Mesa extends contracts of 3 execs

Despite current legal battles, Mesa directors give a thumbs up to its executives

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Despite a federal court ruling over its Hawaii operation that is costing the company tens of millions of dollars to fight, Mesa Air Group Chief Executive Jonathan Ornstein and two other top executives got a vote of confidence yesterday from the airline's board of directors in the form of three-year employment extensions.

"The board of directors strongly believes that given the challenges the company faces today it was important to demonstrate our support of management," said Dan Altobello, lead director of the board.

Mesa, which has seen its cash position decline and its stock price more than cut in half over the past year, was ordered on Oct. 30 to pay Hawaiian Airlines $80 million in damages, plus interest and attorney fees, for misusing confidential information obtained as a potential investor during Hawaiian's bankruptcy when starting its go! interisland airline.

On Monday, federal Bankruptcy Judge Robert Faris ordered Mesa to put up a bond of $90 million bond by today while it appeals his decision on the damages to federal District Court.

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Mesa Air Group Chief Executive Jonathan Ornstein, mired in a costly federal lawsuit over go!'s entry into the Hawaii interisland market, was given a vote of confidence yesterday by the company's board of directors in the form of a three-year employment extension.

"The board of directors strongly believes that, given the challenges the company faces today, it was important to demonstrate our support of management," said Dan Altobello, lead director of the board.

The board of directors also granted three-year employment extensions to Michael Lotz, president and chief operating officer of Mesa, and Brian Gillman, executive vice president and general counsel. Gillman also got a raise.

Ornstein is chairman of the eight-person board, but the decision to extend the contracts came from a recommendation by the compensation committee. Ornstein said he recused himself from voting on the contract extensions.

Mesa, which has seen its cash position decline and its stock price more than cut in half over the past year, was ordered by federal Bankruptcy Judge Robert Faris on Oct. 30 to pay $80 million in damages, plus interest and attorney fees, after being sued by Hawaiian Airlines for misusing confidential information obtained as a potential investor during Hawaiian's bankruptcy.

Hawaiian had claimed in its lawsuit against Mesa that the Phoenix-based carrier used the information to gain a competitive advantage in entering the Hawaii market. On Monday, Faris ordered Mesa to put up a bond of $90 million bond by today while it appeals his decision on the damages to federal District Court.

Aloha Airlines also has sued Mesa for misusing confidential information obtained as a potential investor during Aloha's bankruptcy. In addition, Aloha has accused Mesa of predatory pricing to drive Aloha out of the market. A hearing on that trial has been rescheduled for Oct. 28 in federal District Court.

Mesa is slated to report its fourth-quarter and full-year fiscal 2007 earnings next month.

Ornstein received nearly $1.1 million in salary, bonus and other annual compensation in 2006, plus $464,901 in long-term awards, according to Mesa's proxy filed earlier this year with the Securities and Exchange Commission. His current base salary for the year ending March 31, 2008 is $450,000, which differs slightly from the $409,327 in the proxy that is based on the company's fiscal year that ended Sept. 30, 2007.

Lotz earned $876,270 in salary, bonus and other annual compensation last year, plus $310,749 in long-term awards. His current base salary for the year ending March 31, 2008, is $400,000. Bonuses for Ornstein and Lotz, which are not included in their base salaries, can vary depending upon financial performance.

Ornstein and Lotz, who both had five-year contracts due to expire in 2009, now are under contract until 2012.

Gillman received $238,766 in salary and bonus and $95,296 in long-term awards in 2006. His three-year contract extension will now expire in 2011.

Gillman also got an increase in base salary to $190,000 from $148,154, and is now entitled to an annual deferred compensation payment, which will be payable through the remaining term of his employment agreement in the event of a change in control of the company.

"I am thankful to have had the opportunity to be part of the Mesa team for the past nine years," Ornstein said. "While we face some significant challenges ahead, this is nothing new to Mesa. I am confident that by working together we will continue to be successful."

Ornstein and Lotz were lauded by Altobello for turning around the company.

"Ten years ago, when I joined the board, and Jonathan Ornstein had Mike Lotz joined Mesa, the company had revenue of $423 million and had lost $54 million in the previous fiscal year," Altobello said. "Since that time, we have grown to over $1.4 billion in revenue and since 9/11 earned operating profits on a pro-forma basis in 26 of 27 quarters, regained our partnership with United Airlines , formed a new partnership with Delta , added approximately 150 regional jets to our fleet, named Regional Airline of the Year in 2005 and provided unsurpassed job security and opportunity for our employees. All this was achieved during what has to have been the most difficult environment for airlines in history."


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