Organization and Operations	9 Months Ended
Jun. 30, 2023
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Organization and Operations	1. Organization and Operations About Mesa Air Group, Inc. Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa" or the "Company") is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 89 cities in 40 states, the District of Columbia, the Bahamas, Canada, Cuba, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport. As of June 30, 2023, Mesa operated a fleet of 80 regional aircraft with approximately 277 daily departures, four (4) 737 cargo aircraft and over 2,341 employees. Mesa’s flights were conducted under the Company’s Capacity Purchase Agreements (“CPAs”) and Flight Services Agreement (“FSA”), leased to a third party, held for sale or maintained as operational spares. Mesa operates all of its flights as either United Express or DHL Express flights pursuant to the terms of the CPA entered into United Airlines, Inc. (“United”) and FSA with DHL Network Operations (USA), Inc. (“DHL”) (each, our “major partner”). Prior to the wind-down and termination of the Company's CPA with American Airlines, Inc. ("American") on April 3, 2023, Mesa also operated flights as American Eagle. All of the Company’s consolidated contract revenues for the three and nine months ended June 30, 2023 and June 30, 2022 were derived from operations associated with the American CPA prior to April 3, 2023, the United CPA, FSA, and leases of aircraft to a third party. The CPA between us and United involves a revenue-guarantee arrangement whereby United pays fixed-fees for each aircraft under contract, departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time), and reimbursement of certain direct operating expenses in exchange for providing flight services. United also pays certain expenses directly to suppliers, such as fuel, ground operations and landing fees. Under the terms of the CPA, United controls route selection, pricing, and seat inventories, reducing our exposure to fluctuations in passenger traffic, fare levels, and fuel prices. Under our FSA with DHL, we receive a fee per block hour with a minimum block hour guarantee in exchange for providing cargo flight services. Ground support expenses including fueling and airport fees are paid directly by DHL. Impact of Pilot Shortage and Transition of Operations to United During our three and nine months ended June 30, 2023 and fiscal year ended September 30, 2022, the severity of the pilot shortage, elevated pilot attrition, the transition of our operations with American to United, and increasing costs associated with pilot wages adversely impacted our financial results, cash flows, financial position, and other key financial ratios. One of the primary factors contributing to the pilot shortage and attrition is the demand for pilots at major carriers, which are hiring at an accelerated rate. These airlines now seek to increase their capacity to meet the growing demand for air travel as the global pandemic has moderated. A primary source of pilots for the major U.S. passenger and cargo carriers are the U.S. regional airlines. As a result of pilot shortage and attrition, we produced less block hours to generate revenues and incurred penalties for operational shortfalls under our CPAs. During the nine months ended June 30, 2023, these challenges resulted in a negative impact on the Company’s financial results highlighted by cash flows used in operations of $13.8 million and net loss of $91.8 million including a non-cash impairment charge of $51.0 million related to the Company designating 14 CRJ-900 aircraft as held for sale and our customer relationship intangible asset. These conditions and events raised financial concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months. As of June 30, 2023, the Company is in compliance with all of its debt covenants. To address such concerns, management developed and implemented several material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months. As previously disclosed plans in form 10-K for the fiscal year ended September 30, 2022, the following plans continue to be effective. • The Company and American agreed to terminate and complete a wind-down of the American CPA. The termination eliminated financial penalties incurred under the American CPA. • We entered into an agreement with a third party to sell eleven (11) of our CRJ-900 aircraft and one (1) CRJ-200 aircraft to raise capital and retire debt. Four (4) aircraft were sold during the quarter ended March 31, 2023, and we expect to complete the sale of the remaining seven (7) aircraft before 2023 fiscal year end. Sale from remaining seven (7) aircraft will generate approximately $21 million of gross proceeds. Furthermore, the Company implemented the following additional measures during the period. • Management is currently engaged in efforts to address the RASPRO aircraft repurchase obligation before it comes due. These efforts include, but are not limited to, obtaining equity financing, issuing debt, entering into other financing arrangements, securing a third party to purchase such aircraft, or restructuring the RASPRO aircraft lease facility. • On June 22, 2023, the Company closed on the sale of 20 spare engines to United. The approximate gross proceeds from this sale was $53.7 million, resulting in approximately $26.9 million of net proceeds after partial debt reduction of $7.8 million on the UMB engine loan, $7.9 million on the United Bridge Loan, and $11.2 million on the UST loan. This transaction completed the sale of the 30 engines to United under the Engine Sale Agreement entered into on December 27, 2022, as previously reported. The Company recorded a gain on the sale of the engines of $6.7 million for the 20 sold during the quarter, and $7.3 million for all 30. • The Company entered into an agreement to sell seven (7) surplus CRJ-900 aircraft. The approximate gross proceeds from the sale of such aircraft is expected to be $71.8 million and to generate approximately $8.5 million of net proceeds after the retirement of debt. The sale of these aircraft will occur individually throughout the remainder of the fiscal year, with the final transaction expected to be completed in October 2023. • Management is in active discussion with United to provide additional liquidity through existing lines of credit and other means. • The Company has unencumbered parts that can be leveraged to provide additional liquidity. • In addition to already executed agreements to sell aircraft, the Company is actively seeking arrangements to sell other surplus assets including aircraft, engines, and spare parts to reduce debt and optimize operations. The Company believes the plans and initiatives outlined above have effectively alleviated the financial concerns above and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements. While we intend to continue to implement and monitor our plans and initiatives, there is no guarantee that these actions will continue to be effective and achieve their desired objectives. As of June 30, 2023, the Company has $124.3 million of long-term debt due within the next twelve months. We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations along with the liquidity we expect to achieve from disposition of surplus assets and other plans to improve cashflow from operations as outlined above. American Capacity Purchase Agreement For the first three days of the three months ended June 30, 2023, the Company operated 30 CRJ-900 aircraft under an Amended and Restated Capacity Purchase Agreement with American dated November 19, 2020 (as amended, the “American CPA”), after which the wind-down period of the American CPA was completed, and the American CPA was officially terminated. In exchange for providing passenger flight services, we received a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown during each month. In addition, we also received incentives or incurred penalties based upon our operational performance, including controllable on-time departure (“CD0”) and controllable flight completion factor (“CCF”) percentages. American also