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Topic: Mesa Air Group Files For Chapter 11 - Part II
Username: LipeGIG
Posted 2010-01-23 22:13:00 and read 5335 times.

Continuation of part 1 , which become too long:

For more info:

Press Release:
http://finance.yahoo.com/news/Mesa-A...mences-bw-3392665865.html?x=0&.v=1

Mesa's own central info regarding the filing:
http://www.mesa-air.com/restructuring/

Link to part 1
Mesa Air Group Files For Chapter 11 Bankruptcy (by Mainland Jan 5 2010 in Civil Aviation)

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: NorCal
Posted 2010-01-24 06:54:21 and read 5234 times.

Here is the most recent news regarding the B-1900Ds that Mesa wants to dump. Raytheon claims the default clause requires Mesa to return the aircraft in an airworthy condition.

From the article:
Terms of the loan agreement require that, in the event of default, the planes are returned in “airworthy condition.” In court papers, Raytheon said that the Beechcraft don’t meet that stipulation because several of the planes are “missing one or both of their engines.”

From what I've heard these aircraft were cannibalized for parts and parked right as major maintenance came due like a hot section. I wonder what condition the other aircraft Mesa has parked are in?

To the legal folks out there; can Mesa essentially dump these aircraft with impunity or does Raytheon have a case? Is this kind of similar to DL not being able to exercise the BK clause of their contract?

http://blogs.wsj.com/bankruptcy/2010...demands-mesa-return-planes-intact/

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: JA
Posted 2010-01-24 07:22:56 and read 5199 times.

Mesa will be allowed to dump them, but they would have to pay to make them airworthy. Chances are good that RACC will do that in-house instead of have Mesa do it. If they were in better condition, RACC would be able to move them faster,

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: NorCal
Posted 2010-01-24 07:31:34 and read 5183 times.



Quoting JA (Reply 2):
Mesa will be allowed to dump them, but they would have to pay to make them airworthy. Chances are good that RACC will do that in-house instead of have Mesa do it. If they were in better condition, RACC would be able to move them faster,

It sounds like it won't be cheap to get these aircraft airworthy again. RACC has a bunch of gliders on their hands at the moment.  Silly

How much cash did Mesa have left before the entered chapter 11?

I wonder what their other parked aircraft are like and if the owners of these aircraft have requirements to be returned airworthy as well?

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: ScottB
Posted 2010-01-24 08:02:57 and read 5140 times.



Quote:
These 2 groups of survivors and casualties, actually, can give some idea about the chances of Mesa.
UA, US, DL, NW survived their bankruptcies because they were too big to fail. It would be too painful for the national transportation system to absorb their liquidation. Can you imagine if some day UA, US, DL or NW all of a sudden would shut their doors.

I don't really think that's true at all. Eastern and Pan Am both failed two decades ago, and both were arguably as important to the national transportation system as the majors that went into bankruptcy in the past decade.

The bigger picture is that UA, US, DL, and NW all found investors/banks who were willing to risk money on their reorganizations. It did not hurt matters that both Airbus and Boeing wanted to make sure that hundreds of relatively new aircraft would stay off the market. In the case of US Airways and its second reorganization, the airline found regional partners who were willing to invest cash in the airline in exchange for long-term capacity purchase agreements. In the cases of UA, DL and NW, the businesses were, for the most part, fundamentally sound once their debt and labor cost issues were resolved.

In the examples of AQ, TZ, SX, DH, E0, etc. management couldn't make a case for investors/creditors to back a reorganization. TZ wasn't viable without the DoD charter contracts. SX's business model wasn't working, especially with 2008's fuel prices. Saving DH would have cost more than just starting over.

Frontier certainly was not too big to fail -- management turned the business around (aided in no small part by the decline in fuel prices) and found investors willing to back emergence from bankruptcy.

Quote:
the chance of Mesa going away (now that they are in trouble) is indeed quite strong.
YV, for the most part, is just a regional feeder. Their business heavily depends on the contracts from major airlines.

That's true, but the fate of Mesa is tied to how interested its two key customers -- UA and US -- are in Mesa continuing to fly. That, and how interested Bombardier is in not having Mesa's CR7's and CR9's parked and depressing the demand for new aircraft.

Quoting JA (Reply 2):
Mesa will be allowed to dump them, but they would have to pay to make them airworthy. Chances are good that RACC will do that in-house instead of have Mesa do it. If they were in better condition, RACC would be able to move them faster,

Mesa may not even have to pay cash if they can argue that it would impede a successful reorganization; Raytheon may have to settle for a larger claim against the bankruptcy estate instead.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Texan
Posted 2010-01-24 08:47:18 and read 5081 times.



