MAIR » Topics » Business

This excerpt taken from the MAIR DEF 14A filed Jun 6, 2008.

Item 1.  BUSINESS

 

General

 

MAIR is the holding company for Big Sky Transportation Co. (“Big Sky”), a regional air carrier based in Billings, Montana.  Until April 24, 2007, MAIR was also the holding company for Mesaba Aviation, Inc., (“Mesaba”), a regional air carrier based in Minneapolis, Minnesota.  The Company’s consolidated financial statements include the accounts of MAIR and Big Sky.  All intercompany transactions and balances have been eliminated in consolidation.

 

Mesaba filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Minnesota (“Bankruptcy Court”) on October 13, 2005 (the “Petition Date”), after which Mesaba operated its business as a debtor-in-possession pursuant to the Bankruptcy Code.  On April 24, 2007 (the “Exit Date”), Mesaba’s bankruptcy plan of reorganization became effective and Mesaba exited bankruptcy as a wholly-owned subsidiary of Northwest Airlines, Inc. (“Northwest”), and, therefore, is no longer owned by MAIR.

 

Dissolution of the Company

 

Following Mesaba’s bankruptcy filing in October 2005, MAIR reviewed a number of potential acquisitions and other growth opportunities, the majority of which focused on opportunities within the airline industry.  MAIR did not identify a business it believed would be in the best interests of MAIR to acquire.  Additionally, the Company anticipated generating monthly profits from operations by December 2007.  Because these profits did not materialize, and because the Company did not expect them to materialize in the foreseeable future, MAIR and Big Sky made the decision that Big Sky would cease its eastern United States operations and begin transferring its remaining western operations to another carrier.  MAIR subsequently determined that it was uneconomical to continue funding Big Sky’s losses, and on March 8, 2008, Big Sky ceased all operations.  MAIR’s Board of Directors then determined that the prudent course of action would be for MAIR to convert its assets into cash, pay its creditors and return remaining cash to the Company’s shareholders.  To that end, the Company has filed a preliminary proxy statement for the purpose of holding a Special Meeting of Shareholders at which the Company’s shareholders will vote whether to approve the Company’s dissolution and proposed Plan of Liquidation.

 

Assuming the shareholders approve the Company’s proposed Plan of Liquidation, MAIR and Big Sky will begin taking actions to formally dissolve, including filing the required documents with the Minnesota and Montana Secretary of State offices.  MAIR and Big Sky will then continue to convert their remaining non-cash assets into cash for the purpose of winding up their affairs, pay or contest liabilities and claims and distribute the remaining assets to the Company’s shareholders.  Assets will be applied first to pay (or provide for the payment of) actual and contingent liabilities of the Company, including payment of expenses associated with the dissolution.  The Company also expects that its stock will be delisted from the NASDAQ Stock Market within 20 days after the Special Meeting of Shareholders, and the Company intends to establish the final date of listing on NASDAQ as the record date for all liquidating distributions.

 

Mesaba Bankruptcy

 

Following Mesaba’s exit from bankruptcy on April 24, 2007, Mesaba’s estate has been administered via a liquidating trust.  As the former equity owner of Mesaba, MAIR will receive all funds remaining in the liquidating trust after the unsecured creditors are paid and after the expenses of the trust are paid.  Based on the amounts at which certain claims have settled and other information available to the Company, the Company currently estimates that MAIR will receive approximately $25 million for its equity interest in Mesaba.  The ultimate amount MAIR receives for its equity distribution will be affected by the amounts at which the remaining unsecured claims are resolved.  MAIR has not recorded the contingent residual equity interest in the trust due to the uncertainties of the amount to be received.

 

One such unresolved claim is the $35 million claim of Fairbrook Leasing, Inc., Lambert Leasing, Inc. and Swedish Aircraft Holdings AB (“Saab Leasing”), which originated from a lawsuit between Saab Leasing and Mesaba

 

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regarding aircraft lease payments allegedly owed by Mesaba to Saab Leasing.  In July 2006, the District Court for the District of Minnesota ruled that Saab Leasing was not eligible to receive damages for the majority of its claims.  In March 2008, the Eighth Circuit Court of Appeals affirmed the ruling by the District Court, and on May 1, 2008, the Eighth Circuit denied Saab Leasing’s petition for a rehearing.  Saab Leasing’s only remaining avenue is to request a hearing before the United States Supreme Court.  The liquidating trustee will continue to hold funds in reserve for Saab Leasing’s claim until the claim is finally resolved.

 

Goldman Sachs Credit Partners, L.P. (“Goldman Credit”) also has a $58 million claim against the liquidating trust relating to aircraft and equipment leases Mesaba rejected in bankruptcy.  Goldman Credit has asserted that the stipulated loss provisions of the applicable leases, under which liquidated damages are calculated, should apply to determine the total claim amount due to Goldman Credit.  Mesaba’s bankruptcy estate filed for summary judgment with the Bankruptcy Court asserting that the liquidated damages constitute unenforceable penalties.  Mesaba’s bankruptcy trustee instead believes that the claim allowed to Goldman Credit should reflect actual damages suffered.  The Bankruptcy Court heard the motion in September 2007, but has not yet ruled on the motion.  The liquidating trustee has been negotiating with Goldman Credit in an attempt to reach a settlement of the claim, and MAIR’s estimate of its equity distribution from the liquidating trust assumes that the claim will be settled.

 

Employees

 

As of March 31, 2008, MAIR had five full-time employees, and Big Sky had 18 full-time employees.

 

Available Information

 

The Company maintains a website at www.mairholdings.com.  On its website, free of charge, the Company makes available its Annual Report on Form 10-K and links to the SEC website for other public filings.  The Company’s Code of Ethics for its Chief Executive Officer and financial officer is also available on its website.  All information is also available in print upon written request to the Company’s General Counsel at 150 South Fifth Street, Suite 1360, Minneapolis, Minnesota 55402.  The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

 

These excerpts taken from the MAIR 10-K filed May 30, 2008.

Item 1.  BUSINESS

 

General

 

MAIR is the holding company for Big Sky Transportation Co. (“Big Sky”), a regional air carrier based in Billings, Montana.  Until April 24, 2007, MAIR was also the holding company for Mesaba Aviation, Inc., (“Mesaba”), a regional air carrier based in Minneapolis, Minnesota.  The Company’s consolidated financial statements include the accounts of MAIR and Big Sky.  All intercompany transactions and balances have been eliminated in consolidation.

