addition, it also is trying to gain profitability for its Essential Air Service markets. To that end, Big Sky expanded to the Northeast via a code-sharing agreement with Delta and MAIR provided capital to acquire the additional Beech 1900Ds needed for the expansion. Foley reported that the northeast markets were showing promise. He also outlined the company’s cash position, saying it has more than enough to fund the Big Sky operation.
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“This is a significant departure from our plans and we are disappointed that we no longer see a route to profitability with the East coast operations and the board is no longer willing to fund the cost,” said Foley last week. “The Eastern Montana routes were already losing money which prompted the East Coast expansion in the first place. While we won a higher subsidy for the East Coast routes beginning in March, we don’t think we can achieve profitability.”
It is currently working on an orderly transition of its western Essential Air Service routes, which could include the Big Sky operating certificate, Foley told investors, although it will attempt to market that separately.
Its termination of its East Coast Essential Air Service, according to the airline, prompted DOT to say it must terminate all its EAS service, which President President Fred DeLeeuw said effectively puts the airline out of business. Its EAS service will largely be assumed by Great Lakes Aviation which has stepped in for a number of failed EAS carriers this year. Big Sky will continue its Western EAS operation until Great Lakes launches service in about 60 days.
Big Sky, which employs 450, inaugurated service in 1978, at the dawn of deregulation, with service from Billings to Helena and Kalispell, Mont. While it grew through its history, it now serves 21 cities in seven states.