Link Copied

Another US passenger airline will now also fly cargo freighters as more carriers court package hauling as a new source of revenue

Another US passenger airline will now also fly cargo freighters as more carriers court package hauling as a new source of revenue
  • Mesa Airlines just announced a five-year cargo-flying contract with DHL Express starting October.
  • DHL is sub-leasing two Boeing 737-400 freighters to Mesa with the possibility for more if the regional carrier is successful.
  • Passenger airlines were turning to cargo to diversify revenue streams and create incentives for pilots before the pandemic but the pressure is now turned up due to the pandemic's economic impact.

More passenger airlines are turning to cargo as a way to diversify revenue streams amid the pandemic as flying boxes is proving to be more lucrative than people.

Mesa Airlines is the latest US airline to announce that it will be flying cargo aircraft come October on behalf of a delivery service alongside its passenger operations. The five-year deal with DHL Express will initially see two Boeing 737 converted freighters sub-leased to Mesa to operate from the logistics giant's hub near Cincinnati.

It's a huge shift from Mesa's normal operation, which consists of flying regional passenger aircraft on behalf of American Airlines and United Airlines from hubs across the country. But one expert says that airlines like Mesa are perfectly suited to these types of cargo operations, where the delivery service provides the aircraft and the operator provides the crew, performs the maintenance, and covers insurance.

Sun Country Airlines shook the industry late last year with its announcement to bring on cargo with 737 freighters as a way to diversify its business but unlike the Minneapolis-based carrier, Mesa will need to prove that it can handle flying cargo and operating the larger aircraft it's being entrusted with.

In an interview with Business Insider, Mesa Airlines' CEO Jonathan Ornstein explained why the shift into cargo is the right move and how he was able to get DHL Express to give a small regional airline a shot at the lucrative contract.

Phoenix-based Mesa Airlines operates hundreds of flights every day with hubs in nearly every time zone but doesn't sell its own tickets nor market its flights, and most passengers don't even know they're flying on the airline.

Phoenix-based Mesa Airlines operates hundreds of flights every day with hubs in nearly every time zone but doesn't sell its own tickets nor market its flights, and most passengers don't even know they're flying on the airline.
Phoenix Sky Harbor International Airport. BCFC/shutterstock
Advertisement

The regional carrier, rather, operates flights on behalf of its major airline partners, United Airlines and American Airlines.

The regional carrier, rather, operates flights on behalf of its major airline partners, United Airlines and American Airlines.
American Airlines and United Airlines planes. Kit Leong / Shutterstock.com
Advertisement

Mesa operates three aircraft types for the partners. For American Airlines, Mesa flies the Bombardier CRJ900 from hubs in Phoenix and Dallas.

Mesa operates three aircraft types for the partners. For American Airlines, Mesa flies the Bombardier CRJ900 from hubs in Phoenix and Dallas.
An American Airlines CRJ900. Thomas Pallini/Business Insider
Advertisement
Advertisement

And for United Airlines, Mesa flies the Bombardier CRJ 700...

And for United Airlines, Mesa flies the Bombardier CRJ 700...
A United Airlines CRJ700. Fabrizio Gandolfo/SOPA Images/LightRocket/Getty
Advertisement

And Embraer E175 from Houston and Washington hubs.

And Embraer E175 from Houston and Washington hubs.
A United Airlines Embraer E175. Austin Deppe / Shutterstock.com
Advertisement

While Mesa has shown it can reliably fly regional jets, with over 100 planes in its stable, DHL is now entrusting Mesa with larger Boeing 737-400 freighter aircraft.

While Mesa has shown it can reliably fly regional jets, with over 100 planes in its stable, DHL is now entrusting Mesa with larger Boeing 737-400 freighter aircraft.
A DHL Boeing 737-400 freighter. Wspin/Shutterstock.com
Advertisement

The Boeing 737 is an integral part of DHL's cargo operation tasked with flying short and medium-haul routes within a given region.

