Mesaba Holdings, Inc.

views updated

Mesaba Holdings, Inc.

7501 26th Avenue South
Minneapolis, Minnesota 55450
U.S.A.
(612) 726-5151
Fax: (612) 726-1568
Web site: http://www.mesaba.com

Public Company
Incorporated :1944 as Mesaba Aviation, Inc.
Employees : 2,634
Sales :$277.22 million (1998)
Stock Exchanges : NASDAQ
Ticker Symbol : MAIR
NAIC :481111 Air Passenger Carriers, Scheduled

Mesaba Holdings, Inc., through its wholly owned subsidiary Mesaba Aviation, Inc. (Mesaba Airlines), is one of the Midwest’s largest regional airlines. With a fleet of 86 jet and jet-prop aircraft, Mesaba handles more than 700 daily departures to 91 cities in Colorado, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Montana, Nebraska, New York, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Virginia, West Virginia, and Wisconsin and the Canadian provinces of Ontario, Quebec, and Saskatchewan. Under a reservation code-sharing agreement with Northwest Airlines, Mesaba has operated as Northwest Airlink since 1984, serving the hub airports of Detroit and Minneapolis/St. Paul. Mesaba and Northwest coordinate their flight schedules to provide connections to air travelers. Mesaba’s headquarters are located at the Minneapolis/St. Paul International Airport.

“The Mighty Eagle”: 1944-83

Mesaba Aviation, Inc. was founded by Gordy Newstrom in 1944 in Coleraine, Minnesota. The company first operated with a single J3 Cub airplane as a Fixed Base Operator, chartering flights and giving flying lessons. Mesaba Aviation took the name “mesaba” from the name of the geographic iron ore range in northern Minnesota. The word “mesaba” is the Native American word for “mighty eagle” and “giant of the hills.” In 1950, Newstrom moved the company to Grand Rapids, Minnesota, to be closer to the Blandin Paper Company and a larger customer base.

In 1973 the company and all its assets were sold to a Duluth-based business that operated a scheduled airline service. Holdings at that time included 15 aircraft and several aircraft hangars. Mesaba Aviation then initiated scheduled service to Spencer, Iowa, as well as Ely, Virginia, and Duluth, Minnesota.

The airline was sold to the Swenson family in 1978, who under CEO Rob Swenson was already operating a small carrier in Thief River Falls, Minnesota. As a result, Mesaba Airlines expanded to several markets in Minnesota and Iowa, as well as North and South Dakota. At that time the airline operated a fleet of Beech 99 turboprop aircraft.

In 1983 Mesaba became a publicly held company when it sold two million shares of common stock in the company. The company began trading on the NASDAQ under the ticker symbol MAIR. The airline offered a second public offering of 900,000 shares in 1985. After forging a partnership with Republic Airlines in 1983 to connect mutual passengers and offer joint fares, Mesaba continued to grow and acquire additional aircraft. The Fokker F-27 and later the Fairchild Metro III aircraft became the backbone of the Mesaba fleet.

The Northwest Connection: 1984-90s

In 1984 Mesaba Airlines began operating under a Part 121 Air Carrier Certificate from the U.S. Department of Transportation, the same type of certificate as that held by the major airlines. The carrier was then flying to 13 cities in five states and had relocated its corporate offices to the Minneapolis/St. Paul International Airport. Also that year, Mesaba discontinued its relationship with Republic and signed a code-sharing agreement with Twin Cities-based Northwest Airlines. This marked the beginning of a very long-term relationship between the two companies. The agreement called for Mesaba to operate as Northwest Airlink, so all of the airline’s flights would carry the familiar “NW” computer reservation code. Additionally, Mesaba’s schedule would be coordinated with Northwest’s, offering convenient connections and competitive joint fares.

In 1985 Mesaba Airlines purchased seven new Fairchild Metro III aircraft to replace its 15-passenger Beech 99 aircraft. The carrier also added three Fokker F-27 aircraft to its fleet. Northwest Airlines and Republic Airlines merged in 1986, causing Mesaba to realign its route structure, discontinuing service to five markets and initiating service to three more cities. At that time, the airline was carrying about 20,000 passengers every month.

Mesaba soon outgrew its facilities and, in 1988, built a new corporate headquarters at the airport. This new 80,000-square-foot facility housed the airline’s corporate offices and a maintenance hangar. During the summer of the same year, Simmons Airlines, the Northwest Airlink partner at the Detroit hub, was purchased by American Airlines. This move left Northwest Airlines without a regional partner at its Detroit facility. So, in August Northwest Airlines selected Mesaba Airlines from several other regional airlines to operate as the Airlink affiliate at the Detroit hub. This was a tremendous boost to Mesaba. The transition from one partner to another was accomplished by late fall of that same year with Mesaba adding 325 new employees. The new operation nearly doubled the airline’s route structure, increased passenger traffic over 73 percent and solidified the corporate relationship they had with Northwest Airlines.

To manage its growth and define its operations further, the shareholders of the company approved the formation of a holding company to be called AirTran, with Mesaba being its only subsidiary. (In 1994 the holding company’s name was changed to Mesaba Holdings, Inc., at which time Northwest made a 29.7 percent investment in the carrier. A year later, Minneapolis investor Carl Pohlad assumed chairmanship of Mesaba.)

On December 1988, the airline initiated service to four new markets out of the Detroit hub, including Cleveland, Dayton, and Akron, Ohio, and Erie, Pennsylvania. This was accomplished with the addition of nine Fokker F-27s and seven Fairchild Metro III aircraft. In January 1989, the airline expanded service to four additional markets in Michigan: Pellston, Traverse City, Flint, and Wausau. Further expansions took place in February 1989 when the carrier expanded into Houghton, Marquette, and Toledo, Ohio. By June 1989, the carrier had doubled its traffic and had added 30 cities to its entire system as the result of the Detroit expansion.

