Mesa Air Group, has released its third quarter fiscal 2023 financial and operating results.
Fiscal Third Quarter Update:
- Total operating revenues of $114.7 million
- Pre-tax loss of $50.3 million, net loss of $47.6 million or $(1.17) per diluted share
- Adjusted net loss1 of $27.2 million or $(0.67) per diluted share
- Adjusted net loss excludes $21.2 million, primarily a $30.5 million impairment loss on assets
- Paid down $27 million of debt with engine sale proceeds
Jonathan Ornstein, Chairman and CEO, said, “As expected, Fiscal 2023 has been a transformative year as we ended our agreement with American Airlines and transitioned all of our regional capacity to United. While we are pleased with the progress we have made in some areas, we have more work to do in others. One of our key initiatives remains the disposition of excess CRJ-900 aircraft and related assets. To date, we have entered into agreements to sell 18 excess CRJ-900s, four of which we closed earlier this year, with the remaining 14 expected to close by calendar-year end. We are currently in active negotiations for the sale of additional aircraft. We also continue to focus on maximizing aircraft utilization with our existing pilot resources through more productive scheduling of our fleet in cooperation with United.”
“Mesa has been a long-time Express carrier for United, and we believe United will ensure we remain an integral part of their regional portfolio. While Mesa’s primary service to United is providing valuable feed traffic, we also assist in the creation of future United pilots through our participation in Aviate, help maintain competitiveness among their regional portfolio, and share co-investments in advanced aviation technology and electric aircraft. In return, United has been an invaluable partner, helping us create additional liquidity through a number of initiatives, which we expect will continue through to the completion of our transformation and return to profitability.”
Fiscal Third Quarter Details:
Total operating revenues in Q3 2023 were $114.7 million, a decrease of $19.7 million, or 14.7%, from $134.4 million for Q3 2022. Contract revenue decreased $24.5 million, or 20.6%. These decreases were primarily driven by a 50% reduction in CRJ-900 block hours and fewer aircraft under contract, partially offset by higher United block-hour rates for new pilot payscales. Pass-through revenue, driven by higher pass-through maintenance expense, increased by $4.8 million. Mesa’s Q3 2023 results include, per GAAP, the recognition of $2.0 million of previously deferred revenue, versus the recognition of $6.8 million of previously deferred revenue in Q3 2022. The remaining deferred revenue balance of $22.7 million will be recognized as flights are completed over the remaining term of the United contract.
Total operating expenses in Q3 2023 were $154.9 million, an increase of $20.7 million, or 15.5%, versus Q3 2022. This increase was primarily due to a $30.5 million impairment on assets held for sale. Adjusted operating expenses were $131.2 million, 2.3% lower vs. Q3 2022, reflecting an $8.4 million decrease in aircraft rent attributable to the reclassification from operating lease to finance lease for certain CRJ-900s, and a $4.8 million decrease in depreciation and amortization primarily driven by the lower depreciable base from the CRJ-900 asset impairment charge in Q4 2022. This decrease was partially offset by a $8.3 million increase in flight operations expense to $51.6 million, primarily reflecting higher pilot pay scales.
Mesa’s Q3 2023 results reflect a net loss of $47.6 million, or $(1.17) per diluted share, compared to a net loss of $10.0 million, or $(0.28) per diluted share for Q3 2022. Mesa’s Q3 2023 adjusted net loss1 was $27.2 million, or $(0.67) per diluted share, versus an adjusted net loss of $7.1 million, or $(0.20) per diluted share, in Q3 2022.
Mesa’s Adjusted EBITDA1 loss for Q3 2023 was $1.8 million, compared to Adjusted EBITDA of $20.1 million in Q3 2022. Adjusted EBITDAR1 loss was $0.9 million for Q3 2023, compared to Adjusted EBITDAR of $29.4 million in Q3 2022.
Operationally, the Company reported a controllable completion factor of 98.8% for United and 100.0% for American during Q3 2023. As a reminder, Mesa completed its final flight for American in early April 2023. This is compared to a controllable completion factor of 99.8% for United and 98.8% for American during Q3 2022. This excludes cancellations due to weather and air traffic control.
