newarkblows

you are right but in the case of airlines the health of the regional directly affects the majors "ability to conduct business." The credit card companies normally pay out when the transaction is processed and absorb the risk if the company was to go bankrupt. The credit card companies have won precedence when dealing with companies like this. They are allowed to not pay the service provider until the actual service has been completed. It really does affect the bottom line of these airlines. If a regional feeder is in bankruptcy or very close to it the credit card companies get very tight with their money which means that the main service provider is handicapped and can contractually enforce the bankruptcy clause in their contracts. an example would be the ACA vs some fueling company a couple of years ago.

you found some good info though.

iPilot

Also, when the court is working out a restructuring plan they'll look into the future earning of Mesa. In their case, all of their major partners have been fairly vocal about not renewing their contracts. They might not be able to drop them in bankruptcy but that doesn't mean they won't simply let their contracts expire naturally. If the judge doesn't see Mesa living too far beyond exiting bankruptcy no matter how much they shed expensive contracts and airplanes, then they will look into liquidation.

In the end it's not a matter of if Mesa wants to survive or not, but what will give the best return to the creditors. Unfortunately for everyone involved they each have some very low cards in their hands.

rickair7777

Thanks for looking that up. People have been alluding to it for a while but nobody was able to document where it came from.

Theonemarine

I was reading some of the earlier posts winglet and I'm DEFINATELY no lawyer and know that you're not either but you seem to be grasping the jist of most of this stuff, does that above quote from the BK laws prevent CX of the contract PERIOD, or just while MESA is under the protection of CH11? i.e. Can Delta potentially CX the contract after Mesa emerges? Thx.

rickair7777

It looks like DL cannot cancel the contracts solely based on the fact that mesa filed BK without the courts approval. Based on the wording that would appear to apply after they exit BK (if they don't liquidate).

However, this is not magic invulnerability...it does nothing for cancellations for OTHER reasons, such as the performance problems which DL has already documented in the past.

Also if the DL contract is going to get cancelled for past performance or when it expires naturally in a couple of years anyway the court might not see any point in forcing DL to continue the contract and basing mesa's restructuring on that DL flying knowing full well it will go away in short order, probably triggering ANOTHER bankruptcy filing. The court might be inclined to let DL out now so MAG can restructure accordingly.

Anybody know exactly when that DL contract runs out?

winglet

Theonemarine,

If I was a lawyer I wouldn't be spending my time on an airline pilot forum talking about Mesa's bankruptcy .

To answer your question, I understand these statutes to mean that cancellation of the contracts is unenforceable period. United and USAirways would then be free to try and do whatever they want after the bankruptcy reorganization but that would be handled via the district courts.

Remember, Delta already tried to get out of their contract and they got slapped with an injunction and a pending $70 million lawsuit, so I imagine it would get expensive for USAirways and United to cancel their contract early as well. They probably would rather just let the contracts run their course and not renew.

I think the reason Mesa management held off declaring bankruptcy so long was that they were attempting to renegotiate with their creditors out of court and didn't want to risk losing their corporate positions.

It is important to remember this fact: If Mesa can restructure without the lease payments on the parked aircraft then Mesa is a viable company (financially sustainable). This is the only thing the bankruptcy judge looks at under reorganization.

By the way, if this reorganization results in a management change I believe that the code-share partners may possibly even be inclined to extend the contracts. I am a creditor and this is my reorganization plan, ha!

winglet

eaglefly

One thing appears virtually certain at the very least.

43% of Mesa pilots will soon be unemployed. Of the remaining 57%, half of them will be F/O's..............and at one of the worst carriers in existance.

The top 28% of Mesa pilots MIGHT hold on to what they've got now, IF the judge buys this bill of goods and DAL isn't allowed to dump their 20 RJ's.

That's the best case scenario and it goes downhill from there. Regardless of Mesa's success in this plan, their future in the feed business is limited to U at the most.

mwa1

and who has ever been denied extensions?? no one that I know of. ual was in for years. u went in more than once. the spectre of having lawyers make choices for a company like DAL might make them more than happy to spend 70m to get free from the tarbaby once for all.

rickair7777

Just because OJ claims 70M, does mean that is a realistic or legitimate number. Don't get too wrapped around the axle on that...the final number might be $0.

I suspect OJ picked $70M beacuse that's about what Hawaiian nailed him for...he figured if they can do it, why can't he

PSACFI

This is true. Mesa has continued to fly with DL and receive payments every month. I'm not sure how they expect to get $70 million in damages. They really haven't lost anything since they have the injunction in effect.