Document and Entity Information - USD ($) $ in Thousands	12 Months Ended
Document and Entity Information - USD ($) $ in Thousands	Sep. 30, 2018	Nov. 30, 2018	Mar. 31, 2018
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Trading Symbol	MESA
Entity Registrant Name	MESA AIR GROUP INC
Entity Central Index Key	0000810332
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	No
Entity Voluntary Filers	No
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Public Float			$ 0
Entity Common Stock, Shares Outstanding		23,902,903

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Current assets:
Cash and cash equivalents	$ 103,311	$ 56,788
Marketable securities	19,921	0
Restricted cash	3,823	3,559
Receivables, net ($0 and $1,329 from related party)	14,290	8,853
Expendable parts and supplies, net	15,658	15,114
Prepaid expenses and other current assets	40,914	61,525
Total current assets	197,917	145,839
Property and equipment, net	1,250,829	1,192,448
Intangibles, net	11,341	11,724
Lease and equipment deposits	2,598	1,945
Other assets	9,703	5,693
Total assets	1,472,388	1,357,649
Current liabilities:
Current portion of long-term debt and capital leases	155,170	140,466
Accounts payable ($1,330 and $2,644 to related party)	54,307	44,738
Accrued compensation	12,208	9,080
Other accrued expenses	29,696	23,929
Total current liabilities	251,381	218,213
Long-term debt and capital leases, excluding current portion	760,177	803,874
Deferred credits ($7,702 and $7,370 to related party)	15,393	17,189
Deferred income taxes	39,797	56,436
Other noncurrent liabilities	31,173	39,713
Total noncurrent liabilities	846,540	917,212
Total liabilities	1,097,921	1,135,425
Commitments and contingencies (Note 13 and Note 14)
Stockholders' equity:
Preferred stock
Common stock and additional paid-in-capital	234,683	114,456
Retained earnings	139,784	107,768
Total stockholders' equity	374,467	222,224
Total liabilities and stockholders' equity	$ 1,472,388	$ 1,357,649

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2018	Sep. 30, 2017
Statement Of Financial Position [Abstract]
Receivable from related party	$ 0	$ 1,329
Accounts payable to related party	1,330	2,644
Deferred credits to related party	$ 7,702	$ 7,370
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, no par value	$ 0	$ 0
Common stock, shares authorized	125,000,000	125,000,000
Common stock, shares issued	23,902,903	11,294,083
Common stock, shares outstanding	23,902,903	11,294,083
Common stock, warrants issued	10,614,990	12,230,625
Common stock, warrants outstanding	10,614,990	12,230,625

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Operating revenues:
Total operating revenues	$ 681,595	$ 643,576	$ 587,836
Operating expenses:
Flight operations	209,065	155,516	141,422
Fuel	498	766	753
Maintenance	193,164	210,729	225,130
Aircraft rent	68,892	72,551	71,635
Aircraft and traffic servicing	3,541	3,676	3,936
General and administrative	53,647	38,996	42,182
Depreciation and amortization	65,031	61,048	46,020
Lease termination	15,109
Total operating expenses	608,947	543,282	531,078
Operating income	72,648	100,294	56,758
Other (expenses) income, net:
Interest expense	(56,867)	(46,110)	(32,618)
Interest income	114	32	325
Other (expense) income	(66)	(514)	381
Total other (expense), net	(56,819)	(46,592)	(31,912)
Income before taxes	15,829	53,702	24,846
Income tax (benefit) expense	(17,426)	20,874	9,926
Net income	$ 33,255	$ 32,828	$ 14,920
Net income per share
Basic	$ 2.46	$ 3.01	$ 1.56
Diluted	$ 1.32	$ 1.40	$ 0.62
Weighted-average common shares outstanding
Basic	13,516	10,919	9,558
Diluted	25,171	23,386	24,082
Contract Revenue [Member]
Operating revenues:
Total operating revenues	$ 639,264	$ 618,698	$ 569,373
Pass Through and Other [Member]
Operating revenues:
Total operating revenues	$ 42,331	$ 24,878	$ 18,463

Consolidated Statement of Stockholders Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Number of Warrants [Member]	Common Stock and Additional Paid-In Capital [Member]	Retained Earnings [Member]
Prior period adjustment	$ 2,252				$ 2,252
Balance as corrected at Sep 30, 2015	174,096			$ 114,076	60,020
Balance as corrected, shares at Sep 30, 2015		7,866,160	16,165,628
Beginning balance at Sep. 30, 2015	171,844			114,076	57,768
Beginning balances, shares at Sep. 30, 2015		7,866,160	16,165,628
Stock compensation expense	1,546			1,546
Repurchased shares and warrants	(1,411)			(1,411)
Repurchased shares and warrants, shares		(232,085)
Forfeited warrants			(804,700)
Warrants converted to common stock		2,210,318	(2,210,318)
Restricted shares issued, shares		525,250
Net income	14,920				14,920
Ending balance at Sep. 30, 2016	189,151			114,211	74,940
Ending balance, shares at Sep. 30, 2016		10,369,643	13,150,610
Stock compensation expense	1,288			1,288
Repurchased shares and warrants	(1,043)			(1,043)
Repurchased shares and warrants, shares		(228,735)
Warrants converted to common stock		919,985	(919,985)
Restricted shares issued, shares		233,190
Net income	32,828				32,828
Ending balance at Sep. 30, 2017	222,224			114,456	107,768
Ending balance, shares at Sep. 30, 2017		11,294,083	12,230,625
Stock compensation expense	1,991			1,991
Repurchased shares and warrants	(7,709)			(7,709)
Repurchased shares and warrants, shares		(438,541)	(250,000)
Warrants converted to common stock		1,365,643	(1,365,643)
Restricted shares issued	11,918			11,918
Restricted shares issued, shares		1,327,700
Conversion of unvested restricted shares	2,321			2,321
IPO issuance	111,706			111,706
IPO issuance, shares		10,354,018	8
Cumulative effect of change in accounting principle	(1,239)				(1,239)
Net income	33,255				33,255
Ending balance at Sep. 30, 2018	$ 374,467			$ 234,683	$ 139,784
Ending balance, shares at Sep. 30, 2018		23,902,903	10,614,990

