Mesa Air Proposes Merger With Atlantic Coast Air

[Todd B]

PHOENIX--(BUSINESS WIRE)--Oct. 6, 2003--Mesa Air Group, Inc. (Nasdaq: MESA - News) today announced that it has made a proposal to the board of directors of Atlantic Coast Airlines Holdings, Inc. (Nasdaq: ACAI - News) to combine the two companies. The combination would create the leading operator in the regional airline industry, with nearly 300 aircraft and broad reach across major US markets.


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[Ch. 12]

...and then the Virgin America table will be set...

 

[Light Years]

This is horrifying.

 

[magsau]

Sure wish I knew where this originated. Would love to think that someone at UAL was behind the push to have ACA acquired. Eliminates the problem of ACA leaving UAL. Gives UAL the opportunity to lower the cost of the ACA product fairly quickly. Would probably see Mesa do what they did when they bought WestAir (former owner of ACA, ironic isn't it?) They bought WestAir, then pulled pretty much all the value assests away and shut them down.

I would think ACA would see the CRJ's go to YV fairly quickly. The ACA operation would be shrunk and YV would grow. The classic Lorenzoesque move that Orenstein is famous for. This gives Mesa more UA market share, drives the cost of Express service to UAL down and maintains the IAD feed without UAL having to take drastic measures. A very bold and innovative idea to say the least. Finally, it appears UAL is getting their store in order and back to the strong armed tactics that they are famous for in respect to feed.

Definitely wonder how the ACA shareholders are going to react and if it will provide any hurdles to lenders that might be considering financing the Low cost start up planned by ACA. With several negative investment reports on the fact that the ACA LCC will have to be priced at the high end (higher than LUV or JBLU) due to the CASM of the CRJ's and that the mainline carriers will squezze from the top while the other LCC's squezze from the bottom could result in a collapse of the proposed "goldilocks" (ACA's codename for the LCC) carrier.

 

[ITRADE]

Sure wish I knew where this originated. Would love to think that someone at UAL was behind the push to have ACA acquired. Eliminates the problem of ACA leaving UAL. Gives UAL the opportunity to lower the cost of the ACA product fairly quickly. Would probably see Mesa do what they did when they bought WestAir (former owner of ACA, ironic isn't it?) They bought WestAir, then pulled pretty much all the value assests away and shut them down.

Yah....Same with CCAir..... RIP.

Definitely wonder how the ACA shareholders are going to react and if it will provide any hurdles to lenders that might be considering financing the Low cost start up planned by ACA. With several negative investment reports on the fact that the ACA LCC will have to be priced at the high end (higher than LUV or JBLU) due to the CASM of the CRJ's and that the mainline carriers will squezze from the top while the other LCC's squezze from the bottom could result in a collapse of the proposed "goldilocks" (ACA's codename for the LCC) carrier.

Well, ACAI's stock is up $2.00 today - nearly 20%. So, a good, quick bump.

 

[airdog]

I would almost be willing to bet the ranch that in some way or another United had a role in causing this proposed transaction. With ACA controlling its own gates at Dulles, United's hub would really become unworkable without the feed. This way, United would get what it has failed to get out of ACA in the BK courts by having Ornstein create the same result. I would also tend to agree that an asset transfer would probably occur and ACA would slowly disappear but it would be a much more difficult process than CCAir given the size, political ramifications and more extensive union presence. I would also not be surprised to see a white knight surface before this gets too far.

 

[Busdrvr]

"I would almost be willing to bet the ranch that in some way or another United had a role in causing this proposed transaction"

Ya Think?...

 

[ACrazy8]

Deleted

 

[phllax]

Anybody know what Holly's take on all this is?

 

[coolflyingfool]

My guess is that UAL is the puppetmaster in this move by MESA. They may have offered Ornstein some sort of position within UAL or compensation. I think I smell a rat. Sorry, but this one is not on the up-and-up. :down: :down: Just my 2 cents........

 

[rwills]

Might be a way for both united/mesa and aca to get what they want:

-united gets their ne regional routes and iad w/o a lot of heartache and work/investment
-aca gets more financial backing to pursue the lcc operation and divests itself from the regional market

Mesa cannot do this by itself (can it?) - they are smaller than aca.

In the meantime aca is still full steam ahead on its lcc plans which include 'enhancements' to the crj fleet.

 

[Ch. 12]

Mesa is not known for doing favors for United and I doubt that they are being as controlled by UA as some think. An interesting angle is that Mesa buys ACA and, with an investment from Sir Richard Branson, fires up the LCC that ACA has been laying ground work for...as "Virgin America". With Ornstein having served as Chairman of Virgin Express prior to moving to Mesa, he has the ties to make it work.

 

[magsau]

I know how this sounds but.....I have contact that is a director at ACA. He told me last spring when things about ACA and Virgin were the hot rumor that Branson did come and take a look in early 2003, but did not care for the operation. He mentioned that one of the problems was the lack a narrowbody type A320 or B737 on the operating certificate and the cost associated with operating the CRJ's. CASM too high

In the past couple of months El Al shed their 20+percent stake in North American. This frees up a type certificated carrier with the B737 and B757 on the certificate already. They are small enough to not have too many employees that might be "tainted" by how they did things previously and have "American" in their name B). IMO, ACA and Branson do not fit.

Still think this is vintage UAL using Mesa and their reunified realtionship to get UAL what it needs. In the past UAL and it express partners have typified the "eat their young" mentality. NPA, Presidential, WestAir, Mesa I, AirWisc I, TransStates, Great Lakes and now ACA. In all of the above cases UAL had contentious realtionships severed or damaged. Some have regrouped to come back into the fold while several just folded. It is going to be interesting.

With alot of the analyst talking about the difficulties ACA would face as an independent LCC this might perhaps give Kerry Skeen the ability to get out with his dignity intact. He does not have to admit the LCC is more difficult than previously thought and saves face by saying this is good for the shareholders. I think the price might go up just a bit but not too much. Recently I read a Raymond James investment newsletter on the ACA start-up that had the share price dropping steadily during the first year of the LCC as cost rise with the start up and the revenue decline compared the Fee for dept. paid by UAL versus the revenue generated by the LCC.

This is definitely going to be something to watch.

 

[Ch. 12]

I agree that an ACA lowcost RJ carrier is not economically feasible and also am not suprised that Branson would have no interest in it. That is why I was thinking that Mesa buys ACA and CHANGES the doomed LCC plan that ACA currently has into something more tangible with a Virgin product. Ornstein has the ties...far closer to Virgin than to UAL. He has enough business sense not to be puppeted by UAL. I think there are loftier motives b/c as Mesa has shown with F9 and also with UAL in the past...they aren't necessarily in their agreements for the long-term. YV is not going to set up UAL in the long term with no obvious long term benefits for themselves.

 

[N230UA]

I agree that an ACA lowcost RJ carrier is not economically feasible and also am not suprised that Branson would have no interest in it. That is why I was thinking that Mesa buys ACA and CHANGES the doomed LCC plan that ACA currently has into something more tangible with a Virgin product. Ornstein has the ties...far closer to Virgin than to UAL. He has enough business sense not to be puppeted by UAL. I think there are loftier motives b/c as Mesa has shown with F9 and also with UAL in the past...they aren't necessarily in their agreements for the long-term. YV is not going to set up UAL in the long term with no obvious long term benefits for themselves.

Ummm... hi!

There is this thing called a "contract" which is legally binding and has been signed between UAL and Mesa.

Mesa cannot end it unless United agrees.

I don't think UAL would sign off the deathwish for its IAD hub... they've done many stupid things before, but nothing as stupid as handing over a hub to a competitor.