UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 0-17895
MESABA HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1616499
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7501 26th Avenue South
Minneapolis, Minnesota 55450
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 726-5151
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of June 2, 1999 was approximately $284,323,000.
As of June 2, 1999, there were 19,865,329 shares of Common Stock of the
registrant issued and outstanding.
Documents Incorporated By Reference
Certain portions of the documents listed below have been incorporated by
reference into the indicated part of this Form 10-K.
Document Incorporated Part of Form 10-K
Proxy Statement for 1999 Annual Meeting of Shareholders Part III
<PAGE>
CAUTIONARY STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this Annual Report on Form 10-K under the captions "Business"
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as oral statements that may be made by the
Company or by officers, directors or employees of the Company acting on the
Company's behalf, that are not historical fact constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such forward looking statements involve risks, uncertainties
and other factors that could cause the actual results of the Company to
differ materially from historical results or from any results expressed or
implied by such forward-looking statements. Such factors include a
material change in the Company's relationship with Northwest Airlines;
reductions or interruptions in Northwest Airlines' air service; changes in
regulations affecting the Company, including DOT and FAA regulations; the
acquisition and phase-in of new aircraft; downturns in economic activity;
seasonal factors; and labor relationships, including work stoppages and the
outcome of ongoing contract negotiations between the Company and the
Aircraft Mechanics Fraternal Association, the mechanics union.
<PAGE>
PART I
Item 1. BUSINESS
Mesaba Holdings, Inc. ("Mesaba Holdings" or the "Company") is the
holding company for Mesaba Aviation, Inc. ("Mesaba"). Mesaba is a regional
airline currently providing scheduled passenger service under the name
"Mesaba Airlines/Northwest Airlink" or "Mesaba Airlines/Northwest Jet
Airlink" to 101 cities and metropolitan areas in Minnesota, Iowa, Nebraska,
New York, North Dakota, South Dakota, Indiana, Wisconsin, Illinois,
Michigan, Ohio, Pennsylvania, Kentucky, Tennessee, West Virginia, Virginia,
Colorado, Montana, Missouri, Kansas, North Carolina, Maine, Georgia, Texas,
Alabama, Arkansas and the Provinces of Ontario, Saskatchewan and Quebec
Canada. All flights currently operated by Mesaba are designated as
Northwest Airlines flights under agreements with Northwest Airlines, Inc.
("Northwest"). Mesaba's flight schedules are coordinated with those of
Northwest to facilitate interline connections at the Minneapolis/St. Paul
International Airport, Detroit Metropolitan Airport and the Memphis
International Airport.
AGREEMENTS WITH NORTHWEST
The Company operates as a regional air carrier providing scheduled
turbo-prop and air freight service as Mesaba Airlines/Northwest Airlink
under an Airline Services Agreement (the "Airlink Agreement") with
Northwest to 84 cities in the Upper Midwest and Canada from Northwest's hub
airports in Minneapolis/St. Paul and Detroit. The Airlink Agreement
provides for exclusive turbo-prop rights to designated service areas and
extends through June 30, 2007. Northwest has the right to terminate the
Airlink Agreement without cause upon 365 days notice, such notice not to be
given before July 1, 2000.
Mesaba also operates regional jet aircraft under a separate Regional
Jet Services Agreement (the "Jet Agreement"), under which Mesaba will
operate 36 Avro RJ85 ("RJ85") regional jets for Northwest. As of June
1999, Mesaba had taken delivery of 26 RJ85 aircraft and currently serve 39
cities. The aircraft are subleased from Northwest and are operated as
Northwest Jet Airlink from the Minneapolis/St. Paul, Detroit and Memphis
hubs.
Under the agreements, all flights that Mesaba currently operates are
designated as Northwest flights using Northwest's designator code in all
computer reservations systems, including the Official Airline Guide, with
an asterisk and a footnote indicating that Mesaba is the carrier providing
the service. In addition, flight schedules of Mesaba and Northwest are
closely coordinated to facilitate interline connections, and Mesaba's
passenger gate facilities at the Minneapolis/St. Paul International
Airport, Detroit Metropolitan Airport and Memphis International Airport are
integrated with Northwest's facilities in the main terminal buildings,
rather than at the more remote commuter air terminals. The agreement with
Northwest also permits Mesaba to offer its passengers fares between the
cities serviced by Mesaba and all of the destinations served by Northwest
as well as participation in Northwest's frequent flyer program. Mesaba's
jet aircraft are painted in the colors of Northwest Airlines and the jet-
prop aircraft are painted in a distinctive "Northwest Airlink"
configuration, with a Northwest Airlines logo in addition to Mesaba's name.
Mesaba, through the agreements, receives ticketing and certain
check-in, baggage, freight and aircraft handling services from Northwest at
certain airports. In addition, Mesaba receives its computerized
reservations services from Northwest. Northwest also performs all
marketing schedules and yield management and pricing services for Mesaba's
flights.
Mesaba believes that its competitive position is enhanced as a result
of its marketing and other agreements with Northwest, particularly through
the ability of Mesaba to offer its passengers coordinated flight schedules
to the destinations served by Northwest. Loss of Mesaba's affiliation with
Northwest or Northwest's failure to materially perform under the Airlink or
Jet Agreement for any reason would have a material adverse effect on the
Company's operations and financial position.
<PAGE>
ROUTE SYSTEM
The following tables set forth certain information with respect to
Mesaba's scheduled route system for June 1999.
Number of
Nonstop air roundtrips
mileage from Date from
Minneapolis/ airline Minneapolis/
Saint Paul service Saint Paul
City Airport commenced per week
- ---------- ------------ --------- --------
Minneapolis/
Saint Paul, MN --- February 15, 1973 --
Grand Rapids, MN 161 February 15, 1973 28
Brainerd, MN 113 February 1, 1981 43
Pierre, SD 350 December 15, 1983 26
Sioux Falls, SD 197 December 15, 1983 26
Bemidji, MN 199 December 1, 1984 43
Thief River Falls, MN 261 May 15, 1985 20
Aberdeen, SD 257 December 15, 1985 40
Des Moines, IA 232 June 1, 1986 47
Wausau, WI 175 June 15, 1986 54
Lincoln, NE 332 October 1, 1986 26
Grand Forks, ND 284 October 1, 1986 28
Watertown, SD 193 October 1, 1986 27
Fargo, ND 223 January 15, 1987 16
Omaha, NE 282 June 1, 1987 6
Moline, IL 274 June 10, 1988 39
Houghton/Hancock, MI 277 February 22, 1989 27
Marquette, MI 296 February 22, 1989 27
LaCrosse, WI 120 January 31, 1991 35
Bloomington, IL 374 September 15, 1992 26
Thunder Bay, Ontario 304 March 16, 1993 14
St. Cloud, MN 67 July 1, 1993 39
Escanaba, MI 304 August 16, 1993 21
Ely, MN 213 May 26, 1995 16
Bismarck, ND 386 September 1, 1995 7
Kalamazoo, MI 426 November 1, 1995 1
Rochester, MN 76 April 1, 1996 29
Kenora, Ontario 343 May 22, 1997 14
Green Bay, WI 252 June 6, 1997 14
Cincinnati, OH 596 June 6, 1997 21
Traverse City, MI 375 June 6, 1997 14
Waterloo, IA 166 August 1, 1997 39
Mason City, IA 120 August 1, 1997 33
Fort Dodge, IA 168 August 1, 1997 25
Sioux City, IA 234 August 1, 1997 46
Hibbing, MN 174 August 1, 1997 36
Duluth, MN 144 August 1, 1997 42
Rhinelander, WI 190 August 1, 1997 42
Eau Claire, WI 85 August 1, 1997 39
Dubuque, IA 212 August 1, 1997 25
Peoria, IL 342 August 1, 1997 26
<PAGE>
Rockford, IL 278 August 1, 1997 25
Appleton, WI 236 August 1, 1997 39
International Falls, MN254 August 1, 1997 42
Pellston, MI 414 June 1, 1997 21
Cedar Rapids, IA 221 July 1, 1997 45
Regina, Saskatchewan 619 October 6, 1997 14
Aspen, CO 802 December 19, 1997 7
Steamboat Springs, CO 774 December 19, 1997 *
White Plains, NY 1,021 March 1, 1998 7
Saginaw, MI 463 May 1, 1998 1
Madison, WI 228 September 9, 1998 7
Rapid City, SD 490 September 15, 1998 19
Flint, MI 491 October 29, 1998 21
Pittsburgh, PA 726 April 4, 1999 7
St. Louis, MO 449 April 4, 1999 7
* Seasonal service from December to April
Number of
Nonstop air Date roundtrips
mileage from airline from
Detroit service Detroit
City Airport commenced per week
- ---------- ------------ --------- --------
Detroit, MI --- December 10, 1988 ---
Erie, PA 163 December 10, 1988 33
Akron/Canton, OH 134 December 10, 1988 34
Dayton, OH 166 December 10, 1988 28
Flint, MI 56 January 8, 1989 39
Traverse City, MI 207 January 8, 1989 36
Pellston, MI 242 January 8, 1989 42
Wausau, WI 363 January 8, 1989 31
Houghton/Hancock, MI 425 February 22, 1989 21
Marquette, MI 364 February 22, 1989 21
Toledo, OH 49 April 2, 1989 41
Muskegon, MI 161 October 11, 1989 33
Columbus, OH 155 August 1, 1990 20
Kalamazoo, MI 113 September 6, 1990 42
Cincinnati, OH 229 September 6, 1990 41
Lansing, MI 74 November 14, 1990 26
Youngstown, OH 153 May 1, 1991 27
Fort Wayne, IN 128 June 1, 1991 41
Lexington, KY 296 June 10, 1991 28
Charleston, WV 281 July 8, 1991 32
London, Ontario 125 September 5, 1991 20
Binghamton, NY 378 July 1, 1992 25
Roanoke, VA 382 August 1, 1992 33
Lafayette, IN 224 September 9, 1992 20
Bloomington, IL 314 September 15, 1992 28
South Bend, IN 157 November 16, 1992 40
Louisville, KY 306 June 1, 1993 22
Escanaba, MI 305 August 16, 1993 21
Champaign, IL 298 September 9, 1993 28
Evansville, IN 364 October 1, 1993 26
<PAGE>
Knoxville, TN 443 October 1, 1993 16
State College, PA 300 January 31, 1994 27
Saginaw, MI 98 June 1, 1995 21
Benton Harbor, MI 158 June 20, 1995 25
Harrisburg, PA 370 December 1, 1994 15
Ottawa, Ontario 439 May 1, 1995 25
Elmira, NY 331 November 15, 1995 25
Allentown, PA 424 December 15, 1995 16
Cleveland, OH 95 December 15, 1995 31
Rochester, NY 296 September 10, 1996 15
Appleton, WI 297 October 1, 1996 33
Rockford, IL 295 October 1, 1996 25
Pittsburgh, PA 201 December 18, 1996 43
Owensboro, KY 369 June 1, 1997 6
Des Moines, IA 534 June 6, 1997 14
Green Bay, WI 288 June 6, 1997 14
Peoria, IL 346 August 1, 1997 18
Rhinelander, WI 385 August 1, 1997 21
Montreal, Quebec 529 November 6, 1997 7
White Plains, NY 505 March 1, 1998 15
Alpena, MI 198 September 9, 1998 21
Sault Ste. Marie, MI 283 September 9, 1998 21
Dubuque, IA 377 September 9, 1998 21
Duluth, MN 541 October 1, 1998 19
Greensboro, NC 460 June 2, 1999 7
Portland, ME 668 June 2, 1999 14
Number of
Nonstop air Date roundtrips
mileage from airline from
Memphis service Memphis
City Airport commenced per week
- ---------- ------------ --------- --------
Memphis, TN -- March 2, 1999 --
Cincinnati, OH 403 March 2, 1999 7
St. Louis, MO 256 March 2, 1999 15
Knoxville, TN 342 March 2, 1999 14
Atlanta, GA 332 April 4, 1999 15
Huntsville, AL 184 April 4, 1999 20
Wichita, KS 453 April 4, 1999 21
Cleveland, OH 622 May 1, 1999 1
Fayetteville, AK 245 May 15, 1999 20
Dallas/Ft. Worth, TX 432 June 2, 1999 8
From time to time Mesaba reviews the feasibility of expanding the
frequency of its service to airports currently being served, as well as
initiating passenger service to additional cities generally within its
service area. Mesaba works closely with Northwest to coordinate flight
schedules and to facilitate connections between Mesaba and Northwest. See
"Business - Agreements with Northwest."