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Cash Flows From Operating Activities:
Net income	$ 33,255,000	$ 32,828,000	$ 14,920,000
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	65,031,000	61,048,000	46,020,000
Stock compensation expense	12,929,000	1,288,000	1,546,000
Deferred income taxes	(17,874,000)	20,515,000	9,513,000
Amortization of unfavorable lease liabilities and deferred credits	(11,035,000)	(10,626,000)	(9,626,000)
non-interest-bearing subordinated notes	4,606,000	2,689,000	1,990,000
Loss on disposal of assets	307,000	533,000	428,000
Provision for obsolete expendable parts and supplies	200,000	419,000	41,000
Lease termination	15,109,000
Provision for doubtful accounts		(86,000)	575,000
Changes in assets and liabilities:
Receivables	(5,437,000)	530,000	1,908,000
Expendable parts and supplies	(744,000)	(3,379,000)	(1,675,000)
Prepaid expenses and other current assets	7,584,000	(17,243,000)	1,554,000
Accounts payable	2,427,000	(17,336,000)	29,673,000
Accrued liabilities	12,581,000	3,547,000	7,625,000
Net cash provided by operating activities	118,939,000	74,727,000	104,492,000
Cash Flows Used In Investing Activities:
Capital expenditures	(117,989,000)	(84,500,000)	(490,081,000)
Purchases of investment securities	(19,921,000)
Proceeds from sale of rotable spare parts		18,000	196,000
Withdrawal (deposit) of restricted cash	(264,000)	(46,000)	807,000
Net returns (payments) of lease and equipment deposits	(653,000)	406,000	(2,049,000)
Net cash used in investing activities	(138,827,000)	(84,122,000)	(491,127,000)
Cash Flows From Financing Activities:
Proceeds from long-term debt	187,703,000	185,912,000	452,841,000
Principal payments on long-term debt and capital leases	(222,153,000)	(152,995,000)	(75,496,000)
Debt financing costs	(5,852,000)	(3,377,000)	(10,086,000)
Proceeds from issuance of common stock	124,246,000
Stock issuance costs	(12,540,000)
Repurchase of stock	(4,993,000)	(1,043,000)	(1,411,000)
Net cash provided by financing activities	66,411,000	28,497,000	365,848,000
Net change in cash and cash equivalents	46,523,000	19,102,000	(20,787,000)
Cash and cash equivalents at beginning of period	56,788,000	37,686,000	58,473,000
Cash and cash equivalents at end of period	103,311,000	56,788,000	37,686,000
Supplemental cash flow information
Cash paid for interest	50,672,000	43,798,000	28,693,000
Cash paid for income taxes - net	385,000	332,000	196,000
Supplemental non-cash investing and financing activities
Accrued capital expenditures	16,677,000	$ 9,533,000	$ 418,000
Acquisition of capital leases	$ 10,473,000

Organization and Operations

12 Months Ended

Sep. 30, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Operations

1.	Organization and Operations

The Company

Mesa Air Group, Inc. (“Mesa” or the “Company”) is a holding company whose principal subsidiary operates as a regional air carrier, providing scheduled passenger service. As of September 30, 2018, the Company served 110 cities in 39 states, the District of Columbia, Canada, Mexico, Cuba and the Bahamas, and operated a fleet of 145 aircraft with approximately 730 daily departures.

The Company’s airline operations are conducted by its regional airline subsidiary, Mesa Airlines, Inc. (“Mesa Airlines”), providing services to major air carriers under capacity purchase agreements. Mesa Airlines operates as American Eagle under a capacity purchase agreement with American Airlines, Inc. (“American”) and as United Express under a capacity purchase agreement with United Airlines, Inc. (“United”). All of the Company’s consolidated contract revenues for years ended September 30, 2018, 2017 and 2016 were derived from operations associated with these two capacity purchase agreements.

The financial arrangements between the Company and its major airline partners involve a revenue-guarantee arrangement (i.e. a “capacity purchase agreement”) whereby the major airline pays a monthly guaranteed amount for each aircraft under contract, a fixed fee for each block hour and flight flown and reimbursement of certain direct operating expenses in exchange for providing regional flying. The major airline partners also pay certain expenses directly to suppliers, such as fuel, ground operations and certain landing fees. Under the terms of these capacity purchase agreements, the major airline controls route selection, pricing and seat inventories, thereby reducing the Company’s exposure to fluctuations in passenger traffic, fare levels, and fuel prices.

On August 8, 2018, the Company filed its Second Amended and Restated Articles of Incorporation, which, among other things: (i) effected a 2.5-for-1 stock split of its common stock; and (ii) increased the authorized number of shares of its common and preferred stock to 125,000,000 and 5,000,000, respectively. All references to share and per share amounts in the Company’s consolidated financial statements have been retrospectively revised to reflect the stock split and increase in authorized shares.

On August 14, 2018, the Company completed an initial public offering (“IPO”) of its common stock, in which it issued and sold 9,630,000 shares (the “Firm Shares”) of common stock at a public offering price of $12.00 per share, resulting in gross proceeds to the Company of approximately $115.6 million. Additionally, in connection with the IPO, the Company granted the underwriters an option to purchase up to an additional 1,444,500 shares of common stock at the same price. On September 11, 2018, the Company closed the sale of 1,344,500 shares (“Option Shares”) of its common stock, in connection with the partial exercise of the overallotment option granted to the underwriters in its IPO. Of the 1,344,500 Option Shares sold, 723,985 were purchased directly from the Company and the remaining 620,515 shares were purchased directly from the selling shareholders. The Firm Shares and Option Shares were sold to the public for a price of $12.00 per share.

The sale of these shares raised gross proceeds of approximately $124,247,820. The Company did not receive any proceeds from the sale of the Option Shares by the selling shareholders.

As part of the IPO, stock appreciation rights (“SARs”) previously issued under the Mesa Air Group, Inc. Amended and Restated Stock Appreciation Rights Plan (the “SAR Plan”), which settled only in cash, were cancelled and exchanged for an aggregate of 1,266,034 shares of restricted common stock under the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) (see note 12), of which 966,022 were fully vested upon issuance and are included in the number of shares of common stock outstanding after the IPO. Of the 966,022 fully vested shares, 314,198 shares were retained by the Company to satisfy tax withholding obligations, resulting in a net issuance of 651,824 shares. Additionally, 983,113 shares of restricted common stock were issued to certain of its employees and directors under its 2018 Plan in exchange for the cancellation of 491,915 shares of existing unvested restricted phantom stock units and 491,198 shares of restricted stock under the 2011 and 2017 Plans, respectively.

