Go-getter CEO turns Mesa Air around - East Valley Tribune: Business

Go-getter CEO turns Mesa Air around

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Posted: Sunday, July 4, 2004 7:48 am | Updated: 4:36 pm, Thu Oct 6, 2011.

When Jonathan Ornstein climbs stairs, he’s in an awful hurry. On the basketball court, he’s hardworking but less talented than most.

When his stockbroker’s license was suspended for three years by the federal government, he repaid his clients for their losses, and some of them remain his friends.

Persistence is a word Ornstein likes to use. An upfront New Yorker, he’s never afraid to work hard or look for opportunities, even if it means launching a hostile takeover bid of another airline.

"I’m probably the oldest guy out there most of the time," he says of his hoops game. "It’s definitely a humbling experience, I can assure you, having some guy dunk on your head. But I’m very competitive. You know how when people go up stairs, they skip steps? That’s me. I can’t walk up a set of stairs. At the gym, even though I’m probably far from the best and close to the worst ballplayer out there, guys seem to not mind playing with me because I play hard, and because they know they can count on me."

The kind of loyalty he talks about in basketball is the same kind he’s shown at east Phoenix-based Mesa Air Group, a regional carrier that Ornstein left and returned to years later when his old boss and mentor asked him back.

His quick run up the stairs is mirrored by the rapid rise of the airline since he took over as chief executive in 1998.

TOUGH ENVIRONMENT

The company is doing well in tough times, something Ornstein knows a little bit about. "When I came to Mesa, we had had four regional jets and we now have 126," he says. "We expanded last year faster than any other airline in history in terms of aircraft. We added, in the last 12 or 14 months, close to 60 aircraft. Our revenue is up about 80 percent year over year. We’re in a sweet spot in this regional jet business."

Ornstein, 47, is described by others as smart, aggressive and impatient when ideas don’t work. He’s not a friend to the pilots union, particularly its management. He’s a cost-cutter with a good sense of humor who thinks of employees like family. He tells you things when he’s not supposed to because he expects trust and loyalty, they say.

Wall Street airline analyst Ray Neidle credits him with turning around the carrier, thanks in part to underpricing the competition.

"When Jonathan took over, it was a mess operationally and financially," he says, adding that Ornstein hired an allstar team to make changes. "He’s really a thinker more than a hands-on manager. Basically, the thing’s running smooth. He took a pretty rundown property and got it into shape."

Mesa Air makes its money by flying the small commuter routes of larger airlines. The company operates 175 aircraft with more than 1,000 daily departures to 176 cities.

Mesa Air operates in the West and Midwest as America West Express; the Midwest and East as US Airways Express; in Chicago, Denver and Los Angeles as United Express; in Kansas City with Midwest Airlines and in New Mexico and Texas as Mesa Airlines. The company, which was founded in New Mexico in 1982, has about 4,400 employees.

EARLY INTEREST

Ornstein’s interest in planes began at the age of 12 when he wrote to several South American governments to try and buy surplus World War II aircraft.

"My father used to love to tell the story about how we got a letter from the FBI asking why I was inquiring about military aircraft," Ornstein says. "My father said, ‘Well, he’s only 12.’ I knew they had them for sale and, in fact, later on, Bolivia, Uruguay and Paraguay, they all sold them to the Confederate Air Force (now the Commemorative Air Force). They’re now . . . incredibly valuable. But I was not doing it for the financial aspect, I was doing it more because I was this enthusiast and these were the last of those aircraft in the world that were still flying. I got back these letters in Spanish, and I remember taking them to school to have a Spanish teacher translate them."

Perhaps, surprisingly, Ornstein, who is married with two children, didn’t come from a family of aviators. The closest the clan came to the inside of the airplane was when Ornstein’s grandfather flew as a naval observer between World War I and World War II. "He was one of those guys that sat in the back," Ornstein says.

A native of New Rochelle, N.Y., Ornstein attended the University of Pennsylvania for three years before deciding to go to California. A football player in college, Ornstein says the captain of the team asked him to come with a group of others to the Golden State. The trip was supposed to last three months.

"I literally cried," Ornstein remembered. "I wanted to stay on the East Coast, and I didn’t know anybody in California. My mom said, ‘Just go out there, Jonathan, you never know what you’ll find.’ Much to her chagrin, I never came back."

He took his first job in a tennis shop where he gave lessons to people who purchased equipment. Noting that Ornstein looked like an athlete, the owner handed him a book to read about tennis instruction.

"I played, but I wasn’t like a great tennis player," Ornstein says.

YOUNG BROKER

His next job was managing a steakhouse in Marina Del Ray called the Hungry Tiger. At 21, he went to work in the securities business, making him the youngest broker ever on the New York Stock Exchange.

An August 1999 Forbes article described what would eventually lead Ornstein to the airline business.

"Over nine years, he bounced around around five firms, getting fired, from several. Why? A lengthy disciplinary record — the official printout is 21-feet long — charging unauthorized trading, misrepresentation, document alteration and churning. Eventually, Ornstein was fined $20,000 and suspended as a broker for three years."

Ornstein chalks up the sanction to youth and the fact he was betting the market would tank when it was going up.

"There are some things that oftentimes you’re just too young to do," he says. "Frankly, I see some folks 21 years old and I look back thinking that I was giving financial advice to people and I’m sort of stunned."

