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Regional Aviation News
May 22, 2008
Mesa Says Bankruptcy a Possibility
While there are a lot of “ifs” in its latest Security and Exchange Commission filings, it was clear that Mesa Air Group could be facing bankruptcy, something predicted by Wall Street analysts during recent investor calls at other airlines. Related Story Mesa Air Group said that if Delta’s termination of Freedom’s Delta Connection agreement is successful and if the aircraft were unable to be redeployed or other capital found to cover their costs, Mesa may be forced into bankruptcy. Related Story In fiscal 2007, the agreement accounted for approximately 20 percent of the Mesa’s total revenues. Mesa is seeking an injunction to block Delta's action which goes to court next week.
Mesa said that termination of the Freedom contract covering 34 Embraer 145s loses the company $20 million per month in revenue or $960 million over the next four years. Mesa estimated leasing costs, labor and other costs totaling approximately $250 to $300 million over the next four years. Mesa also said that it will be unable to redeploy the aircraft in a timely manner, or at the lease rates commensurate with its Delta Connection rates resulting in defaults on the leases unless it can raise capital through equity or debt financings, asset sales, consensual restructuring of debt and least terms. It further said that such defaults would then trigger other defaults under other existing agreements, which would be material to the operational cash flows of the company.
“The company’s cash flows from operations and its available working capital would be insufficient to meet these cash requirements, including its obligations under the lease agreements, which will result in defaults,” it stated in its filing. “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, which could materially adversely affect the company’s ability to continue as a going concern.”
The news came as it also announced it reached an agreement with note holders defering $19.8 million of the $37.8 million that comes due next month.
May 22, 2008
Mesa Says Bankruptcy a Possibility
While there are a lot of “ifs” in its latest Security and Exchange Commission filings, it was clear that Mesa Air Group could be facing bankruptcy, something predicted by Wall Street analysts during recent investor calls at other airlines. Related Story Mesa Air Group said that if Delta’s termination of Freedom’s Delta Connection agreement is successful and if the aircraft were unable to be redeployed or other capital found to cover their costs, Mesa may be forced into bankruptcy. Related Story In fiscal 2007, the agreement accounted for approximately 20 percent of the Mesa’s total revenues. Mesa is seeking an injunction to block Delta's action which goes to court next week.
Mesa said that termination of the Freedom contract covering 34 Embraer 145s loses the company $20 million per month in revenue or $960 million over the next four years. Mesa estimated leasing costs, labor and other costs totaling approximately $250 to $300 million over the next four years. Mesa also said that it will be unable to redeploy the aircraft in a timely manner, or at the lease rates commensurate with its Delta Connection rates resulting in defaults on the leases unless it can raise capital through equity or debt financings, asset sales, consensual restructuring of debt and least terms. It further said that such defaults would then trigger other defaults under other existing agreements, which would be material to the operational cash flows of the company.
“The company’s cash flows from operations and its available working capital would be insufficient to meet these cash requirements, including its obligations under the lease agreements, which will result in defaults,” it stated in its filing. “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, which could materially adversely affect the company’s ability to continue as a going concern.”
The news came as it also announced it reached an agreement with note holders defering $19.8 million of the $37.8 million that comes due next month.
