Filed to Expedite Restructuring; Mesaba Will Continue Normal
Mesaba Aviation, Inc.
has announced it has filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the District of Minnesota.
The company emphasized that it will continue its regular
operations to serve customers, honor tickets, and operate its
schedule as a Northwest Airlink partner.
"This was a difficult but necessary step; Northwest's actions
since filing bankruptcy along with the continuing distress
affecting the entire industry requires us to change and to do so
quickly," said John Spanjers, Mesaba Airlines president and chief
operating officer. "The changes imposed on us by Northwest since
its filing in September have left us with insufficient revenues to
support our cost structure.
"This work will be invisible to our passengers," Spanjers
continued. "As we go through this process, we will remain focused
on delivering the highest levels of safety, reliability and service
that our passengers have come to expect from us."
Prior to its filing,
Northwest on September 12th failed to make a semi-monthly payment
of approximately $18.5 million due to Mesaba under the Airline
Services Agreement (ASA) for services rendered in the last half of
August. On the following payment due dates of September 26 and
October 11, Northwest made partial payments of $1.6 million and
$15.7 million respectively. As a result, Mesaba has a net unsecured
claim of approximately $30 million in the Northwest Chapter 11
In addition, Northwest
has advised Mesaba that it intends to reduce the number of Avro and
Saab aircraft in Mesaba's fleet and that Mesaba should count on
receiving only two of the fifteen new CRJ aircraft committed under
the ASA. Further, Northwest also has notified Mesaba of Northwest's
intent to terminate the sub-leases on all 35 of the Avros.
"The combination of the loss of $30 million of revenue and the
reduction in our fleet size by at least 28 percent has left us with
no choice but to take this difficult step," Spanjers said. "We view
bankruptcy as a last resort, but a necessary one because no other
alternatives would allow us to change as rapidly as we need
"We worked hard to avoid Chapter 11, but we firmly believe this
action affords us the best opportunity to restructure our finances
and to be successful over the long run," Spanjers added. "We have
valuable assets, including our dedicated employees who continue to
focus on operating a safe, reliable airline. We plan to emerge from
this Chapter 11 case as a lean and competitive regional carrier
flying for Northwest or other major airlines."
Mesaba Aviation, Inc., d/b/a Mesaba Airlines, operates as a
Northwest Airlink partner under the new service agreement with
Northwest Airlines. Mesaba Aviation serves 109 cities in 29 states
and Canada from Northwest's and Mesaba Aviation's three major hubs:
Detroit, Minneapolis/St. Paul, and Memphis. Mesaba Aviation
operates an advanced fleet of 98 regional jet and jet-prop
aircraft, consisting of the 69-passenger Avro RJ85 and the 30-
34-passenger Saab SF340.
MAIR Holdings, Mesaba's parent company, supports the airline's
decision to pursue restructuring through the Chapter 11 process and
has, in fact, offered to extend debtor-in-possession financing to
Mesaba. MAIR Holdings' primary business units are its regional
airline subsidiary Mesaba Aviation, Inc., d/b/a Mesaba Airlines,
and its regional airline subsidiary Big Sky Transportation Co.,
d/b/a Big Sky Airlines. MAIR Holdings, Inc. is traded under the
symbol MAIR on the NASDAQ National Market.