Mesa Leads Airline Sell-Off


(TVLW) – Mesa Air Group led a sell-off in airline stocks Monday, after the regional carrier’s motion for a new trial was rejected by a bankruptcy court judge and the company said it wasn’t able to estimate 2007 financial results.

The Amex Airline Index fell 3.7 percent to 36.73 in morning trading even as light, sweet crude for January delivery fell 81 cents to $90.46 a barrel on the New York Mercantile Exchange. Fuel is one of the airline industry’s highest costs. The index has fallen about 35 percent this year as oil prices have climbed.

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U.S. Bankruptcy Court Judge Robert Faris last week rejected Phoenix-based Mesa’s motion for a new trial. Faris ordered Mesa to pay Hawaiian Airlines $80 million on Oct. 30, saying it launched regional carrier go! airlines using confidential information obtained from Hawaiian’s bankruptcy proceedings. Mesa had argued it needed a new trial because the company hasn’t been able to present evidence that it did not misuse the confidential records.

Faris ordered Mesa to post a $90 million bond, because of interest and expenses over the next year.

In a filing with the Securities and Exchange Commission Friday, Mesa also said it isn’t able to “provide a reasonable estimate of full-year results for fiscal 2007 until it completes a review of certain estimates and reserves that may affect the financial statements.”

Mesa’s stock fell 95 cents, or 21.3 percent, to $3.52 in midday trading.

Soleil Securities analyst James Higgins said Monday he is “less optimistic” about AMR Corp.’s stock outlook because of “revenue headwinds” in its trans-Atlantic routes and labor-negotiation concerns. Higgins lowered his price target for American Airlines’ parent company to $20 from $24 and maintained a “Neutral” rating.

“On balance, we believe there is more downside risk than upside surprise potential in our forecast absent a significant fuel price drop,” he wrote in a note to clients.

AMR shares fell 5 cents to $16.50.

Regional and low-cost carriers posted large drops, including Frontier Airlines Holdings Inc., which fell 47 cents, or 7.8 percent, to $5.58 and ExpressJet Holdings Inc., which saw shares fall 10 cents, or 3.6 percent, to $2.67.

JetBlue Airways Corp. received another positive analyst report from Citi Investment Research analyst Andrew Light, who said Lufthansa AG’s plan to purchase 19 percent of its shares will add to JetBlue’s earnings and reduce its financial risk. JetBlue shares fell 9 cents to $7.