Quoting NorCal (Reply 1):
To the legal folks out there; can Mesa essentially dump these aircraft with impunity or does Raytheon have a case?

Some disclaimers before I say anything. First, I have not seen the contract and do not know any details, so my opinion is limited by that. Second, I am not a bankruptcy lawyer. Third, take this as gospel at your own risk! With that out of the way . . .

Raytheon will of course make the case that Mesa must repair the aircraft because of the terms of the contract. Mesa, however, will argue that the Automatic Stay provision of Chapter 11 prevents Raytheon from enforcing this contractual obligation. Part of the issue will be when the default on the airplanes occurred. If default occurred prior to Mesa's bankruptcy filing, and Raytheon filed a claim before Mesa's bankruptcy filing, then Mesa may be exempt under 11 U.S.C. § 362 (a)(1), (3), or (4).

If default did not occur until after Mesa's bankruptcy filing, then Raytheon might be barred by 11 U.S.C. § 362 (7):

Quote:
under subsection (a) of this section, of the exercise by a repo participant or financial participant of any contractual right (as defined in section 559) under any security agreement or arrangement or other credit enhancement forming a part of or related to any repurchase agreement, or of any contractual right (as defined in section 559) to offset or net out any termination value, payment amount, or other transfer obligation arising under or in connection with 1 or more such agreements, including any master agreement for such agreements.

A quick simplification of this quote: "A creditor's attempt to enforce a contractual right as part of a security agreement related to a repurchase agreement or of any contractual right about termination value, payment amounts, or transfer obligations, are automatically stayed by this section."

Since Raytheon is likely trying to enforce a contractual right through a security agreement about transfer obligations, it is unlikely that Mesa will have to abide by this agreement.

Again, take this analysis for what it is: incomplete and lacking all the facts. I made a couple of assumptions in there that may turn out to be untrue. There is still a chance a judge will not agree that this falls under 11 U.S.C. § 362, which is the automatic stay provision.

Hope that helps.

Texan

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: NorCal
Posted 2010-01-24 08:49:53 and read 5081 times.



Quoting ScottB (Reply 4):
That, and how interested Bombardier is in not having Mesa's CR7's and CR9's parked and depressing the demand for new aircraft.

Those wouldn't stay parked for long or at all. Other carriers will gobble them up and throw all kinds of incentives at UA and US to fly them.

Quoting ScottB (Reply 4):
Mesa may not even have to pay cash if they can argue that it would impede a successful reorganization;

Personally I find that outrageous that Mesa can just trash these planes and get away with it but I guess the counter argument is that Raytheon took a risk leasing these aircraft to Mesa.

If Mesa does emerge from chapter 11 I wonder how their actions taken now will affect their ability to lease future aircraft at good rates. I doubt Bombardier and Embraer will be happy if their aircraft are forced back on them in unairworthy conditions too. If I were them I'd charge a premium to lease aircraft to Mesa given their past behavior.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Cubsrule
Posted 2010-01-24 10:43:46 and read 5015 times.



Quoting Texan (Reply 5):
There is still a chance a judge will not agree that this falls under 11 U.S.C. § 362, which is the automatic stay provision.

It does and it doesn't. YV can clearly dump the leases and quit paying for the airplanes, meaning that Raytheon gets possession of them and title to them. That doesn't settle the question of whether YV needs to pay to make them airworthy, however. That question largely turns on Section 362 while YV is in bankruptcy, but remember that 362 only applies until YV emerges, and then there is a whole different set of questions.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: MasseyBrown
Posted 2010-01-24 10:57:02 and read 4991 times.



Quoting NorCal (Reply 3):
It sounds like it won't be cheap to get these aircraft airworthy again. RACC has a bunch of gliders on their hands at the moment.

Ouch. Is there any possibility that removing the engines could constitute a criminal act? Willful destruction?

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Jeb94
Posted 2010-01-24 11:13:17 and read 4973 times.

Also, in a lot of these contracts the specific engines that originally came with the aircraft must be returned on that particular airframe. Only in the event of the complete loss of an engine may it be replaced with a suitable replacement.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Cubsrule
Posted 2010-01-24 11:16:05 and read 4963 times.



Quoting MasseyBrown (Reply 8):
Ouch. Is there any possibility that removing the engines could constitute a criminal act? Willful destruction?

