Oct 14, 2005 12:56 am US/Central
Mesaba Files For Bankruptcy Protection
Minneapolis (WCCO) ―
Regional airline Mesaba Aviation's passengers, planes and cash all came from bankrupt Northwest Airlines, and its financial problems did, too. Mesaba filed for bankruptcy protection on Thursday, saying Northwest's fleet reductions 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.
Mesaba Airlines will lay off 70 employees by Nov. 1 and another 150 by January 4, according to Chief Operating Officer John Spanjers.
"We have sufficient enough information to move quickly to start downsizing this organization," Spanjers said.
The airline said it will eliminate 10 Saab and nine Avro jets from its fleet, with the possibility of an even greater reduction.
"They are going into long-term storage," Spanjers said. "We consider them gone."
The future of more plans is in limbo and Mesaba's fleet could be cut as much as half. Layoffs would be tied to the final number of aircraft remaining, Spanjers said.
"Our goal here through the bankruptcy process is to really -- besides organizing this operation for what we have with Northwest -- emerge with a cost structure that's attractive for any airline," Spanjers said.
On Tuesday, Northwest reduced the money it owes Mesaba, which now totals $30 million for flights and various services, according to an SEC filing.
On Wednesday, Mesaba filed an 8K form with the Securities and Exchange Commission, outlining how much damage Northwest's debts have done to the smaller airline.
In the filing, Mesaba alerted its shareholders that it "continues to assess whether a court-supervised restructuring under Chapter 11 of the Bankruptcy Code is an appropriate alternative to address its financial situation."
Mesaba flies under the Northwest Airlink name and gets its schedule, passengers, planes and revenue from Northwest.
Northwest Airlines filed for Chapter 11 bankruptcy protection 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. And last week, Mesaba warned that Northwest said it would remove 10 Saab prop planes on Jan. 4. Already, Mesaba has reported that its September capacity dropped 3.6 percent versus the same month last year.
Mesaba was also hurt when Northwest withheld $30 million for flying Mesaba did just before Northwest entered bankruptcy court.
"I think we could still offer Northwest a very attractive product," Spanjers said. "As we restructure our costs and emerge out of the Chapter 11 process, one of our goals is to be a lean airline."
"We believe that's a goal we can attain and that is what we're going to achieve," he said.
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 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
(© 2005 CBS Worldwide Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
