SEC Filing | Mesa Air Group

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-38626

MESA AIR GROUP, INC.

(Exact name of registrant as specified in its charter)


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

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

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	MESA	Nasdaq Global Select Market

Indicate by check mark 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 past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 1, 2023, the registrant had 40,830,594 shares of common stock, no par value per share, issued and outstanding.

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION	4

Item 1. Financial Statements	4

Condensed Consolidated Balance Sheets	4

Condensed Consolidated Statements of Operations and Comprehensive Loss	5

Condensed Consolidated Statements of Stockholders' Equity	6

Condensed Consolidated Statements of Cash Flows	7

Notes to Condensed Consolidated Financial Statements	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3. Quantitative and Qualitative Disclosures About Market Risk	38

Item 4. Controls and Procedures	39

PART II – OTHER INFORMATION	41

Item 1. Legal Proceedings	41

Item 1A. Risk Factors	41

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3. Defaults Upon Senior Securities	41

Item 4. Mine Safety Disclosures	41

Item 5. Other Information	41

Item 6. Exhibits	41

SIGNATURES	43

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "future," "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "will," "would," “should,” "could," "can," "may," and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 filed with the Securities and Exchange Commission on December 29, 2022. Unless otherwise stated, references to particular years, quarters, months, or periods refer to our fiscal years ended September 30 and the associated quarters, months, and periods of those fiscal years. Each of the terms "the Company," "Mesa Airlines," "Mesa," "we," "us" and "our" as used herein refers collectively to Mesa Air Group, Inc. and its wholly owned subsidiaries, unless otherwise stated. We do not assume any obligation to revise or update any forward-looking statements.

The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

▪

public health epidemics or pandemics such as COVID-19;

▪

the severity, magnitude, and duration of the COVID-19 pandemic, including impacts of the pandemic and of business’ and governments’ responses to the pandemic on our operations and personnel, and on demand for air travel;

▪

the supply and retention of qualified airline pilots and mechanics and associated costs;

▪

the volatility of pilot and mechanic attrition;

▪

dependence on, and changes to, or non-renewal of, our capacity purchase and flight services agreements;

▪

failure to meet certain operational performance targets in our capacity purchase and flight services agreements, which could result in termination of those agreements;

▪

increases in our labor costs;

▪

reduced utilization - the percentage derived from dividing (i) the number of block hours actually flown during a given month by (ii) the maximum number of block hours that could be flown during such month under our capacity purchase agreement;

▪

the direct operation of regional jets by our major partner;

▪

the financial strength of our major partners and their ability to successfully manage their businesses through the unprecedented decline in air travel attributable to the COVID-19 pandemic or any other public health epidemic;

▪

restrictions under our Amended and Restated United CPA to enter into new regional air carrier service agreements, excluding our existing Flight Services Agreement with DHL, which will remain in place until the earlier to occur of (i) January 1, 2026 and (ii) the Company’s satisfaction of certain Performance Milestones (as defined in the Amended and Restated United CPA);

▪

our significant amount of debt and other contractual obligations;

▪

our compliance with ongoing financial covenants under our credit facilities

▪

our ability to keep costs low and execute our growth strategies; and

▪

the effects of extreme or severe weather conditions that impacts our ability to complete scheduled flights.

Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports we have filed with the SEC may be further amplified by the global impact of the COVID-19 pandemic. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

Part I – Financial Information

Item 1. Financial Statements

MESA AIR GROUP, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts) (June 30, 2023 is unaudited)


	June 30,			September 30,
	2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	48,349		$	57,683
Restricted cash		3,146			3,342
Receivables, net ($493 and $85 from related party)		3,582			3,978
Expendable parts and supplies, net		28,731			26,715
Assets held for sale		90,954			—
Prepaid expenses and other current assets		6,364			6,616
Total current assets		181,126			98,334

Property and equipment, net		709,694			865,254
Intangible assets, net		—			3,842
Lease and equipment deposits		1,172			6,085
Operating lease right-of-use assets		11,416			43,090
Deferred heavy maintenance, net		8,753			9,707
Assets held for sale		21,000			73,000
Other assets		28,841			16,290
Total assets	$	962,002		$	1,115,602

