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Subsequent Events

6 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

17.	Subsequent Events

CARES Act

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") into law. This relief package includes financial grant providing the airline industry with up to $25 billion to be used for employee wages, salaries and benefits.

In April 2020, the Company was granted $92.5 million in emergency relief through the payroll support program of the CARES Act to be paid in installments through September 2020. The Company received the first installment of $30.8 million in April 2020 and the remaining $61.6 million is scheduled to be paid to Mesa in four equal payments from June to September 2020.

The relief payments are conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other conditions include prohibitions on share repurchases and dividends through September 30, 2021, continuing essential air service as directed by the U.S. Department of Transportation and certain limitations on executive compensation.

The CARES Act provides for up to $25 billion in secured loans to the airline industry. The Company has submitted the application for a loan under the loan program and is awaiting the outcome of the application. Under the Loan Program, the Company expects to have the ability, through September 30, 2020, to borrow a currently undetermined amount from the U.S. Treasury Department for a term of up to five years. Any loans issued under the Loan Program are expected to be senior secured obligations of the Company, with collateral to be determined. If the Company borrows any amounts under the Loan Program, the Company expects to issue to the U.S. Treasury Department warrants to purchase shares of MESA common stock.

The CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020. The Company expects to defer approximately $7.0 million with 50% of the deferred amount to be repaid on December 31, 2021 and the remaining 50% to be repaid on December 31, 2022.

These aforementioned reliefs under the CARES Act are expected to provide liquidity during the locked down and recovery periods this year.

One of our aircraft lenders has agreed to defer $28 million of principal debt payments otherwise due beginning on March 19, 2020, to and including September 30, 2020. All Deferred Payments shall be due in a lump sum payment on September 30, 2020 per the letter agreement dated April 9, 2020. Although the agreement is to pay the full amount back on September 30, 2020, the Company is seeking more favorable repayment terms from the lender. There is no certainty on whether the repayment terms will be able to be modified.

Removal of Aircraft from Code Share and Revenue Sharing Agreement with American Airlines

In April 2020, the Company received a withdrawal notice from American seeking to permanently withdraw three aircraft from the Code Share and Revenue Sharing Agreement. Two of the aircraft will be withdrawn effective May 19, 2020 and the third aircraft will be withdrawn effective June 1, 2020. American’s withdrawal of these three aircraft stems from withdrawal rights that American previously asserted were triggered in September 2019 and November 2019. At such time, American refrained from exercising such withdrawal rights, however, reserved the right to withdrawal the three aircraft at a later date under certain circumstances. In light of the rapid grounding of aircraft caused by the COVID-19 virus, the overall reduction in demand for air travel, and the need to reduce capacity, American has elected to remove such aircraft now.

Following the removal of the three aircraft referenced above, the Company will continue to operate 56 CRJ-900 aircraft under the American CPA.

Decline in Block Hours Flown for Major Airlines Partners

The Company further reports that, beginning in March 2020, it has experienced a material decline in demand in block hours from both of its major airline partners, American and United Airlines, Inc. (“United” and together with American, the “Partners”) resulting from the spread of the COVID-19 virus. As a result of this decline in demand and the subsequent capacity reductions by the Company’s Partners, the Company operated 10,297 block hours in April 2020, a 72.4% drop from April 2019. The Company also anticipates similar schedule reductions will likely continue into the second quarter of 2020 and may continue throughout the remainder of 2020 and into 2021.