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Organization and Operations | 3 Months Ended
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Dec. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Organization and Operations | 1. Organization and Operations The Company 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 76 cities in 32 states, Cuba, and Mexico. As of December 31, 2024, Mesa operated a fleet of 60 regional aircraft consisting of 54 E-175 aircraft and six CRJ-900 aircraft with approximately 228 daily departures. During the three months ended December 31, 2024, Mesa’s fleet were operated under our Capacity Purchase Agreement ("CPA") with United, leased to a third party, held for sale or maintained as operational spares. Mesa operates all of its flights as United Express flights pursuant to the terms of the CPA entered into with United. Except as set forth in the following sentence, all of the Company's consolidated contract revenues for the three months ended December 31, 2024 and 2023, and fiscal years ended September 30, 2024 and 2023 were derived from operations associated with the CPA, leases of aircraft to a third party, and Mesa Pilot Development, ("MPD"). Revenues during the three months ended December 31, 2023 and fiscal years ended September 30, 2024 and 2023 also included revenues derived from our Flight Services Agreement ("FSA") with DHL Network Operations (USA), Inc. ("DHL"), which terminated in March 2024. Revenues during the fiscal year ended September 30, 2023 also included revenues derived from our CPA with American Airlines, Inc. ("American"). Additionally, our leases of aircraft to a third party terminated upon the sale of such aircraft to United during the three months ended December 31, 2024. 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 the three months ended December 31, 2024 and fiscal year ended September 30, 2024, costs associated with the transition of our operations with American to United, ongoing carrying costs related to the parked CRJ-900 fleet that has been sold but not closed, selling costs related to the CRJ-900 airframes and GE CF34-8B/C engines, and increasing interest rates adversely impacted our financial results, cash flows, financial position, and other key financial ratios. Additionally, United had asked us to accelerate the removal of CRJ-900 aircraft and transition the pilots to our E-175 fleet, leading to increased costs and impacting our block hour capabilities while these pilots are in training. As a result, these challenges resulted in a negative impact on the Company’s financial results highlighted by net loss of $111.9 million, primarily due to an impairment expense of $65.7 million related to held-for-sale assets and a $46.7 million loss on asset sales, contributing to the ongoing financial distress. These conditions and events raised substantial doubt regarding our ability to continue as a going concern and to fund our operations and meet our debt obligations over the next twelve months after the filing of this Form 10-KT. As of December 31, 2024, Mesa has $9.0 million of borrowing capacity under the United Revolving Credit Facility based on spare parts valuation. As of December 31, 2024, the Company has $143.3 million of principal maturity payments on long-term debt due within the next twelve months including $112.1 million under our UST Loan which is due and payable on October 30, 2025, and extendable to November 28, 2025. Mesa’s merger with Republic On April 4, 2025, Republic and Mesa entered into the Merger Agreement pursuant to the Merger. Upon closing of the Merger, the Surviving Corporation, to be renamed Republic Airways Holdings Inc., will be led by the executive leadership of Republic. Republic will designate six of seven non-employee directors to the Surviving Corporation Board, while Mesa will designate one of seven non-employee directors. Upon effectiveness of the Merger, stockholders of Republic will hold an approximate 88% interest in the Surviving Corporation, and stockholders of Mesa will hold an approximate 6% interest in the Surviving Corporation with the ability to acquire additional equity interests up to 6% of the Surviving Corporation, totaling up to approximately 12% in the aggregate, contingent upon Mesa’s satisfaction of certain pre-closing criteria. Concurrently with the execution and delivery of the Merger Agreement, Republic, Mesa, and United Airlines, among other parties, entered into the TPA, pursuant to which, among other things: (i) Mesa will take certain actions at or prior to the closing of the Merger to dispose of certain assets, extinguish certain liabilities, and effectuate certain related transactions; (ii) United Airlines will take certain actions at or prior to the closing of the Merger to facilitate Mesa’s