American Capacity Purchase Agreement

As of September 30, 2018, the Company operated 64 CRJ-900 aircraft for American under a capacity purchase agreement. Unless otherwise extended or amended, the capacity purchase agreement for the aircraft expires between 2021 and 2025. In exchange for providing flights and all other services under the agreement, the Company receives a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours (the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination) flown during the month. In addition, the Company may also receive incentives or pay penalties based upon the Company’s operational performance, including controllable on-time departure and controllable completion percentages. American also reimburses the Company for the actual amount incurred for certain items such as passenger liability and hull insurance, and aircraft property taxes. In addition, American also provides, at no cost to the Company, certain ground handling and customer service functions, as well as airport-related facilities and fuel. The Company also receives a monthly profit margin payment from American based on the number of aircraft operating. The capacity purchase agreement is subject to early termination for cause under specified circumstances and subject to the Company’s right to cure under certain conditions. American had a 7.2% and 10.6% ownership interest in the Company, calculated on a fully-diluted basis as of September 30, 2018 and 2017, respectively. The related party amounts presented on the consolidated balance sheets and statements of operations pertain to American.

United Capacity Purchase Agreement

As of September 30, 2018, the Company operated 20 CRJ-700 and 60 E-175 aircraft for United under a capacity purchase agreement. Subject to certain early termination rights, the capacity purchase agreement for each of the 20 CRJ-700 aircraft expires between August and December 2019. Subject to early termination rights, the capacity purchase agreement for 30 of the E-175 aircraft (owned by United) expires between June 2019 and August 2020, subject to United’s right to extend for four additional two-year terms (maximum of eight years). Subject to early termination rights, the capacity purchase agreement for 18 of the E-175 aircraft (owned by Mesa) expires between January 2028 and November 2028. During fiscal 2017, the Company and United expanded the capacity purchase agreement to include, subject to early termination rights, an additional 12 E-175 aircraft (purchased by United) with the aircraft entering service through January 2018 for five-year terms, subject to United’s right to extend for four additional two-year terms (maximum of eight years). In exchange for performing the flight services under such agreement, the Company receives from United a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown during the month. Additionally, certain costs incurred by the Company in performing the flight services are “pass-through” costs, whereby United agrees to reimburse the Company for the actual amounts incurred for the following items: property tax per aircraft, landing fees, and additionally for the E-175 aircraft owned by United, heavy airframe and engine maintenance, landing gear, APUs and component maintenance. The Company also receives a profit margin based upon certain reimbursable costs under the agreement, as well as its operational performance in addition to a fixed profit margin. The capacity purchase agreement is also subject to early termination for cause under specified circumstances and subject to the Company’s right to cure under certain circumstances. United is also permitted, subject to certain conditions, to terminate the agreement early in its discretion by giving us notice of 90 days or more.

In February 2018, the Company mutually agreed with United to temporarily remove two aircraft from service under its United capacity purchase agreement until the Company was able to fully staff flight operations. During the temporary removal, the Company agreed to pay the lease costs associated with the two E-175 aircraft, which totaled $1.9 million as of September 30, 2018. In June 2018, the Company was able to fully staff flight operations and these two E-175 aircraft were placed back into service under the United capacity purchase agreement.

Summary of Significant Accounting Policies

12 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned operating subsidiaries. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). All intercompany accounts and transactions have been eliminated in consolidation.

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and may remain an emerging growth company until the last day of our fiscal year following the fifth anniversary of the IPO, subject to specified conditions. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. In consideration of ASC 280, “Segment Reporting,” we are not organized around specific services or geographic regions. We currently operate in one service line providing scheduled passenger services in accordance with our capacity purchase agreements.

While we operate under two separate capacity purchase agreements, we do not manage our business based on any performance measure at the individual contract level. Additionally, our chief operating decision maker uses consolidated financial information to evaluate our performance, which is the same basis on which he communicates our results and performance to our Board of Directors. He bases all significant decisions regarding the allocation of our resources on a consolidated basis. Based on the information described above and in accordance with the applicable literature, management has concluded that we are organized and operated as one operating and reportable segment.

All of our operating revenue in our 2018, 2017 and 2016 fiscal years was derived from operations associated with our American and United Capacity Purchase Agreements. It is currently impractical to provide certain information on our revenue from our customers for each of our services and geographic information on our revenues and long lived assets.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Marketable Securities

The Company’s investments in marketable securities are deemed by management to be available-for-sale and are reported at fair market value. The Company’s holdings of marketable securities as of September 30, 2018 and 2017 was $19.9 million and $0, respectively.

Restricted Cash

Restricted cash primarily includes deposits in trust accounts to collateralize letters of credit and to fund workers’ compensation claims, landing fees, and other business needs. Restricted cash is stated at cost, which approximates fair value.

The Company has an agreement with a financial institution for a $6.0 million letter of credit facility to issue letters of credit for landing fees, workers’ compensation insurance, and other business needs. Pursuant to such agreement, $3.8 million and $3.6 million of outstanding letters of credit are required to be collateralized by amounts on deposit as of September 30, 2018 and 2017, respectively, which are classified as restricted cash.

Expendable Parts and Supplies

Expendable parts and supplies are stated at the lower of cost (using the first-in, first-out method) or market, and are charged to expense as they are used. The Company provides an allowance for obsolescence for such parts and supplies over the useful life of its aircraft after considering the useful life of each aircraft fleet, the estimated cost of expendable parts expected to be on hand at the end of the useful life, and the estimated salvage value of the parts. This allowance was $1.8 million and $1.6 million as of September 30, 2018 and 2017, respectively.

Prepaid Expenses

Prepaid expenses consist primarily of the excess of aircraft lease payments over the straight-lined lease expense. The straight-lined lease expense is net of estimated rebates to be received from the lessor during the term of the agreements, contingent on the Company performing certain engine restorations.

Property and Equipment

Property and equipment are stated at cost, net of manufacturer incentives, and depreciated over their estimated useful lives to their estimated salvage values, which are 20% for aircraft and rotable spare parts, using the straight-line method.

Estimated useful lives of the various classifications of property and equipment are as follows:

Property and Equipment		Estimated Useful Life
Buildings		30 years
Aircraft		25 years from manufacture date
Flight equipment		7-20 years
Equipment		5-9 years
Furniture and fixtures		3-5 years
Vehicles		5 years
Rotable spare parts		Life of the aircraft or term of the lease, whichever is less
Leasehold improvements		Life of the aircraft or term of the lease, whichever is less

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. The Company records an impairment loss if (i) the undiscounted future cash flows are found to be less than the carrying amount of the asset or asset group, and (ii) the carrying amount of the asset or asset group exceeds fair value. If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its estimated fair value. The Company recognized no impairment charges on property and equipment for the years ended September 30, 2018 and 2017.

