XML 17 R10.htm IDEA: XBRL DOCUMENT
v3.24.3

Organization and Operations | 9 Months Ended
--- | ---
Jun. 30, 2024
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", the "Company", "we", "our", or "us") is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 73 cities in 32 states, Cuba, and Mexico. Mesa operated a fleet of 73 regional aircraft with approximately 279 daily departures and 1,992 employees as of June 30, 2024. The aircraft in Mesa’s fleet were operated under the Company’s Capacity Purchase Agreement ("CPA"), leased to a third party, held for sale, or maintained as operational spares. Mesa operates all of its flights as United Express pursuant to the terms of the CPA entered into with United (our “major partner”). Prior to March 1, 2024, Mesa's fleet were also operated under a Flight Services Agreement ("FSA") with DHL Network Operations (USA), Inc. ("DHL") pursuant to the terms of the FSA entered into with DHL. Except as set forth in the following sentence, all of the Company’s consolidated contract revenues for the three and nine months ended June 30, 2024 and June 30, 2023 were derived from operations associated with the CPA, FSA, leases of aircraft to a third party, and Mesa Pilot Development. Revenues during the three and nine months ended June 30, 2023 also included revenues derived from our CPA with American Airlines, Inc. ("American"), which terminated in April 2023. The United CPA 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. Liquidity and Going Concern During our three and nine months ended June 30, 2024 and fiscal year ended September 30, 2023, the decrease in scheduled flying activity associated with the transition of our operations with American to United, increased costs associated with pilot wages, and increasing interest rates adversely impacted our financial results, cash flows, financial position, and other key financial ratios. Additionally, United has asked us to accelerate the removal of CRJ-900 aircraft and transition the pilots to our E-175 fleet. This will lead to increased costs and impact our block hour capabilities while these pilots are in training. As of July 16, 2024, the Compan y was not in compliance with a financial covenant related to a minimum liquidity requirement of $15.0 million of cash and cash equivalents associated with its Second Amended and Restated Credit and Guaranty Agreement with United. On September 25, 2024, the Company reached an agreement with United to obtain a waiver for the covenant breach through December 31, 2024. As of the issuance of this Form 10-Q, we are in compliance with all financial covenants. As a result of the decrease in scheduled flying activity, we produced less block hours to generate revenues. During the nine months ended June 30, 2024, these challenges resulted in a negative impact on the Company’s financial results highlighted by net loss of $66.1 million, including a non-cash impairment charge of $50.9 million primarily related to the Company designating eight CRJ-900 aircraft, 11 CRJ-900 airframes (without engines), and 61 spare engines as held for sale. 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 from the filing of this Form 10-Q. 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. The Company implemented the following measures during or subsequent to the three months ended June 30, 2024. • We had 15 aircraft under the RASPRO Trust ("RASPRO") finance lease with a buyout obligation of $50.3 million. On April 22, 2024, we entered into a binding Memorandum with RASPRO that provides for the payment of certain commitment fee amounts by the Company, along with certain RASPRO administration fee amounts, in consideration for the deferral of the $50.3 million buyout obligation over the period of June 2024 to September 2024. Certain of the commitment fee amounts and Trust fees otherwise payable will be waived if the Company completes its purchase obligations with respect to all 15 airframes and 30 engines as set forth in the agreement. During the first fiscal quarter of 2024, we entered into purchase agreements with two separate parties to purchase the RASPRO aircraft and related engines. One agreement is for 30 engines for a total of $19.5 million. The second agreement is for 15 airframes (without engines) for a total of $18.8 million. Both of these transactions are expected to be completed by the end of September 2024, with net cash outflows from these transactions expected to be approximately $12.1 million. o During the three months ended June 30, 2024, we purchased six airframes and 15 engines from RASPRO for $22.3 million and sold them to third parties for $17.3 million. Subsequent to June 30, 2024, we purchased the remaining nine airframes and 15 engines from RASPRO for $23.2 million, completely paying off our obligation under the RASPRO finance lease. Subsequent to June 30, 2024, we sold all of the associated airframes and 14 of the engines to third parties for $20.4 million. We expect to close the sale of the final engine by the end of October 2024, with gross proceeds expected to be $0.7 million on the sale. o We are leasing three of the airframes that were sold to the third party through the period in which the respective airframes are covered under the United CPA, between July 31, 2024 and