I don't think so. The link in Reply 1 makes it sound like YV was allowed to part out the airplanes provided they didn't default, and if that's the case, they would have been entitled to part them out. Had they parted them out after they had decided to get rid of them, that's a trickier question.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Toltommy
Posted 2010-01-24 13:00:51 and read 4879 times.



Quoting NorCal (Reply 3):
How much cash did Mesa have left before the entered chapter 11?

Seems to me that I heard the number $60 million. At the time they filed, they felt this would be enough to get thru the CH11 process without the need for DIP financing.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: PI731
Posted 2010-01-24 17:35:04 and read 4748 times.

Personally I would love to see US and UAL dump Mesa. I have never had a good experience flying with them. Either the aircraft is beat up with maker on the seats and walls, to employees being well I’ll just say not the friendliest. More I though about it, it wouldn’t surprise me if we see Mesa continue to fly for US. From what I understand for reading on here, US can’t replace the CR9 flying with anyone due to not being able to fly more than 70, 70+ RJs. So, I would think US would do anything to keep that flying

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Beryllium
Posted 2010-01-24 20:19:45 and read 4654 times.



Quoting ScottB (Reply 4):
I don't really think that's true at all. Eastern and Pan Am both failed two decades ago, and both were arguably as important to the national transportation system as the majors that went into bankruptcy in the past decade.

The bigger picture is that UA, US, DL, and NW all found investors/banks who were willing to risk money on their reorganizations.



Quoting ScottB (Reply 4):
In the examples of AQ, TZ, SX, DH, E0, etc. management couldn't make a case for investors/creditors to back a reorganization.

Yes, Eastern and Pan Am were very important to the national transportation system... and the system learned the lesson pretty well to make sure something like that does not happen yet another time... Let's try to think why UA/US/DL/NW were able to find those investors, while AQ/TZ/SX/DH/E0 were not... You may disagree but it was exactly because the former were important to the system, while the latter were not... Because the former were "too big to fail" and were essential, while the latter did not have the necessary critical mass and could easily be disposed of... Because the disappearance of any of the former would create a major disruption in the operation of the national air transportation system, while the disappearance of any of the latter was barely noticeable...

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: ScottB
Posted 2010-01-24 22:13:25 and read 4590 times.



Quoting Beryllium (Reply 13):
Yes, Eastern and Pan Am were very important to the national transportation system... and the system learned the lesson pretty well to make sure something like that does not happen yet another time... Let's try to think why UA/US/DL/NW were able to find those investors, while AQ/TZ/SX/DH/E0 were not... You may disagree but it was exactly because the former were important to the system, while the latter were not... Because the former were "too big to fail" and were essential, while the latter did not have the necessary critical mass and could easily be disposed of...

I do disagree, completely. There is no evidence to support your supposition of government intervention to save the four legacy carriers which declared bankruptcy between 2002 and 2005. United failed to qualify for the ATSB loan guarantee for which it applied, while failed carriers AQ and TZ were both granted ATSB loan guarantees.

Investors don't step in to rescue a company because it is "too big to fail." They do it when they feel that the company is worth more reorganized than liquidated. In the case of US, for example, there was ample capacity in the system to handle displaced passengers, and it's likely that Delta could have avoided bankruptcy due to the boost in traffic and reduction in competition in their core markets. Even a failure of United would not have crippled the national system, given the availability of alternate carriers in all of their hub city markets and in most of their spoke cities as well. American and Southwest would have been bolstered in Chicago, Los Angeles and San Francisco, while Frontier would have benefited in Denver. Delta would have seen improvements in its spokes from SLC and CVG, while Northwest would have also seen gains in smaller cities in the Midwest.

If any of the network carriers had truly been "too big to fail," we would have seen more direct intervention by the government -- possibly even forced consolidation.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Beryllium
Posted 2010-01-25 00:48:40 and read 4547 times.



Quoting ScottB (Reply 14):
Even a failure of United would not have crippled the national system, given the availability of alternate carriers in all of their hub city markets and in most of their spoke cities as well.

