American Airlines is dropping Mesa citing financial problems

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

Alex Tai | SOPA | Getty Images

American Airlines said on Saturday that it will fall Mesa Air for some of its regional flights, citing concerns about its partner’s financial and operational woes, problems related to rising costs and the industry’s pilot shortage.

“As a result, we have concerns about Mesa’s ability to be a reliable partner for American going forward,” Derek Kerr, American’s chief financial officer and president of the regional American Eagle brand, said in an employee release seen by CNBC Saturday. “American and Mesa agree that the best way to address these concerns is to terminate our agreement.”

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The last Mesa flight for American will be April 3, though American will cut Mesa flights in March, Kerr said in his note.

Now, Arizona-based Mesa plans to “convert all of our CRJ900s that fly to United Airlines‘ an airline it already flies for, Mesa CEO Jonathan Ornstein said in a note to employees seen on CNBC on Saturday.

United declined to comment.

Major airlines like American, United and Delta Airlines They regularly hire regional airlines to fly many shorter routes and they account for about half of departures, although this varies by airline.

At the heart of the problem stems from a pilot shortage, which is most acute on regional airlines and has worsened since travel demand fell after a pandemic travel slump. Mesa and other regional airlines have raised wages sharply to attract and retain fliers. American has increased wages at its regional subsidiaries.

American declined to fund higher pilot rates for other regional partners, Mesa’s CEO told employees, adding that they would be penalized for failing to meet pre-Covid contract obligations.

“With that in mind, we are pleased to announce that we have negotiated a cessation of our operations with American and are entering into a new agreement with United that will transition all CRJ900s currently flying American Eagle to United Express,” said Mesa’a Ornstein .

American did not comment on Mesa’s note to employees.

Mesa had a net loss of about $67 million for the nine months ended June 30, according to a securities filing. The airline postponed its quarterly report last week.

As of September 30, 2021, about 45% of Mesa’s revenue came from American and 52% from United, according to the company’s most recent annual report, released a year ago. Mesa also flies for DHL.

American said its agreement with Mesa is tied primarily to its hubs at Dallas/Fort Worth International Airport and Phoenix Sky Harbor International Airport.

American plans to concentrate its flying with its wholly owned regional subsidiaries, such as Envoy and PSA, and an independent regional airline SkyWest. Air Wisconsin will also fly for the American Eagle brand, beginning its arrangement earlier than originally planned, Kerr said.

“Flights previously operated by Mesa will be replenished by these high quality regional carriers as well as our mainline operations to ensure we continue to build and deliver the very best global network for our customers,” Kerr wrote.

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