George S. May Business Blog

Mesa Air files for bankruptcy

For those unaware, Mesa Air Group filed for Chapter 11 Tuesday in a New York federal bankruptcy court.

Mesa chairman and chief executive officer Jonathan Ornstein said in a statement that Mesa had tried to rework its debt outside bankruptcy:

“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.”

Here are some key details about Mesa Air Group’s situation from the filing

* As of Sept. 30, Mesa and subsidiaries had $975 million in assets and $869 million in liabilities.

* About 96 percent of its passenger revenues came from its code-share arrangements with Delta Air Lines, US Airways and United Airlines. The other 4 percent came from its Go! Mokulele joint venture in Hawaii. The joint venture is not part of the bankruptcy filing.

* Of its fleet of 178 aircraft, “52 aircraft are parked and not being used,” and “over the next several months, the Debtors plan to retire additional aircraft that are not needed to service the Debtors’ customers.”

* It has identified its fleet of 20 Beech 1900Ds, with five spare engines, as equipment it wants to give back. The owner is Raytheon Aircraft Credit of Wichita.

“The outstanding principal balance as of December 14, 2009 for all 20 aircraft was approximately $33.6 million,” Mesa president Michael Lotz said in an affidavit. “The Debtors intend to abandon these aircraft upon authorization from the Court.”

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