UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

 

For the fiscal year ended March 31, 2002

 

OR

 

 

For the transition period from              to             

 

Commission File No. 0-17895

 

MESABA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

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 ý  No o

 

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. ý

 

The aggregate market value of voting stock held by nonaffiliates of the registrant as of May 15, 2002 was approximately $143,913,820.

 

As of May 15, 2002, there were 20,298,141 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.

 

 

CAUTIONARY STATEMENT UNDER THE

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

 

Statements in this Annual Report on Form 10-K under the caption “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 may 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 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.  The Company cautions the public not to place undue reliance on forward-looking statements, which may be based on assumptions and anticipated events that do not materialize.  Factors which could cause the Company’s actual results to differ from forward-looking statements include material changes in the relationship between the Company and Northwest Airlines; reductions or interruptions in Northwest Airlines’ air service; reduced passenger and flight activity as a result of the terrorist events of September 11, 2001; expenses associated with restructuring the Company’s operations; a general slow-down in the United States economy; increased operating costs due to the events of September 11, 2001; the impact of United States government programs on the Company’s operations; changes in regulations affecting the Company, including DOT and FAA regulations or directives affecting airworthiness of aircraft; the acquisition and phase-in of aircraft; seasonal factors; and labor relationships, including labor shortages, slow downs and/or work stoppages associated with the outcome of contract negotiations between the Company and the Air Line Pilots Association.

 

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PART I

 

Item 1.             BUSINESS

 

Mesaba Holdings, Inc. (“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”.  As of May 1, 2002, Mesaba is flying to 102 cities and metropolitan areas in 26 states and four provinces in 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

 

Mesaba operates as a regional air carrier providing scheduled jet-prop passenger and airfreight service as Mesaba Airlines/Northwest Airlink under an Airline Services Agreement (the “Airlink Agreement”).  As of May 1, 2002, Mesaba serves 82 cities in the United States and Canada from Northwest’s hub airports in Minneapolis/St. Paul, Detroit and Memphis.  The Airlink Agreement provides for exclusive jet-prop rights to designated service areas and extends through June 30, 2007. Either Northwest or Mesaba has the right to terminate the Airlink Agreement without cause upon 365 days notice.

 

Mesaba also operates regional jet aircraft under a separate Regional Jet Services Agreement (the “Jet Agreement”), under which Mesaba operates Avro RJ85 (“RJ85”) regional jets for Northwest.  As of May 1, 2002, Mesaba served 40 cities under the Jet Agreement.  The aircraft are subleased from Northwest and are operated as Northwest Jet Airlink from the Minneapolis/St. Paul, Detroit and Memphis hubs. Northwest has the right to terminate the Jet Agreement on April 25, 2004 with at least 180 days or up to 365 days prior notice.

 

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 agreements with Northwest also permit Mesaba to offer its passengers fares between the cities served 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, 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.  The Airlink Agreement and the Jet Agreement can each be terminated immediately by a party in the event of an uncured breach by, or the insolvency of, the other party.  Northwest can also terminate either agreement immediately if Mesaba violates certain covenants, including failure to make aircraft lease payments or maintain insurance coverage.  Loss of Mesaba’s affiliation with Northwest or Northwest’s failure to materially perform under the Airlink Agreement or Jet Agreement would have a material adverse effect on the Company’s operations and financial position.

 

 

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Route System

 

The following sets forth certain information with respect to Mesaba’s scheduled route system for May 2002.

 

Cities served from Minneapolis/St. Paul: Aberdeen, SD, Appleton, WI, Bemidji, MN, Bismarck, ND, Bloomington, IL, Brainerd, MN, Cedar Rapids, IA, Champaign, IL, Cincinnati, OH, Columbus, OH, Des Moines, IA, Dubuque, IA, Duluth, MN, Eau Claire, WI, Flint, MI, Fort Dodge, IA, Grand Forks, ND, Grand Rapids, MI, Grand Rapids, MN, Green Bay, WI, Houghton/Hancock, MI, Hibbing, MN, International Falls, MN, Kalamazoo, MI, LaCrosse, WI, Lincoln, NE, Madison, WI, Marquette, MI, Mason City, IA, Moline, IL, Oklahoma City, OK, Omaha, NE, Peoria, IL, Pierre, SD, Pittsburgh, PA, Regina, Saskatchewan, Rhinelander, WI, Rochester, MN, Rockford, IL, Saginaw, MI, St. Cloud, MN, St. Louis, MO, Sioux City, IA, Sioux Falls, SD, Thief River Falls, MN, Thunder Bay, Ontario, Traverse City, MI, Waterloo, IA, Watertown, SD, Wausau, WI, White Plains, NY, Winnipeg, Manitoba.