Now, let's imagine for a second that tomorrow there is no UA. It's gone. It has shut its doors. What would you do with all the passengers, who have confirmed bookings?
Let's take ORD as an example. You would put them all on AA? AA has that many spare aircarft to accomodate all those folks? Somehow I don't think so. That's when the national system becomes crippled in an instant, and the consequences would be so severe, that it would take a lot of time and resources to fix that. It is not just about investors, as you are trying to describe. Failure of such airline as UA (i.e. its disappearance from the scene overnight) would be about much more than that - it would be about the functionality of the entire economy of the country. And yes, politicians (federal, state, local) would never allow UA to disappear.
As for investors - yes, they naturally would always step in where they see a potential to get a decent return on their investment.
So, here comes the question: why UA was a decent investment and AQ/TZ/SX/E0 were not?
The answer: It's the size. (Of course, not only that, but the importance of the size of the business entity is enormous). Investors knew that because of its size and importance in the national transportation system UA would survive - one way or another, as a stand-alone company or thru a merger/acquisition, but it will not go away overnight like AQ or TZ.
Because it is "too big to fail". Because unlike AQ or TZ, it will be there no matter what - either as UA, or as a combined entity with CO or anyone else.

Quoting ScottB (Reply 14):
If any of the network carriers had truly been "too big to fail," we would have seen more direct intervention by the government -- possibly even forced consolidation.

This one is strange looking... Why would government force consolidation? I thought, that government should do quite the opposite - namely, encourage competition, because it is supposed to be for the benefit of the population...

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Ridgid727
Posted 2010-01-25 04:41:46 and read 4503 times.



Quoting Beryllium (Reply 15):
Now, let's imagine for a second that tomorrow there is no UA. It's gone. It has shut its doors. What would you do with all the passengers, who have confirmed bookings?

Which also begs the question..Why do the FEDS permit the mega mergers to happen? What would happen if the Delta of today were to stumble?

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Saab2000
Posted 2010-01-25 04:53:27 and read 4496 times.

There is enough capacity or potential capacity to absorb the loss of any US carrier pretty quickly. Even Delta, which is not going to happen of course.

But if United went under today, other carriers would offer to honor many of the tickets in order to create good will and enable new bookings.

Airlines come and go and it's not the end of the world when it happens.

There is no airline that is 'Too big to fail' and while there should be pragmatism with regards to jobs lost and restructuring allowances under Ch. 11, there should be very, very few handouts to airlines IMHO.

Post 9/11 was one thing. It was a unique event but bad management or even just market forces do not constitute a unique event and should not subsidized.

Just my opinion...

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Beryllium
Posted 2010-01-25 06:45:57 and read 4434 times.



Quoting Saab2000 (Reply 17):
There is no airline that is 'Too big to fail' and while there should be pragmatism with regards to jobs lost

I would name six such airlines in the United States: DL, AA, UA, WN, CO, US.
How much money these airlines lost since year 2001? (WN is the exception here, of course).
Tons and tons.
However, they are still around, and no matter how much money they are destined to lose in the future, they will still be around in many years to come.
Why?
Because of their size and importance in the national transportation system.
One of them might merge with another one (UA+CO), but all of them will be present in one way or another - either as a stand-alone or as a combined entity.
They will always be able to find investors.
They will always get significant support from politicians.

"Pragmatism with regards to jobs lost", by the way, is also one of the important reasons why they are sort of "unsinkable ships".

Speaking of Mesa (this is the topic of the thread)... These guys do not belong to that circle of those who are "too big to fail". Their chance of survival is, therefore, slimmer... But, not impossible...

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Saab2000
Posted 2010-01-25 06:49:42 and read 4432 times.

While it is certainly debatable whether or not any of the above mentioned carriers should or should not fail or what the role of the government should be with regards to that failure, it is quite clear that no "fee for departure" carrier like Mesa falls into that category.

On that point we are in agreement.

They have run a ragged business for years and are not deserving of any special treatment in my opinion.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Texan
Posted 2010-01-25 08:16:05 and read 4368 times.



Quoting Cubsrule (Reply 7):
That question largely turns on Section 362 while YV is in bankruptcy, but remember that 362 only applies until YV emerges, and then there is a whole different set of questions.

True. I haven't seen any cases extremely close to this, so ho knows what will happen if or when Mesa emerges from bk.

Texan

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: ScottB
Posted 2010-01-25 09:05:16 and read 4325 times.



Quoting Beryllium (Reply 15):
Let's take ORD as an example. You would put them all on AA? AA has that many spare aircarft to accomodate all those folks? Somehow I don't think so. That's when the national system becomes crippled in an instant, and the consequences would be so severe, that it would take a lot of time and resources to fix that.

A United failure simply wouldn't have crippled the system at ORD any more than a multi-day blizzard would have. The connecting passengers could have been sent via any of a half-dozen or more competitor hubs. The O&D passengers would end up on AA or WN at MDW. It's like saying that the national air transportation system melted down because CO's hub at IAH and WN's operation at HOU shut down for several days due to Hurricane Ike. Connecting passengers find alternatives and the airlines serving the failed airline's hub add service and capacity.

