McClatchy Newspapers
NEW YORK -- Mesa Air Group Inc. filed for Chapter 11 bankruptcy in order to eliminate excess aircraft and reach a faster a resolution in its lawsuit against Delta Air Lines, the airline said Tuesday.
Mesa stock fell nearly 54 percent Tuesday to 6 cents a share. The stock has been trading at bankruptcy levels since early 2008 when record-high oil prices helped to wipe out profits.
The Phoenix-based carrier said it had ample liquidity to support itself during the restructuring, which is expected to take about six months, said Mesa spokesman Brian Gillman.
The company doesn't expect any layoffs due to the bankruptcy, though ongoing fleet reductions will likely lead to a smaller workforce.
Mesa has 3,500 employees and operates 130 aircraft. There are also 52 leased aircraft, including 21 Beechcraft 1900s, that are parked and in disuse.
Listed assets and liabilities at Mesa were in the range of $500 million to $1 billion.
The bankruptcy doesn't appear to part of a wider trend within the industry, according to analysts, citing Mesa's lack of partnerships, a weak balance sheet and a recent loss of business from Delta Air Lines and United.
"I don't see any real bankruptcies coming up," said CreditSights bond analyst Roger King. "I expected one or two by now, but they bought themselves so much money in the fall that they got themselves another year."
As the financial markets thawed late last year, airlines were able to tap billions in new debt to keep their operations going until a potential industry-wide recovery later this year.
"If Mesa goes away, no one will miss them," said Gimme Credit analyst Vicki Bryan, adding that the airline has no credit, its costs are too high and the competition is too great. If it vanishes, she said, other airlines would easily pick up its routes.
In a release, Mesa Air said it faced an "untenable financial situation" due to lease obligations on aircraft it no longer required. Over the last two years the carrier has eliminated $160 million in debt and returned planes, but it can't rid itself of the extra planes fast enough.
Mesa has contracts with 25 different leasing companies.
"Chapter 11 filing provides the most effective and efficient means to restructure with minimal impact on the business and our customers," Chairman and Chief Executive Jonathan Ornstein said.
"This process will allow us to eliminate excess aircraft to better match our needs and give us the flexibility to align our business to the changing regional airline marketplace, ensuring a leaner and more competitive company poised for future success," Ornstein said.
Mesa also intends restructure its inventory management and engine-overhaul agreements, as well as reach a timelier conclusion in its litigation against Delta Air Lines. The airline is suing Atlanta-based Delta for $70 million over a canceled contract.
Airlines have faced a severe drop in demand in the past 18 months as the recession took its toll on business travel. Large carriers have reduced their reliance on regional carriers that feed into the large airport hubs in order to cut costs.
Mesa operates as Delta Connection, US Airways Express and United Express under contractual agreements with Delta Air Lines, US Airways and United parent UAL Corp. It also operated independently as Mesa Airlines and go! Mokulele.
In a separate release, Hawaii-based go! Mokulele said it was not included in Mesa's Chapter 11 proceedings. The carrier is a joint venture between Mesa and Republic Airways Holdings Inc.
Mesa has about 700 daily departures to 127 cities in North America.
"Customers can be assured that tickets will continue to be sold and honored, all terms and conditions governing tickets purchased remain the same, and our frequent flyer program remains intact," Ornstein said.