The Boeing 737 is an integral part of DHL's cargo operation tasked with flying short and medium-haul routes within a given region.
A DHL Boeing 737 freighter. JIMIN LAI/AFP/Getty
Advertisement

It's the middle child in a fleet of heavy hitters like the Boeing 777F...

It's the middle child in a fleet of heavy hitters like the Boeing 777F...
A Kalitta Air/DHL Boeing 777 Freighter. Carlos Yudica/Shutterstock.com
Advertisement

And Boeing 747-400F,

And Boeing 747-400F,
A Polar Air Cargo/DHL Boeing 747 Freighter. Thiago B Trevisan/Shutterstock.com
Advertisement

But a few steps above DHL's smallest aircraft like the Cessna Caravan 208.

But a few steps above DHL's smallest aircraft like the Cessna Caravan 208.
A Kingfisher Air Services/DHL Cessna Caravan 208. Fabrizio Gandolfo/SOPA Images/LightRocket/Getty
Advertisement

The 737 is a tried and true freighter with the aircraft family having a track record of reliability. The jet is used by the likes of Amazon Air...

The 737 is a tried and true freighter with the aircraft family having a track record of reliability. The jet is used by the likes of Amazon Air...
An Amazon Prime Air Boeing 737-800 freighter. Mustafa Yalcin/Anadolu Agency/Getty
Advertisement

And FedEx Express.

And FedEx Express.
A FedEx Express Boeing 737-400 freighter. InsectWorld / Shutterstock.com
Advertisement

But it's a type Mesa has never flown before and larger than anything in its current fleet as a regional carrier.

But it's a type Mesa has never flown before and larger than anything in its current fleet as a regional carrier.
A Mesa Airlines CRJ900 aircraft. Alex Tai/SOPA Images/LightRocket/Getty
Advertisement

The investment is massive as new courses will need to be added to Mesa's existing pilot training program to learn the ins and outs of the aircraft, which less than 20 pilots will fly at first.

The investment is massive as new courses will need to be added to Mesa's existing pilot training program to learn the ins and outs of the aircraft, which less than 20 pilots will fly at first.
A Boeing 737 cockpit. Patrick van Katwijk/Getty
Advertisement

Each pilot will also have to undergo new simulator training, paid for by Mesa.

Each pilot will also have to undergo new simulator training, paid for by Mesa.
A Boeing 737 simulator. Eric Piermont/AFP Photo/Getty Images
Advertisement

And with Mesa covering maintenance for the aircraft, mechanics will also have to learn how to service the plane, which requires being sent off for additional training.

And with Mesa covering maintenance for the aircraft, mechanics will also have to learn how to service the plane, which requires being sent off for additional training.
A DHL Boeing 737 aircraft. JUAN CARLOS ULATE/Reuters
Advertisement

That's all while operating from a new base at Cincinnati/Northern Kentucky International Airport where DHL has a global hub comparable to UPS' in Louisville, Kentucky and FedEx's in Memphis, Tennessee.

That's all while operating from a new base at Cincinnati/Northern Kentucky International Airport where DHL has a global hub comparable to UPS' in Louisville, Kentucky and FedEx's in Memphis, Tennessee.
Cincinnati/Northern Kentucky International Airport. EQRoy / Shutterstock.com
Advertisement

Despite the major investment and workload to onboard a new plane in a new location, CEO Jonathan Ornstein isn't worried as he's had experience operating the 737, even though his current company hasn't.

Despite the major investment and workload to onboard a new plane in a new location, CEO Jonathan Ornstein isn't worried as he's had experience operating the 737, even though his current company hasn't.
A DHL Boeing 737 cargo plane. JIMIN LAI/AFP/Getty
Advertisement

In the mid-1990s, Ornstein was in Europe launching a low-cost airline under the iconic Virgin brand, the aptly named Virgin Express, where he served as chief executive officer.

