Mesa Air Group has begun a financial restructuring through the voluntary filing of petitions to reorganise under Chapter 11 of the US Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
During the restructuring, the company plans to operate as normal, without interruption, which includes its codeshare agreements with its partners US Airways, United Airlines and Delta Air Lines. Mesa’s go!-Mokulele joint venture, an independent Hawaiian inter-island operation, is not included in the filing and will continue to operate its full flight schedule.
“After careful consideration, the company determined that a Chapter 11 filing provides the most effective and efficient means to restructure with minimal impact on the business and our customers. 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,” remarked Jonathan Ornstein, chairman and chief executive of Mesa. “Over the past two years, we have worked closely with our lessors, creditors and other constituents to restructure our financial obligations. These efforts have led to the elimination of over $160 million of debt obligations, the return of a number of aircraft, and the restructuring of inventory management and engine overhaul agreements. We are nonetheless faced with an untenable financial situation resulting primarily from our continued lease obligations on aircraft excess to our current requirements. In addition, this action will give us the opportunity to reach a more timely conclusion in the litigation with Delta Air Lines in which Mesa is currently seeking damages in excess of $70 million.”
To ensure it operates without interruption, Mesa is seeking authority from the Court to continue all of its normal operations. The requests include authority to continue to pay employee salary and benefits, fulfil codeshare partner agreements, honour customer programmes, and pay vendors and suppliers for post-petition goods and services. These requests are standard and the company anticipates receiving approval. Vendor and supplier invoices incurred prior to the commencement of the company’s Chapter 11 case that have not been paid will be resolved through the company’s ‘Plan of Reorganization’ which requires Court approval and has yet to be submitted.
“We remain committed to our partners and customers by providing continued low-cost regional air service that has permitted Mesa to become a leading regional airline,” Ornstein added. “Our company has ample liquidity to support itself during this process and we are confident we will emerge from Chapter 11 an even stronger operation. The foundation of our business – our people, operational integrity and values – remains intact, and the 20-plus years that many of us have worked together form a bond from which we will draw our strength as we face and overcome this challenge.”
Mesa currently operates 130 aircraft with approximately 700 daily system departures to 127 cities, 41 states, Canada, and Mexico. Mesa operates as Delta Connection, US Airways Express and United Express and independently as Mesa Airlines and go! Mokulele.
One of the airline’s aircraft suppliers, Embraer, commented on the news: “Embraer is awaiting the presentation of the restructuring plan, in order to assess any eventual impact on its balance sheet and financial results, and points out that:
1. it is not a creditor of the Mesa Air Group;
2. it has warranty obligations associated with the financing structures of the 36 ERJ 145s, in which it holds $67 million in escrow accounts;
3. this amount is held in reserve in addition to the present standing of Embraer’s cash position and is a part of the $493.2 million held in escrow and duly recorded in the financial statements for fiscal year 2008;
4. as of this moment, Mesa Air Group is not in arrears with these financing structures.”
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