With respect to a total completion factor that includes all cancellations, Mesa reported a total completion factor of 96.4% for United and 97.0% for American during Q3 2023. This is compared to a total completion factor of 98.8% for United and 97.7% for American during Q3 2022.
For Q3 2023, approximately 96% of the Company’s total revenue was derived from our contract with United. Our CPA with United provides for 80 large (70/76 seats) jets, comprising a mix of E-175s and CRJ-900s. In Q3, our fleet mix comprised 56 E-175s and 24 CRJ-900s, as well as four 737 cargo aircraft.
Balance Sheet and Cash Flow:
Mesa ended the quarter at $48.3 million in unrestricted cash and equivalents. As of June 30, 2023, the Company had $566.3 million in total debt secured primarily with aircraft and engines. The Company made $40.6 million of debt payments in the quarter and $4.2 million in finance lease payments.
During the quarter, Mesa closed on the sales of the remaining 20 engines that the Company previously agreed to sell to United, using the proceeds to pay down $19.1 million of debt. Going forward, Mesa plans to close on the remaining 7 CRJ-900s that the Company previously agreed to sell to a third party. Separately, the Company is in the process of closing on the sale of 7 excess CRJ-900 NextGen aircraft. Once completed, these transactions will reduce debt by approximately $74.3 million.
MESA AIR GROUP, INC.
Consolidated Statements of Operations and Comprehensive (Loss) Income
(In thousands, except per share amounts) (Unaudited)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating revenues: | ||||||||||||||||
| Contract revenue (2023—$88,415 and $200,184 and 2022—$48,295 and $158,876 from related party) | $ | 94,356 | $ | 118,899 | $ | 326,588 | $ | 367,781 | ||||||||
| Pass-through and other revenue | 20,335 | 15,498 | 57,111 | 37,586 | ||||||||||||
| Total operating revenues | 114,691 | 134,397 | 383,699 | 405,367 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Flight operations | 51,557 | 43,254 | 164,707 | 133,262 | ||||||||||||
| Maintenance | 51,072 | 49,694 | 145,344 | 156,032 | ||||||||||||
| Aircraft rent | 864 | 9,299 | 5,782 | 28,319 | ||||||||||||
| General and administrative | 11,346 | 11,112 | 38,872 | 31,550 | ||||||||||||
| Depreciation and amortization | 15,316 | 20,103 | 47,060 | 61,878 | ||||||||||||
| Asset Impairment | 30,489 | — | 50,951 | 39,475 | ||||||||||||
| (Gain) on sale of assets | (6,722 | ) | — | (7,271 | ) | — | ||||||||||
| Other operating expenses | 999 | 722 | 2,358 | 3,379 | ||||||||||||
| Total operating expenses | 154,921 | 134,184 | 447,803 | 453,895 | ||||||||||||
| Operating income (loss) | (40,230 | ) | 213 | (64,104 | ) | (48,528 | ) | |||||||||
| Other income (expense), net: | ||||||||||||||||
| Interest expense | (12,015 | ) | (8,716 | ) | (36,321 | ) | (24,766 | ) | ||||||||
| Interest income | 8 | 24 | 128 | 117 | ||||||||||||
| Gain on investments, net | 2,859 | (3,926 | ) | 3,275 | (12,649 | ) | ||||||||||
| Other income, net | (946 | ) | (73 | ) | (540 | ) | (203 | ) | ||||||||
| Total other expense, net | (10,094 | ) | (12,691 | ) | (33,458 | ) | (37,501 | ) | ||||||||
| Income (loss) before taxes | (50,324 | ) | (12,478 | ) | (97,562 | ) | (86,029 | ) | ||||||||
| Income tax expense (benefit) | (2,764 | ) | (2,493 | ) | (5,791 | ) | (18,987 | ) | ||||||||
| Net income (loss) | $ | (47,560 | ) | $ | (9,985 | ) | $ | (91,771 | ) | $ | (67,042 | ) | ||||
| Net income (loss) per share attributable to common shareholders | ||||||||||||||||
| Basic | $ | (1.17 | ) | $ | (0.28 | ) | $ | (2.35 | ) | $ | (1.86 | ) | ||||
| Diluted | $ | (1.17 | ) | $ | (0.28 | ) | $ | (2.35 | ) | $ | (1.86 | ) | ||||
| Weighted-average common shares outstanding | ||||||||||||||||
| Basic | 40,688 | 36,183 | 38,986 | 36,064 | ||||||||||||
| Diluted | 40,688 | 36,183 | 38,986 | 36,064 | ||||||||||||
MESA AIR GROUP, INC.
