Fallout After Air Midwest Crash Cited

Citing increased maintenance expenses, due in part to the 2003 crash of an Air Midwest Beech 1900, and higher than expected fuel costs, Mesa Air Group [MESA] has petitioned the U.S. Department of Transportation (DOT) to increase its Essential Air Service (EAS) subsidiary to continue serving six Midwest and Southwest markets with its Air Midwest unit.

According to DOT, Mesa's late June filing is the first by a carrier seeking multiple market adjustments. "A blanket request to re-examine the rates has not been done before. The [adjustments] are usually done as part of a contract review," said DOT spokesman Bill Mosely.

The filing covers about one-third of Mesa's EAS contracts, Mosely said.

Mesa's point person on EAS contracts, Scott Lyon, its vice president of planning, declined to comment on the filing now pending before the DOT.

DOT does not have a formal review process to deal with Mesa's request, Mosely said. "We will look into it, talk with the airline and then decide."

Under DOT rules, if a carrier's costs exceed the projections in the EAS contract by 10 percent for at least two months, the carrier can ask for an adjustment in its subsidy.

Collectively, the additional expenses for six contracts exceeded the contract estimates by $670,404 in the first three months of 2004. In one market, Brownwood, Texas, the expenses exceed the contract projection by 32.4 percent. The smallest overage was 17.4 percent for Dodge City and Garden City, Kan. The other contract communities include Carlsbad, N.M.; El Dorado, Camden, Jonesboro, Harrison and Hot Springs, Ark.; and Great Bend and Hayes, also in Kansas.

By far, the largest overage for the six contracts could be attributed to increased maintenance. Collectively, Mesa has spent more than $400,000 in the first quarter to keep its aging fleet of Beech 1900s in the air. In its filing, Mesa noted that since the 2003 crash, "it has incurred significant maintenance charges related to a more stringent maintenance program."

Fuel expenses also increased by more than $200,000 in the same period.

Mesa had earlier filed a request to discontinue service to Brownwood and the two Arkansas contracts because actual expenses were now exceeding the $200 per passenger limit spelled out in the EAS regulations. On July 1, DOT agreed that Mesa could discontinue the Texas service as well as the Hot Springs and Harrison service effective Oct. 1. However, based on earlier information, DOT concluded that Mesa would need to continue to provide service to Jonesboro-El Dorado-Camden because these costs fell below the $200 per passenger mark. The agency will accept comments on its findings until July 19.

>>Contact: Bill Mosely, DOT, 202-366-5582; DOT Docket: OST-2004-18463; OST-1997-2935.<<