Mesa Air Says May Seek Bankruptcy Protection

May 22, 2008

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Mesa Air, which provides regional flights for major airlines, said on Thursday it might be forced to file for bankruptcy protection if it loses a legal fight with Delta Air Lines.

If it files for bankruptcy, Mesa would be the eighth airline to seek Chapter 11 protection or close down operations in the past five months, following Frontier Airlines, Skybus Airlines, ATA Airlines and others, as they grapple with record fuel prices.

Mesa, which operates regional flights for Delta, United Airlines and US Airways, has been in dispute with Delta since March, when Delta told Mesa that it planned to terminate their partnership, accusing Mesa of failing to complete a specified number of flights.

Mesa denies that allegation, and in April it sued Delta, saying the airline had breached their agreement.

Earlier this month, Mesa filed a motion in the US District Court for the Northern District of Georgia to prevent Delta from terminating the agreement. A court hearing is set for May 27-29, and Mesa said it expects a ruling when that is completed.

In a regulatory filing early on Thursday, Mesa warned that if it loses the case, and Delta ends the agreement -- worth about USD$20 million a month to Mesa -- then it might file for bankruptcy.

That lost revenue, and about USD$250 million to USD$300 million in staff, leasing and other costs over the next four years, would cause Mesa to default on lease agreements, the company said, which would seriously affect its operations and finances.

"In such event, the company's financial condition would require that the company seek protection under applicable US reorganization laws in order to avoid or delay actions by its lessors, creditors and code-share partners," Mesa said in its filing.

The airline, which is already struggling to shore up its finances by issuing shares to buy back debt, closed its Air Midwest unit earlier this month.

Other airlines that have filed for bankruptcy or shut down recently are Eos Airlines, Champion Air, Aloha Airlines and MAXjet Airways.