 

Cities served from Detroit: Akron/Canton, OH, Allentown, PA, Alpena, MI, Appleton, WI, Binghamton, NY, Birmingham, AL, Bloomington, IL, Buffalo, NY, Champaign, IL, Charleston, WV, Charlotte, NC, Cincinnati, OH, Cleveland, OH, Columbus, OH, Dayton, OH, Des Moines, IA, Dubuque, IA, Elmira, NY, Erie, PA, Evansville, IN, Flint, MI, Fort Wayne, IN, Harrisburg, PA, Houghton/Hancock, MI, Kalamazoo, MI, Knoxville, TN, Lafayette, IN, Lansing, MI, Lexington, KY, London, Ontario, Louisville, KY, Marquette, MI, Moline, IL, Montreal, Quebec, Muskegon, MI, Ottawa, Ontario, Pellston, MI, Peoria, IL, Pittsburgh, PA, Roanoke, VA, Rochester, NY, Saginaw, MI, Sault Ste. Marie, MI, South Bend, IN, State College, PA, Toledo, OH, Traverse City, MI, Wausau, WI, White Plains, NY,  Youngstown, OH.

 

Cities served from Memphis: Alexandria, LA, Baton Rouge, LA, Biloxi/Gulfport, MS, Birmingham, AL, Charlotte, NC, Cincinnati, OH, Cleveland, OH, Columbus, OH, Columbus, MS, Des Moines, IA, Evansville, IN, Fayetteville, AR, Fortsmith, AR, Huntsville, AL, Jackson, MS, Joplin, MO, Knoxville, TN, Lafayette, LA, Lexington, KY, Moline, IL, Louisville, KY, Nashville, TN, Panama City, FL, St. Louis, MO, Tallahassee, FL, Tri-cities, TN.

 

Other cities that Mesaba flies to on a seasonal basis are Aspen, CO, Ely, MN, Fargo, ND, and Portland, ME.

 

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.”

 

Aircraft

 

The following table sets forth certain information as to Mesaba’s passenger aircraft fleet as of May 20, 2002:

 

Type of Aircraft		Number of Aircraft		Seating Capacity		Approximate Single Flight Range (miles)		Approximate Average Cruising Speed (M.P.H.)
Avro RJ85		36		69		1,400		410
Saab 340		80		30/33/34		500		300

 

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Mesaba leases or sub-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 pressurized jet airplanes with galleys, dual class cabins, 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 initial 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.

 

Under the agreements with Northwest, the Company has the ability to enter into arrangements with other air carriers for service to cities not served by Northwest, so long as the Company does not use the “NW” designator code, Avro RJ85 or Saab 340 aircraft with respect to such service.  The Company would need to acquire additional aircraft if it entered into an arrangement for service to carriers other than Northwest.

 

All of Mesaba’s aircraft comply fully with all current Federal Aviation Regulations issued by the Federal Aviation Administration (“FAA”).

 

As of May 2002, Mesaba’s existing fleet of Avro RJ85 and Saab 340 aircraft had remaining lease terms of four months to 14 years.  The current aggregate monthly lease payments for all aircraft is approximately $9.2 million.

 

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 larger 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.  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.

 

Fuel

 

The cost of aviation fuel accounted for 5.4% of total operating costs for the year ended March 31, 2002, 6.3% the year ended March 31, 2001, and 7.5% for the year ended March 31, 2000.

 

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 fluctuations in aviation fuel prices while the Jet Agreement requires Northwest to provide jet fuel to Mesaba at its expense.

 

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Fares

 

Mesaba derives its passenger revenues by selling its capacity to Northwest at predetermined rates.  Passenger fares vary primarily in relation to the length of the flight and other factors and are established by Northwest.  Under the agreements with Northwest, the Company has the ability to enter into arrangements with other air carriers for service to cities not served by Northwest, so long as the Company does not use the “NW” designator code, Avro RJ85 or Saab 340 aircraft with respect to such service.  The Company would need to acquire additional aircraft if it entered into an arrangement for service to carriers other than 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.  Mesaba holds 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.  Because Northwest maintains certain contracts with the Department of Defense (the “DOD”), Mesaba is subject to periodic inspections by the DOD.

 

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 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.

 

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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 52 of the cities it serves, Mesaba receives support service under agreements with Northwest.

 

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 (“MAC”).  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 $17,000 per month under the ground lease for the underlying land and access ramp.  Mesaba has entered into an agreement with the MAC to terminate these leases in September 2003, to accommodate planned runway construction.  As part of the runway expansion plan, Mesaba will relocate its hangar facilities to the western side of the airport and is currently evaluating lease options with the MAC.