 

Mesaba filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Minnesota (“Bankruptcy Court”) on October 13, 2005 (the “Petition Date”), after which Mesaba operated its business as a debtor-in-possession pursuant to the Bankruptcy Code.  On April 24, 2007 (the “Exit Date”), Mesaba’s bankruptcy plan of reorganization became effective and Mesaba exited bankruptcy as a wholly-owned subsidiary of Northwest Airlines, Inc. (“Northwest”), and, therefore, is no longer owned by MAIR.

 

Dissolution of the Company

 

Following Mesaba’s bankruptcy filing in October 2005, MAIR reviewed a number of potential acquisitions and other growth opportunities, the majority of which focused on opportunities within the airline industry.  MAIR did not identify a business it believed would be in the best interests of MAIR to acquire.  Additionally, the Company anticipated generating monthly profits from operations by December 2007.  Because these profits did not materialize, and because the Company did not expect them to materialize in the foreseeable future, MAIR and Big Sky made the decision that Big Sky would cease its eastern United States operations and begin transferring its remaining western operations to another carrier.  MAIR subsequently determined that it was uneconomical to continue funding Big Sky’s losses, and on March 8, 2008, Big Sky ceased all operations.  MAIR’s Board of Directors then determined that the prudent course of action would be for MAIR to convert its assets into cash, pay its creditors and return remaining cash to the Company’s shareholders.  To that end, the Company has filed a preliminary proxy statement for the purpose of holding a Special Meeting of Shareholders at which the Company’s shareholders will vote whether to approve the Company’s dissolution and proposed Plan of Liquidation.

 

Assuming the shareholders approve the Company’s proposed Plan of Liquidation, MAIR and Big Sky will begin taking actions to formally dissolve, including filing the required documents with the Minnesota and Montana Secretary of State offices.  MAIR and Big Sky will then continue to convert their remaining non-cash assets into cash for the purpose of winding up their affairs, pay or contest liabilities and claims and distribute the remaining assets to the Company’s shareholders.  Assets will be applied first to pay (or provide for the payment of) actual and contingent liabilities of the Company, including payment of expenses associated with the dissolution.  The Company also expects that its stock will be delisted from the NASDAQ Stock Market within 20 days after the Special Meeting of Shareholders, and the Company intends to establish the final date of listing on NASDAQ as the record date for all liquidating distributions.

 

Mesaba Bankruptcy

 

Following Mesaba’s exit from bankruptcy on April 24, 2007, Mesaba’s estate has been administered via a liquidating trust.  As the former equity owner of Mesaba, MAIR will receive all funds remaining in the liquidating trust after the unsecured creditors are paid and after the expenses of the trust are paid.  Based on the amounts at which certain claims have settled and other information available to the Company, the Company currently estimates that MAIR will receive approximately $25 million for its equity interest in Mesaba.  The ultimate amount MAIR receives for its equity distribution will be affected by the amounts at which the remaining unsecured claims are resolved.  MAIR has not recorded the contingent residual equity interest in the trust due to the uncertainties of the amount to be received.

 

One such unresolved claim is the $35 million claim of Fairbrook Leasing, Inc., Lambert Leasing, Inc. and Swedish Aircraft Holdings AB (“Saab Leasing”), which originated from a lawsuit between Saab Leasing and Mesaba

 

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regarding aircraft lease payments allegedly owed by Mesaba to Saab Leasing.  In July 2006, the District Court for the District of Minnesota ruled that Saab Leasing was not eligible to receive damages for the majority of its claims.  In March 2008, the Eighth Circuit Court of Appeals affirmed the ruling by the District Court, and on May 1, 2008, the Eighth Circuit denied Saab Leasing’s petition for a rehearing.  Saab Leasing’s only remaining avenue is to request a hearing before the United States Supreme Court.  The liquidating trustee will continue to hold funds in reserve for Saab Leasing’s claim until the claim is finally resolved.

 

Goldman Sachs Credit Partners, L.P. (“Goldman Credit”) also has a $58 million claim against the liquidating trust relating to aircraft and equipment leases Mesaba rejected in bankruptcy.  Goldman Credit has asserted that the stipulated loss provisions of the applicable leases, under which liquidated damages are calculated, should apply to determine the total claim amount due to Goldman Credit.  Mesaba’s bankruptcy estate filed for summary judgment with the Bankruptcy Court asserting that the liquidated damages constitute unenforceable penalties.  Mesaba’s bankruptcy trustee instead believes that the claim allowed to Goldman Credit should reflect actual damages suffered.  The Bankruptcy Court heard the motion in September 2007, but has not yet ruled on the motion.  The liquidating trustee has been negotiating with Goldman Credit in an attempt to reach a settlement of the claim, and MAIR’s estimate of its equity distribution from the liquidating trust assumes that the claim will be settled.

 

Employees

 

As of March 31, 2008, MAIR had five full-time employees, and Big Sky had 18 full-time employees.

 

Available Information

 

The Company maintains a website at www.mairholdings.com.  On its website, free of charge, the Company makes available its Annual Report on Form 10-K and links to the SEC website for other public filings.  The Company’s Code of Ethics for its Chief Executive Officer and financial officer is also available on its website.  All information is also available in print upon written request to the Company’s General Counsel at 150 South Fifth Street, Suite 1360, Minneapolis, Minnesota 55402.  The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

 

Item 1. 
BUSINESS



 



General



 



MAIR
is the holding company for Big Sky Transportation Co. (“Big Sky”), a regional
air carrier based in Billings, Montana. 
Until April 24, 2007, MAIR was also the holding company for Mesaba
Aviation, Inc., (“Mesaba”), a regional air carrier based in Minneapolis,
Minnesota.  The Company’s consolidated
financial statements include the accounts of MAIR and Big Sky.  All intercompany transactions and balances
have been eliminated in consolidation.



 



Mesaba
filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court
for the District of Minnesota (“Bankruptcy Court”) on October 13, 2005 (the
“Petition Date”), after which Mesaba operated its business as a
debtor-in-possession pursuant to the Bankruptcy Code.  On April 24, 2007 (the “Exit Date”), Mesaba’s
bankruptcy plan of reorganization became effective and Mesaba exited bankruptcy
as a wholly-owned subsidiary of Northwest Airlines, Inc. (“Northwest”), and,
therefore, is no longer owned by MAIR.



