Embraer awaits Mesa restructuring plan to assess impact of Ch 11

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Embraer says it needs to see Mesa Air Group's restructuring plan before it can assess the eventual impact of the regional operator's bankruptcy protection filing on its balance sheet and financial results.

The Brazilian airframer in a statement today points out that while it is not a creditor of Mesa, it has warranty obligations associated with the financing structures of Mesa's 36 Embraer ERJ-145s, in which it holds $67 million in escrow accounts.

"This amount is held in reserve in addition to the present standing of Embraer's cash position and is a part of the $493.2 million held in escrow and duly recorded in the financial statements for fiscal year 2008," says Embraer, adding that, at this moment, Mesa "is not in arrears with these financing structures".

Mesa yesterday filed for Chapter 11 bankruptcy protection. The Phoenix-based company says it will soon present an economic restructuring plan to the court, notes Embraer, and that it intends to continue operations as well as its operational agreements with its US major partners.

Meanwhile, information about Bombardier's exposure to Mesa has emerged. The Canadian airframer is Mesa's second largest creditor with a potential claim valued at $133 million.

"Yes, there is financial exposure for Bombardier," says a Bombardier spokesman, adding: "We are not detailing any specific terms except to say the exposure we foresee we have adequately made provisions for."

A growing number of excess aircraft was the main driver behind Mesa's decision to seek bankruptcy protection. At present, the firm has 52 aircraft idle, but that number is expected to rise to 77 next year.