Take a moment and read this ALPA communication to the pilots at large. I know it is a long one, but it has some good information in it.
PART 1
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Dear Fellow Pilots,
With our Spring MEC Meeting behind us, and with two new officers at the helm, this seems like a great time to evaluate where we have been, where we are and where we are going, as a company, and as a Union. Although we would like to be able to address the pilot group with good news and information about our company and its future, we have to be very honest and let everyone know about how difficult and challenging the situation is here at Mesa Air Group.
The intent of this letter is to let everyone know as much information possible about the events that are going on here and around the industry. We need to take these very seriously and want everyone to know that it is our desire to see MAG succeed and become a better company and a better place to work. We will start out with some of the facts and then finish with some discussion.
The State of Mesa Air Group:
· Today, MAG Management announced, via press release and SEC filing, that Delta Airlines has served MAG with a Notice of Termination Due to Breach with regard to the 35 fifty-seat ERJ operated by MAG as Delta Connection. MAG management has indicated they intend to contest this alleged breach via court if necessary, although apparently the parties are in negotiations on a resolution. MAG’s CRJ-900 flying for Delta is not affected by this Notice of Termination, although those aircraft are actually owned or leased by Delta (not MAG). When more details related to this Notice become available we will communicate them with the pilot group.
· Several weeks ago, MAG reported its seventh consecutive quarter of declining earnings. MAG Management also used the occasion of the first quarter 2008 (Oct/Nov/Dec 2007) earnings call to announce the planned removal of a total of approximately 30 50-seat aircraft by mid-year, to be replaced by approximately 8 larger-gauge aircraft (for a net reduction of 22 aircraft). They also reiterated their plan to shut down the money-losing Air Midwest Beech 1900 operation by September 30 of this year. All key measurements, available seat miles, revenue seat miles, and load factor, continue to decline. On Friday, March 7, MAG announced that Jan/Feb 2008 revenue seat miles declined a stunning 12.5 percent from the 2007 numbers.
· MAG has $38 million in convertible bonds coming due June 2008; another $110 million in convertible bonds are payable February 1, 2009.
· MAG has posted a $90 million cash appeal bond in connection with its appeal of the Hawaiian Airlines judgment. Unless a settlement is reached by the parties, it is unlikely a decision will be forthcoming from the Ninth Circuit Court of Appeals before Summer 2009. There is no doubt that this cash bond has severely impacted MAG’s cash position.
· Aloha Airlines has also filed a suit against MAG, alleging predatory pricing and related anti-trust violations. That suit is scheduled for trial in October 2008.
· Meanwhile, MAG’s go! airlines operation (as well as its competitors) continues to lose money in the Hawaii market. Just yesterday MAG announced that it will increase the number of flights conducted in Hawaii significantly because of the Aloha situation. This may turn things around in the go! operation but we need to remember that there are still other issues that need to be resolved.
· MAG management concedes that the China joint venture with Schenzen Airlines has proven “challenging." The new carrier, named “Kunpeng Airlines," has ordered 50 regional jets from Embraer and another 50 from a Chinese manufacturer. It is probable to speculate that these aircraft orders indicate that MAG will not be able to place our excess 50 seat RJ’s in China. Although management has indicated publicly that they are striving to find “homes” for the 50-seaters as they are removed from the United Express system it is clear that the company is facing a difficult challenge.
· MAG has no new business on the horizon, although United continues to seek replacements of the 50-seat aircraft with larger gauge airplanes, typically at a 3 (50-seater) for one (70-seater) ratio.
· From a pilot perspective it appears that the “solution” to our staffing shortage so far has focused on reduction in aircraft/flying, with a corresponding direct impact on our top-line revenue.
· Our Company’s financial and operational challenges are publicly known, and are likely to continue for the foreseeable future. There is no way to “sugar-coat” this reality. Every MAG pilot should be aware of MAG’s looming cash crisis, and the financial challenges this company faces.
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