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Mesa Air Group Woes



News for Mesa Air Group continues to get worse

News for Mesa Air Group continues to get worse
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By Brett Snyder | May 19, 2010

The news for once-large Mesa Air Group continues to get worse and worse. The airline, which does contract flying of regional jets for legacy carriers in the US, has lost a lot of flying over the last few years. In January, Mesa filed for bankruptcy and now, the airline just lost a fight with Delta which allows Delta to pull out of the contract. This is an awful situation for the company, but US Airways (LCC) must be ecstatic. This gives them a growing influence over the airline.

Mesa has long flown for US Airways and its two predecessor airlines. In addition, Mesa flies for Delta and United, but both of those relationships have been highly contentious. With United, there are really only twenty 70-seat regional jets that are stable in the fleet. The 10 more that were supposed to enter service are the subject of a lawsuit. All other flying for United is toast.

Meanwhile, Mesa continued to fly 22 of the Embraer 145 regional jets for Delta through it’s Freedom Airlines subsidiary. Delta argued that Mesa hadn’t met performance guarantees so it wanted out of the contract. Mesa’s response?

The litigation stemmed from Delta’s asserted termination of the Freedom Airlines agreement based upon flights canceled at Delta’s request, during periods of operational irregularity (bad weather and ATC delays) at JFK in order to make way for Delta’s larger jets, which were then retroactively held against Freedom for purposes of calculating its minimum flight completion factor.

Though the original bent seemed to favor Mesa, the judge has now ruled that Delta is right. So the contract will end.

This now leaves Mesa with very little flying. Though it has 177 airplanes, when all is said and done, only 79 actually have commitments as follows:

6 Bombardier Dash-8s with US Airways

8 Bombardier CRJ-200s with US Airways

38 Bombardier CRJ-900s with US Airways

20 Bombardier CRJ-700s with United

5 Bombardier CRJ-200s with Hawaiian subsidiary go!

2 Embraer ERJ-145s subleased out

With Mesa in bankruptcy, it has the opportunity to strip itself of many of these airplanes, but at some point, the airline simply just has no reason to exist. In this case, it’s really US Airways standing in between those points.

After this is done, US Airways will be responsible for two-thirds of the airplanes that Mesa has contracted, and that assumes that United doesn’t find a way out of its contract. So ultimately, Mesa’s existence relies upon US Airways and that means that they have them over a barrel. Mesa has long been a low cost provider of transportation, but they’ve lost out on some contracts in recent times. US Airways is likely to turn the screws here to get Mesa to give up as much as possible in order to extend the current contract to give it a little breathing room, and that’s not a good position to be in if you’re Mesa.

On the other hand, if you’re US Airways, you’re pretty happy right now. Leverage is always a good thing.

Source: bnet.com




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