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NWA and Mesaba in the ring

Joe Patroni

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Northwest Airlines feuds with regional partner


November 9, 2005, 6:30 PM

MINNEAPOLIS (AP) -- A bankruptcy judge Wednesday rejected Northwest Airlines Corp.'s request for a contempt finding against regional partner Mesaba Airlines in a spat over whether the airlines can withhold payments from each other.
Bankruptcy law is meant to stop creditors from taking action against a bankrupt company so the debt can be handled in an orderly way. But Northwest and Mesaba are both in Chapter 11, raising dueling claims that by withholding money, each airline is hurting the other one in violation of that law.
Mesaba has asked a federal judge in Minnesota to order Northwest to quit withholding payments. Northwest filed for bankruptcy in New York.
Northwest said Wednesday that Mesaba's action warranted a finding of contempt and damages. The nation's fourth-largest carrier asked for a hearing on the matter immediately, because a hearing on Mesaba's request is scheduled for Thursday.
But bankruptcy Judge Allan L. Gropper in New York wrote that he was "unwilling to haul another debtor into this Court on such short notice, especially as Mesaba might argue that Northwest's actions" violated bankruptcy law just as much as Mesaba's might have.
Northwest spokesman Kurt Ebenhoch pointed out that Gropper's order left open the possibility that he would hear the matter in the future. A Mesaba spokeswoman said she was checking to see if the carrier had any comment.
Rarely do two companies so closely intertwined end up bankrupt at the same time, said William Rochelle, a New York bankruptcy attorney who has worked on airline cases.
"Only in the airline industry," he said.
Mesaba leases most of its planes from Northwest, and it said bankruptcy law allows it to quit paying Northwest for those planes for two months. Northwest then deducted those payments from money it owed Mesaba. Mesaba said Northwest owes it $5.2 million, plus other money for flying done before Northwest went bankrupt.
Northwest's actions have "caused significant cash shortages at Mesaba" and put its ability to keep flying at risk, Mesaba said in a court filing.
Rochelle said the law is murky on what's supposed to happen when two companies in Chapter 11 have dueling claims like the one between Northwest and Mesaba.
"Only we bankruptcy lawyers can get any ghoulish pleasure out of this," he said.
Northwest and Mesaba have a relationship built on mutual need, and they usually get along.
Mesaba, an independent company, flies small planes marked Northwest Airlink from small cities to Northwest's hubs. Northwest, Michigan's largest passenger air carrier, provides Mesaba's passengers, most of its planes, and 93 percent of its revenue.
But Northwest has been cutting flights since filing for bankruptcy in September, sending Mesaba into its own bankruptcy proceeding last month.
Aviation consultant Doug Abbey in Washington said Northwest has a reputation for being hard-nosed with employees, and it's no surprise that they would be tough with regional partners, too.
"As with a dysfunctional family, this is playing out like a soap opera," he said.

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On the Net:
Northwest: http://www.nwa.com
Mesaba parent MAIR Holdings: http://www.mairholdings.com
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Joshua Freed can be reached at jfreed(at)ap.org

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