Can regional airlines actually file c11 bankruptcy? Think about it, most majors have clauses in their contract about bankruptcy which state that they have the right to pull out. So, while filing bankruptcy is a legitimate way of getting back on track for the majors, it would seem like a catch 22 for the regionals because they have no leverage. Take Mesa for example, rumors are that they don't even have enough cash to get out of bankruptcy. And their reason for not filing long ago can be explained by what I said above, that it's either profits or liquidation for the regionals. Am I wrong?

 

I wouldn't go so far as to say you are wrong, but just because major airlines CAN terminate their regional contracts if that regional files for bankruptcy, it doesn't mean they will. Bankruptcy offers a chance to restructure debt repayments and cost structures, among other things. If Mesa, or whichever regional, filed bankruptcy, it may benefit the mainline carrier to keep the regional relationship active for a while. Simply put, the major partner may want to see IF restructuring is possible, and if that restructuring may lead to lower costs. If our hypothetical bankrupt regional were able to cut costs by 20% or so, it may be able to keep some or all mainline flying by offering to fly for a lower reimbursement rate.

If Mesa went into Chapter 11, they could crunch some numbers and make new proposals to their contract partners. As long as some major is interested in Mesa's new offering, Mesa can proceed to try to make that proposal a reality by seeing if "future" surplus aircraft can be returned or sold, if needed leases can be renegotiated, and if other debts can be reduced. If Mesa could get all those ducks in a row, it can offer up a business plan to the judge that shows how it intends to meet its debt obligations, and how it plans to run as a healthy business with the new fleet and contracts. Say Delta pulls out of its contracts, but US Airways and United stick around to see what bargain could be had. If Mesa can make the new numbers work, and all the creditors are happy with the new business plan, Mesa could exit bankruptcy leaner but alive. Of course, someone would have to sponsor their exit. You never know who could step in. GE may want to keep those CRJ engines flying, or maybe Bombardier doesn't want to get zero return on those planes if Mesa shut its doors. Lots of possibilities.

In reality though, with everyone looking to reduce regional lift, I think any regional that filed Chapter 11 would have a hard time exiting unless another airline bought them. Look at Frontier. Good company, profitable while in bankruptcy, positive future, but only other airlines would give them a serious look. And any regional is far less attractive to purchase than Frontier was. As for Mesa, I think if one partner decided to end its relations with Mesa, that Mesa could not sustain itself anymore. The margins are too thin.

 

Kinda apples to bowling balls because it deals with legacy/regional ownership issues and the crap flows downhill issues that happen, but;

MPR: Mesaba follows Northwest Airlines into bankruptcy

ComAir President Resigns Amidst Bankruptcy, Labor Talks - 05/31/06 | Workers Independent News

 

Exactly, that's what I am saying. That for a regional, it would be very hard to come out alive unless someone buys them, kind of like Mesaba. But they were sort of set up for that scenario because in their case NWA obviously saw them as very valuable for their region of flights as well as for interests like Compass. For other airlines like Mesa, which have multiple partners looking to get rid of them in court, filing BK would be crazy but it would also be as risky as not filing.

 

It is much for harder for a regional because...

1. Their contracts can normally be cancelled if they enter BK. In times like these, everyone wants to cut capacity and ANY regional would be fired if they filed BK.

2. Nobody gives a crap. Congress is not going to bail out mesa, or any other podunk commuter airline.

Mesaba was different, that was orchestrated by NWA. A wholly-owned that gets sucked into BK has a better chance.

 

Bingo... Comair went into BK because of being wholly owned by Delta and Delta went. Kind of like Chevy went there because of General Motors.... Mesaba went into "scamruptcy" because it was a corporate ploy plotted out by Nortwest (which was syncronized with Delta to prepare for the merger) Neither case put the carrier at true risk. Mesa as was stated would be an example of a carrier that will try to tread water til it goes straight to Chapter 7 and history, because every one of its contract partners has publicly stated already they want to dump Mesa... BK filing would make that an instant reality along with the end of Mesa. (for example)

 

well said...

 

With negotiations over contracts for flight attendants set to resume on June 5, Comair President Fred Buttrell has announced his resignation... Buttrell will be replaced by financial officer Don Bornhorst.

That should have said "Comair president Fred Buttrell will be replaced by financial officer Don Bornhorst, Song president John Selvaggio, and Compass president John Bendoritis."

But that article was written three years ago. How were they to know?