Delta Terminates Mesa Contract!!!

[Eagle757shark]

UPDATE 1-Mesa Air says to fight Delta plan to quit contract

Tue Apr 1, 2008 9:27pm EDT
(Adds comment from Mesa, Delta, details, paragraphs 4-9)
NEW YORK, April 1 (Reuters) - Mesa Air Group Inc (MESA.O: Quote, Profile, Research) on Tuesday said it plans to contest Delta Air Lines Inc's (DAL.N: Quote, Profile, Research) plan to terminate a contract with its Freedom Airlines Inc unit.
Phoenix-based Mesa said Delta notified it on March 28 of its intent to terminate a connection agreement with Freedom dated May 3, 2005.
It said Delta alleged that Freedom failed to complete a specified number of flights on ERJ-145 jets during three months of the six-month period ending in February. Mesa said the notice would allow Freedom to provide connection services to Delta while the airlines work out a "transition agreement."
Mesa said it intends to defends its rights under the contract. "Delta's effort to terminate the agreement will not be upheld in a court of law," Mesa Chief Executive Jonathan Ornstein said in a statement.
Gina Laughlin, a spokeswoman for Atlanta-based Delta, said the carrier decided to terminate the contract "due to operational performance. We expect the operational pulldown to be orderly and have minimal impact to our customers."
Freedom's connection agreement with Delta governing larger CRJ-900 jets is not affected, both carriers said.
Embraer (EMBR3.SA: Quote, Profile, Research) builds ERJ-145 jets, while Bombardier Inc (BBDb.TO: Quote, Profile, Research) builds the CRJ-900 jets.
Delta on March 18 announced plans to cut 2,000 jobs and scale back flights, in the wake of rising fuel prices and a weakening economy. It said it plans to take 15 to 20 mainline aircraft and 20 to 25 regional jets temporarily out of service to reduce capacity.
Mesa said it operates 182 aircraft. Freedom operates mainly in the U.S. southeast, according to Mesa's Web site. (Reporting by Jonathan Stempel; Editing by Gary Hill)

 

[ACL65PILOT]

Awesome. I hope that it sticks

 

[AlbieF15]

Saw the PFN-MCO route done by Freedom/Mesa in the past is now ASA CRJ 100s in May/June.

'bout to get nasty in 50seaterville....

Good luck to all involved.

 

[Andy]

This is all part of trimming airline schedules. Delta looks like they're doing this VERY smart. They'll shift their RJ flying around and upguage some city pairs to mainline while reducing frequency (ie 1 MD80 for 2 RJs).
With the additional new aircraft that they've got coming online, this is one way to make room for them while cutting back on ASMs.

This will likely stick; if it does, we'll probably see other majors trim back regional partner flying.

 

[RiddleEagle18]

Delta currently has 9 connection carries and has made it know they intend to bring that number down to 4 or 5 to try and more closely control the overall delta product. Who goes next?

 

[Andy]

Delta currently has 9 connection carries and has made it know they intend to bring that number down to 4 or 5 to try and more closely control the overall delta product. Who goes next?

Whichever company fails to meet its contractual requirements.

 

[fly4surf]

Bye Bye Mesa.

 

[glasspilot1]

Delta, you get what you pay for! You put out the bid for your feed to the lowest common denominator and what do you get? Mesa.

 

[~~~^~~~]

Delta currently has 9 connection carries and has made it know they intend to bring that number down to 4 or 5 to try and more closely control the overall delta product. Who goes next?

There is a slight problem... We thought the Mesa contract was the easiest to walk away from. Now we learn that Mesa is going to fight this in Court and Mesa still operates the CRJ900's. Could something be negotiated? Mesa will sure try.

SkyWest (& alter ego, ASA) has Delta under a contract very favorable to SkyWest. That isn't going anywhere. Republic, Chautauqua, Shuttle likely have an strong deal as well. Big Sky, already gone. Comair wholly owned. Express Jet may be the only carrier with a shorter term deal.

IMHO it would be worth while to buy back ASA just to exit the SkyWest agreement.

I'm still thinking that Delta's excess RJ's are going to be used to backfill DC9's that will be parked very quickly. Even the CRJ200 has a lower CASM than a DC9.

Delta can not legally cancel the contracts mid term with these RJ lift providers and it is a problem. Delta was paying SkyWest around 2.5 Billion per year, plus fuel.

I'm telling you, we have to carefully watch the changes to Section 1 in whatever transition agreement is reached with management.

 

[Andy]

I'm still thinking that Delta's excess RJ's are going to be used to backfill DC9's that will be parked very quickly. Even the CRJ200 has a lower CASM than a DC9.