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance leases ($2,622 and $0 from related party)	$	124,341		$	97,218
Current portion of deferred revenue		6,398			385
Current maturities of operating leases		4,380			17,233
Accounts payable		51,916			59,386
Accrued compensation		8,358			11,255
Other accrued expenses		26,721			29,000
Total current liabilities		222,114			214,477
Noncurrent liabilities:
Long-term debt and finance leases, excluding current portion ($30,630 and $0 from related party)		441,941			502,517
Noncurrent operating lease liabilities		8,966			16,732
Deferred credits ($4,489 and $2,193 from related party)		4,489			3,082
Deferred income taxes		11,561			17,719
Deferred revenue, net of current portion		16,327			23,682
Other noncurrent liabilities		28,706			29,219
Total noncurrent liabilities		511,990			592,951
Total liabilities		734,104			807,428
Commitments and contingencies (Note 16)
Stockholders' equity:
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 40,830,594 (2023) and 36,376,897 (2022) shares issued and outstanding, 4,899,497 (2023) and 4,899,497 (2022) warrants issued and outstanding		270,673			259,177
Retained earnings/(Accumulated deficit)		(42,775	)		48,997
Total stockholders' equity		227,898			308,174
Total liabilities and stockholders' equity	$	962,002		$	1,115,602

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands) (Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2023			2022			2023			2022
Operating revenues:
Contract revenue (2023—$88,415 and $200,184 and 2022—$49,845 and $158,876 from related party)	$	94,356		$	118,899		$	326,588		$	367,781
Pass-through and other revenue		20,335			15,498			57,111			37,586
Total operating revenues		114,691			134,397			383,699			405,367

Operating expenses:
Flight operations		51,557			43,254			164,707			133,262
Maintenance		51,072			49,694			145,344			156,032
Aircraft rent		864			9,299			5,782			28,319
General and administrative		11,346			11,112			38,872			31,550
Depreciation and amortization		15,316			20,103			47,060			61,878
Asset impairment		30,489			—			50,951			39,475
(Gain) on sale of assets		(6,722	)		—			(7,271	)		—
Other operating expenses		999			722			2,358			3,379
Total operating expenses		154,921			134,184			447,803			453,895
Operating income/(loss)		(40,230	)		213			(64,104	)		(48,528	)
Other income (expense), net:
Interest expense		(12,015	)		(8,716	)		(36,321	)		(24,766	)
Interest income		8			24			128			117
Gain/(Loss) on investments, net		2,859			(3,926	)		3,275			(12,649	)
Other income (expense), net		(946	)		(73	)		(540	)		(203	)
Total other expense, net		(10,094	)		(12,691	)		(33,458	)		(37,501	)
Loss before taxes		(50,324	)		(12,478	)		(97,562	)		(86,029	)
Income tax benefit		(2,764	)		(2,493	)		(5,791	)		(18,987	)
Net loss and comprehensive loss	$	(47,560	)	$	(9,985	)	$	(91,771	)	$	(67,042	)
Net loss per share attributable to
common shareholders
Basic	$	(1.17	)	$	(0.28	)	$	(2.35	)	$	(1.86	)
Diluted	$	(1.17	)	$	(0.28	)	$	(2.35	)	$	(1.86	)
Weighted-average common shares outstanding
Basic		40,688			36,183			38,986			36,064
Diluted		40,688			36,183			38,986			36,064

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Stockholders' Equity

(In thousands, except share amounts) (Unaudited)


	Nine Months Ended June 30, 2022
						Common
						Stock and
						Additional
	Number of			Number of		Paid-In			Retained
	Shares			Warrants		Capital			Earnings			Total
Balance at September 30, 2021		35,958,759			4,899,497	$	256,372		$	231,675		$	488,047

Stock compensation expense		—			—		716			—			716
Payment of tax withholding for RSUs		(2,275	)		—		(15	)		—			(15	)
Restricted shares issued		7,500			—		—			—			—
Net loss		—			—		—			(14,274	)		(14,274	)
Balance at December 31, 2021		35,963,984			4,899,497	$	257,073		$	217,401		$	474,474

Stock compensation expense		—			—		671			—			671
Payment of tax withholding for RSUs		(13,421	)		—		(60	)		—			(60	)
Restricted shares issued		122,594			—		—			—			—
Employee share purchases		53,567			—		239			—			239
Net loss		—			—		—			(42,783	)		(42,783	)
Balance at March 31, 2022		36,126,724			4,899,497	$	257,923		$	174,618		$	432,541

Stock compensation expense		—			—		719			—			719
Payment of tax withholding for RSUs		(116,455	)		—		(339	)		—			(339	)
Restricted shares issued		282,132			—		100			—			100
Net loss		—			—		—			(9,985	)		(9,985	)
Balance at June 30, 2022		36,292,401			4,899,497	$	258,403		$	164,633		$	423,036


	Nine Months Ended June 30, 2023
						Common
						Stock and		Retained
						Additional		Earnings/
	Number of			Number of		Paid-In		(Accumulated
	Shares			Warrants		Capital		Deficit)		Total
Balance at September 30, 2022		36,376,897			4,899,497	$	259,177	$	48,997	$	308,174

Stock compensation expense		—			—		688		—		688
Payment of tax withholding for RSUs		(847	)		—