DALLAS — The CEO of Mesa Airlines (YV), Jonathan Ornstein, has announced that the regional carrier will cease operating its aircraft for American Airlines (AA). The CEO added that an agreement to operate those aircraft for United Airlines (UA) was almost complete.
Derek Kerr, AA’s CFO and president of the airline’s regional brand American Eagle confirmed that the airlines will end their flying agreement. According to CNBC, Kerr cited AA’s concerns about YV’s financial and operational issues, which are related to rising costs and the industry’s pilot shortage.
The Crux of the Problem
The shortage of pilots, which is most acute at regional airlines and has gotten worse since travel demand picked up after a pandemic travel slump, is the root of the issue. In an effort to recruit and keep pilots, YV and other regional airlines have raised pay while AA has increased pay at its regional affiliates.
However, the CEO of YV informed staff in the note that AA had declined to pay for higher pilot rates for additional regional partners and that YV had been penalized for failing to fulfill pre-COVID contract obligations, actions that cost Mesa around “US$5 million in losses per month,” Ornstein said.
According to a securities filing, Mesa had a net loss of about US$67m over the nine months that ended on June 30. The airline delayed the release of its quarterly earnings report last week.
According to Mesa’s most recent annual report, which was released a year ago, approximately 45% of AA and 52% of United were responsible for the company’s revenue as of September 30, 2021. Mesa flies for DHL as well.
Further Comments from American, Mesa Airlines
American’s Kerr was quoted as saying, “…we have concerns about Mesa’s ability to be a reliable partner for American going forward,” Kerr said in an employee memo. “American and Mesa agree the best way to address these concerns is to wind down our agreement.”
Mesa’s Ornstein told employees in a memo, “We are excited to announce we have negotiated a wind-down of our operations with American and are finalizing a new agreement with United which would transition all CRJ900s currently flying for American Eagle to United Express.”
American intends to focus on flying with independent regional carrier SkyWest Airlines (OO) and its wholly-owned regional subsidiaries Envoy and PSA. The final Mesa flight for AA will be on April 3, though AA is slashing Mesa flights in March, Kerr said in his note.
Featured image: American Eagle (Mesa Airlines) N925FJ Bombardier CRJ-900ER. Photo: Luca Flores/Airways