<SUBMISSION>
<ACCESSION-NUMBER>0000950153-01-000215
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20001231
<FILING-DATE>20010214
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>MESA AIR GROUP INC
<CIK>0000810332
<ASSIGNED-SIC>4512
<IRS-NUMBER>850302351
<STATE-OF-INCORPORATION>NV
<FISCAL-YEAR-END>0930
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-15495
<FILM-NUMBER>1545919
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>410 NORTH 44TH STREET
<STREET2>SUITE 700
<CITY>PHOENIX
<STATE>AZ
<ZIP>85008
<PHONE>6026854000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>410 NORTH 44TH STREET
<STREET2>SUITE 700
<CITY>PHOENIX
<STATE>AZ
<ZIP>85008
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>MESA AIRLINES INC
<DATE-CHANGED>19950426
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>p64602e10-q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>

<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF SECURITIES EXCHANGE ACT OF 1934

[ X ]             For the quarterly period-ended  December 31, 2000

                                       OR

[   ]             Transition Report Pursuant to Section 13 or 15(d)
                        of Securities Exchange Act of 1934

Commission File Number 0-15495

                              MESA AIR GROUP, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                  <C>
                        Nevada                           85-0302351
         (State or other jurisdiction of              (I.R.S. Employer
          incorporation or organization)             Identification No.)

410 North 44th Street, Suite 700, Phoenix, Arizona           85008
        (Address of principal executive offices)           (Zip code)

Registrant's telephone number, including area code:    (602)- 685-4000
</TABLE>

Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days.

                              Yes X     No

On January 31, 2001, the registrant had outstanding 31,931,784 shares of Common
Stock.


                                       1
<PAGE>   2
                                      INDEX


                         PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
<S>                                                                     <C>
Item 1.    Financial Statements (unaudited)

           Consolidated Statements of Income                                3

           Consolidated Balance Sheets                                      4

           Consolidated Statements of Cash Flows                            5

           Unaudited Notes to Consolidated Financial Statements             7


Item 2.    Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                    9



                           PART II - OTHER INFORMATION

Item 1.     Legal Proceedings                                              15

Item 2.     Changes in Securities and Use of Proceeds                      15

Item 3.     Quantitative and Qualitative Disclosures about Market Risk     15

Item 4.     Submission of Matters to vote for Security Holders             15

Item 5.     Other Matters                                                  15

Item 6.     Exhibits and Reports on Form 8-K                               15



SIGNATURES                                                                 16
</TABLE>


                                       2
<PAGE>   3
PART 1. FINANCIAL INFORMATION
Item 1.

                              MESA AIR GROUP, INC.

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                               Three Months Ended
                                                                        -------------------------------
                                                                        December 31,         December 31,
                                                                           2000                  1999
                                                                        ---------             ---------
<S>                                                                     <C>                   <C>
Operating revenues:
    Passenger                                                           $ 129,826             $ 108,711
    Freight and other                                                       1,769                 2,242
                                                                        ---------             ---------
       Total operating revenues                                           131,595               110,953
                                                                        ---------             ---------
Operating expenses:
    Flight operations                                                      66,729                50,254
    Maintenance                                                            24,101                18,964
    Aircraft and traffic servicing                                         13,775                13,194
    Promotion and sales                                                     6,953                 8,212
    General and administrative                                              6,548                 6,516
    Depreciation and amortization                                           3,769                 4,666
                                                                        ---------             ---------
       Total operating expenses                                           121,875               101,806
                                                                        ---------             ---------
    Operating income                                                        9,720                 9,147
                                                                        ---------             ---------
Other income (expense):
    Interest expense                                                       (4,110)               (4,584)
    Interest income                                                           458                   862
    Other income                                                            3,360                 3,236
                                                                        ---------             ---------
       Total other income (expense)                                          (292)                 (486)
                                                                        ---------             ---------
Income before income taxes and cumulative effect of
      accounting change                                                     9,428                 8,661
Income taxes                                                                3,720                  --
                                                                        ---------             ---------

Income  before cumulative effect of accounting change                       5,708                 8,661
Cumulative effect of accounting change, net of $0 applicable
      income taxes                                                           --                  18,085
                                                                        ---------             ---------

Net income                                                              $   5,708             $  26,746
                                                                        =========             =========

Income per common share - basic:
Income before cumulative effect of accounting change                    $    0.19             $    0.25
Cumulative effect of accounting change, net                                  --                    0.53
                                                                        ---------             ---------

Net income                                                              $    0.19             $    0.78
                                                                        =========             =========

Income per common share - diluted:
Income before cumulative effect of accounting change                    $    0.18             $    0.25
Cumulative effect of accounting change, net                                  --                    0.53
                                                                        ---------             ---------
Net income                                                              $    0.18             $    0.78
                                                                        =========             =========
</TABLE>

           See accompanying notes to consolidated financial statements


                                       3
<PAGE>   4
                                         MESA AIR GROUP, INC.

                                     CONSOLIDATED BALANCE SHEETS
                                            (in thousands)

<TABLE>
<CAPTION>
                                                                    (Unaudited)
                                                                    December 31,       September 30,
                                                                        2000                2000
                                                                      --------            --------
<S>                                                                 <C>                <C>
ASSETS
Current Assets:
       Cash and cash equivalents                                      $ 12,651            $ 26,403
       Marketable securities                                            14,340               7,681
       Receivables, primary traffic                                     38,264              41,719
       Inventories                                                      34,326              27,716
       Aircraft held for sale                                           31,240              31,149
       Prepaid expenses and other current assets                         6,688               9,140
       Deferred income taxes                                             8,527               8,527
                                                                      --------            --------
                Total current assets                                   146,036             152,335

       Property and equipment, net                                     191,374             185,909
       Lease and equipment deposits                                     23,062              22,857
       Intangibles, net                                                  9,806              10,014
       Deferred income taxes                                             1,102               4,822
       Other assets                                                      9,927               8,990
                                                                      --------            --------
                Total assets                                          $381,307            $384,927
                                                                      ========            ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
       Current portion of long-term debt                              $ 45,673            $ 45,673
       Accounts payable                                                 21,679              25,741
       Air traffic liability                                             3,518               3,445
       Accrued compensation                                              2,130               3,056
       Other accrued expenses                                           15,545              15,264
                                                                      --------            --------
                Total current liabilities                               88,545              93,179

Long-term debt, excluding current portion                              134,088             135,533
Deferred credits and other liabilities:                                 11,039              11,641
                                                                      --------            --------
                Total liabilities                                      233,672             240,353
                                                                      --------            --------

Stockholders' equity:
       Common stock of no par value, 75,000,000 shares
           authorized; 31,833,628 and 32,286,303
           shares issued and outstanding, respectively                 110,112             112,759
       Retained earnings                                                37,523              31,815
                                                                      --------            --------

                Total stockholders' equity                             147,635             144,574
                                                                      --------            --------

                Total liabilities and stockholders' equity            $381,307            $384,927
                                                                      ========            ========
</TABLE>