 



Dissolution
of the Company



 



Following
Mesaba’s bankruptcy filing in October 2005, MAIR reviewed a number of potential
acquisitions and other growth opportunities, the majority of which focused on
opportunities within the airline industry. 
MAIR did not identify a business it believed would be in the best
interests of MAIR to acquire. 
Additionally, the Company anticipated generating monthly profits from
operations by December 2007.  Because
these profits did not materialize, and because the Company did not expect them
to materialize in the foreseeable future, MAIR and Big Sky made the decision
that Big Sky would cease its eastern United States operations and begin
transferring its remaining western operations to another carrier.  MAIR subsequently determined that it was
uneconomical to continue funding Big Sky’s losses, and on March 8, 2008, Big
Sky ceased all operations.  MAIR’s Board
of Directors then determined that the prudent course of action would be for
MAIR to convert its assets into cash, pay its creditors and return remaining
cash to the Company’s shareholders.  To
that end, the Company has filed a preliminary proxy statement for the purpose
of holding a Special Meeting of Shareholders at which the Company’s
shareholders will vote whether to approve the Company’s dissolution and
proposed Plan of Liquidation.



 



Assuming
the shareholders approve the Company’s proposed Plan of Liquidation, MAIR and
Big Sky will begin taking actions to formally dissolve, including filing the
required documents with the Minnesota and Montana Secretary of State
offices.  MAIR and Big Sky will then
continue to convert their remaining non-cash assets into cash for the purpose
of winding up their affairs, pay or contest liabilities and claims and
distribute the remaining assets to the Company’s shareholders.  Assets will be applied first to pay (or
provide for the payment of) actual and contingent liabilities of the Company,
including payment of expenses associated with the dissolution.  The Company also expects that its stock will
be delisted from the NASDAQ Stock Market within 20 days after the Special
Meeting of Shareholders, and the Company intends to establish the final date of
listing on NASDAQ as the record date for all liquidating distributions.



 



Mesaba
Bankruptcy



 



Following
Mesaba’s exit from bankruptcy on April 24, 2007, Mesaba’s estate has been
administered via a liquidating trust.  As
the former equity owner of Mesaba, MAIR will receive all funds remaining in the
liquidating trust after the unsecured creditors are paid and after the expenses
of the trust are paid.  Based on the
amounts at which certain claims have settled and other information available to
the Company, the Company currently estimates that MAIR will receive
approximately $25 million for its equity interest in Mesaba.  The ultimate amount MAIR receives for its
equity distribution will be affected by the amounts at which the remaining
unsecured claims are resolved.  MAIR has
not recorded the contingent residual equity interest in the trust due to the
uncertainties of the amount to be received.



 



One
such unresolved claim is the $35 million claim of Fairbrook Leasing, Inc., Lambert
Leasing, Inc. and Swedish Aircraft Holdings AB (“Saab Leasing”), which
originated from a lawsuit between Saab Leasing and Mesaba



 



2
















 



regarding
aircraft lease payments allegedly owed by Mesaba to Saab Leasing.  In July 2006, the District Court for the
District of Minnesota ruled that Saab Leasing was not eligible to receive
damages for the majority of its claims. 
In March 2008, the Eighth Circuit Court of Appeals affirmed the ruling
by the District Court, and on May 1, 2008, the Eighth Circuit denied Saab
Leasing’s petition for a rehearing.  Saab
Leasing’s only remaining avenue is to request a hearing before the United
States Supreme Court.  The liquidating
trustee will continue to hold funds in reserve for Saab Leasing’s claim until
the claim is finally resolved.



 



Goldman
Sachs Credit Partners, L.P. (“Goldman Credit”) also has a $58 million claim
against the liquidating trust relating to aircraft and equipment leases Mesaba
rejected in bankruptcy.  Goldman Credit has asserted that the stipulated
loss provisions of the applicable leases, under which liquidated damages are
calculated, should apply to determine the total claim amount due to Goldman
Credit.  Mesaba’s bankruptcy estate filed for summary judgment with the
Bankruptcy Court asserting that the liquidated damages constitute unenforceable
penalties.  Mesaba’s bankruptcy trustee instead believes that the claim
allowed to Goldman Credit should reflect actual damages suffered.  The
Bankruptcy Court heard the motion in September 2007, but has not yet ruled on
the motion.  The liquidating trustee has
been negotiating with Goldman Credit in an attempt to reach a settlement of the
claim, and MAIR’s estimate of its equity distribution from the liquidating
trust assumes that the claim will be settled.



 



Employees



 



As
of March 31, 2008, MAIR had five full-time employees, and Big Sky had 18
full-time employees.



 



Available
Information



 



The
Company maintains a website at www.mairholdings.com.  On its website, free of charge, the Company
makes available its Annual Report on Form 10-K and links to the SEC website for
other public filings.  The Company’s Code
of Ethics for its Chief Executive Officer and financial officer is also
available on its website.  All
information is also available in print upon written request to the Company’s
General Counsel at 150 South Fifth Street, Suite 1360, Minneapolis, Minnesota
55402.  The Company is not including the
information contained on or available through its website as a part of, or
incorporating such information by reference into, this Annual Report on Form 10-K.



 



These excerpts taken from the MAIR 10-Q filed Feb 8, 2007.
“Business Day” means a day other than Saturday, Sunday or any other day which commercial banks in New York, New York are authorized or required by Law to close.

Business

Mesaba

Mesaba operates as a regional carrier providing scheduled passenger service as Mesaba Airlines/Northwest Airlink and Mesaba Airlines/Northwest Jet Airlink under a ten-year omnibus Airline Services Agreement (“ASA”) with Northwest, dated August 29, 2005.  On January 22, 2007, MAIR and Mesaba announced that they had reached definitive agreements with Northwest to allow Mesaba to exit bankruptcy as a wholly-owned operating subsidiary of Northwest (see Note 3).  In the interim, the ASA continues to govern Mesaba’s operation of Saab 340 jet-prop aircraft (“Saabs”) and Canadair regional jets (“CRJs”).  As of December 31, 2006, Mesaba was operating 49 Saabs and one CRJ, all of which are subleased from Northwest.  As of December 31, 2006, Mesaba served 72 cities in the United States and Canada from Northwest’s hub airports located in Minneapolis/St. Paul, Detroit and Memphis.

The ASA provides for incentive payments from Northwest to Mesaba based on achievement of certain operational goals on a semi-annual basis.  Such incentives totaled $0.3 million for each the three months ended December 31, 2006 and 2005.  Incentives totaled $1.8 million and $2.5 million for the nine months ended December 31, 2006 and 2005, respectively, and are included in passenger revenues in Mesaba’s condensed statements of operations (see Note 13).

