Mesa Files Bankruptcy, Looks to Shrink By Nearly Half

after a very long downhill slide. I imagine that there’s not a single person in the airline industry surprised by this move. What does this mean for you, the traveler? Nothing. Yet.

This is a Chapter 11 filing, so (PDF). I spoke with Paul Skellon, VP of Mesa’s go! subsidiary, and he assured me that this isn’t like most bankruptcies you see. They have enough cash to cover their operation so they don’t actually need any debtor-in-possession financing. It seems that this filing is all about breaking contracts – they want to ditch a bunch of airplanes that they aren’t using and get lower rates on the ones they’re keeping.

Right now, Mesa has 177 airplanes to its name. Incredibly, a whopping 52 of those are parked:

  • 20 Beechcraft 1900 19 seat turboprops haven’t been used for a long time
  • 3 Bombardier Dash-8 turboprops have joined them
  • 17 Bombardier CRJ-200 50 seat jets are sitting in the desert
  • 12 Embraer ERJ-145 50 seat jets are parked

In addition to that, United will be ending its contract for 7 Dash 8s and 18 CRJ-200s in the near future. Mesa says it wants to ditch those 76 airplanes. That will leave them with a mere 101 airplanes left as follows.

  • 6 Bombardier Dash-8s with US Airways
  • 8 Bombardier CRJ-200s with US Airways
  • 5 Bombardier CRJ-200s with go!
  • 22 Embraer ERJ-145s with Delta
  • 2 Embraer ERJ-145s subleased out
  • 20 Bombardier CRJ-700s with United
  • 38 Bombardier CRJ-900s with US Airways

Now, the question is this . . . will they survive? It’s in the hands of the judge. United and Delta have been ending contracts with Mesa as quickly as possible, so you know they’d be happy to walk away and have someone else take over this flying. An April 2009 prospectus last year noted that if . Paul Skellon wasn’t able to comment on whether this clause was still in effect, and my calls to other people at Mesa went unanswered. I heard back from Brian Gillman, Mesa’a EVP, General Counsel, and Secretary and he confirmed that those bankruptcy clauses are unenforceable. They are only included in case the laws change in the future.

This is a bit of a gamble for Mesa. Even if they don’t need the money and they can get around the bankruptcy clauses, they still need the bankruptcy judge to agree to let them break their contracts. The largest unsecured creditors are aircraft lessors and owners: Wells Fargo, Bombardier, Embraer, and GE, companies that all have larger relationships with Delta, United, and US Airways. Would any of them really be adversely impacted if Mesa disappeared? Probably not. They could just find someone else to do the flying. I wonder how the judge will feel about this.

I could see ExpressJet jumping at the chance to operate the ERJs in exchange for a long term deal with Delta. And Republic and SkyWest/ASA would probably fight for at least a piece of the business as well. I just don’t see who wins by having Mesa survive except for Mesa itself. If the judge decides not to let them break contracts, then this could turn ugly.

That, of course, doesn’t mean Mesa won’t come out of this in the end. Even if Mesa doesn’t make it out, I imagine that one piece will survive – go!, the one piece that isn’t involved in the bankruptcy filing. Now that go! and Mokulele have combined in a joint venture, they’ve become the only major competitor to Hawaiian within Hawai’i. Maybe Island Air would be interested in stepping up, but really, there is room for a second airline and right now, that’s go!

If you’re booked on a Mesa-operated flight, I wouldn’t worry. I asked Delta, United, and US Airways if they were allowing people to change from Mesa-operated flights to other flights. As expected, they aren’t. Nothing is changing . . . yet.

So we’ll see how this bankruptcy case goes. It’s definitely a unique situation, and I’m curious to see how it plays out.

Updated 1/7 @ 1257p to reflect Mesa’s comment on the bankruptcy clause in contracts

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