           See accompanying notes to consolidated financial statements


                                        4
<PAGE>   5
                              MESA AIR GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                           ---------------------------------
                                                                           December 31,         December 31,
                                                                               2000                 1999
                                                                             --------             --------
<S>                                                                        <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                   $  5,708             $ 27,280
Adjustments to reconcile net income to net cash flows provided by
operating activities:
      Depreciation and amortization                                             3,769                4,666
      Cumulative effect of change in accounting principle                        --                (18,085)
      Deferred income taxes                                                     3,720                 --
      Amortization of deferred credits                                           (339)               7,108
      Provision for obsolete inventory                                           (500)                --
      Provision for doubtful accounts                                              27                   24
      Unrealized (loss) gain on investment securities                          (1,370)                (710)
      Changes in assets and liabilities:
         Receivables                                                            3,428               (2,068)
         Inventories                                                           (6,110)              (2,459)
         Prepaid expenses and other current assets                              2,361                5,809
         Accounts payable                                                      (4,062)              (2,132)
         Other accrued liabilities                                               (572)              (8,827)
                                                                             --------             --------

      NET CASH PROVIDED BY OPERATING ACTIVITIES:                                6,060               10,606
                                                                             --------             --------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Capital expenditures                                                     (6,891)              (2,224)
      Net (purchases) sales of investment securities                           (5,289)               2,100
      Change in other assets                                                   (3,072)               4,016
      Other                                                                      --                   (410)
      Lease and equipment deposits                                               (205)                (298)
                                                                              -------              -------
      NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES:                    (15,457)               3,184
                                                                              --------             -------
</TABLE>

                                                                     (Continued)


                                       5
<PAGE>   6
                              MESA AIR GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<S>                                                                                 <C>                  <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
      Principle payments on long-term debt                                            (1,445)              (5,132)
      Proceeds from issuance of common stock                                              48                   10
      Common stock purchased and retired                                              (2,695)                (507)
      Change in deferred credits                                                        (263)                --
                                                                                    --------             --------

      NET CASH USED IN FINANCING ACTIVITIES                                           (4,355)              (5,629)
                                                                                    --------             --------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                              (13,752)               8,161

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                      26,403               52,905
                                                                                    --------             --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $ 12,651             $ 61,066
                                                                                    ========             ========

SUPPLEMENTAL CASH FLOW INFORMATION:
      Cash paid for interest, net of amounts capitalized                            $  4,110             $  4,050
      Cash paid for income taxes                                                         541
SUPPLEMENTAL NON-CASH INFORMATION:
      Reversal of accrued maintenance due to change in accounting method                                 $ 18,085
      Sale of Property in exchange for debt reduction                                                       2,100
</TABLE>

           See accompanying notes to consolidated financial statements


                                       6
<PAGE>   7
                              MESA AIR GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Business and Basis of Presentation

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with accounting principles generally accepted in the
     United States of America for interim financial information and with the
     instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
     they do not include all of the information and footnotes required by
     accounting principles generally accepted in the United States of America
     for a complete set of financial statements. In the opinion of management,
     all adjustments (consisting of normal recurring accruals) considered
     necessary for a fair presentation of the results for the unaudited
     three-month periods have been made. Operating results for the three-month
     period ended December 31, 2000, are not necessarily indicative of the
     results that may be expected for the fiscal year ending September 30, 2001.
     These consolidated financial statements should be read in conjunction with
     the Company's consolidated financial statements and notes thereto included
     in the Company's annual report on Form 10K for the fiscal year ended
     September 30, 2000.

     The consolidated financial statements include the accounts of Mesa Air
     Group, Inc. and its wholly owned subsidiaries, Mesa Airlines, Inc., WestAir
     Holdings, Inc., Air Midwest, Inc., CCAIR, Inc., Mesa Leasing, Inc., MAGI
     Insurance, Ltd., Regional Aircraft Services, Inc., the Ritz Hotel
     Management Corporation and MPD, Inc. All significant intercompany balances
     and transactions have been eliminated in consolidation.

2.   New Accounting Standards

     Effective October 1, 1999, the Company elected to change its method of
     accounting for engine and airframe maintenance costs on its CRJ aircraft
     and engine maintenance on its DeHavilland Dash 8-200 aircraft from the
     accrual method to the direct expense method. Under the accrual method,
     maintenance costs were accrued to expense on the basis of estimated future
     costs and estimated cycles or flight hours between major maintenance
     events. Implementation of the change necessitated the write-off of
     previously recorded accrued amounts. Effective October 1, 1999, the Company
     began expensing these maintenance costs as incurred. The cumulative effect
     of the change for prior years was a favorable adjustment of $18.1 million,
     net of tax. Due to the valuation allowance at October 1, 1999, there is no
     tax effect related to the cumulative effect of the change.

3.   Segment Reporting

     The Company has adopted SFAS No. 131, "Disclosures About Segments of an
     Enterprise and Related Information." The statement requires disclosures
     related to components of a company for which separate financial information
     is available that is evaluated regularly by a company's chief operating
     decision maker in deciding the allocation of resources and assessing
     performance. The Company is engaged in one line of business, the scheduled
     and chartered transportation of passengers, which constitutes nearly all of
     its operating revenues.

4.   Marketable Securities

     The Company has a cash management program that provides for the investment
     of excess cash balances primarily in short-term money market instruments,
     intermediate-term debt instruments and common equity securities of
     companies operating in the airline industry.

     SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
     Securities," requires that all applicable investments be classified as
     trading securities, available for sale securities or held to maturity
     securities. All of the Company's investments are classified as trading
     securities during the periods presented and accordingly, are carried at
     market value with changes in value reflected in current period operations.


                                       7
<PAGE>   8
     From time to time, the Company enters into short positions on common equity
     securities when management believes that the Company may capitalize on
     downward moves in particular securities. The Company marks short positions
     to market at each reporting period with changes in value reflected in
     current period earnings. Included in marketable securities are liabilities
     related to short positions on common equity securities of $7.0 million and
     $3.0 million at December 31, 2000 and September 30, 2000, respectively.
     Unrealized gains and (losses) relating to trading securities held at
     December 31, 2000 and September 30, 2000 were $1.4 million and ($0.5)
     million, respectively.


                                       8
<PAGE>   9
Item 2.                MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Mesa Air Group, Inc. and its subsidiaries (collectively referred to herein as
"Mesa") is an independently owned regional airline serving 142 cities in 36
states, the District of Columbia, Canada and Mexico. Mesa operates a fleet of
131 aircraft and has approximately 1,100 daily departures.

Mesa's airline operations are conducted by three regional airlines utilizing
hub-and-spoke systems. Mesa Airlines, Inc. ("MAI"), a wholly owned subsidiary of
Mesa, operates as America West Express under a code sharing agreement with
America West Airlines, Inc. ("America West") and as USAirways Express under
code-sharing agreements with USAirways, Inc. ("USAirways") and also operates an
independent division, Mesa Airlines, from a hub in Albuquerque, New Mexico. Air
Midwest, Inc., a wholly owned subsidiary of Mesa, also operates under a
code-sharing agreement with USAirways and flies as USAirways Express. CCAIR,
Inc. ("CCAIR"), a wholly owned subsidiary of Mesa, which was acquired during
1999, operates under a code-share agreement with USAirways that permits CCAIR to
operate under the name USAirways Express and to charge their joint passengers on
a combined basis with USAirways.

