Phoenix-based Mesa Air Group filed for Chapter 11 bankruptcy protection in New York Tuesday, citing economic weakness in the airline industry as the primary reason.
The company, which has 3,500 employees, said it will continue to operate without interruptions while it restructures, including its regional-service partnerships with US Airways, United Airlines and Delta Air Lines.
The weak economy has left the company with more aircraft than it needs, and the Chapter 11 filing will allow the carrier to downsize its fleet to match travel demand, said Chief Executive Jonathan Ornstein.
“After careful consideration, the company determined that a Chapter 11 filing provides the most effective and efficient means to restructure with minimal impact on the business and our customers,” he said in a written statement. “This process will allow us to eliminate excess aircraft to better match our needs and give us the flexibility to align our business to the changing regional airline marketplace.”
Ornstein said the company has ample liquidity to support itself during its restructuring, and “we are confident we will emerge from Chapter 11 an even stronger operation.”
The company has been able to reduce its debt by more than $160 million in the past two years through return of leased aircraft and the restructuring of inventory management and engine-overhaul agreements, Ornstein said.
“We are nonetheless faced with an untenable financial situation resulting primarily from our continued lease obligations on aircraft excess to our current requirements,” he said.
The action also will permit a quicker resolution of the company’s litigation with Delta Air Lines, in which Mesa is seeking more than $70 million in damages, he said.
That lawsuit resulted from an effort by Delta in 2008 to terminate a contract with Mesa Air before it ended. Court rulings have barred Delta from ending the contract.
Mesa currently operates 130 aircraft in a system that serves 127 cities in 41 states, Canada and Mexico. Mesa operates as Delta Connection, US Airways Express and United Express under agreements with those carriers as well as independently as Mesa Airlines and Go! Mokulele, an inter-island air service in Hawaii.
The independent Go! Mokulele is a joint venture with Republic Holdings that’s not included in the filing, the company said.
In its bankruptcy filing, Mesa listed $975.5 million in assets and $868.6 million in debts.
The ailing carrier, which was founded in 1982, has been struggling financially for several years. Its shares traded above $3 a share in early 2008 but dipped below $1 in May of that year as fuel prices soared. That was followed by the recession, which cut into travel demand.
Mesa’s stock has not traded above 30 cents a share since September 2009. On Tuesday the stock fell more than 50 percent to five cents a share on the Nasdaq exchange.