The Wall Street Journal-20080123-Mesa Air-s Insiders Bank on Turnaround- Stock Takes Beating Amid Legal Woes- Question of Mergers
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Mesa Air's Insiders Bank on Turnaround; Stock Takes Beating Amid Legal Woes; Question of Mergers
Mesa Air Group Inc. shares are hovering near a multiyear low, but Chairman and Chief Executive Jonathan G. Ornstein said he bought the stock because he believes things are looking up for the regional air carrier.
Mr. Ornstein is one of six insiders at the Phoenix-based airline company who bought a combined $200,000 of stock last week. The purchases came in the wake of a low of $2.29 a share reached Jan. 4. Shares have rebounded to trade at $3.05, down 14 cents, yesterday.
Mr. Ornstein said he took advantage of the opening of a so-called trading window to buy his company's stock. Many companies restrict insider trades to specific trading windows to limit the possibility of the improper use of inside information.
"I think it's a very good long-term value," Mr. Ornstein said. "Mesa has historically had a trading range -- this being the very lowest end of the trading range -- and I feel comfortable that in the future things are going to improve."
Mr. Ornstein said he believes other company insiders who bought stock also feel confident in Mesa Air's long-term strategy.
Mesa Air, which gets most of its revenue from code-share agreements with major airlines, reported last week swinging to a fourth-quarter net loss of $68.2 million, or $2.37 a share.
The company said its results were hurt by a ruling in a legal dispute with Hawaiian Airlines Inc. In October, the U.S. Bankruptcy Court for the District of Hawaii ruled that Mesa Air violated a confidentiality agreement it had with Hawaiian Airlines and awarded $80 million in damages to Hawaiian Airlines on top of legal costs. Mesa Air recorded an $86.9 million pretax charge for the fourth quarter as a result of the judgment. Mesa Air is appealing the ruling.
"I really do feel that ultimately we are going to see this judgment thrown out," Mr. Ornstein said.
Ben Silverman, research director at InsiderScore -- a firm that tracks and rates insider transactions -- said that the latest insider purchases at Mesa Air represent a positive "reversal sentiment" at a company where insiders mostly sold stock in recent years.
"Obviously, with the stock getting battered down so much, I think that's a good thing that insiders stepped up here," he said.
Six Mesa Air insiders bought a total of 73,000 shares for an average of $2.77 a share last week, according to data provider Washington Service. Mr. Ornstein bought 39,000 shares for an average of $2.71 a share for himself, his mother and his children, according to a filing with the Securities and Exchange Commission. This is Mr. Ornstein's largest stock purchase in more than three years, and he now has direct ownership over 243,103 shares and indirect ownership over an additional 29,000 shares through his relatives.
Mr. Silverman said that one of the big questions looming for Mesa Air is the potential consolidation of its airline partners. UAL Corp., parent of United Airlines, expressed interest in consolidation yesterday, and Delta Air Lines Inc. is reportedly pursuing merger discussions with UAL and Northwest Airlines Corp.
For the year ended Sept. 30, Mesa Air derived about 98% of its passenger revenue from agreements with U.S. Airways Group Inc., United and Delta.
"To the extent it makes our partners stronger that's a good thing," said Mr. Ornstein of a hypothetical merger. "To the extent that makes them smaller, that would probably be a bad thing," he said.
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