Tuesday, January 05, 2010

Mesa Air Group files for Chapter 11 bankruptcy protection

by B. N. Sullivan

Mesa Air GroupCiting an "untenable financial situation" due to leases on aircraft it no longer needs or wants, Mesa Air Group has filed voluntarily for Chapter 11 bankruptcy protection. Mesa CEO Jonathan Ornstein said the move will allow Mesa to "eliminate excess aircraft."

"In addition" said Ornstein, "this action will give us the opportunity to reach a more timely conclusion in the litigation with Delta Air Lines in which Mesa is currently seeking damages in excess of $70 million."

Mesa sued Delta Air Lines after the latter canceled a lucrative contract.

In a statement to the press Mesa claimed that they "will continue to operate as normal, without interruption" during the financial restructuring. No layoffs were announced, however fleet reductions usually are accompanied by work force downsizing as well, so who knows what may be in store later in the year for crews and other Mesa employees.

Meanwhile, Mesa's press release specified (among other things) that the company is "seeking authority from the Court... to continue to pay employee salary and benefits," stating that it has ample liquidity to support itself during the bankruptcy process.

Mesa operates as Delta Connection, US Airways Express and United Express under contractual agreements with Delta Air Lines, US Airways and United Airlines, respectively, and independently as Mesa Airlines and go! Mokulele. The latter is not included in Mesa's Chapter 11 bankruptcy filing.

UPDATE Jan. 6, 2010: The Mesa Air Group (MAG) unit of the Air Line Pilots Association (ALPA) has released the following statement regarding Mesa's bankruptcy filing:
“While we are not surprised by the company’s bankruptcy filing, it is a sad day for all of us as MAG pilots. Our company experienced tremendous growth since it began operating in 1982.

Unfortunately, the steady decline in the U.S. economy has had a tremendous impact on our partners and our company and MAG was forced to declare bankruptcy to eliminate excess aircraft. The bankruptcy process will allow our company to restructure its fleet and debt so that it meets the flying needs of our partners and remains competitive for future business opportunities.

“MAG has some of the lowest costs in the industry. Labor expenses are clearly not the problem, and the company indicated that they plan to honor the existing collective bargaining agreement with their pilots. The union will continue working to protect our pilots’ rights under this agreement.

“We have an extremely dedicated pilot group and are strongly committed to seeing our airline succeed. MAG pilots offer its partners and their customers quality service and proven performance, and we are committed to maintaining the same level of excellence for passengers traveling on our aircraft.”