Would it be inconvenient? Absolutely, especially for United's passengers! Crippling? No way. Especially so in the case of United, where its hub cities have ample service on other airlines at the same or alternate airports.

Quoting Beryllium (Reply 15):
Why would government force consolidation? I thought, that government should do quite the opposite - namely, encourage competition, because it is supposed to be for the benefit of the population...

The government might force consolidation if the goal were to save a failing company -- as we saw in the financial industry or even the auto industry with the Chrysler-Fiat Deal. But this happens very, very infrequently.

Quoting Beryllium (Reply 18):
How much money these airlines lost since year 2001? (WN is the exception here, of course).
Tons and tons.
However, they are still around, and no matter how much money they are destined to lose in the future, they will still be around in many years to come.
Why?
Because of their size and importance in the national transportation system.

The four legacy carriers which went through bankruptcy managed to reorganize because they found investors and/or banks willing to loan them money! Their route systems did have value if the costs and debt could be brought under control. I don't agree that they will all be around for years to come -- witness the speculation that US Airways could be a candidate for breakup.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Beryllium
Posted 2010-01-25 10:03:02 and read 4265 times.



Quoting ScottB (Reply 21):
Would it be inconvenient? Absolutely, especially for United's passengers! Crippling? No way. Especially so in the case of United, where its hub cities have ample service on other airlines at the same or alternate airports.

If UA shut down, it would be very interesting to see how all those UA pax would find that "ample service" on other airlines. It's like saying that all other airlines have that many aircraft standing by to immediately pick up that traffic in case UA disappears...
If UA all of a sudden shut its doors today, it would not be just an "inconvenience". It would be much more than that...

Quoting ScottB (Reply 21):
The four legacy carriers which went through bankruptcy managed to reorganize because they found investors and/or banks willing to loan them money! Their route systems did have value if the costs and debt could be brought under control. I don't agree that they will all be around for years to come -- witness the speculation that US Airways could be a candidate for breakup.

Yes, their route systems have enormous value... because, unlike route systems of AQ or TZ, those network are really huge... size does matter.
As for US, I think they will be fine - and even if they get absorbed by AA, or whoever else, they will still continue in that form or the other. It's not like all of US will suddenly stop flying, as was the case with AQ or TZ.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: ScottB
Posted 2010-01-25 11:49:47 and read 4201 times.



Quoting Beryllium (Reply 22):
If UA shut down, it would be very interesting to see how all those UA pax would find that "ample service" on other airlines. It's like saying that all other airlines have that many aircraft standing by to immediately pick up that traffic in case UA disappears...
If UA all of a sudden shut its doors today, it would not be just an "inconvenience". It would be much more than that...

No, it would not be much more than that. The other airlines aren't running 100% load factors, so there is clearly some room to accommodate a portion of a failed airline's traffic. Fares would certainly be higher in the short term, but there would also be potential opportunities for new entrants -- just as EA's failure created an opportunity for Valujet at ATL. A United failure might allow an airline like JetBlue or Virgin America create a hub at ORD. It might give room for Southwest to expand at LAX.

United only represents a bit over 10% of the domestic market. Pre-merger Delta is about the same. The industry would have enough capacity to absorb the traffic. There's a huge difference between many inconvenienced passengers and total collapse of the system.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Mariner
Posted 2010-01-25 11:53:17 and read 4197 times.

Quoting Beryllium (Reply 18):
However, they are still around, and no matter how much money they are destined to lose in the future, they will still be around in many years to come.
Why?
Because of their size and importance in the national transportation system.

I believe they are mostly still around because they represent a perpetual piggy bank to the credit markets.

United, for example, had to pay an effective 17% on a recent money raising venture and right now, in these "improved" times, they're offering 11% on some bonds.

mariner

[Edited 2010-01-25 12:00:31 by mariner]

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Lightsaber
Posted 2010-01-25 12:08:43 and read 4187 times.



Quoting NorCal (Reply 6):
Personally I find that outrageous that Mesa can just trash these planes and get away with it but I guess the counter argument is that Raytheon took a risk leasing these aircraft to Mesa.

I'm in 100% agreement. I've avoided posting much on these Mesa threads as I've run out of things to contribute, but I keep reading them. What strikes me is that Mesa has not played well with anyone.



I see continued consolodation in RJ flying until 2016.

