Judge Rejects Northwest's Request for Contempt Finding Against Mesaba

A bankruptcy court judge rejected Northwest Airlines Corp.'s request for a contempt finding against regional partner Mesaba Airlines on Wednesday in a spat over whether the bankrupt airlines can withhold payments from each other.

Bankruptcy law is meant to stop creditors from taking action against the bankrupt company so the debt can be handled in an orderly way. But Northwest and Mesaba are both in Chapter 11, raising dueling claims that by withholding money each airline is hurting the other and breaking that law.

Mesaba has asked a federal judge in Minnesota to order Northwest to quit withholding payments. Northwest filed for bankruptcy in New York.

Northwest said on Wednesday that Mesaba's action warranted a finding of contempt and damages. The nation's fourth-largest carrier asked for a hearing on the matter immediately, because a hearing on Mesaba's request is scheduled for Thursday.

But Bankruptcy Court Judge Allan L. Gropper in New York wrote that he was "unwilling to haul another debtor into this Court on such short notice, especially as Mesaba might argue that Northwest's actions" violated bankruptcy law just as much as Mesaba's might have.

Northwest spokesman Kurt Ebenhoch noted that Gropper's order left open the possibility that he would hear the matter in the future. Mesaba had no immediate comment.

Rarely do two companies so closely intertwined end up bankrupt at the same time, said William Rochelle, a New York bankruptcy attorney who has worked on airline cases.

"Only in the airline industry," he quipped.

Mesaba leases most of its planes from Northwest, and contends that bankruptcy law allows it to quit paying Northwest for those planes for two months. Northwest then deducted those payments from money it owed Mesaba. Mesaba said Northwest owes it $5.2 million, plus other money for flying done before Northwest went bankrupt.

Rochelle said the law is murky on what's supposed to happen when two companies in Chapter 11 have dueling claims like the one between Northwest and Mesaba.

Northwest and Mesaba have a relationship built on mutual need, and they usually get along.

Mesaba, a wholly owned subsidiary of MAIR Holdings, Inc., flies small planes marked Northwest Airlink from small cities to Northwest's hubs. Northwest provides Mesaba's passengers, most of its planes, and 93 percent of its revenue.

But Northwest has been cutting flights since filing for bankruptcy in September, sending Mesaba into its own bankruptcy proceeding last month.

Aviation consultant Doug Abbey in Washington said Northwest has a reputation for being hard-nosed with employees, and it's no surprise that they would be tough with regional partners, too.

"As with a dysfunctional family, this is playing out like a soap opera," he said.

___

On the Net:

Northwest: http://www.nwa.com

Mesaba parent MAIR Holdings: http://www.mairholdings.com

___

Joshua Freed can be reached at jfreed(at)ap.org

News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.