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United Airlines Fights Mesa Air Group Over Airplanes (Part I)

If you're interested in the anatomy of a dysfunctional relationship, let me introduce you to United (UAUA) and its regional partner Mesa Air Group (MESA). A relatively straightforward part of the contract in which Mesa flies some aircraft under the United Express brand is now the center of attention. A combination of what appears to be ego and lack of interest has now exploded to land these two in court, fighting it out. Grab a bag of popcorn and enjoy. This story is absolutely crazy. Today I'll talk about how they got here, and then tomorrow, I'll jump into the lawsuit.

Mesa has been flying a few different airplane types for United for awhile. United recently canceled the contract for Mesa to fly 10 Dash 8 props, and the airline has also failed to renew Mesa's contract operating 26 CRJ-200 fifty seat regional jets. This is a huge chunk of Mesa's fleet, and it's certainly bad news for the airline. That being said, Mesa does still operate 20 CRJ-700s for United, and it was going to get 10 more. Those 10 planes form the crux of the disagreement.

In its contract with Mesa, United agreed to a mix of CRJ-200 and CRJ-700 aircraft from Mesa. It did, however, note that 15 of the CRJ-200 aircraft could be replaced by the larger CRJ-700s. Here's the exact wording of the amended agreement that eventually extended the dates to this point:

Article II.B.2.b RJ-50: For fifteen (15) 50-seat Regional Jet ("RJ-50") aircraft, the term of this Agreement will expire no later than April 30, 2010 and will correspond to the introduction of the 15 Replacement RJ 70s as outlined in Article II.B.2.c
Ok, sounds pretty clear to me. But what does Article II.B.2.c say? It's actually subsection (i) that's got the meat of that section.

Delivery of Replacement RJ-70s: Contractor must advise United of the delivery date of each Replacement RJ-70 no later than 180 days before the delivery date of each RJ-70. Contractor must advise United of the delivery dates of all RJ-70s no later than October 31, 2009. Replacement RJ-70s must be delivered and ready to enter the United Express schedule on these dates. Any decision by Contractor to delay the exit of the CRJ200s and the entry of the replacement CRJ-700s shall not affect the final termination date of the existing Agreement, currently set at no later than October 31, 2018.
When this was signed, Mesa put this in an 8-K:
The code-share agreement for . . . the 15 70-seat regional jets (to be delivered upon the withdrawal of the 50-seat regional jets) terminates on the earlier of ten years from delivery date or October 31, 2018 . . . .
Five of these airplanes have already been swapped out, so there are really only 10 replacement RJ-70s that are still under discussion. With the October 31 date coming up, Mesa sent a letter to United with its notice that it would be placing the 10 remaining replacement CRJ-700s in service. Though the CRJ-200s would be withdrawn at the end of April, as prescribed, the CRJ-700s would enter service in three phases. Three would go in service on October 15, 2010, another three on November 15, 2010, and the last four on December 15, 2010.

United received the letter but promptly rejected it, notifying Mesa that the letter didn't count as notice. United explained to Mesa that these aircraft needed to replace the CRJ-200s on a one-to-one basis. United couldn't accept a six to eight month gap in service. That makes sense - why would United want to just go without these airplanes during the busy summer months? They wouldn't.

So how did Mesa respond? Well they sent a letter on October 27 explaining that they were entirely within their rights to put those in place that far out as long as they gave their notice by October 31, and the letter was valid notice. Despite that, "Mesa hereby provides United notice of alternative in-service dates for the RJ-70 aircraft of April 30, 2010."

Ok, so now we're all happy right? Nope, not so fast. United sent a response saying that the October 15 letter isn't valid, but, "We simply re-state that United appreciates that Mesa has provided proper Notice of its intent to deliver the ten (10) Replacement RJ-70s on April 30, 2010."

Good, we're all happy now. Or not. Mesa shoots back (shooting themselves in the foot, or possibly somewhere even more painful than that). Mesa says that there is a genuine disagreement and goes on and on, finally saying, "Mesa intends to place the RJ-70s into service on the dates set forth in our October 15, 2009 letter . . . ."

Wow, just wow. And that is how the lawsuit came about. Tomorrow, we'll get into that in more detail.

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