January 31, 2025. • On May 8, 2024, we entered into a Waiver Agreement to our Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of a certain projected financial covenant default with respect to the fiscal quarter ending June 30, 2024. • On May 29, 2024, and June 20, 2024, we entered into two separate purchase agreements with third parties providing for the sale of nine and fourteen engines, respectively. Gross proceeds from the sale of the engines are expected to be $8.8 million and $24.7 million, respectively, of which, $8.8 million and $20.2 million, respectively, will be used to pay down our loan with the United States Department of the Treasury (the "UST Loan"). Subsequent to June 30, 2024, we closed the sale of eight engines in connection with the June 20, 2024 purchase agreement for gross proceeds of approximately $12.9 million and net proceeds of approximately $4.4 million after the paydown of debt. • On May 30, 2024, we amended two finance leases on CRJ-700 aircraft providing for the revision of the lease term from June 22, 2031 to May 29, 2027 for initial payments totaling approximately $1.8 million. • During the three months ended June 30, 2024, we generated an additional approximately $9.6 million in incremental revenue from increased CPA rates agreed upon in the First Amendment to our Third Amended and Restated United CPA and the Second Amendment to our Third Amended and Restated United CPA (the "January 2024 United CPA Amendments"). We are projected to generate an additional $46.0 million in incremental revenue from September 1, 2024 through August 31, 2025. • During the three months ended June 30, 2024, the Company sold approximately 760 thousand shares of Archer Aviation Inc. ("Archer") for approximately $2.7 million of proceeds. Subsequent to June 30, 2024, we sold substantially all of our remaining 1.5 million shares of Archer for approximately $6.9 million of proceeds and realized a gain of approximately $1.6 million on the sale. • During the three months ended June 30, 2024, the Company furloughed 53 first officers and captains to match scheduled flying activity. This is expected to result in savings of approximately $3.9 million from July 1, 2024 through December 31, 2024. • On September 23, 2024, we entered into an agreement with the UST (the "CCR Modification Agreement") to reduce our required minimum Collateral Coverage Ratio ("CCR") for our UST Loan from 1.55:1.0 to 1.44:1.0 through November 22, 2024, after which, the required CCR minimum will revert back to 1.55:1.0. • On September 25, 2024, we reached an agreement with United to provide additional liquidity described below: o The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments through August 31, 2025. o The commitment of a combined fleet of 60 CRJ-900 and E-175 aircraft through January 2025, and an entirely E-175 fleet by March 2025. o Reimbursement of up to $14.0 million of expenses related to the transition to an entirely E-175 fleet. o The commitment to buy our two CRJ-700 aircraft out of their lease with GoJet and to purchase the two CRJ-700 aircraft for total proceeds of $11.0 million, $4.5 million of which will pay down the outstanding obligations. o The commitment to grant a waiver through December 31, 2024, for the financial covenant breach related to the $15.0 million minimum liquidity requirement on our United Revolving Credit Facility. • Based on the most recent appraisal value of our spare parts, we have $12.4 million available under our United Revolving Credit Facility. • In addition to already executed agreements to sell aircraft, the Company is actively seeking arrangements to sell other surplus assets primarily related to the CRJ fleet including aircraft, engines, and spare parts to reduce debt and optimize operations. • We have delayed and/or deferred major spending on aircraft and engine maintenance to match the current and projected level of flight activity. The Company believes the plans and initiatives outlined above have effectively alleviated the financial concerns and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements. The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months following the issuance of its financial statements was prepared with significant judgment and estimates of future cash flows based on projections of CPA block hours, maintenance events, labor costs, and other relevant factors. Assumptions used in the forecast may change or not occur as expected. As of June 30, 2024, the Company has $72.8 million of principal maturity payments on 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, and the liquidity created from the additional measures identified above. If our plans are not realized, we intend to explore additional opportunities to create liquidity by refinancing and deferring repayment of our principal maturity payments that are due within the next twelve months. The Company continues to monitor covenant compliance with its lenders as any noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations. United Capacity Purchase Agreement Under the United CPA, we currently have the ability to fly up to 73 aircraft for United. As of June 30, 2024, we operated 55 E-175 and 18 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. 