Mesa Air Group is due to lose another chunk of commuter-flight business from Delta Airlines, a move Delta blamed on the airline’s poor performance.
The airline’s stock fell 15 percent, to 42 cents, on a day most airlines’ stock rose sharply due to the continuing decline in oil prices.
The Phoenix-based regional airline said it plans to file a lawsuit against Delta, as it did earlier this year when the Atlanta carrier said it was canceling another, larger contract with Mesa. In that case, Mesa won a preliminary injunction preventing the move.
Mesa’s contention in this case is the same as in the earlier one: this is not about the airline’s performance but rather about Delta’s need to cut costs in this tough industry environment.
Mesa Chairman and Chief Executive Officer Jonathan Ornstein said Delta’s claim that Mesa was below the performance standards in the other contract “did not hold up in court when they made it the first time … and we don’t believe it holds up in this case.”
The latest contract Delta said it is canceling involves 14 regional jets, half already in service for Delta out of Kennedy Airport in New York; the other half are due to enter service by May.
Ornstein said the loss of this contract would not be as financially crippling to Mesa as the larger one involving nearly three dozen planes because Delta owns these planes.
In the other Delta contract, Mesa leases the planes in use at Delta and would be stuck with the lease payments but no revenue to offset them if the business goes away. That contract is worth more than $200 million a year in revenue; the latest contract about $25 million, Ornstein said. The airline has conceded it may have to file for bankruptcy if Delta prevails in canceling the larger contract.
Mesa’s performance in June was poor in key categories, according to the government’s latest Air Travel Consumer Report.
The airline had the most flight cancellations among the 19 carriers ranked, at 4.3 percent. It also ranked 18th of 19 airlines in baggage handling, though its rate of mishandled bags fell from a year ago.
In on-time arrivals, it was ranked 14th, at 67.3 percent. The single biggest factor for the delays, according to the report: factors in its own control, such as maintenance or crew.
Ornstein blamed some of the poor showing on its major airline partners, as they tend to cancel or delay commuter flights ahead of more packed flights on their larger planes. On baggage handling, he said it does not do its own baggage handling in most cities.