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American Airlines is dropping Mesa, citing financial problems

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American Eagle Bombardier CRJ-900ER aircraft seen at Phoenix Sky Harbor International Airport.

Alex Tai | SOPA | Getty Images

American Airlines said Saturday that it can drop Mesa Air for a few of its regional flying, citing concerns about its partner’s financial and operational problems, issues which might be tied to an increase in costs and the industry’s pilot shortage.

“Consequently, we have now concerns about Mesa’s ability to be a reliable partner for American going forward,” Derek Kerr, American’s chief financial officer and president of American’s regional brand American Eagle, said in a staff note, which was seen by CNBC on Saturday. “American and Mesa agree the perfect option to address these concerns is to wind down our agreement.”

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The ultimate Mesa flight for American will likely be on April 3, though American is slashing Mesa flights in March, Kerr said in his note.

Now, Arizona-based Mesa is planning to transition “all of our CRJ900 flying to United Airlines,” a carrier it already flies for, Mesa’s CEO Jonathan Ornstein said in a note to staff on Saturday, which was seen by CNBC.

United declined to comment.

Large carriers like American, United and Delta Air Lines routinely contract regional airlines to fly many shorter routes, and so they account for roughly half of exits, though that varies by airline.

The guts of the issue stems from a shortage of pilots, which is most acute at regional carriers, and has turn out to be more severe since travel demand snapped back after a pandemic travel slump. Mesa and other regional airlines have sharply raised wages to draw and retain aviators. American raised wages at its regional subsidiaries.

American declined to fund higher pilot rates for other regional partners, Mesa’s CEO told staff, adding that they were penalized for not having the ability to meet pre-Covid contract obligations.

“With that in mind, we’re excited to announce we have now negotiated a wind down of our operations with American and are finalizing a latest agreement with United which might transition all CRJ900s currently flying for American Eagle to United Express,” Mesa’a Ornstein said.

American didn’t comment on the Mesa note to staff.

Mesa had a net lack of about $67 million within the nine months ended June 30, in keeping with a securities filing. Last week, the airline postponed its quarterly earnings report.

As of Sept. 30, 2021, about 45% of Mesa’s revenue got here from American and 52% from United, in keeping with the corporate’s last annual filing, which was published a 12 months ago. Mesa also flies for DHL.

American said its agreement with Mesa was mostly tied to its hubs at Dallas/Fort Price International Airport and Phoenix Sky Harbor International Airport.

American plans to pay attention its flying with its wholly owned regional subsidiaries like Envoy and PSA, in addition to an independent regional carrier SkyWest. Air Wisconsin may even fly for the American Eagle brand, starting its agreement sooner than originally planned, Kerr said.

“The flying previously done by Mesa will likely be backfilled by these high-quality regional carriers in addition to our mainline operation, ensuring we will proceed to construct and deliver the best possible global network for our customers,” Kerr wrote.

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