Approximately $18.7 million, or 86.1%, and $25.7 million, or 88.1%, of the respective December 31, 2006 and March 31, 2006 net accounts receivable balances in Mesaba’s condensed balance sheets were due from Northwest and were not collateralized (see Note 13).  Approximately 92.4% and 94.7% of Mesaba’s operating revenue recognized for the three months ended December 31, 2006 and 2005, respectively, was from Northwest.  Approximately 93.8% and 95.2% of Mesaba’s operating revenue recognized for the nine months ended December 31, 2006 and 2005, respectively, was from Northwest.  Accounts payable owed to Northwest by Mesaba, primarily for ground handling, was $4.0 million as of December 31, 2006 and $4.2 million as of March 31, 2006.  Mesaba paid Northwest $4.3 million and $4.8 million for ground handling and other services for the three months ended December 31, 2006 and 2005, respectively.  Mesaba paid Northwest $15.5 million and $11.7 million for ground handling and other services for the nine months ended December 31, 2006 and 2005, respectively.

There are other significant related party transactions and balances between Northwest and Mesaba disclosed throughout the Notes to Condensed Consolidated Financial Statements.  Northwest’s failure to make timely payment of amounts owed to Mesaba would have a material adverse effect on Mesaba’s operations, financial position and cash flows.

Big Sky

Big Sky operates as a regional air carrier based in Billings, Montana, providing scheduled passenger, freight, express package and charter services.  As of December 31, 2006, Big Sky provided scheduled air service to 20 communities in Montana, Colorado, Idaho, Illinois, Oregon, Washington and Wyoming.  Big Sky operates daily scheduled flights providing interline and online connecting services and local market services.  Big Sky also has code-sharing agreements with Alaska Airlines, Horizon Air, US Air and Northwest, where its services are marketed

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jointly with those air carriers for connecting flights.  In the fall of 2006, Big Sky also started a capacity purchase operation in Florida, beginning with one Beechcraft 1900D aircraft.  Additionally, in December 2006, Big Sky began service from Springfield, Illinois to Chicago Midway Airport.

Big Sky participates in the Essential Air Service (“EAS”) program with the Department of Transportation (“DOT”).  The EAS program subsidizes air carriers to provide air service to designated rural communities throughout the United States that could not otherwise economically justify that service based on their passenger traffic.  The DOT pays EAS subsidies for each departure in a covered market.  During the three months ended December 31, 2006 and 2005, Big Sky recognized revenue from EAS subsidies of $1.9 million and $2.0 million, respectively. During the nine months ended December 31, 2006 and 2005, Big Sky recognized revenue from EAS subsidies of $6.2 million and $6.0 million, respectively.

“Business Day” means a day other than Saturday, Sunday or any other day which commercial banks in New York, New York are authorized or required by Law to close.

This excerpt taken from the MAIR 10-Q filed Nov 8, 2006.

Business

Mesaba

Mesaba operates as a regional carrier providing scheduled passenger service as Mesaba Airlines/Northwest Airlink and Mesaba Airlines/Northwest Jet Airlink under a ten-year omnibus Airline Services Agreement (“ASA”) with Northwest Airlines, Inc. (“Northwest”) dated August 29, 2005.  The ASA governs Mesaba’s operation of Avro RJ85 regional jets (“Avros”), Saab 340 jet-prop aircraft (“Saabs”), and Canadair regional jets (“CRJs”).  As of September 30, 2006, Mesaba was operating nine Avros, 49 Saabs and one CRJ, all of which are subleased from Northwest.  Neither Mesaba nor Northwest has assumed or rejected the ASA in its respective bankruptcy proceedings, and Mesaba is continuing to operate under the terms of the ASA (see Note 2 regarding Northwest filing for Chapter 11 bankruptcy protection on September 14, 2005 and the effect of such filing on the ASA).  As of September 30, 2006, Mesaba served 88 cities in the United States and Canada from Northwest’s hub airports located in Minneapolis/St. Paul, Detroit and Memphis.

The ASA provides for incentive payments from Northwest to Mesaba based on achievement of certain operational goals on a semi-annual basis.  Such incentives totaled $0.2 million and $0.8 million for the three months ended September 30, 2006 and 2005, respectively.  Incentives totaled $1.5 million and $2.2 million for the six months ended September 30, 2006 and 2005, respectively, and are included in passenger revenues in Mesaba’s condensed statements of operations (see Note 12).

Approximately $19.4 million, or 85.8%, and $25.7 million, or 88.1%, of the respective September 30, 2006 and March 31, 2006 net accounts receivable balances in Mesaba’s condensed balance sheets were due from Northwest and were not collateralized (see Note 12).  Approximately 94.0% and 95.4% of Mesaba’s operating revenue recognized for the three months ended September 30, 2006 and 2005, respectively, was from Northwest.  Approximately 94.4% and 95.5% of Mesaba’s operating revenue recognized for the six months ended September 30, 2006 and 2005, respectively, was from Northwest.  Accounts payable owed to Northwest by Mesaba, primarily for ground handling, was insignificant as of September 30, 2006 and $0.1 million as of March 31, 2006.  Mesaba paid Northwest $5.8 million and $3.6 million for ground handling and other services for the three months ended September 30, 2006 and 2005, respectively.  Mesaba paid Northwest $11.2 million and $6.9 million for ground handling and other services for the six months ended September 30, 2006 and 2005, respectively.

In connection with the ASA, and pursuant to its separate agreement with Northwest, MAIR made a capital contribution of approximately $31.7 million to Mesaba in September 2005, just prior to Northwest filing for bankruptcy (see Note 2).

There are other significant related party transactions and balances between Northwest and Mesaba disclosed throughout the Notes to Condensed Consolidated Financial Statements.  Loss of Mesaba’s business relationship with Northwest or Northwest’s failure to make timely payment of amounts owed to Mesaba would have a material adverse effect on Mesaba’s operations, financial position and cash flows.

Big Sky

Big Sky operates as a regional air carrier based in Billings, Montana, providing scheduled passenger, freight, express package and charter services.  As of September 30, 2006, Big Sky provided scheduled air service to 18 communities in Montana, Colorado, Idaho, Oregon, Washington and Wyoming.  Big Sky operates daily scheduled flights providing interline and online connecting services and local market services.  Big Sky also has code-sharing agreements with Alaska Airlines, Horizon Air, US Air and Northwest, where its services are marketed jointly with those air carriers for connecting flights.

