Mesa Air files bankruptcy

[surfnfly]

From reading other posts it seems as if Delta has the same out clause due to BK and it is known that Delta wants Mesa gone. If a judge let US or Delta drop Mesa would he/she have to let the other follow suite. Any rumblings from the sandcastle as to what Dougie wants to do.

 

[freedom]

From reading other posts it seems as if Delta has the same out clause due to BK and it is known that Delta wants Mesa gone. If a judge let US or Delta drop Mesa would he/she have to let the other follow suite. Any rumblings from the sandcastle as to what Dougie wants to do.

i bet i know what he wants to do ......

NAH NAH NAH , NAH NAH NAH , HEY HEY HEY GOODBYE , NAH NAH NAH , NAH NAH NAH , HEY HEY HEY GOODBYE!!!

sing it with me!!

 

[USFlyer]

is it possible that a bankruptcy judge could prevent US from simply walking away from the agreement at its expiration in 2011?

No, unless US-Mesa negotiate an extension. A judge cannot force someone to do business with another company if there's no contract in place. And, as of January 2011, there is no contract in place.

 

[Capecod]

Mesa Airline's SEC 10K report dated September 30, 2008 states: "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."

See story

700UW said: "If the contract has an out clause because of Chapter 11 US has the right to exercise it, the clause would not have been in the Contract if it is against the current bankruptcy laws."

USA320Pilot comments: I agree with 700UW. Moreover, US Airways' "fee for service" contract with Mesa expires in less than 12 months on January 1, 2011. In my opinion, US Airways and Mesa may negotiate new agreements for some of Mesa's aircraft to remain in US Airways Express service; however, Mesa's SEC 10K report specifically states, "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." And, US Airways has the right to remove all Mesa flying from the legacy carrier's network in less than 1-year regardless of the agreement listed in the 10-K report.

Regards,

USA320Pilot

As is the usual, USA320 talks like he is in the know when actually he knows nothing. Below is a cut and paste from another msg board. It is very clear that LCC can't CX the Mesa contract bc of the CH11 filing.

"Sorry but bankruptcy law is much more complex than that. These "contract termination" clauses were made unenforceable by the rewriting of the Bankruptcy Code in 1979. They are still commonly placed automatically in contracts to provide protection in the off chance the Bankruptcy Code changes within the lifespan of the contracts.

These unenforceable ipso facto provisions are covered by U.S. Bankruptcy Code:

11 U.S.C. §541©

©(1) Except as provided in paragraph (2) of this subsection, an interest of the debtor in property becomes property of the estate under subsection (a)(1), (a)(2), or (a)(5) of this section notwithstanding any provision in an agreement, transfer instrument, or applicable nonbankruptcy law -
(A) that restricts or conditions transfer of such interest by the debtor; or
(B) that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement, and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor's interest in property.
(2) A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title.


11 U.S.C. §365(e)(1)

(e)
(1) Notwithstanding a provision in an executory contract or unexpired lease, or in applicable law, an executory contract or unexpired lease of the debtor may not be terminated or modified, and any right or obligation under such contract or lease may not be terminated or modified, at any time after the commencement of the case solely because of a provision in such contract or lease that is conditioned on—
(A) the insolvency or financial condition of the debtor at any time before the closing of the case;
(B) the commencement of a case under this title; or
© the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement."

Also USA320, you say over and over that it's a FACT that LCC's contract with Mesa expires on Jan 2011, can you show proof? I left Mesa 3 yrs ago so something may have changed, but at that time, the majority of the CRJ900 flying was under contract until sometime in 2014.

 

[Capecod]

Here are some key points I know to be factual:

1. US Airways' Mesa "fee for service" agreement expires in less than 12 months on January 1, 2011. This gives US Airways leverage to modifiy terms with Mesa. Another words, if Mesa wants any of US Airways' business before it exists bankrupty then the two companies must negotiate a new mutually acceptable agreement or Mesa will lose all of its US Airways Express flying.
Regards,

USA320Pilot

Seems like were both wrong, of course I wasn't stating mine as FACT: according to Mesa's 2009 10K.:


As of September 30, 2008, we operated 38 CRJ-900, 11 CRJ-200, and 6 Dash-8 aircraft for US Airways under a revenue-guarantee code-share agreement. In exchange for providing flights and all other services under such agreement, we receive a fixed monthly minimum amount plus certain additional amounts based upon the number of flights flown and block hours performed during the month. US Airways also reimburses us for certain costs on an actual basis, including fuel costs, aircraft ownership and financing costs, landing fees, passenger liability, hull insurance and aircraft property taxes, all as defined in the agreement. In addition, US Airways also provides, at no cost to Mesa, certain ground handling and customer service functions, as well as airport-related facilities and gates at US Airways hubs and cities where both carriers operate. We also receive a monthly payment from US Airways based on a percentage of revenue from flights that we operate under the code-share agreement. Under our code-share agreement, US Airways has the right to reduce the combined CRJ fleets utilized under the code-share agreement by one aircraft in any six-month period. The Company has received notice of US Airways' intent to reduce one CRJ-200 in January 2009, one in July 2009 and one CRJ-200 in January 2010. We anticipate US Airways will continue to further reduce the number of covered aircraft in accordance with the agreement. In addition, US Airways may eliminate the Dash-8 aircraft upon 180 days prior written notice. The code-share agreement terminates on June 30, 2012 unless US Airways elects to extend the contract for two years or exercises options to increase fleet size. The code-share agreement is subject to termination prior to that date in various circumstances including:

 

[BoeingBoy]

but at that time, the majority of the CRJ900 flying was under contract until sometime in 2014.

June 30, 2012 according to Mesa's last annual report. US can extend for 2 years, and can also reduce CRJ's by 1 every 6 months (which US has been doing) and terminate the Dash-8 fleet with 180 days notice.

With the Air Whiskey contract in place, I expect US to continue to reduce Mesa's CRJ200 count by 1 every 6 months. The CRJ900's may be around till the contract expires.

Jim

 

[john john]

Has MESA had any problems paying bills if so this could present problems with services

 

[BoeingBoy]

Has MESA had any problems paying bills if so this could present problems with services

Filing for BK means they don't have to pay pre-BK bills - they'll get sorted out in BK. The first day motions are to get court authorization to continue paying bills during BK so Mesa can continue operating, and those were approved. Remember that US pays most of the bills for the fee for departure operators - Mesa basically just provides the airplane, crew, and maintneance.

Jim

 

[john john]

Can vendor maintenance cut them off if they don’t pay the bills?

 

[nycbusdriver]

Can vendor maintenance cut them off if they don’t pay the bills?

I don't think they can. I believe they have to continue to service the contract and simply wait for the court proceedings to rule on the debt PREVIOUS to the filing. Debt incurred after the filing has to be paid.

During the second BK filing out here in the east, one of the crew hotels was so livid that they refused to house the crews for which they were contracted. Phone calls were exchanged among the bankruptcy lawyers and the hotel chain's legal department. The hotel management could not have been quicker to hand out the room keys.

 

[BoeingBoy]

See - we agree again.

john john,

When a company is in BK,, you have to distinguish between pre and post BK. Otherwise most questions have two answere - yes and no.

Jim

 

[redheadtempe33]

Here's a question that's been rolling around in my head.

Could US snatch up the entire Mesa operation at a cheap enough price to make Doug pull the trigger and buy them?

The obstacle would seem to be the amount of cash required to complete a transaction.

I wondered this too. If Mesa employees are really as underpaid as everyone says they are, you would think US wouldn't let the opportunity pass them by. Would suck for mainline employees though.

 

[Kneecaps]

I wondered this too. If Mesa employees are really as underpaid as everyone says they are, you would think US wouldn't let the opportunity pass them by. Would suck for mainline employees though.

To buy MESA you only need enough cash to get their shareholders to say 'gee thanks, ill take that instead of these lowsy shares'. That would have been only about 5-10m bucks. Sounds like a bargain right? Ah, but there is so much more to it than that.

When you buy a company, you buy all of its assets, and all of its liabilities. Things like lease obligations, contracts etc.. In the case of mesa, they have dozens of aircraft which they owe money on, but are not flying.

Mesa's contracts with DAL and UAL would be up for immediate nullification if mesa was purchased by anyone.
That would park an additional ~60-80 aircraft that still cost money to do nothing.

Airways (or any potential buyer) would have to quickly place into profitable flying the over 120 mesa aircraft that would be parked immediately after such an acquisition.

Since mesa is now in bankruptcy, everything is run through the courts. It might actually be smarter for Airways and other potential buyers to allow the courts to nullify mesa's debts, return the unused airplanes to the creditors, and purchase the 'leaner, meaner' version of mesa once all is said and done.

It wont happen while they are in the early stages of bk, it may happen after many of those costly parked leases are returned.

 

[SparrowHawk]

BTW Kneecaps your assessment is pretty accurate. When I posted I was thinking that US pick up the assets for dirt AFTER all of the "Heavy Lifting" had been done by the courts.

Also about how many jobs are affected if Mesa were to bite the C7 dust?

 

[BoeingBoy]

About 3700 according to their last SEC filing before entering BK.

Jim