<PAGE>
AIRCRAFT
The following table sets forth certain information as to Mesaba's
passenger aircraft fleet as of June 1, 1999:
Approximate Approximate
single Average
flight Cruising
Type of Number of Seating range Speed
aircraft aircraft Capacity (miles) (M.P.H.)
-------- -------- -------- ------- -------
Avro RJ85 26 69 1,400 410
Saab 340 74 30/34 500 300
Mesaba leases its Avro RJ85 aircraft from Northwest under operating
leases with terms of up to 10 years. The Jet Agreement allows Mesaba to
return aircraft to Northwest upon the occurrence of certain events. The
Avro RJ85 aircraft are fast, pressurized jet airplanes with galleys, dual
class cabin, standup headroom, lavatories, ACARS, radar, ground proximity
warning, traffic collision avoidance and de-icing systems.
Mesaba leases all of its Saab 340 aircraft, either directly from
aircraft leasing companies or through sub-leases with Northwest under
operating leases with terms of up to 17 years. The Airlink Agreement
allows Mesaba to return aircraft to Northwest upon the occurrence of
certain events. The Saab 340 aircraft are fast, fuel efficient,
pressurized jet-prop airplanes with galleys, standup headroom, lavatories,
radar, global positioning, ground proximity warning, traffic collision
avoidance and de-icing systems.
All of Mesaba's aircraft comply fully with all current Federal
Aviation Regulations issued by the Federal Aviation Administration ("FAA").
As of June 1999, Mesaba's existing fleet of Avro RJ85 and Saab
340BPlus aircraft had remaining lease terms of nine to 17 years. Lease
terms on Mesaba's 23 Saab 340A aircraft are subject to current negotiations
with Saab Aircraft leasing companies. The current aggregate monthly lease
payments for all aircraft is approximately $7,500,000.
COMPETITION
The airline industry is highly competitive as a result of the Airline
Deregulation Act of 1978 (the "Deregulation Act"). In general, the
Deregulation Act increased competition by eliminating restrictions on fares
and route selection. The Deregulation Act also contributed to the
withdrawal of national and major carriers from short-haul markets by
allowing them to more easily obtain additional long-haul routes, which can
be more efficiently and profitably served by jet aircraft. Elimination of
barriers to entry into new markets, however, also creates greater potential
for competing service by other carriers operating small, fuel-efficient
aircraft on short-haul routes serving small and medium-sized cities.
Mesaba currently competes directly with other regional airlines on some
routes it serves. Mesaba also faces competition from regional carriers
offering service to alternative hubs for connecting flights. However, due
to the consolidation of the airline industry and the development of the
"hub and spoke" network, Mesaba has experienced a reduction of competition
in its specific market segments. No assurance can be given that other
carriers, including major carriers, will not institute competing service on
routes served by Mesaba.
Competitive factors in the airline industry generally include fares,
frequency and dependability of service, convenience of flight schedules,
type of aircraft flown, airports served, relationships with travel agents,
and efficiency and reliability of reservations systems and ticketing
services. The compatibility of flight schedules with those of other
airlines and the ability to offer through fares and convenient
inter-airline flight connections are also important competitive factors.
The Company believes that Mesaba is competitive with respect to each of
such factors because of its established reputation, cost structure,
aircraft fleet which is properly suited for the small and medium-sized
cities served, and especially its relationship with Northwest.
<PAGE>
FUEL
The cost of aviation fuel is one of the Company's largest operating
expenses, accounting for 8.5% of total operating costs for the year ended
March 31, 1999, 10.1% the year ended March 31, 1998, and 10.7% for the year
ended March 31, 1997.
The Company has arrangements with Northwest and ten major fuel
suppliers for substantial portions of its fuel requirements. The Company
believes that such arrangements assure an adequate supply of fuel for
current and anticipated future operations. Both the cost and availability
of fuel, however, are subject to factors beyond the control of the Company.
Certain provisions of the Airlink Agreement protect Mesaba from future
increases in aviation fuel prices and Northwest provides fuel for all of
the jet operations
FARES
Mesaba derives its passenger revenues by selling its seat capacity to
Northwest at predetermined rates. Under the agreements with Northwest,
Mesaba has the ability to enter into arrangements with other air carriers
for service to cities not served by Northwest, so long as Mesaba does not
use the "NW" designator code, Avro RJ85 or Saab 340 aircraft with respect
to such service. Passenger fares vary primarily in relation to the length
of the flight and other factors and are established by Northwest.
REGULATION
Pursuant to the Federal Aviation Act of 1958, as amended (the
"Aviation Act"), the federal Department of Transportation ("DOT"),
principally through the FAA, has certain regulatory authority over the
operations of all air carriers. The jurisdiction of the FAA extends
primarily to the safety and operational provisions of the Aviation Act,
while the responsibility of the DOT involves principally the regulation of
certain economic aspects of airline operations.
FAA REGULATION. Mesaba holds an "Air Carrier Certificate" from the
FAA, under Part 119 of the Federal Aviation Regulation, permitting it to
conduct flight operations in compliance with Part 121 of the Federal
Aviation Regulations. The Part 121 regulations are the same regulatory
requirements applied to major airlines. The FAA regulations to which Mesaba
is subject are extensive and include, among other items, regulation of
aircraft maintenance and operations, equipment, ground facilities,
dispatch, communications, training, weather observation, flight personnel
and other matters affecting air safety. To ensure compliance with its
regulations, the FAA requires airlines to obtain operating, airworthiness
and other certificates that are subject to suspension or revocation for
cause. Mesaba holds all certificates necessary for its operations.
DOT REGULATION. Prior to October 1992, Mesaba was registered under
Part 298 of the economic regulations of the DOT. On October 26, 1992, the
DOT granted Mesaba a Certificate of Public Convenience and Necessity under
Section 401 of the Aviation Act. As a certificated carrier, Mesaba is
required to file certain additional quarterly reports with the DOT,
including a report of aircraft operating expenses and related statistics.
The Certificate of Public Convenience and Necessity is a prerequisite for
operations with aircraft larger than 60 seats.
OTHER REGULATION. Under the Noise Control Act of 1972 and the
Aviation Safety and Noise Abatement Act of 1979, the FAA has authority to
monitor and regulate aircraft engine noise. Management of the Company
believes that Mesaba's aircraft comply with or are exempt from such
regulations and that Mesaba complies with standards for aircraft exhaust
emissions and fuel storage facilities issued by the Environmental
Protection Agency. The Company is also required to comply with the drug-
testing program adopted under Part 14 CFR by the DOT. As a foreign carrier
operating in Canada, the Company is subject to regulation by the Canadian
Department of Transport and has been issued Foreign Air Carrier Operating
Certificates by such agency.
<PAGE>
INSURANCE
Mesaba carries the types of insurance customary in the airline
industry, including coverage for public liability, passenger liability,
property damage, aircraft loss or damage, baggage and cargo liability, and
workers' compensation. The Company believes that this insurance is
adequate as to amounts and risks covered. There can be no assurance,
however, that the insurance carried would be sufficient to protect the
Company adequately in the event of a catastrophic accident.
AIRCRAFT MAINTENANCE
Mesaba employs its own aircraft, avionics and engine maintenance
staff that perform substantially all routine maintenance to its aircraft
and engines. Major overhauls on its airframes, engines, and other rotable
parts on Saab 340 and RJ85 aircraft are performed internally or at FAA
authorized facilities.
AIRPORT AND TERMINAL FACILITIES AND SERVICES
Mesaba's ticket counter and baggage-handling space is leased from
local airport authorities or other airlines at all of the airports served.
In 41 of the cities it serves, Mesaba receives support service under
agreements with Northwest. The duration of the leases and service
agreements vary.
Mesaba pays local airport authorities for the use of landing fields
at rates that are based on the number of flights per day, fixed fees, or on
the number of aircraft landings and aircraft weight.
PROPERTIES
The Company's principal executive offices are located at the
Minneapolis/Saint Paul International Airport. Mesaba leases approximately
293,000 square feet of facilities, ramp, parking and unimproved land at the
airport under separate ground and facilities leases with the Metropolitan
Airports Commission. The lease expires on December 31, 2008 and provides
that Mesaba will have a right of first refusal on any new lease covering
the premises. Mesaba's primary facility contains approximately 83,000
square feet of office, shop, and hangar space. Mesaba is obligated to make
payments of approximately $35,000 per month under the lease for the hangar,
office and maintenance facility, in addition to approximately $13,000 per
month under the ground lease for the underlying land and access ramp.
Mesaba leases approximately 394,000 square feet of facilities, ramp,
parking and unimproved land at the Detroit Metropolitan Airport under
separate ground and facilities leases. The facilities lease covers
approximately 45,000 square feet of hangar and maintenance space and
obligates Mesaba to pay monthly rentals ranging between approximately
$22,000 and $36,000 until August 1, 2002 as part of Special Facilities Bond
financing provided by Wayne County, Michigan. The ground lease has a 20-
year term concurrent with the facilities lease, which expires August 1,
2010. Monthly lease payments of approximately $7,000 are currently
required under the ground lease, subject to an annual adjustment on January
1 each year based upon the percentage change in an index published by the
Bureau of Labor Statistics of the U.S. Department of Commerce.
Mesaba owns approximately 38,000 square feet of hangar and office
space located on approximately 102,000 square feet of land and parking
areas of which Mesaba is ground lessee, at the Central Wisconsin Airport in
Mosinee, Wisconsin. Mesaba pays approximately $800 per month under the
terms of the ground lease relating to such facility, which expires on
December 31, 2011, subject to two 10-year renewal options.
Mesaba has committed to lease approximately 497,000 square feet of
facilities, ramp, parking and unimproved land at the Cincinnati/Northern
Kentucky Airport under separate ground and facilities leases. The
facilities lease covers approximately 126,000 square feet of hangar and
maintenance space currently under construction and obligates Mesaba to pay
monthly rentals ranging between approximately $90,000 and $105,000 until
January 29, 2029 as part of Special Facilities Bond financing provided by
Cincinnati/Northern Kentucky Airport Authority. The ground lease is
<PAGE>
expected to have a 30-year term concurrent with the facilities lease, which
is expected to expire January 29, 2029. Monthly lease payments of
approximately $10,500 are anticipated to be required under the ground
lease.
EMPLOYEES
As of June 1999, Mesaba employed 3,005 persons, of whom 875 were
pilots, 276 were management, administrative and clerical personnel, 295
were aircraft maintenance personnel, 1,043 were station managers, station
agents and line services personnel, and 516 were flight attendants.
Approximately 690 of Mesaba's employees are part-time.
The Air Line Pilots Association ("ALPA") represents Mesaba's pilots.
Mesaba concluded negotiations with ALPA and reached a new collective
bargaining agreement effective June 1, 1996, with a term of four years. In
October 1996, Mesaba and ALPA reached agreement on a modification of the
collective bargaining agreement which, in addition to other enhancements,
extended the term of the agreement to June 1, 2002.
Mesaba's mechanics are represented by the Aircraft Mechanics
Fraternal Association ("AMFA"). Formal negotiations between Mesaba and
AMFA are currently in progress. The Company has yet to achieve its first
contract with AMFA, although negotiations have been ongoing since July,
1997. At the request of AMFA, a mediator from the National Mediation Board
("NMB") is assisting in the negotiations. The Railway Labor Act precludes
any job action without a formal declaration of an impasse by the NMB, which
has not yet occurred. Any work stoppage, whether from a failure to enter
into a new collective bargaining agreement or otherwise, could have a
material adverse impact on the Company.