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Big Sky participates in the Essential Air Service (“EAS”) program with the Department of Transportation (“DOT”).  The EAS program subsidizes air carriers to provide air service to designated rural communities throughout the United States that could not otherwise economically justify that service based on their passenger traffic.  The DOT pays EAS subsidies for each departure in a covered market.  Big Sky recognized revenue from EAS subsidies of $2.1 million for each of the three months ended September 30, 2006 and 2005.  During the six months ended September 30, 2006 and 2005, Big Sky recognized revenue from EAS subsidies of $4.3 million and $4.0 million, respectively.

This excerpt taken from the MAIR 10-Q filed Aug 8, 2006.

Business

Mesaba

Mesaba operates as a regional carrier providing scheduled passenger service as Mesaba Airlines/Northwest Airlink and Mesaba Airlines/Northwest Jet Airlink under a ten-year omnibus Airline Service Agreement (“ASA”) with Northwest Airlines, Inc. (“Northwest”) dated August 29, 2005.  Neither Mesaba nor Northwest has assumed or rejected the ASA in their respective bankruptcy proceedings, and Mesaba is continuing to operate under the terms of the ASA (see Note 2 regarding Northwest filing for Chapter 11 bankruptcy protection on September 14, 2005 and the effect of such filing on the ASA).  Prior to the ASA, Mesaba provided regional airline services to Northwest pursuant to two separate agreements, an Airline Service Agreement (the “Airlink Agreement”) that governed Mesaba’s operation of Saab 340 jet-prop aircraft (“Saab”), and a Regional Jet Services Agreement (the “Jet Agreement”) that governed Mesaba’s operation of Avro RJ85 regional jets (“Avro”).  The ASA is an omnibus agreement that incorporates the existing payment terms for the Saabs and the Avros contained in the Airlink Agreement and the Jet Agreement and adds new payment terms for the Canadair regional jets (“CRJs”) that Mesaba began operating in October 2005.  As of June 30, 2006, Mesaba served 98 cities in the United States and Canada from Northwest’s hub airports located in Minneapolis/St. Paul, Detroit and Memphis.

Northwest purchases Mesaba’s entire capacity and pays Mesaba in arrears on the 11th and 26th of each month for regional airline services that Mesaba provides to Northwest utilizing the Saabs and Avros.  Beginning in October 2005, Northwest began paying Mesaba, on a regular bi-monthly basis, on the 1st and 16th of each month for regional airline services that Mesaba provides to Northwest utilizing the CRJs.  The CRJ payment made on the 1st of each month represents a prepayment based on an estimate of regional airline services to be provided by Mesaba for the first 15 days of the month.  The CRJ payment made on the 16th of the month consists of a prepayment based on an estimate of regional airline services to be provided by Mesaba for the 16th through the end of the month and a true-up amount adjusting for actual services provided by Mesaba in the prior month.

For flights utilizing the Saabs, Mesaba recognizes revenue for each completed available seat mile, or ASM (the number of seats in an aircraft multiplied by the number of miles those seats are flown), and purchases fuel (which is set at a fixed price of 83.5 cents per gallon), ground handling and other services from Northwest.

For flights utilizing the Avros, Mesaba recognizes revenue for each block hour flown (the elapsed time between aircraft departing and arriving at a gate).  Northwest provides fuel and airport and passenger related services at Northwest’s expense for the Avros.

For flights utilizing the CRJs, Mesaba recognizes revenue through monthly expense reimbursement payments for actual expenses incurred relating to aircraft rent, maintenance, landing fees and fuel (which is set at a fixed price of 70 cents per gallon); semi-monthly payments for each block hour and cycle operated; a monthly fixed cost payment based on the size of the CRJ fleet (intended to cover Mesaba’s costs that are not reimbursed through the monthly reimbursement payments, which consist mainly of labor costs, ground handling costs, overhead and depreciation) and margin payments based on  the revenues described above calculated to achieve a target operating margin.  The target operating margin through April 2007 is set at a fixed amount, after which time the target operating margin

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will be based on the average operating margin of the publicly traded United States domestic regional airlines operating primarily regional jet aircraft, excluding Pinnacle Airlines Corp. (“Pinnacle”) and any regional carrier under bankruptcy protection, subject to a margin cap and floor.

The ASA contains termination provisions that allow both Mesaba and Northwest to terminate the ASA in the event the other party breaches the agreement, subject to the other party’s right to cure the breach within a prescribed time period.  Additionally, Northwest may terminate the ASA in the event of certain lease and other performance defaults by Mesaba; failure by Mesaba to maintain required insurance coverage; failure by Mesaba to allow inspections pursuant to the ASA; change in control events; revocation or failure by Mesaba to obtain Department of Transportation (“DOT”) certification; if Mesaba or its affiliates operate an aircraft type that causes Northwest to be in violation of its collective bargaining agreement with its pilots; failure to elect a chief executive officer/president of MAIR or Mesaba reasonably acceptable to Northwest; if a specified percentage of the aircraft subject to the agreement are not operated for a specified period of time, other than as a result of the Federal Aviation Administration (“FAA”) grounding all aircraft for all carriers; if there is a strike; cessation or interruption of work involving Mesaba’s pilots, flight attendants or mechanics providing service; or if MAIR breaches its agreement entered into with Northwest concurrently with the ASA.

Under the ASA, all scheduled flights that Mesaba operates are designated as Northwest flights using Northwest’s designator code in all computer reservation systems, with an asterisk and a footnote indicating that Mesaba is the carrier providing the service.  In addition, flight schedules of Mesaba and Northwest are closely coordinated to facilitate interline connections, and Mesaba’s passenger gate facilities at the Minneapolis/St. Paul International Airport, Detroit Metropolitan Airport and Memphis International Airport are integrated with Northwest’s facilities in the main terminal buildings.

Mesaba, through the ASA, receives ticketing and certain check-in, baggage, freight and aircraft handling services from Northwest at certain airports.  In addition, Mesaba receives its computerized reservations services from Northwest.  Northwest also performs all marketing, scheduling, yield management and pricing services for Mesaba’s flights.

The ASA provides for incentive payments from Northwest to Mesaba based on achievement of certain operational goals on a semi-annual basis.  Such incentives totaled $1.2 million and $1.4 million for the three months ended June 30, 2006 and 2005, respectively, and are included in passenger revenues in Mesaba’s condensed statements of operations (see Note 13).