Approximately 96% of Mesa's consolidated revenues for the quarter ended December
31, 2000, were derived from operations associated with code-sharing agreements
with America West and USAirways. All of MAI's America West Express operations
and USAirways Express jet operations are on a fee per departure basis. For the
quarter ended December 31, 2000, approximately 61% of Mesa's airline revenues
were derived from fee per departure contractual arrangements. The percentage of
revenue generated under fee per departure agreements is expected to increase in
the future as Mesa adds additional regional jets to its America West Express and
USAirways Express operations. The Company's code-sharing agreement with America
West expires in 2007. The Company's code-sharing agreements with USAirways
expire on various dates from 2003 through 2005, with the regional jet agreement
expiring in 2008. Mesa derives the remainder of its passenger revenues from a
combination of local fares, through fares and joint fares.


During fiscal 2001 several significant events have occurred:

In October 2000, the Company and US Airways amended the US Airways regional jet
service agreement to expand the number of regional jets under contract from 28
to 32 and extend the term to 2008. The Company and US Airways also amended
prorate agreements covering Kansas City, Pittsburgh, and Philadelphia, New
Orleans, and Tampa/Orlando. The Kansas City agreement was extended from 2000 to
2005 and amended to eliminate the ability of either party to terminate the
agreement without cause and permit the Company to add additional code share
partners in Kansas City. The other four prorate agreements were extended by one
year over their previous expiration dates.

In November 2000, the Company and America West amended their Contract Agreement
to expand the number of regional jets operated from 17 to 22 and extend the term
of the agreement for regional jets from 2004 to 2007.

In November 2000, the Company entered into a non-binding letter of intent with
Midwest Express Airlines, Inc. ("Midwest Express") to add the Midwest Express
code to the Company's operations in Kansas City. The anticipated start date for
the arrangement is the second quarter of fiscal 2001. The agreement will cover
13 cities already served by ten Beechcraft 1900D aircraft out of Kansas City.

In December 2000, the Company reached agreement with Fleet Capital for a $35
million line of credit, collateralized by the Company's inventory and
receivables. The agreement, which expires in December 2003, has provisions that
allow the expansion of available credit to $50 million by adding new lenders.
The Company will use the facility for general working capital purposes.


                                       9
<PAGE>   10
The following tables set forth quarter - to - quarter comparisons for the
periods indicated below:

                                 OPERATING DATA

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                           --------------------------------
                                                           December,              December,
                                                             2000                   1999
                                                           ---------              ---------
<S>                                                       <C>                    <C>
Passengers                                                 1,224,003              1,097,771
Available seat miles (000's)                                 812,579                720,722
Revenue passenger miles (000's)                              451,025                371,318
Load factor                                                     55.5%                  51.5%
Yield per revenue passenger mile (cents)                        29.2                   29.9
Revenue per available seat mile (cents)                         16.0                   15.4
Operating cost per available seat mile (cents)                  15.1                   14.3
Average stage length (miles)                                     266                    244
Number of operating aircraft in fleet                            131                    137
Gallons of fuel consumed                                  21,418,565             19,339,018
Block hours flown                                            100,663                100,743
Departures                                                    83,673                 88,474
</TABLE>

                                 FINANCIAL DATA

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                    ---------------------------------------------------------------
                                          December 31, 2000                  December 31, 1999
                                    ----------------------------       ----------------------------
                                      Costs per       % of total         Costs per       % of total
                                    ASM (cents)         Revenues       ASM (cents)         Revenues
                                   ------------        ---------        ----------        ---------
<S>                                       <C>              <C>               <C>              <C>
Flight operations                          8.21             50.7%             6.97             45.3%
Maintenance                                2.97             18.3%             2.63             17.1%
Aircraft and traffic servicing             1.70             10.5%             1.83             11.9%
Promotion and sales                        0.86              5.3%             1.14              7.4%
General and administrative                 0.81              5.0%             0.90              5.9%
Depreciation and amortization              0.46              2.9%             0.65              4.2%

Total operating expenses                  15.00             92.6%            14.13             91.8%
Interest expense                           0.51              3.1%             0.64              4.1%
</TABLE>


                                       10
<PAGE>   11
RESULTS OF OPERATIONS

Operating Revenues:

Operating revenues increased by $20.6 million (18.6 %) for the quarter ended
December 31, 2000 as compared to the quarter ended December 31, 1999. This
increase was primarily due to the increase in capacity, as measured by available
seat miles ("ASM's"), in the Mesa system. ASM's increased by 12.7% for the
quarter ended December 31, 2000 over the same period in 1999. The increase in
ASM's was a result of the number of regional jets added to the fleet, which have
additional seats and fly longer stage lengths. Passenger traffic measured by
revenue passenger miles ("RPM's"), representing one passenger carried one mile,
increased by 21.5%. Passenger load factor increased from 51.5% to 55.5%, yield
(passenger revenue per RPM) decreased by 0.7 cents to 29.2 cents in the first
quarter of 2001. The airline industry has a history of fare and traffic
volatility. The regional jet aircraft, which are generally faster and flown over
a longer stage length than the turboprop aircraft, typically generate lower
revenue and cost per ASM. Because Mesa expects to operate increasing number of
regional jet aircraft in the future, overall revenue per ASM and cost per ASM
are expected to decrease in the future.

Operating Expenses

Flight Operations

Flight operations expense increased by 32.8% to $66.7 million (8.21 cents per
ASM) for the quarter ended December 31, 2000, from $50.3 million (6.97 cents per
ASM) from the comparable period in 2000 primarily due to an increase in capacity
(ASM's) and higher fuel costs.

Maintenance Expense

Maintenance expense increased by 27.1% to $24.1 million (2.97 cents per ASM) for
the quarter ended December 31, 2000, from $19.0 million (2.63 cents per ASM) for
the comparable period in 1999. Increased maintenance costs are primarily the
result of an increase in available capacity, which drives maintenance events.

Aircraft and Traffic Service Expense

Aircraft and traffic servicing costs increased by 4.4% to $13.8 million (1.70
cents per ASM) for the quarter ended December 31, 2000 from $13.2 million (1.83
cents per ASM) during the comparable quarter of the previous fiscal year. This
change is also a result of an increase in flying activity.

Promotion and Sales

Promotion and sales expense decreased 15.3% to $7.0 million (0.86 cents per ASM)
for the quarter ended December 31, 2000 from $8.2 million (1.14 cents per ASM)
from the prior year's comparable quarter. Mesa's contract with America West and
our Jet Contract with USAirways eliminates booking fees and travel agency
commissions being charged directly to Mesa and as such, these costs per ASM are
expected to decline as the America West Express operation grows.

General and Administrative Expense

General and administrative expenses of $6.5 million were relatively the same as
prior year (0.81 cents per ASM and 0.90 cents per ASM for the quarters ended
December 31, 2000 and 1999, respectively. The decrease on an ASM basis is due to
increased capacity (ASM's) without a corresponding increase in general and
administrative expenses.


                                       11
<PAGE>   12
Depreciation and Amortization

Depreciation and amortization decreased by 19.2% to $3.8 million (0.46 cents per
ASM) for the quarter ended December 31, 2000 as compared to $4.7 million (0.65
cents per ASM) for the quarter ended December 31, 1999. The decrease is
primarily due to the disposal of Beech 1900 aircraft in the fourth quarter of
Fiscal 2000.

Non-Operating Items

For the quarter ended December 31, 2000, Mesa recognized $3.1 million in
investment related gains.


LIQUIDITY AND CAPITAL RESOURCES

Mesa's cash and cash equivalents and marketable securities as of December 31,
2000 totaled $27.0 million. Mesa's net cash flow from operations totaled
approximately $9.6 million during the three months ended December 31, 2000.
Mesa's cash and cash equivalents and marketable securities are intended to be
used for working capital, capital expenditures and acquisitions. In addition,
the Company has a $35 million line of credit facility with Fleet Capital. There
were no amounts outstanding on the line as of December 31, 2000.