Mesaba has had no work stoppages and management, in general,
believes that its relations with its employees are good.
CYCLICALITY AND SEASONALITY
The airline industry generally is subject to cyclical moves in the
economy. Because both personal discretionary travel and business travel
may be expected to decline during periods of economic weakness, the airline
industry tends to experience poorer financial results during such periods.
Further, because the Company serves primarily the North Central region,
its results may be affected to a greater extent by regional economic
variations than the results of air carriers with national operations.
Seasonal factors, primarily weather conditions and passenger demand,
historically have affected Mesaba's monthly passenger boardings. The first
and second fiscal quarters have typically shown a higher level of passenger
boardings as compared with the third and fourth quarters for many of the
cities served by Mesaba. As a result of such factors, the Company's
revenues and earnings historically have been higher during the first six
months of the fiscal year.
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the
executive officers of the Company and its subsidiary, Mesaba Aviation, Inc.
Officer
Name Age Position since
---- --- -------- -------
Carl R. Pohlad 83 Chairman of the Company and Mesaba 1995
John S. Fredericksen 50 Interim Chief Executive Officer and 1992
Vice President, Administration,
General Counsel and Secretary of
the Company and Mesaba
Robert H. Cooper 39 Vice President, Chief Financial 1997
Officer and Treasurer of the
Company and Mesaba
F. Darrell Richardson 52 Vice President and Chief Operating 1995
Officer of Mesaba
Scott L. Durgin 37 Vice President, Customer Service 1996
of Mesaba
CARL R. POHLAD is a Class Two director and Chairman of the Board of
Directors. Mr. Pohlad has been President and a director of Marquette
Bancshares, Inc. since 1993. Prior to 1993, Mr. Pohlad served as President
and Chief Executive Officer of Marquette Bank Minneapolis and Bank Shares
Incorporated. Mr. Pohlad was Chairman of the Board of MEI Corporation from
1972 to 1986 and Chairman of the Board of MEI Diversified Inc. from 1986 to
1994. Mr. Pohlad is also an owner, director and the President of CRP
Sports, Inc., the managing general partner of the Minnesota Twins baseball
club, and is a director of Genmar Holdings, Inc.
JOHN S. FREDERICKSEN was appointed interim Chief Executive Officer of
the Company and Mesaba on June 29, 1999, to replace Bryan K. Bedford, who
resigned as President and Chief Executive Officer on that date. Mr.
Fredericksen joined the Company as Vice President, General Counsel in July
1992. In August 1993, Mr. Fredericksen was appointed Senior Vice President,
Operations of the Company and Mesaba. He was appointed Secretary of the
Company and Mesaba in November 1994. In October 1995, he was appointed Vice
President, Administration; General Counsel and Secretary of the Company and
Mesaba. From March 1987 until joining the Company, Mr. Fredericksen was
employed by the Regional Airline Association, Washington, D.C., serving most
recently as its President. From 1980 until 1987, Mr. Fredericksen was an
attorney with the Federal Aviation Administration.
ROBERT H. COOPER was named Vice President, Chief Financial Officer
and Treasurer of the Company and Mesaba in July 1997. Mr. Cooper joined
the Company as Director of Finance in October 1995. Mr. Cooper served as
Corporate Controller for Atlantic North America from August 1994 to October
1995. He served as Corporate Controller of Phoenix Airline Services, Inc.
from September 1991 until July 1994. From 1984 until September 1991, Mr.
Cooper held various positions, the last being Assistant Corporate
Controller, for Murata Electronics Corporation.
<PAGE>
F. DARRELL RICHARDSON joined Mesaba as Vice President and Chief
Operating Officer in September 1995. Mr. Richardson was Senior Vice
President, Operations of Phoenix Airline Services, Inc. from November 1993
until joining the Company. He served as President and Chief Executive
Officer of United Aerodynamics Corporation from July 1991 to October 1993
and as Vice President of Maintenance and Engineering of Continental Express
from June 1989 to June 1991. Prior to June 1989, Mr. Richardson was
employed in various positions in the aviation industry, beginning in 1968.
SCOTT L. DURGIN joined the Company as Vice President, Customer
Service in December 1996. Mr. Durgin was Vice President, Customer Service
of Business Express Airlines from May 1995 until joining the Company. He
served as a Regional Director for Express I Airlines from December 1991 to
May 1995, and held various positions, the last being Director of Stations,
at Pilgrim Airlines from 1983 until December 1991.
<PAGE>
Item 2. PROPERTIES
See information provided under the captions "Business . Aircraft," ".
Airport and Terminal Facilities and Services," and ". Properties" in Item 1
herein.
Item 3. LEGAL PROCEEDINGS
The Company is not currently a party to any material pending legal
proceedings. From time to time the Company may become involved in routine
litigation incidental to its business.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS DURING
FOURTH QUARTER OF FISCAL YEAR
There were no matters submitted to a vote of the Company's
shareholders during the three-month period ended March 31, 1999.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded under the symbol "MAIR" on the
NASDAQ National Market.
The following table sets forth the range of high and low sale prices
for the Company's Common Stock and the dividends per share for each of the
fiscal quarters of the two years ended March 31, 1999. Quotations for such
periods are as reported by NASDAQ for National Market issues. All prices
have been adjusted to reflect the Company's three-for-two stock split
effective April 30, 1998.
Stock Quotations
($) High ($) Low
Fiscal 1998
First quarter 10.18 7.50
Second quarter 14.75 8.83
Third quarter 17.33 13.42
Fourth quarter 21.00 15.83
Fiscal 1999
First quarter 24.25 20.00
Second quarter 28.75 13.00
Third quarter 21.00 9.75
Fourth quarter 21.00 12.13
On June 2, 1999, the number of holders of record of Common Stock was
928.
The transfer agent for the Company's Common Stock is Norwest Bank
Minnesota, National Association, 161 North Concord Exchange, South St.
Paul, Minnesota, 55075-0738, telephone: (651) 450-4064.
<PAGE>
Item 6. SELECTED FINANCIAL DATA AND STATISTICAL COMPARISON
The following table sets forth selected financial data with respect
to the Company as of the dates and for the periods indicated. The selected
financial data has been derived from the audited financial statements. The
financial data set forth below should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in Item 7.
March 31,
---------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(amounts in thousands, except per share data)
Statement of Operations Data:
Operating revenues $331,753 $277,225 $185,701 $170,455 $145,900
Operating expenses $299,531 $246,856 $166,118 $158,148 $141,541
-------- -------- -------- -------- --------
Operating income $ 32,222 $ 30,369 $ 19,583 $ 12,307 $ 4,359
======== ======== ======== ======== ========
Net income $ 21,271 $ 19,804 $ 11,986 $ 6,972* $ 2,606
======== ======== ======== ======== ========
Net income per
share - diluted $ 0.99 $ 0.95 $ 0.62 $ 0.40* $ 0.19
======== ======== ======== ======== ========
Weighted Average number of
shares outstanding and common
share equivalents - diluted 21,512 20,846 19,310 17,534 13,670
*Excludes non-taxable gain of $49,303 from distribution of subsidiary
As of March 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(dollars in thousands)
Balance Sheet Data:
Current assets $117,354 $ 94,201 $ 71,201 $ 44,465 $ 46,154
Net property and equipment 47,195 32,097 19,772 12,388 14,931
Other noncurrent assets 14,674 10,893 13,593 1,351 5,799
-------- -------- -------- -------- --------
Total assets $179,223 $137,191 $104,566 $ 58,204 $ 66,884
======== ======== ======== ======== ========
Current liabilities $ 48,674 $ 42,509 $ 33,393 $ 17,323 $ 17,052
Long-term liabilities 21,310 19,136 21,379 6,466 7,388
Shareholders' equity 109,239 75,546 49,794 34,415 42,444
-------- -------- -------- -------- --------
Total liabilities and
shareholders' equity $179,223 $137,191 $104,566 $ 58,204 $ 66,884
======== ======== ======== ======== ========
<PAGE>
Mesaba Aviation, Inc. (1)
Year ended March 31,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Selected Operating Data:
Revenue passengers
carried 4,342,200 3,324,146 1,959,632 1,572,401 1,433,605
Revenue passenger miles 1,112,050 805,495 445,871 344,592 314,636
Available seat miles 1,994,626 1,469,229 864,083 732,018 705,182
Passenger revenue per $.165 $.186 $.212 $.204 $.191
Cost per available seat $.150 $.168 $.192 $.190 $.178
Passenger load factor 55.8% 54.8% 51.6% 47.1% 44.6%
Break-even load factor 49.8% 48.3% 46.3% 43.3% 40.9%
Yield per revenue $.295 $.340 $.416 $.434 $.428
Departures 236,209 201,622 144,266 123,985 114,399
__________________________
(1) Does not include the operations of AirTran Airways, Inc. which was
spun off from the Company on September 7, 1995.
(2) "Revenue passenger miles" are determined by multiplying the number of
fare paying passengers carried by the distance flown.
(3) "Available seat miles" are determined by multiplying the number of
seats available for passengers by the number of miles flown.
(4) "Passenger load factor" is determined by dividing revenue passenger
miles by available seat miles.
(5) "Break-even load factor" is computed by dividing the sum of the
airline operating expenses and net interest expense by total airline
operating revenues and multiplying the result by the passenger load
factor.
(6) "Yield per revenue passenger mile" is determined by dividing passenger
revenue by revenue passenger miles.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (As used herein, "unit cost" means operating
cost per available seat mile. Dollars and shares outstanding are
expressed in thousands)
EARNINGS SUMMARY
The Company reported net income of $21.3 million or $0.99 per share
for the fiscal year ended March 31, 1999, compared to $19.8 million or
$0.95 per share in fiscal 1998 and $12.0 million or $0.62 per share in
fiscal 1997. Weighted average common shares and common share equivalents
outstanding increased to 21.5 million in the current year from 20.8 million
and 19.3 million respectively. The increase in the average number of
shares outstanding was due primarily to the dilutive effect of the issuance
of warrants to Northwest and the exercise of stock options by current and
former employees. On August 29, 1998 the Company temporarily suspended
operations as a result of the pilot strike at Northwest Airlines. The
Company resumed service on September 16, 1998. The suspension of service
had a material adverse affect on the results of operations for the current
fiscal year. Earnings per share and weighted average shares outstanding
for fiscal 1998 and 1997 have been adjusted to reflect a three-for-two
stock split in the form of a 50% stock dividend declared by the Board of
Directors on April 6, 1998 for shares held of record on April 17, 1998.
RESULTS OF OPERATIONS
OPERATING REVENUES. Operating revenues rose 19.7% to $331.8 million
in fiscal 1999 from $277.2 million in fiscal 1998 and $185.7 million in
fiscal 1997. Passenger revenue per available seat mile ("RASM") decreased
11.3% to $0.165 from $0.186 in 1998 and 22.2% from $0.212 in 1997,
primarily due to the introduction of the higher capacity RJ85 aircraft.
Mesaba's average passenger load factor was 55.8% in 1999, up from 54.8% in
1998 and 51.6% in 1997. The improvement in traffic and load factor are
attributable to the introduction of 12 RJ85 aircraft and the expanded jet-
prop activity at the Minneapolis/St. Paul airport as well as overall
increases in passenger demand within the industry. These increases were
offset by the 18-day suspension of service as a result of the pilot strike
at Northwest Airlines.