Approximately $24.0 million, or 89.2%, and $25.7 million, or 88.1%, of the respective June 30, 2006 and March 31, 2006 net accounts receivable balances in Mesaba’s condensed balance sheets were due from Northwest and were not collateralized (see Note 13).  Approximately 94.8% and 95.2% of Mesaba’s operating revenue recognized for the three months ended June 30, 2006 and 2005, respectively, was from Northwest.  Accounts payable owed to Northwest by Mesaba, primarily for ground handling, was $0.2 million and $0.1 million as of June 30, 2006 and March 31, 2006, respectively.  Mesaba paid Northwest $5.3 million and $3.3 million for ground handling and other services for the three months ended June 30, 2006 and 2005 respectively.

Upon execution of the ASA, and pursuant to a separate agreement between MAIR and Northwest, MAIR issued to Northwest an amended and restated warrant (the “Warrant”) to replace the warrants held by Northwest to reduce the number of shares of MAIR’s common stock issuable upon exercise from 4,151,922 shares exercisable at prices ranging from $7.25 to $21.25 per share to an aggregate of 4,112,500 shares exercisable at a price of $8.74 per share.  The Warrant expires ten years from the date of the ASA.  The Warrant will become exercisable for sixty percent of the shares upon the delivery by Northwest of the 15th CRJ aircraft to Mesaba and an additional 4% of the shares with each subsequent delivery of each of the next ten CRJ aircraft.

As of June 30, 2006, Northwest had delivered only two CRJ aircraft to Mesaba.  Northwest removed one of the CRJs from Mesaba’s schedule at the end of June 2006 and placed it with Northwest’s newly formed subsidiary, Compass Airlines, Inc. (“Compass”).  As part of its reorganization, Northwest has also requested bids from regional airlines for the operation of up to 126 CRJ aircraft, 124 of which are currently operated by Pinnacle, one by Compass, and one by Mesaba.  Mesaba has submitted a proposal to conduct all CRJ flying for Northwest.  If

8




 

Mesaba is not awarded some or all of the CRJ business, Northwest will remove the remaining CRJ that Mesaba currently operates.

In connection with the ASA, and pursuant to its separate agreement with Northwest, MAIR made a capital contribution of approximately $31.7 million to Mesaba in September 2005, just prior to Northwest filing for bankruptcy (see Note 2). MAIR also entered into a registration rights agreement to cover the registration of the shares of stock currently held by Northwest and the shares of stock to be issued to Northwest upon exercise of the Warrant.

There are other significant related party transactions and balances between Northwest and Mesaba disclosed throughout the Notes to the Condensed Consolidated Financial Statements.  Loss of Mesaba’s business relationship with Northwest or Northwest’s failure to make timely payment of amounts owed to Mesaba would have a material adverse effect on Mesaba’s operations, financial position and cash flows.

Big Sky

Big Sky operates as a regional air carrier based in Billings, Montana, providing scheduled passenger, freight, express package and charter services.  As of June 30, 2006, Big Sky provided scheduled air service to 22 communities in Montana, Colorado, Idaho, Oregon, Washington and Wyoming.  Big Sky operates daily scheduled flights providing interline and online connecting services and local market services.  Big Sky also has code-sharing agreements with Alaska Airlines, Horizon Air, America West Airlines, US Air and Northwest, where its services are marketed jointly with those air carriers for connecting flights.

Big Sky participates in the Essential Air Service (“EAS”) program with the DOT.  The EAS program subsidizes air carriers to provide air service to designated rural communities throughout the United States that could not otherwise economically justify that service based on their passenger traffic.  The DOT pays EAS subsidies for each departure in a covered market.  During the three months ended June 30, 2006 and 2005, Big Sky recognized revenue from EAS subsidies of $2.2 million and $2.0 million, respectively.

This excerpt taken from the MAIR 10-K filed Jun 27, 2006.

Business

 

Mesaba

Mesaba operates as a regional carrier providing scheduled passenger service as “Mesaba Airlines/Northwest Airlink” and Mesaba Airlines/Northwest Jet Airlink under a ten-year omnibus Airline Service Agreement (“ASA”) with Northwest Airlines, Inc. (“Northwest”) dated August 29, 2005.  Neither

 

 

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Mesaba nor Northwest has assumed or rejected the ASA in their respective bankruptcy proceedings, and both parties are continuing to operate under the terms of the ASA (see Note 3 regarding Northwest filing for Chapter 11 bankruptcy protection on September 14, 2005 and the effect of such filing on the ASA)  Prior to the ASA, Mesaba provided regional airline services to Northwest pursuant to two separate agreements, an Airline Service Agreement (the “Airlink Agreement”) that governed Mesaba’s operation of Saab 340 jet-prop aircraft (“Saabs”), and a Regional Jet Services Agreement (the “Jet Agreement”) that governed Mesaba’s operation of Avro RJ85 regional jets (“Avros”).  The ASA is an omnibus agreement that incorporates the existing payment terms for the Saabs and the Avros contained in the Airlink Agreement and the Jet Agreement and adds new payment terms for the Canadair regional jets (“CRJ’s”) that Mesaba began operating in October 2005.  As of March 31, 2006, Mesaba served 102 cities in the United States and Canada from Northwest’s hub airports located in Minneapolis/St. Paul, Detroit and Memphis.

 

Northwest purchases Mesaba’s entire capacity and pays Mesaba in arrears on the 11th and 26th of each month for regional airline services that Mesaba provides to Northwest utilizing the Saabs and Avros.  Beginning in October 2005, Northwest began paying Mesaba, on a regular bi-monthly basis, on the 1st and 16th of each month for regional airline services that Mesaba provides to Northwest utilizing the CRJs.  The CRJ payment made on the 1st of each month represents a prepayment based on an estimate of regional airline services to be provided by Mesaba for the first 15 days of the month.  The CRJ payment made on the 16th of the month consists of a prepayment based on an estimate of regional airline services to be provided by Mesaba for the 16th through the end of the month and a true-up amount adjusting for actual services provided by Mesaba in the prior month.

 

For flights utilizing the Saabs, Mesaba recognizes revenue for each completed available seat mile, or ASM (the number of seats in an aircraft multiplied by the number of miles those seats are flown), and purchases fuel (which is set at a fixed price of $0.835 per gallon), ground handling and other services from Northwest.  Mesaba paid Northwest $18.3 million, $21.9 million and $19.7 million for ground handling and other services in fiscal 2006, 2005 and 2004, respectively.