Consolidated Balance Sheets
(In thousands, except shares) (Unaudited)
| June 30, 2023 | September 30, 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 48,349 | $ | 57,683 | ||||
| Restricted cash | 3,146 | 3,342 | ||||||
| Receivables, net ($493 and $85 from related party) | 3,582 | 3,978 | ||||||
| Expendable parts and supplies, net | 28,731 | 26,715 | ||||||
| Assets held for sale | 90,954 | — | ||||||
| Prepaid expenses and other current assets | 6,364 | 6,616 | ||||||
| Total current assets | 181,126 | 98,334 | ||||||
| Property and equipment, net | 709,694 | 865,254 | ||||||
| Intangible assets, net | — | 3,842 | ||||||
| Lease and equipment deposits | 1,172 | 6,085 | ||||||
| Operating lease right-of-use assets | 11,416 | 43,090 | ||||||
| Deferred heavy maintenance, net | 8,753 | 9,707 | ||||||
| Assets held for sale | 21,000 | 73,000 | ||||||
| Other assets | 28,841 | 16,290 | ||||||
| TOTAL ASSETS | $ | 962,002 | $ | 1,115,602 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current portion of long-term debt and finance leases ($2,622 and $0 from related party) | $ | 124,341 | $ | 97,218 | ||||
| Current portion of deferred revenue | 6,398 | 385 | ||||||
| Current maturities of operating leases | 4,380 | 17,233 | ||||||
| Accounts payable | 51,916 | 59,386 | ||||||
| Accrued compensation | 8,358 | 11,255 | ||||||
| Other accrued expenses | 26,721 | 29,000 | ||||||
| Total current liabilities | 222,114 | 214,477 | ||||||
| NONCURRENT LIABILITIES: | ||||||||
| Long-term debt and finance leases, excluding current portion ($30,630 and $0 from related party) | 441,941 | 502,517 | ||||||
| Noncurrent operating lease liabilities | 8,966 | 16,732 | ||||||
| Deferred credits ($4,498 and $2,193 from related party) | 4,489 | 3,082 | ||||||
| Deferred income taxes | 11,561 | 17,719 | ||||||
| Deferred revenue, net of current portion | 16,327 | 23,682 | ||||||
| Other noncurrent liabilities | 28,706 | 29,219 | ||||||
| Total noncurrent liabilities | 511,990 | 592,951 | ||||||
| Total liabilities | 734,104 | 807,428 | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 40,619,274 (2023) and 36,376,897 (2022) shares and 4,899,497 (2023) and 4,899,497 (2022) warrants issued and outstanding | 270,673 | 259,177 | ||||||
| Retained earnings/(Accumulated deficit) | (42,775 | ) | 48,997 | |||||
| Total stockholders' equity | 227,898 | 308,174 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 962,002 | $ | 1,115,602 | ||||
MESA AIR GROUP, INC.
Operating Highlights (unaudited)
| Three months ended | |||||||||
| June 30, | |||||||||
| 2023 | 2022 | Change | |||||||
| Available seat miles (thousands) | 1,002,945 | 1,553,616 | (35.4)% | ||||||
| Block hours | 45,301 | 63,486 | (28.6)% | ||||||
| Average stage length (miles) | 555 | 619 | (10.3)% | ||||||
| Departures | 24,555 | 33,291 | (26.2)% | ||||||
| Passengers | 1,500,634 | 2,164,295 | (30.7)% | ||||||
| Controllable completion factor* | |||||||||
| American | 100.00% | 98.77% | 1.2% | ||||||
| United | 98.83% | 99.76% | (0.9)% | ||||||
| Total completion factor** | |||||||||
| American | 96.97% | 97.66% | (0.7)% | ||||||
| United | 96.39% | 98.83% | (2.5)% | ||||||
*Controllable completion factor excludes cancellations due to weather and air traffic control
**Total completion factor includes all cancellations