Mesaba lines up $24 million in financing

The airline asked a court to approve the deal. Also, Mesaba executives will forgo incentive pay as a gesture of shared sacrifice.

Liz Fedor, Star Tribune
July 22, 2006

Mesaba Airlines intends to avert a cash crisis by securing financing for as much as $24 million through a New York company, and it asked a bankruptcy judge Friday for approval to consummate the deal.

In late June, the regional carrier's top financial officer warned that Mesaba could run out of cash around Sept. 1 unless it lined up debtor-in-possession financing.

In a court filing Friday, Mesaba said it needs the money to continue daily operations and to help it restructure its business. Its financing partner is Marathon Asset Management, a company founded in 1998 with more than $7 billion in capital under management.

It's unclear what interest rate Mesaba would pay for the financing, because it was blacked out in the agreement filed with the court. A preliminary hearing is scheduled for Thursday on Mesaba's financing motion.

There was another key development Friday that could help the airline's management and its unions come closer to negotiated agreements.

Tom Wychor, chairman of the pilots union at the carrier, said he was told by Mesaba President John Spanjers that the airline's top five officers had decided to forgo incentive compensation for fiscal 2006. In Spanjers' case, he'll give up a bonus of $33,638, Mesaba spokeswoman Jane Berg said.

"We see it as a very positive step in accepting that there will be shared sacrifices among all the employees," Wychor said.

He was involved in contract negotiations Friday with management, and said pilot talks will continue next week.

Berg said the other officers who had elected not to receive incentive payments are Vice Presidents Bill Pal-Freeman, Bill Poerstel, Steve Holme and Tom Schmidt.

Based on their desire to reach consensual labor agreements with the regional carrier's unions, the executives recognized that it was the "right decision" to decline their annual incentive payments, Berg said.

Spanjers' compensation was listed in a proxy statement filed Friday by MAIR Holdings Inc., Mesaba's parent company. For the fiscal year that ended March 31, Spanjers was paid a salary of $193,000.

Wychor was critical of the compensation of MAIR Holdings CEO Paul Foley, who was paid a salary of $350,000 and a bonus of $175,000. Foley received $195,087 in other compensation, including $131,617 to move from the East Coast to Minnesota.

"The compensation committee concluded that Mr. Foley continued to excel in his leadership role, both before and after the Mesaba bankruptcy filing," MAIR said Friday in its proxy statement. Wychor said many Mesaba employees who question what Foley does on a daily basis would view that statement as "inexplicable."

Statement 'speaks for itself'

MAIR spokesman Jon Austin declined to elaborate concerning the board's view of Foley's performance. "The proxy speaks for itself. Compensation policies of MAIR are set by the board of directors and the compensation committee," Austin said.

Foley has been a lightning rod for many Mesaba employees and for union leaders. They are upset that Mesaba does not have access to MAIR cash that's been generated from Mesaba's revenue, and they point to the fact that money-losing Big Sky Airlines was acquired on Foley's watch.

Wychor said it is "unconscionable" for Foley to accept a large bonus while Mesaba executives are turning down their incentive pay and the airline's employees have been asked "to take subpoverty wages."

Staff writer Patrick J. Kennedy contributed to this report.
Liz Fedor • 612-673-7709