Air Midwest Latest Victim of Oil Prices...

Well, sort of. Today, Mesa Air Group announced they were beginning an orderly shutdown of their Air Midwest subsidiary, starting of next week. That segment of Mesa operates their Essential Air Service contracts to about 20 hotspots such as Kingman and Prescott AZ, Athens GA, Harrison AR, Ely NV, and Grand Island and McCook NE.

Don't feel bad if you can't locate a lot of those towns on a map. They're tiny markets that only had air service because of some poorly crafted language in the Airline Deregulation Act... Instead of allowing the market to dictate, these services have been long subsidized by federal funding. Until fuel prices started to climb, it was a fairly lucrative market to chase. Today, the subsidies don't cover the operating costs.

They'd announced their intention to exit the EAS markets in January, so this is not at all unexpected. DOT required them to continue operating the routes as long as they were in business, so as with Big Sky last month, the only option available for Mesa to stop the bleeding was for that operating subsidiary to cease operations.

The net effect is that Mesa's bleeding. And sadly, that actually warms my heart somewhat...

Oddly enough, Island Air (based in Hawaii) will be their replacement in four of the EAS markets. Island Air was the smallest player in the hotly contested interisland market that eventually claimed Aloha, and wound up returning two Q400 aircraft and laying off about 65 employees last year because of Mesa's Go! operation.

I'm not sure which move is the smarter one -- Mesa getting out of the EAS business, or Island Air getting into it.