In the mid-1990s, Ornstein was in Europe launching a low-cost airline under the iconic Virgin brand, the aptly named Virgin Express, where he served as chief executive officer.
A Virgin Express Boeing 737. Etienne DE MALGLAIVE/Gamma-Rapho/Getty
Advertisement

Ornstein and Mesa's current president, Mile Lotz, "operated a fleet of almost 40 737s over in Europe," Ornstein told Business Insider in an interview.

Ornstein and Mesa's current president, Mile Lotz, "operated a fleet of almost 40 737s over in Europe," Ornstein told Business Insider in an interview.
A Boeing 737 aircraft. Saul Loeb/AFP
Advertisement

"The 737-400 is actually the type of aircraft that we were operating in Europe," Ornstein said. "So, it's not as if we don't have experience with this type of equipment."

"The 737-400 is actually the type of aircraft that we were operating in Europe," Ornstein said. "So, it's not as if we don't have experience with this type of equipment."
A Boeing 737-400 aircraft. Jay Limsirichai / Shutterstock.com
Advertisement

The flagship of Virgin Express' fleet was the Boeing 737 aircraft with the airline operating the -300 and -400 models, the latter of which is now being operated by Mesa as a freighter.

The flagship of Virgin Express' fleet was the Boeing 737 aircraft with the airline operating the -300 and -400 models, the latter of which is now being operated by Mesa as a freighter.
A Virgin Express Boeing 737. Dietmar Plath/ullstein bild/Getty
Advertisement

Even before his stint in Europe, Ornstein worked for Continental Airlines in executive positions, where he gained some experience with the 737 as the Houston-based airline was very loyal to Boeing.

Even before his stint in Europe, Ornstein worked for Continental Airlines in executive positions, where he gained some experience with the 737 as the Houston-based airline was very loyal to Boeing.
A Continental Airlines Boeing 737. Ryan Fletcher / Shutterstock.com
Advertisement

"And, in fact, one of the first things that we found when we were in Europe is – even on an older aircraft – the 737s are extremely reliable," Ornstein said. "So, we felt comfortable from that standpoint because it's critical that we do an outstanding job of DHL both to retain and to potentially expand the business."

"And, in fact, one of the first things that we found when we were in Europe is – even on an older aircraft – the 737s are extremely reliable," Ornstein said. "So, we felt comfortable from that standpoint because it's critical that we do an outstanding job of DHL both to retain and to potentially expand the business."
A DHL Boeing 737 cargo plane. JIMIN LAI/AFP/Getty
Advertisement

And air cargo experts aren't concerned with Mesa flying the 737 as, at the end of the day, it's just a plane and Mesa is an airline.

And air cargo experts aren't concerned with Mesa flying the 737 as, at the end of the day, it's just a plane and Mesa is an airline.
A Boeing 737 aircraft. Thomas Pallini/Business Insider
Advertisement

"From a Mesa perspective, it almost doesn't matter what you're operating," Neel Jones Shah, global head of airfreight at Flexport, told Business Insider. "As long as you're operating airplanes, you are in your core business."

"From a Mesa perspective, it almost doesn't matter what you're operating," Neel Jones Shah, global head of airfreight at Flexport, told Business Insider. "As long as you're operating airplanes, you are in your core business."
United Airlines Boeing 737 aircraft. AP
Advertisement

The contract plays right into Mesa's existing operation that sees the regional airline flying planes on behalf of another company and charging a certain amount for doing so.

The contract plays right into Mesa's existing operation that sees the regional airline flying planes on behalf of another company and charging a certain amount for doing so.
An American Airlines mainline and regional jet. Thomas Pallini/Business Insider
Advertisement

"You're typically running a cost-plus business," Shah said. "And as you grow that business, that's where the leverage comes in because you can lower your cost but you don't have to pass on the savings to the company you're operating for."