When did Delta get DC9s?
If you're still counting on a DAL/NWA merge, where do you expect the additional investment capital to come from? USAirways got a $1.5B capital injection on their merger; your merge would require a higher amount of new capital than USAirways required.

 

[~~~^~~~]

When did Delta get DC9s?
If you're still counting on a DAL/NWA merge, where do you expect the additional investment capital to come from? USAirways got a $1.5B capital injection on their merger; your merge would require a higher amount of new capital than USAirways required.

You are right. I'm thinking a Comair sale with a new flying award might inject somewhere around another half a billion or so. Just a guess.

 

[Jon Rivoli]

They'll shift their RJ flying around and upguage some city pairs to mainline while reducing frequency (ie 1 MD80 for 2 RJs).

You guys with Big Jet Syndrome are mathematically challenged (1 MD-80 = 145 seats / 2 CRJ200's = 100 seats ) A given city could be served by 2 MD's a day or 6 RJ's with the same number of seats. Which do you think the marketing types would prefer. Want to trim capacity, cut one or two flights and retain frequency. One flight per day won't cut it. No legecy has the domestic narrow body capacity to take back RJ flying if they wanted to and they don't want to. All the legacies are focusing on growing international, that is where they make their money and REDUCING domestic capacity. Delta is not going to buy any more MD's, more likely they will park the one's they have. Money is tight, they will spend it where they can make the most money i.e. 777's.

The future won't look like the past and my crystal ball says in the future of domestic narrow body flying will all be outsourced to the regionals. In ten years the legacies won't do any of it.

 

[slapstick]

Finally! Someone realizes the cheapest operator isn't necessarily the best for business. I had a Freedom CA in my jumpseat once - told me he wouldn't ever let his family ride on a Freedom airplane.

 

[Oakum_Boy]

I had a Freedom CA in my jumpseat once - told me he wouldn't ever let his family ride on a Freedom airplane.

A sensible guy.

 

[1st Rate]

I hope this deal knocks some sense into Mesa'a board of directors and shows J.O. the door. It would be a great day!!

 

[Andy]

You guys with Big Jet Syndrome are mathematically challenged (1 MD-80 = 145 seats / 2 CRJ200's = 100 seats ) A given city could be served by 2 MD's a day or 6 RJ's with the same number of seats. Which do you think the marketing types would prefer. Want to trim capacity, cut one or two flights and retain frequency. One flight per day won't cut it. No legecy has the domestic narrow body capacity to take back RJ flying if they wanted to and they don't want to. All the legacies are focusing on growing international, that is where they make their money and REDUCING domestic capacity. Delta is not going to buy any more MD's, more likely they will park the one's they have. Money is tight, they will spend it where they can make the most money i.e. 777's.

The future won't look like the past and my crystal ball says in the future of domestic narrow body flying will all be outsourced to the regionals. In ten years the legacies won't do any of it.

That was a generalized example, but thanks for taking the bait.
Does 1 MD80 ~ 2 CRJ-700s? How about 1 CRJ-700 and 1 CRJ-900?
Redeploy 1 CRJ-900 to cover 2 CRJ100s?

Which costs more, 1 MD80 or 1 CRJ-700 and 1 CRJ-900?
Which costs more, 1 CRJ-900 or 2 CRJ100s?

Stop thinking in narrow terms of a single guage swap for another guage; it's much more complex than that.

And I never mentioned buying new aircraft; I'm speaking in general terms of a systemwide downguaging of aircraft to reduce ASMs.


Your crystal ball's better than mine; I have NO idea what things will look like in five years, much less ten.

 

[~~~^~~~]

You guys with Big Jet Syndrome are mathematically challenged (1 MD-80 = 145 seats / 2 CRJ200's = 100 seats ) A given city could be served by 2 MD's a day or 6 RJ's with the same number of seats. Which do you think the marketing types would prefer. Want to trim capacity, cut one or two flights and retain frequency. One flight per day won't cut it. No legecy has the domestic narrow body capacity to take back RJ flying if they wanted to and they don't want to. All the legacies are focusing on growing international, that is where they make their money and REDUCING domestic capacity. Delta is not going to buy any more MD's, more likely they will park the one's they have. Money is tight, they will spend it where they can make the most money i.e. 777's.

The future won't look like the past and my crystal ball says in the future of domestic narrow body flying will all be outsourced to the regionals. In ten years the legacies won't do any of it.

John,

I think you are mostly correct. Sure you will have ATL/LAX markets flown by something large, but anything smaller than a 757 is subject to outsourcing until the next generation of 100 seat jets is built. The 737-700 is a special case due to performance limits on the RJ's.