Quoting ScottB (Reply 23):
United only represents a bit over 10% of the domestic market. Pre-merger Delta is about the same. The industry would have enough capacity to absorb the traffic. There's a huge difference between many inconvenienced passengers and total collapse of the system.

 checkmark  It would be like the failure of Eastern and PanAm. It was a disruption, but there are enough parked aircraft to meet demand... after a minor increase in fares.

The parked fleet is at a record:
http://industry.bnet.com/travel/1000...-capacity-aircraft-boneyards-rise/

http://www.flightglobal.com/articles...leet-balloons-to-record-level.html

Lightsaber

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Beryllium
Posted 2010-01-25 12:47:28 and read 4201 times.



Quoting ScottB (Reply 23):
No, it would not be much more than that. The other airlines aren't running 100% load factors, so there is clearly some room to accommodate a portion of a failed airline's traffic.

To accommodate the traffic (even a portion) of someone like UA on the load factor leftovers of others? Good luck with that.

Quoting ScottB (Reply 23):
There's a huge difference between many inconvenienced passengers and total collapse of the system.

I was not talking about total collapse.
I was talking about major disruption in system.
It is of less magnitude than "total collapse", but of greater than "many inconvenienced passengers".

Quoting Lightsaber (Reply 25):
It would be like the failure of Eastern and PanAm. It was a disruption, but there are enough parked aircraft to meet demand... after a minor increase in fares.

Yes, there is a lot of parked aircraft. But, when someone like UA shuts its doors, you have to make those aircraft available, put them in service and staff them, and do it very fast. It is easier said than done.

------

And also, there are tens of thousands of employees at UA. Let's keep this in mind, when we are saying that UA's demise would be just an inconvenience...

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Lightsaber
Posted 2010-01-25 13:18:50 and read 4174 times.



Quoting Beryllium (Reply 26):
Yes, there is a lot of parked aircraft. But, when someone like SA)">UA shuts its doors, you have to make those aircraft available, put them in service and staff them, and do it very fast. It is easier said than done.

Agreed. So there will be a disruption. As there was when EA and PA shut down.

Quoting Beryllium (Reply 26):
And also, there are tens of thousands of employees at SA)">UA. Let's keep this in mind, when we are saying that SA)">UA's demise would be just an inconvenience...

I do. But there were once upon a time tens of thousands of employees making steam locamotives. A few of the businesses converted over to diesel, the rest are history. SA)">UA is a great airline, but there have been more automotive workers made redundant in the last few years that SA)">UA employs. I fly SA)">UA more than any other airline, so it would really sadden me to see them go under.

But that is not saying they could not go under. SA)">UA is paying exorbitant rates to borrow a la PanAm at the end. Ever read "Skygods?" No one thought PanAm could fail (even after selling off so many routes).

It would take time to repair service to many of the locations SA)">UA serves. But one reason we're on this MESA thread is that SA)">UA is getting out of a bad contract (for poor service) for MESA.

I actually think a SA)">UA shutdown would only be an major inconvienience for passengers. For employees, it is sad when anyone who works hard losses their job. But there are tens of throusands losing their job every week in this economy. I do not want SA)">UA to fail, but unless they finally get their act together, they are in danger of failing. Nothing I think might stop that.

Lightsaber

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: ScottB
Posted 2010-01-26 00:04:11 and read 4024 times.



Quoting Beryllium (Reply 26):
I was not talking about total collapse.
I was talking about major disruption in system.
It is of less magnitude than "total collapse", but of greater than "many inconvenienced passengers".

Your claim was that several carriers were "too big to fail." But we've seen plenty of acts of nature that caused a "major disruption" in the system -- ice storms in the Midwest, nor'easters hitting every major airport from IAD to BOS, Gulf Coast hurricanes, multi-day blizzards at DEN, etc.

But the fact still remains that none of the airlines are "too big to fail." Sure, big enough to cause major disruption if they fail, but the system would adjust within several weeks.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Beryllium
Posted 2010-01-26 01:17:29 and read 4003 times.



Quoting ScottB (Reply 28):
Your claim was that several carriers were "too big to fail."



Quoting ScottB (Reply 28):
But the fact still remains that none of the airlines are "too big to fail."

The fact still remains that six of them are (DL, AA, UA, WN, CO, US).
As I mentioned, they (with the exception of WN) have lost tons of $$$ over the past decade, and still were able to find investors when they needed them.
I also mentioned why it is so - it is because of their size, and importance in the system.
Route network - huge.
Number of carried passengers - huge.
Number of employees - huge.
"Too big to fail". Period.
5 years ago everybody thought that US would disappear. Everybody thought that the airline was a total failure. Very few people gave them a chance of survival. Still, even then someone (HP) stepped in, and saved them.

