Lakefield Throws Down Gauntlet

[mweiss]

Mesa is guaranted a profit on every single flight, if it has one passenger or 50.

Is it really a guaranteed profit (i.e. cost-plus) or a guaranteed dollar amount (i.e., if Mesa's costs doubled, they'd suddenly find themselves losing money on every flight)? It's an important consideration on a few levels.

Seems to me the money would be better kept in the group instead of making John Orenstein a rich man. Then at least you would have better quality control over the product.

Certainly for quality reasons. Any sense of what the CASM is for Mesa vs. WOs in an apples-to-apples sense?

 

[700UW]

Yes Mesa is guaranted a profit on every flight, I have done the research on this. And you have to remember, we remburse them for the costs, so if fuel goes up, we pay them more.

It is a two-sided contract, the flat fee rate plus expenses.

 

[mweiss]

That's a horrid contract for US! What idiot agreed to those terms???

 

[700UW]

There you go, Dave Siegel and the BOD. I did a lot of research when it comes to RJ operators. For example CO, owns all 224 RJs and leases them to XJT, until a couple of years ago XJT was owned by CO, now CO has all the prefered stock and some regular, they are not the majority shareholder but in reality they still control them.

Pinnacle is owned by NWA through stock and NWA owns every single RJ Pinnacle flies.

So you see NWA and CO are paying them to operate the flights, but at least they get lease money back, unlike US who just chooses to throw the money to anyone that can fly an RJ.

 

[mweiss]

In CO's case the spinoff is a close relative to burning the furniture. They've been highly leveraged out of necessity, given where they were in 1994, and it gave them a nice one-time cash infusion.

I knew that US has done a bad job with the regionals, but it seems that it's even worse than I thought. And, lemme guess, the Mesa contract has a long duration, too, right? With really nasty early-termination penalties?

 

[geo1004]

Geo,

There are numerous opportunities for US to generate more revenue... <snip>

I agree on all your points. There have been numerous opportunities that US management has failed to take advantage of. Youre examples are spot on as to why the revenue stream is NOT as strong as it should/could be. A perfect example is the NRT slots US was granted during the Wolf administration. Those slots were not utilized because management thought they would become useless once the merger with UA went through. Well, that never happened and now ANA is flying a full 777 every day from IAD and a full 747-400 from ORD to NRT. Methinks a lot of US Airways FF'ers would be happy to fly connect thru PHL to a long-haul A-340 if US had aquired a few. A "no-brainer" that, IMO, slipped a few minds.....

 

[700UW]

Actually the NRT slot were given to US when Schofield was CEO, not Wolf.

 

[geo1004]

Actually the NRT slot were given to US when Schofield was CEO, not Wolf.

Thanks for the correction - I did not know US had them that early.