Fair Value Measurements

The Company accounts for assets and liabilities in accordance with accounting standards that define fair value and establish a consistent framework for measuring fair value on either a recurring or a nonrecurring basis. Fair value is an exit price representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

Accounting standards include disclosure requirements relating to the fair values used for certain financial instruments and establish a fair value hierarchy. The hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels:

•

Level 1 – Observable inputs such as quoted prices in active markets;

•

Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•

Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Prepaid Maintenance Deposits

Prepaid maintenance deposits consist of payments made on a monthly basis to cover certain future maintenance events for leased flight equipment. The deposits are contractual obligations that are held in trust by the lessors. The deposits are only to be used to cover maintenance events, which include, among other things, C-checks, engine restoration events, engine life limited parts, landing gear repairs, and auxiliary power unit overhauls. The Company expenses the service as it is performed and receives reimbursement from the reserve trust account. The current portion is included in prepaid expenses and other current assets and the noncurrent portion is included in other assets on the consolidated balance sheet.

Debt Financing Costs

Debt financing costs consist of payments made to issue debt related to the purchase of aircraft, flight equipment, and certain flight equipment maintenance costs. The Company defers the costs and amortizes them over the term of the debt agreement. Debt financing costs related to a recognized debt liability are presented as a direct deduction from the carrying amount of the related long-term debt on the consolidated balance sheet. Debt financing costs with no related recognized debt liability are presented as assets, with the current portion included in prepaid expenses and other current assets and the noncurrent portion included in other assets on the consolidated balance sheet.

Unutilized Manufacturer Credits

Manufacturer credits received in connection with aircraft purchases that can be used for the future purchase of certain goods and services are recorded as a prepaid asset based on the value of the credits expected to be utilized, and the Company reduces the asset as the credits are utilized to fund such purchases. The current portion is included in prepaid expenses and other current assets and the noncurrent portion is included in other assets on the consolidated balance sheet.

Intangibles

In accordance with ASC 360, Property, Plant and Equipment, an intangible asset with a finite life that is being amortized is reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. The Company records an impairment loss if the undiscounted future cash flows are found to be less than the carrying amount of the asset and if the carrying amount of the asset exceeds fair value. If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its estimated fair value.

Other Assets

Other long-term assets primarily consist of noncurrent deferred reimbursed costs, debt financing costs, and prepaid maintenance deposits.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records deferred tax assets for the value of benefits expected to be realized from the utilization of alternative minimum tax credit carryforwards, capital loss carryforwards, and state and federal net operating loss carryforwards. The Company periodically reviews these assets to determine the likelihood of realization. To the extent the Company believes some portion of the benefit may not be realizable, an estimate of the unrealized position is made and a valuation allowance is recorded. The Company and its consolidated subsidiaries file a consolidated federal income tax return.

Deferred Credits

Deferred credits consist of cost reimbursements from major airline partners related to aircraft modifications per revised capacity purchase agreements and costs associated with pilot training. The deferred credits are amortized on a straight-line basis as a component of revenue over the term of the respective capacity purchase agreements.

Other Noncurrent Liabilities

Other noncurrent liabilities consist of the remaining fair value adjustment for unfavorable aircraft operating leases related to a previous bankruptcy and related accounting. This adjustment to fair value is being amortized on a straight-line basis over the remaining initial lease terms for these aircraft. During each of the years ended September 30, 2018, 2017 and 2016, the Company recorded amortization of this unfavorable lease liability of $6.6 million, $6.8 million, and $6.8 million, respectively, as a reduction of lease expense. During the year ended September 30, 2018, the Company wrote off $1.2 million of unfavorable lease liability related to the lease termination of its aircraft lease facility with Wells Fargo Bank Northwest, National Association, as owner trustee and lessor (the “GECAS Lease Facility”), which was accounted for as lease termination expense.

Revenue Recognition

Under the Company’s capacity purchase agreements, the major airline partners generally pay a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown. The contracts also include reimbursement of certain costs incurred by the Company in performing flight services. These costs, known as “pass-through costs,” may include passenger and hull insurance, aircraft property taxes, as well as landing fees and catering. Additionally, for the E-175 aircraft owned by United, the capacity purchase agreement provides that United will reimburse the Company for heavy airframe and engine maintenance, landing gear, auxiliary power units (“APU”) and component maintenance which are treated as pass-through and will increase revenue (and expense for the same amount) upon completion of the work. The Company also receives compensation under its capacity purchase agreements for heavy maintenance expenses at a fixed hourly rate or per aircraft rate for all aircraft in scheduled service other than the E-175 aircraft owned by United. The Company records reimbursement of pass-through costs as pass-through and other revenue in the consolidated statements of operations as service is provided. In addition, the Company’s major airline partners also provide, at no cost to the Company, certain ground handling and customer service functions, as well as airport-related facilities and gates at their hubs and other cities. Services and facilities provided by major airline partners at no cost to the Company are presented net in the Company’s consolidated financial statements; hence, no amounts are recorded for revenue or expense for these items. The contracts also include a profit margin on certain reimbursable costs, as well as a profit margin, incentives and penalties based on certain operational benchmarks. The Company recognizes revenue under its capacity purchase agreements when the transportation is provided, including an estimate of the profit component based upon the information available at the end of the accounting period. All revenue recognized under these contracts is presented as the gross amount billed to the major airline partners.

Under the Company’s capacity purchase agreements with American and United, the Company is reimbursed under a fixed rate per block hour, plus an amount per aircraft designed to reimburse the Company for certain aircraft ownership costs. The Company has concluded that a component of its revenue under these agreements is rental income, as such agreements identify the “right of use” of a specific type and number of aircraft over a stated period of time. The Company calculates the amount of rental income using the contractual ownership rates set forth in the respective capacity purchase agreements. The amount deemed to be rental income during fiscal 2018, 2017 and 2016 was $217.0 million, $217.6 million and $190.1 million, respectively, and has been included in contract revenue on the Company’s consolidated statements of operations. The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statements of operations because the use of the aircraft is not a separate activity of the total service provided.

Our American and United Capacity Purchase Agreements contain an option that allows the major airline partner to assume the contractual responsibility for procuring and providing the fuel necessary to operate the flights that the Company operates for them. Both airlines have exercised this option. Accordingly, the Company does not recognize fuel expense or revenue for fuel on passenger flight services.

Maintenance Expense

The Company operates under an FAA approved continuous inspection and maintenance program. The Company uses the direct expense method of accounting for its maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance wherein the expense is recognized when the maintenance work is completed, or over the period of repair, if materially different. For leased aircraft, the Company is subject to lease return provisions that require a minimum portion of the “life” of an overhaul be remaining on the engine at the lease return date. The Company estimates the cost of maintenance lease return obligations and accrues such costs over the remaining lease term when the expense is probable and can be reasonably estimated.

