Mesa Sees Room To Experiment In Hawaii
2005-10-31 16:32 (New York)
Editor's note: Mesa Air Group CEO Jonathan Ornstein recently
spoke with Regional Aviation News about his strategy for forming a new
carrier in Hawaii.
Jonathan Ornstein, a successful regional airline executive, may be flying non-regional aircraft, Boeing [BA] 737s, in Hawaii if his new airline proves to be a success.
Sometime in the first quarter, Ornstein's Mesa Air Group [MESA]
will launch a new carrier tailored for the inter-island travel of the
Hawaiian Islands, serving five major cities.
It may not look anything like the current model of a regional
carrier. It may look like a throwback to the old independent, commuter
carriers. Or it could be the airline of the future. Much depends upon
how the new carrier is structured, its fleet selection and its initial
success.
Since the late September announcement (RAN, Oct. 3), Ornstein
and company have fleshed out their business plan and filed the
necessary paperwork with state authorities in Hawaii. Although the
carrier does not have a name (stay tuned; that is coming in about two
weeks), Ornstein last week put in place the leadership team for the
carrier. Greg Stephens, president of Mesa's Air Midwest subsidiary,
will be the chief operating officer of the new carrier. Mickey Bowman
will be its vice president of scheduling and planning, a position
similar to the one he has held with the holding company.
"We think the inter-island market has the potential for long-
term profits," Ornstein said. "We look at it as something fun to do for
the company. It is independent, which makes it a more interesting
operation.
"It is not as if we are putting the company at risk as we will
have partners who will share in the upside.
"The structure will depend upon how much money we raise and what
our partners want to do. We have to have the flexibility to fly the
aircraft we want at competitive prices," he said.
The new carrier will be a joint venture with Mesa, either as the
majority owner or a substantial minority partner and operator. Ornstein
is looking for less than a handful of investors. "We are looking for
quality people in Hawaii who can show us the ropes. My first choice
would be to get players, not deep pockets from New York. We feel
confident that will happen."
Ornstein decline to say how much start-up capital he is seeking
or what its first year operating budget will be.
He projects that it will tie up only 2.5 percent of Mesa's
capacity. "Because we have a very profitable operation on the mainland,
we can operate aircraft there for a very, very, very long time. We
think that with the 50-seaters, we won't do much worse than break
even."
If Mesa owns less that 50 percent of the joint venture, then the new carrier will not a unit under the Mesa Air Group umbrella. Perhaps more importantly, the Hawaiian carrier would not be bound by Mesa's contract with the Air Line Pilots Association (ALPA).
When the Hawaiian carrier begins operations, it will be flying
five or six 50-seat RJs on the five busiest routes between Hilo,
Honolulu, Kona, Lihue and Kahului. Currently, Aloha Airlines and
Hawaiian Airlines [HA] serve these routes. It will not be competing
with the established commuter operations of Island Air and Pacific
Wings, which both fly turboprop or piston-powered planes.
"We will transition to 90-seat or larger aircraft when they
become available - that may be 12 to 18 months down the road depending
upon market demand," Ornstein said, adding that the carrier may fly B737s if there is enough demand - and if it has the labor flexibility.
"We know that the 50-seat is not always the most appropriate,"
he said. "We expect to get a pretty good deal for them in today's
environment.
"While our plan is currently to stay with the [Bombardier] CRJs, it would not be any stretch of the imagination that we will operate aircraft larger than a CRJ 900. If there is less competition, there is the chance we will operate larger aircraft."
To get the new carrier in the air, Ornstein said a reservation
system must be operational and local facilities need to be in place.
Mesa has been looking at reservations systems now in use by
several low-cost carriers as well as an upgrade of its Sabre [TSG]
system.
Currently, Mesa Airlines' Beechcraft 1900 operation, based in
Albuquerque, N.M., has its own Sabre system for reservations and a call
center. "We have the infrastructure in place that are residuals from
the old days."
As the new carrier looks to get off the ground, Ornstein said it
is talking to its current code-share partners - United Airlines [UALAQ], US Airways [LCC] and Delta Air Lines [DALQ] - to strike a code-share agreement with the new operation. "We will be developing our own brand. We will operate this with a code-share using this brand. We
will not operate as Delta Connection or United Express. It will be similar to how United's code-share with Aloha [works]."
The new brand name will give Mesa the flexibility to use it in
other areas should Ornstein decide to replicate the operations.
>>Contact: Jonathan Ornstein, Mesa, (602) 685-4010.<<
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