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Mesa Air files for Chpt. 11 bankruptcy protection

Jan. 5, 2010 – Mesa Air Group Inc., whose operations include flying regional routes for major airlines like Delta, United and US Airways, has filed for Chapter 11 bankruptcy protection, hoping to shed financial obligations for leases on airplanes it no longer needs.


January 5, 2010
By The Canadian Press

Jan. 5, 2010 – Mesa Air Group Inc., whose operations include flying regional routes for major airlines like Delta, United and US Airways, has filed for Chapter 11 bankruptcy protection, hoping to shed financial obligations for leases on airplanes it no longer needs.

Mesa's liabilities were US$869 million as on Sept. 30, 2009, including US$133 million owed to Canadian aircraft maker Bombardier. That makes the Montreal-based company the second-largest creditor after Wells Fargo Bank.

Mesa, which currently runs 130 aircraft, said the filing will allow it to reorganize its operations and allow it to get rid of its extra planes and become more competitive.

Mesa said Tuesday that its go!-Mokulele Hawaiian joint venture with Mokulele Airlines is not included in the bankruptcy filing and will run a full flight schedule.

It said the rest of its operations are expected to run normally during the restructuring process, with Mesa anticipating it will win court approval to continue paying workers and the fulfilling code-share partner agreements within the next few days.

The airline's fleet includes 98 Bombardier CRJs, 16 Dash 8 turboprops and 22 Embraer regional jets.

Bombardier has delivered 90 of 100 CRJs ordered by Mesa.

National Bank Financial analyst David Newman said the remaining 10 CRJ700s included in Bombardier's current backlog run the risk of being cancelled.

“The CRJ is a lower-margin product and we believe this termination should not have a material near-term impact on production or earnings, other than reduced overhead absorption,'' he wrote in a report.

Cancellation of the order would reduce the CRJ backlog by about two months. Bombardier plans to reduce the jet's production rate this year, laying off an additional 600 employees in Montreal.

Newman said Mesa's bankruptcy could be short since the company has a labour agreement with its pilots union and a tentative deal with flight attendants.

In November, United Airlines chose not to extend a deal under which Mesa ran 26 regional jets for that carrier. The Phoenix company also runs regional flights for carriers including Delta Air Lines and US Airways.

Regional jets are smaller than the planes that large airlines use on most of their routes. They are often used to bring travellers to hub airports, where they can connect with other flights.

The company also expects its restructuring to help it more quickly resolve its lawsuit against Delta, in which Mesa is seeking more than $70 million in damages. Delta has tried to terminate their deal.

Chairman and CEO Jonathan Ornstein said in a statement that Mesa has spent the past two years working with lessors, creditors and others in order to restructure its financial obligations, which in turn helped it get rid of more than $160 million in debt
obligations; rework inventory management and engine overhaul deals and return some planes.

Ornstein said the company has enough liquidity to support itself during the restructuring.

Mesa voluntarily filed its Chapter 11 petitions with the U.S. Bankruptcy Court for the Southern District of New York.

Mesa shares, which have traded between one cent and 36 cents over the past 52 weeks, closed Monday at 12 cents.

Mesa is a major commuter carrier and operates flights as Delta Connection, US Airways Express and United Express under agreements with Delta, US Airways Group Inc. and United Airlines.

Bombardier is the world's third-largest aircraft manufacturer and the largest railway manufacturer in the world. Its shares were down two cents at C$4.85 in morning trading on the Toronto Stock Exchange.