reimbursed us for certain costs on an actual basis, including passenger liability and hull insurance and aircraft property taxes. Other expenses, including fuel and certain landing fees, were directly paid to suppliers by American. In addition, American also provided, at no cost to us, certain ground handling and customer service functions as well as airport-related facilities and gates at American hubs and cities where we operated. In December 2022, we entered into Amendment No. 11 (the “American Amendment”) to the American CPA. The American Amendment provided for the termination and wind-down of the American CPA by April 3, 2023 (the “Wind-down Period”), at which time all Covered Aircraft (as defined in the American CPA) were removed from the American CPA. In March 2023, we began to transition aircraft operated under the American CPA to the United CPA. The American CPA was previously set to expire by its terms on December 31, 2025. Under the terms of the American Amendment, during the Wind-down Period (i) we continued to receive a fixed minimum monthly amount per aircraft covered by the American CPA, plus additional amounts based on the number of flights and block hours flown during each month, subject to adjustment based on the Company’s controllable completion rate and certain other factors, and (ii) American agreed not to exercise certain termination or withdrawal rights under the American CPA if we failed to meet certain operational performance targets for the three (3) consecutive month period ending January 31, 2023. We were in compliance with all of the terms of the American CPA during the Wind-down Period and no Material Breach (as defined in the American CPA) occurred. Pursuant to the American Amendment, as no material breaches occurred during the wind-down period, American agreed to waive Mesa’s failure to meet certain past operational performance targets and other requirements, which triggered termination and withdrawal rights for American pursuant to the terms of American CPA. All CCF targets were met during the Wind-down Period, and there were no penalties associated with that performance metric. The American Amendment provided for liquidated damages (the “Liquidated Damages Claim”) payable to American in the event of a Material Breach (as defined in the American CPA) of the American CPA or a repudiation by us of our obligations under the American CPA. No Material Breaches occurred during the wind-down period that would require the Company to pay any liquidated damages. The parties executed a written mutual release of all claims and acknowledgment that no Material Breaches have occurred under the American CPA (including, without limitation, any Liquidated Damages Claim). United Capacity Purchase Agreement Under the United CPA, we have the ability to fly up to 80 aircraft for United. The aircraft can be a mix of any number of E-175, E-175LL, or CRJ-900 aircraft so long as the number of aircraft operating at any given time does not exceed 80. As of June 30, 2023, we operated 56 E-175 and 24 CRJ-900 aircraft under our Third Amended and Restated Capacity Purchase Agreement with United dated December 27, 2022, which amended and restated the Second Amended and Restated Capacity Purchase Agreement dated November 4, 2020 (as amended, the “United CPA” or the "Amended and Restated United CPA"). Under the United CPA, United owns 42 of our 60 E-175 aircraft and all of our E-175LL aircraft and leases them to us at nominal amounts. The E-175 aircraft owned by United and leased to us have terms expiring between 2024 and 2028, and the 18 E-175 aircraft owned by us have terms expiring in 2028. The E-175LL aircraft have terms expiring in 2032 and 2033. In exchange for providing passenger flight services, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown and the results of passenger satisfaction surveys. United reimburses us for certain costs on an actual basis, including property tax per aircraft and passenger liability insurance. United also reimburses us on a pass-through basis for all costs related to heavy airframe and engine maintenance, landing gear, auxiliary power units ("APUs"), and component maintenance for the E-175 aircraft owned by United. Other expenses, including fuel and certain landing fees, are directly paid to suppliers by United. Our United CPA is subject to termination prior to its expiration, including under the following circumstances: • If certain operational performance factors fall below a specified percentage for a specified time, subject to notice under certain circumstances; • If we fail to perform the material covenants, agreements, terms or conditions of our United CPA or similar agreements with United, subject to 30 days' notice and cure rights; • If either United or we become insolvent, file bankruptcy, or fail to pay debts when due, the non-defaulting party may terminate the agreement; • If we merge with, or if control of us is acquired by another air carrier or a corporation directly or indirectly owning or controlling another air carrier; • United, subject to certain conditions, including the payment of certain costs tied to aircraft type, may terminate the agreement in its discretion, or remove E-175 aircraft from service, by giving us notice of 90 days or more; and • If United elects to terminate our United CPA in its entirety or permanently remove aircraft from service, we are permitted to return any of the affected E-175 aircraft leased from United at no cost to us. DHL Flight Services Agreement On December 20, 2019, we entered into a Flight Services Agreement with DHL (the “DHL FSA”). Under the terms of the DHL FSA, we operate four (4) Boeing 737 aircraft which are leased to us from DHL and a third party to provide cargo air transportation services as of June 30, 2023. In exchange for providing cargo flight services, we receive a fee per block hour with a minimum block hour guarantee. We are eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance. Ground support expenses including fueling and airport fees are paid directly by DHL. Under our DHL FSA, DHL leases two (2) Boeing 737-400F aircraft and one (1) 737-800F and subleases them to us at nominal amounts. DHL reimburses us on a pass-through basis for all costs related to heavy maintenance including C-checks, off-wing engine maintenance and overhauls including life limited parts (“LLPs”), landing gear overhauls and LLPs, thrust reverser overhauls, and APU overhauls and LLPs. Certain items such as fuel, de-icing fluids, landing fees, aircraft ground handling fees, en-route navigation fees, and custom fees are paid directly to suppliers by DHL or otherwise reimbursed if incurred by us. A third Boeing 737-400F aircraft is leased to us under an operating lease by a third party. The DHL FSA expires five (5) years from the commencement date of the first aircraft placed into service, which was in October 2020. DHL has the option to extend the agreement with respect to one (1) or more aircraft for a period of one year with 90 days’ advance written notice. Our DHL FSA is subject to the following termination rights prior to its expiration: • If either party fails to comply with the obligations, warranties, representations, or undertakings under the DHL FSA, subject to certain notice and cure rights; • If either party is declared bankrupt or insolvent; • If we are unable to legally operate the aircraft under the DHL FSA for a specified number of days; • At any time after the first anniversary of the commencement date of the first aircraft placed in service with 90 days' written notice. • If we fail to comply with performance standards for three (3) consecutive measurement periods. • If we are subject to a labor incident that materially and adversely affects our ability to perform services under the DHL FSA for a specified number of days; • Upon a change in control or ownership of the Company; and • DHL may terminate the agreement for a specific aircraft if it is subject to a total loss and the Company does not provide alternate services at our expense, or if the aircraft becomes unavailable for more than 30 days due to unscheduled maintenance.