Engine overhaul expense totaled $51.2 million, $64.0 million and $90.9 million for the years ended September 30, 2018, 2017 and 2016, respectively, of which $12.3 million, $0.3 million and $0 million was pass-through expense. Airframe check expense totaled $21.5 million, $22.6 million and $13.2 million for the years ended September 30, 2018, 2017 and 2016, respectively, of which $7.5 million, $4.9 million and $0 million was pass-through expense.

Pursuant to the United capacity purchase agreement, United reimburses the Company for heavy maintenance on certain E-175 aircraft. Those reimbursements are included in pass-through and other revenue. See Note 1: “Organization and Operations” for further information.

Aircraft Leases

In addition to the aircraft we receive from United under our Capacity Purchase Agreement, approximately 19% of our aircraft are leased from third parties. In order to determine the proper classification of a lease as either an operating lease or a capital lease, we must make certain estimates at the inception of the lease relating to the economic useful life and the fair value of an asset as well as select an appropriate discount rate to be used in discounting future lease payments. These estimates are utilized by management in making computations as required by existing accounting standards that determine whether the lease is classified as an operating lease or a capital lease. All of our aircraft leases have been classified as operating leases, which results in rental payments being charged to expense over the term of the related leases. Additionally, operating leases are not reflected in our consolidated balance sheets and accordingly, neither a lease asset nor an obligation for future lease payments is reflected in our consolidated balance sheets. In the event that we or one of our major airline partners decide to exit an activity involving leased aircraft, losses may be incurred. In the event that we exit an activity that results in exit losses, these losses are accrued as each aircraft is removed from operations for early termination penalties, lease settle up and other charges. See “Recent Accounting Pronouncements” below for a discussion of a new accounting standard that is likely to have an impact on our aircraft lease accounting beginning in 2019.

Change in Accounting Policy

Stock Appreciation Rights (“SARs”) and Phantom Stock historically were accounted for as liability compensatory awards under ASC 710, Compensation – General, valued using the intrinsic value method, as permitted by ASC 718, Compensation – Stock Compensation, for nonpublic entities. Upon becoming a public company, as defined in ASC 718, in the third quarter of fiscal 2018, the Company was required to change its methodology for valuing the SARs and Phantom Stock. The SARs and Phantom Stock were re-measured at each quarterly reporting date and were accounted for prospectively at fair value using a Black-Scholes fair value pricing model until they were converted to restricted stock awards upon completion of the Company’s IPO. The Company recorded the impact of the change in valuation methods as a cumulative effect of a change in accounting principle, as permitted by ASC 250, Accounting Changes and Error Corrections. The effect of the change increased the SARs and Phantom Stock liability by $2.4 million which was the difference in compensation cost measured using the intrinsic value method and the fair value method. An equal and offsetting change to retained earnings in the consolidated balance sheet was recorded with the revaluation. Any future changes in fair value were recorded as compensation expense in the consolidated statement of operations. Upon completion of the Company’s IPO the SARs and Phantom Stock were cancelled and exchanged for shares of restricted stock under our 2018 Plan.

Correction of Immaterial Misstatement

Subsequent to the issuance of the Company’s 2016 consolidated financial statements, management determined that a payment the Company received in 2017 of $4.6 million from a former vendor for engine maintenance support credits should have been recorded as a receivable and a reduction in engine maintenance expense in prior years, and also identified other minor prior period adjustments for under-accrued property tax. Accordingly, the Company made a prior period adjustment to increase retained earnings by $2.3 million as of September 30, 2015 and adjusted accounts receivable, accrued property taxes, and deferred tax liability (for related income tax effects) as of September 30, 2016, to correct such amounts. These adjustments had no effect on the Company’s previously-reported results of operations or net cash flows from operating, investing, or financing activities for the year ended September 30, 2016. The Company evaluated these adjustments considering both quantitative and qualitative factors and concluded they were immaterial to previously issued financial statements.

Recent Accounting Pronouncements

12 Months Ended

Sep. 30, 2018

Accounting Changes And Error Corrections [Abstract]

Recent Accounting Pronouncements

3.	Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The standard establishes a new recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and changes in judgments. ASU 2014-09 allows the Company to apply the standard either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. In July 2015, the FASB approved a one-year deferral of the effective date of the new standard, making it effective for our reporting periods beginning October 1, 2018. Under the new standard, the Company concluded that individual flights are distinct services and these flight services promised in a capacity purchase agreement represent a series of services that should be accounted for as a single performance obligation, recognized over time as the flights are completed. We do not expect ASU 2014-09 to have a material impact to our financial statements. The Company anticipates applying the standard as a cumulative-effect adjustment as of the date of adoption. We will continue to monitor industry activities and any additional guidance provided by regulators, standards setters, or the accounting profession and adjust our assessment and implementation plans accordingly.

In August 2014, The FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Topic 205), which provides guidance on determining when and how to disclose going-concern uncertainties in the consolidated financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the consolidated financial statements are issued. An entity must provide certain disclosure if “conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.” The update applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter. The Company adopted this ASU in fiscal year 2017, and the adoption did not have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which provides guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of income. The guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements.

In March of 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). With this standard, all excess tax benefits and tax deficiencies are required to be recognized as income tax benefit or expense in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2016-09 in the first quarter of the year ended September 30, 2018. This change in accounting principle has been applied on a modified retrospective transition method by means of a cumulative effect adjustment to equity as of the beginning of fiscal year 2018 as a cumulative-effect adjustment increasing deferred tax assets by $0.4 million, increasing income tax expense by $0.3 million, and increasing retained earnings by $0.7 million. Adoption of ASU 2016-09 did not have any other material effect on the Company’s results of operations, financial position or cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force), which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company does not expect ASU 2016-15 to have a material impact to its financial statements.

In November 2016, the FASB issued ASU No. 2016-18 that requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company expects the adoption of ASU 2016-18 to have no effect on our consolidated statements of operations or its consolidated balance sheets. ASU 2016-18 is expected to only result in a change in presentation of restricted cash and restricted cash equivalents on the Company's consolidated statement of cash flows. The Company has restricted cash of $3.8 million and $3.6 million as of September 30, 2018 and 2017, respectively, and intends to adopt the new guidance in fiscal 2019.

Concentrations

12 Months Ended

Sep. 30, 2018

Risks And Uncertainties [Abstract]

Concentrations

4.	Concentrations

At September 30, 2018, the Company had capacity purchase agreements with American and United. All of the Company’s consolidated revenue for the years ended September 30, 2018, 2017 and 2016 and accounts receivable at the end of September 30, 2018 and 2017 was derived from these agreements. The terms of both the American and United capacity purchase agreements are not aligned with the lease obligations on the aircraft performing services under such agreements.