To maintain its growing business, more aircraft were needed as well as new, modernized facilities to house the aircraft. In 1991 the airline built a new hangar facility at Detroit Metro International Airport to service the Detroit aircraft. The carrier also acquired a hangar in Wausau, Wisconsin, which had been owned by Midstate Airlines. That year, Mesaba Airlines also entered into an agreement with Northwest Airlines, which called for Northwest Airlines to lease 25 deHavilland Dash aircraft on behalf of Mesaba Airlines. These 37-passenger aircraft would be delivered from 1991 through 1993.

In November 1995, Mesaba Airlines in connection with Northwest Airlines opened the new “G” concourse at Detroit Metro International Airport. The new world-class facility offered expanded and improved passenger seating, convenient shuttle trips to the aircraft, and significant reduction in distance the passengers had to walk to the other Northwest concourses. Four months later, in March 1996, Mesaba announced the purchase commitment of 50 34-passenger Saab 340 aircraft with the option of purchasing 22 additional aircraft. The order included a mix of new and pre-owned aircraft, including 20 pre-owned Saab 340A and 30 new Saab 340Bplus aircraft.

To accommodate the increased passenger traffic and aircraft in use, Mesaba began a major facility upgrade at its Minneapolis hub in May 1996. The upgrade included improved passenger seating and the addition of workstations with telephone and modem hookups for business travelers. Improved lighting and signage was also included in the refurbishment. In the next month, Mesaba began taking delivery of the Saab aircraft at the rate of two per month.

By October 1996, Mesaba executed a separate agreement with Northwest Airlines for the operation of 12 new Avro RJ85 aircraft, which allowed the company to be the first regional airline in the United States to offer its passengers a first-class cabin.

Mesaba moved into its new 9,000-square-foot regional terminal at the end of the Green concourse at Minneapolis/St. Paul International Airport in May 1997. The new terminal was modeled after the successful Detroit regional terminal, whose design to support expansion of service proved valuable over time. In June 1997, Mesaba successfully introduced its first two Avro RJ85 aircraft.

By mid-July, the last of the Fairchild Metro III aircraft were retired from the Mesaba fleet, allowing Mesaba to offer an all cabin-class fleet. This same year, Mesaba announced that it signed an agreement to fly six additional Avro RJ85 regional jets for Northwest Airlines which brought the total number of RJ85s to 18. In addition to this, Mesaba and Northwest announced plans to amend their existing regional jet agreement to increase from 18 to 36 the number of Avro RJ85 aircraft that would be operated by Mesaba on the behalf of Northwest over a ten-year period.

Company Perspectives

By keeping our focus firmly on serving our guests’ needs, we will provide safe, reliable, convenient and comfortable air transportation that will set the standard for all regional airlines, while providing a secure and positive environment for our associates, and a market-driven return on investment for our shareholders.

On August 1, 1997, the airline expanded its operation to include services to 14 markets that were previously served by Express Airlines, Inc., another Airlink affiliate. In December, Mesaba inaugurated regional jet service to Aspen and Steamboat Springs, Colorado, as well as Montreal, Canada. These additions alone broadened the airline’s route map over 1,600 miles. The same year, Mesaba added summer service between Minneapolis/St. Paul and Aspen/Snowmass, Colorado. Bozeman and Kalispell, Montana service was also added to the route system, stretching Mesaba’s service to western Montana.

In October 1998, Mesaba began nonstop service from Duluth, Minnesota, to Detroit, Michigan, with the Avro RJ85 aircraft. The company retired the last ten of its older deHavil-land Dash 8 aircraft in December 1998. By the end of 1998, Mesaba boasted a fleet of 80 state-of-the-art jet and jet-prop aircraft, offering over 800 daily departures to 91 cities in 18 states and three Canadian provinces.

Facilities continued to keep up with the expansion as well. In June 1998, Mesaba opened a new maintenance facility at the Rhinelander-Oneida County Airport in Wisconsin. The facility was designed to house up to four Saab 340 aircraft. Mesaba also planned the facility to provide temporary housing for its Rhinelander crew. By December of the same year plans were underway to construct a $12.5 million, 126,000-square-foot aircraft maintenance facility and crew base at the Cincinnati/Northern Kentucky International Airport in early 1999 and the company was also reviewing expansion possibilities at its Detroit and Minneapolis/St. Paul facilities.

A Quarter Century and Still Going Strong

Throughout 1998 Mesaba celebrated its 25th anniversary of scheduled commercial service. To mark the occasion, the airline placed in service a new Saab 340Bplus aircraft with a special commemorative paint scheme. The aircraft was named The Silver City Flyer. That year the airline’s president and CEO, Bryan K. Bedford, was named Regional Airline Executive of the Year by Commuter Regional Airline News and the Allison Engine Company. In addition, Mesaba was named “Regional Airline of the Year” by Air Transport World magazine. This was the first time in five years that a U.S.-based regional airline had been selected for the honor by the highly respected aviation journal. Finally, Forbes magazine listed Mesaba as one of the “Top 200 Small Companies in America.” The company was listed 41st in Forbes ’s annual ranking and was the only airline to be included in the listing that year.

As it headed into the next century, Mesaba was a prominent regional airline poised for a bright future. Building on a 46 percent increase in air traffic and reportedly high consumer satisfaction, the company slogan announced: “Mesaba, An Airline To Call Your Own.” The carrier remained committed to quality service, leading edge technology, sound training protocol, and ongoing aircraft development and maintenance. Net income for fiscal 1999 was expected to reach $24.3 million on overall revenue of $348 million.