Graham Warwick/WASHINGTON DC
US regional Mesa Air Group is to sell or close down its Fresno, California-based WestAir Commuter division, which operates as United Express, after it failed to reach agreement with United Airlines to renew the codesharing agreement.
The Westair agreement expires on 31 May and United has also cancelled contracts with the group's Mesa Airlines division to provide United Express service in the US Pacific Northwest, effective 30 September. Mesa also warns that United could terminate its codeshare agreement covering United Express services out of Denver, Colorado. United says it is currently in discussions to provide replacement services.
The WestAir codeshare was terminated after Mesa rejected a United proposal to extend the agreement because it would provide for significant increases in cost. United Express operations account for 48% of the group's revenues, and involve 80 of its 186 aircraft. Mesa says that the closure of WestAir will see the retirement of 21 British Aerospace Jetstream 31s and ten Embraer EMB-120 Brasilias.
Cancellation of services in the Pacific Northwest will force the sale of 13 Raytheon Beech 1900Ds, while the closure of Denver operations would affect 26 1900Ds.
The Denver codesharing agreement does not expire until 2005, but Mesa says that increased airport costs and reduced fares have made it unprofitable. The airline says that United has refused to increase connecting fares or to allow Mesa to terminate unprofitable services. If the dispute is not resolved, Mesa believes, United may unilaterally cancel the Denver codeshare and award the routes to another carrier.
The group has provided for a loss of $72.1 million in its financial year ended 30 September, 1997, to cover discontinuation of WestAir and restructuring of Mesa Airlines operations. This includes $39.4 million to sell or retire aircraft and $6.4 million for employee severance. The group had 1997 revenues of $132 million, up 4.5% over 1996, but posted a $44 million loss, down from a $8 million profit.
Mesa Air Group also has codeshare agreements with America West and US Airways. Mesa is discussing allocating additional Bombardier Canadair Regional Jets (CRJs) to the America West Express operations beyond the three now in use. The group has signed a new agreement to operate 12 CRJs as US Airways Express, with an option for 12 more.
The group says that crew shortages at Mesa Airlines, which resulted in excessive flight cancellations and poor on-time performance and forced the removal of ten 1900Ds from US Airways Express service, should be alleviated by the April.
Mesa Air Group chairman Larry Risely will retire in April. Meanwhile, a group led by former Mesa executive Jonathan Ornstein, now chairman of Brussels-based Virgin Express, has acquired a 5.3% stake in Mesa and is seeking fleet and management changes.
Source: Flight International