"You're typically running a cost-plus business," Shah said. "And as you grow that business, that's where the leverage comes in because you can lower your cost but you don't have to pass on the savings to the company you're operating for."
A United Airlines Embraer E175. Thomas Pallini/Business Insider
Advertisement

But the contract at present is for just two aircraft so it's a test for Mesa to show that it can reliably fly the new aircraft in the cargo setting before it can scale up.

But the contract at present is for just two aircraft so it's a test for Mesa to show that it can reliably fly the new aircraft in the cargo setting before it can scale up.
A DHL Boeing 737 cargo plane. Alla Greeg/Shutterstock.com
Advertisement

Getting that test took a while, with Ornstein saying this move has been in the works for years and the Mesa head's more recent experience sitting on the board of directors for Southern Air likely helped the airline get to the top of the list.

Getting that test took a while, with Ornstein saying this move has been in the works for years and the Mesa head's more recent experience sitting on the board of directors for Southern Air likely helped the airline get to the top of the list.
A Southern Air/DHL Boeing 777 Freighter. Carlos Yudica/Shutterstock.com
Advertisement

Southern Air is just one of many cargo airlines that DHL contracts to fly its packages around the world and Ornstein joining the board gave him a direct line to DHL.

Southern Air is just one of many cargo airlines that DHL contracts to fly its packages around the world and Ornstein joining the board gave him a direct line to DHL.
A DHL cargo plane. AMR ABDALLAH/DALSH/Reuters
Advertisement

And just two-months before announcing cargo operations, Ornstein brought Southern's former CEO Dan McHugh onto the Mesa board as the company prepared to enter the new realm.

And just two-months before announcing cargo operations, Ornstein brought Southern's former CEO Dan McHugh onto the Mesa board as the company prepared to enter the new realm.
A DHL cargo plane. DARRIN ZAMMIT/LUPI/Reuters
Advertisement

But what ended up being a genius way to diversify Mesa's flying business amid a pandemic began as something a lot simpler.

But what ended up being a genius way to diversify Mesa's flying business amid a pandemic began as something a lot simpler.
A DHL cargo plane. Aviation images.com/Universal Images Group/Getty
Advertisement

Ornstein initially viewed bringing the 737s into Mesa's fleet as a way to draw new pilots to the airline.

Ornstein initially viewed bringing the 737s into Mesa's fleet as a way to draw new pilots to the airline.
United Airlines aircraft in Newark. Nicolas Economou/NurPhoto/Getty
Advertisement

Before the pandemic, Mesa had been muddling through the pilot shortage along with the country's other regional airlines and viewed the 737 as an incentive, nearly above all.

Before the pandemic, Mesa had been muddling through the pilot shortage along with the country's other regional airlines and viewed the 737 as an incentive, nearly above all.
A Boeing 737 cockpit. Michael Dunning/Getty Images
Advertisement

It's no secret that pilots love flying larger aircraft so the opportunity to fly a Boeing 737 early on in a pilot's career before heading to the major carriers was seen as a major pull to get more pilots in the door at Mesa.

It's no secret that pilots love flying larger aircraft so the opportunity to fly a Boeing 737 early on in a pilot's career before heading to the major carriers was seen as a major pull to get more pilots in the door at Mesa.
A DHL cargo plane. DARRIN ZAMMIT/LUPI/Reuters
Advertisement

Though the pilot shortage is temporarily over, with the pandemic inflicting mass layoffs and furloughs, the strategy will still pay off for Mesa as it brings in another revenue stream.

Though the pilot shortage is temporarily over, with the pandemic inflicting mass layoffs and furloughs, the strategy will still pay off for Mesa as it brings in another revenue stream.
A DHL cargo plane. DARRIN ZAMMIT/LUPI/Reuters
Advertisement

Mesa will start with two planes, scheduled to arrive in the next few weeks before cargo operations begin in October.

Mesa will start with two planes, scheduled to arrive in the next few weeks before cargo operations begin in October.
A DHL cargo plane. JUAN CARLOS ULATE/Reuters
Advertisement

Like with most of these contracts, DHL will own the aircraft while Mesa sub-leases them under a CMI contract, meaning Mesa provides the crew, maintenance, and insurance. Amazon does the same with its air cargo contractors.

