Mesa Air Bordering on Bankruptcy if Delta Ends Contract
Mesa Air Lines said Thursday it may seek bankruptcy protection if a fails to stop Delta Air Lines from moving ahead with a plan to cancel a service contract.
The Phoenix-based carrier, the parent company of the interisland carrier go! airlines, said in a filing with the Securities and Exchange Commission that it stands to lose $20 million in monthly revenue, or $960 million over the next four years.
In such event, the company's financial condition would require that the company seek protection under applicable U.S. reorganization laws in order to avoid or delay actions by its lessors, creditors and code-share partners, Mesa said in its filing.
Delta warned Mesa in March that it wanted to terminate its Delta Connection agreement due to Mesa's failure to maintain a specified completion rate through its subsidiary, Freedom Airlines.
Mesa launched a court motion earlier this month in a bid to prevent Delta from terminating the contract. A hearing is planned for next week in the U.S. District Court of Northern District of Georgia.
The news caused Mesa shares to fall nearly 16 percent to 48 cents a share, a long shot from its high of $7.25 set last July.
As the airline industry grapples with record fuel prices, customers have scaled back on regional flights as they're generally seen as a lower-yielding service.
If Mesa files for bankruptcy, it would be the eighth airline to seek Chapter 11 protection or close down operations in the past five months, following Frontier Airlines Holdings Inc, Skybus Airlines Inc, ATA Airlines, Aloha Airlines and others.
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