Ornstein blames Mesa share loss on ExpressJet woes
Shares of commuter airlines Mesa Air Group Inc., the parent company of Hawaii interisland carrier go!, and ExpressJet Holdings Inc. declined more than 5 percent yesterday on investor concerns over revenue and hiring pressures.
Mesa shares traded at the lowest price since 2005 after the Air Line Pilots Association said almost 400 pilots have left over contract issues, prompting "flight delays and cancellations."
ExpressJet share prices fell to the lowest ever after an arbitration panel ordered a $14 million rate reduction.
Fees received by the regional carriers to fly short routes for larger airlines have declined as the industry cut costs to stem losses. Larger carriers including Delta Air Lines Inc. and Northwest Airlines Corp. are starting to hire pilots after trimming their payrolls while in bankruptcy.
"We think staffing and attrition are likely to continue to be issues for Mesa since major airlines are hiring and we think Mesa faces concerns about future growth," James Corridore, a Standard & Poor's analyst in New York, wrote yesterday.
He rated the shares "sell."
Mesa, based in Phoenix, also flies as Mesa Airlines and provides commuter services as Delta Connection for Delta, US Airways Express for US Airways Group Inc. and United Express for UAL Corp.'s United Airlines.
Houston-based ExpressJet carries passengers for Continental Airlines Inc. The Aug. 2 arbitrator ruling cut the rates that Continental pays ExpressJet, said Robert Mann, a consultant with R.W. Mann & Co. Inc. in Port Washington, New York. That action also colored investors' views of Mesa, he said.
"I think all of the regionals are being painted with the same brush as ExpressJet, which I think is inappropriate," Mesa CEO Jonathan Ornstein said.
ExpressJet spokeswoman Kristy Nicholas said the reduced compensation of $14 million from Continental is "immaterial" compared with 2006 revenue of $1.7 billion.