In fact, the history of the past decade even creates an impression that it does not really matter what finanical results these big airlines would post at any given time. Their pockets are too deep anyway, and there will always be people who would be willing to invest in them or to lend them money. And there will always be political figures who (directly or indirectly) would always do everything possible to make sure the big airline stays afloat. That's what I call "too big to fail".

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Cubsrule
Posted 2010-01-26 07:37:09 and read 3929 times.



Quoting Beryllium (Reply 29):
And there will always be political figures who (directly or indirectly) would always do everything possible to make sure the big airline stays afloat.

What you have said about investors is correct, but what evidence do you have for this assertion?

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: NorCal
Posted 2010-01-26 07:40:02 and read 3936 times.

New motions from Mesa:

Mesa filed a motion today to "reject, abandon, transfer title, or surrender and return excess equipment"
Hearing scheduled Feb. 9th.

The exhibits include:

Excess Leased Equipment to be Rejected Immediatley

2 GE CF34-3B1
1 GE CF34-8C1
1 RR AE3007
1 GE CF34-8C5

Excess Leased Equipment to be Rejected on Date to be Determined, Subject to Further Notice

16 Dash 8 200 series
46 CRJ-200
12 CRJ-700
25 CRJ-900
35 ERJ 145

Owned Equipment that May be Subsequently Abandoned

2 CRJ-200
8 CRJ-700
13 CRJ-900



If you include the already dumped B-1900s this list covers the entire fleet. I guess they are getting court approval to dump the aircraft in an event that they lose some of their contracts from UA, US, or DL. I highly doubt US will dump the -900 flying but I guess JO is keeping his options open?

[Edited 2010-01-26 07:41:03]

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Cubsrule
Posted 2010-01-26 07:46:39 and read 3913 times.



Quoting NorCal (Reply 31):
I highly doubt US will dump the -900 flying but I guess JO is keeping his options open?

Yes, and it's probably a smart move. That way, he doesn't have to go back to court (or, if he does have to go back, he has an easier path).

Of course, they are unlikely to abandon the owned CR7s and CR9s, as if they lose the flying to support them, they are likely to be better off liquidating.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: ScottB
Posted 2010-01-26 08:14:36 and read 3893 times.



Quoting NorCal (Reply 31):
If you include the already dumped B-1900s this list covers the entire fleet. I guess they are getting court approval to dump the aircraft in an event that they lose some of their contracts from UA, US, or DL. I highly doubt US will dump the -900 flying but I guess JO is keeping his options open?

I think it's largely procedural in that filing to reject the leases and mortgages on owned aircraft opens the door for Mesa to renegotiate leases and loans with their lessors and mortgagees for better rates/terms. But I think there's little doubt that Mesa will at most be flying the CR9's for US, the CR7's for UA, and 5-7 CR2's for Go.

Quoting Cubsrule (Reply 32):
Of course, they are unlikely to abandon the owned CR7s and CR9s, as if they lose the flying to support them, they are likely to be better off liquidating.

As well as the leased CR7's and CR9's. No flying, no Mesa.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Lightsaber
Posted 2010-01-26 12:27:00 and read 3803 times.



Quoting NorCal (Reply 31):
Excess Leased Equipment to be Rejected on Date to be Determined, Subject to Further Notice

16 Dash 8 200 series
46 CRJ-200
12 CRJ-700
25 CRJ-900
35 ERJ 145

Owned Equipment that May be Subsequently Abandoned

2 CRJ-200
8 CRJ-700
13 CRJ-900

My jaw just hit the floor. I realize this is a negotiation ploy, but wow. Talk about the nuclear option.  wideeyed 


My count is 118 RJ leases to be rejected (I'm not counting the Dash-8's) and 23 more that may subsequently be abandoned. In a word... Wow. It sounds like Mesa is hedging bets in case they must wind down. I agree this is to re-negotiate...

The RJ market is not ready to accept 100+ frames.  Sad

Quoting ScottB (Reply 33):
But I think there's little doubt that Mesa will at most be flying the CR9's for US, the CR7's for UA, and 5-7 CR2's for Go.

With that small of a fleet, I'm not sure Go! is viable... In my opinion, Mesa was willing to experiment with Go! due to the 'economies of scale' they had due to other CR2 opperation. In my opinion, it is not worth keeping 5 to 7 CR2's in Hawaii if the rest of the CR2 fleet is gone. But if Mesa is able to retain *any* CR2 flying, then Go is viable. Just my  twocents 

I'm still dumbfounded by that filing. Thank you NorCal for posting the information.

