Battered Mesa Air Holds Out Hope

CHARLOTTE, N.C. -- Things could hardly have been worse for Mesa(MESA Quote) in 2008, as the 91% decline in the airline's share price amply demonstrates.

The Phoenix-based regional carrier was recently threatened with delisting by Nasdaq. It has sued Delta(DAL Quote), one of its principal partners, which had sought to terminate a contract.

Attempted new business ventures in other parts of the world have had some unintended consequences. In Hawaii, where it set up a new interisland airline in 2006, Mesa lost one lawsuit, paying out $52.5 million to Hawaiian(HA Quote), and settled a second, paying $2 million to the estate of defunct Aloha. Mesa was accused of using confidential information obtained from Hawaiian, and of predatory pricing.

Meanwhile, in China, Mesa sold a once-vaunted partnership with Shenzen Airlines, taking a $7.4 million loss.

Currently, with $92 million worth of bonds coming due, Mesa is trying to convince bondholders to take stock in payment. It's not an easy sell, given that shares traded Tuesday at 20 cents, but bondholders may decide that getting something beats getting less in bankruptcy court.

Last week, Mesa reported earnings for its fiscal fourth quarter, which ended Sept. 30. The net loss was $22.3 million, compared with a loss of $62.2 million a year earlier. Excluding special items, pro forma net income was $3.1 million, the company said, up from $2.2 million. Revenue was $325 million, down 1%.

The late filing triggered the delisting threat. Mesa attributed the delay to an accounting issue associated with its value falling below the value of net operating losses, triggering a compilation of its various owners. In fact, had Nasdaq not suspended its rules on minimum share price due to the troubled economy, Mesa would still face delisting.