Tuesday, 5 January 2010

New year, new airline bankruptcy, same old lies

Mesa Air, a “regional” airline operating interisland flights in Hawaii as Go Mokulele and operating codeshare flights elsewhere in the names of United Express, US Airways Express, and Delta Connection, filed for bankruptcy protection today.

I’ve updated my FAQ about Airline Bankruptcies accordingly.

In a press release announcing the filing, headlined “Business Will Continue Unaffected”, Mesa claimed that, “Customers can be assured that tickets will continue to be sold and honored, all terms and conditions governing tickets purchased remain the same, and our frequent flyer program remains intact.”

That’s a lie. False, obviously intended to give potential customers false reassurance, and clearly fraudulent. This press release is a “deceptive business practice”, and if the U.S.Department of Transportation were doing its job in policing airline truth-in-advertising, it would be the subject of immediate and severe enforcement action and sanctions.

Later in the same press release, Mesa gives a more accurate statement of the facts:

To ensure the Company operates without interruption, Mesa is seeking authority from the Court to continue all of its normal operations. The requests include authority to continue to pay employee salary and benefits, fulfill code-share partner agreements, honor customer programs, and pay vendors and suppliers for post-petition goods and services. These requests are standard and the Company anticipates receiving approval in the next few days. [emphasis added]

There’s a huge gulf between what “can be assured” or what a company “will” do, and what it is “seeking authority from the Court” to do, even if it “anticipates” approval (which may not be granted, and which if granted could be revoked at any time).

The bottom line is that now that the company has (voluntarily) placed itself under the protection and supervision of the court, whether it will be allowed to continue to operate is out of the hands of company management, and in the hands of the bankruptcy judge. Except to the extent that holders of paid tickets are considered creditors (as they should be, and as they should be represented in the creditors’ committee), the judge is required to make that decision not on the basis of any desire for continuity of service, but solely on the basis of what will maximize how many pennies on the dollar the company may eventually return to its creditors.

Ironically, Mesa Air wasn’t even in the running in the current betting with an Irish bookie taking bets on which airline will be the next to go bankrupt.

Link | Posted by Edward on Tuesday, 5 January 2010, 06:52 ( 6:52 AM)
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