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Bad news piles up for Mesa Air Group
By HARRY EAGAR, Staff Writer
WASHINGTON — The stock of Mesa Air Group dropped another 15 percent Thursday, closing at 81 cents.
Industry observers had Mesa at or near the top of their lists of the next airline that might crash, and in testimony before a Senate committee the owner of Island Air said both Mesa’s go! and his airline might not survive if government action does not come soon.
The bad news kept piling up for Mesa. MAIR Holdings Inc. said its Big Sky subsidiary had received a notice of default and demand for payment of $4.8 million from Mesa Airlines Inc.
Big Sky went out of business last month, but its owner MAIR (what’s left of what used to be Mesabi Airlines) said it kept up lease payments on 10 planes it got from Mesa, which has 182 planes.
In a Securities and Exchange Commission filing, MAIR estimated the amount it owes Mesa at $4.1 million.
Mesa is short of cash and it acted to draw on a $1.9 million letter of credit that MAIR established with Mesa in 2005. MAIR then sued in federal court to have those funds placed in a trust until the court determines the proper amount of damages to be awarded.
Trading in Mesa stock was very heavy, 3.27 million shares, compared to an average of fewer than 500,000 during recent months.
There are more than 26 million shares outstanding.
At 81 cents, the company is valued at less than $22 million — about what it has spent trying to get go! going.
Next month, it will seek shareholder approval to raise more than $38 million in new capital through a stock sale.
Charles Willis, owner and chairman of Island Air, told Sen. Daniel Inouye that unless some sort of interisland cooperation agreement is reached quickly “you are just going to see a monopoly.”
He did not name the sole survivor of a final shakeout of interisland carriers, but odds are it would be Hawaiian Airlines, which won a $90 million award in a civil suit claiming go! violated confidentiality terms of a prior bankruptcy.
Besides Mesa’s many problems on the Mainland, it is saddled with what the head of the Air Transport Association called “the least efficient” airplane in America’s commercial aviation fleet, Canadair RJ 200s. James May, association president, also testified before the Senate Commerce, Science and Transportation Committee in Washington on Thursday.
“The 50-seat RJs are the least efficient plane in the fleet,” he said, a critical matter with fuel costs hammering every air carrier.
David Banmiller, president of Aloha Airlines, held up four fingers. He told Inouye that go! had lost around $20 million in 16 months with go! flying CJRs. “That’s with four planes,” he said.
Go! is now using seven RJs, having expanded its interisland service when Aloha shut down.
Before Aloha shut down, it reported a load factor of just under 68 percent. Go! announced it would hold to its low fare after Aloha failed, and so did Hawaiian, although Banmiller said he expects go! will whittle down the number of the cheap seats and predicted that interisland airfares will bounce back to pre-go! prices within six months.
Willis said go! had taken more business from his airline than from the two big ones. Island Air does not fly jets, but its 37-seat deHavilland DASH-8s are closer in size to go!’s RJ 200s.
Island Air has shrunk by about half, losing $5 million since go! introduced the $39 fare.
“No airline or aircraft type can make money at that price,” he said.
• Harry Eagar can be reached at heagar@mauinews.com.
Industry observers had Mesa at or near the top of their lists of the next airline that might crash, and in testimony before a Senate committee the owner of Island Air said both Mesa’s go! and his airline might not survive if government action does not come soon.
The bad news kept piling up for Mesa. MAIR Holdings Inc. said its Big Sky subsidiary had received a notice of default and demand for payment of $4.8 million from Mesa Airlines Inc.
Big Sky went out of business last month, but its owner MAIR (what’s left of what used to be Mesabi Airlines) said it kept up lease payments on 10 planes it got from Mesa, which has 182 planes.
In a Securities and Exchange Commission filing, MAIR estimated the amount it owes Mesa at $4.1 million.
Mesa is short of cash and it acted to draw on a $1.9 million letter of credit that MAIR established with Mesa in 2005. MAIR then sued in federal court to have those funds placed in a trust until the court determines the proper amount of damages to be awarded.
Trading in Mesa stock was very heavy, 3.27 million shares, compared to an average of fewer than 500,000 during recent months.
There are more than 26 million shares outstanding.
At 81 cents, the company is valued at less than $22 million — about what it has spent trying to get go! going.
Next month, it will seek shareholder approval to raise more than $38 million in new capital through a stock sale.
Charles Willis, owner and chairman of Island Air, told Sen. Daniel Inouye that unless some sort of interisland cooperation agreement is reached quickly “you are just going to see a monopoly.”
He did not name the sole survivor of a final shakeout of interisland carriers, but odds are it would be Hawaiian Airlines, which won a $90 million award in a civil suit claiming go! violated confidentiality terms of a prior bankruptcy.
Besides Mesa’s many problems on the Mainland, it is saddled with what the head of the Air Transport Association called “the least efficient” airplane in America’s commercial aviation fleet, Canadair RJ 200s. James May, association president, also testified before the Senate Commerce, Science and Transportation Committee in Washington on Thursday.
“The 50-seat RJs are the least efficient plane in the fleet,” he said, a critical matter with fuel costs hammering every air carrier.
David Banmiller, president of Aloha Airlines, held up four fingers. He told Inouye that go! had lost around $20 million in 16 months with go! flying CJRs. “That’s with four planes,” he said.
Go! is now using seven RJs, having expanded its interisland service when Aloha shut down.
Before Aloha shut down, it reported a load factor of just under 68 percent. Go! announced it would hold to its low fare after Aloha failed, and so did Hawaiian, although Banmiller said he expects go! will whittle down the number of the cheap seats and predicted that interisland airfares will bounce back to pre-go! prices within six months.
Willis said go! had taken more business from his airline than from the two big ones. Island Air does not fly jets, but its 37-seat deHavilland DASH-8s are closer in size to go!’s RJ 200s.
Island Air has shrunk by about half, losing $5 million since go! introduced the $39 fare.
“No airline or aircraft type can make money at that price,” he said.
• Harry Eagar can be reached at heagar@mauinews.com.
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