ALPA is again asleep at the wheel, hoping jet fuel nullifies the issue, when in fact jet fuel as added incentives to outsource the DC9's and MD88's.

 

[regionalcap]

The future won't look like the past and my crystal ball says in the future of domestic narrow body flying will all be outsourced to the regionals. In ten years the legacies won't do any of it.

Might want to get another crystal ball.

 

[~~~^~~~]

And I never mentioned buying new aircraft; I'm speaking in general terms of a systemwide downguaging of aircraft to reduce ASMs.

...and at the same time increasing unit revenues. When you pull a MD88 out of a market and put a CRJ900 in, the cost of the ticket generally increases on decreased supply.

You will always have some business travellers that pay whatever it costs for last minute travel.

The retired folks and families of four on priceline.com tickets will most always fill up an airplane to sunny destinations, but rarely pay the costs to actually get them there.

The problem is half empty 50 seaters going to cities which are only a 30 minute drive to a major hub. Particularly those cities which have welched on their marketing agreements to pay for jet service.

I see the RJ's doing MD88 flying, the MD88's doing 757 flying, 757's doing 767 flying etc.... Eventually we will have agreed to outsource almost all domestic narrowbody flying and that really stinks. On the other side AirFrance / KLM and others are happy to do our International operations.

ALPA needs to get religion about scope!

 

[Jon Rivoli]

Might want to get another crystal ball.

Wishful thinking DAL newbie, but don't worry you'll be making the big bucks flying a 777 or a 787.

When scope finally does collapse completely the senior Captain sitting next to you who just voted himself a big pay raise will explain to you how you didn't really want to fly those little planes (MD-80, 737) any way. Too many legs in a day, crappy overnights, etc. No, one leg a day and GOOD beer in London or Frankfurt, that's the ticket.

 

[Andy]

...and at the same time increasing unit revenues. When you pull a MD88 out of a market and put a CRJ900 in, the cost of the ticket generally increases on decreased supply.

You will always have some business travellers that pay whatever it costs for last minute travel.

The retired folks and families of four on priceline.com tickets will most always fill up an airplane to sunny destinations, but rarely pay the costs to actually get them there.

The problem is half empty 50 seaters going to cities which are only a 30 minute drive to a major hub. Particularly those cities which have welched on their marketing agreements to pay for jet service.

I see the RJ's doing MD88 flying, the MD88's doing 757 flying, 757's doing 767 flying etc.... Eventually we will have agreed to outsource almost all domestic narrowbody flying and that really stinks. On the other side AirFrance / KLM and others are happy to do our International operations.

ALPA needs to get religion about scope!

The downguaging that you're referring to assumes maintaining the same frequency. It also does not take into account what happens to the 777 when it's replaced with a 767.
The 777s would need to be sold. United dumped a bunch of 747s on the world market (and I think 777s, but am not positive). They went dirt cheap. Fortunately, there was a market for them. What if a bunch of the majors start dumping their widebodies? No, that's why I think frequency will decrease this time around.

Let me give you one city pair example. United on PHX-LAX. There are 5 daily 50 seaters that fly that route. 250 seats.
What if United went to 3 70 seaters and dump the 50 seaters?
Now we've got a hole where the 70 seaters were flying. Plug in 2 A319s - still cheaper than 3 RJ70s. Plug in 1 757 into the market served by 2 319s.

This is an incredibly complex puzzle where I am using very simple examples; the airlines use supercomputers to build their schedules. I can't give you a 'solid' example across multiple guages while sipping a beverage (hey, it's 5 o'clock somewhere) that will not have holes in it.

And yes, alpo does need to get religion about scope. However, I'm convinced that alpo's run by these guys: http://upload.wikimedia.org/wikipedia/en/3/3a/Stoogelogo.gif

 

[~~~^~~~]

Andy:

I'm not saying the larger airplanes are getting dumped, quite the contrary - they are going further out to make Delta a Global Airline and that strategy is working.

But, instead of 15% growth international and 10% shrinkage domestically, we should be seeing growth in both areas commensurate with GDP and other factors (around 3.5% yearly in normal conditions). Instead if we had the numbers on how much Delta Air Lines won domestic narrowbody flying has decreased we would have LEC meetings with 2,500 in attendence.

We should have rational growth in both areas. More people are flying, they just are not flying mainline.


Jon:

You are scaring me. Pretty good crystal ball you have there. In fact, that is exactly what they say....

But if the ALPA was run by the Three Stooges, they would all have mustaches.

Don't anyone get me wrong, I am a true blue union loyalist, but think they need to reorganize so they can determine and execute a national strategy.

