Mesa Posts Heavy Losses as Ink Dries on United Deal

DALLAS - Mesa Air Group has endured a tough few months after ending its contract with American Airlines (AA). This has been reflected in the carrier's fourth quarter (Q4) results, for which it posted a loss of US$115.6m. Losses of US$183m have also been recorded for the full fiscal year. This compares to a US$16.6m profit last year.

Mesa Airlines (YV) said that part of the Q4 losses was owing to the US$5m per month penalties incurred from AA if it does not fly enough block hours. Pressures have also been mounting following the pilot shortage, which is acutely affecting US regional airlines.

Mesa has blamed its losses, in part, on the poor terms of its current agreement with AA. Photo: Andrew Henderson/Airways.

Severing Ties

On December 18, Mesa's CEO Jonathan Ornstein announced that its agreement with AA, which has been in operation since 1992, would be severed. The current schedule will continue until February 28, 2023, with flights then reduced by 50% until all flying for AA ceases on April 3.

However, it's not all bad news for Mesa. A new five-year deal has been signed with United Airlines (UA), with whom it plans to become exclusively linked. The capacity purchase agreement covers up to 38 Bombardier CRJ900s, depending on how many Embraer E175s the airline is flying. Currently, YV has 37 CRJ900s in service with AA and 60 E175s flying for UA.

Speaking of the deal, Ornstein said, "This is an important momentum reversal for the regional airline industry as we work to restore service to neglected smaller and rural markets – three-quarters of which have seen service reductions in the past three years – by adding over 100 daily regional jet flights to the United network."

The CRJ's will gradually be transferred over to United Express. Photo: Michael Rodeback/Airways.

United Deal

UA will provide YV with US$41.2m to bolster its finances and US$80m for 30 spare engines. In exchange, UA will receive a 10% shareholding in the regional carrier. United will also increase its block-hour wages to YV pilots, covering the recent wage increases signed with the Air Line Pilots Association (ALPA) union.

Mesa also plans "to expand to western states" by opening new crew and maintenance bases in Houston (IAH) and Denver (DEN). They will join the current bases in Dallas (DFW), El Paso (ELP), Louisville (SDF) and Phoenix (PHX).

The new deal will also assist YV with its pilot shortage. Mesa currently has 400 pilots ready for training. The airline is now planning on becoming an entry route for flight crews wanting to fly for UA. "United has acted very decisively in this particular circumstance to ensure there's a pilot flow that goes from Mesa into United," Ornstein said. "There is a big demand for pilots and I think United views Mesa as their farm team."

https://airwaysmag.com/american-mesa-airlines-to-cut-ties/

Featured Image: Mesa currently has 60 E175s flying for United Express. Photo: Luke Ayers/Airways.