Mesa sees huge potential in China
The carrier announces plans to begin flying in China within a year
Jonathan Ornstein has never shied away from challenges.
And in teaming up with Shenzhen Airlines to operate an airline within mainland China, the chairman and chief executive of Mesa Air Group Inc. has the Phoenix-based carrier poised to take a giant leap forward.
"We see this new partnership as a great opportunity to continue growing our business and further diversify our airline operations," Ornstein said in Beijing today in announcing a joint venture between the two carriers. "The potential for Mesa to grow our business with Shenzhen Airlines through this partnership is significant. With a population of more than 1.2 billion people, China is the world's fastest-growing air travel market."
Mesa and Shenzhen said today they had signed an agreement to create a Chinese regional airline, unofficially called Beijing Airlines, that will operate 50-seat regional jets for routes within mainland China. The cities served will be Shenzhen, Beijing, Chongqing, Xiamen, Nanjing, Kunming, Dalian, Shenyang, Xian, Zhengzhou and Nanning. Service is expected to begin within 12 months, with 20 jets to be in operation before the 2008 Beijing Olympic Games. The fleet is expected to grow to more than 100 planes within five years and be composed of 50-, 70- and 90-seat aircraft.
Ornstein, who started Hawaii interisland carrier go! in June, said he's excited about venturing into a foreign market. He said Mesa initially will provide pilot, maintenance and operations support and training, as well as the sourcing of aircraft.
China has long been coveted by U.S. airlines because of its large population and growing economy, but it's been a difficult place in which to gain a foothold.
Ornstein, who addressed several Chinese dignitaries in making the announcement, called the agreement "a truly historical event not only for the People's Republic of China's aviation industry, but also for Mesa."
Richard Aboulafia, an analyst for Fairfax, Va.-based aviation consulting firm Teal Group, described the deal as "pretty significant."
"Few, if any, airlines have exported their expertise, and until you get the ability to serve another nation's air routes -- which is not going to happen for a long time, if ever -- this is the best you can do to tap into the market," he said. "And everybody wants to tap into the China market."
Aboulafia called Mesa's growth plans for the country "ambitious," but acknowledged that "there's pretty good growth in China."
He also said there was plenty of room for an experienced regional carrier like Mesa.
"I think the concept is more important than the initial size," Aboulafia said. "Mesa knows how to run a regional airline, how to structure contracts and how to serve hub-and-spoke route networks. China is underserved by regional carriers and they haven't done a lot with hub-and-spoke route development."
Shenzhen Airlines President Li Kun called the agreement "an important milestone for our company," noting that the partnership will enable the new airline to extend service to many smaller communities throughout the country.
Airline analyst Robert Mann said there are a lot of small-city pairs in China that are well suited for regional aircraft. Although Mesa hasn't identified the type of aircraft it will use, Mann said the Bombardier CRJ-200s that Mesa uses on many of its U.S. routes, including Hawaii, have low lease rates now because they're out of favor in the United States.
"To put them to work in China is great if you know what you're doing, and Mesa knows what it's doing," said Mann, president of Port Washington, N.Y.-based R.W. Mann & Co. "They're capable operators. The operating environment will be a little challenging and Mesa's a pioneer. Sometimes pioneers succeed and sometimes they get arrows in their head."