Amounts billed by the Company under capacity purchase agreements are subject to the Company’s interpretation of the applicable capacity purchase agreement and are subject to audit by the Company’s major airline partners. Periodically, the Company’s major airline partners dispute amounts billed and pay amounts less than the amount billed. Ultimate collection of the remaining amounts not only depends upon the Company prevailing under the applicable audit, but also upon the financial well-being of the major airline partner. As such, the Company periodically reviews amounts past due and records a reserve for amounts estimated to be uncollectible. The allowance for doubtful accounts was $1.3 million and $0.7 million at September 30, 2018 and 2017, respectively. If the Company’s ability to collect these receivables and the financial viability of our partners is materially different than estimated, the Company’s estimate of the allowance could be materially impacted.

American accounted for approximately 54%, 56% and 64% of the Company’s total revenue for the years ended September 30, 2018, 2017 and 2016, respectively. United accounted for approximately 46%, 44% and 36% of the Company’s total revenue for the years ended September 30, 2018, 2017 and 2016, respectively. A termination of either the American or the United capacity purchase agreement would have a material adverse effect on the Company’s business prospects, financial condition, results of operations, and cash flows.

Intangible Assets

12 Months Ended

Sep. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

5.	Intangible Assets

Information about the intangible assets of the Company at September 30, 2018 and 2017, were as follows (in thousands):

	September 30,			September 30,
	2018			2017
Customer relationship	$	43,800		$	43,800
Accumulated amortization		(32,459	)		(32,076	)
	$	11,341		$	11,724

Total amortization expense recognized was approximately $0.4 million for the fiscal years ended September 30, 2018, 2017 and 2016. The Company expects to record amortization expense of $1.8 million for 2019, and $1.5 million, $1.2 million, $1.0 million, $0.9 million for fiscal years 2020, 2021, 2022, 2023, respectively.

Balance Sheet Information

12 Months Ended

Sep. 30, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Balance Sheet Information

6.	Balance Sheet Information

Certain significant amounts included in the Company’s consolidated balance sheet as of September 30, 2018 and 2017, consisted of the following (in thousands):

	September 30,			September 30,
	2018			2017
Expendable parts and supplies, net
Expendable parts and supplies	$	18,907		$	17,807
Less obsolescence and other		(3,249	)		(2,693	)
	$	15,658		$	15,114
Prepaid expenses and other current assets
Prepaid aircraft rent	$	30,267		$	53,645
Unutilized manufacturer credits		4,500			—
Deferred offering and reimbursed costs		1,945			1,863
Other		4,202			6,017
	$	40,914		$	61,525
Property and equipment—net
Aircraft and other flight equipment substantially pledged	$	1,502,940		$	1,388,990
Other equipment		3,721			3,383
Leasehold improvements		2,754			2,746
Vehicles		692			744
Building		699			699
Furniture and fixtures		287			251
Total property and equipment		1,511,093			1,396,813
Less accumulated depreciation		(260,264	)		(204,365	)
	$	1,250,829		$	1,192,448
Other accrued expenses
Accrued property taxes	$	6,981		$	6,484
Accrued interest		6,118			4,036
Accrued vacation		5,470			2,663
Accrued wheels, brakes and tires		1,452			2,477
Other		9,675			8,269
	$	29,696		$	23,929

Depreciation expense totaled $64.6 million, $60.7 million and $45.6 million for the years ended September 30, 2018, 2017 and 2016, respectively.

The Company recorded amortization of the unfavorable lease liability amounting to $6.6 million, $6.8 million and $6.8 million for the years ended September 30, 2018, 2017 and 2016, respectively, as a reduction to lease expense. During the year ended September 30, 2018, the Company wrote off $1.2 million of unfavorable lease liability related to the lease termination of its aircraft lease facility with Wells Fargo Bank Northwest, National Association, as owner trustee and lessor (the “GECAS Lease Facility”), which was accounted for as lease termination expense.

Fair Value Measurements

12 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

7.	Fair Value Measurements

The Company did not measure any of its assets or liabilities at fair value on a recurring or nonrecurring basis as of September 30, 2018 and 2017.

The carrying values of cash and cash equivalents, accounts receivable, and accounts payable included on the consolidated balance sheets approximated fair value at September 30, 2018 and 2017.

The Company’s debt agreements are not traded on an active market. The Company has determined the estimated fair value of its debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable and, therefore, could be sensitive to changes in inputs. The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt.

The carrying value and estimated fair value of the Company’s long-term debt, including current maturities, were as follows (in millions):

	September 30, 2018				September 30, 2017
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Long-term debt, including current maturities⁽¹⁾	$	930.2	$	926.2	$	956.9	$	975.0

⁽¹⁾	Current and prior period long-term debts’ carrying and fair values exclude net debt issuance costs.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Long-Term Debt and Other Borrowings

12 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Long-Term Debt and Other Borrowings

8.	Long-Term Debt and Other Borrowings

Long-term debt as of September 30, 2018 and 2017, consisted of the following (in thousands):

	September 30,			September 30,
	2018			2017
Notes payable to financial institution, collateralized by the underlying aircraft, due 2019⁽¹⁾⁽²⁾	$	4,428		$	58,254
Notes payable to financial institution, collateralized by the underlying aircraft, due 2022⁽³⁾⁽⁴⁾		69,340			113,611
Notes payable to financial institution, collateralized by the underlying aircraft, due 2024⁽⁵⁾		72,438			82,776
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2027⁽⁶⁾		122,591			137,028
Notes payable to secured parties, collateralized by the underlying aircraft, due 2028⁽⁷⁾		209,240			226,399
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2028⁽⁸⁾		167,269			181,115
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2022⁽¹⁷⁾		95,060			—
Notes payable to financial institution, collateralized by the underlying equipment, due 2022⁽⁹⁾		88,162			93,031
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2022⁽¹⁰⁾		63,403			—
Notes payable to financial institution, collateralized by the underlying equipment, due 2020⁽¹¹⁾		3,318			4,976
Notes payable to financial institution due 2020⁽¹²⁾		4,360			6,390
Notes payable to financial institution, collateralized by the underlying equipment, due 2020⁽¹³⁾		14,971			9,158
Notes payable to financial institution due 2019⁽¹⁴⁾		5,896			18,530
Working capital draw loan, collateralized by certain flight equipment and spare parts⁽¹⁵⁾		—			25,650
Other obligations due to financial institution, collateralized by the underlying equipment, due 2023⁽¹⁶⁾		9,731			—
Total long-term debt		930,207			956,918
Less current portion		(155,170	)		(140,466	)
Less unamortized debt issuance costs		(14,860	)		(12,578	)
Long-term debt—excluding current portion	$	760,177		$	803,874

⁽¹⁾	In fiscal 2005, the Company financed five CRJ-900 aircraft with $118 million in debt. The debt bears interest at the monthly London InterBank Offered Rate (“LIBOR”), plus 3% (5.261% at September 30, 2018) and requires monthly principal and interest payments.

