iPilot

So, what would happen, theoretically if they run out of money? I presumed bankruptcy is defined by not being able to pay bills but if they have zero operating cash how do paychecks get paid? I know they have to enter Ch. 11 with enough money to get through it but absent a loan from somebody they could run completely dry at some point if they don't reorganize fast enough.

winglet

iPilot,

There is a predictable period of losses in an airline bankruptcy while planes are parked and revenue decreases. The downsizing of the United flying is a pre-petition cost meaning that it was already in the works before the bankruptcy declaration was made. These leases and insurance costs will have to be paid until the airplanes are off the books. The bankruptcy court decides the timetable on the new lease and debt agreements. Once those are settled you should see a difference in the MOR (Monthly Operating Report).

"Theoretically" if a company ran out of revenue during bankruptcy they go to Chapter 7 but MAG has a stream of revenue right now with USAirways, United and Delta. MAG chose not to seek DIP financing (Debtor in Posession) which is bankruptcy financing from the outside. This means they will have to rely on that revenue. This is usually designed to make their POR (Plan of Reorganization) look more viable to the court and committees deciding their fate.

MAG's biggest concern right now is the Delta litigation. Other than that and the fact that MAG probably wishes to be relieved of the leases and insurance sooner than later, the bankruptcy proceedings are going as well as can be expected.

On a side note; the judge recently released both United and MAG from the automatic stay so that they could persue the litigation over putting the 10 optional 700's in service.

winglet

hslightnin

Shouldnt have voted yes then

StrikeTime

Then we'll have an honest talk about that contract you enthusiastically defended.

winglet

There seems to be a lot of confusion concerning the Delta litigation cases. It is complicated and has obviously caused some misunderstandings over which case is now awaiting the Judge's order in Georgia.

Here is a quick summary:

Delta terminated MAG's ERJ contract in March 2008 and the CRJ-900 contract in August 2008.

In response, Mesa brought civil action in the Georgia District Court concerning the ERJ's and won a preliminary injunction enjoinging Delta from terminating the agreement. This is the "Delta ERJ Termination Litigation" (Mesa Airlines, Inc. and Freedom Airlines, Inc. vs. Delta Airlines Inc. Civil Action No. 1:08-CV-1334-CC). Delta appealed in the Georgia Court of Appeals and lost (The injunction was upheld).

From the 11th Circuit Court of Appeals:

"III. CONCLUSION
The evidence showed that Delta induced Mesa to agree to Delta’s coordinated cancellations by promising not to count such cancellations against it and then, having benefitted from Mesa’s willingness to extend Delta this courtesy, attempted to cancel the parties’ contract on the theory that this promise was invalid as a matter of law. In the light of this evidence, the district court did not abuse its discretion when it granted Mesa’s motion for a preliminary injunction.
AFFIRMED."

The result is that Delta is now bound by a court injunction to honor their executory contract until either Mesa wins or loses the case, or the contract expires. This is the case that commenced on April 20th, 2010 and is currently awaiting Judge Cooper's order.

A separate case, The "Delta MFN Litigation", concerns the "Most Favored Nation" provision of the contract (Delta Airlines, Inc. vs. Mesa Airlines, Inc. and Freedom Airlines, Inc. Civil Action No. 1:09-CV-2267-CC). MFN provisions effectively guarantee that sub-contractors don't out price the "lowest bidder".

Delta claims that MAG is currently charging $1.5 million a month more than Pinnacle Airlines and that the MFN provision guaranteed that MAG would be the lowest cost Delta Connection operator.

MAG in turn claims; Delta hasn't been properly utilizing their aircraft on a "full-time basis"; Delta refuses to engage in the annual rate setting procedures; attorneys' fees; costs; and "other damages".

The "Delta MFN Litigation" case has subsequently been transferred to the New York Bankruptcy Court and the court date is currently scheduled for July 12th, 2010.

There is yet another case concerning the cancellation of the CRJ-900 contract. That's another story.

The "Delta MFN Litigation" proceedings in New York will be determined by the outcome of the "Delta ERJ Termination Litigation" case in Georgia. I hope this clears up some confusion.

winglet

Ftrooppilot

Who owns the 900s - Delta or Mesa ?

winglet

Ftrooppilot,

Delta owns the NextGen 900's that Mesa flew as Delta Connection (These aircraft are separate from the 38 CRJ-900's Mesa is currently flying as USAirways Express). Mesa provided crew and maintenance for the Delta Connection NextGen 900's from October 2007 until August 2008. I believe Mesa may have taken delivery of six or seven airframes before the contract was terminated. The original contract was fourteen aircraft for ten years.

winglet

theHub

Who owns the 900's that they fly for Airways? I was under the impression that America West co-signed for them so if Mesa liquidated then they would default to Airways.

winglet

theHub,

On the day bankruptcy was declared (January 5th, 2010) MAG owned 14 CRJ-900's and leased 24 more. These 38 aircraft are currently flying as USAirways Express and are based in PHX and CLT. See my previous post for a breakdown of the fleet.

You were misinformed.

winglet

Ftrooppilot

Speculative question: If Mesa "folds" where will the "six or seven" Delta Connection 900s go ?