The primary reason for the $8.5 million decrease in adjusted pre-tax income from Q3 2019 to Q3 2020 was $16.0 million of deferred revenue. The $16.0 million revenue deferral is a GAAP concept, which requires the Company to recognize revenue related to fixed monthly payments received under capacity purchase agreements over time, based on completed flights relative to the estimated number of flights expected over the term of the agreements. The deferred revenue will be recognized over the remainder of the capacity purchase agreements based on the estimated number of completed flights.
Total operating expense decreased by $105.3 million, or 64.5%, to $57.9 million in Q3 2020 as compared to Q3 2019. The primary reason for the decrease was lower flight operations and maintenance expenses due to reduced flying as a result of COVID-19 and $43.0 million related to the Federal Grant received through the Payroll Support Agreement under the CARES Act. The Company recognized the Federal Grant received through the Payroll Support Agreement under the CARES Act as an offset to payroll expenses in Flight Operations, Maintenance and General and Administrative expenses.
"Given the difficult operating environment, we are extremely pleased to be reporting both a profit and positive cash flow. We believe this is the result of our relentless focus on low costs and reliable operations, the construct of our agreements with our major partners, and the dedication and hard work of all our employees," said Jonathan Ornstein, Mesa Air Group Chairman and Chief Executive Officer. "While we believe there are significant opportunities ahead, there remain COVID-19 related challenges; our fleets continue to be utilized below 60%, aircraft financing has become more difficult, and the recovery time projected for demand to return to pre-COVID-19 levels."
"In addition to operating profitably, we operated the quarter without any controllable cancellations," said Brad Rich, Executive Vice President and Chief Operating Officer. "Working together with our partners and regulatory authorities, we remain committed to the highest level of safety for our passengers and employees. I would like to thank all of our employees for an outstanding job."
From a fleet perspective, the twenty new E175s for United are scheduled for delivery beginning in September and will continue through June 2021. We are currently negotiating financing on the first ten aircraft. The CRJ-700 fleet of twenty aircraft will remain in the United CPA until the new E175s are delivered. After removal, the CRJ-700 aircraft are contracted with United to be leased to another United Express carrier or operated by Mesa.
Mesa ended the quarter at $64.9 million in unrestricted cash and equivalents compared to $52.4 million in Q2 FY2020. During the quarter, we paid $12 million in capital expenditures offset by $14 million of returned deposits and paid $24.2 million in scheduled principal payments on aircraft and engine debt. As previously disclosed, Mesa was approved for $92.5 million in connection with the Payroll Support Program under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") covering the period April through September 2020. As of August 3rd, Mesa has received $77.1 million under the program and expects to receive the final payment of $15.4 million on September 1st. All the payments are grants with no requirement for any portion to be repaid.
Mesa has applied for a loan under the CARES Act and has been allocated $277.0 million. The Company is currently negotiating with the Treasury Department and its advisors to determine the final loan amount as well as the terms and conditions of the loan. Mesa will then evaluate its participation level in the loan program and the timing.
Mesa recently signed a five-year agreement with DHL to operate two Boeing 737-400F cargo aircraft with service anticipated to start in October 2020. Mesa Is the first regional airline to enter the narrow-body cargo business.
Due to uncertainty related to COVID-19 the Company is not providing guidance at this time.
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