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa" or the "Company") is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 89 cities in 40 states, the District of Columbia, the Bahamas, Canada, Cuba, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport. As of June 30, 2023, Mesa operated a fleet of 80 regional aircraft with approximately 277 daily departures, four (4) 737 cargo aircraft and over 2,341 employees. Mesa’s flights were conducted under the Company’s Capacity Purchase Agreements (“CPAs”) and Flight Services Agreement (“FSA”), leased to a third party, held for sale or maintained as operational spares. Mesa operates all of its flights as either United Express or DHL Express flights pursuant to the terms of the CPA entered into United Airlines, Inc. (“United”) and FSA with DHL Network Operations (USA), Inc. (“DHL”) (each, our “major partner”). Prior to the wind-down and termination of the Company's CPA with American Airlines, Inc. ("American") on April 3, 2023, Mesa also operated flights as American Eagle. All of the Company’s consolidated contract revenues for the three and nine months ended June 30, 2023 and June 30, 2022 were derived from operations associated with the American CPA prior to April 3, 2023, the United CPA, FSA, and leases of aircraft to a third party.

The CPA between us and United involves a revenue-guarantee arrangement whereby United pays fixed-fees for each aircraft under contract, departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time), and reimbursement of certain direct operating expenses in exchange for providing flight services. United also pays certain expenses directly to suppliers, such as fuel, ground operations and landing fees. Under the terms of the CPA, United controls route selection, pricing, and seat inventories, reducing our exposure to fluctuations in passenger traffic, fare levels, and fuel prices. Under our FSA with DHL, we receive a fee per block hour with a minimum block hour guarantee in exchange for providing cargo flight services. Ground support expenses including fueling and airport fees are paid directly by DHL.