⁽²⁾	In fiscal 2004, the Company financed five CRJ-700 and nine CRJ 900 aircraft with $254.7 million in debt. The debt bears interest at the monthly LIBOR plus 3% (5.261% at September 30, 2018) and requires monthly principal and interest payments.

⁽³⁾	In fiscal 2007, the Company financed three CRJ-900 and three CRJ-700 aircraft for $120.3 million. The debt bears interest at the monthly LIBOR plus 2.25% (4.511% at September 30, 2018) and requires monthly principal and interest payments.

⁽⁴⁾	In fiscal 2014, the Company financed 10 CRJ-900 aircraft for $88.4 million. The debt bears interest at the monthly LIBOR plus a spread ranging from 1.95% to 7.25% (4.211% to 9.511% at September 30, 2018) and requires monthly principal and interest payments.

⁽⁵⁾	In fiscal 2014, the Company financed eight CRJ-900 aircraft with $114.5 million in debt. The debt bears interest at 5% and requires monthly principal and interest payments.

⁽⁶⁾

In fiscal 2015, the Company financed seven CRJ-900 aircraft with $170.2 million in debt. The senior notes payable of $151 million bear interest at monthly LIBOR plus 2.71% (4.971% at September 30, 2018) and require monthly principal and interest payments. The subordinated notes payable are noninterest-bearing and become payable in full on the last day of the term of the notes. The Company has imputed an interest rate of 6.25% on the subordinated notes payable and recorded a related discount of $8.1 million, which is being accreted to interest expense over the term of the notes.

⁽⁷⁾	In fiscal 2016, the Company financed 10 E-175 aircraft with $246 million in debt under an EETC financing arrangement (see discussion below). The debt bears interest ranging from 4.75% to 6.25% and requires semi-annual principal and interest payments.

⁽⁸⁾

In fiscal 2016, the Company financed eight E-175 aircraft with $195.3 million in debt. The senior notes payable of $172 million bear interest at the three-month LIBOR plus a spread ranging from 2.20% to 2.32% (4.598% to 4.718% at September 30, 2018) and require quarterly principal and interest payments. The subordinated notes payable bear interest at 4.50% and require quarterly principal and interest payments.

⁽⁹⁾	In fiscal 2017, the Company financed certain flight equipment with $99.1 million in debt. The debt bears interest at the monthly LIBOR (rounded to the nearest 16th) plus 7.25% (9.511% at September 30, 2018) and requires monthly principal and interest payments.

⁽¹⁰⁾

In December 2017, the Company refinanced nine CRJ-900 aircraft with $74.9 million in debt. The senior notes payable of $46.9 million bear interest at the three-month LIBOR plus 3.50% (5.898% at September 30, 2018) and require quarterly principal and interest payments. The subordinated notes payable bear interest at the three-month LIBOR plus 4.50% (6.898% at September 30, 2018) and require quarterly principal and interest payments.

⁽¹¹⁾	In fiscal 2015, the Company financed certain flight equipment with $8.3 million in debt. The debt bears interest at 5.163% and requires monthly principal and interest payments.

⁽¹²⁾	In fiscal 2015 and 2016, the Company financed certain flight equipment maintenance costs with $10.2 million in debt. The debt bears interest at the three-month LIBOR plus 3.07% (5.468% at September 30, 2018) and requires quarterly principal and interest payments.

⁽¹³⁾

In fiscal 2016 and 2017, the Company financed certain flight equipment maintenance costs with $11.9 million in debt. The debt bears interest at the three-month LIBOR plus a spread ranging from 2.93% to 2.96% (5.328% to 5.358% at September 30, 2018) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of September 30, 2018, the Company was in compliance with this covenant.

⁽¹⁴⁾

In fiscal 2017, the Company financed certain flight equipment maintenance costs with $25 million in debt. The debt bears interest at the three-month LIBOR plus 3.30% (5.698% at September 30, 2018) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of September 30, 2018, the Company was in compliance with this covenant.

⁽¹⁵⁾

In fiscal 2016, the Company obtained a $35 million working capital draw loan, which terminates in August 2019. Interest is assessed on drawn amounts at one-month LIBOR plus 4.25% (6.511% at September 30, 2018). The line was drawn upon during fiscal 2017. The working capital draw loan is subject to an interest and rental coverage ratio covenant. As of September 30, 2018, the Company was in compliance with this covenant.

⁽¹⁶⁾	In February 2018, the Company leased two spare engines. The leases were determined to be capital as the leases contain a bargain purchase option at the end of the term. Imputed interest is 9.128% and the leases requires monthly payments.

⁽¹⁷⁾

In June 2018, the Company refinanced six CRJ-900 aircraft with $27.5 million in debt and financed nine CRJ-900 aircraft, which were previously leased, with $69.6 million in debt. The senior notes payable of $65.8 million bear interest at the three-month LIBOR plus 3.50% (5.898% at September 30, 2018) and require quarterly principal and interest payments. The subordinated notes payable bear interest at three-month LIBOR plus 7.50% (9.898% at September 30, 2018) and require quarterly principal and interest payments.

Principal maturities of long-term debt as of September 30, 2018, and for each of the next five years are as follows (in thousands):

	Total Principal
	Amount
2019	$	155,170
2020		150,092
2021		146,067
2022		141,917
2023		69,232
Thereafter		267,729
	$	930,207

The net book value of collateralized aircraft and equipment as of September 30, 2018 was $1,047.6 million.

In December 2015, an Enhanced Equipment Trust Certificate (“EETC”) pass-through trust was created to issue pass-through certificates to obtain financing for new E-175 aircraft. At September 30, 2018, Mesa has $209.2 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the consolidated balance sheets. The structure of the EETC financing consists of a pass-through trust created by Mesa to issue pass-through certificates, which represent fractional undivided interests in the pass-through trust and are not obligations of Mesa.

The proceeds of the issuance of the pass-through certificates were used to purchase equipment notes which were issued by Mesa and secured by its aircraft. The payment obligations under the equipment notes are those of Mesa. Proceeds received from the sale of pass-through certificates were initially held by a depositary in escrow for the benefit of the certificate holders until Mesa issued equipment notes to the trust, which purchased such notes with a portion of the escrowed funds.