 

For flights utilizing the Avros, Mesaba recognizes revenue for each block hour flown (the elapsed time between aircraft departing and arriving at a gate).  Northwest provides fuel and airport and passenger related services at Northwest’s expense for the Avros.

 

For flights utilizing the CRJs, Mesaba recognizes revenue though monthly expense reimbursement payments for actual expenses incurred relating to aircraft rent, maintenance, landing fees and fuel (which is set at a fixed price of $0.70 per gallon); semi-monthly payments for each block hour and cycle operated; a monthly fixed cost payment based on the size of the CRJ fleet (intended to cover Mesaba’s costs that are not reimbursed through the monthly reimbursement payments, which consist mainly of labor costs, ground handling costs, overhead and depreciation) and margin payments based on  the revenues described above calculated to achieve a target operating margin.  The targeted operating margin through April 2007 is set at a fixed amount, after which time the target operating margin will be based on the average operating margin of the publicly traded United States domestic regional airline operating primarily regional jet aircraft, excluding Pinnacle Airlines Corp. (“Pinnacle”), and any regional carrier under bankruptcy protection, subject to a margin cap and floor.

 

The ASA contains termination provisions that allow both Mesaba and Northwest to terminate the ASA in the event the other party breaches the agreement, subject to the other party’s right to cure the breach within a prescribed time period.  Additionally, Northwest may terminate the ASA in the event of certain lease and other performance defaults by Mesaba; failure by Mesaba to maintain required insurance coverage; failure by Mesaba to allow inspections pursuant to the ASA; change in control events; revocation or failure by Mesaba to obtain Department of Transportation (“DOT”) certification; if Mesaba

 

 

53



 

or its affiliates operate an aircraft type that causes Northwest to be in violation of its collective bargaining agreement with its pilots; failure to elect a chief executive officer/president of Holdings or Mesaba reasonably acceptable to Northwest; if a specified percentage of the aircraft subject to the agreement are not operated for a specified period of time, other than as a result of the Federal Aviation Administration (“FAA”) grounding all aircraft for all carriers; if there is a strike; cessation or interruption of work involving Mesaba’s pilots, flight attendants or mechanics providing service; or if Holdings breaches its agreement entered into with Northwest concurrently with the ASA.

 

Under the ASA, all scheduled flights that Mesaba operates are designated as Northwest flights using Northwest’s designator code in all computer reservation systems, with an asterisk and a footnote indicating that Mesaba is the carrier providing the service.  In addition, flight schedules of Mesaba and Northwest are closely coordinated to facilitate interline connections, and Mesaba’s passenger gate facilities at the Minneapolis/St. Paul International Airport, Detroit Metropolitan Airport and Memphis International Airport are integrated with Northwest’s facilities in the main terminal buildings.

 

Mesaba, through the ASA, receives ticketing and certain check-in, baggage, freight and aircraft handling services from Northwest at certain airports.  In addition, Mesaba receives its computerized reservations services from Northwest.  Northwest also performs all marketing, scheduling, yield management and pricing services for Mesaba’s flights.

 

The ASA provides for incentive payments from Northwest to Mesaba based on achievement of certain operational goals on a semi-annual basis.  Such incentives totaled $3.7 million, $3.1 million and $4.6 million for fiscal 2006, 2005 and 2004, respectively, and are included in passenger revenues in Mesaba’s condensed financial statements (see Note 20).

 

Approximately 79.2% and 88.8% of the respective March 31, 2006 and 2005 net accounts receivable balances in Mesaba’s condensed balance sheets (see Note 20) are due from Northwest and were not collateralized.  Approximately 94.5% of Mesaba’s operating revenue recognized in fiscal 2006 was from Northwest.  Approximately 92.7% and 92.9% of the Company’s consolidated operating revenue recognized in fiscal 2005 and 2004, respectively, was from Northwest.  Accounts payable owed to Northwest by Mesaba, primarily for ground handling, was $4.2 million and $0.4 million as of March 31, 2006 and 2005, respectively.

 

Upon execution of the ASA, and pursuant to a separate agreement between Holdings and Northwest, Holdings issued to Northwest an amended and restated warrant (the “Warrant”) to replace the warrants held by Northwest to reduce the number of shares of Holdings’ common stock issuable upon exercise from 4,151,922 shares exercisable at prices ranging from $7.25 to $21.25 per share to an aggregate of 4,112,500 shares exercisable at a price of $8.74 per share.  The Warrant expires ten years from the date of the ASA.  The Warrant will become exercisable for sixty percent of the shares upon the delivery by Northwest of the 15th CRJ aircraft to Mesaba and an additional 4% of the shares with each subsequent delivery of each of the next ten CRJ aircraft.

 

As of June 15, 2006, Northwest had delivered only two CRJ aircraft to Mesaba.  Northwest has advised Mesaba that it will remove one of the CRJs that Mesaba currently operates and place the CRJ with Northwest’s newly formed subsidiary, Compass Airlines, Inc. (“Compass”)  As part of its reorganization, Northwest has also requested bids from regional airlines for the operation of up to 126 CRJ aircraft, 124 of which are currently operated by Pinnacle and two of which are operated by Mesaba.  Mesaba has submitted a proposal to conduct all CRJ flying for Northwest.  If Mesaba is not awarded some or all of the CRJ business, Northwest will remove the other CRJ that Mesaba currently operates.  Holdings also entered into a registration rights agreement to cover the registration of the shares of stock currently held by Northwest and the shares of stock to be issued to Northwest upon exercise of the Warrant.

 

 

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In connection with the ASA, Mesaba incurred all of the start-up costs necessary to bring the CRJ fleet into service.  During fiscal 2006, Mesaba incurred and expensed approximately $7.0 million in start-up costs related to adding the CRJ aircraft into its fleet, and Holdings incurred and expensed approximately $0.3 million in related start-up costs.

 

In connection with the ASA, and pursuant to its separate agreement with Northwest, Holdings made a capital contribution of approximately $31.7 million to Mesaba in September 2005, just prior to Northwest filing for bankruptcy (see Note 2 — Investment in Mesaba and Note 3).

 

There are other significant related party transactions and balances between Northwest and Mesaba disclosed throughout the Notes to the Consolidated Financial Statements.  Loss of Mesaba’s business relationship with Northwest or Northwest’s failure to make timely payment of amounts owed to Mesaba would have a material adverse effect on Mesaba’s and, therefore, the Company’s, operations, financial position and cash flows.