 

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 60,000 square feet of hangar and maintenance space and obligates Mesaba to pay monthly rentals ranging between approximately $29,000 and $31,000 until June 1, 2010 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 June 1, 2010.  Monthly lease payments of approximately $10,000 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.   On May 9, 2000, the previous hangar collapsed due to a severe storm. During reconstruction, Mesaba expanded the facility to approximately 60,000 square feet.  Due to the hangar incident and corresponding reconstruction, the lease was reclassified from a capital to an operating lease.  The hangar facility reopened on June 1, 2001.

 

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 leases approximately 19,000 square feet of office space in Eagan, Minnesota.  Mesaba pays approximately $18,000 per month under the terms of the lease which expires on February 2017.

 

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Mesaba leases 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 and Mesaba pays monthly rentals of approximately $92,000 until January 29, 2029 as part of Special Facilities Bond financing provided by the Cincinnati/Northern Kentucky Airport Authority.  The ground lease has a 30-year term concurrent with the facilities lease, which expires January 29, 2029.  Monthly lease payments of approximately $10,500 are required under the ground lease.

 

Employees

 

As of May 1, 2002, Mesaba employed approximately 3,800 persons, of whom 940 were pilots, 350 were management, administrative and clerical personnel, 360 were aircraft maintenance personnel, 1,600 were station managers, station agents and line services personnel, and 550 were flight attendants.  Approximately 1,000 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 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 is currently negotiating with the pilots under Section 6 of the Railway Labor Act.

 

The Aircraft Mechanics Fraternal Association (“AMFA”) represents Mesaba’s mechanics.  Mesaba concluded negotiations with AMFA and reached a new collective bargaining agreement effective August 22, 1999, with a term of four years.

 

The Transportation Workers Union (“TWU”) represents Mesaba’s dispatchers. Mesaba concluded negotiations with the TWU and reached a new collective bargaining agreement effective May 26, 2000, with a term of five years.

 

The Association of Flight Attendants (“AFA”) represents Mesaba’s flight attendants. Mesaba concluded negotiations with the AFA and reached a new collective bargaining agreement effective April 1, 2002, with a term of four years.

 

The Railway Labor Act precludes any job action without a formal declaration of an impasse by the National Mediation Board, which has not 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.  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.

 

After September 11, 2001 and the mandated Federal Aviation Administration shutdown of the airline industry, Northwest immediately reduced Mesaba’s flight activity to approximately 80% of pre-September 11 operations.  Through the remainder of fiscal 2002, Mesaba’s jet flight activity gradually returned to levels that existed prior to September 11, while Mesaba’s jet-prop fleet has remained at the 80% level.

 

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Northwest Acquisition Offer

 

On November 1, 2000, Northwest presented the Company with an offer to purchase all of the Company’s outstanding shares not currently owned by Northwest at a price of $13.00 per share.  Northwest owns 5.7 million shares, or approximately 28% of the Company’s current shares outstanding.  The Company’s Board of Directors appointed a special committee of independent directors to consider and act upon Northwest’s offer and other alternatives on behalf of the Company and its public shareholders.  On June 14, 2001, Northwest announced that it had withdrawn its offer to purchase the Company’s shares.

 

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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.

 

Name		Age		Position		Officer Since
Carl R. Pohlad		86		Chairman of the Company and Mesaba		1995
Paul F. Foley		49		President and Chief Executive Officer of the Company and Mesaba		1999
Robert E. Weil		37		Vice President, Chief Financial Officer and Treasurer of the Company and Mesaba		2000
John G. Spanjers		47		Vice President, Flight Operations of Mesaba		1999
Scott R. Bussell		49		Vice President, Technical Operations of Mesaba		2000
Jeffrey W. Wehrenberg		42		Vice President, Minneapolis Hub Operations of Mesaba		2001
William T. Poerstel		41		Vice President, Detroit Hub Operations of Mesaba		2002
Robert T. Meekin		40		Vice President, People and Processes of Mesaba		2001

 

Carl R. Pohlad is a Class Two director and Chairman of the Board of Directors.  Mr. Pohlad has been Chairman of the Board, President and a director of Marquette Financial Companies, formerly 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.

 

Paul F. Foley is a Class Three director and President and Chief Executive Officer of the Company and Mesaba.  Mr. Foley was appointed President and Chief Executive Officer of the Company and Mesaba in October 1999.  Prior to joining the Company and Mesaba, Mr. Foley was Vice President of Operations Support at Atlas Air, Inc. from December 1996 to September 1999.  In this position, Mr. Foley was responsible for Airline Flight Crew and Ground Operations in 66 cities and 33 countries.  Mr. Foley was previously at LSG Lufthansa Service/Sky Chefs as Group Vice President of Operations, North America.  Mr. Foley also served as President of Continental Airline’s subsidiary, Chelsea Catering Corporation.  Mr. Foley holds a Bachelor of Science degree from Cornell University and a Masters Degree in Business Administration (“MBA”) from the Cox School of Business at Southern Methodist University.