Mesa evaluated whether the pass-through trust formed for its EETC financing is a Variable Interest Entity (“VIE”) and required to be consolidated. The pass-through trust was determined to be a VIE, however, the Company has determined that it does not have a variable interest in the pass-through trust, and therefore, has not consolidated the pass-through trust with its financial statements.

On June 27, 2018, the Company refinanced $16.0 million of debt on six CRJ-900 aircraft (due in 2019), with $27.5 million of debt, resulting in net cash proceeds to the Company of $10.4 million after transaction related fees. The notes payable require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus 3.50%.

On June 28, 2018, the Company purchased nine CRJ-900 aircraft, which were previously leased under the GECAS Lease Facility, for $76.5 million. The Company financed the aircraft purchase with $69.6 million in new debt and proceeds from the June 2018 refinancing of six CRJ-900 aircraft. The notes payable of $69.6 million require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus a spread ranging from 3.50% for the senior promissory notes to 7.50% for the subordinated promissory notes. The Company recorded non-cash lease termination expense of $15.1 million in connection with the lease buyout. Also, as part of the transaction, the Company (i) received $4.5 million of future goods and services credits and $5.6 million of loan forgiveness for loans with a maturity date in 2027 from the aircraft manufacturer, and (ii) mutually agreed with GE Capital Aviation Services LLC to terminate the GE Warrant to purchase 250,000 shares of common stock.

On August 14, 2018 the Company paid down the outstanding balance on the CIT Revolving Credit Facility of $25.7 million.

Earnings Per Share

12 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Earnings Per Share

9.	Earnings Per Share

Calculations of net income per common share were as follows (in thousands, except per share data):

	Year Ended September 30,
	2018		2017		2016
Net income	$	33,255	$	32,828	$	14,920
Basic weighted average common shares outstanding		13,516		10,919		9,558
Add: Incremental shares for:
Dilutive effect of warrants		11,492		12,369		14,451
Dilutive effect of restricted stock		163		98		73
Diluted weighted average common shares outstanding		25,171		23,386		24,082

Net income per common share
Basic	$	2.46	$	3.01	$	1.56
Diluted	$	1.32	$	1.40	$	0.62

Basic income per common share is computed by dividing net income attributable to Mesa Air Group by the weighted average number of common shares outstanding during the period.

The number of incremental shares from the assumed issuance of shares relating to restricted stock and exercise of warrants is calculated by applying the treasury stock method. Share-based awards and warrants whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income or loss per share calculation. In loss periods, these incremental shares are excluded from the calculation of diluted loss per share, as the inclusion of unvested restricted stock and warrants would have an anti-dilutive effect. There were no anti-dilutive shares relating to restricted stock and exercise of warrants that were excluded from the calculation of diluted loss per share for the years ended September 30, 2018, 2017 and 2016.

Common Stock

12 Months Ended

Sep. 30, 2018

Stockholders Equity Note [Abstract]

Common Stock

10.	Common Stock

The Company previously issued warrants to third parties, which had a five-year term to be converted to common stock at an exercise price of $0.004 per share. Outstanding warrants to purchase shares of common stock are held by persons who are not U.S. citizens. The warrants are not exercisable due to restrictions imposed by federal law requiring that no more than 24.9% of our stock be voted, directly or indirectly, or controlled by persons who are not U.S. citizens. The warrants can be converted to common stock upon warrant holders demonstrating U.S. citizenship. During June 2018, the Company extended the term of outstanding warrants set to expire by five years (through fiscal year 2023). Any warrants that were not extended were forfeited.

On June 28, 2018, the Company agreed with GE Capital Aviation Services LLC (“GE Capital”) to terminate a warrant to purchase 250,000 shares of common stock held by GE Capital. Our shares of common stock became listed on The NASDAQ Global Select Market under the symbol “MESA” effective August 10, 2018.

In July 2018, the Company’s Board of Directors and Compensation Committee approved the issuance of shares of restricted common stock under its 2018 Plan immediately following completion of the Company’s IPO to certain of its employees and directors in exchange for the cancellation of existing restricted phantom stock units, unvested restricted shares and SARs. The shares of restricted common stock issued under the 2018 Plan in exchange for the cancellation of restricted phantom stock units, unvested restricted shares and SARs are subject to vesting on the same terms set forth in the prior vesting schedules and are not subject to acceleration in connection with the 2018 Plan issuances.

On August 14, 2018, the Company completed its IPO, in which it issued and sold 9,630,000 shares of common stock, no par value, at a public offering price of $12.00 per share (the “Firm Shares”). Additionally, in connection with the IPO, the Company granted the underwriters an option to purchase up to an additional 1,444,500 shares of common stock at the same price. On September 11, 2018, the Company closed the sale of 1,344,500 shares (“Option Shares”) of its common stock, in connection with the partial exercise of the overallotment option granted to the underwriters in its IPO. Of the 1,344,500 Option Shares sold, 723,985 were purchased directly from the Company and the remaining 620,515 shares were purchased directly from the selling shareholders. The Firm Shares and Option Shares were sold to the public for a price of $12.00 per share. The aggregate gross proceeds to us from the IPO were approximately $124.2 million. We received $111.7 million in net proceeds after deducting $8.7 million of underwriting discounts and commissions and $3.8 million in offering costs.

We have not historically paid dividends on shares of our common stock. Additionally, our RASPRO Lease Facility and GECAS Lease Facility contain restrictions that limit our ability to or prohibit us from paying dividends to holders of our common stock.

Income Taxes

12 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

11.	Income Taxes

The provision for income taxes consists of the following:

	Years Ended September 30,
	2018			2017		2016
	(in thousands)
Current
Federal	$	—		$	—	$	—
State		465			359		413
	$	465		$	359	$	413
Deferred
Federal		(17,308	)		17,713		8,982
State		(583	)		2,802		531
	$	(17,891	)	$	20,515	$	9,513
(Benefit) provision for income taxes	$	(17,426	)	$	20,874	$	9,926

Reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows:

	Years Ended September 30,
	2018			2017		2016
	(in thousands)
Income tax expense at federal statutory rate	$	3,878		$	18,796	$	8,696
(Reduction) increase in income taxes resulting from:
State taxes, net of federal tax benefit		660			1,397		792
Nondeductible stock compensation expenses		—			—		—
Permanent items		63			92		71
Change in valuation allowances		(646	)		531		249
US Tax Cuts and Jobs Act Impact		(22,015	)

Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2016
Contract Revenue [Member]
Revenue from related party	$ 359,467	$ 354,614	$ 366,911
Pass Through and Other [Member]
Revenue from related party	$ 6,628	$ 7,920	$ 8,885