 

[contrail67]

Mesa shares tumbled following the carrier's report that Delta plans to terminate a contract with the company due to issues with the number of flights it completed.



I have been a victim many times by their cancelled mess, cannot imagine the frustration on the passengers part.

 

[Andy]

We should have rational growth in both areas. More people are flying, they just are not flying mainline.

OK, THAT's the fundamental disconnect. You see an increase in passenger traffic. I disagree; I think that there is going to be a large dropoff in passenger travel. Think post-911 squared.

As for the 3 stooge link, that was me. Excellent point on the mustaches; too bad I stink at photoshopping.

 

[IronCityBlue]

Wishful thinking DAL newbie, but don't worry you'll be making the big bucks flying a 777 or a 787.

When scope finally does collapse completely the senior Captain sitting next to you who just voted himself a big pay raise will explain to you how you didn't really want to fly those little planes (MD-80, 737) any way. Too many legs in a day, crappy overnights, etc. No, one leg a day and GOOD beer in London or Frankfurt, that's the ticket.

You have done an excellent job pointing out the idiocy of mainline pilot groups though recent history. That's exactly how it happened. Furthermore, that's exactly how it could happen for larger aircraft.

To carry your example to its endless conclusion, SkyWest, in 20 years, will do all flying for Delta and United (and Midwest and others) because at some point the last group of mainline pilots will sell out all that exists for one final payday push.

You think this will happen, and clearly want it to happen. That's fine. Go for it. If the mainline pilots are that stupid, you 100% deserve to do all the flying. Not only that, they will deserve to lose it. You can dance on their graves and they will have no right to complain. In fact, every mainline pilot will owe you a beer because of the big payday your years of future toil has provided them.

But mental "mathercise" aside, you have admitted that it is not your decision. It is up to the mainline pilot groups, not you. The same goes for the shiny large RJ's you currently fly. Your company's ability to continue to outsource them depends on two crucial things: mainline pilots continuing to allow that outsourcing, and your company's ability to always be the cheapest RFP of the year (month, week, etc).

But thanks for the prediction anyway. Nice pom poms by the way.

 

[~~~^~~~]

OK, THAT's the fundamental disconnect. You see an increase in passenger traffic. I disagree; I think that there is going to be a large dropoff in passenger travel.

If you look at the charts the line has remained right at 4% over the past 20 years now. While the legacies have shrunk they have been back filled by the SWA's, AAI's, JetBlue and DCI airlines in the grand scheme of things.

The flying has not gone away, we simply have negotiated & managed our way out of it. Boeing has good reports on the subject and they see no changes to their 20 year long growth line between 2.9 to 4.9%.

 

[maxblast72]

Just curious, how many 50 seaters at Mesa are going to be affected by Delta's decision to drop this contract?

 

[GogglesPisano]

Resolution: At least 50% of the MEC members and neg committee members at the legacies should be staffed by bottom-third FO's.

Can I get a "Seconded?"

 

[Yuppyguppy]

You guys with Big Jet Syndrome are mathematically challenged (1 MD-80 = 145 seats / 2 CRJ200's = 100 seats ) A given city could be served by 2 MD's a day or 6 RJ's with the same number of seats. Which do you think the marketing types would prefer. Want to trim capacity, cut one or two flights and retain frequency. One flight per day won't cut it. No legecy has the domestic narrow body capacity to take back RJ flying if they wanted to and they don't want to. All the legacies are focusing on growing international, that is where they make their money and REDUCING domestic capacity. Delta is not going to buy any more MD's, more likely they will park the one's they have. Money is tight, they will spend it where they can make the most money i.e. 777's.

The future won't look like the past and my crystal ball says in the future of domestic narrow body flying will all be outsourced to the regionals. In ten years the legacies won't do any of it.

Yep John your right...I told you to stop drinking you fool. Did you get your crystal ball from J.O.?

 

[~~~^~~~]

Just curious, how many 50 seaters at Mesa are going to be affected by Delta's decision to drop this contract?

How many do they have? That would be the correct answer.

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 has serious financial problems. They had to post a 90 million dollar bond in the Hawaii litigation where they destroyed evidence (big no no) and the Aloha litigation is just getting spun up, which will likely follow the path of the Hawaii suit. MAG's island operation has always been a money loser and the Chinese appear to have backed out of the deal with Kunnenpeg (sp?). The Chinese are hard for anyone to do business with anyway. United is yanking flying and they have debt obligations of $150,000,000 due in the next 10 months.

When the lawsuits start flying in the numbers MAG has to contend with the end is usually close behind. At best management is distracted from running the company. At worst, the lawyers' billing just eat up any cash that is left to fund the day to day operation.