OPERATING EXPENSES. Total operating expenses increased 21.3% to
$299.5 million in 1999 from $246.9 million in 1998 and $166.1 million in
1997. Mesaba experienced a 10.7% decrease in the cost per available seat
mile ("CASM") to 15.0 cents compared with 16.8 cents in 1998. Seat capacity
(measured in available seat miles "ASM") increased 35.8% in 1999 to 1.99
billion, primarily as a result of the introduction of 12 RJ85 aircraft, and
the increased activity at the Minneapolis/St. Paul airport. The following
table compares components of Mesaba's operating cost per ASM for the years
ended March 31, 1999, 1998 and 1997:
1999 1998 1997
------ ------ ------
Wages and benefits 4.0 CENTS 4.6 CENTS 5.8 CENTS
Fuel 1.3 1.7 2.1
Direct maintenance 2.8 2.9 2.9
Rents 3.5 3.9 3.6
Landing fees 0.4 0.4 0.6
Insurance and taxes 0.4 0.5 0.6
Depreciation and amortization 0.5 0.4 0.5
Other 2.1 2.4 3.1
------ ------ ------
Total 15.0 CENTS 16.8 CENTS 19.2 CENTS
Wages and benefits increased 19.5% to $80.3 million in fiscal 1999
compared to $67.2 million in fiscal 1998 and $49.9 million in fiscal 1997.
However the increased capacity generated by the additional aircraft has
caused these costs to be reduced on a unit cost basis 13.0% to 4.0 cents
from 4.6 cents. The overall dollar increase is a result of increased cost
of flight crews due to a 14.2% increase in block hours flown and the
addition of flight crews to support the introduction of the RJ85 aircraft
<PAGE>
as well as continued costs to support the Saab fleet transition program.
Mesaba also experienced an increase in wage and benefit cost of support
personnel due to an increase in scheduled operations. Overall, personnel
levels (measured on a full time equivalent basis at the fiscal year end)
increased 200 to approximately 2,700 from 2,500, with the remaining
increase due to normal wage and benefit increases.
Total fuel costs increased 2.0% to $25.5 million in fiscal 1999 from
$25.0 million in fiscal 1998 and $17.9 million in fiscal 1997. The change
is attributable to increased consumption. The average price per gallon,
including taxes and into plane fees, was 83.5 cents in fiscal years 1999,
1998 and 1997. Certain provisions ofthe Airlink Agreement protect Mesaba
from future increases in fuel prices. Unit cost decreased 23.5% to 1.3
cents from 1.7 cents. Mesaba is not required to provide fuel for the jet
operation.
Direct maintenance expense, excluding wages and benefits costs,
increased to $56.7 million in fiscal 1999 from $42.2 million in fiscal 1998
and $25.0 million in fiscal 1997. This increase was attributable to the
addition of 12 RJ85 and 24 Saab 340BPlus aircraft to the fleet when
compared to one year ago. This increase was partially offset by lower
costs associated with the Dash 8 fleet due to 13 aircraft having been
removed from service and returned to lessors. On a unit cost basis the
cost decreased 3.6% from 2.9 to 2.8 cents
Aircraft rentals were $70.4 million in fiscal 1999, $57.2 million in
fiscal 1998 and $31.2 million in fiscal 1997. Mesaba added 12 RJ85 and 24
Saab 340 aircraft during the period and returned 13 Dash 8 aircraft to
lessors. However, unit costs decreased 10.3% to 3.5 cents from 3.9 cents.
Fiscal year 1998 costs include $7.7 million in wet leased aircraft
expenses.
Landing fees were $6.9 million in fiscal 1999, $6.3 million in fiscal
1998 and $4.8 million in fiscal 1997. The increase is attributable to a
14.1% increase in jet-prop departures, which caused an increase in the
total gross landing weight. This increase was partially offset by a slight
decrease in the overall effective landing fee rate. Unit cost was
unchanged at 0.4 cents. Mesaba is not required to pay landing fees for jet
aircraft.
Insurance and taxes were $6.9 million in fiscal 1999, $6.8 million in
fiscal 1998 and $5.3 million in fiscal 1997. This is due primarily to an
increase in passenger liability insurance associated with increased
passenger volume and an increase in property taxes and hull insurance
caused by increasing fleet values offset by a reduction in passenger
liability and hull insurance rates. Due to the additional capacity
generated by the jet and jet-prop equipment, unit cost decreased 20.0% to
0.4 cents from 0.5 cents.
Depreciation and amortization totaled $10.0 million in fiscal 1999
compared to $6.5 million in fiscal 1998 and $4.3 million in fiscal 1997.
The increase in Mesaba's depreciation and amortization resulted primarily
from the acquisition of spare parts to support the RJ85 and Saab 340 fleet.
In April and June 1998, the Company paid a contract rights fee in the form
of stock purchase warrants to Northwest as part of amendments to the
Regional Jet Services Agreement allowing for the increase from 12 to 36
aircraft. Contract rights are being amortized on a straight-line basis
over the minimum term of the Jet Agreement through October 2002. Unit
costs increased 25.0% to 0.5 cents from 0.4 cents.
Administrative and other costs totaled $42.8 million in fiscal 1999,
$35.7 million in fiscal 1998 and $27.8 million in fiscal 1997. This
increase is primarily attributable to higher crew related expenses due to
increased flying and training to support the RJ85 and Saab 340 fleet
transition program. Additionally, higher passenger and airport related
expenses were incurred due to increases in traffic and the number of cities
served. Unit cost decreased 12.5% to 2.1 cents from 2.4 cents. Mesaba is
generally not required to provide airport and passenger related expenses
for the jet operation.
OPERATING INCOME. The Company's operating income was $32.2 million in
fiscal 1999, $30.4 million in fiscal 1998 and $19.6 million in fiscal 1997.
Mesaba's operating margins were 9.7% in 1999, 11.0% in 1998 and 10.5% in
1997. Both operating income and operating margins were adversely impacted
by the pilots strike at Northwest Airlines which resulted in an 18-day
suspension of service.
NONOPERATING INCOME. Nonoperating income was $4.0 million in fiscal
<PAGE>
1999, $2.6 million in fiscal 1998 and $1.1 million in fiscal 1997.
Interest income increased $1.5 million to $3.7 million in 1999 from $2.2
million in 1998.
PROVISION FOR INCOME TAXES. The provision for income taxes was $14.1
million in fiscal 1999, $13.1 million in fiscal 1998 and $8.7 million in
fiscal 1997. The effective tax rate decreased to 39.0% in 1999 from 39.9%
in 1998 and 42.1% (not including the gain on distribution which is not
taxable) in 1997. This decrease is due primarily to the lower level of
nondeductible expenses as a percentage of taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $68.7 million with a
current ratio of 2.4 at March 31, 1999 compared to $51.7 million and 2.2 at
March 31, 1998. Cash and short-term investments increased by $16.6 million
to $83.2 million at March 31, 1999. Net cash flows provided by operating
activities totaled $35.9 million in fiscal 1999 compared to $30.0 million
in fiscal 1998. Net cash flows provided by financing activities amounted
to $3.4 million in fiscal 1999 and consisted of $3.8 million in proceeds
from the exercise of stock options by current and former employees offset
by principal payments of $0.4 million.
The Company maintains a letter of credit facility totaling $0.2
million, which secures a lease commitment to the County of Wayne, Michigan
for the Company's Detroit hangar.
Long term debt, net of current maturities, totaled $4.4 million at
March 31, 1999 and $4.8 million as of March 31, 1998. Long-term debt
consists principally of capitalized lease financing for the Minneapolis/St.
Paul and Detroit hangar facilities. The ratio of long term debt to
stockholders' equity was 4% at March 31, 1999 compared to 6% at the end of
fiscal 1998.
As of June 1999, Mesaba's fleet consisted of 100 aircraft covered
under operating leases with remaining terms of eight months to 17 years and
aggregate monthly lease payments of approximately $7.5 million. Operating
leases have been the Company's primary method for acquiring aircraft, and
management expects to continue relying on this method to meet most of its
future aircraft financing needs.
During Fiscal 1999, Mesaba committed to lease approximately 497,000
square feet of facilities, ramp, parking and unimproved land at the
Cincinnati/Northern Kentucky Airport. The commitment covers approximately
126,000 square feet of hangar and maintenance space and obligates Mesaba to
pay monthly rentals expected to range between approximately $95,000 and
$105,000 until January 29, 2029 as part of Special Facilities Bond
financing provided by Cincinnati/Northern Kentucky Airport Authority. The
ground lease is expected to have a 30-year term concurrent with the
facilities lease, which is expected to expire January 29, 2029. Monthly
lease payments of approximately $10,500 are anticipated to be required
under the ground lease.
Approximately 81% of Mesaba's passengers connected with Northwest in
fiscal 1999, 79% in 1998 and 72% in 1997. Approximately 89% of the
Company's accounts receivable balance at March 31, 1999 is due from
Northwest. Loss of the Company's affiliation with Northwest or Northwest's
failure to make timely payment of amounts owed to the Company or to
otherwise materially perform under the Airlink or Jet Agreement for any
reason would have a material adverse effect on the Company's operations and
financial results.
The Company has historically relied upon cash reserves and internally
generated funds to support its working capital requirements. Other than
financing required for the new maintenance facility, management believes
that funds from operations and existing cash balances will provide adequate
resources for meeting non-aircraft capital needs in fiscal 2000.
OTHER INFORMATION
The Company has implemented a Year 2000 compliance program designed to
ensure that the Company's internal information technology will function
properly beyond 1999. This includes software applications, hardware and
<PAGE>
infrastructure which are essential for flight scheduling; aircraft
maintenance; finance systems; internal communication and facilities
management. The Company estimates that the overall cost of the Year 2000
compliance program will not exceed $500,000 and expects its Year 2000 date
conversion program to be completed on a timely basis. Any expenditure
will be funded through operating cash flows while any costs for new
software will be capitalized and amortized over the software's useful life.
The Company is working cooperatively with third parties having systems
upon which the Company must rely. The Company can not give any assurance
that the systems of other parties will be year 2000 compliant on a timely
basis or the Company's or third parties contingency plans will mitigate the
effects of noncompliance. Third parties with systems the Company uses or
relies upon include: Federal Aviation Administration Air Traffic Control,
Saab Aircraft, British Aerospace and Northwest Airlines. The Company's
business, financial condition and results of operations could be materially
affected by the failure of its systems or those operated by others (which
the Company believes is the most reasonable worst case scenario) and could
result in the reduction or suspension of the Company's operation.
The Company is reviewing and revising its business interruption
contingency plans to address internal and external issues to the extent
practicable. The review, together with any necessary revisions, will be
completed by September 1999. The review of these plans will include how to
maintain safety, increase inventory of essential components, change
suppliers, perform certain functions and processes manually and reduce or
suspend operations. Due to the uncertainty related to year 2000 issues,
the Company's contingency plan will be ongoing in nature and may require
further modifications to existing systems as new information is made
available and the Company further assesses the readiness of third parties
upon which the Company relies.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and the related
Report of Independent Public Accountants are included in this Form 10-K on
the pages indicated below.
Page
Report of Independent Public Accountants.................... 22
Consolidated balance sheets as of March 31, 1999 and 1998... 23
Consolidated statements of operations for the years
ended March 31, 1999, 1998 and 1997.................... 24
Consolidated statements of shareholders' equity for the years
ended March 31, 1999, 1998 and 1997.................... 25
Consolidated statements of cash flows for the years
ended March 31, 1999, 1998 and 1997.................... 26
Notes to consolidated financial statements.................. 27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mesaba Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Mesaba
Holdings, Inc. (a Minnesota corporation) and Subsidiary as of March
31, 1999 and 1998, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three
years in the period ended March 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Mesaba
Holdings, Inc. and Subsidiary as of March 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three
years in the period ended March 31, 1999, in conformity with generally
accepted accounting principles.
