Mesaba Airlines (a Northwest link airline)

Mesaba began operations in 1944 as a feeder route in Minnesota. In 1984, it began flying exclu­sively for Northwest Airlines as a regional carrier. Mesaba depended on Northwest for all of its pas­sengers and its entire schedule. When Northwest filed for bankruptcy protection on September 14, 2005, cash shortages, fleet changes, and other uncertainties were imposed on Mesaba by North­west. It is not surprising, then, that Mesaba fol­lowed Northwest into Chapter 11, which it did on October 13, 2005. Mesaba was owed $30 million by Northwest when Northwest filed in September.

Between 2002 and 2005, eight major carri­ers had entered bankruptcy. By 2007 all major airlines that had entered Chapter 11 post 9/11 had emerged from bankruptcy:

• June 2, 2005: Hawaiian Airlines

• September 27, 2005: US Airways. In Chapter 11, it merged with America West.

• February 1, 2006: United Airlines

• February 17, 2006: Aloha Airlines

• April 30, 2007: Delta Airlines

• May 31, 2007: Northwest Airlines

These transitions through reorganization have been largely at the cost of air industry labor groups and employees, as well as the stockhold­ers of the companies. The one consistent win­ner through the years since deregulation has been the consumer. Domestic airfares had fallen 50.5 percent since 1978, adjusted for inflation. This phenomenon explains, in large part, the explosive growth that has been seen in air travel.

In 2005, the U. S. air carrier industry reported its first operating profit since 2000. Yet interest expense and other nonoperating costs left the airlines with a net loss of $5.7 billion.

By the end of 2006, for the first time since the turn of this century, U. S. air carriers had recorded a net profit. That year the airlines posted net income of $3 billion on $163.8 billion in rev­enues. Although fuel prices continued to increase (see Figure 35-17), fuel efficiency also increased, by 22 percent over the year 2000. Passenger load factor increased to 79 percent. (See Figure 35-18.) The airlines carried 12 percent more passengers in 2006 than in 2000, and they used 719 million fewer gallons of fuel in doing so. And they did it with fewer employees. (See Figure 35-12 and Table 35-1.) The airline fleet continued toward modernization. (See Table 35-2.)

«Since 1978 the record pretty well shows that no start-up airline. . . has really been successful, so the odds of

JetBlue having long-term success are remote. I’m not going to say it can’t happen because stranger things have happened, but I personally believe P T. Barnum was, in that respect, correct.**

(Ed. Note: P. T. Barnum, a 19th century showman and circus owner, is supposed to have famously said, “There is a sucker born every minute.”)

Gordon Bethune, CEO Continental Airlines, commenting on the 70% rise in JetBlue’s stock price in the days after its IPO. Continental’s annual shareholder meeting, 17 April 2002.