Another airline to bite the dust?

[marmar]

from AP, via AOL:



Mesa Air Warns of Cash Crunch
By BOB CHRISTIE,AP
Posted: 2008-05-23 10:30:44


PHOENIX (May 23) - Regional airline Mesa Air Group Inc. warned Thursday that it faces a cash crunch and could be forced into bankruptcy if it can't stop Delta Air Lines Inc. from going through with a plan to cancel a service contract.

The Phoenix-based company said in a filing with the Securities and Exchange Commission that the loss of $20 million in monthly revenue from the Delta deal could lead to a cascade of defaults if it can't restructure its debt.

Mesa's filing said the Delta operations accounted for approximately 20 percent of its 2007 revenue. Losing the deal to provide Delta regional service would cost the company an estimated $960 million over the next four years.

In addition, Mesa would be on the hook for leases for 34 regional jets that it likely would be unable to redeploy to other routes. It estimated aircraft leasing, labor and other costs at $250 million to $300 million over the next four years.

Such a scenario would lead to series of defaults unless the company can restructure debt, acquire additional capital or otherwise restructure.

"In such event, the company's financial condition would require that the company seek protection under applicable U.S. reorganization laws in order to avoid or delay actions by its lessors, creditors, and code-share partners, which could materially adversely affect the company's ability to continue as a going concern," the filing concluded.

Mesa is a major commuter carrier and operates flights as Delta Connection, US Airways Express and United Express under agreements with Delta, US Airways Group Inc. and United Airlines. .....(more)

The complete piece is at: http://money.aol.com/news/articles/_a/mesa-air-warns-of-cash-crunch/20080523102609990002?icid=1615984954x1202947167x1200307283

[Turn CO Blue]

1. I'd wager at least 3 more will be gone in the next 4-10 weeks...

We've already seen Aloha Airlines go (50 years in business) and Midwest Airlines. I expect to see all the low-cost carriers gone within the next year.

No airline can withstand the pressure of jet fuel at the equivalent of $150/barrel. All of our budgets for the current year were based on $85 barrel, which was already double the price of the year before. Even the largest carriers are losing $600 million per quarter. If they only have $1B or $2B in the bank as liquid cash, then it doesn't take a mathematician to figure out that none of the airlines will last more than a couple of quarters at most without another 9/11 bailout (which won't be coming this time) or without EXTREME changes to the business model (which customers will hate). This situation is worse for the airlines than 9/11.

So smaller carriers just don't stand a chance. There are so many markets already that won't have any service - airports in small towns will become ghost towns.

We'll be going back to the model where only rich people can fly, and regular folks will have to take the bus or car.

And I'll tell you, expect several dozen freight companies and distributers to be gone soon too. The pressures on independent truckers is enormous. Some runs may pay $1800 for one day's work, but if the truckers have to spend $1700 on diesel, what good is that? They have giant auto and liability insurance premiums to pay each month, plus other upkeep on their rigs.

This is why goods are so high now, but once the distributors and airlines (airfreight/cargo shippers) start going out of business, then we'll see prices skyrocket and long for the price of milk and bread now.

Time to start buying locally.

[mr_hat]

2. Midwest? They're still flying.

[Turn CO Blue]

3. Oops! Not sure what I was thinking...it was ATA and Skybus

filed for Chapter 7 Liquidation.

[mr_hat]

4. Hard to keep track these days. Silver Jet

just went under, too.

I wouldn't normally pay this much attention, but my son is a junior-to-be at SLU/Parks College. All he wants to do is fly...