As explained in Note 7 to the financial statements, effective April 1,
1998, the Company changed its method of accounting for start-up costs.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
May 7, 1999
<PAGE>
MESABA HOLDINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Information)
As of March 31,
---------------
1999 1998
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 83,152 $ 66,554
Accounts receivable, net 15,905 13,610
Inventories 6,564 5,547
Prepaid expenses and deposits 3,719 3,788
Deferred income taxes 8,014 4,702
-------- --------
Total current assets 117,354 94,201
PROPERTY AND EQUIPMENT:
Facilities under capital lease 9,147 9,147
Flight equipment 41,178 22,449
Other property and equipment 21,635 16,865
Accumulated depreciation and amortization (24,765) (16,364)
-------- --------
Net property and equipment 47,195 32,097
OTHER ASSETS, net 14,674 10,893
-------- --------
$179,223 $137,191
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of capital lease obligations $ 393 $ 436
Accounts payable 20,857 18,093
Accrued liabilities-
Payroll 8,786 9,362
Maintenance 10,415 6,877
Other 8,223 7,741
-------- --------
Total current liabilities 48,674 42,509
CAPITAL LEASE OBLIGATIONS, net of current 4,359 4,751
maturities
OTHER NONCURRENT LIABILITIES 16,951 14,385
-------- --------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 60,000,000 shares
authorized; 19,863,829 and 19,397,523 shares
issued and outstanding, respectively 199 194
Paid-in capital 45,013 41,196
Warrants 16,500 7,900
Retained earnings 47,527 26,256
-------- --------
Total shareholders' equity 109,239 75,546
-------- --------
$179,223 $137,191
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
MESABA HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(In Thousands, Except Per Share Information)
For the Years Ended March 31,
1999 1998 1997
-------- -------- --------
OPERATING REVENUES:
Passenger $328,244 $273,973 $183,409
Freight and other 3,509 3,252 2,292
-------- -------- --------
Total operating revenues 331,753 277,225 185,701
OPERATING EXPENSES:
Wages and benefits 80,297 67,194 49,850
Aircraft fuel 25,512 24,983 17,850
Aircraft maintenance 56,682 42,172 25,012
Aircraft rents 70,422 57,235 31,242
Landing fees 6,886 6,330 4,770
Insurance and taxes 6,894 6,761 5,307
Depreciation and amortization 10,027 6,500 4,265
Other 42,811 35,681 27,822
-------- -------- --------
Total operating expenses 299,531 246,856 166,118
Operating income 32,222 30,369 19,583
NONOPERATING (EXPENSE) INCOME:
Interest expense (443) (458) (511)
Interest income and other 4,405 3,022 1,641
-------- -------- --------
Income before income taxes and
change in accounting principle 36,184 32,933 20,713
PROVISION FOR INCOME TAXES 14,113 13,129 8,727
-------- -------- --------
Net income before change in
accounting principle $ 22,071 $ 19,804 $ 11,986
PRE-OPERATING COST WRITE-OFF, net of tax (800) - -
-------- -------- --------
Net income $ 21,271 $ 19,804 $ 11,986
======== ========= =========
Earnings Per Common Share Before
Accounting Change - Basic $ 1.12 $ 1.03 $ 0.63
======== ========= =========
Earnings Per Common Share - Basic $ 1.07 $ 1.03 $ 0.63
======== ========= =========
Weighted Average Number of Common Shares
Outstanding - Basic 19,793 19,270 19,143
======== ========= =========
Earnings Per Common Share Before
Accounting Change - Diluted $ 1.03 $ 0.95 $ 0.62
======== ========= =========
Earnings Per Common Share - Diluted $ 0.99 $ 0.95 $ 0.62
======== ========= =========
Weighted Average Number of Common Shares
Outstanding and Common Share
Equivalents Outstanding - Diluted 21,512 20,846 19,310
======== ========= =========
The accompanying notes are an integral part of these consolidated statements.
<TABLE>
<CAPTION>
MESABA HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
For the Years Ended March 31
(In Thousands, Except Share and Per Share Information)
Total
Common Stock Paid-In Warrants Retained Shareholders'
Shares Amount Capital Shares Amount Earnings Equity
------------------ --------- ------------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, March 31, 1996 19,104,069 190 39,759 - - (5,534) $ 34,415
Issuance of warrants - - - 922,500 3,100 - 3,100
Exercise of stock options, net of related tax effects 72,000 2 291 - - - 293
Net income - - - - - 11,986 11,986
---------- ---- -------- ---------- -------- -------- ---------
BALANCE, March 31, 1997 19,176,069 192 $40,050 922,500 3,100 6,452 $ 49,794
Issuance of warrants - - - 1,320,000 4,800 - 4,800
Exercise of stock options, net of related tax effects 221,184 2 1,146 - - - 1,148
Net income - - - - - 19,804 19,804
---------- ---- -------- ---------- -------- -------- ---------
BALANCE, March 31, 1998 19,397,253 $194 $41,196 2,242,500 $7,900 $26,256 $ 75,546
Issuance of warrants - - - 1,909,422 8,600 - 8,600
Exercise of stock options, net of related tax effects 466,576 5 3,817 - - - 3,822
Net income - - - - - 21,271 21,271
---------- ---- -------- ---------- -------- -------- ---------
BALANCE, March 31, 1999 19,863,829 $199 $45,013 4,151,922 $16,500 $47,527 $109,239
========== ==== ======== ========== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
MESABA HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(In Thousands)
For the Years Ended March 31,
1999 1998 1997
-------- -------- --------
OPERATING ACTIVITIES:
Net income $ 21,271 $ 19,804 $ 11,986
Adjustments to reconcile net income to
net cash provided by operating
activities-
Depreciation and amortization 10,027 6,500 4,265
Deferred income taxes (2,581) (819) (2,228)
Change in current operating items:
Accounts receivable, net (1,018) (266) (4,090)
Inventories (443) (1,835) (411)
Prepaid expenses and deposits 69 (734) (280)
Accounts payable and other 8,557 7,305 14,117
-------- -------- --------
Net cash flows provided by
operating activities 35,882 29,955 23,359
-------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (22,669) (13,418) (3,301)
Increase in other assets - 175 (219)
-------- -------- --------
Net cash flows used for investing
activities (22,669) (13,243) (3,520)
FINANCING ACTIVITIES:
Repayment of capital lease obligations (437) (432) (434)
Proceeds from issuance of common stock 3,822 1,148 293
-------- -------- --------
Net cash flows (provided by) used
for financing activities 3,385 716 (141)
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 16,598 17,428 19,698
CASH AND CASH EQUIVALENTS:
Beginning of year 66,554 49,126 29,428
-------- -------- --------
End of year $ 83,152 $ 66,554 $ 49,126
======== ======== ========
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 443 $ 458 $ 511
======== ======== ========
Income taxes $ 14,569 $ 15,169 $ 7,948
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
MESABA HOLDINGS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Share and Per Share Information)
1.CORPORATE ORGANIZATION AND BUSINESS
CORPORATE ORGANIZATION
The consolidated financial statements include the accounts of Mesaba
Holdings, Inc. (the "Company") and its subsidiary, Mesaba Aviation, Inc.
("Mesaba"). All significant intercompany balances have been eliminated in
consolidation.
BUSINESS
The Company operates a regional air carrier providing scheduled passenger
and air freight service as Mesaba Airlines/Northwest Airlink and Mesaba
Airlines/Northwest Jet Airlink under two separate agreements with Northwest
Airlines, Inc.("Northwest") to 101 cities from Northwest's hub airports,
Minneapolis/St. Paul, Detroit and Memphis.
The Airline Services Agreement (the "Airlink Agreement") provides for
exclusive rights to designated service areas and extends through June 30,
2007, automatically renewing indefinitely thereafter. Northwest may
terminate the Airlink Agreement on 365 days notice any time after June 30,
2000. In addition, Mesaba purchases fuel, reservation systems, ground
handling and other services from Northwest. The Company paid $16,440 to
Northwest in fiscal 1999, $17,963 in 1998 and $16,611 in 1997 for these
sevices. The Airlink Agreement provides for certain incentive payments
from Northwest to Mesaba based on achievement of certain operational or
financial goals, as defined. Such incentives totaled $4,830 in 1999,
$4,297 in 1998, and $1,960 in 1997.
Mesaba and Northwest entered into a Regional Jet Services Agreement, dated
October 25, 1996 (the "Jet Agreement"), under which Mesaba will operate 36
Avro RJ85 ("RJ85") regional jets for Northwest. The aircraft will be
subleased from Northwest and will be operated from Minneapolis/St. Paul,
Detroit and Memphis hubs according to routes and schedules determined by
Northwest. Under the Jet Agreement, Mesaba is not required to provide
fuel and airport and passenger related services. Jet service began in June
1997.
Under the agreements, all Mesaba flights appear in Northwest's timetables
and Mesaba receives ticketing and certain check-in, baggage and
freight-handling services from Northwest at certain airports. Mesaba also
benefits from its relationship with Northwest through advertising and
marketing programs.
Approximately 81% of Mesaba's passengers connected with Northwest in fiscal
1999, 79% in 1998 and 72% in 1997. Approximately 89% of the March 31, 1999
accounts receivable balances in the accompanying consolidated balance sheet
are due from Northwest.
Although Mesaba maintains an expanding air system serving those traffic
centers, loss of Mesaba's affiliation with Northwest or Northwest's
failure to make timely payment of amounts owed to the Company or to
otherwise materially perform under the Airlink or Jet Agreement would
have a material adverse effect on the Company's operations, financial
position and cash flows. Northwest and the Company review contract
compliance on a periodic basis.
<PAGE>
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash equivalents consist primarily of U.S. government securities and
interest-bearing deposits with average maturities of less than 90 days and
are stated at cost, which approximates market.
INVENTORIES
Inventories are stated at the lower of average cost or market and consist
of expendable aircraft service parts and fuel. Expendable parts are
charged to maintenance as used.
PROPERTT AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a
straight-line basis for financial reporting purposes over estimated useful
lives of 5-10 years for aircraft engines, flight equipment and rotable
parts; 3-10 years for all other equipment; 5-36 years for buildings and
improvements; and over the lease term for facilities under capital lease.
Leasehold improvements are amortized over the shorter of the life of the
lease or the life of the asset. Accelerated cost recovery methods of
depreciation are applied for tax reporting purposes.
CONTRACT RIGHTS
In connection with the Jet Agreement as amended, the Company paid a
contract rights fee in the form of stock purchase warrants to Northwest.
Contract rights and related other assets totaled $11,700 and related
accumulated amortization totaled $1,759 and $689 at March 31, 1999 and
1998 respectively. Contract rights are amortized on a straight-line basis
over six years to coincide with the minimum term of the Jet Agreement.
In connection with the Airlink Agreement, the Company paid a contract
rights fee in the form of a stock purchase warrant to Northwest. Contract
rights and related other assets totaled $4,800 and related accumulated
amortization totaled $840 and $360 at March 31, 1999 and 1998 respectively.
Contract rights are amortized on a straight-line basis over ten years to
coincide with the term of the Airlink Agreement.
REVENUE RECOGNITION
Passenger revenues are recorded as income when the respective services are
rendered.
FREQUENT FLYER AWARDS
As a Northwest Airlink carrier, Mesaba participates in Northwest's frequent
flyer program ("WorldPerks"), and passengers may use mileage accumulated in
that program to obtain discounted or free trips that might include a flight
segment on one of Mesaba's flights. However, under the Airlink or Jet
Agreement, Northwest is responsible for the administration of WorldPerks,
and Mesaba receives revenue from Northwest for WorldPerks travel awards
redeemed on Mesaba flight segments.
INCOME TAXES
The Company accounts for income taxes under the liability method whereby
deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities. These differences will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
<PAGE>
INCOME PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
requires presentation of "Basic" and "Diluted" earnings per share amounts,
as defined. "Basic" earnings per share replaces primary earnings per share
under APB Opinion No. 15, and excludes the dilutive effects of options,
warrants and convertible securities, if any, from the calculation. Fully
diluted earnings per share has not changed significantly but has been named
"Dilutive" earnings per share. Statement No. 128 became effective for
fiscal 1998. All earnings per share prior to 1998 have been restated to
comply with this Statement.
OTHER ASSETS
In order to assist the Company in integrating new aircraft into its fleet,
certain manufacturers provide the Company with spare parts or other credits.
The Company has deferred these amounts and amortizes them over the terms of
the related aircraft leases as a reduction of rent expense. Amortization
expense of $1,822 and $1,071 was recorded during the year ended March 31,
1999 and 1998 respectively.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability
of the remaining balance of its long-lived assets. If such events or
circumstances were to indicate that the carrying amount of these assets
would not be recoverable, the Company would estimate the future cash flows
expected to result from the use of the assets and their eventual
disposition. If the sum of the expected future cash flows (undiscounted
and without interest charges) were less than the carrying amount of the
intangible assets, the Company would recognize an impairment loss.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of financial statements
and the reported amounts of revenues and expenses during the reporting
period. Ultimate results could differ from those estimates.
