Mesaba creditors to pursue MAIR claims

An agreement lets the airline's unsecured creditors go after claims against the bankrupt airline's parent.

Marie Beaudette , Dow Jones News Service
September 28, 2006

WASHINGTON - Northwest Airlines feeder carrier Mesaba Airlines has reached a deal with unsecured creditors to allow them to pursue claims against parent company MAIR Holdings Inc.

U.S. Bankruptcy Judge Gregory Kishel approved the agreement Tuesday in Minneapolis, allowing the committee of creditors in Mesaba's bankruptcy case to take action related to "significant transfers of funds" to MAIR from Mesaba before the airline sought Chapter 11 protection in 2005. Mesaba filed for Chapter 11 on Oct. 13, about a month after Northwest sought protection from its creditors in the U.S. Bankruptcy Court in Manhattan.

The creditors have questioned Mesaba's pre-bankruptcy relationship with MAIR, which isn't in Chapter 11 protection. The committee has said Mesaba accounts for more than 95 percent of MAIR's consolidated operating revenue and substantially all of its income.

The committee last month asked Kishel for approval to prosecute claims against MAIR on Mesaba's behalf, saying its involvement would prevent conflicts of interest.

In papers filed Tuesday, Mesaba said the pursuit of claims against MAIR is best left to the unsecured creditors.

"The debtor and the committee agree that the investigation and prosecution of any such claims should be done by the committee," Mesaba said.

Mesaba, based in Minneapolis, is battling with the labor unions representing its pilots, flight attendants and mechanics. The company, which was unsuccessful in its bid to get court approval to impose contract terms, has said it must cut annual wages by 19.4 percent to survive.

Company spokeswoman Elizabeth Costello said Mesaba held negotiations Wednesday with the Aircraft Mechanics Fraternal Association and will continue the talks today, but there were no developments to report yet.

Mesaba has said it wants to reach deals with its unions by today or it will again ask the court to reject the contracts.