The Phoenix Business Journal reports on the Chapter 11 filing by a local company, Mesa Air Group. Mesa Air’s CEO states a common reason for filing a Chapter 11 bankruptcy petition: burdensome lease obligations.
Long term leases can cripple a business of any size. Many East Valley businesses are stuck in multi-year leases at rental rates set during the boom. Often, revenues in 2010 simply do not cover lease payments set 2006 or 2007, when revenues were high. In other cases, the business no longer needs to lease as much space or as much equipment, as with Mesa Air’s excess aircraft leases.
In the right circumstances, a Chapter 11 case can allow a business to reject burdensome leases as part of a new business plan.