3.FLIGHT EQUIPMENT
The Company's airline fleet consisted of the following aircraft held under
operating leases as of March 31, 1999:
Number of Seating
Aircraft Type of Aircraft Capacity
75 Saab 340 30/34
22 Avro RJ85 69
Under terms of the Jet Agreement, the Company subleases its Avro RJ85
aircraft from Northwest under operating leases with original terms of up
to ten years. The Jet Agreement allows the Company to return aircraft to
Northwest upon the occurrence of certain events, including termination or
breach of the Jet Agreement.
The Company leases all of its Saab 340 aircraft, either directly from
aircraft leasing companies or through sub-leases with Northwest under
operating leases with terms of up to 17 years. The Airlink Agreement
allows Mesaba to return aircraft to Northwest upon the occurrence of
certain events.
<PAGE>
Aircraft maintenance and repairs on Saab 340 and RJ85 aircraft are charged
to expense when incurred, except for the cost of major airframe
inspections, for which the estimated cost is accrued and charged to
maintenance expense based upon hours flown, thus providing for the
inspection cost when it occurs.
The aircraft operating leases require future minimum rental payments as
follows at March 31, 1999:
2000 $ 84,021
2001 83,268
2002 83,268
2003 82,561
2004 79,483
Thereafter $410,585
Mesaba has firm lease commitments for the remaining 14 undelivered RJ85
aircraft. The table above does not reflect any minimum lease payments for
those undelivered aircraft.
Rent expense under aircraft operating leases totaled approximately $70,422
in 1999, $49,500 (not including wet lease expense) in 1998 and $31,242 in
1997 (including $32,472, $27,172 and $21,564 paid to Northwest in 1999,
1998 and 1997, respectively).
4.INCOME TAXES
The provision for income taxes for the three years ended March 31 is
comprised of the following elements:
1999 1998 1997
------- ------- -------
Current:
Federal $11,657 $11,053 $ 8,748
State 2,973 2,895 2,207
Deferred (517) (819) (2,228)
------- ------- -------
Total provision for income taxes $14,113 $13,129 $ 8,727
The actual income tax expense differs from the expected tax expense for
1999, 1998 and 1997 (computed by applying the U.S. federal corporate tax
rate of 35 percent to earnings before income taxes) as follows:
1999 1998 1997
------- ------- -------
Computed tax expense at statutory rate $12,664 $11,527 $ 7,250
Increase (decrease) in income taxes
resulting from:
State taxes, net of federal tax benefit 1,932 1,672 1,654
Non-deductible flight crew expenses 754 552 397
Other, net (1,237) (622) (574)
------- ------- -------
Total income tax expense $14,113 $13,129 $ 8,727
<PAGE>
Deferred tax assets and liabilities are comprised of the following as of
March 31:
1999 1998 1997
------- ------- -------
Deferred tax assets:
Maintenance $ 3,456 $ 2,126 $ 2,560
Prepaids 1,288 229 248
Warrant Amortization 411 489 -
Other Accruals 3,672 3,450 1,921
------- ------- -------
Gross deferred tax assets 8,827 6,294 4,729
Deferred tax liabilities:
Property and equipment 746 1,042 619
Preoperating costs 67 457 63
Integration funds - 93 164
------- ------- -------
Gross deferred tax liabilities 813 1,592 846
------- ------- -------
Net deferred tax assets $ 8,014 $ 4,702 $ 3,883
======= ======= =======
5.SHAREHOLDERS' EQUITY
STOCK SPLIT
On April 6, 1998 the Company's board of directors declared a three-for-two
stock split of the Company's common stock for shares held of record on April
17, 1998. The par value per common share remained at $0.01. This stock
split has been retroactively reflected in these financial statements.
STOCK OPTION PLANS
The Company has stock option plans for key employees and directors, which
authorize the issuance of shares of common stock for such options. Under
the plans, options are granted by the compensation committee of the board
of directors and vest over a period of four to five years commencing one
year after the date of grant. The purchase price of the stock is 110% of
the fair market value of the stock at the date of grant for participants
owning 10% or more of the outstanding common stock and 100% of the fair
market value for all other participants.
<PAGE>
Stock option transactions for the three years ended March 31 were as
follows:
Shares Price Per
Share
-------- -----------
Options outstanding, March 31, 1996 941,250 $ 2.75-$ 5.25
Granted 456,000 $ 7.75-$ 8.92
Exercised (72,000) $ 3.17-$ 5.17
Canceled (15,000) $8.00
---------
Options outstanding, March 31, 1997 1,310,250 $ 2.75-$ 8.92
Granted 217,500 $ 8.25 - $14.25
Exercised (221,184) $ 2.75 - $ 8.92
---------
Options outstanding, March 31, 1998 1,306,566 $ 2.92 - $14.25
Granted 190,000 $18.00 - $23.00
Exercised (470,779) $ 2.92 - $12.42
---------
Options outstanding, March 31, 1999 1,025,787 $ 3.50 - $23.00
=========
Exercisable at March 31, 1999 327,512
=========
Available for grant at March 31, 1999 554,000
=========
As of March 31, 1999, of the total shares available for grant, 174,000 are
available for non-employee directors and 380,000 are available for certain
management personnel.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees,"and related interpretations in accounting for
its stock option plans. Accordingly, no compensation cost has been
recognized in the accompanying consolidated statement of operations. Had
compensation cost been recognized based on the fair values of options at the
grant dates consistent with the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company's net income and net income per
common share would have been decreased to the following pro forma amounts:
1999 1998 1997
------- ------- -------
Net Income
As reported $21,271 $19,804 $11,986
Pro forma $19,904 $18,873 $11,462
Basic Earnings Per
As reported $ 1.07 $ 1.03 $ 0.63
Pro forma $ 1.01 $ 0.97 $ 0.60
Diluted Earnings Per
As reported $ 0.99 $ 0.95 $ 0.62
Pro forma $ 0.93 $ 0.91 $ 0.59
<PAGE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions summarized below:
1999 1998 1997
------------- ------------- --------------
Risk free interest 5.56% - 5.59% 5.66% - 5.68% 6.08% - 6.45%
Expected life of 6 yrs. 6 yrs. 6 yrs.
Expected volatility of 54.91% 36.63% 43.50% - 45.06%
Expected dividend $0 $0 $0
Weighted average fair $11.90 $13.98 $ 4.19
6.COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
In addition to the aircraft described in Note 3, the Company leases land,
office and hangar facilities and certain terminal facilities under
capitalized and operating leases which provide for approximate future
minimum rental payments as follows at March 31,1999:
Capitalized Operating
Leases Leases
2000 $ 784 $1,051
2001 785 690
2002 786 489
2003 643 331
2004 643 299
Thereafter 3,383 1,184
------ ------
7,024 $4,044
======
Less- Amount representing interest 2,272
------
4,752
Less- Current maturities 393
------
Total long-term capital lease
obligations $ 4,359
=======
Rent expense under all facility operating leases totaled approximately
$3,421 in 1999, $3,410 in 1998 and $2,857 in 1997.
BENEFIT PLAN
The Company maintains a 401(k) benefit plan for eligible employees whereby
the Company will match 25% to 75% of employee contribution to the plan, up
to 8% of each employee's compensation, depending on each employee's length
of service. The Company's contribution to the plan totaled $882 in 1999,
$701 in 1998 and $589 in 1997.
<PAGE>
LITIGATION
The Company is a party to ongoing legal and tax proceedings arising in the
ordinary course of business. In the opinion of management, the resolution
of these matters will not have a material adverse effect on the Company's
consolidated financial position, results of operations, or its cash flows.
7. EARNINGS PER SHARE
The following table sets forth the computation of earnings per common share
1999 1998 1997
------- ------- ------
Numerator:
Net Income $21,271 $19,804 $11,986
Denominator:
For Earnings per Common Share - Basic:
Weighted average number of issued shares
outstanding 19,793 19,270 19,143
Effect of dilutive Securities:
Computed shares outstanding under the
Company's stock option plan utilizing the
treasury stock method 486 711 86
Computed shares outstanding under warrants
issued utilizing the treasury stock
method 1,233 865 81
------- ------- ------
For earnings per Common Share _ Diluted:
Weighted Average Common Shares and Share
Equivalents Outstanding 21,512 20,846 19,310
======= ======= ======
Earnings per share - Basic $ 1.07 $ 1.03 $ 0.63
======= ======= ======
Earnings per share - Diluted $ 0.99 $ 0.95 $ 0.63
======= ======= ======
In April of 1998, the Company adopted AICPA Statement of Position (SOP)
98-5 "Reporting on the Costs of Start-Up Activities" which requires all
start-up costs to be charged to expense as incurred. The adoption of SOP
98-5 resulted in an $800 charge (net of tax) to operations, or $0.03 per
basic and diluted share for previously capitalized start-up costs and was
recorded as a cumulative effect of change in accounting principle.
<PAGE>
8. QUARETERLY FINANCIAL DATA (Unaudited)
(in thousands except share and per share data)
Quarters of Fiscal Year Ended
-----------------------------
March 31, 1999
--------------
June 30, Sept.30, Dec. 31, March 31, Fiscal Yr.
1998 1998 1998 1999 1999
-------- -------- -------- -------- --------
Total operating revenues $ 80,469 $ 71,689 $ 89,641 $ 89,954 $331,753
Operating income 10,464 1,806 10,242 9,710 32,222
Net income 6,033 2,080 6,730 6,428 21,271
Earnings per Common share
- Basic $ 0.31 $ 0.10 $ 0.34 $ 0.32 $ 1.07
Weighted average Common
shares outstanding - Basic 19,616 19,824 19,838 19,864 19,793
Earnings per Common
Share - Diluted $ 0.28 $ 0.10 $ 0.32 $ 0.30 $ 0.99
Weighted average Common
shares and Share
Equivalents outstanding
- Diluted 21,755 21,638 21,230 21,246 21,512
Quarters of Fiscal Year Ended
-----------------------------
March 31, 1998
--------------
June 30, Sept.30, Dec. 31, March 31, Fiscal Yr.
1997 1997 1997 1998 1998
-------- -------- -------- -------- --------
Total operating revenues $ 54,424 $ 71,942 $ 75,443 $ 75,416 $277,225
Operating income 6,209 9,155 8,327 6,678 30,369
Net income 3,973 5,748 5,292 4,791 19,804
Earnings per Common share
- Basic $ 0.21 $ 0.30 $ 0.27 $ 0.25 1.03
Weighted average Common
shares outstanding - Basic 19,183 19,238 19,276 19,381 19,270
Earnings per Common
Share - Diluted $ 0.20 $ 0.28 $ 0.25 $ 0.22 $ 0.95
Weighted average Common
shares and Share
Equivalents outstanding
- Diluted 19,792 20,549 21,021 21,530 20,846
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K into the Company's previously
filed Registration Statements File Nos. 33-89930, 33-62386, 33-42757,
33-42759, 33-19528 and 2-93739.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
June 25, 1999
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of the Company is incorporated
herein by reference to the descriptions set forth under the caption
"Election of Directors" in the Proxy Statement for the 1999 Annual Meeting
of Shareholders (the "1999 Proxy Statement"). Information regarding
executive officers of the Company is incorporated herein by reference to
Item 1 of this Form 10-K under the caption "Executive Officers of the
Company" on page 11.
Item 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated herein by
reference to the information set forth under the caption "Compensation of
Executive Officers" in the 1999 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners
and management of the Company is incorporated herein by reference to the
information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the 1999 Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
with the Company is incorporated herein by reference to the information set
forth under the caption "Certain Transactions" in the 1999 Proxy Statement.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)
Documents filed with this report.
(1) Financial Statements of Mesaba Holdings, Inc.