Mesa had receivables of approximately $38.3 million at December 31, 2000, which
consisted primarily of amounts due from code-sharing partners America West and
USAirways and passenger ticket receivables due through the Airline Clearing
House. Under the terms of the USAirways agreement, Mesa receives a substantial
portion of its revenues through the clearing house. Historically, Mesa has
generated adequate cash flow to meet its needs.

In October 1999, Mesa settled various disputed claims it had against BRAD
regarding Bombardier's obligation to accept trade-in Brasilia aircraft and the
availability of 16 additional rolling option CRJs. Under this settlement, Mesa
is to receive $9 million ($8.5 million cash, $.5 million credit), $7.1 million
of which has been received to date, the remainder of which was received
subsequent to the end of the quarter.

Management's belief that Mesa will have adequate cash flow to meet its operating
needs is a forward-looking statement. Actual cash flow could materially differ
from this forward looking statement as a result of many factors, including the
termination of one or more code-sharing agreements; failure to sell, dispose, or
redeploy excess aircraft in a timely manner; a substantial decrease in the
number of routes allocated to MAI under its code-sharing agreements with
USAirways; reduced levels of passenger revenue, additional taxes or costs of
compliance with governmental regulations; fuel cost increases; increases in
competition; increases in interest rates and general economic conditions. Mesa
has minimal market risk with respect to market risk instruments such as foreign
currency exchange risk and commodity price risk. Mesa is subject to interest
rate risk with respect to current and future aircraft financing.

In December 1999, the Company's Board of Directors authorized the Company to
repurchase up to 10%, approximately 3.4 million shares, of the outstanding
shares of its Common Stock. In January 2001, the Board approved the repurchase
by the Company of up to an additional one million shares of its Common Stock. As
of February 6, 2001, the Company has acquired approximately 2.5 million shares
of Common Stock for approximately $13.6 million leaving approximately 1.9
million shares available for repurchase under the current Board authorizations.


                                       12
<PAGE>   13
AIRCRAFT

The following table lists the aircraft owned and leased by Mesa for scheduled
operations as of December 31, 2000:

<TABLE>
<CAPTION>
                                                                       Operating on         Passenger
      Type of Aircraft          Owned      Leased       Total       December 31, 2000       Capacity
      ----------------          -----      ------       -----       -----------------       --------
<S>                             <C>        <C>          <C>         <C>                     <C>
Canadair Regional Jet             --         32           32                32                 50
Embraer Regional Jet              --         12           12                12                 50
BeechCraft 1900D                  51         10           61                52                 19
Jet Stream Super 31               --         14           14                14                 19
Dash 8-100                        --         10           10                 9                 37
Dash 8-200                        --         12           12                12                 37
Embraer EMB-120                   --          7            7                --                 30
                                -----       -----       -----             -----
                                  51         97          148               131
</TABLE>

PENDING DEVELOPMENTS

ERJ Program

In January 2000, Mesa entered into an agreement with Empresa Brasiliera de
Aeronautica SA ("Embraer") to acquire 36 50-passenger Embraer ERJ-145 regional
jets. Deliveries began late in the third quarter of fiscal 2000 and will
continue through late fiscal 2002. Mesa also has options for an additional 64
aircraft with the right to convert deliveries into 37-seat ERJ 135's. Mesa
introduced the ERJ-145 aircraft into revenue service early in the third quarter
of fiscal 2000 as USAirways Express. Mesa intends to move the CRJ regional jets
currently flying as USAirways Express to America West Express and replace them
with the ERJ-145's as deliveries take place. As of February 8, 2001, the
Company has taken delivery of 12 of these aircraft, which have been financed as
operating leases. In conjunction with this purchase agreement, Mesa has placed
an $11.8 million deposit with Embraer, which is included with lease and
equipment deposits.

CRJ Program

In August 1996, the Company entered into an agreement with Bombardier Regional
Aircraft Division ("BRAD") to acquire 16 CRJ 50-passenger jet aircraft. The
agreement also granted the Company an option to acquire an additional 16 jet
aircraft and provided for additional rolling options to acquire a third block of
16 aircraft. In fiscal 1997, the Company exercised options to purchase 16 of the
32 CRJ aircraft reserved under the option provisions of the BRAD purchase
agreement. In connection with the 32 CRJ aircraft, all are currently under
permanent financing as operating leases with terms of 16-1/2 to 18-1/2 years.

Beechcraft 1900D

During fiscal 1999, the Company announced its intention to dispose of 30 excess
B1900 aircraft. As of September 30, 2000, the Company had disposed of 17 of such
aircraft, and is actively seeking proposals for the disposition of the remaining
13 B1900 aircraft. Under an agreement with Raytheon Aircraft Corporation, the
Company has the right to sell to Raytheon six B1900 aircraft in October 2001 and
five B1900 aircraft in October 2002.


This form 10-Q filing, and particularly this Pending Developments section,
contains certain statements including, but not limited to, information regarding
the replacement, deployment and acquisition of certain


                                       13
<PAGE>   14
numbers and types of aircraft, and projected expenses associated therewith;
costs of compliance with FAA regulations and other rules and acts of Congress;
the passing of taxes, fuel costs, inflation, and various expenses to the
consumer; the relocation of certain operations of Mesa; the resolution of
litigation in a favorable manner, and certain projected financial obligations.
These statements, in addition to statements made in conjunction with the words
"expect," "anticipate," "intend," "plan," "believe," "seek," " estimate," and
similar expressions, are forward-looking statements within the meaning of the
Safe Harbor provision of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements relate to future events or the future financial performance of Mesa
and only reflect Management's expectations and estimates. The following is a
list of factors, among others, that could cause actual results to differ
materially from the forward-looking statements: changing business conditions in
certain market segments and industries; an increase in competition along the
routes Mesa operates or plans to operate; material delays in completion by the
manufacturer of the ordered and yet-to-be-delivered aircraft; changes in general
economic conditions; changes in fuel prices; changes in regional economic
conditions; Mesa's relationship with employees and the terms of future
collective bargaining agreements; the impact of current and future laws,
Congressional investigations and governmental regulations affecting the airline
industry and Mesa's operations; bureaucratic delays; amendments to existing
legislation; consumers unwilling to incur greater costs for flights; unfavorable
resolution of negotiations with municipalities for the leasing of facilities;
and risks associated with litigation outcomes. One or more of these or other
factors may cause Mesa's actual results to differ materially from any
forward-looking statement. Mesa is not undertaking any obligation to update any
forward-looking statements contained in this Form 10-Q.


                                       14
<PAGE>   15
PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings

      Mesa is a party to legal proceedings and claims, which arise in the
ordinary course of business.

      Although the ultimate outcome of these pending lawsuits cannot be
      determined at this time, Mesa believes, based upon currently available
      information, that the ultimate outcome of all the proceedings and claims
      pending against Mesa is not expected to have a material adverse effect on
      Mesa's consolidated financial position. Mesa's belief regarding the
      outcome of all pending proceedings and claims is a forward-looking
      statement.

Item 2.    Changes in Securities and Use of Proceeds

      Not applicable

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

      There have been no material changes in the Company's market risk since
September 30, 2000.