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. During the three months ended June 30, 2024, United advised the Company that due to 70 and 76 seat scope limitations and commitments for 70 and 76 seat aircraft for other United Express carriers, the combined Mesa fleet of CRJ-900 and E-175 aircraft would be capped at 60 aircraft by October 2024. Additionally, the fleet would be an entirely E-175 fleet by March 2025. In exchange for providing flight services under our United CPA, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based on exceeding established goals for certain operational metrics. United also reimburses us for certain costs on an actual basis, including property tax per aircraft and passenger liability insurance. Other expenses, including fuel and landing fees, are directly paid to suppliers by United. United reimburses us on a pass-through basis for certain costs related to heavy airframe and engine maintenance, landing gear, auxiliary power units ("APUs") and component maintenance for the aircraft owned by United. Our United CPA permits United, subject to certain conditions, including the payment of certain costs tied to aircraft type, to terminate the agreement in its discretion, or remove aircraft from service, by giving us notice of 90 days or more. If United elects to terminate our United CPA in its entirety or permanently remove select aircraft from service, we are permitted to return any of the affected aircraft leased from United at no cost to us. In addition, if United removes any of our 18 owned E-175 aircraft from service at its direction, United would remain obligated, at our option, to assume the aircraft ownership and associated debt with respect to such aircraft through the end of the term of the United CPA. On September 25, 2024, we reached an agreement with United which provides for the following: • The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments through August 31, 2025. • The commitment of a combined fleet of 60 CRJ-900 and E-175 aircraft through January 2025, and an entirely E-175 fleet by March 2025. • Reimbursement of $14.0 million of expenses related to the transition to an entirely E-175 fleet. • The commitment to buy our two CRJ-700 aircraft out of their lease with GoJet and to purchase the two CRJ-700 aircraft for $11.0 million. • The commitment to grant a waiver through December 31, 2024, for the financial covenant breach related to the $15.0 million minimum liquidity requirement on our United Revolving Credit Facility. In January 2024, the Amended and Restated United CPA was amended with the January 2024 United CPA Amendments which provide for the following: • Increased CPA rates for E-175 aircraft, retroactive to October 1, 2023 through December 31, 2024; • Amended certain notice requirements for removal by United of up to eight CRJ-900 Covered Aircraft (as defined in the United CPA) from the United CPA; • Extended United's existing utilization waiver for the Company's operation of E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA) to June 30, 2024. Additionally, in January 2023, in consideration for entering in the Amended and Restated United CPA and providing the revolving line of credit, discussed in Note 8, the Company (i) granted United the right to designate one individual to the Company's board of directors (the "United Designee"), which occurred effective May 2, 2023 with the appointment of Jonathan Ireland and (ii) issued to United 4,042,061 shares of the Company’s common stock equal to approximately 10% of the Company’s issued and outstanding capital stock on such date (the "United Shares"). United's board designee rights will terminate at such time as United's equity ownership in the Company falls below five percent (5%) of the Company's issued and outstanding stock. United was also granted pre-emptive rights relating to the issuance of any equity securities by the Company and certain registration rights, set forth in a definitive registration rights agreement with United, granting United customary demand registration rights in respect of publicly registered offerings of the Company, subject to usual and customary exceptions and limitations. Pursuant to the United CPA, we agreed to lease our CRJ-700 aircraft to another United Express service provider for a term of nine years. We ceased operating our CRJ-700 fleet in February 2021 in connection with the transfer of those aircraft into a lease agreement. 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 April 1, 2024, April 19, 2024, April 30, 2024, and June 24, 2024, we received individual notices from United exercising its right under Section 2.4(a) of the United CPA to remove a total of 18 CRJ-900 Covered Aircraft (as defined in the United CPA), effective as follows: one aircraft - May 21, 2024; one aircraft - May 31, 2024; two aircraft - June 30, 2024; two aircraft - July 31, 2024; two aircraft - October 31, 2024; five aircraft - January 6, 2025; and 5 aircraft - January 31, 2025.

X
- References No definition available. + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480424/946-10-50-1 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480424/946-10-50-2 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205/tableOfContent + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration