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American Airlines and Mesa Air Part Ways

Business

American Airlines Plane | Image by Shutterstock

American Airlines Group Inc. is ending its partnership with Mesa Air Group Inc.

Fort Worth-based American Airlines and Phoenix-based Mesa Air came to a mutual agreement to wind down their partnership due to the latter carrier’s struggling financial and operational performance amid an industry-wide pilot shortage.

Mesa Air’s many difficulties and questionable reliability this year have caused American Airlines to reevaluate its partnership with the regional carrier, said Derek Kerr, American’s chief financial officer. Because of this, American Airlines will begin winding down the partnership with Mesa beginning in March, with the final American flight operated by Mesa scheduled on April 3, he said.

In a separate memo, Mesa Air’s Chief Executive Officer Jonathan Ornstein reported that the partnership, which focused on American’s Phoenix and Dallas-Fort Worth hubs, had resulted in an annualized loss of $60 million a year, or $5 million each month.

Ornstein attributed the financial loss to American Airlines’ slow contract negotiations and inaction on supporting higher pay for Mesa Pilots, which, amid the industry-wide pilot shortage, resulted in a failure to meet contracted flight amounts.

Despite the rocky partnership coming to an end, it’s not over for Mesa Air. The airline has negotiated an agreement with United Airlines Holding Inc. to transition its CRJ900s planes currently flying for American Eagle to United Express.

“This new agreement would allow us to transition to higher revenue-per-block hour operations and create more opportunities and job security for our people,” Mesa said in a news release. “Importantly, current and future pilots at Mesa will benefit from the anticipated new agreement with United, which is poised to offer the best combination of the highest pay rates and fastest career path to a major airline in the industry.”

While the agreement with United Airlines can be viewed as positive, investors are not convinced, with the carrier’s stock down more than 75% year-to-date. In addition, the company last week delayed its fourth-quarter results and 10-K filings.

Despite Mesa’s struggling performance, the airline is making moves to improve its financials.

“To further enhance liquidity, Mesa is finalizing the previously announced sale of its remaining 8 CRJ-550s to United,” the carrier said in the release. “Mesa has also reached an agreement to sell 11 surplus CRJ-900 aircraft to a third party. Furthermore, Mesa is pursuing other avenues to increase liquidity through the sale of additional surplus aircraft, spare parts, and spare engines.”

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