Like with most of these contracts, DHL will own the aircraft while Mesa sub-leases them under a CMI contract, meaning Mesa provides the crew, maintenance, and insurance. Amazon does the same with its air cargo contractors.
An Amazon Air Boeing 767 freighter. AP Photo/Ted S. Warren
Advertisement

Sub-leasing is popular and as it means the delivery service holds the cards and can be flexible with who it selects to fly the planes.

Sub-leasing is popular and as it means the delivery service holds the cards and can be flexible with who it selects to fly the planes.
An Amazon Air Boeing 767 freighter. Mark Makela/Reuters
Advertisement

On the other hand, Mesa doesn't have to go out and buy new 737s for what may only be a five-year contract is DHL doesn't extend.

On the other hand, Mesa doesn't have to go out and buy new 737s for what may only be a five-year contract is DHL doesn't extend.
DHL cargo planes. Jay LaPrete/Reuters
Advertisement

Mesa is the second US passenger airline to introduce dedicated cargo aircraft into its fleet this year, signaling a trend for the industry especially as the pandemic prepares to enter its fifth month.

Mesa is the second US passenger airline to introduce dedicated cargo aircraft into its fleet this year, signaling a trend for the industry especially as the pandemic prepares to enter its fifth month.
DHL and FedEx cargo planes. Oed/ullstein bild/Getty
Advertisement

Following a major transition at the airline from full-service to low-cost, Sun Country Airlines CEO Jude Bricker also landed a deal with Amazon's Prime Air that would see his airline operate 10 Boeing 737-800 freighters.

Following a major transition at the airline from full-service to low-cost, Sun Country Airlines CEO Jude Bricker also landed a deal with Amazon's Prime Air that would see his airline operate 10 Boeing 737-800 freighters.
Sun Country Airlines CEO Jude Bricker. Sun Country Airlines
Advertisement

Much like Mesa, the deal came at a perfect time as Sun Country announced in December, shortly before the public even know what COVID-19 was, and appeared to be a match made in heaven thanks to the airline's all-Boeing 737 fleet.

Much like Mesa, the deal came at a perfect time as Sun Country announced in December, shortly before the public even know what COVID-19 was, and appeared to be a match made in heaven thanks to the airline's all-Boeing 737 fleet.
A Sun Country Airlines Boeing 737-800. Sun Country Airlines
Advertisement

Bricker told Business Insider in a previous interview that his airline wants to get all of the contracted planes in his fleet as soon as possible to support the business now that the pandemic has impacted the airline's passenger flying.

Bricker told Business Insider in a previous interview that his airline wants to get all of the contracted planes in his fleet as soon as possible to support the business now that the pandemic has impacted the airline's passenger flying.
A Sun Country Airlines Boeing 737-800. Sun Country Airlines
Advertisement

For Mesa, the mission is now to prove it can handle the 737 and get DHL to expand the terms of its deal with more planes so that the regional carrier can establish itself as a worthy contender in the new realm.

For Mesa, the mission is now to prove it can handle the 737 and get DHL to expand the terms of its deal with more planes so that the regional carrier can establish itself as a worthy contender in the new realm.
A Boeing 737 aircraft. Shutterstock.com
Advertisement

"We're very pleased that DHL is willing to make a bet with us that we can be an important member of their team," Ornstein said.

"We're very pleased that DHL is willing to make a bet with us that we can be an important member of their team," Ornstein said.
A DHL logo is seen on a DHL Boeing 757 aircraft during a charity fundraising event at the Safi Aviation Park in Safi Reuters
Advertisement
COVID-19IndiaCases: 1.96MDeaths: 40.6kRecovered: 1.32M
COVID-19WorldCases: 18.35MDeaths: 696kRecovered: 11.30M
COVID-19USACases: 4.67MDeaths: 154kRecovered: 1.57M