Mesa Set to do Continental Airlines Bid

Mesa Air Group Inc. said it would bid to become a commuter carrier for Continental Airlines Inc. if Continental proceeds with a plan to hire a new partner.

Mesa Chief Executive Officer Jonathan Ornstein said in an interview Thursday that his Phoenix-based company would be "very competitive" in seeking to provide the service. Mesa's stock rose, as did shares of St. George-based SkyWest Inc. and Republic Airways Holdings Inc., two other potential bidders for the business.

Continental said Wednesday that it plans to take back 69 small jets from ExpressJet Holdings Inc., now the sole provider of the Continental Express service, and seek a lower-cost operator. Continental would be shifting 25 percent of the 274 planes purchased or leased for the commuter operation. The company didn't specify which carriers it would ask for bids.

"It would diversify our business," said Ornstein, who was chief executive officer of Continental Express in 1994. "We could provide the service very cost-effectively and make a profit at the same time."

Mesa now makes commuter flights for US Airways Group Inc., Delta Air Lines Inc. and UAL Corp.'s United Airlines. In addition to Mesa, Indianapolis-based Republic and SkyWest may bid to provide service for Continental, Raymond James analyst James Parker said in a report Thursday.

Mesa shares rose 46 cents, or 4.6 percent, to close at $10.51 in Nasdaq Stock Market composite trading and have gained 32 percent this year. SkyWest climbed 82 cents, or 3.1 percent, to $27.67, and Republic increased 49 cents, or 3.4 percent, to $14.99.

Parker raised his ratings on Mesa and Republic to "outperform" from "market perform" and reiterated an "outperform" rating on SkyWest. He cited potential added business for the three carriers from Continental, Delta Air Lines Inc. and US Airways Group Inc. in the next several months.

"We believe earnings estimates for SkyWest, Republic and Mesa are likely to increase," Parker said in the report.

SkyWest declined to comment, citing federal restrictions while the company is in the process of registering securities. Republic didn't immediately respond to calls seeking a comment.

Goldman Sachs analyst Glenn Engel said in a report Wednesday that he expects Continental may still reach agreement to keep the planes at ExpressJet.

"Ultimately, we believe that Continental and ExpressJet will reach a new agreement with lower margins for Continental and better and longer protection for ExpressJet, but we may not see any resolution until mid-2006," Engel said in the report.

ExpressJet shares declined 22 cents to $8.10 in New York Stock Exchange composite trading. Continental rose 34 cents to $21.52. Both companies are based in Houston.

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