winglet

PSACFI,

You are correct. The minute the bankruptcy petition was filed an "automatic stay" went into effect. This places an injunction on all lawsuits and freezes all contracts during the bankruptcy process. Mesa has a deadline of May 5, 2010 to submit a reorganization plan.

p.s. Ignore the trolls...

winglet

PSACFI

Now the question is if DL, US, or UA have to serve notice that they intend to end the contracts after they emerge from chapter 11? It would seem to me that information would be vital for the court in determining if Mesa can reorganize or not. What would be the point of Mesa emerging if they have no or few contracts?

I'm guessing Embraer and Bombardier are major creditors (probably GE and some banks too) so I doubt they want to see a liquidation because that means a ton of aircraft and engines flood the used market. The 50 seaters would probably be next to impossible to place in airline service, but the others would find homes again. If Mesa sticks around the creditors may at least be able to collect some revenue from lease payments even if it is a reduced rate.

Again the actual cost/benefit analysis that the creditors are likely doing is way over my head but I'm sure there is some point that they have figured out where it is cheaper to liquidate and turn the 50 seaters into beer cans. The -700s and -900s will definitely find a home again. The Dashes might too.


If Mesa does survive it'll be a shadow of it's former self, but it'll probably be in a position with low enough labor costs to come screaming back. Let's just hope J.O. isn't in charge.

Another major issue is the exit financing. J.O. says he has enough cash on hand but is he telling the truth? I'm speculating that he is expecting any DL settlement money to be that cash.

minimwage4

The creditors are screwed. Now that Mesa has filed bk they'll be lucky if they'll get any kind of money.

As far as bankruptcy, am I the only one that thinks what you guys are saying makes absolutely no sense? The contract is clear, they have the right to get rid of mesa during BK. Why would the courts allow Mesa to survive only to have DAL,Ua,US get rid of their contracts after they emerge? I doubt very much that JO is telling the truth, there is no Delta money and there will never be any Delta money. Delta would have cut it's losses long ago if they felt they didn't have a case.

eaglefly

Look for any number of claims by Mesa management of not being able to comply and asking for an extension.

Time will only tell whether the judge is a big enough sap to believe it.

winglet

PSACFI,

The code-share partners can request "relief" during the proceedings but I can only guess the reason they have not is that there are severe enough penalties for cancelling the contracts as long as Mesa is meeting certain criteria even during bankruptcy. This may be the leverage Mesa has to prevent contracts from being cancelled. The details of the code-share contracts have not been made public and probably won't be. The contracts are much more complicated than simply "cancelled if Mesa declares bankruptcy". The key word is "may" be cancelled but at what cost. Mesa seems to believe $70 Million. We'll all know more in time.

winglet

Mesabah

The contracts are public and they have a bankruptcy opt out clause. The courts can prevent DAL and the others from pulling out, but new contracts have to be written going forward. Either they are canceled or a new contract is awarded that is very favorable to their mainline partners. Mesa will have to deal with the possibility of contract cancellation now. If Mesa's plan is to apply a stay and hope for the best, chapter 7 will be the most likely result. They have to get their ducks in a row during bankruptcy, not after.

winglet

I agree there is a bankruptcy clause. If you have access please post a copy of the "public" Delta/Mesa "Bankruptcy Opt-Out Clause".

The "stay" was applied automatically when bankruptcy was declared.

winglet

Mesabah

EDGAR Pro

Article 11 B.

minimwage4

Mesa website:

Airways:
"The code-share agreement is subject to termination prior to that date in various circumstances including: If either US Airways or we become insolvent, file for bankruptcy or fail to pay our debts as they become due, the non-defaulting party may terminate the agreement;"

UA:
The code-share agreement is subject to termination prior to these dates under various circumstances including: If either United or we become insolvent, file bankruptcy or fail to pay debts when due, the non-defaulting party may terminate the agreement;"

DL:
The agreements may be subject to early termination under various circumstances including: If either Delta or we file for bankruptcy, reorganization or similar action or if either Delta or we make an assignment for the benefit of creditors;"



Winglet you seem to think mesa knows what they're doing and that this is all part of a plan. We think they're simply out of time and are hoping for the best. As you say, time will tell.

winglet

Thanks,

I thought these were confidential. Where does Mesa think they will get the leverage for $70 million then? Perhaps they think the district courts will rule in their favor if they can get some sympathy in the bankruptcy courts? We will all have to wait and see how the creditors interpret all of this.

winglet