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Tis the Season…To Break Deals With Airline Partners
By miller22 | May 30, 2008
It seems to be the latest fashion in the airline industry to try to screw the people you’ve signed a deal with. Whether it be mainline-regional agreements, or cargo, there’s been no lost love in the industry lately. With yesterday’s news regarding the relationship between Mesa and Delta, I thought it was time to discuss just how nasty it’s gotten out there.
After Delta’s claims that Mesa did not meet minimum flight completion requirements, Delta announced they would no longer continue to do business with Mesa. For those of you who’ve been following the death spiral that is Mesa, you know that they’ve been largely criticized for their inability to maintain crew staffing, have launched an expensive and questionable ventures in China and Hawaii, and have recently been ordered to pay over $50 million to Aloha. After the announcement by Delta, Mesa warned it’s shareholders that, should Delta be allowed to terminate the contract, Mesa would be forced to file for bankruptcy on or before July 20. Mesa filed for an injunction which was allowed by the courts yesterday, effectively holding everything at status-quo.
For Delta, the attempted cancellation of the contract comes at a convenient time when they’re trying to get rid of excess 50-seat lift. The injunction will leave them looking elsewhere, or waiting for the appeal process to be completed or the contract to expire. The clear exposure here is on Comair, which is the only regional carrier owned lock-stock by Delta.
For Mesa, this injunction is a small win which just delays the inevitable. Their performance has been suffering across all customers as of late, and forcing one of your larger customers to keep in a contract they don’t agree with does not a viable long-term solution make.
The biggest surprise of yesterday came from the announcement that DHL would entirely scrap it’s U.S. network and outsource all flying to UPS. This is a devastating blow to both ABX and Astar, both of which who currently fly for DHL in the U.S. DHL owns 49% of Astar, and accounts for almost 100% of its revenues. No announcement has been made by Astar as to the future of the company. ABX does operate some flights outside the DHL network, notably with ANA in Asia. Even with this slight diversification, shares of ATSG were down over 40% on the news.
According to releases from both UPS and DHL, the transition will take place over the course of 2008 and 2009, and still has to pass Department of Justice approval. With precedence set in the FedEx/USPS contract, this approval is not expected to see any obstacles.
In one of the most creative stabs in the back we’ve seen in a while, Continental Airlines said it would only continue its relationship with ExpressJet if they sold to Skywest airlines. This was conveniently accompanied with an offer from Skywest to by ExpressJet. It seems the contract between Continental and ExpressJet wasn’t even negotiated by ExpressJet, but Skywest.
Topics: Cargo, Continental, Delta | Comments