Mesaba Files for Bankruptcy Protection Regional Airline Mesaba Files for Bankruptcy Protection, Citing Northwest's Fleet Reductions By JOSHUA FREED AP Business Writer
MINNEAPOLIS Oct 13, 2005 — Regional airline Mesaba Aviation's passengers, planes and cash all came from bankrupt Northwest Airlines, along with its financial problems. Mesaba filed for bankruptcy protection on Thursday, saying Northwest's fleet reductions had forced it into Chapter 11.
Mesaba parent MAIR Holdings Inc. said the bankruptcy was prompted by "cash shortages and significant fleet changes and uncertainties imposed on it" by Northwest Airlines Corp., which is Mesaba Aviation Inc.'s only customer.
The company said it expects to keep flying while in bankruptcy.
Flying under the Northwest Airlink name, Mesaba ferries passengers between Northwest hubs and outposts around the upper Midwest, where it is often the only air carrier.
The filing listed assets of $108.5 million and debts of $87 million.
Northwest entered bankruptcy court on Sept. 14 and is cutting its domestic schedule to avoid unprofitable routes.
Many of those cuts have fallen on its regional carriers, Mesaba and Pinnacle Airlines Inc. Northwest has said it will take away Mesaba's 35 Avro Regional Jets, about a third of its fleet of 100, although Mesaba hopes to keep 26 of those. And last week, Mesaba warned that Northwest said it would remove 10 Saab turboprop planes on Jan. 4. Already, Mesaba has reported that its September capacity dropped 3.6 percent versus the same month last year.
Northwest's planned fleet reductions would ground about half of the smaller carrier's planes.
Mesaba has said Northwest owes it $30 million for flying done just before Northwest entered bankruptcy court equal to more than a quarter of MAIR's first quarter earnings of $118 million.
"Nearly all of the majors have really been pretty merciless with their partners," said Doug Abbey, a partner at the Washington-based aviation consulting firm The Velocity Group.
Most regional carriers reduce their vulnerability by flying for more than one major carrier, he said. Mesa Air Group, for instance, flies for Delta Air Lines Inc., U.S. Airways Group Inc., and UAL Corp.'s United Airlines.
In its bankruptcy filing, Mesaba President and Chief Operating Officer John Spanjers said Mesaba will use bankruptcy to get "labor costs that will allow it to offer a competitive product to any major airline."
Spanjers told reporters that under its most recent flying agreement with Northwest, "there was a little bit more flexibility given to us on that, and those are things that we'll be talking about with Northwest."
But he said Mesaba's focus would be on fixing its cost structure so it can grow with Northwest.
"I don't consider our relationship broken, I don't consider our relationship in trouble," he said.
Northwest spokesman Kurt Ebenhoch called Mesaba "a valued Airlink partner and we look forward to continuing to work with them."
Spanjers said Mesaba will lay off about 220 workers by Jan. 4 more if Northwest grounds all of Mesaba's Avros.
Mesaba was founded in 1944, using one plane to fly between Grand Rapids, Minn., and the Twin Cities. It began flying for Northwest in 1984. It now serves about 100 cities in the upper Midwest and Canada, and employs 3,945 people.
Memphis, Tenn.-based Pinnacle has struggled with Northwest's bankruptcy filing, too. It warned earlier this month that it has been told to park 15 of its 139 Canadair regional jets on Oct. 31, and said that would reduce quarterly earnings by as much as 15 percent below what it had expected before.
Mesaba is the largest subsidiary of Eagan-based MAIR Holdings Inc., which also owns Billings, Mont.-based regional carrier Big Sky Transportation Co. MAIR said on Thursday that it is solvent. In a filing with the Securities and Exchange commission, MAIR said it would give Mesaba up to $35 million in financing, including $20 million if Mesaba delivers a five-year business plan by Jan. 31.
MAIR shares fell 11.4 percent, or 53 cents, after the bankruptcy filing. Earlier, the stock fell 23 cents, or 4.7 percent, to close at $4.66 on the Nasdaq Stock Market.
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