actions in the foregoing clause (i); (iii) Mesa, following the Closing (and in all events immediately following the Effective Time), will conduct the Escrow Issuance; and (iv) United Airlines will reimburse the Surviving Corporation for certain specified costs and expenses. As part of the merger closing process, the TPA among Mesa, Republic, and United outlines a structured approach to resolving Mesa’s outstanding financial obligations. Specifically, Mesa will terminate its existing capacity purchase agreement with United Airlines and dispose of certain aircraft and spare inventory assets. The proceeds from these sales, along with Mesa’s available cash, will be applied toward the repayment of substantially all trade debts, long-term liabilities, and other outstanding obligations. If any residual liabilities remain after Mesa’s resources are exhausted, United Airlines will either forgive the remaining amounts or provide a one-time cash payment at closing sufficient to fully discharge them. Note that a Form S-4 Proxy Statement/Prospectus ("Form S-4") was filed by Mesa with the SEC for the proposed Merger, and Mesa received the Notice of Effectiveness of the Form S-4 on September 30, 2025. On September 29, 2025, Mesa filed a Form 8-K (Item 5.03) approving a change in the Company’s fiscal year-end, moving from September 30 to December 31 of each year, effective for the fiscal year beginning on January 1, 2025, and ending on December 31, 2025. The change in the fiscal year-end was approved by the Board of Directors of Mesa on September 24, 2025. Mesa’s Special Meeting and shareholder vote to approve the merger occurred on November 17, 2025, and the Merger is expected to close on November 25, 2025. All closing conditions are listed below and are all satisfied as of November 20, 2025: • Republic and Stockholder Approvals: Mesa held a special meeting of its stockholders on November 17, 2025, during which the Merger was approved. Republic’s stockholder approval was already obtained earlier. • Regulatory Approvals and HSR Act Compliance: All regulatory approvals have been received. The HSR waiting period expired on June 16, 2025. All necessary approvals from DOT, FAA, FCC, TSA, and foreign CAA have been received. Additionally, notification to AFAC and the necessary approvals regarding transfer of control have been obtained. • Effectiveness of SEC Registration Statement: The registration statement has been declared effective by the SEC on September 30, 2025. No stop order has been issued. • Nasdaq Listing Approval: Nasdaq has approved the shares of Mesa common stock to be issued in the Merger. • Absence of Legal Prohibition: No such legal or regulatory prohibition exists. Condition satisfied. • Accuracy of Representations and Warranties: Each party has delivered an officer certificate confirming the accuracy of its representations and warranties. Condition satisfied. • Compliance with Covenants: Compliance has been confirmed by both parties. • Absence of Material Adverse Effect: No material adverse effect has occurred. Condition satisfied. • Certificates: Officer certificates have been delivered. Condition satisfied. • Ownership Limitation Post-Merger: Post-merger, no entity will own 30% or more of the new company. Confirmed that no such ownership concentration will exist post-closing. • TPA Agreement Compliance: All required pre-Closing transactions have been completed. No breaches have been reported. Certification from United Airlines has been received. • CPA Side Letter Compliance: No breach or notice of non-performance has been received. • Filing of Financial Statement: Required filings have been made and are publicly available on EDGAR. • Disposition of Non-Core Assets: All CRJ-related assets have been sold, except three airframes, 11 engines and certain spare parts, which will be sold post-closing and credited to Mesa. All other non-E-175 assets have been disposed of. Condition substantially satisfied. Asset sales On December 31, 2024 and January 31, 2025, Mesa sold 18 E-175 aircraft to United for $227.7 million in gross proceeds equal to the fair market value of the assets based on multiple appraisals discounted by $20 million. $69.6 million of the proceeds was used to pay off outstanding debt, and $73.4 million of the proceeds was withheld by United for the assumption of debt. As a result of these sales, all 60 E-175 aircraft are owned by United and all heavy maintenance (C Check, L Gear, Engine) as well as all non-expendable part repairs are pass-through expenses reimbursed by United, eliminating the majority of Mesa’s maintenance cost exposure for these aircraft. Amendment to Loan and Guarantee Agreement On October 24, 2025, the Company entered into an Amendment (the "Amendment") to its Loan and Guarantee Agreement, dated as of October 