 

Robert E. Weil was named Vice President, Chief Financial Officer and Treasurer of the Company and Mesaba in January 2000.  Mr. Weil  was the Managing Director of Finance – Ground Operations for Northwest Airlines from December 1997 until joining the Company and Mesaba.  He also held the position of Controller – Ground Operations and held various other finance positions at Northwest since 1991.  Mr. Weil holds a Masters degree in Management from the Kellogg Graduate School of Management at Northwestern University.

 

John G. Spanjers was named Vice President, Flight Operations of Mesaba in November 1999.  Mr. Spanjers was the Director Performance Engineering for Northwest from April 1997 until November 1999.  Mr. Spanjers also held various other positions within the SOC organization at Northwest since June 1988.  Prior to that, Mr. Spanjers held various operational positions within the regional and charter airline industry.  Mr. Spanjers holds a Bachelor of Science degree from the University of Minnesota.

 

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Scott R. Bussell was named Vice President, Technical Operations of Mesaba in May 2000.  Mr. Bussell joined Mesaba in October 1995 as Director of Maintenance.  Before joining Mesaba in 1995, Mr. Bussell held the position of Director of Maintenance for Renown Aviation in Roswell, NM.  From 1977 to 1994, Mr. Bussell held numerous positions in technical operations while employed at Continental Airlines and Frontier Airlines in Denver, CO. Mr. Bussell graduated with honors from Colorado Aero Tech and holds a FAA Airframe and Powerplant License.

 

Jeffrey W. Wehrenberg was named Vice President, Minneapolis Hub Operations of Mesaba in March 2001.  Mr. Wehrenberg joined Mesaba in September 2000 as Director of Systems Operations Control.  Before joining Mesaba, Mr. Wehrenberg held the position of Senior Vice President and Chief Operating Officer at TransMeridian Airlines from May 1999.  He also was President and Chief Operating Officer at Chicago Express Airlines between November 1998 and May 1999 and served in a variety of senior operational positions with Express Airlines I, between 1995 and 1998, including Vice President of Customer Service and Vice President and General Manager of the company’s northern region.

 

William T. Poerstel was named Vice President, Detroit Hub Operations of Mesaba in May 2002.  Before joining Mesaba, Mr. Poerstel held various positions at United Airlines from 1986 to October 2001, most recently as Quality Service Director.  He also served as UAL/US Airways Integration Program Director - Operations, System Workload Manager, Manager Aircraft Maintenance Operations, and Manager Hangar Maintenance for United.  Mr. Poerstel holds a Bachelor of Science degree in Aeronautics and Bachelor of Science degree in Aircraft Maintenance Engineering and Aircraft Maintenance Management from St. Louis University.

 

Robert T. Meekin was named Vice President, People and Processes of Mesaba in March 2001.  Before joining Mesaba, Mr. Meekin held the position of Director of Organization Development for Becton Dickinson, a medical technology company in Franklin Lakes, NJ.  Mr. Meekin held numerous positions in human resource management and organizational development at Becton Dickinson since 1997, The Perrier Group of America from 1992 to 1997 and Exxon Corporation from 1987 to 1992.  Mr. Meekin holds a Masters Degree in Labor and Industrial Relations from the University of Minnesota and a Masters Degree in Management and Organizational Development from American University.

 

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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

 

Northwest Acquisition Offer

 

In early November 2000, the Company was served with four lawsuits in Hennepin County District Court and one lawsuit in Dakota County District Court.  The Dakota County suit was subsequently transferred to Hennepin County.  The lawsuits were styled as purported class actions on behalf of the Company’s shareholders.  Also named as defendants in the lawsuits were each of the Company’s current directors and Northwest.

 

The lawsuits arose out of the proposal by Northwest to acquire all of the outstanding shares of the Company’s common stock which Northwest did not presently own.  The lawsuits alleged that the defendants had breached their fiduciary duties to the Company’s shareholders in connection with the proposed transaction.  Each of the lawsuits sought to enjoin the defendants from proceeding with the proposed transaction and, if the transaction was completed, to rescind the transaction or to compensate the Company’s shareholders for alleged damages.  The complaints also sought legal fees and other expenses on behalf of the plaintiffs.

 

During fiscal 2002, the Company obtained orders dismissing without prejudice each of the lawsuits.

 

Insurance Lawsuit

 

On March 2, 2002, Mesaba filed a lawsuit in Minnesota State Court against Federal Insurance Company, a subsidiary of The Chubb Corporation, for coverage of the business interruption, extra expense and fire suppression for the Detroit hangar that was destroyed due to a severe storm in May 2000.  The ultimate outcome of this lawsuit cannot be predicted with certainty.

 

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, 2002.

 

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PART II

 

Item 5.             MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS