American Airlines Drops Regional Partner That Was Losing $5 Million Per Month

American Airlines and a regional operator that operated American Eagle branded flights on behalf of the Dallas Fort Worth-based airline say they are parting ways due to what AA’s chief financial officer Derek Kerr described as “various financial and operational issues” at the regional carrier.

Mesa Airlines has operated CRJ-900 jets on behalf of American Eagle since 2014, having previously had a longstanding agreement with US Airways before its merger with AA.

The Phoenix-based carrier announced on Saturday that is has had “concerns about American’s ability to be a reliable partner going forward” after racking up losses of $5 million per month on its American Eagle operations.

Mesa blamed American’s decision to significantly increase pilot pay rates at its wholly owned regional subsidiaries while refusing to do the same for its non-affiliated partners. As a result, Mesa was struggling to recruit enough pilots to keep up with AA’s flying schedule and was incurring penalties for failing to produce enough block hours as stipulated in a pre-pandemic contract.

“Needless to say, this put us between a rock and a hard place. At that point, your management knew that something had to change,” the airline told employees in a Saturday memo.

That change took the form of Mesa starting negotiations with its other partner United Airlines, for whom Mesa currently provides Embraer E175 regional services.

Mesa said the negotiations “culminated in what we believe will prove to be one of the most advantageous transactions in the history of regional aviation”.

The airline will slowly wind down operations with American Eagle and fly its last AA flight next April before transferring all of its CRJ flying to United Express.

Assuaging worries of impending job losses, Mesa said United will maintain existing crew and maintenance bases and even add Denver and Houston as additional CRJ crew bases.

American Airlines has two wholly owned subsidiaries, Envoy and PSA, which operate American Eagle flights and will continue working with Skywest on regional services. The airline has also tapped Air Wisconsin to provide some regional services.