Item 4.    Submission of Matters to vote for Security Holders

         Not applicable

Item 5.    Other Matters

         Not applicable

Item 6.    Exhibits and Reports on Form 8-K

    (A)    Exhibits:

           (10.1) Amendment to the Employment Agreement dated as of March 22,
           2000 between Mesa Air Group, Inc. and you Jonathan Ornstein

           (10.2) Amendment to the Employment Agreement dated as of March 22,
           2000 between Mesa Air Group, Inc. and Michael J. Lotz

    (B)    Reports on form 8-K

           The Company filed a report on Form 8-K dated October 16, 2000
           disclosing a definitive agreement with Raytheon Aircraft Company and
           Raytheon Aircraft Credit Corporation for the sale of sixteen
           Beechcraft 1900D aircraft to Raytheon on September 29, 2000. No
           financial statements were filed as a part of the report.

           The Company filed a report on Form 8-K dated November 2, 2000
           regarding its position in Mesaba Holdings on November 1, 2000. No
           financial statements were filed as a part of the report.


                                       15
<PAGE>   16
                                   SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                                MESA AIR GROUP, INC.



                                                By: /s/  Jeff P. Poeschl
                                                      Jeff P. Poeschl
                                                 Vice President - Finance
                                              (Principal Accounting Officer)



Dated: February 14, 2001


                                       16
<PAGE>   17
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT NO.             DESCRIPTION
-----------             -----------
<S>                     <C>
   (10.1)               Amendment to the Employment Agreement dated as of March
                        22, 2000 between Mesa Air Group, Inc. and you Jonathan
                        Ornstein

   (10.2)               Amendment to the Employment Agreement dated as of March
                        22, 2000 between Mesa Air Group, Inc. and Michael J.
                        Lotz
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>p64602ex10-1.txt
<DESCRIPTION>EX-10.1
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.1

March 22, 2000

Mr. Jonathan G. Ornstein
4840 Grandview Lane
Phoenix, AZ   85018


Re:      Amendment to Employment Agreement

Dear Jonathan:

This letter constitutes an amendment to the Employment Agreement dated as of
March 13, 1998 between Mesa Air Group, Inc. (the "Company") and you (the
"Employment Agreement").

Section 7.4(i) of the Employment Agreement is hereby amended by deleting the
first sentence thereof and replacing it with the following:

      "The Executive shall be entitled to terminate his employment hereunder for
      Good Reason immediately upon, or at any time within one-year after, the
      occurrence of an event constituting Good Reason."

Section 7.4(i) of the Employment Agreement is also hereby amended by deleting
clause (6) thereof and replacing it with the following:

      "(6) a Change in Control (as hereinafter defined), provided in no event
      shall the Executive be deemed to have given his consent to any Change of
      Control;".

Section 7.4(ii)(6) of the Employment Agreement is hereby deleted and replaced
with the following:

      "(6) The shareholders of the Company approve a merger or consolidation
      involving the Company (A) in which the Company is not the surviving
      corporation or (B) if, immediately following such merger or consolidation,
      less than seventy-five percent (75%) of the surviving corporation's
      outstanding voting stock is held or is anticipated to be held by persons
      who are stockholders of the Company immediately prior to such merger or
      consolidation."

Section 7.5 of the Employment Agreement is hereby amended and supplemented by
adding the following to end thereof:

      "In addition, and notwithstanding the terms of any stock option, stock
      incentive or similar plan maintained by the Company or any other agreement
      between the Company and Executive (including, without limitation, any
      stock option agreement), upon termination of the Executive's employment
      Without Good Cause or upon the exercise by the Executive of his rights to
      terminate his employment for Good Reason (including without limitation
      upon or following a Change in Control), the Company shall make a lump sum
      cash payment to Executive as follows:

               (i) If the Executive's employment is terminated by the Company
      Without Good Cause or by Executive for Good Reason, in each case, upon or
      following a Change in Control transaction in which the holders of
      Company's common stock receive consideration for their shares (either in
      the form of cash or securities, property or a combination thereof), the
      cash payment to Executive shall be made on the closing date of the
      transaction constituting the Change in Control and shall equal the greater
      of (A) the aggregate Black Scholes value as of such closing date of all
      options held by the Executive to acquire shares of the common stock of the
      Company ("Company Options") and (B) the product of (i) the per share
      consideration (the value of which shall be determined by agreement between
      the


                                       17
<PAGE>   2
      Company and Executive) to be paid to a holder of a share of the Company's
      common stock minus the exercise price per share of each Company Option
      held by Executive and (ii) the number of shares of common stock of the
      Company covered by each unexercised Company Option held by Executive;
      provided, however, that the total aggregate cash payment to be made to
      Executive pursuant to this Section 7.5 shall not in any event be less than
      $4,000,000.

               (ii) If the Executive's employment is terminated by the Company
      Without Good Cause or by Executive for Good Reason, in each case, in
      circumstances other than those applicable to clause (i) above, the cash
      payment to Executive shall be made on the date of termination or the date
      of the event giving rise to Executive's right to terminate his employment
      (whichever is earlier) and shall equal the aggregate Black Scholes value
      as of such earlier date of all Company Options held by the Executive."

The following new Section 7.7 is added to the Employment Agreement following
Section 7.6:

      "7.7 Consulting Agreement. If the Executive's employment is terminated by
      the Company Without Good Cause or by Executive for Good Reason, on the
      effective date of the termination, the Company and Executive shall enter
      into a consulting agreement in the form of Exhibit A hereto.

Section 11.1 of the Employment Agreement is hereby amended and supplemented by
adding, immediately following clause (4) thereof, the following new clause (5):

      ", or (5) any benefit or payment under Section 7.5."

This letter does not constitute a consent or waiver to or modification of any
other provision, term or condition of the Employment Agreement, all of which
remain in full force and effect.

If the foregoing meets with your approval, please indicate your acceptance of
the terms set forth in this letter by signing in the space provided below and on
the enclosed copy and by returning the copy to us for our records.

Very truly yours,

MESA AIR GROUP, INC.



By:

/s/ Andre H. Merrett
Title: Vice President, General Counsel & Secretary



Accepted and agreed:

/s/ Jonathan G. Ornstein


                                       18
<PAGE>   3
                                                                       EXHIBIT A

                              CONSULTING AGREEMENT

                  CONSULTING AGREEMENT (this "Agreement") made and entered
________ ___, ____, (the "Effective Date"), between Mesa Air Group, Inc., a
Nevada Corporation (the "Company"), with its principal place of business at 410
North 44th Street, Phoenix, Arizona 85008, and Jonathan G. Ornstein
("Consultant"), residing at Building 116, Melsbroek Airport, 1820 Melsbroek,
Belgium

                  WHEREAS, Consultant's employment with the Company terminated
as of ______ __, _____.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the parties agree as
follows:


RETENTION AS CONSULTANT.

         The Company hereby retains Consultant as a consultant to the Company.

                  Section 1.01 Services. Consultant shall render general
management consulting services ("Services") to the Company as may reasonably be
requested of him from time to time by the Company's Board of Directors.
Consultant shall have no minimum hourly service requirement nor will Consultant
be required to devote substantially all his time and attention to matters
concerning the Company. Except as may be specifically agreed to by the Company,
Consultant shall pay his own expenses relating to his performance of this
Agreement.

                  Section 1.02 Performance. Upon reasonable notice, Consultant
shall perform such Services in Phoenix, Arizona or such other location as the
parties may mutually agree.