 

Big Sky

Big Sky operates as a regional air carrier based in Billings, Montana, providing scheduled passenger, freight, express package and charter services.  As of March 31, 2006, Big Sky provided scheduled air service to 22 communities in Montana, Colorado, Idaho, Oregon, Washington and Wyoming.  Big Sky operates daily scheduled flights providing interline and online connecting services and local market services.  Big Sky also has code-sharing agreements with Alaska Airlines, Horizon Air, America West Airlines, US Air and Northwest, where its services are marketed jointly with those air carriers for connecting flights.

 

Big Sky participates in the Essential Air Service (“EAS”) program with the DOT.  The EAS program subsidizes air carriers to provide air service to designated rural communities throughout the United States that could not otherwise economically justify that service based on their passenger traffic.  The DOT pays EAS subsidies for each departure in a covered market.  Big Sky was recently reselected as the EAS provider for seven Montana cities for a two-year period beginning March 1, 2006 for an additional $1.0 million in EAS subsidies per year.

 

Big Sky purchased fuel at market prices from Northwest for $1.4 million, $1.7 million and $1.9 million in fiscal 2006, 2005 and 2004, respectively.

 

This excerpt taken from the MAIR 10-Q filed Nov 15, 2005.
“Business Day” means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in the City of New York, New York; or Minneapolis, Minnesota.

 

This excerpt taken from the MAIR 10-K filed Jun 14, 2005.

Business

 

Mesaba

Mesaba operates as a regional air carrier providing scheduled passenger service as “Mesaba Airlines/Northwest Airlink” and “Mesaba Airlines/Northwest Jet Airlink” under two separate agreements with Northwest Airlines, Inc., a wholly owned indirect subsidiary of Northwest Airlines Corporation (“Northwest”), to 109 cities in the United States and Canada from Northwest’s hub airports located in Minneapolis/St. Paul, Detroit and Memphis.

 

Under the Airline Services Agreement (the “Airlink Agreement”), Mesaba operates Saab 340 jet-prop aircraft (“Saab”) for Northwest.  This agreement provides for exclusive rights to designated service areas and extends through June 30, 2007.  Under the Airlink Agreement, Mesaba recognizes revenue for each completed “available seat mile” (the number of seats available for passengers multiplied by the number of miles those seats are flown).  Additionally, under the Airlink Agreement, Mesaba purchases fuel, ground handling at spoke stations and other services from Northwest.  The Company, on a net basis, paid to Northwest $21.9 million, $19.7 million and $17.2 million in fiscal 2005, 2004 and 2003, for these services.  Either Northwest or Mesaba may terminate the Airlink Agreement on 365 days notice or it may be terminated immediately by either party for certain provisions provided for in the Airlink Agreement.

 

Under the Regional Jet Services Agreement (the “Jet Agreement”), Mesaba operates Avro RJ85 regional jets (“RJ85”) for Northwest.  The Jet Agreement extends through April 25, 2007.  Under the Jet Agreement, Mesaba recognizes revenue for each “block hour” flown (the elapsed time between aircraft departing and arriving at a gate).  Under the Jet Agreement, Northwest provides fuel and airport and passenger related services at Northwest’s expense.  The Jet Agreement may be terminated immediately by Mesaba or Northwest in accordance with certain provisions provided for in the Jet Agreement.

 

Under the agreements, all Mesaba flights appear in Northwest’s timetables and Mesaba receives ticketing and certain check-in, baggage and freight-handling services from Northwest at certain airports.  Mesaba also benefits from its relationship with Northwest through advertising and marketing programs.  The Airlink Agreement and Jet Agreement provide for certain incentives from Northwest to Mesaba based on achievement of certain operational or financial goals.  Approximately 83% and 75% of the March 31, 2005 and 2004 accounts receivable balances in the accompanying consolidated balance sheets are due from Northwest and this receivable is not collateralized.  Approximately 92.7%, 92.9% and 96.5% of the Company’s total operating revenue recognized in fiscal 2005, 2004 and 2003 was from Northwest.  Accounts payable owed to Northwest, primarily for ground handling was $0.4 million and $0.7 million as of March 31, 2005 and 2004.  There are other significant related party transactions and balances between Northwest and Mesaba disclosed throughout the Notes to the Consolidated Financial Statements.

 

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For the years ended December 31, 2004, 2003 and 2002, Northwest’s net income (loss) was $(862) million, $248 million and $(798) million.  As of March 31, 2005, Northwest had a stockholders’ equity deficit of $3.5 billion and negative working capital of $1.2 billion.  If Northwest continues to incur operating losses, it may be unable to fulfill its financial obligations, including payments due to Mesaba under the Airlink Agreement and Jet Agreement.  Additionally, the Company’s business could be adversely affected by events such as a reorganization by Northwest through Chapter 11 bankruptcy proceedings, an inability by Northwest to reduce labor expenses and other costs, continued and unsustainable operating losses at Northwest, changes in Northwest’s business plan or model, employee strike or job actions, significant curtailment of service (and thus curtailment of the utilization of the Company’s aircraft), continued volatility of fuel costs and terrorist events.  Loss of the Company’s business relationship with Northwest or Northwest’s failure to make timely payment of amounts owed to the Company would have a material adverse effect on the Company’s operations, financial position and cash flows.

 

Big Sky

Big Sky operates as a regional air carrier based in Billings, Montana, primarily providing scheduled passenger, airfreight, express package and charter services.  Big Sky provides scheduled air service to 18 communities in Montana, Colorado, Idaho, North Dakota, Washington and Wyoming via its Billings hub.  Big Sky operates daily scheduled flights providing interline and online connecting services and local market services.  Big Sky also has code-sharing agreements with Alaska/Horizon Airlines, America West Airlines and Northwest, where its services are marketed jointly with those air carriers for connecting flights.

 

Big Sky participates in the Essential Air Service (“EAS”) program with the U.S. Department of Transportation (“DOT”).  The EAS program subsidizes air carriers to provide air service to designated rural communities throughout the country that could not otherwise economically justify that service based on its passenger traffic.  The DOT pays EAS subsidies for each departure in a covered market.  Big Sky recognized revenue from EAS subsidies of $7.4 million, $7.1 million and $2.2 million in fiscal 2005, 2004 and 2003.

 

Big Sky purchased fuel from Northwest for $1.7 million, $1.9 million and $0 in fiscal 2005, 2004 and 2003.

 

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