Page of this
Form 10-K
Report of Independent Public Accountants 22
Consolidated balance sheets as of March 31,
1999 and 1998 23
Consolidated statements of operations for the
years ended March 31, 1999, 1998 and 1997 24
Consolidated statements of shareholders'
equity for the years ended March 31, 1999, 25
1998 and 1997
Consolidated statements of cash flows for the
years ended March 31, 1999, 1998 and 1997 26
Notes to consolidated financial statements 27
(2) Not applicable
<PAGE>
(3) Exhibits
3A. Restated Articles of Incorporation. Incorporated by reference to
Exhibit 3.1 to the Company's Form 10-Q for the quarter ended
September 31, 1995.
3B. Articles of Amendment to the Company's Articles of Incorporation.
Incorporated by reference to exhibit 3A to the Company's 10-Q
for the quarter ended September 30, 1997.
3C. Bylaws. Incorporated by reference to Exhibit 3.2 to the Form
S-4.
4A. Specimen certificate for shares of the Common Stock of the
Company. Incorporated by reference to Exhibit 4A to the
Company's Form 10-K for the year ended March 31, 1989.
4B. Common Stock Purchase Warrant dated October 25, 1996 issued to
Northwest Airlines, Inc. Incorporated by reference to Exhibit 4A
to the Company's 10-Q for the quarter ended September 30, 1996.
4C. Common Stock Purchase Warrant dated October 17, 1997 issued to
Northwest Airlines, Inc. Incorporated by reference to Exhibit 4A
to the Company's 10-Q for the quarter ended September 30, 1997.
9A. Shareholder's Agreement regarding election of representative of
Northwest Aircraft Inc. to Board of Directors. Incorporated by
reference to Exhibit 9A to Mesaba's Registration Statement on
Form S-1, Registration No. 33-820.
10A. FAA Air Carrier Operating Certificate. Incorporated by reference
to Exhibit 10A to the Company's Form 10-K for the year ended
March 31, 1989.
10B. 1986 Stock Option Plan (as Amended). Incorporated by reference
to Exhibit 10D to the Company's Form 10-K for the year ended
March 31, 1990.
10C. 1991 Director Stock Option Plan. Incorporated by reference to
Exhibit 10(i) to the Company's Registration Statement on Form
S-8, Registration No. 33-62386.
10D. CAB Part 298 Registration. Incorporated by reference to Exhibit
10G to Mesaba's Form 10-K for the year ended March 31, 1987.
10E. Revolving Credit and Term Loan Agreement Dated as of November 7,
1988 between Norwest Bank Minnesota, N.A. and Mesaba Aviation,
Inc. Incorporated by reference to Exhibit 10F to the Company's
Form 10-K for the year ended March 31, 1989.
10F. Airline Services Agreement between Mesaba Aviation, Mesaba
Holdings, Inc. and Northwest Airlines, Inc. dated July 1, 1997
(certain portions of this agreement are subject to an order
granting confidential treatment pursuant to Rule 24b-2).
Incorporated by reference to Exhibit 10A to the Company's Form
10-Q for the quarter ended September 30, 1997.
10G. Regional Jet Services Agreement between Mesaba Holdings, Inc.,
Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated October
25, 1996 (certain provisions of this agreement are subject to an
order granting confidential treatment pursuant to Rule 24b-2).
Incorporated by reference to Exhibit 10A to the Company's Form
10-Q for the quarter ended September 30, 1996.
10H. Foreign Air Carrier Operating Certificates issued May 6, 1991 by
the Canadian Department of Transport. Incorporated by reference
to Exhibit 10H to the Company's Form 10-K for the year ended
March 31, 1991.
<PAGE>
10I. Facility Lease and Operating Agreement dated April 18, 1988,
between the Metropolitan Airport Commission and Mesaba Aviation,
Inc. Incorporated by reference to Exhibit 10K to the Company's
Form 10-K for the year ended March 31, 1989. Incorporated by
reference to Exhibit 10J to the Company's Form 10-K for the year
ended March 31, 1997.
10J. Ninth Amendment to Revolving Credit and Term Loan Agreement and
Amendment to Revolving Note between Mesaba Aviation, Inc. and
Norwest Bank Minnesota, National Association.
10K. Letter of Credit and Reimbursement Agreement dated as of
August 1, 1990 between Mesaba Aviation, Inc. and Norwest Bank
Minnesota, National Association. Incorporated by reference to
Exhibit 10A to the Company's Form 10-Q for the quarter ended
September 30, 1990.
10L. Special Facilities Lease dated as of August 1, 1990 between
Charter County of Wayne, State of Michigan and Mesaba Aviation,
Inc. Incorporated by reference to Exhibit 10B to the Company's
Form 10-Q for the quarter ended September 30, 1990.
10M. Ground Lease dated August 1, 1990 between Charter County of
Wayne, State of Michigan and Mesaba Aviation, Inc. Incorporated
by reference to Exhibit 10C to the Company's Form 10-Q for the
quarter ended September 30, 1990.
10N. Combination Leasehold Mortgage, Assignment of Rents, Security
Agreement and Fixture Financing Statement dated as of August 1,
1990 between Mesaba Aviation, Inc. and Norwest Bank Minnesota,
National Association. Incorporated by reference to Exhibit 10D
to the Company's Form 10-Q for the quarter ended September 30,
1990.
10O. Letter Agreement dated December 24, 1992 relating to the
repurchase of shares of Common Stock from Northwest Aircraft,
Inc. Incorporated by reference to Exhibit 10EE to the Company's
Form 10-K for the year ended March 31, 1993.
10P. DOT Certificate of Public Convenience and Necessity dated October
26, 1992. Incorporated by reference to Exhibit 10FF of the
Company's Form 10-K for the year ended March 31, 1993.
10Q. Stock Purchase Agreement between AirTran Corporation and Carl R.
Pohlad dated as of October 18, 1993. Incorporated by reference
to Exhibit 10 of the Company's Form 8-K dated October 19, 1993.
10R. 1994 Stock Option Plan (as amended July 1, 1997). Incorporated
by reference to Exhibit 10B to the Company's Form 10-Q for the
quarter ended September 30, 1997.
10S. Agreement between AirTran Corporation, Mesaba Aviation, Inc.,
Northwest Aircraft, Inc., and Northwest Airlines, Inc. dated May
18, 1995. Incorporated by reference to Exhibit 10A of the
Company's Form 8-K as filed May 18, 1995.
10T. Preliminary Agreement between AirTran Corporation, Mesaba
Aviation, Inc. and Northwest Airlines, Inc. dated March 8, 1995.
Incorporated by reference to Exhibit 10 of the Company's Form 8-
K as filed March 8, 1995.
10U. Term Sheet Proposal for the Acquisition of Saab 340 Aircraft by
Mesaba Aviation, Inc. dated March 7, 1996 (certain portions of
this document have been deleted pursuant to an application for
confidential treatment under Rule 24b-2). Incorporated by
reference to Exhibit 10U to the Company's Form 10-K/A for the
year ended March 31, 1996.
10V. Letter Agreement regarding Saab 340B Plus Acquisition Financing
dated March 7, 1996 (certain portions of this document have been
<PAGE>
deleted pursuant to an application for confidential treatment
under Rule 24b-2). Incorporated by reference to Exhibit 10V to
the Company's Form 10-K/A for the year ended March 31, 1996.
10W. Letter Agreement of April 26, 1996 relating to Airline Services
Agreement between Mesaba Aviation, Inc. and Northwest Airlines,
Inc. (certain portions of this document have been deleted
pursuant to an application for confidential treatment under Rule
24b-2). Incorporated by reference to Exhibit 10W to the Company's
Form 10-K/A for the year ended March 31, 1996.
10X. Letter Agreement of October 25, 1996 relating to Regional Jet
Services Agreement between Mesaba Aviation, Inc. and Northwest
Airlines, Inc. (certain portions of this document have been
deleted pursuant to an application for confidential treatment
under Rule 24b-2). Incorporated by reference to Exhibit 10A to
the Company's Form 10-Q/A for the quarter ended September 30,
1996.
10Y. Amendment No. 1 to Regional Jet Services Agreement dated April
1, 1998 between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and
Northwest Airlines, Inc. (certain portions of this document have
been deleted pursuant to an application for confidential
treatment under Rule 24b-2). Incorporated by reference to Exhibit
10A to the Company's Form 10-Q for the quarter ended June 30,
1998
10Z. Amendment No. 2 to Regional Jet Services Agreement dated June
2, 1998 between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and
Northwest Airlines, Inc. (certain portions of this document have
been deleted pursuant to an application for confidential
treatment under Rule 24b-2). Incorporated by reference to Exhibit
10B to the Company's Form 10-Q for the quarter ended June 30,
1998
21. Subsidiaries. Incorporated by reference to Exhibit 21 to the
Company's Form 10-K for the year ended March 31, 1997.
23. Consent of independent public accountants.
24. Powers of Attorney.
(b)
Reports on Form 8-K. No reports were filed on Form 8-K during the
quarter ended March 31, 1999.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MESABA HOLDINGS, INC.
Dated: June 29, 1999 By /s/ John S. Fredericksen
---------------------------
John S. Fredericksen
Interim Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ John S. Fredericksen
- -------------------- Interim Chief Executive Officer June 29, 1999
John S. Fredericksen (Principal Executive Oficer)
/s/ Robert H. Cooper
- -------------------- Vice President and Chief Financial Officer June 29, 1999
Robert H. Cooper (Principal Financial Officer)
/s/Jon R. Meyer
- -------------------- Director of Accounting and Controller June 29, 1999
Jon R. Meyer (Principal Accounting Officer)
*
- -------------------- Director June 29, 1999
Donald E. Benson
*
- -------------------- Director June 29, 1999
Christopher E. Clouser
*
- -------------------- Director June 29, 1999
Richard B. Hirst
*
- -------------------- Director June 29, 1999
Carl R. Pohlad
*
- -------------------- Director June 29, 1999
Robert C. Pohlad
*
- -------------------- Director June 29, 1999
John S. Kern
*
- -------------------- Director June 29, 1999
Raymond W. Zehr, Jr.
*By
/s/ John S. Fredericksen Attorney-in-fact June 29, 1999
- ------------------------
John S. Fredericksen
EXHIBIT INDEX
Manually Numbered
Exhibit No. Exhibit Page References
- ----------- ----------------------------------- -----------------
3A. Restated Articles of Incorporation.
Incorporated by reference to
Exhibit 3.1 to the Company's Form
10-Q for the quarter ended
September 31, 1995.
3B. Bylaws. Incorporated by reference
to Exhibit 3.2 to the Form S-4.
4A. Specimen certificate for shares of
the Common Stock of the Company.
Incorporated by reference to
Exhibit 4A to the Company's Form
10-K for the year ended March 31,
1989.
4B. Common Stock Purchase Warrant dated
October 26, 1996 issued to Northwest
Airlines, Inc. Incorporated by reference
to Exhibit 4A to the Company's Form
10-Q for the quarter ended September
30, 1996
4C. Common Stock Purchase Warrant dated
October 17, 1997 issued to Northwest
Airlines, Inc. Incorporated by reference
to Exhibit 4A to the Company's Form
10-Q for the quarter ended September
30, 1997
9A. Shareholder's Agreement regarding
election of representative of
Northwest Aircraft Inc. to Board of
Directors. Incorporated by
reference to Exhibit 9A to Mesaba's
Registration Statement on Form S-1,
Registration No. 33-820.
10A. FAA Air Carrier Operating
Certificate. Incorporated by
reference to Exhibit 10A to the
Company's Form 10-K for the year
ended March 31, 1989.
10B. 1986 Stock Option Plan (as
Amended). Incorporated by
reference to Exhibit 10D to the
Company's Form 10-K for the year
ended March 31, 1990.
10C. 1991 Director Stock Option Plan.
Incorporated by reference to
Exhibit 10(i) to the Company's
Registration Statement on Form S-8,
Registration No. 33-62386.
10D. CAB Part 298 Registration.
Incorporated by reference to
Exhibit 10G to Mesaba's Form 10-K
for the year ended March 31, 1987.