                  Section 1.03 Term. The term of this Agreement shall expire as
of the close of business on the tenth anniversary of the date hereof, unless
sooner terminated as hereinafter set forth.

                  Section 1.04 Payment. Consultant shall be entitled to be
compensated at the rate of $[50,000] per annum, payable in semi-annual
installments. The compensation set forth above shall be the sole compensation
payable to Consultant for his performance hereunder.

                  Section 1.05 Other Benefits. During the term of this
Agreement, the Company shall provide Consultant with life and health insurance
benefits and perquisites substantially similar to those which Consultant was
receiving immediately prior to the date hereof. Life and health insurance
coverage provided by the Company will terminate automatically upon Consultant's
employment with any other entity which provides life and health insurance
coverage. The Company and its affiliated airlines will grant Consultant and his
spouse lifetime passes for positive space travel. Consultant will not be
entitled to receive any vacation or illness payments, or to participate in any
plans, arrangements, or distributions by the Company pertaining to any bonus,
profit sharing, or similar benefits for the Company's employees.


RELATIONSHIP OF PARTIES

                  Section 1.06 Independent Contractor. Consultant is an
independent contractor and is not an agent or employee of, and has no authority
to bind, the Company by contract or otherwise. Consultant will perform the
Services under the general direction of the Board of Directors of the Company,


                                       19
<PAGE>   4
but Consultant will determine, in Consultant's sole discretion, the manner and
means by which the Services are accomplished, subject to the requirement that
Consultant shall at all times comply with applicable law. The Company has no
right or authority to control the manner or means by which the Services are
accomplished. Any employee, independent contractor or agent used by Consultant
in the course of performing the Services hereunder is the sole responsibility of
Consultant.

                  Section 1.07 Employment Taxes. Consultant will report as
self-employment income all compensation received by Consultant pursuant to this
Agreement. Consultant will indemnify the Company and hold it harmless from and
against all claims, damages, losses and expenses, including reasonable fees and
expenses of attorneys and other professionals, relating to any obligation
imposed by law on the Company to pay any withholding taxes, social security,
unemployment or disability insurance, or similar items in connection with
compensation received by Consultant pursuant to this Agreement.


CONFIDENTIAL INFORMATION

                  Consultant acknowledges that Consultant may have heretofore
acquired or may hereafter acquire information and materials from the Company and
knowledge about the business, products, customers, consultants, advisors and
suppliers of the Company and that all such knowledge, information and materials
acquired, the existence, terms and conditions of this Agreement, and the content
are and will be the trade secrets and confidential and proprietary information
of the Company (collectively, "Confidential Information"). Confidential
Information will not include, however, any information that is or becomes part
of the public domain through no fault of Consultant or that the Company
specifically designates as non-confidential. Consultant agrees to hold all such
Confidential Information in strict confidence, not to disclose it to others or
use it in any way, commercially or otherwise, except in performing the Services,
and not to allow any unauthorized person access to it, either before or after
expiration or termination of this Agreement. Consultant further agrees to take
all action reasonably necessary and satisfactory to protect the confidentiality
of the Confidential Information, including, without limitation, physically
securing any Confidential information that comes into Consultant's possession
from time to time.


INDEMNIFICATION BY CONSULTANT

                  Consultant will indemnify the Company and hold it harmless
from and against all claims, damages, losses and expenses, including court costs
and reasonable fees and expenses of attorneys, expert witnesses, and other
professionals, arising out of or resulting from, and, at the Company's option,
Consultant will defend the Company against any action by a third party that is
based on any negligent act or omission or intentional misconduct of Consultant
which results in: (a) any bodily injury or death; (b) any injury or destruction
to tangible or intangible property or any loss of use resulting therefrom; or
(c) any violation of any statute, ordinance or regulation.


TERMINATION AND EXPIRATION

                  Section 1.08 Breach. Either party may terminate this Agreement
in the event of a material breach by the other party of this Agreement if such
breach continues uncured for a period of ten (10) days after written notice.

Section 1.09 At Will. The Company may terminate this Agreement at any time, for
any reason or no reason, by written notice to Consultant. In the event the
Company terminates this Agreement for any reason other than for breach of
Section 3 or Subsection 5.1 herein, Consultant shall be entitled to receive
payment hereunder until the earlier of the expiration of the term of this
Agreement or Consultants death.


                                       20
<PAGE>   5
                  Section 1.10 Expiration. Unless terminated earlier, this
Agreement will expire at the end of the period of consultancy.

                  Section 1.11 No Election of Remedies. The election by the
Company to terminate this Agreement in accordance with its terms shall not be
deemed an election of remedies, and all other remedies provided by this
Agreement or available at law or in equity shall survive any termination.


EFFECT OF EXPIRATION OR TERMINATION

                  Section 1.12 Survival of Obligations. Upon the expiration or
termination of this Agreement for any reason, each party will be released from
all obligations to the other arising after the date of expiration or
termination, except that expiration or termination of this Agreement will not
relieve Consultant of its obligations under Section 3 above nor will expiration
or termination relieve Consultant or the Company from any liability arising from
any breach of this Agreement.

                  Section 1.13 Return of Confidential Information. Upon the
expiration or termination of this Agreement for any reason, Consultant will
promptly notify the Company of all Confidential Information, including, but not
limited to, the content in Consultant's possession and, in accordance with the
Company's instructions, will promptly deliver to the Company all such
Confidential Information.


COVENANTS

                  Section 1.14 Solicitation of Employment. Consultant agrees
that it will not solicit the services of any of the employees, consultants,
advisors, suppliers or customers of the Company for the Period of Consultancy
and for six (6) months thereafter without the prior written consent of the
Company.

                  Section 1.15 Time of Performance. Consultant represents and
warrants that Consultant has performed all Services during Consultant's free
time and in no event has Consultant performed the Services during the course of
Consultant's work as an employee, consultant, independent contractor or
otherwise with any independent third party.


GENERAL

                  Section 1.16 Assignment. Consultant may not assign
Consultant's rights or delegate Consultant's duties under this Agreement, either
in whole or in part, without the prior written consent of the Company. Any
attempted assignment or delegation without such consent will be void.

                  Section 1.17 Equitable Remedies. Because the Services are
personal and unique and because Consultant will have access to Confidential
Information of the Company, the Company will have the right to enforce this
Agreement and any of its provisions by injunction, specific performance, or
other equitable relief without the need to post a bond or other security,
without prejudice to any other rights and remedies that the Company may have for
a breach of this Agreement.

                  Section 1.18 Attorneys' Fees. If any action is necessary to
enforce the terms of this Agreement, the substantially prevailing party will be
entitled to reasonable attorneys' fees, costs and expenses in addition to any
other relief to which such prevailing party may be entitled.

                  Section 1.19 Governing Law; Severability. This Agreement will
be governed by and construed in accordance with the laws of the State of
Arizona, excluding that body of law pertaining to conflict of laws. If any
provision of this Agreement is for any reason found to be inoperative, invalid
or unenforceable, the remainder of this Agreement will continue in full force
and effect without regard to such


                                       21
<PAGE>   6
inoperative, invalid or unenforceable provision and, to this end all provisions
of this Agreement are declared to be severable.

                  Section 1.20 Notices. Any notices under this Agreement will be
sent by certified or registered mail, return receipt requested, by personal
delivery to the address specified above or such other address as the party
specifies in writing. Such notice will be effective upon its delivery or
transmittal as specified.

                  Section 1.21 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.

                  Section 1.22 Complete Understanding; Modification. This
Agreement, together with the Amendment to Agreement and the Exhibits thereto,
constitutes the complete and exclusive understanding and agreement of the
parties and supersedes all prior understandings and agreements, whether written
or oral, with respect to the subject matter hereof. Any waiver, modification or
amendment of any provision of this Agreement will be effective only if in
writing and signed by the parties hereto.

                  IN WITNESS WHEREOF, the parties have signed this Agreement as
of the Effective Date.


         MESA AIR GROUP, INC.                          CONSULTANT




By:________________________________         By:_________________________________
Name:______________________________         Name: Jonathan G. Ornstein
Title:_____________________________


                                       22

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>p64602ex10-2.txt
<DESCRIPTION>EX-10.2
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 10.2





March 22, 2000

Mr. Michael J. Lotz
7400 Gainey Club Drive #140
Scottsdale, AZ 85258


                  Re: Amendment to Employment Agreement

                  Dear Michael:

                  This letter constitutes an amendment to the Employment
Agreement dated as of January 1, 1999 between Mesa Air Group, Inc. (the
"Company") and you (the "Employment Agreement").

                  Section 7.4(i) of the Employment Agreement is hereby amended
by deleting the first sentence thereof and replacing it with the following:

                       "The Executive shall be entitled to terminate his
      employment hereunder for Good Reason immediately upon, or at any time
      within one-year after, the occurrence of an event constituting Good
      Reason."

                  Section 7.4(i) of the Employment Agreement is also hereby
amended by deleting clause (4) thereof and replacing it with the following:

                       "(4) a Change in Control (as hereinafter defined),
      provided in no event shall the Executive be deemed to have given his
      consent to any Change of Control;".

                  Section 7.4(ii)(6) of the Employment Agreement is hereby
deleted and replaced with the following:

                       "(6) The shareholders of the Company approve a merger or
      consolidation involving the Company (A) in which the Company is not the
      surviving corporation or (B) if, immediately following such merger or
      consolidation, less than seventy-five percent (75%) of the surviving
      corporation's outstanding voting stock is held or is anticipated to be
      held by persons who are stockholders of the Company immediately prior to
      such merger or consolidation."

                  Section 7.5 of the Employment Agreement is hereby amended and
supplemented by adding the following to end thereof:

                       "In addition, and notwithstanding the terms of any stock
      option, stock incentive or similar plan maintained by the Company or any
      other agreement between the Company and Executive (including, without
      limitation, any stock option agreement), upon termination of the
      Executive's employment Without Good Cause or upon the exercise by the
      Executive of his rights to terminate his employment for Good Reason
      (including without limitation upon or following a Change in Control), the
      Company shall make a lump sum cash payment to Executive as follows:

                       (i) If the Executive's employment is terminated by the
      Company Without Good Cause or by Executive for Good Reason, in each case,
      upon or following a Change in Control transaction in which the holders of
      Company's common stock receive consideration for their shares


                                       23
<PAGE>   2


      (either in the form of cash or securities, property or a combination
      thereof), the cash payment to Executive shall be made on the closing
      date of the transaction constituting the Change in Control and shall
      equal the greater of (A) the aggregate Black Scholes value as of such
      closing date of all options held by the Executive to acquire shares of
      the common stock of the Company ("Company Options") and (B) the product
      of (i) the per share consideration (the value of which shall be
      determined by agreement between the Company and Executive) to be paid
      to a holder of a share of the Company's common stock minus the exercise
      price per share of each Company Option held by Executive and (ii) the
      number of shares of common stock of the Company covered by each
      unexercised Company Option held by Executive; provided, however, that
      the total aggregate cash payment to be made to Executive pursuant to
      this Section 7.5 shall not in any event be less than $1,300,000.

                       (ii) If the Executive's employment is terminated by the
      Company Without Good Cause or by Executive for Good Reason, in each case,
      in circumstances other than those applicable to clause (i) above, the cash
      payment to Executive shall be made on the date of termination or the date
      of the event giving rise to Executive's right to terminate his employment
      (whichever is earlier) and shall equal the aggregate Black Scholes value
      as of such earlier date of all Company Options held by the Executive."

                  The following new Section 7.7 is added to the Employment
Agreement following Section 7.6:

                       "7.7 Consulting Agreement. If the Executive's employment
      is terminated by the Company Without Good Cause or by Executive for Good
      Reason, on the effective date of the termination, the Company and
      Executive shall enter into a consulting agreement in the form of Exhibit A
      hereto.

                  Section 11.1 of the Employment Agreement is hereby amended and
supplemented by adding, immediately following clause (4) thereof, the following
new clause (5):

                       ", or (5) any benefit or payment under Section 7.5."

                  This letter does not constitute a consent or waiver to or
modification of any other provision, term or condition of the Employment
Agreement, all of which remain in full force and effect.

                  If the foregoing meets with your approval, please indicate
your acceptance of the terms set forth in this letter by signing in the space
provided below and on the enclosed copy and by returning the copy to us for our
records.

                  Very truly yours,

                  MESA AIR GROUP, INC.

                  By:
                     ------

                  /s/ Andre H. Merrett
                  --------------------
Title: Vice President, General Counsel & Secretary



                  Accepted and agreed:

                  /s/  Michael J. Lotz
                  --------------------



                                       24


<PAGE>   3



                                                                       EXHIBIT A

                              CONSULTING AGREEMENT

                  CONSULTING AGREEMENT (this "Agreement") made and entered ____
___, _____ (the "Effective Date"), between Mesa Air Group, Inc., a Nevada
Corporation (the "Company"), with its principal place of business at 410 North
44th Street, Phoenix, Arizona 85008, and Michael J. Lotz ("Consultant"),
residing at ________________.

                  WHEREAS, Consultant's employment with the Company terminated
as of ______ __, _____.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the parties agree as
follows:


RETENTION AS CONSULTANT.

                  The Company hereby retains Consultant as a consultant to the
Company.

         Section 1.23 Services. Consultant shall render general management
consulting services ("Services") to the Company as may reasonably be requested
of him from time to time by the Company's Board of Directors. Consultant shall
have no minimum hourly service requirement nor will Consultant be required to
devote substantially all his time and attention to matters concerning the
Company. Except as may be specifically agreed to by the Company, Consultant
shall pay his own expenses relating to his performance of this Agreement.

         Section 1.24 Performance. Upon reasonable notice, Consultant shall
perform such Services in Phoenix, Arizona or such other location as the parties
may mutually agree.

         Section 1.25 Term. The term of this Agreement shall expire as of
the close of business on the tenth anniversary of the date hereof, unless sooner
terminated as hereinafter set forth.

         Section 1.26 Payment. Consultant shall be entitled to be
compensated at the rate of $[25,000] per annum, payable in semi-annual
installments. The compensation set forth above shall be the sole compensation
payable to Consultant for his performance hereunder.

         Section 1.27 Other Benefits. During the term of this Agreement,
the Company shall provide Consultant with life and health insurance benefits and
perquisites substantially similar to those which Consultant was receiving
immediately prior to the date hereof. Life and health insurance coverage
provided by the Company will terminate automatically upon Consultant's
employment with any other entity which provides life and health insurance
coverage. The Company and its affiliated airlines will grant Consultant and his
spouse lifetime passes for positive space travel. Consultant will not be
entitled to receive any vacation or illness payments, or to participate in any
plans, arrangements, or distributions by the Company pertaining to any bonus,
profit sharing, or similar benefits for the Company's employees.