The experience makes Ornstein a sucker to those needing a second chance.

"I understand bad things can happen to people who are basically pretty good and some people are able to dust themselves off and choose the right path," he says. "It’s worth giving people a chance to do that. A lot of the personnel people in the company, they won’t let people who have been terminated come and see me because I always give them their jobs back."

In 1986, Ornstein got involved with a small airline in Los Angles called Air LA.

"I had . . . raised some money with some of my clients for this company," he says. "Before I knew it, I was spending more time at the airport than I was at the office. Air LA was an interesting company. It basically flew tourists from Los Angeles to the Grand Canyon. We had a nice little business. I think I was like the sixth or seventh employee."

MESA CONNECTION

When the business grew to where nine-passenger planes weren’t big enough, Air LA inked a lease deal with a company called Mesa Airlines in Farmington, N.M.

"I thought Farmington was in Connecticut," Ornstein says. "I had no idea. I went out and met with the president of Mesa, Larry Risley. Larry wanted to buy Air LA because he thought it was a good little business. I did some due diligence on Mesa and I found Mesa’s stock was very undervalued. So I put together another little partnership and we bought 5 percent of Mesa."

The two decided to grow the company and Risley offered Ornstein a job.

"I was just very lucky," Ornstein says. "I got a guy who was a great operations person, he let me sort of take over the planning and finance, and the two of us just hit it off. He was like my mentor. He was just a great person. I owe everything to him, frankly. If you looked at the two of us on paper, we couldn’t have been any more different, which is the beauty of America. I went to an Ivy League school and was from New York. He’s from Abilene, Texas, went to a vocational college and was an aircraft mechanic. On paper, we were as opposite as we can be, but we shared a similar work ethic and moral fiber."

Risley, who is now retired, thought Ornstein was "a wild personality" when the two met.

"It just seemed like he never slowed down, the thought process was always running in overdrive somehow," he says. "I used to tell people, ‘Jonathan has a lot of great ideas if you can follow around behind him, pick up all the ideas off the floor, and pick out the good ones from the bad ones, you’d be in great shape.’ "

Ornstein later met the chairman of Continental Airlines who offered him the chief executive job of Continental Express, the company’s regional jet operation. At the time, it was a bigger company than Mesa, so Ornstein left. He was later named senior vice president of operations at Continental.

When Continental began to struggle, Ornstein went to Brussels, Belgium, to work for Richard Branson, who wanted to start a low-cost Boeing 737 jet operation called Virgin Express.

"He’s a great guy, he let me do my own thing," Ornstein says of Branson. "We went on vacations together. The guy is a promoter."

RISKY BUSINESS

Ornstein took a chance with an aggressive ad campaign aimed at Switzerland, which he says was trying to keep Virgin from flying in the country to protect Swiss Air.

In it, he used the Manneken Pis, a small bronze fountain sculpture depicting a nude little boy urinating into the fountain’s basin. It is the emblem of Belgium, the equivalent of the Statue of Liberty in this country, Ornstein says.

"I put out this ad that was a picture of the Manneken Pis, and it says, ‘This is what we think of the high fares charged by your hometown airline.’ You can imagine the Swiss, who are so proper, they went berserk, but Richard thought it was great because he said, ‘Jonathan, within one day, everyone in Switzerland knew who Virgin was.’ "

Ornstein spent 3 1/2 years at Virgin before Risley asked him to come back in 1998.

"I liked working for Virgin," Ornstein says. "But living in Europe is very tough, and if you’re accustomed to the U.S. way of life, the conveniences we have, the freedoms that we have, even the way people in the U.S. get along, it’s hard to be in Europe. It’s gray. It’s not what I call a real healthy existence. No one exercises, everyone smokes. The people are very closed-minded in a lot of respects. Women and minorities are nonexistent in the business world. Coming back to the United States was very refreshing."

But things were far from rosy at Mesa.

"We were a $500 million company . . . and we lost half the business overnight," Ornstein says. "United canceled their agreement with Mesa. We came back and we had 100 airplanes on the ground and 2,000 employees we didn’t know what to do with. It was just a mess."

The company was able to save a faltering deal with Tempe-based America West, greatly expanded its U.S. Airways agreement and reestablished its relationship with United. Late last year, Mesa unsuccessfully tried a hostile takeover of Atlantic Coast Airlines, a move that caused some of Atlantic’s employees to chant "No Johnny O" at rallies.

PEOPLE SKILLS

Ornstein knows some people see him as pushy.

"I would not put myself in the category of politically correct," he says. "I’m not always as diplomatic as maybe I should be. But I also think that allows us to do what we’ve done. We are strong-willed when we think we’re on the right track. We run the company from a financial standpoint, very carefully. We’ve got $250 million in cash with $1 billion in revenue. There’s not many airlines that have that ratio of cash to revenues. We don’t do deals just to do them. We do them when we think they make a lot of sense."

The airlines’ pilot union declined to be interviewed for this story, but Ornstein insists the company’s success hasn’t come on the backs of workers. Unlike other carriers, no pilots are furloughed and Mesa Air has hired 600 pilots, more than Southwest and JetBlue combined, he says.

"I’d like to think that while we’re very clear about the fact we don’t pay the highest wages, we do take care of our people." he says, adding that he and other officers have contributed $350,000 to a company fund that helps employees in times of crises.

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