10E. Revolving Credit and Term Loan
Agreement Dated as of November 7,
1988 between Norwest Bank
Minnesota, N.A. and Mesaba Aviation, Inc.
Incorporated by reference to
Exhibit 10F to the Company's Form
10-K for the year ended March 31,
1989.
10F. Airline Services Agreement between
Mesaba Holdings, Inc, Mesaba Aviation,
Inc., and Northwest Airlines, Inc.
(certain portions of this agreement
are subject to an order granting
confidential treatment pursuant to
Rule 24b-2). Incorporated by reference
to Exhibit 10A to the Company's Form
10-Q for the quarter ended
September 30, 1997.
<PAGE>
10G. Regional Jet Services Agreement between
Mesaba Holdings, Inc., Mesaba Aviation,
Inc. and Northwest Airlines, Inc., dated
October 25, 1996 (certain portions of
this agreement are subject to an order
granting confidential treatment pursuant
to Rule 24b-2). Incorporated by reference
to Exhibit 10A to the Company;s Form 10-Q
for the quarter ended September 30, 1996.
10H. Foreign Air Carrier Operating
Certificates issued May 6, 1991 by
the Canadian Department of
Transport. Incorporated by
reference to Exhibit 10H to the
Company's Form 10-K for the year
ended March 31, 1991.
10I. Facility Lease and Operating
Agreement dated April 18, 1988,
between the Metropolitan Airport
Commission and Mesaba Aviation,Inc.
Incorporated by reference to
Exhibit 10K to the Company's Form
10-K for the year ended March 31,
1989.
10J. Ninth Amendment to Revolving Credit
and Term Loan Agreement and
Amendment to Revolving Note between
Mesaba Aviation,Inc.and Norwest Bank
Minnesota, National Association.
Incorporated by reference to Exhibit
10J to the Company's Form 10-K for the
year March 31, 1997.
10K. Letter of Credit and Reimbursement
Agreement dated as of August 1,
1990 between Mesaba Aviation, Inc. and
Norwest Bank Minnesota, National
Association. Incorporated by
reference to Exhibit 10A to the
Company's Form 10-Q for the quarter
ended September 30, 1990.
10L. Special Facilities Lease dated as
of August 1, 1990 between Charter
County of Wayne, State of Michigan
and Mesaba Aviation, Inc. Incorporated by
reference to Exhibit 10B to the
Company's Form 10-Q for the quarter
ended September 30, 1990.
10M. Ground Lease dated August 1, 1990
between Charter County of Wayne,
State of Michigan and Mesaba Aviation, Inc.
Incorporated by reference to
Exhibit 10C to the Company's Form
10-Q for the quarter ended
September 30, 1990.
10N. Combination Leasehold Mortgage,
Assignment of Rents, Security
Agreement and Fixture Financing
Statement dated as of August 1,
1990 between Mesaba Aviation, Inc. and
Norwest Bank Minnesota, National
Association. Incorporated by
reference to Exhibit 10D to the
Company's Form 10-Q for the quarter
ended September 30, 1990.
10O. Letter Agreement dated December 24,
1992 relating to the repurchase of
shares of Common Stock from
Northwest Aircraft, Inc.
Incorporated by reference to
Exhibit 10EE to the Company's Form
10-K for the year ended March 31,
1993.
10P. DOT Certificate of Public
Convenience and Necessity dated
October 26,1992. Incorporated by
reference to Exhibit 10FF of the
Company's Form 10-K for the year
ended March 31, 1993.
<PAGE>
10Q. Stock Purchase Agreement between
AirTran Corporation and Carl R.
Pohlad dated as of October 18,
1993. Incorporated by reference to
Exhibit 10 of the Company's Form 8-
K dated October 19, 1993.
10R. 1994 Stock Option Plan (as amended July
1, 1997). Incorporated by reference
to Exhibit 10B of the Company's Form
10-Q for the quarter ended September
30, 1997.
10S. Agreement between AirTran
Corporation, Mesaba Aviation, Inc.,
Northwest Aircraft, Inc., and
Northwest Airlines, Inc. dated May
18, 1995. Incorporated by
reference to Exhibit 10A of the
Company's Form 8-K as filed May 18,
1995.
10T. Preliminary Agreement between
AirTran Corporation, Mesaba Aviation, Inc.
and Northwest Airlines, Inc. dated
March 8, 1995. Incorporated by
reference to Exhibit 10 of the
Company's Form 8-K as filed March
8, 1995.
10U. Term Sheet Proposal for the
Acquisition of Saab 340 Aircraft by
Mesaba Aviation, Inc. dated March
7, 1996 (certain portions of this
document have been deleted pursuant
to an application for confidential
treatment under Rule 24b-2).
Incorporated by reference to
Exhibit 10U on the Company's Form
10-K/A for the year ended March 31,
1996.
10V. Letter Agreement regarding Saab
340B Plus Acquisition Financing
dated March 7, 1996 (certain
portions of this document have been
deleted pursuant to an application
for confidential treatment under
Rule 24b-2). Incorporated by
reference to Exhibit 10V on the
Company's Form 10-K/A for the year
ended March 31, 1996.
10W. Letter Agreement of April 26, 1996
relating to Airline Services
Agreement between Mesaba Aviation,
Inc. and Northwest Airlines, Inc.
(certain portions of this document
have been deleted pursuant to an
application for confidential
treatment under Rule 24b-2).
Incorporated by reference to
Exhibit 10W on the Company's Form
10-K/A for the year ended March 31,
1996.
10X. Letter Agreement of October 25,
1996 relating to Regional Jet
Services Agreement between Mesaba
Aviation,Inc. and Northwest
Airlines, Inc. (certain portions of
this document have been deleted
pursuant to an application for
confidential treatment under Rule
24b-2). Incorporated by reference
to Exhibit 10W on the Company's
Form 10-Q/A for the quarter ended
September 30, 1996.
10Y. Amendment No. 1 to Regional Jet Services
Agreement dated April 1, 1998 between
Mesaba Holdings, Inc., Mesaba Aviation,
Inc. and Northwest Airlines, Inc. (certain
portions of this document have been deleted
pursuant to an application for
confidential treatment under Rule 24b-2).
Incorporated by reference to Exhibit 10A to
the Company's Form 10-Q for the quarter
ended June 30, 1998
10Z. Amendment No. 2 to Regional Jet Services
Agreement dated June 2, 1998 between Mesaba
Holdings, Inc., Mesaba Aviation, Inc. and
Northwest Airlines, Inc. (certain portions of
this document have been deleted pursuant
to an application for confidential
treatment under Rule 24b-2). Incorporated by
reference to Exhibit 10B to the Company's
Form 10-Q for the quarter ended June 30,
1998
21. Subsidiaries. Incorporated by reference
to Exhibit 21 to the Company's Form
10-K for the year ended March 31, 1997
23. Consent of independent public
accountants.
24. Powers of Attorney.
<PAGE>
<PAGE>
POWER OF ATTORNEY
The undersigned officer and/or director of Mesaba Holdings, Inc.
hereby constitutes and appoints Bryan K. Bedford and John S. Fredericksen,
or either of them, with power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substituition and
resubstituition, for him and in his stead, in any and all capacities to
sign Form 10-K of Mesaba Holdings, Inc. for the year ended March 31, 1999,
pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, as amended, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing necessary or
advisable to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, herby ratifying and confiming
all that said attorney-in-fact and agent, or his substitute or substitutes,
may lawfully do or cause to be done by virtue herof.
Dated: June 21, 1999
Signed: /s/ Christopher E. Clouser
---------------------------
Christopher E. Clouser
<PAGE>
POWER OF ATTORNEY
The undersigned officer and/or director of Mesaba Holdings,
Inc. hereby constitutes and appoints Bryan K. Bedford and John S.
Fredericksen, or either of them, with power to act without the
other, his true and lawful attorney-in-fact and agent, with full
power of substituition and resubstituition, for him and in his
stead, in any and all capacities to sign Form 10-K of Mesaba
Holdings, Inc. for the year ended March 31, 1999, pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934,
as amended, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing necessary or advisable to be done in connection
therewith, as fully to all intents and purposes as he might or
could do in person, herby ratifying and confiming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue herof.
Dated: June 21, 1999
Signed: /s/ Donald E. Benson
---------------------------
Donald E. Benson
<PAGE>
POWER OF ATTORNEY
The undersigned officer and/or director of Mesaba Holdings,
Inc. hereby constitutes and appoints Bryan K. Bedford and John S.
Fredericksen, or either of them, with power to act without the
other, his true and lawful attorney-in-fact and agent, with full
power of substituition and resubstituition, for him and in his
stead, in any and all capacities to sign Form 10-K of Mesaba
Holdings, Inc. for the year ended March 31, 1999, pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934,
as amended, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing necessary or advisable to be done in connection
therewith, as fully to all intents and purposes as he might or
could do in person, herby ratifying and confiming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue herof.
Dated: June 21, 1999
Signed: /s/ Carl R. Pohlad
---------------------------
Carl R. Pohlad
<PAGE>
POWER OF ATTORNEY
The undersigned officer and/or director of Mesaba Holdings,
Inc. hereby constitutes and appoints Bryan K. Bedford and John S.
Fredericksen, or either of them, with power to act without the
other, his true and lawful attorney-in-fact and agent, with full
power of substituition and resubstituition, for him and in his
stead, in any and all capacities to sign Form 10-K of Mesaba
Holdings, Inc. for the year ended March 31, 1999, pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934,
as amended, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing necessary or advisable to be done in connection
therewith, as fully to all intents and purposes as he might or
could do in person, herby ratifying and confiming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue herof.
Dated: June 21, 1999
Signed: /s/ Robert C. Pohlad
---------------------------
Robert C. Pohlad
<PAGE>
POWER OF ATTORNEY
The undersigned officer and/or director of Mesaba Holdings,
Inc. hereby constitutes and appoints Bryan K. Bedford and John S.
Fredericksen, or either of them, with power to act without the
other, his true and lawful attorney-in-fact and agent, with full
power of substituition and resubstituition, for him and in his
stead, in any and all capacities to sign Form 10-K of Mesaba
Holdings, Inc. for the year ended March 31, 1999, pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934,
as amended, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing necessary or advisable to be done in connection
therewith, as fully to all intents and purposes as he might or
could do in person, herby ratifying and confiming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue herof.
Dated: June 21, 1999
Signed: /s/ Raymond W. Zehr, Jr.
---------------------------
Raymond W. Zehr, Jr.
<PAGE>
POWER OF ATTORNEY
The undersigned officer and/or director of Mesaba Holdings,
Inc. hereby constitutes and appoints Bryan K. Bedford and John S.
Fredericksen, or either of them, with power to act without the
other, his true and lawful attorney-in-fact and agent, with full
power of substituition and resubstituition, for him and in his
stead, in any and all capacities to sign Form 10-K of Mesaba
Holdings, Inc. for the year ended March 31, 1999, pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934,
as amended, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing necessary or advisable to be done in connection
therewith, as fully to all intents and purposes as he might or
could do in person, herby ratifying and confiming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue herof.
Dated: June 18, 1999
Signed: /s/ John S. Kern
---------------------------
John S. Kern
<PAGE>
POWER OF ATTORNEY
The undersigned officer and/or director of Mesaba Holdings,
Inc. hereby constitutes and appoints Bryan K. Bedford and John S.
Fredericksen, or either of them, with power to act without the
other, his true and lawful attorney-in-fact and agent, with full
power of substituition and resubstituition, for him and in his
stead, in any and all capacities to sign Form 10-K of Mesaba
Holdings, Inc. for the year ended March 31, 1999, pursuant to the
requirements of Section 13 of the Securities Exchange Act of 1934,
as amended, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing necessary or advisable to be done in connection
therewith, as fully to all intents and purposes as he might or
could do in person, herby ratifying and confiming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue herof.
Dated: June 23, 1999
Signed: /s/ Richard B. Hirst
---------------------------
Richrd B. Hirst
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