American Airlines, Mesa Airlines cut ties

"Mesa Airlines 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,” American Airlines Chief Financial Officer Derek Kerr said in an employee memo shared with CNBC. “American and Mesa agree the best way to address these concerns is to wind down our agreement."

Kerr, who is also president of American’s regional airline, American Eagle, announced his plans to step down as CFO at the end of the year, but plans to remain at the airline as vice chair, president of American Eagle, and strategic advisor.

In an employee memo, Mesa Air Group CEO Jonathan Ornstein placed blame on the ongoing pilot shortage and American Airlines’ decision not to raise pilot salaries at its non-subsidiary regional airlines, which include SkyWest and Republic Airways.

"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,” Ornstein said. “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."

Mesa reported a net loss of about $67 million during a nine-month period that ended June 30.  

In the same memo, Ornstein announced that Mesa was finalizing a new agreement with United Airlines that would transition its 80 Embraer E175s to United Express. Under its new agreement, Mesa plans to retain its existing bases and maintenance facilities currently operated for American at Dallas/Fort Worth International Airport and Phoenix Sky Harbor International Airport with plans to add Denver and Houston as domiciles.

“This will be a win-win for both companies and will provide a more financially stable and focused enterprise for our shareholders and employees,” Ornstein said in a company press release. “This new agreement would allow us to transition to higher revenue-per-block hour operations and create more opportunities and job security for our people. Importantly, current and future pilots at Mesa will benefit from the anticipated new agreement with United, which is poised to offer the best combination of the highest pay rates and fastest career path to a major airline in the industry. I’d like to thank our employees and our ALPA and AFA labor union leadership whose hard work and dedication has been and will continue to be the core of Mesa’s success.”

In the release, Mesa also said that to improve its cashflow, it plans to sell its remaining eight CRJ-550s to United Airlines and 11 surplus CRJ-900 aircraft to a third party.

Mesa will make its last flight under the American Eagle banner on April 3.