NWA to keep Avros in Mesaba fleet
Liz Fedor, Star Tribune
Published January 31, 2004
Northwest Airlines will keep its four-engine Avro jets in the Mesaba Airlines fleet, a decision that means the smaller, regional carrier will not lose 40 percent of its revenue.
Mesaba is expected to formally announce Northwest's decision on the Avro next week.
An executive familiar with Northwest's decision said Friday afternoon: "A thorough study was completed and cost efficiencies were identified that allow Mesaba to continue flying the Avros for Northwest."
In response to the news about Northwest's decision, Mesaba's Jackson said, "We have not received any official notification from Northwest Airlines regarding the Avro decision."
Five of the 36 Avros were taken out of Mesaba's fleet in December and January, and they are parked in the Phoenix area.
Now that Northwest has decided to keep the Avros, two of those planes will be returned to Mesaba's schedule in April, and the other three planes will be back in service in June. No further details about the magnitude of the Avro cost savings were available Friday.
In mid-January, Robert Ashcroft, a UBS Investment Research analyst, said, "Northwest Airlines is on the hook for this aircraft whether it uses it or not." He estimated that Northwest has $494 million tied up in the financing of the Avros. Northwest leases 25 of the Avro RJ
-85s and owns 11 of them.
"The likely revenue Northwest could expect from leasing the Avro out of the Northwest system would be unlikely to cover more than about half of what Northwest pays in rent and debt service," Ashcroft said in a report.
Northwest's service contract to fly Avros runs through April 25, 2007. That long-term contract has a clause that allows Northwest to terminate the contract early. Northwest could have severed the contract by giving notice in October, but it delayed its decision until December. Northwest postponed the Avro decision a second time, pushing it back until early this year to allow Mesaba time to settle its pilots' contract.
Source: Minneapolis StarTribune
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