Major regional carrier Republic Airways has signed a takeover deal with Mesa Air Group to create a leading regional airline that provides contracted services to American Airlines, Delta, and United Airlines.
After more than 40 years, the Mesa Air brand will cease to exist as a result of this deal, although the Phoenix-based carrier’s future had been looking shaky for some time.
In 2022, Mesa Air lost its long-running regional contract with American Airlines, leaving it just with United Airlines as a business partner. Effectively, it was up to United Airlines whether Mesa Air would survive or not.
Monday’s deal, however, secures a new 10-year contract between Mesa and United, while Republic Airways will continue to provide services to American Airlines, Delta, and United.
The combined company will have a single fleet of around 310 Embraer 170 and 175 E-Jets, although the airlines will fly under their existing operating certificates until a single operating certificate for the combined company can be secured from the Federal Aviation Administration.
Republic’s shareholders are very much the winners in this transaction, owning 88% of the combined company, while Mesa’s shareholders will end up with between 6% and 12% of the renamed Republic Airways Holdings Inc.
Jonathan Ornstein, Mesa’s Chairman and CEO, said, however, that Monday’s deal secured the “best outcome” for the airline’s shareholders and employees.
Mesa Air’s relationship with American Airlines, operating American Eagle-branded flights, can be traced back to 2014, having previously had a longstanding agreement with US Airways before its merger with AA.
In 2022, however, the contract was terminated due to what AA’s chief financial officer, Derek Kerr, described as “various financial and operational issues” at the regional carrier.
Mesa Air was reportedly losing as much as $5 million per month operating American Eagle regional flights after American Airlines significantly increased pilot pay rates at its two wholly-owned regional carriers, Envoy and PSA.