During our three and nine months ended June 30, 2023 and fiscal year ended September 30, 2022, the severity of the pilot shortage, elevated pilot attrition, the transition of our operations with American to United, and increasing costs associated with pilot wages adversely impacted our financial results, cash flows, financial position, and other key financial ratios. One of the primary factors contributing to the pilot shortage and attrition is the demand for pilots at major carriers, which are hiring at an accelerated rate. These airlines now seek to increase their capacity to meet the growing demand for air travel as the global pandemic has moderated. A primary source of pilots for the major U.S. passenger and cargo carriers are the U.S. regional airlines.

As a result of pilot shortage and attrition, we produced less block hours to generate revenues and incurred penalties for operational shortfalls under our CPAs. During the nine months ended June 30, 2023, these challenges resulted in a negative impact on the Company’s financial results highlighted by cash flows used in operations of $13.8 million and net loss of $91.8 million including a non-cash impairment charge of $51.0 million related to the Company designating 14 CRJ-900 aircraft as held for sale and our customer relationship intangible asset. These conditions and events raised financial concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months. As of June 30, 2023, the Company is in compliance with all of its debt covenants.

To address such concerns, management developed and implemented several material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months. As previously disclosed plans in form 10-K for the fiscal year ended September 30, 2022, the following plans continue to be effective.

•

The Company and American agreed to terminate and complete a wind-down of the American CPA. The termination eliminated financial penalties incurred under the American CPA.

•

We entered into an agreement with a third party to sell eleven (11) of our CRJ-900 aircraft and one (1) CRJ-200 aircraft to raise capital and retire debt. Four (4) aircraft were sold during the quarter ended March 31, 2023, and we expect to complete the sale of the remaining seven (7) aircraft before 2023 fiscal year end. Sale from remaining seven (7) aircraft will generate approximately $21 million of gross proceeds.

Furthermore, the Company implemented the following additional measures during the period.

•

Management is currently engaged in efforts to address the RASPRO aircraft repurchase obligation before it comes due. These efforts include, but are not limited to, obtaining equity financing, issuing debt, entering into other financing arrangements, securing a third party to purchase such aircraft, or restructuring the RASPRO aircraft lease facility.

•

On June 22, 2023, the Company closed on the sale of 20 spare engines to United. The approximate gross proceeds from this sale was $53.7 million, resulting in approximately $26.9 million of net proceeds after partial debt reduction of $7.8 million on the UMB engine loan, $7.9 million on the United Bridge Loan, and $11.2 million on the UST loan. This transaction completed the sale of the 30 engines to United under the Engine Sale Agreement entered into on December 27, 2022, as previously reported. The Company recorded a gain on the sale of the engines of $6.7 million for the 20 sold during the quarter, and $7.3 million for all 30.

•

The Company entered into an agreement to sell seven (7) surplus CRJ-900 aircraft. The approximate gross proceeds from the sale of such aircraft is expected to be $71.8 million and to generate approximately $8.5 million of net proceeds after the retirement of debt. The sale of these aircraft will occur individually throughout the remainder of the fiscal year, with the final transaction expected to be completed in October 2023.

•

Management is in active discussion with United to provide additional liquidity through existing lines of credit and other means.

•

In addition to already executed agreements to sell aircraft, the Company is actively seeking arrangements to sell other surplus assets including aircraft, engines, and spare parts to reduce debt and optimize operations.

The Company believes the plans and initiatives outlined above have effectively alleviated the financial concerns above and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements. While we intend to continue to implement and monitor our plans and initiatives, there is no guarantee that these actions will continue to be effective and achieve their desired objectives.

As of June 30, 2023, the Company has $124.3 million of long-term debt due within the next twelve months. We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations along with the liquidity we expect to achieve from disposition of surplus assets and other plans to improve cashflow from operations as outlined above.

For the first three days of the three months ended June 30, 2023, the Company operated 30 CRJ-900 aircraft under an Amended and Restated Capacity Purchase Agreement with American dated November 19, 2020 (as amended, the “American CPA”), after which the wind-down period of the American CPA was completed, and the American CPA was officially terminated. In exchange for providing passenger flight services, we received a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown during each month. In addition, we also received incentives or incurred penalties based upon our operational performance, including controllable on-time departure (“CD0”) and controllable flight completion factor (“CCF”) percentages. American also reimbursed us for certain costs on an actual basis, including passenger liability and hull insurance and aircraft property taxes. Other expenses, including fuel and certain landing fees, were directly paid to suppliers by American. In addition, American also provided, at no cost to us, certain ground handling and customer service functions as well as airport-related facilities and gates at American hubs and cities where we operated.

In December 2022, we entered into Amendment No. 11 (the “American Amendment”) to the American CPA. The American Amendment provided for the termination and wind-down of the American CPA by April 3, 2023 (the “Wind-down Period”), at which time all Covered Aircraft (as defined in the American CPA) were removed from the American CPA. In March 2023, we began to transition aircraft operated under the American CPA to the United CPA. The American CPA was previously set to expire by its terms on December 31, 2025.

Under the terms of the American Amendment, during the Wind-down Period (i) we continued to receive a fixed minimum monthly amount per aircraft covered by the American CPA, plus additional amounts based on the number of flights and block hours flown during each month, subject to adjustment based on the Company’s controllable completion rate and certain other factors, and (ii) American agreed not to exercise certain termination or withdrawal rights under the American CPA if we failed to meet certain operational performance targets for the three (3) consecutive month period ending January 31, 2023.

We were in compliance with all of the terms of the American CPA during the Wind-down Period and no Material Breach (as defined in the American CPA) occurred. Pursuant to the American Amendment, as no material breaches occurred during the wind-down period, American agreed to waive Mesa’s failure to meet certain past operational performance targets and other requirements, which triggered termination and withdrawal rights for American pursuant to the terms of American CPA. All CCF targets were met during the Wind-down Period, and there were no penalties associated with that performance metric.

The American Amendment provided for liquidated damages (the “Liquidated Damages Claim”) payable to American in the event of a Material Breach (as defined in the American CPA) of the American CPA or a repudiation by us of our obligations under the American CPA. No Material Breaches occurred during the wind-down period that would require the Company to pay any liquidated damages. The parties executed a written mutual release of all claims and acknowledgment that no Material Breaches have occurred under the American CPA (including, without limitation, any Liquidated Damages Claim).

Under the United CPA, we have the ability to fly up to 80 aircraft for United. The aircraft can be a mix of any number of E-175, E-175LL, or CRJ-900 aircraft so long as the number of aircraft operating at any given time does not exceed 80. As of June 30, 2023, we operated 56 E-175 and 24 CRJ-900 aircraft under our Third Amended and Restated Capacity Purchase Agreement with United dated December 27, 2022, which amended and restated the Second Amended and Restated Capacity Purchase Agreement dated November 4, 2020 (as amended, the “United CPA” or the "Amended and Restated United CPA"). Under the United CPA, United owns 42 of our 60 E-175 aircraft and all of our E-175LL aircraft and leases them to us at nominal amounts. The E-175 aircraft owned by United and leased to us have terms expiring between 2024 and 2028, and the 18 E-175 aircraft owned by us have terms expiring in 2028. The E-175LL aircraft have terms expiring in 2032 and 2033.

In exchange for providing passenger flight services, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown and the results of passenger satisfaction surveys. United reimburses us for certain costs on an actual basis, including property tax per aircraft and passenger liability insurance. United also reimburses us on a pass-through basis for all costs related to heavy airframe and engine maintenance, landing gear, auxiliary power units ("APUs"), and component maintenance for the E-175 aircraft owned by United. Other expenses, including fuel and certain landing fees, are directly paid to suppliers by United.

Our United CPA is subject to termination prior to its expiration, including under the following circumstances:

•

If certain operational performance factors fall below a specified percentage for a specified time, subject to notice under certain circumstances;

•

If we fail to perform the material covenants, agreements, terms or conditions of our United CPA or similar agreements with United, subject to 30 days' notice and cure rights;

•

If either United or we become insolvent, file bankruptcy, or fail to pay debts when due, the non-defaulting party may terminate the agreement;

•

If we merge with, or if control of us is acquired by another air carrier or a corporation directly or indirectly owning or controlling another air carrier;

•

United, subject to certain conditions, including the payment of certain costs tied to aircraft type, may terminate the agreement in its discretion, or remove E-175 aircraft from service, by giving us notice of 90 days or more; and

•

If United elects to terminate our United CPA in its entirety or permanently remove aircraft from service, we are permitted to return any of the affected E-175 aircraft leased from United at no cost to us.

On December 20, 2019, we entered into a Flight Services Agreement with DHL (the “DHL FSA”). Under the terms of the DHL FSA, we operate four (4) Boeing 737 aircraft which are leased to us from DHL and a third party to provide cargo air transportation services as of June 30, 2023. In exchange for providing cargo flight services, we receive a fee per block hour with a minimum block hour guarantee. We are eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance. Ground support expenses including fueling and airport fees are paid directly by DHL.

Under our DHL FSA, DHL leases two (2) Boeing 737-400F aircraft and one (1) 737-800F and subleases them to us at nominal amounts. DHL reimburses us on a pass-through basis for all costs related to heavy maintenance including C-checks, off-wing engine maintenance and overhauls including life limited parts (“LLPs”), landing gear overhauls and LLPs, thrust reverser overhauls, and APU overhauls and LLPs. Certain items such as fuel, de-icing fluids, landing fees, aircraft ground handling fees, en-route navigation fees, and custom fees are paid directly to suppliers by DHL or otherwise reimbursed if incurred by us. A third Boeing 737-400F aircraft is leased to us under an operating lease by a third party.

The DHL FSA expires five (5) years from the commencement date of the first aircraft placed into service, which was in October 2020. DHL has the option to extend the agreement with respect to one (1) or more aircraft for a period of one year with 90 days’ advance written notice.

Our DHL FSA is subject to the following termination rights prior to its expiration:

•

If either party fails to comply with the obligations, warranties, representations, or undertakings under the DHL FSA, subject to certain notice and cure rights;

•

At any time after the first anniversary of the commencement date of the first aircraft placed in service with 90 days' written notice.

•

If we are subject to a labor incident that materially and adversely affects our ability to perform services under the DHL FSA for a specified number of days;

•

DHL may terminate the agreement for a specific aircraft if it is subject to a total loss and the Company does not provide alternate services at our expense, or if the aircraft becomes unavailable for more than 30 days due to unscheduled maintenance.