Shuttle America picks new chief

By Stephanie Stoughton, Globe Staff
December 1, 2001, Page C1

Shuttle America will appoint Scott Durgin, who helped steer Mesaba Airlines
during its massive growth during the 1990s, as chief executive when it
officially emerges later this month from bankruptcy protection.

In an interview yesterday, Durgin said Shuttle America, which flies out of
Hanscom Field in Bedford, will undergo a similar expansion, adding flights,
routes, and employees at a time when most airlines are scaling back. The
incoming CEO and new airline owner, investment firm Wexford Capital LLC,
also are considering moving the regional carrier's headquarters from Windsor
Locks, Conn., to Bedford or Mercer County, N.J. "Right now, Bedford probably
makes the most sense," Durgin said.

A US bankruptcy judge in Hartford yesterday approved Shuttle America's plan
to emerge from Chapter 11 bankruptcy protection. With Wexford's backing, the
once-undercapitalized airline has been able to reorganize its finances and
forge an alliance with US Airways Express. The small carrier recently added
service to Philadelphia, and plans to resume daily flights next month to New
York's LaGuardia Airport.

By the spring, Shuttle America executives expect to be flying 17 turboprop
planes, up from just three, and more than double its staff of 155 employees.
The company is now training dozens of pilots and flight attendants - some of
whom were laid off by airlines after the Sept. 11 terrorist attacks, Durgin
said.

Wexford had been expected to bring in its own manager to replace CEO David
Hackett, who is now working as a consultant for Shuttle America. The
financial firm's executives learned of Durgin through his mentor, Bryan
Bedford, chief executive at Indianapolis-based Chautaqua Airlines Inc.,
another Wexford investment. Bedford and Durgin had worked together at two
regional airlines: Mesaba and Business Express.

Durgin is familiar with both boom and bust times for regional carriers. From
1995 to 1996, he was vice president of customer service for Portsmouth,
N.H.-based Business Express Airlines, which filed for Chapter 11 bankruptcy
protection after defaulting on aircraft lease payments. In 1999, the
regional carrier was purchased by American Eagle.

At Minneapolis-based Mesaba, Durgin received accolades for helping guide the
expansion of the regional airline, which doubled its aircraft, absorbed new
routes, and tripled its staff between 1996 and 1999. Last fall,
Commuter/Regional Airline News named Durgin an "up-and-coming" airline
executive, after polling industry chairmen, presidents, and CEOs.

"To pull off what he did, it means he's definitely an operations guy," said
Benet Wilson, former editor-in-chief of the Potomac, Md.-based weekly
publication. "That's such a huge undertaking. And it's especially important
in the post-Sept. 11 airline environment, as regional airlines have been
handed down routes from their major airline partners and have had to
incorporate them rather quickly."

In September, Durgin left his position as vice president of customer service
at Mesaba and took a month off to relax and help his brother and
sister-in-law - who run a New York press production business near the World
Trade Center - apply for small-business loans. The business was forced to
close for about two weeks because of its proximity to ground zero.

Shuttle America hasn't been immune to the collateral damage of the attacks.
After Sept. 11, customer demand plummeted and security costs skyrocketed.
Furthermore, aviation analysts say its code-sharing partner, US Airways, has
become one of the weakest airlines following the collapse of its merger with
United Airlines and a steep decline in revenue.

Even so, Shuttle America's business started to rebound when travelers
seeking to avoid security tieups at larger airports began flocking to
Hanscom Field. At the height of the Thanksgiving travel period, more than 90
percent of the seats on its aircraft were filled, said Mark Cestari, the
airline's vice president of marketing.

Durgin said he sees more room for growth as airline retrenchments leave gaps
in service to airports in Hartford, Providence, Manchester, N.H., and White
Plains, N.Y. "We think there will be many opportunities for low-cost
turboprop operations," he said.

© Copyright 2001 Globe Newspaper Company

========================
Recovering Shuttle America names new chief
12/04/01

By TONY HAGEN
Trenton Times Staff Writer

EWING -- Newly reorganized Shuttle America yesterday did away with its old
guard leadership and appointed a new president to lead the ailing airline
into the black.

Officials of Shuttle America, the sole commercial airline flying out of
Trenton Mercer Airport, said they had appointed Scott L. Durgin, a former
vice president of customer service with Mesaba Aviation of Minneapolis to
serve as president.

He replaces both David Hackett and Barry Lutin, who have served as chief
executive and president, respectively, since the airline was founded with $8
million in venture capital in 1996.

"It's a chance to run the whole show," Durgin said yesterday of his new
duties with Shuttle America.

The airline emerged from bankruptcy court protection Friday after a yearlong
struggle in which it shed routes and planes to stay in business.

Wexford Capital of Greenwich, Conn., has received court permission to
acquire the airline in a buyout scheduled to close Friday.

In court papers, the purchase price has been listed as $1.4 million;
however, the company has not divulged a final figure that takes into account
adjustments imposed during bankruptcy court hearings.

Hackett and Lutin are among six original investors in the airline who are
technically the sellers. Wexford Capital is a private equity group.

Shuttle America has $23.2 million in accumulated debt, and owes substantial
sums to creditors for airline engines and leased planes. It also owes $3
million to the Connecticut Development Authority.

Shuttle America had threatened to become the 10th airline flying out of
Trenton Mercer to fail since 1983.

The airline began 2001 with six planes, had to cut five of them from its
budget, and flew with just one plane until increasing to three after
becoming a franchise of US Airways Express in October.

Although the airline will be formally known as Shuttle America Corp., its
planes now fly under the US Airways name. A Shuttle America spokesman
yesterday said the airline faltered because the mountain of debt weighed it
down so heavily. "In our old incarnation as Shuttle America we simply had
too much debt as a startup," said the spokesman, Mark Cestari.

Not only that, Shuttle America was too small to realize some of the
economies of scale enjoyed by bigger airlines, which can spread their basic
costs for reservations and other services over their larger volume of sales,
Cestari said.

"It proved to be very difficult to compete as a free-standing, low-fare
carrier. We never got big enough," Cestari said. That said, Shuttle America
was, in general, flying with break-even passenger loads and it was the
crushing debt that held it down, Cestari said.

Shuttle America at its peak flew to Buffalo, N.Y., Greensboro, N.C., and
Hanscom Field in Bedford, Mass., outside Boston.

Currently, it flies between Hanscom and Ewing and Hanscom and Philadelphia
International Airport.

Officials of the revamped flier say their wheels likely will get off the
ground this time with the US Airways partnership.

It has enabled them to raise fares significantly and offer business
discounts and frequent flier miles. They said customers are also likely to
be attracted by the transnational and international connections available
through the US Airways relationship.

"These programs we couldn't muster ourselves," Cestari said.

Officials said the airline's financial turbulence was in no way related to
the fact it flies 37-seat turboprops, a hybrid between a jet engine and a
propeller system that turns some customers off because they perceive
thoroughbred jet planes as safer.

"We think there's going to be a lot of opportunity for a low-cost turboprop
operator within the US Airways operation," said Durgin.

He said turboprop airlines can play their cards right by moving into shorter
routes abandoned by regional jet airlines that have been forced to
consolidate their operations and retire planes in recent months, due in part
to the Sept. 11 aftermath.

"A lot of capacity was out there. It's not there now," Durgin said.

Durgin, who holds a pilot's license, managed 850 employees at Mesaba, where
he worked since 1996 until he was sidelined by a downsizing this fall, he
said.

Previously, he worked with Business Express Airlines of Portsmouth, N.H.,
where he oversaw 650 employees in the customer service department. In all,
he has more than 20 years in the aviation business. At Shuttle America he
will be managing a growing staff of more than 300.

========================================================

Some see turbulence in Shuttle America's future

By Davis Bushnell, Globe Correspondent, 12/9/2001

BEDFORD - Now that Shuttle America apparently will emerge soon from
bankruptcy proceedings and resume service to New York City on Jan. 6, some
airline industry analysts are questioning whether the airline will have
enough financial resources to prevail in a troubled marketplace.

Also up in the air, these analysts suggest, is Shuttle America's marketing
agreement with US Airways for the long term. Since Oct. 24, Shuttle America
has been operating from Bedford's Hanscom Field as US Airways Express, with
daily round trips to Trenton, N.J., and Philadelphia.

US Airways, which is based in Arlington, Va., and has contracts with 10
regional carriers, is operating in the red, as are many of its competitors.

So charting a new, ambitious course for Shuttle America is going to be ''a
massive undertaking'' for the airline's new owner, Wexford Capital LLC of
Greenwich, Conn., said Robert Mann, an airline analyst from Port Washington,
N.Y.

The US Bankruptcy Court in Hartford confirmed a reorganization for the
airline, based in Windsor Locks, Conn., on Nov. 30. Under the plan, the
airline will be sold for $1.4 million to Shuttle Acquisition Corp., a unit
of Wexford Capital.

Wexford is a seven-year-old private equity business that will be responsible
for settling Shuttle America's debts of more than $23 million.

Wexford, which says it manages assets of some $900 million, also owns
Chautauqua Airlines Inc. of Indianapolis and is a major creditor of Midway
Airlines Inc. of Morrisville, N.C., which is also in bankruptcy.

Shuttle America will emerge from bankruptcy as soon as the Hartford court
issues a final decree, based on the reorganization plan's terms being
carried out, said Peggy Johnson, a court clerk.

Mark Cestari, chief spokesman for Shuttle America, which filed for Chapter
11 bankruptcy protection in April, said the airline could petition the
bankruptcy court for the decree at any time.

Meantime, Scott Durgin is preparing to become the airline's chief executive,
replacing David Hackett, said Cestari, who will be a vice president in
charge of marketing and customer service.

Durgin previously was a customer service vice president of Mesaba Airlines
of Minneapolis. Prior to that, he had the same position at Business Express
Airlines of Portsmouth, N.H., which went bankrupt and was acquired by
American Eagle.

Shuttle America is now negotiating to lease two aircraft a month until the
second quarter of next year, when it expects to have 16 planes to handle an
undisclosed, expanded schedule, Cestari said.

The first two 33-seat, Saab turboprop planes will provide service to
LaGuardia Airport in New York, beginning Jan. 6, he said. Six round trips
each business day are planned.

Shuttle America suspended service to LaGuardia April 15, after filing for
bankruptcy. It had inaugurated service to LaGuardia on Nov. 1 of last year.

Within three months, the airline will decide whether to keep its
headquarters in Windsor Locks or relocate to Trenton, N.J., or the Bedford
area, Cestari said.

Mann, the airline analyst, said the airline's deliberations concerning a
headquarters site could ''take the focus off running an airline'' under
Wexford Capital's wing.

Taking over Shuttle America, he asserted, ''places Wexford's [risk] exposure
at the high-water mark. It has a lot of balls in the air with Shuttle
America as well as Midway and Chautauqua. And, this could be a long, cold
winter for the airline business.''

Cestari countered, ''We now have a solid financial backer.''

Wexford could be considered Shuttle America's ''white knight,'' said another
airline industry observer, Michael Boyd of Evergreen, Colo. ''But what
happens if US Airways goes away, filing for bankruptcy? That would be the
real problem.''

US Airways spokesman David Castelveter has said he can't comment on his
airline's financial condition or ''any future relationship with Shuttle
America.''

Cestari said he believes Shuttle America has a two-year agreement with US
Airways, which takes an undisclosed cut of all fares to Trenton and
Philadelphia and provides ticketing and baggage services.

This story ran on page 11 of the Boston Globe's NorthWest Weekly and page 8
of the West Weekly on 12/9/2001.
© Copyright 2001 Globe Newspaper Company.
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