Lightsaber

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: ScottB
Posted 2010-01-26 12:59:07 and read 3765 times.



Quoting Lightsaber (Reply 34):
In my opinion, Mesa was willing to experiment with Go! due to the 'economies of scale' they had due to other CR2 opperation. In my opinion, it is not worth keeping 5 to 7 CR2's in Hawaii if the rest of the CR2 fleet is gone. But if Mesa is able to retain *any* CR2 flying, then Go is viable.

We know that the CR2 flying for United is done. US Airways clearly intends to continue to reduce Mesa's CR2 flying as well; they're down to 8 now. As I've said before, I think the most likely result of any negotiations between US Airways and Mesa will be a contract extension for Mesa on the CR9's, in exchange for the phase-out of the Dash-8 and CR2 flying. US will also need YV to drop its exclusivity on Express flying at PHX. A long shot might be for Mesa to accept lower rates for its service if US retains the CR2 flying at PHX -- but is Go really worth reducing the margins on what will probably amount to 60% of the reorganized business?

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: NorCal
Posted 2010-01-26 12:59:35 and read 3758 times.



Quoting Lightsaber (Reply 34):
The RJ market is not ready to accept 100+ frames.

It isn't but if this is brinksmanship on JO's part he should be careful because there are other airlines out there that are eyeing his large RJs.

That many 50 seaters dumped on the open market would destroy what residual value they have left. They'd also hurt manufacturers like Cessna (as well as Bombardier and Embraer) because these aircraft would be prime business jet conversions.

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: NorCal
Posted 2010-01-26 13:06:57 and read 3758 times.

Apparently Mesa and Raytheon settled the issue over the un-airworthy aircraft. Looks like it'll cost them $14 million. Mesa has a lot of other aircraft they are going to be looking to dump, this could get rather costly for them if they all have to be returned in airworthy condition.



Mesa and RACC (Raytheon Credit) settle at the hearing on the 20 1900D's (Agreed upon combined worth: $14 million). Stipulation is that Mesa has to return the airframes with all parts, engines, propellers and avionics, essentially making them whole.

From Exhibit A:

"Each Aircraft must be returned with a full complement of engines, propellers, avionics, equipment, parts and components, including all additions, accessions and substitutions of the aforesaid items to the extent that the foregoing is within the care, custody or control of the Debtors or could be within the Debtors’ care, custody and control upon the exercise of the Debtors’ commercially reasonable efforts"

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: Lightsaber
Posted 2010-01-26 13:53:50 and read 3716 times.



Quoting ScottB (Reply 35):
A long shot might be for Mesa to accept lower rates for its service if US retains the CR2 flying at PHX -- but is Go really worth reducing the margins on what will probably amount to 60% of the reorganized business?

That I am not certain of. But if there is *any* CR2 flying left on the mainland, they Go continues to be viable. If US decides to unwind all CR2 flying by Mesa... then Go is non-viable.

Quoting NorCal (Reply 36):
It isn't but if this is brinksmanship on JO's part he should be careful because there are other airlines out there that are eyeing his large RJs.

I'm not sure if it is brinkmanship or desperation... either way, Mesa is playing with fire.  flamed 

Quoting NorCal (Reply 36):
That many 50 seaters dumped on the open market would destroy what residual value they have left. They'd also hurt manufacturers like Cessna (as well as Bombardier and Embraer) because these aircraft would be prime business jet conversions.

 checkmark  Note: I think Mesa might only be pulling up the drop in 50 seat residuals by a few years anyway. I think in 2015/2016 the floor falls out from under that market when a number of contracts come up for re-negotiation.

But if I take a step back, it is a pretty precarious market ( about 2,000 airframes in the 50 seat RJ market) if 5% of the fleet being dumped onto the resale market kills the residual values. Note: I believe the market is that precarious due to low RASM and high fuel prices.

Quoting NorCal (Reply 37):
Looks like it'll cost them $14 million.

I think that is the best Raytheon could do. Mesa is getting off easy (in my opinion).

Lightsaber

Topic: RE: Mesa Air Group Files For Chapter 11 - Part II
Username: NorCal
Posted 2010-01-26 14:33:48 and read 3669 times.



Quoting Lightsaber (Reply 38):
I think that is the best Raytheon could do. Mesa is getting off easy (in my opinion).

I agree, I figure replacing the engines alone on those B-1900Ds would cost more than that. You're the engine expert though so I defer to your opinion.  Smile


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