RELATIONSHIP OF PARTIES

Section 1.28 Independent Contractor. Consultant is an independent contractor and
is not an agent or employee of, and has no authority to bind, the Company by
contract or otherwise.

                                       25

<PAGE>   4


Consultant will perform the Services under the general direction of the Board of
Directors of the Company, but Consultant will determine, in Consultant's sole
discretion, the manner and means by which the Services are accomplished, subject
to the requirement that Consultant shall at all times comply with applicable
law. The Company has no right or authority to control the manner or means by
which the Services are accomplished. Any employee, independent contractor or
agent used by Consultant in the course of performing the Services hereunder is
the sole responsibility of Consultant.

         Section 1.29 Employment Taxes. Consultant will report as
self-employment income all compensation received by Consultant pursuant to this
Agreement. Consultant will indemnify the Company and hold it harmless from and
against all claims, damages, losses and expenses, including reasonable fees and
expenses of attorneys and other professionals, relating to any obligation
imposed by law on the Company to pay any withholding taxes, social security,
unemployment or disability insurance, or similar items in connection with
compensation received by Consultant pursuant to this Agreement.


CONFIDENTIAL INFORMATION

                  Consultant acknowledges that Consultant may have heretofore
acquired or may hereafter acquire information and materials from the Company and
knowledge about the business, products, customers, consultants, advisors and
suppliers of the Company and that all such knowledge, information and materials
acquired, the existence, terms and conditions of this Agreement, and the content
are and will be the trade secrets and confidential and proprietary information
of the Company (collectively, "Confidential Information"). Confidential
Information will not include, however, any information that is or becomes part
of the public domain through no fault of Consultant or that the Company
specifically designates as non-confidential. Consultant agrees to hold all such
Confidential Information in strict confidence, not to disclose it to others or
use it in any way, commercially or otherwise, except in performing the Services,
and not to allow any unauthorized person access to it, either before or after
expiration or termination of this Agreement. Consultant further agrees to take
all action reasonably necessary and satisfactory to protect the confidentiality
of the Confidential Information, including, without limitation, physically
securing any Confidential information that comes into Consultant's possession
from time to time.


INDEMNIFICATION BY CONSULTANT

                  Consultant will indemnify the Company and hold it harmless
from and against all claims, damages, losses and expenses, including court costs
and reasonable fees and expenses of attorneys, expert witnesses, and other
professionals, arising out of or resulting from, and, at the Company's option,
Consultant will defend the Company against any action by a third party that is
based on any negligent act or omission or intentional misconduct of Consultant
which results in: (a) any bodily injury or death; (b) any injury or destruction
to tangible or intangible property or any loss of use resulting therefrom; or
(c) any violation of any statute, ordinance or regulation.


TERMINATION AND EXPIRATION

         Section 1.30 Breach. Either party may terminate this Agreement in
the event of a material breach by the other party of this Agreement if such
breach continues uncured for a period of ten (10) days after written notice.

         Section 1.31 At Will. The Company may terminate this Agreement at
any time, for any reason or no reason, by written notice to Consultant. In the
event the Company terminates this Agreement for any reason other than for breach
of Section 3 or Subsection 5.1 herein, Consultant shall be entitled to receive
payment hereunder until the earlier of the expiration of the term of this
Agreement or Consultants death.

                                       26

<PAGE>   5

         Section 1.32 Expiration. Unless terminated earlier, this Agreement
will expire at the end of the period of consultancy.

         Section 1.33 No Election of Remedies. The election by the Company
to terminate this Agreement in accordance with its terms shall not be deemed an
election of remedies, and all other remedies provided by this Agreement or
available at law or in equity shall survive any termination.


EFFECT OF EXPIRATION OR TERMINATION

         Section 1.34 Survival of Obligations. Upon the expiration or
termination of this Agreement for any reason, each party will be released from
all obligations to the other arising after the date of expiration or
termination, except that expiration or termination of this Agreement will not
relieve Consultant of its obligations under Section 3 above nor will expiration
or termination relieve Consultant or the Company from any liability arising from
any breach of this Agreement.

         Section 1.35 Return of Confidential Information. Upon the
expiration or termination of this Agreement for any reason, Consultant will
promptly notify the Company of all Confidential Information, including, but not
limited to, the content in Consultant's possession and, in accordance with the
Company's instructions, will promptly deliver to the Company all such
Confidential Information.


COVENANTS

         Section 1.36 Solicitation of Employment. Consultant agrees that it
will not solicit the services of any of the employees, consultants, advisors,
suppliers or customers of the Company for the Period of Consultancy and for six
(6) months thereafter without the prior written consent of the Company.

         Section 1.37 Time of Performance. Consultant represents and
warrants that Consultant has performed all Services during Consultant's free
time and in no event has Consultant performed the Services during the course of
Consultant's work as an employee, consultant, independent contractor or
otherwise with any independent third party.


GENERAL

         Section 1.38 Assignment. Consultant may not assign Consultant's
rights or delegate Consultant's duties under this Agreement, either in whole or
in part, without the prior written consent of the Company. Any attempted
assignment or delegation without such consent will be void.

         Section 1.39 Equitable Remedies. Because the Services are personal
and unique and because Consultant will have access to Confidential Information
of the Company, the Company will have the right to enforce this Agreement and
any of its provisions by injunction, specific performance, or other equitable
relief without the need to post a bond or other security, without prejudice to
any other rights and remedies that the Company may have for a breach of this
Agreement.

         Section 1.40 Attorneys' Fees. If any action is necessary to
enforce the terms of this Agreement, the substantially prevailing party will be
entitled to reasonable attorneys' fees, costs and expenses in addition to any
other relief to which such prevailing party may be entitled.

         Section 1.41 Governing Law; Severability. This Agreement will be
governed by and construed in accordance with the laws of the State of Arizona,
excluding that body of law pertaining to conflict of laws. If any provision of
this Agreement is for any reason found to be inoperative, invalid or
unenforceable, the remainder of this Agreement will continue in full force and
effect without regard to such

                                       27

<PAGE>   6

inoperative, invalid or unenforceable provision and, to this end all
provisions of this Agreement are declared to be severable.

         Section 1.42 Notices. Any notices under this Agreement will be
sent by certified or registered mail, return receipt requested, by personal
delivery to the address specified above or such other address as the party
specifies in writing. Such notice will be effective upon its delivery or
transmittal as specified.

         Section 1.43 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.

         Section 1.44 Complete Understanding; Modification. This Agreement,
together with the Amendment to Agreement and the Exhibits thereto, constitutes
the complete and exclusive understanding and agreement of the parties and
supersedes all prior understandings and agreements, whether written or oral,
with respect to the subject matter hereof. Any waiver, modification or amendment
of any provision of this Agreement will be effective only if in writing and
signed by the parties hereto.

                  IN WITNESS WHEREOF, the parties have signed this Agreement as
of the Effective Date.


MESA AIR GROUP, INC.




By:  __________________________________________________
     Name:_____________________________________________
     Title:____________________________________________




 CONSULTANT



By: ___________________________________________________
    Name: Michael J. Lotz




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</TEXT>
</DOCUMENT>
</SUBMISSION>
