Mesa says it will halt American Airlines flights, finalizing deal with United By Reuters

By David Shepardson

WASHINGTON (Reuters) -Mesa Airlines said late Saturday it is finalizing an agreement to operate regional flights for United Airlines after an announcement it will wind down flights for American Airlines (NASDAQ:) early next year.

In a memo sent to employees and provided to Reuters by the company, Mesa Air Group (NASDAQ:) Chief Executive Jonathan Ornstein said the Arizona-based carrier is “finalizing a new agreement with United which would transition all CRJ900s currently flying for American Eagle (NYSE:) to United Express.” The CRJ900 is a regional jet made by Canada’s Bombardier (OTC:) Inc that has around 75 seats.

American Eagle is a network of six regional carriers operating 3,400 daily flights under a codeshare with American – often flights to smaller regional cities. Three of the six are American Airlines subsidiaries, and three are contract carriers including Mesa.

A United spokeswoman declined to comment.

American declined to comment on Ornstein’s memo. The airline said earlier on Saturday that Mesa would halt service for the airline on April 3 after significant reductions in March.

American said in a memo made available to Reuters by the company that flights operated by Mesa will be backfilled by other regional carriers, adding “Air Wisconsin is preparing to join the American Eagle family earlier than planned.”

Mesa said the switch was prompted by a regional pilot shortage and American’s actions related to that.

Ornstein said American “significantly raised regional pilot wages for their wholly owned subsidiaries to deter pilots from going to national carriers and attract pilots from the ever-shrinking pool of qualified pilot applicants.”

But, Ornstein added in the Mesa memo, “American chose not to fund the higher pilot rates for their non-affiliated carriers. At the same time, we were being penalized for not producing the required block hours under our pre-COVID contract with American. These two actions were costing us approximately $5 million in losses per month.”

Ornstein said, “As a result, we have concerns about American’s ability to be a reliable partner going forward … We just do not believe it is in Mesa’s long term interest to fund ongoing losses at American.”

The latter cast the decision differently in its memo, saying Mesa “has experienced various financial and operational difficulties this year. As a result, we have concerns about Mesa’s ability to be a reliable partner for American going forward.”

Mesa’s Ornstein said under the anticipated new agreement, “United would maintain all existing domiciles and maintenance bases currently operated for American and plans to add Denver as a domicile and Houston as a CRJ domicile.”

Ornstein noted that United announced a huge Boeing (NYSE:) order Tuesday – 100 787 Dreamliners and 100 737 MAX airplanes.

“United’s growth plan provides extensive advancement opportunities for our people,” Ornstein wrote. “This deeper relationship will position us to be the preferred carrier for future regional flying opportunities with United.”