30, 2020 (as theretofore amended, the "Loan Agreement"), among Mesa, Mesa Airlines, the Guarantors party thereto from time to time, Jefferies Capital Services, LLC (as successor in interest to the United States Department of the Treasury) (the "Lender" or "Jefferies"), and The Bank of New York Mellon as Administrative Agent and Collateral Agent (the "Agents") (collectively, the "Parties"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Loan Agreement. Under the terms of the Amendment, Jefferies agreed to: (a) extend the Maturity Date of the Loan Agreement from October 30, 2025 to November 28, 2025, subject to the Company’s further right to extend the Maturity Date by 30 days by providing notice to the Administrative Agent to no later than November 27, 2025; (b) reduce the interest rate under the Loan Agreement to zero percent (0%) for a period of 90 days from the date of the Amendment; (c) waive the restrictions on Fundamental Changes and Organizational Document amendments in connection with the Merger; (d) waive the Collateral Coverage Ratio through the Maturity Date, and (e) subject to the payment in full of the obligations under the Loan Agreement on the Maturity Date, reduce the principal amount of the Obligations under the Loan Agreement by $12.3 million (collectively, the "Amendments"). In connection with the execution of the Amendment, (i) Mesa Airlines entered into a Security and Control Agreement with Jefferies pursuant to which Mesa Airlines deposited $31.9 million into a collateral account controlled by Jefferies and agreed to pledge an aircraft engine, each as collateral for the obligations under the Loan Agreement, and (ii) Mesa Airlines agreed to pay Jefferies a non-refundable advisory fee of $3.5 million, payable on the earlier of the approval of the Merger and the Maturity Date. As of the issuance of this Form 10-KT, the Company has implemented certain strategic and financial plans, including the merger with Republic as outlined above. Based on management `s plan, which includes the increased financial position of the combined Company, the Company has alleviated the substantial doubt regarding its ability to continue as a going concern and expects to be able to meet its cash obligations for next twelve months following the issuance of this Form 10-KT. United Capacity Purchase Agreement Under the United CPA, we currently have the ability to fly up to 60 aircraft for United. During the three months ended December 31, 2024, we continued our transition to an entirely E-175 fleet. The remaining six CRJ-900 aircraft will be removed from the CPA by the end of February 2025. As of December 31, 2024 we operated 54 E-175 and six CRJ-900 aircraft under our United CPA. Under the United CPA, United owns 50 of our 60 E-175 aircraft. The E-175 aircraft owned by United and leased to us have terms expiring between 2025 and 2028, and the 10 E-175 aircraft owned by us have terms expiring in 2028. 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 upon the number of flights and block hours flown and the results of certain performance 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 certain 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 10 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. Subsequent to December 31, 2024, we amended our United CPA, providing for the following: • The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments through March 31, 2026. • The extension of incentives for achieving certain performance metrics through March 2026. • The commitment of a combined fleet of 60 CRJ-900 and E-175 aircraft through February 2025, and an entirely E-175 fleet by March 2025. • Reimbursement of up to $14.0 million of expenses related to the transition to an entirely E-175 fleet. • Amendment of certain scheduled exit dates for our E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA). On January 11, 2024 and January 19, 2024, we entered into the January 2024 United CPA Amendments which provide for the following: • Increased CPA rates, 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. Our United CPA is subject to early termination prior to its expiration in various circumstances including: • 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 FSA with DHL (the “DHL FSA”). Under the terms of the DHL FSA, we operated four Boeing 737 aircraft to provide cargo air transportation services. In exchange for providing cargo flight services, we received a fee per block hour with a minimum block hour guarantee. We were 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 were paid directly by DHL. On March 15, 2024, we entered into Amendment No. 3 to our DHL FSA which provided for the wind-down and termination of our flight operations on behalf of DHL.

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