UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

For the quarterly period ended December 31, 2019

Or

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number 001-38626

 

MESA AIR GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

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

 

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

 

 

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.

 

 

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 December 31, 2019, the registrant had 33,039,126 shares of common stock, no par value per share, issued and outstanding.

 

 

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TABLE OF CONTENTS

 

 

 

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Where You Can Find More Information

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (http://investor.mesa-air.com/), SEC filings, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with our members and public about our company, our products, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.

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. 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.

In some cases, you can identify forward-looking statements by terms such as "may", "should", "expects", "might", "plans", "anticipates", "could", "intends", "target", "projects", "contemplates", "believes", "estimates", "predicts", "potential", "seek", "would", "continue", or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the "Risk Factors" section and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. 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:

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.

 

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Part I – Financial Information

Item 1. Financial Statements

MESA AIR GROUP, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts) (Unaudited)

 

 

See accompanying notes to these condensed consolidated financial statements.

 

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MESA AIR GROUP, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts) (Unaudited)

 

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 

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MESA AIR GROUP, INC.

Condensed Consolidated Statements of Stockholders' Equity

(In thousands, except share amounts) (Unaudited)

 

 

 

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Stockholders' Equity

(In thousands, except share amounts) (Unaudited)

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 

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MESA AIR GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

 

 

See accompanying notes to these condensed consolidated financial statements.

^{(1 )}See section 14 Leases and Commitments.

 

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MESA AIR GROUP, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

About Mesa Air Group, Inc.

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa" or the "Company") is a holding company whose principal subsidiary, Mesa Airlines, Inc. ("Mesa Airlines"), operates as a regional air carrier providing scheduled flight service to 144 cities in 41 states, the District of Columbia, Canada, Mexico, Cuba, and the Bahamas. As of December 31, 2019, Mesa operated a fleet of 145 aircraft with approximately 742 daily departures and 3,600 employees. Mesa operates all of its flights as either American Eagle or United Express flights pursuant to the terms of the capacity purchase agreements entered into with American Airlines, Inc. (“American”) and United Airlines, Inc. (“United”).

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 (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) 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 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.

American Capacity Purchase Agreement

As of December 31, 2019, the Company operated 60 CRJ-900 aircraft for American under our American Capacity Purchase Agreement. In exchange for providing flight services under our American Capacity Purchase Agreement, 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 during each month. In addition, we may also receive incentives or incur penalties based upon our operational performance, including controllable on-time departures and controllable completion percentages. American also reimburses us for certain costs on an actual basis, including passenger liability and hull insurance and aircraft property taxes, all as set forth in our American Capacity Purchase Agreement. Other expenses, including fuel and certain landing fees, are directly paid to suppliers by American. In addition, American also provides, at no cost to us, certain ground handling and customer service functions, as well as airport-related facilities and gates at American hubs and cities where we operate.

Our American Capacity Purchase Agreement establishes minimum levels of flight operations.  In prior periods, the FAA Qualification Standards (as defined below) have negatively impacted our ability to hire pilots at a rate sufficient to support required utilization levels, and, as a result, we have issued credits to American pursuant to the terms of our American Capacity Purchase Agreement.

 

Our American Capacity Purchase Agreement will terminate with respect to different tranches of aircraft between 2021 and 2025, unless otherwise extended or amended. As of the date of this filing, we remain in discussions with American regarding the terms of extending the 32 aircraft that are due to expire in 2021 and the 20 aircraft that are due to expire in 2022 and the 7 that expire in 2025. Our American Capacity Purchase Agreement is subject to termination prior to that date, subject to our right to cure, in various circumstances including:

 

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In the event that American has the right to terminate our American Capacity Purchase Agreement, American may, in lieu of termination, withdraw up to an aggregate of 14 aircraft from service under our American Capacity Purchase Agreement. Upon any such withdrawal, American's payments to us would be correspondingly reduced by the number of withdrawn aircraft.

On January 31, 2019, the Company entered into an amendment to the American Capacity Purchase Agreement, the terms of which provide for new and revised operational performance metrics, the Company's right to earn additional incentive compensation based on the achievement of such metrics, and the right of American to permanently withdraw up to six (6) aircraft in the event the Company fails to meet such new/revised performance metrics.  Under the terms of such amendment the Company agreed, effective April 2, 2019, to convert two (2) aircraft to be utilized by the Company as operational spares in the Company's sole discretion throughout its system. In July 2019, American exercised its right to permanently withdraw two (2) aircraft from the American Capacity Purchase Agreement due to the Company's failure to meet certain performance metrics. The aircraft were removed on November 2, 2019. On November 25, 2019, the Company amended its agreement with American Airlines. The Company did not meet certain performance metrics during the most recent measurement period, which allows American to remove two additional aircraft from the capacity purchase agreement. American has agreed to defer the right to remove these two aircraft but has elected to remove one of two previously deferred aircraft, effective January 2, 2020.  As of January 2, 2020 American has removed three (3) of the six (6) aircraft under this amendment and retains the right to permanently withdraw the remaining three (3) aircraft at any time.

United Capacity Purchase Agreement

As of December 31, 2019, the Company operated 20 CRJ-700 and 60 E-175 aircraft for United under our United Capacity Purchase Agreement. In exchange for providing the flight services under our United Capacity Purchase Agreement, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown and the results of passenger satisfaction surveys. United 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. We also receive a minimum profit margin based upon our operational performance. Under our United Capacity Purchase Agreement, United owns 42 of the 60 E-175 aircraft and leases them to us at nominal amounts. United reimburses us on a pass-through basis for all costs related to heavy airframe and engine maintenance, landing gear, auxiliary power units ("APUs") and component maintenance for the 42 E-175 aircraft owned by United. Our United Capacity Purchase Agreement 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 Capacity Purchase Agreement in its entirety or permanently remove select aircraft from service, we are permitted to return any of the affected E-175 aircraft leased from United at no cost to us. In addition, if United removes any of our 18 owned E-175 aircraft from service at its direction, United would remain obligated to assume the aircraft ownership and associated debt with respect to such aircraft through the end of the term of the agreement.

On November 26, 2019, we amended and restated our United Capacity Purchase Agreement to, among other things, incorporate the terms of the 11 prior amendments to that Agreement and to extend the term thereof through the addition of twenty (20) new Embraer E175LL aircraft to the scope of such Agreement.  These new aircraft will be financed and owned by us and operated for a period of twelve (12) years from the in-service date.  Deliveries of the new E175LL aircraft are scheduled to begin in May 2020 and be completed by December 31, 2020.  Commencing five (5) years after the actual in-service date, United has the right to remove the E175LL aircraft from service by giving us notice of 90 days or more, subject to certain conditions, including the payment of certain wind-down expenses plus, if removed prior to the ten (10) year anniversary of the in-service date, certain accelerated margin payments.  

In addition to adding the 20 new E175LL aircraft to the amended and restated United Capacity Purchase Agreement, we extended the term of our 42 E-175 aircraft leased from United for an additional five (5) years, which now expire between 2024 and 2028.  As part of the amended and restated United Capacity Purchase Agreement, we agreed to lease our twenty (20) CRJ-700 aircraft to another United Express service provider for a term of seven (7) years. We will continue to operate such aircraft until they are transitioned over the period between May 2020 and December 2020. United has a right to purchase the CRJ 700 aircraft at the then fair market value. In addition, we own 18 E-175 aircraft that expire in 2028.

 

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Our United Capacity Purchase Agreement is subject to early termination under various circumstances noted above and including:

 

Basis of Presentation

The accompanying condensed 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.

These condensed consolidated financial statements should be read in conjunction with, the Company's audited consolidated financial statements and notes thereto as of and for the year ended September 30, 2019 included in the Company's Annual Report on Form 10-K for the year ended September 30, 2019 on file with the U.S. Securities and Exchange Commission (the "SEC"). Information and footnote disclosures normally included in financial statements have been condensed or omitted in these condensed consolidated financial statements pursuant to the rules and regulations of the SEC and GAAP. These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented.

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 its 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.

Adoption of New Lease Standard

 

Effective October 1, 2019, we have adopted 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. We determine if an arrangement is a lease at inception. Our current lease activities are recorded in operating lease right-of-use (“ROU”) assets, current maturities of operating lease and noncurrent operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of long-term debt and financing leases, long-term debt and financing leases, excluding current portion.

 

 

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ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Variable lease payments are not included in the calculation of the right-of-use assets and lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

As a lessor, for our aircraft operated under our capacity purchase agreements, we have historically accounted for the non-lease component under ASC 606 and have historically accounted for the lease component under ASC 840. Under the available practical expedient, we have elected to account for the lease and non-lease components as a single component for all classes of underlying assets.  As the predominant component of the combined components are the flights services, the leases are being accounted for entirely under ASC 606. As a lessee, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less).

 

 

Aircraft Lease

In addition to the aircraft we receive from United under our United Capacity Purchase Agreement, approximately 12% of our aircraft are leased from third parties. 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. 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. Additionally, any remaining ROU assets and lease liabilities will be written off.

 

The majority of the Company's leased aircraft are leased through trusts that have a sole purpose to purchase, finance, and lease these aircraft to the Company; therefore, they meet the criteria of a variable interest entity. However, since these are single-owner trusts in which the Company does not participate, the Company is not at risk for losses and is not considered the primary beneficiary. Management believes that the Company's maximum exposure under these leases is the remaining lease payments.

 

Use of Estimates

The preparation of the Company's condensed 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 condensed consolidated financial statements. Actual results could differ from those estimates.

 

Maintenance Expense

The Company operates under a Federal Aviation Administration ("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 Company recognizes the expense when the maintenance work is completed, or over the repair period, if materially different. Our maintenance policy is determined by fleet when major maintenance is incurred. 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.

 

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Under the Company's aircraft operating lease agreements and FAA operating regulations, it is obligated to perform all required maintenance activities on its fleet, including component repairs, scheduled air frame checks and major engine restoration events. The Company estimates the timing of the next major maintenance event based on assumptions including estimated usage, FAA-mandated maintenance intervals and average removal times as recommended by the manufacturer. The timing and the cost of maintenance are based on estimates, which can be impacted by changes in utilization of its aircraft, changes in government regulations and suggested manufacturer maintenance intervals. Major maintenance events consist of overhauls to major components.

Engine overhaul expense totaled $10.6 million and $4.1 million for the three months ended December 31, 2019, and 2018, respectively, of which $1.9 million and $1.5 million, respectively, was pass-through expense.  Airframe C-check expense totaled $7.3 million and $1.5 million for the three months ended December 31, 2019, and 2018, respectively, of which $1.2 million and $0.0 million, respectively, was pass-through expense

 

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU introduces a new accounting model known as Credit Expected Credit Losses (“CECL”). CECL requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is recognized. The new standard will also apply to receivables arising from revenue transactions such as contract assets and accounts receivables. There are other provisions within the standard affecting how impairments of other financial assets may be recorded and presented, as well as expanded disclosures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.  The Company is currently evaluating the impact on its 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 Company adopted Topic 842 effective October 1, 2019 and elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company’s contracts are or contain leases, (2) lease classification and (3) initial direct costs.  In July 2018, the FASB issued ASU No. 2018-11, "Targeted Improvements - Leases (Topic 842)." The Company did not elect the hindsight practical expedient. This update provides an optional transition method that allows entities to elect to apply the standard using the modified retrospective approach at its effective date, versus recasting the prior years presented. If this adoption method is elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. The Company elected this adoption method on October 1, 2019.There was not adjustment to retained earnings.

 

Additionally, the Company’s adoption of Topic 842 did not have a significant impact on the recognition, measurement or presentation of lease revenue and lease expenses within the consolidated statements of operations or the consolidated statements of cash flows. The Company’s adoption of Topic 842 did not have a material impact on the timing or amount of the Company’s lease revenue as a lessor.  The Company’s prepaid aircraft rents, accrued aircraft rents and deferred rent credits that were separately stated in the Company’s September 30, 2019 balance sheet have been classified as a component of the Company’s right-of-use assets effective October 1, 2019. The consolidated financial statements for the three months ended December 31, 2019 are presented under the new standard, while comparative years presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy. See Note 14, "Leases, Commitments and Contingencies," for more information.

 

In July 2018, the FASB issued ASU 2018-09, Codification Improvements, which contains amendments that affect a wide variety of Topics in the Codification, including amendment to Subtopic 718-40, Compensation-Stock Compensation-Income Taxes, that clarifies the timing of when an entity should recognize excess tax benefits. We adopted this standard on October 1, 2019 and it did not have a material impact on our condensed consolidated financial statements.

 

 

 

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At December 31, 2019, the Company had capacity purchase agreements with American and United. All of the Company's condensed consolidated revenue for the three months ended December 31, 2019 and 2018 and accounts receivable at December 31, 2019 and September 30, 2018 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 $1.8 million and $1.0 million at December 31, 2019 and September 30, 2019, respectively. If the Company's ability to collect these receivables and the financial viability of its partners is materially different than estimated, the Company's estimate of the allowance could be materially impacted.

American accounted for approximately 51% and 53% of the Company's total revenue for the three months ended December 31, 2019 and 2018, respectively. United accounted for approximately 49% and 47% of the Company's revenue for the three months ended December 31, 2019 and 2018, 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.

Information about the intangible assets of the Company at December 31, 2019 and September 30, 2019, were as follows (in thousands):

 

 

Total amortization expense recognized was approximately $0.4 million and $0.5 million for the three months ended December 31, 2019 and 2018, respectively. The Company expects to record amortization expense of $1.1 million for the remainder of 2020, and $1.2 million, $1.0 million, $0.9 million, $0.8 million for fiscal years 2021, 2022, 2023, and 2024 respectively.

 

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Certain significant amounts included in the Company's condensed consolidated balance sheet as of December 31, 2019 and September 30, 2019, consisted of the following (in thousands):

 

 

Depreciation expense totaled approximately $20.2 million and $18.0 million for the three months ended December 31, 2019 and 2018, respectively.

Prior to the Company’s adoption of Topic 842 on October 1, 2019, the Company recorded amortization of the unfavorable lease liability of approximately $1.5 million for the three months ended December 31, 2018 as a reduction to lease expense. Upon the Company’s adoption of Topic 842, the unfavorable lease liability is now included in its ROU asset balance and amortized therein.

 

The carrying values reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments.

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.

 

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

 

 

 

 

Long-term debt as of December 31, 2019 and September 30, 2019, consisted of the following (in thousands):

 

 

 

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Principal maturities of long-term debt as of December 31, 2019, and for each of the next five years are as follows (in thousands):

 

 

The net book value of collateralized aircraft and equipment as of December 31, 2019 was $1,081.0 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 December 31, 2019 Mesa has $191.2 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the condensed 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 January 28, 2019, the Company entered into a Term Loan Agreement (the "Term Loan") pursuant to which the lenders thereunder committed to lend to the Company term loans in the aggregate principal amount of $91.2 million.  Borrowings under the Term Loan bear interest at LIBOR plus 3.10%. This interest rate is significantly lower than the interest rate under the Company's Spare Engine Facility (defined below), which the Term Loan refinanced and replaced.  The Spare Engine Facility accrued interest at LIBOR plus 7.25%.  The Term Loan has a term of five years, with principal and interest payments due monthly over the term of the loan in accordance with an amortization schedule.  The Company recorded a loss on extinguishment of debt of $3.6 million, due to a $1.9 million write-off of financing fees and $1.7 million in prepayment penalties, in connection with the repayment of the Spare Engine Facility.

On June 14, 2019, the Company completed the purchase of ten CRJ-700 aircraft, which were previously leased under the aircraft lease facility with Wells Fargo Bank Northwest, National Association, as owner trustee and lessor (the “GECAS Lease Facility”), for $70.0 million. The Company financed the aircraft purchase with $70.0 million in new debt. The notes payable of $70.0 million require monthly payments of principal and interest through fiscal 2023 bearing interest at LIBOR plus 5.0%. The Company recorded non-cash lease termination expense of $9.5 million in connection with the lease buyout ⁽¹⁴⁾.

On September 25, 2019, the company extended the term on their $35.0 million working capital draw loan by three years, which now terminates in September 2022. Interest is assessed on drawn amounts at one-month LIBOR plus 3.75%.

On September 27, 2019, the company financed certain flight equipment with $8.0 million in new debt. The debt of $8.0 million require monthly payments of principal and interest through fiscal 2023 bearing interest at Libor plus 5.0%^(15).

 

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Calculations of net income per common share attributable to Mesa Air Group were as follows (in thousands, except per share data):

 

 

 

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 (excluding warrants with a nominal conversion price) 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 three months ended December 31, 2019 and 2018.

Restatement

Basic and Diluted Net Income per Common Share Available to Common Shareholders for the Three Months Ended December 31, 2018

Subsequent to the issuance of the Company’s condensed consolidated financial statements for the three months ended December 31, 2018, we determined our previously issued condensed consolidated financial statements included warrants with a nominal conversion price in diluted income per common share available to common shareholders, however, they should have been included in basic income per common share available to common shareholders.  Since diluted shares are under the treasury stock method, diluted income per common share available to common shareholders was impacted by this change.  As a result, basic and diluted income per common share available to common shareholders for the periods ended December 31, 2018 have been restated to appropriately include the warrants with a nominal conversion price in basic income per common share available to common shareholders.  

The restatement adjustment did not impact our previously reported consolidated balance sheet, consolidated statements of stockholders’ equity, consolidated statements of cash flows, or net income (in thousands, except per share data).

 

 

 

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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. Certain persons who are not U.S. citizens currently hold outstanding warrants to purchase shares of the Company's common stock. The warrants are exercisable if consistent with federal law, which requires that no more than 24.9% of the Company's 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 or if consistent with above described federal law ownership limitations. In June 2018, the Company and holders agreed to extend the term of outstanding warrants set to expire by five years (through fiscal year 2023).

In July 2018, the Company's Board of Directors and Compensation Committee approved the issuance of shares of restricted common stock under its 2018 Equity Incentive Plan (the "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 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 condensed consolidated financial statements have been retrospectively revised to reflect the stock split and increase in authorized shares.

The Company's shares of common stock were listed on The NASDAQ Global Select Market under the symbol "MESA" effective August 10, 2018. 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. The Company received $111.7 million in net proceeds after deducting $8.7 million of underwriting discounts and commissions and $3.6 million in offering costs.

On April 9, 2019, and pursuant to Section 4.4 of the 2018 Plan in connection with the 2.5-for-1 stock split effected on August 8, 2018, the board of directors approved an increase in the number of shares authorized for issuance under the 2018 Plan by 1,000,000 shares of common stock.  

The Company has not historically paid dividends on shares of its common stock. Additionally, the Company's aircraft lease facility (the "RASPRO" Lease Facility) with RASPRO Trust 2005, a pass-through trust contains restrictions that limit the Company's ability to or prohibit it from paying dividends to holders of its common stock.

The Company's effective tax rate (ETR) from continuing operations was 24.7% for the three months ended December 31, 2019 and 23.8% for the three months ended December 31, 2018. The Company's current year effective tax rate increased compared to the prior year tax rate as a result of an increase to permanent differences between book and taxable income in the deductibility of meals, employer provided parking, and compensation of officers.  In addition, the Company's rate varied from the prior year's as a result of the vesting of stock compensation where the tax deduction differed from the book expense, state taxes, changes in the valuation allowance against state net operating losses, and changes in state statutory rates.  

 

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The income tax provision for the three months ended December 31, 2019 results in an effective tax rate of 24.7% which differs from the U.S. federal statutory rate of 21% primarily due to permanent book and tax deductible expense differences, state taxes, changes in the valuation allowance against state net operating losses, routine stock vestings and exercises, and changes in state apportionment and state statutory rates. We continue to maintain a valuation allowance on a portion of our state net operating losses in jurisdictions with shortened carryforward periods or in jurisdictions where our operations have significantly decreased as compared to prior years in which the net operating losses were generated.

As of September 30, 2019, the Company had aggregate federal and state net operating loss carryforwards of $478.3 million and $228.3 million, respectively, which expire in 2027-2037 and 2020-2039, respectively.  Approximately $2.7 million of state net operating loss carryforwards are expiring in 2020.

Restricted Stock

The restricted share activity for the three months ended December 31, 2019 were summarized as follows:

 

 

As of December 31, 2019, there was $4.8 million, of total unrecognized compensation cost related to unvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.7 years.

Compensation cost for share-based awards are recognized on a straight-line basis over the vesting period. Share-based compensation expense for the three months ended December 31, 2019 and 2018 was $1.3 million and $1.5 million, respectively.

The Company repurchased 5,403 shares of its common stock for $0.04 million to cover the income tax obligation on vested employee equity awards and warrant conversions during the three months ended December 31, 2019.  

The Company has granted restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) as part of its long-term incentive compensation to employees and non-employee members of the Board of Directors.  RSAs and RSUs generally vest over a period of 3 to 5 years for employees and over one year for members of the Board of Directors.  The restricted common stock underlying RSAs are deemed issued and outstanding upon grant, and carry the same voting rights of unrestricted outstanding common stock.  The restricted common stock underlying RSUs are not deemed issued or outstanding upon grant, and do not carry any voting rights.  

2019 ESPP

The Mesa Air Group, Inc. 2019 Employee Stock Purchase Plan (the "2019 ESPP") is a nonqualified plan that provides eligible employees of Mesa Air Group, Inc. with an opportunity to purchase Mesa Air Group, Inc. ordinary shares through payroll deductions. Under the 2019 ESPP, eligible employees may purchase Mesa Air Group, Inc. ordinary shares through the Employee Stock Purchase Plan. Under the 2019 ESPP, eligible employees may elect to contribute 1% to 15% of their eligible compensation during each semi-annual offering period to purchase Mesa Air Group, Inc. ordinary shares at a 10% discount.

A maximum of 500,000 Mesa Air Group, Inc. ordinary shares may be issued under the 2019 ESPP. As of December 31, 2019, we had not issued any Mesa Air Group, Inc. ordinary shares under the 2019 ESPP.  

 

 

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Effective October 1, 2019, the Company adopted Topic 842 and recorded ROU assets and lease liabilities of $154.6 million and $141.9 million, respectively. As part of the adoption, prepaid aircraft rent, deferred rent credits and accrued aircraft rents of $35.8 million, $21.3 million and $1.8 million, respectively, were classified as a component of the Company’s ROU assets.

 

At December 31, 2019, the Company leased 18 aircraft, airport facilities, office space, and other property and equipment under non-cancelable operating leases. The leases require the Company to pay all taxes, maintenance, insurance, and other operating expenses. Rental expense is recognized on a straight-line basis over the lease term, net of lessor rebates and other incentives. The Company expects that, in the normal course of business, such operating leases that expire will be renewed or replaced by other leases, or the property may be purchased rather than leased. Aggregate rental expense under all operating aircraft, equipment and facility leases totaled approximately $16.8 million and $19.1 million for the three months ended December 31, 2019 and 2018, respectively.

 

As of December 31, 2019, the Company’s operating lease right-of-use assets were $146.1 million, the Company’s current maturities of operating lease liabilities were $37.7 million, and the Company’s noncurrent lease liabilities were $96.0 million.

 

As of December 31, 2019, the Company’s operating lease payments in operating cash flows for the quarter ended December 31, 2019 is $9.5 million. The disclosure is not applicable for the quarter ended December 31, 2018 due to the method of adoption of the new leasing Standard ASC-842. ⁽¹⁾

 

The table below presents lease related terms and discount rates as of December 31, 2019:

 

 

 

The following table summarizes future minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining non-cancelable lease terms as of December 31, 2019 (in thousands):

 

 

 

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The following represents future minimum lease obligations under non-cancelable operating leases as of September 30, 2019 (in thousands):

 

 

 

 

The Company is involved in various legal proceedings (including, but not limited to, insured claims) and FAA civil action proceedings that the Company does not believe will have a material adverse effect upon its business, financial condition, or results of operations, although no assurance can be given to the ultimate outcome of any such proceedings.

The Company adopted ASU 2016-18 on a retrospective basis during the quarter ended December 31, 2018. The following is a reconciliation of the captions in the Condensed Consolidated Balance Sheets to the Condensed Consolidated Statements of Cash Flows (in thousands):

 

 

The restricted cash balance primarily includes deposits in trust accounts to collateralize letters of credit and to fund workers' compensation claims, landing fees, and other business needs.

None.

 

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

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements, the accompanying notes, and the other financial information included elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward‑looking statements that involve risks and uncertainties such as our plans, estimates, and beliefs.  Our actual results could differ materially from those discussed in the forward-looking statements below.  Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the sections titled "Cautionary Notes Regarding Forward-Looking Statements" above and "Risk Factors" below.

Overview

Mesa Airlines is a regional air carrier providing scheduled flight service to 144 cities in 41 states, the District of Columbia, Canada, Mexico, Cuba and the Bahamas. All of our flights are operated as either American Eagle or United Express flights pursuant to the terms of capacity purchase agreements we entered into with American Airlines, Inc. ("American") and United Airlines, Inc. ("United") (each, our "major airline partner"). We have a significant presence in several of our major airline partners' key domestic hubs and focus cities, including Dallas, Houston, Phoenix and Washington-Dulles.

As of December 31, 2019, we operated a fleet of 145 aircraft with approximately 742 daily departures. We operate 60 CRJ-900 aircraft under our capacity purchase agreement with American (our "American Capacity Purchase Agreement") and 20 CRJ-700 and 60 E-175 aircraft under our capacity purchase agreement with United (our "United Capacity Purchase Agreement"). For the three months ended December 31, 2019, approximately 55.2% of our aircraft in scheduled service were operated for United and approximately 44.8% were operated for American. All of our operating revenue in our fiscal year ended September 30, 2019 (our "2019 fiscal year") and the three months ended December 31, 2019 was derived from operations associated with our American and United Capacity Purchase Agreements.  

Our long-term capacity purchase agreements provide us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour (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) and flight actually flown, and reimbursement of certain direct operating expenses in exchange for providing regional flying on behalf of our major airline partners. Our capacity purchase agreements also shelter us from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of passengers. In providing regional flying under our capacity purchase agreements, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of our major airline partners. Our major airline partners control route selection, pricing, seat inventories, marketing and scheduling, and provide us with ground support services, airport landing slots and gate access.

Components of Results of Operations

The following discussion summarizes the key components of our condensed consolidated statements of operations.

Operating Revenues

Our condensed consolidated operating revenues consist primarily of contract revenue flight services as well as pass-through and other revenues.

Contract Revenue. Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our capacity purchase agreements with our major airline partners, along with the additional amounts received based on the number of flights and block hours flown. Contract revenues we receive from our major airline partners are paid and recognized by us on a weekly basis.

Pass-Through and Other. Pass-through and other revenue consists of passenger and hull insurance, aircraft property taxes, and certain maintenance costs related to our E-175 aircraft.

Operating Expenses

Our operating expenses consist of the following items:

Flight Operations. Flight operations expense includes costs related to salaries, bonuses and benefits earned by our pilots, flight attendants, and dispatch personnel, as well as costs related to technical publications, lodging of our flight crews and pilot training expenses.

 

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Fuel. Fuel expense includes fuel and related fueling costs for flying we undertake outside of our capacity purchase agreements, including aircraft repositioning and maintenance.  All aircraft fuel and related fueling costs for flying under our capacity purchase agreements were directly paid and supplied by our major airline partners. Accordingly, we do not record an expense or the related revenue for fuel supplied by American and United for flying under our capacity purchase agreements.

Maintenance. Maintenance includes costs related to engine overhauls, airframe, landing gear and normal recurring maintenance, which includes pass-through maintenance costs related to our E-175 aircraft, as well as maintenance lease return obligations on our leased aircraft when the expense is probable and can be reasonably estimated. We record these expenses using the direct expense method of accounting, wherein the expense is recognized when the maintenance work is completed, or over the repair period, if materially different. Our maintenance policy is determined by fleet when major maintenance is incurred. As a result of using the direct expense method, the timing of maintenance expense reflected in the financial statements may vary significantly period to period.

Aircraft Rent. Aircraft rent includes costs related to leased engines and aircraft.

Aircraft and Traffic Servicing. Aircraft and traffic servicing includes expenses related to our capacity purchase agreements, including aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by our major airline partners.

General and Administrative. General and administrative expense includes insurance and taxes, the majority of insurance and taxes are pass-through costs, non-operational administrative employee wages and related expenses, building rents, real property leases, utilities, legal, audit and other administrative expenses.

Depreciation and Amortization. Depreciation expense is a periodic non-cash charge primarily related to aircraft, engine and equipment depreciation. Amortization expense is a periodic non-cash charge related to our customer relationship intangible asset.

Other (Expense) Income, Net

Interest Expense. Interest expense is interest on our debt to finance purchases of aircraft, engines, equipment as well as debt financing costs amortization.

Interest Income. Interest income includes interest income on our cash and cash equivalent balances.

Other Expense. Other expense includes expense derived from activities not classified in any other area of the condensed consolidated statements of income, including write-offs of miscellaneous third-party fees.

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 flight 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 (“CODM”) uses condensed 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. The CODM 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.

Cautionary Statement Regarding Non-GAAP Measures

We present EBITDA and EBITDAR in this Quarterly Report on Form 10-Q, which are not recognized financial measures under GAAP, as supplemental disclosures because our senior management believes that they are well recognized valuation metrics in the airline industry that are frequently used by companies, investors, securities analysts and other interested parties in comparing companies in our industry.

 

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EBITDA. We define EBITDA as net income or loss before interest, income taxes, and depreciation and amortization.

EBITDAR. We define EBITDAR as net income or loss before interest, income taxes, depreciation and amortization, and aircraft rent.

EBITDA and EBITDAR have limitations as analytical tools. Some of the limitations applicable to these measures include: (i) EBITDA and EBITDAR do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; (ii) EBITDA and EBITDAR do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (iii) EBITDA and EBITDAR do not reflect changes in, or cash requirements for, our working capital needs; (iv) EBITDA and EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future; and (vi)  EBITDA and EBITDAR do not reflect any cash requirements for such replacements and other companies in our industry may calculate EBITDA and EBITDAR differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, EBITDA and EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. In addition, EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. For the foregoing reasons, each of EBITDA and EBITDAR has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information.

Results of Operations

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

We had operating income of $27.2 million in our three months ended December 31, 2019 compared to operating income of $39.2 million in our three months ended December 31, 2018.  In our three months ended December 31, 2019, we had net income of $10.8 million compared to net income of $19.1 million in our three months ended December 31, 2018.  Our operating results for the three months ended December 31, 2019 reflected an increase in contract revenue primarily related to additional flying on our E-175 fleets and an increase in pass-through and other revenues primarily due to an increase in maintenance pass-through expense.

Our maintenance expense increased primarily due to more C-check and engine heavy maintenance events due to timing of events.  Our aircraft rent decreased in the three months ended December 31, 2019 compared to the same period in 2018 mainly as a result of purchasing ten CRJ-700 aircraft that were previously leased under our GECAS Lease Facility.  We also had an increase in depreciation expense primarily due to the purchase of ten CRJ-700 aircraft that were previously leased under our GECAS Lease Facility.

Operating Revenues

 

 

"Available seat miles" or "ASMs" means the number of seats available for passengers multiplied by the number of miles the seats are flown.

 

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"Average stage length" means the average number of statute miles flown per flight segment.

“Block hours” means 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.

"CRASM" means contract revenue divided by ASMs.

"RPM" means the number of miles traveled by paying passengers.

Total operating revenue increased by $5.9 million, or 3.3%, to $184.0 million for our three months ended December 31, 2019 as compared to our three months ended December 31, 2018. Contract revenue increased by $1.4 million, or 0.8%, to $171.8 million primarily due to an increase in flying on our E-175 fleet offset by a reduction in credits given to our major airline partners based on contractual utilization levels and decrease in AA ownership revenue due to removal of four aircraft.  Our block hours flown during our three months ended December 31, 2019 increased 0.5% compared to the three months ended December 31, 2018 primarily due to increased flying on our E-175 fleet. Our pass-through and other revenue increased during our three months ended December 31, 2019 by $4.5 million, or 58.8%, to $12.2 million primarily due to pass-through maintenance revenue related to our E-175 fleet.

Operating Expenses

 

 

Flight Operations. Flight operations expense decreased $0.6 million, or 1.1%, to $52.6 million for our three months ended December 31, 2019 compared to the same period in 2018.  The decrease was primarily driven by a decrease in pilot training wages and related training costs, partially offset by an increase in pilot and flight attendant wages as staffing levels have improved.

Fuel. Fuel expense increased $0.05 million, or 39.7%, to $0.2 million for our three months ended December 31, 2019 compared to the same period in 2018.  The increase was primarily driven by an increase in ferry flight fuel. All fuel costs related to flying under our capacity purchase agreements during our three months ended December 31, 2019 and 2018 were directly paid to suppliers by our major airline partners.

Maintenance. Aircraft maintenance costs increased $18.3 million, or 46.0%, to $58.1 million for our three months ended December 31, 2019 compared to the same period in 2018. This increase was primarily driven by an increase in engine overhaul expense, c-check expense, and labor and other expense.  Total pass-through maintenance expenses reimbursed by our major airline partners increased by $3.5 million during our three months ended December 31, 2019.

 

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The following table presents information regarding our maintenance costs during our three months ended December 31, 2019 and 2018 (in thousands):

 

 

Aircraft Rent. Aircraft rent expense decreased $2.8 million, or 19.8%, to $11.3 million for our three months ended December 31, 2019 compared to the same period in 2018. The decrease is attributable to a $3.9 million decrease in aircraft lease expense as a result of purchasing ten CRJ-700 aircraft which were previously leased under the GECAS Lease Facility in June 2019, offset by a $1.1 million increase in engine rent due to leasing additional engines.

Aircraft and Traffic Servicing. Aircraft and traffic servicing expense increased $0.1 million, or 13.9%, to $1.1 million for our three months ended December 31, 2019 compared to the same period in 2018. The increase is primarily due to an increase in interrupted trip expense, offset partially by pass-through regulatory charges. For our three months ended December 31, 2019 and 2018, 42.2% and 53.4%, respectively, of our aircraft and traffic servicing expenses were reimbursed by our major airline partners.

General and Administrative. General and administrative expense increased $0.8 million, or 6.4%, to $13.0 million for our three months ended December 31, 2019 compared to the same period in 2018. The increase is primarily due to an increase in pass-through insurance expenses. For our three months ended December 31, 2019 and 2018, $4.4 million and $3.1 million, respectively, of our insurance and property tax expenses were reimbursed by our major airline partners.

Depreciation and Amortization. Depreciation and amortization expense increased $2.1 million, or 11.1%, to $20.6 million for our three months ended December 31, 2019 compared to the same period in 2018. The increase is primarily attributable to an increase in depreciation expense related to the purchase of ten CRJ-700 aircraft which were previously leased under the GECAS Lease Facility.  The increase was also partially related to the purchase of spare engines and rotable inventory, partially offset by a decrease in aircraft enhancement depreciation.

Other Expense

Other expense decreased $1.3 million, or 9.4%, to $12.9 million for our three months ended December 31, 2019, compared to the same period in 2018. The decrease is primarily a result of a decrease in interest expense due to lower interest rates on our new Spare Engine Facility and a decrease in outstanding aircraft principal balances. Additionally, our loss on disposal increased in the three months ended December 31, 2019, compared to the same period in 2018.

Income Taxes

The Company’s effective tax rate (ETR) from continuing operations was 24.7% for the three months ended December 31, 2019 and 23.8% for the three months ended December 31, 2018. The Company's current year effective tax rate increased compared to the prior year tax rate as a result of an increase to permanent differences between book and taxable income in the deductibility of meals, employer provided parking, and compensation of officers. In addition, the Company's rate varied from the prior year's as a result of the vesting of stock compensation where the tax deduction differed from the book expense, state taxes, changes in the valuation allowance against state net operating losses, and changes in state statutory rates.

The income tax provision for the three months ended December 31, 2019 results in an effective tax rate of 24.7% which differs from the U.S. federal statutory rate of 21% primarily due to permanent book and tax deductible expense differences, state taxes, changes in the valuation allowance against state net operating losses, routine stock vestings and exercises, and changes in state apportionment and state statutory rates.

 

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We continue to maintain a valuation allowance on a portion of our state net operating losses in jurisdictions with shortened carryforward periods or in jurisdictions where our operations have significantly decreased as compared to prior years in which the net operating losses were generated.

As of September 30, 2019, we had aggregate federal and state net operating loss carryforwards of $478.3 million and $228.3 million, respectively, which expire in 2027-2037 and 2020-2039, respectively.  Approximately $2.7 million of state net operating loss carryforwards are expected to expire in 2020.

 

EBITDA and EBITDAR

The following table presents a reconciliation of net income to estimated EBITDA and EBITDAR for the period presented (in thousands):

 

 

Liquidity and Capital Resources

Sources and Uses of Cash

We require cash to fund our operating expenses and working capital requirements, including outlays for capital expenditures, aircraft pre-delivery payments, maintenance, aircraft rent and to pay debt service obligations, including principal and interest payments. Our cash needs vary from period to period primarily based on the timing and costs of significant maintenance events. Our principal sources of liquidity are cash on hand, cash generated from operations and funds from external borrowings. In the near term, we expect to fund our primary cash requirements through cash generated from operations and cash and cash equivalents on hand. We also have the ability to utilize our credit and guaranty agreement (the "CIT Revolving Credit Facility") pursuant to which the CIT Lenders committed to lend to Mesa Airlines and Mesa Air Group—Airline Inventory Management, LLC, ("MAG-AIM") revolving loans in the aggregate principal amount of up to $35.0 million, which remains available until the facility matures on August 12, 2022.

We believe that the key factors that could affect our internal and external sources of cash include:

Our ability to service our long-term debt obligations, including our equipment notes, to remain in compliance with the various covenants contained in our debt agreements and to fund working capital, capital expenditures and business development efforts will depend on our ability to generate cash from operating activities, which is subject to, among other things, our future operating performance, as well as to other factors, some of which may be beyond our control.

If we fail to generate sufficient cash from operations, we may need to raise additional equity or borrow additional funds to achieve our longer-term objectives. There can be no assurance that such equity or borrowings will be available or, if available, will be at rates or prices acceptable to us.

 

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We believe that cash flow from operating activities coupled with existing cash and cash equivalents, short-term investments and existing credit facilities will be adequate to fund our operating and capital needs, as well as enable us to maintain compliance with our various debt agreements, through at least the next 12 months. To the extent that results or events differ from our financial projections or business plans, our liquidity may be adversely impacted.  

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect the current market conditions and our projected demand. Our capital expenditures are primarily directed toward our aircraft fleet and flight equipment. Our capital expenditures, net of purchases of rotable spare parts and aircraft and spare engine financing for three months ending December 31,2019 is approximately 4.6% which is higher compared to our historical expense of approximately 1.2% to 1.5% of annual revenues due to expenses incurred related to aircraft enhancements. We expect to continue to incur capital expenditures to support our business activities. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

As of December 31, 2019, our principal sources of liquidity were cash and cash equivalents of $57.8 million. In addition, we had restricted cash of $3.4 million as of December 31, 2019. Restricted cash includes certificates of deposit that secure letters of credit issued for particular airport authorities as required in certain lease agreements. Primary uses of liquidity are capital expenditures, and debt repayments. As of December 31, 2019, we had $164.1 million of short-term debt, excluding financing leases, and $641.0 million of long-term debt excluding financing leases.

Sources of cash for the three months ended December 31, 2019 were primarily cash flows from operations of $38.2 million. This positive cash flow was primarily driven by receipts from performance under our capacity purchase agreements.

Restricted Cash

As of December 31, 2019, we had $3.4 million in restricted cash. We have an agreement with a financial institution for a $6.0 million letter of credit facility and to issue letters of credit for landing fees, worker's compensation insurance and other business needs. Pursuant to the agreement, $3.5 million of outstanding letters of credit are required to be collateralized by amounts on deposit.

 

Cash Flows

The following table presents information regarding our cash flows for each of the three months ended December 31, 2019 and 2018 (in thousands):

 

 

Net Cash Flow Provided By Operating Activities

During our three months ended December 31, 2019, cash flow provided by operating activities of $38.2 million. We had net income of $10.8 million adjusted for the following significant non-cash items: depreciation and amortization of $20.6 million, stock-based compensation of $1.3 million, deferred income taxes of $3.2 million, amortization of deferred credits of $(1.1) million, amortization of debt financing costs and accretion of interest on non-interest bearing subordinated notes of $1.1 million, $0.4 million loss on disposal of assets and $0.1 million provision of obsolete expendable parts and supplies. We had a net change of $1.9 million within other net operating assets and liabilities largely driven by an increase in accrued liability during our three months ended December 31, 2019.

Net Cash Flows Used In Investing Activities

During our three months ended December 31, 2019, net cash flow used in investing activities totaled $(12.8) million. We invested $2.8 million in two spare engines, $5.0 million in aircraft improvements, $4.5 million in inventory, and $0.6 million in miscellaneous projects.

 

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Net Cash Flows Used In Financing Activities

During our three months ended December, 2019, net cash flow used in financing activities was $(36.7) million. We made $36.5 million of principal repayments on long-term debt during the period. We incurred $0.2 million of costs related to debt financing and $0.04 million of costs related to the repurchase of shares of our common stock.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (i) made guarantees, (ii) a retained or a contingent interest in transferred assets, (iii) an obligation under derivative instruments classified as equity or (iv) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission (the "SEC").

A majority of our leased aircraft are leased through trusts formed for the sole purpose of purchasing, financing and leasing aircraft to us. Because these are single-owner trusts in which we do not participate, we are not at risk for losses and we are not considered the primary beneficiary. We believe that our maximum exposure under the leases are the remaining lease payments and any return condition obligations.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with GAAP. In doing so, we must make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting estimates, which we discuss below.

The accompanying discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated interim financial statements included elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States. We believe certain of our accounting policies are critical to understanding our financial position and results of operations. Except with respect to our revenue recognition practices included in Note 2: "Summary of Significant Accounting Policies" in the notes to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, there have been no changes to the critical accounting policies as explained in Part 1, Item 7 of the 2018 Form 10-K under the heading "Critical Accounting Policies."

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3: "Summary of Significant Accounting Policies" to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risks in the ordinary course of our business. These risks include interest rate risk and, on a limited basis, commodity price risk with respect to foreign exchange transactions. The adverse effects of changes in these markets could pose a potential loss as discussed below. The sensitivity analysis provided does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.

Interest Rate Risk. We are subject to market risk associated with changing interest rates on our variable rate long-term debt; the variable interest rates are based on LIBOR. The interest rates applicable to variable rate notes may rise and increase the amount of interest expense on our variable rate long-term debt. We do not purchase or hold any derivative instruments to protect against the effects of changes in interest rates.

 

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As of December 31, 2019, we had $540.2 million of variable-rate debt including current maturities. A hypothetical 50 basis point change in market interest rates would have affected interest expense by approximately $2.7 million in the three months ended December 31, 2019.

As of December 31, 2019, we had $285.2 million of fixed-rate debt, including current maturities. A hypothetical 50 basis point change in market interest rates would not impact interest expense or have a material effect on the fair value of our fixed-rate debt instruments as of December 31, 2019.

Foreign Currency Risk. We have de minimis foreign currency risks related to our station operating expenses denominated in currencies other than the U.S. dollar, primarily the Canadian dollar. Our revenue is U.S. dollar denominated. To date, foreign currency transaction gains and losses have not been material to our financial statements and we have not had a formal hedging program with respect to foreign currency. A 10% increase or decrease in current exchange rates would not have a material effect on our financial results.

Fuel Price Risk. Unlike other airlines, our capacity purchase agreements largely shelter us from volatility related to fuel prices, which are directly paid and supplied by our major airline partners.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

During the three months ended December 31, 2019, the Company adopted Accounting Standards Update No. 2016-02 “Leases (Topic 842).” The operating effectiveness of these changes will be evaluated as part of our annual assessment of the effectiveness of internal controls over financial reporting.

Inherent Limitations on Effectiveness of Controls

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.  

 

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to commercial and employment litigation claims, FAA civil action proceedings and to other administrative and regulatory proceedings and reviews. We currently believe that the ultimate outcome of such claims, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on our financial position, liquidity or results of operations. Additionally, from time to time we are subject to legal proceedings and regulatory oversight in the ordinary course of our business.

Item 1A. Risk Factors

We refer you to documents filed by us with the SEC, specifically "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled "Cautionary Statements Regarding Forward-looking Statements" of this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

 

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EXHIBIT INDEX

 

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

32

Exhibit 10.1

Certain confidential information contained in this document, marked by brackets, has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.

Execution Version

 

AMENDED AND RESTATED

 

CAPACITY PURCHASE AGREEMENT

 

Among

 

United Airlines, Inc.,

 

Mesa Airlines, Inc.

and

 

Mesa Air Group, Inc.

 

 

Dated as of November 25, 2019

 

 

 

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Table of Contents

i

 

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ii

 

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iii

 

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iv

 

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AMENDED AND RESTATED

CAPACITY PURCHASE AGREEMENT

 

This Amended and Restated Capacity Purchase Agreement (this “Agreement”), dated as of November 25, 2019 is among United Airlines, Inc., a Delaware corporation (“United”), Mesa Airlines, Inc., a Nevada corporation (“Contractor”), and Mesa Air Group, Inc., a Nevada corporation (“Parent”).

WHEREAS, the parties previously entered into that certain Capacity Purchase Agreement, dated as of August 29, 2013 (as amended, the “Original Agreement”);

WHEREAS, Contractor desires to perform Contractor Services pursuant to the terms hereof, and United desires to engage Contractor to perform such services, provided that the performance of such services is guaranteed by Parent;

WHEREAS, the parties have previously entered into the Ancillary Agreements (as defined herein), in each case as an integral part of this Agreement; and

WHEREAS, the Original Agreement is hereby amended and restated in its entirety.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and obligations hereinafter contained, the parties agree to:

ARTICLE I
DEFINITIONS

Capitalized terms used in this Agreement (including, unless otherwise defined therein, in the Schedules, Appendices and Exhibits to this Agreement) shall have the meanings set forth in Exhibit A hereto.

ARTICLE II
CAPACITY PURCHASE, SCHEDULES AND FARES

1

 

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2

 

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3

 

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4

 

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Contractor and Parent acknowledge and agree that all revenues resulting from the sale and issuance of passenger tickets associated with the operation of the Covered Aircraft and all other sources of revenue associated with the operation of the Covered Aircraft or the provision of Regional Airline Services, in each case following the Effective Date and during the Term, including without limitation revenues relating to Charter Flights, the transportation of cargo or mail, the sale of food, beverages and onboard entertainment, checked baggage fees, duty-free services, exterior and interior advertising and guaranteed or incentive payments from airport or governmental authorities, civic associations or other third parties in connection with scheduling flights to such airport or locality, are the sole property of and shall be retained by United (or, if received by Contractor or Parent, shall be promptly remitted to United, free and clear of claims of any third party arising by, through or under Contractor or Parent or their affiliates).  Contractor agrees that it shall reasonably cooperate with United so as to permit United to receive all revenues of the type described above.

All pass travel and other non-revenue travel on any Scheduled Flight shall be administered in accordance with Exhibit C.

5

 

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6

 

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7

 

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8

 

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9

 

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10

 

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11

 

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provided that (v) the Supplemental Rent rates (for CRJ Third Party Lessee) shall be adjusted annually by the applicable Annual Supplemental Rent Adjustment (as defined below) commencing on the January 1, 2021 and on January 1 of each year thereafter, (w) Supplemental Rent related to airframes will be calculated using aircraft flight hours, (x) Supplemental Rent related to APUs will be calculated using aircraft flight hours, (y) Supplemental Rent related to landing gear will be calculated using aircraft cycles, and (z) Supplemental Rent related to engines will be driven by the engine flight hours and engine cycles accrued on the engines associated with the CRJ700 Covered Aircraft under the applicable aircraft lease; and provided further, that Supplemental Rent related to each APU and each landing gear assembly will be attributable to a generic APU or landing gear assembly position for such leased CRJ700 Covered Aircraft, respectively, regardless of the individual identity of any such APU or landing gear assembly then-currently installed on such aircraft.

“Annual Supplemental Rent Adjustment” - means

12

 

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“Qualifying Event” - means,

13

 

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“First Event Settlement Amount” – means, with respect to each maintenance category described in the table above, the following amount:

[***]

Where:

[***]

[***]

[***]

[***]

14

 

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15

 

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16

 

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ARTICLE III
CONTRACTOR COMPENSATION

For and in consideration of the services to be provided by Contractor pursuant to the terms and conditions of this Agreement, and subject to the terms and conditions set forth herein, (i) United shall be responsible for (a) paying to Contractor Compensation for Carrier Controlled Costs (as adjusted by the Monthly Incentive Adjustments), (b) reimbursing Contractor for the Pass-Through Costs, and (c) incurring directly the expenses described in Section 3.4(a), and United shall not be responsible for any other costs or expenses incurred by Contractor hereunder, and (ii) Contractor shall be responsible for incurring directly the expenses described in Section 3.4(b), in each case as more specifically provided below in this Article III, such amounts to be paid and reconciled as set forth in Section 3.6 below.

For and in consideration of the services to be provided by Contractor pursuant to the terms and conditions of this Agreement, United shall make payments to Contractor, subject to the terms and conditions set forth in this Article III and elsewhere in this Agreement (including, but not limited to, Section 2.1(e)), for the following measurements, in each case as applicable with respect to the Covered Aircraft depending on the measurements set forth on Schedules 2A, 2B and 2C with respect to the Covered Aircraft: (i) aircraft per month, (ii) block hours flown on completed Scheduled Flights, (iii) flight hours flown on completed Scheduled Flights, (iv) the number of departures for completed Scheduled Flights, (v) interrupted trip expense, (vi) the number of aircraft in schedule, and (vii) passengers on completed Scheduled Flights, in each case in accordance with the rates set forth on Schedules 2A (with respect to the E175 Covered Aircraft), 2B (with respect to the CRJ700 Covered Aircraft and E175LL Covered Aircraft) and 2C (with respect to the CRJ550 Covered Aircraft) (all such compensation, collectively, the “Compensation for Carrier Controlled Costs”), as applicable.  Compensation for Carrier Controlled Costs shall be paid as provided in Section 3.6 below.

United and Contractor shall adhere to the following provisions regarding a monthly incentive payment program (the “Incentive Program”) under which Contractor’s monthly compensation under this Agreement shall be adjusted (the aggregate monthly adjustment for any given calendar month, the “Monthly Incentive Adjustment”) as more fully set forth below (it being understood that, if the Monthly Incentive Adjustment is a positive number, then Contractor’s monthly compensation payable under this Agreement pursuant to Section 3.6 shall be increased by the Monthly Incentive Adjustment, and, if the Monthly Incentive Adjustment is a negative number, then Contractor’s monthly compensation payable under this Agreement pursuant to Section 3.6 shall be reduced by the Monthly Incentive Adjustment):

17

 

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18

 

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* Both metrics exclude spares, round aircraft age to nearest whole number

19

 

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20

 

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If, notwithstanding the foregoing, Contractor incurs any of the expenses set forth in this Section 3.4(a), and only to the extent that United determines, in its sole discretion, that such expenses are both reasonable and should properly have been incurred by United hereunder, then United shall reimburse Contractor for such expenses.

21

 

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Contractor shall make available for inspection by United and its outside auditors and advisors, within a reasonable period of time after United makes a written request therefor, all of Contractor’s books and records (including all financial and accounting records and operations reports, and records of other subsidiaries or affiliates of Contractor, if any) (i) as necessary to audit any payments made or amounts or setoff pursuant to this Agreement, and (ii) otherwise related to Contractor’s provision of Contractor Services to United or any of Contractor’s other obligations under this Agreement, including without limitation relating to the performance, regulatory and operational standards in Sections 4.2, 4.3, 4.4, 4.5, 4.7, 4.8, 4.9, 4.17, 4.18, 4.19, 4.20 and 4.22 (all such books and records, collectively, the “CPA Records”).  United and its outside auditors and advisors shall be entitled to make copies and notes of such information as they deem necessary and to discuss such records with Contractor’s Chief Financial Officer or such other employees or agents of Contractor knowledgeable about such records.  Upon the reasonable written request of United or its outside auditors or advisors, Contractor will cooperate with United and its outside auditors and advisors to permit United and its outside auditors and advisors access to Contractor’s outside auditors for purposes of reviewing such records.  Any audit conducted pursuant to this Section 3.5 shall be paid for by United, unless pursuant to such audit it is determined that Contractor owes United in excess of [***], in which case Contractor shall pay to United the entire costs and expenses incurred by United in connection with such audit.  In addition, Contractor shall deliver or cause to be delivered to United (I) as soon as available, but in any event within 90 days after the end of each fiscal year, a copy of the consolidated balance sheet of Contractor, as at the end of such year, and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on by an independent certified public accountants of nationally recognized standing; and (II) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year, the unaudited consolidated balance sheet of

22

 

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Contractor, as at the end of such quarter, and the related unaudited consolidated statements of income and retained earnings and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a responsible officer of Contractor as being fairly stated in all material respects (subject to normal year-end audit adjustments); provided, that Contractor shall not be required to deliver financial statements pursuant to this sentence at any time that Contractor is a reporting issuer pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and such financial statements are timely filed with the Securities and Exchange Commission pursuant thereto.  All financial statements delivered hereunder shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). Without limiting, and in addition to, the foregoing in this Section 3.5, upon United’s delivery of a written notice at any time and from time to time pursuant to this Section 3.5 (any such notice, a “3.5 Notice”), Contractor shall promptly provide responsive information, which shall in all events be responsive to any specific information requests delivered by United in any such 3.5 Notice, together with reasonable supporting documentation (which, in the case of projected information, will include reasonable supporting assumptions), it being understood that a 3.5 Notice may include, but shall not be limited to, requests regarding any of the following with respect to Contractor or its affiliates (including Parent): crew resources and availability (including with respect to pilots and flight attendants), and historical and projected operational statistics.  Notwithstanding anything in this Section 3.5 to the contrary (but subject to the immediately succeeding proviso), in no event shall Contractor be required to provide information to United or any of its representatives pursuant to the requirements of this Section 3.5 if such information relates to any other code share partner of Contractor or includes data that is not specific to United and Contractor’s provision of services under this Agreement; provided, however that the foregoing in this sentence shall not relieve Contractor of the obligation to provide United information that is generally applicable to an entire cadre of Contractor pilots, flight attendants, or other resources related to the operation of regional jet aircraft or an entire fleet of regional jet aircraft (whether such pilots, flight attendants or other resources are applicable, or subject to, capacity purchase provisions in this Agreement or any other agreement with a code share partner other than United), including, but not limited to, total pilot headcount, total flight attendant headcount, mechanic headcount, dispatch headcount and facility lease terms.

23

 

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24

 

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28

 

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29

 

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“Block-Hour Adjustment Amount” – means, for any calendar month, the product of (x) the Block-Hour Monthly Threshold minus the Total Monthly Scheduled Block-Hours, multiplied by (y) [***]; provided that the figure in the foregoing clause (y) shall be adjusted on each June 1 of each calendar year as follows: the new figure, applicable beginning on June 1 of each calendar year, shall be equal to the figure in effect on the date immediately preceding June 1 of each calendar year multiplied by [***]); provided further that the Block-Hour Adjustment Amount shall be calculated separately for each of the E175 Covered Aircraft, on the one hand, and the Bombardier Covered Aircraft, on the other hand; and provided further that, notwithstanding anything to the contrary in this Section 3.6(b)(iii), the Block-Hour Adjustment Amount for any fleet for any calendar month shall be reduced to the extent that the number of block-hours actually flown for such calendar month is less than the Block-Hour Monthly Threshold for such calendar month due to United’s good faith determination that Contractor did not have the operational capacity to operate the applicable Block-Hour Monthly Threshold for such calendar month.

“Block-Hour Monthly Threshold” – means, with respect to any calendar month, the product obtained by multiplying (x) the product obtained by multiplying (1) the number of block-hours per day per Available to Schedule Covered Aircraft corresponding to the average stage length applicable to the Final Monthly Schedule for such calendar month, by (2) the total number of Available to Covered Aircraft applicable to the Final Monthly Schedule for such calendar month, by (y) the number of days in such calendar month; provided that the Block-Hour Monthly Threshold shall be calculated separately for each of the E175 Covered Aircraft, on the one hand, and the Bombardier Covered Aircraft, on the other hand; and provided further that the number of block-hours per day corresponding to a particular [***] for a particular fleet as referenced in the foregoing clause (x) shall be determined by applying the average scheduled stage length in the applicable Final Monthly Schedule to the table set forth below (subject to linear interpolation between the data points in such table).

31

 

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32

 

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34

 

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ARTICLE IV
CONTRACTOR OPERATIONS AND AGREEMENTS WITH UNITED

37

 

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Contractor has and shall maintain all certifications, permits, licenses, certificates, exemptions, approvals, plans, and insurance required by governmental authorities and Airport Authorities, including, without limitation, FAA, DOT and TSA, to enable Contractor to perform the services required by this Agreement.  All flight operations, dispatch operations and all other operations and services undertaken by Contractor pursuant to this Agreement shall be conducted, operated and provided by Contractor in compliance with all laws, regulations and requirements of applicable governmental authorities and Airport Authorities (foreign and domestic), including, without limitation, those relating to airport security, the use and transportation of hazardous materials and dangerous goods, crew qualifications, crew training and crew hours, the carriage of persons with disabilities and without any violation of U.S. or foreign laws, regulations or governmental prohibitions.  All Covered Aircraft shall be operated and maintained by Contractor in compliance with all laws, regulations and governmental requirements of applicable governmental authorities and Airport Authorities (foreign and domestic), Contractor’s own

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operations manuals and maintenance manuals and procedures, all applicable provisions of any aircraft lease, mortgage or sublease, and all applicable equipment manufacturers’ manuals and instructions. Without limiting the foregoing, Contractor and its subcontractors shall abide by the requirements of 41 CFR §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a), which regulations (x) prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin, and (y) require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability.

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Contractor agrees, to the extent permitted by law, to accept as an air carrier any and all regulatory complaints issued by a governmental or regulatory authority having competent jurisdiction for any reason or cause. Contractor agrees that any such complaint, regardless of whether the basis for such complaint is within Contractor’s control, shall be accepted as a Contractor complaint for such regulatory authority purposes. For the avoidance of doubt, no complaint recorded on a Contractor flight, inclusive of station origin and destination, will count against United’s complaint rate for such applicable regulatory authority. Notwithstanding the provisions of Sections 7.1 and 7.2, United shall be liable for and hereby agrees to indemnify and hold harmless Contractor from and against regulatory fines and penalties arising from any such regulatory complaints accepted by Contractor to the extent resulting from the negligence of United, or any ground handler or other party acting pursuant to a contract with United and directly interfacing with passengers on Scheduled Flights (e.g. wheelchair providers); provided that, for the avoidance of doubt, the provisions of Sections 7.3, 7.4, 7.5 and 7.6 shall apply with respect to Contractor’s right to indemnification as provided in this Section 4.4.

Contractor must maintain Department of Defense air carrier approval per 32 CFR Part 861 and agrees to notify United immediately if changes to such status occur.

Contractor shall promptly notify United of all irregularities involving a Scheduled Flight or Covered Aircraft operated by Contractor, including, without limitation, aircraft accidents and incidents, which result in any damage to persons and/or property or may otherwise result in a complaint or claim by passengers or an investigation by a governmental agency or authority.  

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Contractor shall furnish to United as much detail as practicable concerning such irregularities and shall cooperate with United at Contractor’s own expense in any appropriate investigation.

Contractor shall adopt United’s Emergency Response Plan for aircraft accidents or incidents and shall be responsible for United’s direct costs resulting from United’s management of emergency response efforts on Contractor’s behalf.  In the event of an accident or incident involving a Covered Aircraft or Scheduled Flight, United will have the right, but not the obligation, exercised in United’s sole discretion, to manage the emergency response efforts on behalf of Contractor with full cooperation from Contractor. Contractor shall be liable for and will indemnify, defend and hold harmless United, United’s Parent, their respective subsidiaries and their respective directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities,  suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses, including but not limited to, reasonable attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to or recoverable from United, United’s Parent, their respective subsidiaries or their respective directors, officers, employees or agents arising out of, connected with, or attributable to any act, error, omission, operation, performance or failure of performance of United, regardless of any negligence whether it be active, passive or otherwise on the part of United (but excluding the gross negligence or willful misconduct of United or its directors, officers, agents or employees), which in any way relates to United’s provision of post-accident or post-incident emergency response management efforts. The provisions of the foregoing indemnification obligation shall survive the termination of this Agreement for a period of seven years.

In the event of a reasonable safety concern, United shall have the right, at its own cost, to inspect, review, and observe Contractor’s operations of Scheduled Flights.  Notwithstanding the conduct or absence of any such review, Contractor is and shall remain solely responsible for the safe operation of its aircraft and the safe provision of Regional Airline Services, including all Scheduled Flights, in each case in accordance with the standards, agreements, representations and warranties set forth in Exhibit N.  Contractor represents and warrants that it has successfully undergone an IATA Operational Safety Audit (“IOSA”).  Contractor hereby covenants (i) to comply and maintain compliance with the requirements of such audits within the timeframe required by IATA and (ii) maintain its membership in the IOSA registry.  Any failure to maintain compliance shall immediately be brought to United’s attention along with corrective actions taken or a corrective action plan.  Although the IOSA is to be completed biennially, United in its sole discretion may require, and Contractor shall comply with, additional safety review audits.  Nothing in Exhibit N, this Section 4.9, or otherwise in this Agreement is intended or shall be interpreted to make United responsible for such safety matters.

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For the avoidance of doubt, United’s direction to Contractor with respect to the foregoing actions shall extend to the action itself (e.g., use commercially reasonable efforts to enter into an agreement) as well as to the substance underlying the action (e.g., directions as to the terms and conditions of such agreement).

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Each Contractor Terminal Facility that is not a Passenger-Related Terminal Facility used for the provision of Contractor Services, and each other facility used by Contractor for the provision of Contractor Services, may be used by Contractor in connection with other flights or for other purposes; provided, that Contractor shall use such facilities for the provision of Contractor Services in priority to any such other use, and any such other use of such facilities shall be subordinate to Contractor’s use for the provision of Contractor Services.

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Contractor agrees to operate all Scheduled Flights using the United flight codes and flight numbers assigned by United, or such other flight codes and flight numbers as may be assigned by United (to accommodate, for example, a United alliance partner), and otherwise under the codeshare terms set forth in Exhibit B.

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At the request of United made during the Term or upon termination of this Agreement, Contractor shall use its commercially reasonable efforts to transfer to United or its designee, to the extent permitted by law, any airport takeoff or landing slots, route authorities or other similar regulatory authorizations transferred to Contractor by United for use in connection with Scheduled Flights, or held by Contractor and used for Scheduled Flights, in consideration of the payment to Contractor of the net book value, if any, of such slot, authority or authorization on Contractor’s books.  Contractor’s obligations pursuant to the immediately preceding sentence shall survive the termination of this Agreement for so long as any transfer requested pursuant to this Section 4.13 shall not have been completed.  Contractor hereby agrees that all of Contractor’s contacts or communications with any applicable regulatory authority concerning any airport takeoff or landing slots, route authorities or other similar regulatory authorizations used for Scheduled Flights will be coordinated through United.  If any airport takeoff or landing slot, route authority or other similar regulatory authorization transferred to Contractor by United for use in connection with Scheduled Flights, or held by Contractor and used for Scheduled Flights is withdrawn or otherwise forfeited as a result of Controllable Cancellations or any other reason within Contractor’s reasonable control, then Contractor agrees to pay to United promptly upon demand an amount equal to the fair market value of such withdrawn or forfeited slot, authority or authorization.

As of the date of this Agreement, but subject to Contractor’s existing contractual codeshare relationships as in effect on the Effective Date, Contractor represents that it does not plan, nor will it, operate pursuant to a marketing or code share relationship in a hub operation with any party other than United at the following airports during the Term: [***]. Contractor may, however, fly to aforementioned airports under codeshare or marketing relationships from another carrier’s hub (other than from aforementioned airports) as a “spoke service”. In the event that Contractor acquires another entity during the course of this agreement with marketing or codeshare operations at any of the aforementioned airports, United agrees to allow Contractor to continue operations at such airports at levels of operations consistent with the acquiree’s right of operation at the time of acquisition. In addition, Contractor will use commercially reasonable efforts to amend its existing contractual commitments to provide for the codeshare limitations set forth in this Section 4.14.  [***].

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United hereby grants to Contractor the right to and a personal, non-exclusive, non-transferable, non-sublicenseable, fully paid-up, and royalty-free license to use the United Marks and other Identification as provided in, and Contractor shall use the United Marks and other Identification in accordance with the terms and conditions of, Exhibit E.

Contractor hereby grants to United the right to and a personal, non-exclusive, non-transferable, non-sublicenseable, fully paid-up, and royalty-free license to use the Contractor Marks as provided in, and United shall use the Contractor Marks in accordance with the terms and conditions of, Exhibit F.

Contractor shall use its commercially reasonable efforts to promptly adopt and adhere to a fuel efficiency program as described on Exhibit H hereto.

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[***].

United shall gather all data relating to the measurement of the time periods elapsed between aircraft brake release and aircraft wheel movement for departures of all Scheduled Flights for E175 Covered Aircraft as measured by the electronic systems included on all in-service E175 Covered

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Aircraft (and such systems shall meet the requirements of Section 4.3(c), Section 4.3(d), Exhibit H and Exhibit I hereto including without limitation in respect of ACARS-based data capture).  Contractor’s early brake release performance relating to E175 Covered Aircraft for each calendar month (the “EBR Performance”) shall be determined by calculating the simple average of the EBR Periods for all Scheduled Flights.

If, in any given calendar month, Contractor’s average EBR Period for Scheduled Flight departures is greater than the EBR Goal, United shall provide Contractor with notice that Contractor has not met the EBR Goal, following which Contractor shall have a [***], (the “EBR Cure Period”) following receipt of such notice, during which to reduce its average EBR Period to an observed average EBR Period less than or equivalent to the EBR Goal.  If Contractor has not reduced its average EBR Period to an observed average EBR Period that is less than or equivalent to the EBR Goal as of the end of the EBR Cure Period, then Contractor shall owe a payment (the “EBR Payment”) to United equal to the product of (x) for all Scheduled Flights of E175 Covered Aircraft included in the EBR Performance calculation whose recorded EBR Period exceeds the EBR Goal, the aggregate number of minutes by which such recorded EBR Periods exceeded the EBR Goal, multiplied by (y) [***] of the block hour rate set forth on Schedule 2A, as applicable.  The EBR Payment will be made by Contractor to United as provided in Section 3.6(c)(ii).  Contractor’s average EBR Period shall be continuously calculated in successive EBR Cure Periods and Contractor shall pay the applicable EBR Payment with respect to each such EBR Cure Period, until Contractor meets the EBR Goal with respect to an EBR Cure Period.

Contractor shall comply with the IT Requirements, as set forth on Exhibit I.

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If Contractor intends to engage in any maintenance, repair or overhaul of the Covered Aircraft, and intends to engage a third party (rather than performing such maintenance, repair or overhaul using its own employees), then Contractor shall invite United to match the most favorable, last and final bona fide offer received by Contractor from a third party for such maintenance, repair or overhaul work on a “right of last offer” basis, and shall engage United to perform such maintenance, repair or overhaul work if United matches such offer.

At United’s direction, and to the extent permitted by applicable federal law and regulations, mainline ground support equipment (“GSE”) and GSE processes shall be used in connection with Contractor’s performance of Regional Airline Services; provided that such GSE and GSE processes shall be modified to be compatible with the Covered Aircraft if necessary, such determination to be made by United.

Contractor agrees to mitigate the risk of passenger ozone exposure on the E175 Covered Aircraft and CRJ Covered Aircraft through the use of a dispatcher product that detects the presence of ozone and adjusts to a higher altitude when ozone is absent.  All costs incurred to achieve this mitigation shall be borne by Contractor.  Product is to be installed not later than November 30, 2015.

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(c)[***].

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With respect to each fiscal quarter, if, as of the end of such fiscal quarter, Contractor has not fully satisfied all Unsatisfied Operational Improvement Metrics (as defined below), then Contractor shall pay United [***] no later than [***] Business Days following the completion of such fiscal quarter; provided, however, that the first payment due under this sentence, if any, shall instead be in the amount of [***] (it being understood that any subsequent payment required under this sentence shall be in the amount of [***]). The determination of whether Contractor has fully satisfied the “Operational Improvement Metrics” set forth on Exhibit T shall be made by United in its reasonable discretion.  “Unsatisfied Operational Improvement Metric” means, with respect to any applicable fiscal quarter, each Operational Improvement Metric set forth on Exhibit T that has not been fully satisfied (x) by the Target Completion Date applicable to such metric set forth on Exhibit T falling in such quarter or (y) with respect to any Operational Improvement Metric that was not fully satisfied in the immediately prior quarter, by the completion of such quarter.  As of the date hereof, Contractor represents and warrants that each Operational Improvement Metric marked as “Complete” in the column applicable to such Operational Improvement Metric in Exhibit T has been fully satisfied in accordance with the requirements set forth in Exhibit T. For purposes of clarification only, once an Operational Improvement Metric has been satisfied, such Operational Improvement Metric is not subject to re-measurement in subsequent quarters, i.e., once an Operational Improvement Metric has been satisfied it is complete for all purposes of this Section 4.28.    

At Contractor’s sole cost and expense, Contractor will (a) open a new maintenance base in a station to be determined by mutual agreement between the parties, and (b) open a new base at IAD for E175 hub operations at IAD, which includes crew domicile.

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ARTICLE V
CERTAIN RIGHTS OF UNITED

Contractor agrees that, except as expressly permitted hereby or as otherwise directed in writing by United, the Covered Aircraft and the Engines may be used only to provide Regional Airline Services.  Without the written consent of United, the Covered Aircraft may not be used by Contractor for any other purpose, including without limitation flying for any other airline or on Contractor’s own behalf.  In addition, with respect to any Engine, Contractor shall not discriminate against United with respect to Contractor’s operation, use or maintenance of such Engine (x) as compared to other similar engines in Contractor’s fleet, or (y) in the provision of Regional Airline Services as compared to Contractor’s operations for other airlines or for its own use.

Upon the occurrence of a Prohibited Transaction without the prior written consent of United, then the provisions of Section 8.2(a) shall apply.

Upon United’s request delivered at any time and from time to time, Contractor’s chief executive officer (the “CEO”) and/or, at United’s option, if Contractor’s Controllable Completion Factor for the most recent [***] consecutive months is below [***], Contractor’s independent lead director (or in the absence of a designated independent lead director, any independent director of Contractor selected by United) (the “Lead Director”) shall meet in person with United at its headquarters to discuss such operational performance as soon as reasonably practicable after United’s request, but in any event not more than thirty (30) days following such request; provided that if the CEO and/or the Lead Director, as applicable, do not meet in person with United upon United’s request as provided above, then Contractor shall pay United, no later than the [***] Business Day following the end of a calendar month, [***] per Covered Aircraft for each month (or pro-rated portion thereof, as the case may be) that occurs following United’s request until either the CEO and/or the Lead Director, as applicable, meets in person with United or this Agreement is earlier terminated.  For the avoidance of doubt, nothing in this Section 5.3 shall limit Contractor’s obligations hereunder and under any Ancillary Agreement to provide Contractor Services, including without limitation its obligations under Section 4.8, and Contractor is and shall remain solely responsible for the safe operation of its aircraft and the safe provision of Regional Airline Services, including all Scheduled Flights.

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ARTICLE VI
INSURANCE

During the Term, in addition to any insurance required to be maintained by Contractor pursuant to the terms of any aircraft lease, or by any applicable governmental or airport authority, Contractor shall maintain, or cause to be maintained, in full force and effect policies of insurance with insurers of recognized reputation and responsibility, in each case to the extent available on a commercially reasonable basis, as follows:

United shall retain the right at any time to review the coverage, form, and amount of the insurance required hereby.  If, in the opinion of United, the insurance provisions in this Agreement do not provide adequate protection for United and/or the aviation operations of Contractor associated with the Covered Aircraft, United may require Contractor to obtain insurance sufficient in coverage, form, and amount to provide adequate protection.  United’s requirement shall be commercially reasonable but shall be designed to assure protection from and against the kind and extent of risk which exists at the time a change in insurance is required (provided such protection is available on commercially reasonable terms), and Contractor agrees to provide same within thirty (30) days of receiving notice from United.

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Contractor shall cause the policies described in Section 6.1 to be duly and properly endorsed by Contractor’s insurance underwriters with respect to Contractor’s flights and operations as follows:

At the commencement of this Agreement, and upon each renewal, Contractor shall furnish to United evidence reasonably satisfactory to United of such insurance coverage and endorsements, including certificates certifying that such insurance and endorsements are in full force and effect.  If Contractor fails to acquire or maintain insurance as herein provided, United may at its option secure such insurance on Contractor’s behalf at Contractor’s expense.

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ARTICLE VII
INDEMNIFICATION

Contractor shall be liable for and hereby agrees to fully defend, release, discharge, indemnify and hold harmless United, UCH, and their respective directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses of any kind, character or nature whatsoever, including attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from United, UCH or their respective directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person, including without limitation any of Contractor’s or United’s directors, officers, employees or agents, (ii) loss of, damage to, or destruction of property (including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights), including any loss of use of such property, or (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to (w) any act or omission by Contractor or any of its directors, officers, employees or agents relating to the provision of Contractor Services, (x) the performance, improper performance, non-performance or breach of any and all obligations to be undertaken by Contractor or any of its directors, officers, employees or agents pursuant to this Agreement or any Ancillary Agreement, or (y) the operation, non-operation, or improper operation of the Covered Aircraft or Contractor’s equipment or facilities at any location, in each case excluding only claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses (A) to the extent resulting from the gross negligence or willful misconduct of United, UCH or their respective directors, officers, agents or employees (other than gross negligence or willful misconduct imputed to such indemnified person by reason of its interest in a Covered Aircraft, and excluding Contractor acting as United’s agent pursuant to Section 10.8), or (B) directly caused by a breach by United of this Agreement or any Ancillary Agreement.

United shall be liable for and hereby agrees to fully defend, release, discharge, indemnify, and hold harmless Contractor, Parent, and their respective directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses of any kind, character or nature whatsoever, including attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from Contractor, Parent or their respective directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person, including without limitation any of Contractor’s or United’s directors, officers, employees or agents (excluding Contractor as such an agent), (ii) loss of, damage to, or destruction of property including real, tangible and intangible property, and specifically including

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regulatory property such as route authorities, slots and other landing rights, including any loss of use of such property or (iii) damages due to delays in any manner, in each case arising out of, connected with or attributable to (x) the performance, improper performance, nonperformance or breach of any and all obligations to be undertaken by United or any of its directors, officers, employees or agents (excluding Contractor as such an agent) pursuant to this Agreement, but only to the extent that such performance, improper performance or nonperformance is due to gross negligence or willful misconduct, or (y) the operation, non-operation or improper operation of United’s aircraft, equipment or facilities (excluding, for the avoidance of doubt, Covered Aircraft and any equipment or facilities leased or subleased by United to Contractor or otherwise used by Contractor for the provision of Contractor Services to United) at any location, in each case excluding only claims, demands, damages, liabilities, suits judgments, actions, causes of action, losses, fines, penalties, costs and expenses (A) to the extent resulting from the negligence or willful misconduct of Contractor (including in its capacity as an agent of United, UCH or their respective directors, officers, agents or employees), Parent or their respective directors, officers, employees or agents, (B) for which Contractor is obligated to indemnify or otherwise reimburse United pursuant to this Agreement or any Ancillary Agreement, (C) directly caused by a breach by Contractor of this Agreement or any Ancillary Agreement, or (D) to the extent resulting from acts or omissions of any ground handler, fuel supplier or servicer, or caterer (including without limitation, for purposes of this clause (D), United and its affiliates where any of them is acting in the capacity as a ground handler pursuant to this Agreement); provided that if United or any of its affiliates is acting directly in the capacity of a ground handler pursuant to this Agreement, then unless superseded by another agreement between United or such affiliate, on the one hand, and Contractor, on the other, the indemnity provisions set forth in Exhibit Q shall govern the indemnification obligations of United or such affiliate to Contractor, its directors, officers, employees and agents with respect to the actions of United or such affiliate in its capacity as a ground handler; and provided further that in the event of a conflict between the provisions of this Section 7.2 and the provisions of Section 4.4, the provisions of Section 4.4 shall control.

A party (the “Indemnified Party”) entitled to indemnification from another party under the terms of this Agreement (the “Indemnifying Party”) shall provide the Indemnifying Party with prompt written notice (an “Indemnity Notice”) of any third party claim or other claim which the Indemnified Party believes gives rise to a claim for indemnity against the Indemnifying Party hereunder.  Notwithstanding the foregoing, the failure of an Indemnified Party to promptly provide an Indemnity Notice shall not constitute a waiver by the Indemnified Party to any right to indemnification or otherwise relieve such Indemnifying Party from any liability hereunder unless and only to the extent that the Indemnifying Party is materially prejudiced as a result thereof, and in any event shall not relieve such Indemnifying Party from any liability which it may have otherwise than on account of this Article VII.  With respect to third party claims, the Indemnifying Party shall be entitled, if it accepts financial responsibility for the third party claim, to control the defense of or to settle any such third party claim at its own expense and by its own counsel; provided that no settlement by the Indemnifying Party of such a claim will be binding on the Indemnified Party for purposes of the indemnification provisions hereof without the prior written consent of such Indemnified Party to such settlement, which consent may not be unreasonably withheld, conditioned or delayed.  The Indemnified Party shall provide the Indemnifying Party with such information as the Indemnifying Party shall reasonably request to defend any such third party claim and shall otherwise cooperate with the Indemnifying Party in the defense of any such third party claim.  Except as set forth in this Section 7.3,  no settlement or other compromise or

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consent to a judgment by the Indemnified Party with respect to a third party claim as to which the Indemnifying Party is asserted to have an indemnity obligation hereunder will be binding on the Indemnifying Party for purposes of the indemnification provisions hereof without the prior written consent of such Indemnifying Party to such settlement, which consent may not be unreasonably withheld, conditioned or delayed, it being agreed however that it shall be reasonable for the Indemnifying Party to withhold or delay its consent if the Indemnifying Party reasonably asserts that the claim is not fully covered by the indemnity provided hereunder, and the entering into of any settlement or compromise or the consent to any judgment in violation of the foregoing shall constitute a waiver by the Indemnified Party of its right to indemnity hereunder to the extent the Indemnifying Party was prejudiced thereby.  Any Indemnifying Party shall be subrogated to the rights of the Indemnified Party to the extent that the Indemnifying Party pays for any loss, damage or expense suffered by the Indemnified Party hereunder.  If the Indemnifying Party does not accept financial responsibility for the third party claim or fails to defend against the third party claim that is the subject of an Indemnity Notice within thirty (30) days of receiving such notice (or sooner if the nature of the third party claim so requires), or otherwise contests its obligation to indemnify the Indemnified Party in connection therewith, the Indemnified Party may, upon providing written notice to the Indemnifying Party, pay, compromise or defend such third party claim without the prior consent of the (otherwise) Indemnifying Party.  In the latter event, the Indemnified Party, by proceeding to defend itself or settle the matter, does not waive any of its rights hereunder to later seek reimbursement from the Indemnifying Party.  With respect to all other claims, the Indemnifying Party shall promptly make payment of such claim upon receipt of reasonably sufficient evidence supporting such claim; provided, that if the Indemnifying Party in good faith disputes all or part of its obligation to indemnify the Indemnified Party hereunder or the amount involved, the senior management of each party shall meet to discuss and attempt to resolve such dispute between the parties and, if such dispute is not resolved within forty-five (45) days of such claim being made, then the parties may pursue other remedies.

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Notwithstanding anything to the contrary contained in this Agreement, no party shall be entitled to indemnification or reimbursement under any provisions of this Agreement for any amount to the extent such party has been indemnified or reimbursed for such amount under any other provision of this Agreement.

The provisions of this Article VII shall survive the termination of this Agreement.

ARTICLE VIII
TERM, TERMINATION AND DISPOSITION OF AIRCRAFT

This Agreement shall be effective as of the date hereof (the “Effective Date”).  The Term of this Agreement shall commence on the date that the first Covered Aircraft is placed into service under the terms and conditions of this Agreement (the “Commencement Date”) and, unless earlier terminated or extended as provided herein, shall continue until the last Scheduled Exit Date for any Covered Aircraft as set forth on Schedule 1, as such date may be extended pursuant to Section 10.2 hereof (the “Term”).

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In addition to the remedies contemplated above in this Article VIII, United shall be entitled to the following remedies:

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For the avoidance of doubt, none of a delay attributable solely to the manufacturer of the delayed E175LL Covered Aircraft or a delay due to an Act of God that continues for fewer than [***] days shall be deemed a default by Contractor for purposes of this Agreement.  

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ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS

Contractor represents, warrants and covenants to United as of the date hereof as follows:

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United represents, warrants and covenants to Contractor as of the date hereof as follows:

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ARTICLE X
CERTAIN AIRCRAFT-RELATED PROVISIONS

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At any time that United desires to utilize aircraft other than the Covered Aircraft, Contractor and United agree to meet and discuss in good faith the appropriate adjustments to this Agreement necessary to include such other aircraft as a Covered Aircraft.

The parties may agree at any time and from time to time during the Term to amend Schedule 1 to increase the number of Covered Aircraft as a result of United’s decision to award or induct new aircraft into the fleet (any such additional aircraft, the “New Aircraft”) utilized by Contractor for Regional Airline Services; provided that the following provisions shall apply, except as otherwise mutually agreed at the time of such additional of New Aircraft:

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With respect to each E175 Covered Aircraft and any other Covered Aircraft that is leased or subleased by United to Contractor, upon not less than ten Business Days’ notice by Contractor to United, and at least ten Business Days’ prior to the Actual In-Service Date for such aircraft, United and Contractor shall enter into a Covered Aircraft Lease for such aircraft; provided that pursuant to each Covered Aircraft Lease, among other things, Basic Rent payable by Contractor to United thereunder shall be entirely abated unless and until (A) such Covered Aircraft has been withdrawn from this Agreement and no longer constitutes a Covered Aircraft, (B) the occurrence of a Labor Strike, or (C) the mandatory grounding of such Covered Aircraft by the FAA due to any action or inaction of Contractor, upon which in each case such Basic Rent shall be payable by Contractor to United until (x) in the case of such a withdrawal of such Covered Aircraft, such aircraft shall have been returned to United in accordance with the terms of such Covered Aircraft Lease and this Agreement, or (y) in the case of a Labor Strike or such a mandatory grounding, as the case may be, the number of Scheduled Flights that are On-Time Departures (including any days resulting from a Labor Strike or mandatory grounding) on any day of the week equals or exceeds the number of Scheduled Flights that were On-Time Departures on the same day of the week prior to such Labor Strike or mandatory grounding, as the case may be.  Notwithstanding anything else contained herein to the contrary, if and when a Covered Aircraft Lease terminates in accordance with its terms, then the aircraft subject to such lease shall no longer constitute a Covered Aircraft effective on the date on which the term of such Covered Aircraft Lease ends, regardless of whether the event giving rise to such lease termination also constitutes an independent termination or withdrawal event hereunder.  Any withdrawal occurring upon such a termination of a Covered Aircraft Lease shall be separate and distinct from, and shall not limit or supersede, any other withdrawal rights of United contained in this Agreement.

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Contractor  shall ensure that any Covered Aircraft added to scope of this Agreement materially conform to United’s then-current specifications, including, but not limited to, specifications for aircraft configuration, galley, seats, winglets, and other standards, and that such aircraft are consistent with the specifications and livery applicable to such fleet type.

ARTICLE XI
MISCELLANEOUS

All notices made pursuant to this Agreement shall be in writing and shall be deemed given upon (a) a transmitter’s confirmation of a receipt of a facsimile transmission (but only if followed by confirmed delivery by a standard overnight courier the following Business Day or if delivered by hand the following Business Day), (b) confirmed delivery by a standard overnight courier or delivered by hand or (c) e-mail delivery, provided that, in the case of any such notice or communication transmitted by e-mail delivery, such notice or communication shall not be in compliance with this Section 11.1 unless such e-mail (i) includes in its subject line the following:

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“United CPA – Important Notice” and (ii) the sender of such email has received a reply which both has not been automatically generated and includes explicit acknowledgement of the e-mail received, to the parties at the following addresses:

if to United:

[***]

with a copy to (which shall not constitute notice):

[***]

if to Contractor:

Mesa Airlines, Inc.
410 N. 44th Street
Suite 700
Phoenix, AZ 85008
Attention: President (with a copy to General Counsel)
Facsimile No.: (602) 685-4350

E-mail:michael.lotz@mesa-air.com, brad.rich@mesa-air.com, brian.gillman@mesa-air.com

if to Parent:

Mesa Air Group, Inc.
410 N. 44th Street
Suite 700
Phoenix, AZ 85008
Attention: President (with a copy to General Counsel)
Facsimile No.: (602) 685-4350

E-mail: michael.lotz@mesa-air.com, brad.rich@mesa-air.com, brian.gillman@mesa-air.com

or to such other address as any party hereto may have furnished to the other parties by a notice in writing in accordance with this Section 11.1.

This Agreement and all of the provisions hereof shall be binding upon the parties hereto and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  Except with respect to a merger or other consolidation of either party with another Person (and without limiting United’s rights pursuant to Section 5.2 hereof), neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other parties.  For the avoidance of doubt, United may effectively assign without Contractor’s prior written consent all of its performance, rights, and obligations hereunder to any direct or indirect wholly-owned Subsidiary of United Continental Holdings, Inc.

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This Agreement may not be amended or modified in any respect except by a written agreement signed by the parties hereto that specifically states that it is intended to amend or modify this Agreement. Any amendment or modification of this Agreement to decrease the amount of Ownership Rate payments required to be paid by United to Contractor with respect to any EETC Aircraft may be an Event of Default as defined under the Trust Indenture and Mortgage for such Aircraft under the EETC Transaction.

The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but such waiver shall be effective only if it is in writing signed by the party against which such waiver is to be asserted that specifically states that it is intended to waive such term.  Unless otherwise expressly provided in this Agreement, no delay or omission on the part of any party in exercising any right or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right or privilege under this Agreement operate as a waiver of any other right or privilege under this Agreement nor shall any single or partial exercise of any right or privilege preclude any other or further exercise thereof or the exercise of any other right or privilege under this Agreement.  No failure by any party to take any action or assert any right or privilege hereunder shall be deemed to be a waiver of such right or privilege in the event of the continuation or repetition of the circumstances giving rise to such right unless expressly waived in writing by each party against whom the existence of such waiver is asserted.

The table of contents and the section and other headings and subheadings contained in this Agreement and in the exhibits and schedules hereto are solely for the purpose of reference, are not part of the agreement of the parties hereto, and shall not in any way affect the meaning or interpretation of this Agreement or any exhibit or schedule hereto.  All references to days or months shall be deemed references to calendar days or months.  All references to “$” shall be deemed references to United States dollars.  Unless the context otherwise requires, any reference to an “Article,” a “Section,” an “Exhibit,” or a “Schedule” shall be deemed to refer to a section of this Agreement or an exhibit or schedule to this Agreement, as applicable.  The words “hereof,” “herein” and “hereunder” and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, unless otherwise specifically provided, they shall be deemed to be followed by the words “without limitation.” This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing the document to be drafted.

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Except as required by law or stock exchange or other regulation or in any proceeding to enforce the provisions of this Agreement, or as otherwise provided below, each party to this Agreement hereby agrees not to publicize or disclose to any third party the terms or conditions of this Agreement or any of the Ancillary Agreements, or any exhibit, schedule or appendix hereto or thereto, or any CPA Records, without the prior written consent of the other parties thereto (except that (i) a party may disclose such information to its existing and potential lenders, lessors and other financing parties, its third-party consultants, its advisors and its representatives, in each case who are themselves bound to keep such information confidential and (ii) United may disclose any information to its organized labor groups and their third-party consultants, advisors and representatives as required pursuant to applicable collective bargaining agreements).  Except as required by law or stock exchange or other regulation or in any proceeding to enforce the provisions of this Agreement or any of the Ancillary Agreements, or as otherwise provided below, each party hereby agrees not to disclose to any third party any confidential information or data, both oral and written, received from the other, whether pursuant to or in connection with this Agreement or any of the Ancillary Agreements, without the prior written consent of the party providing such confidential information or data (except that a party may disclose such information to its third-party consultants, advisors and representatives, in each case who are themselves bound to keep such information confidential).  Each party hereby agrees not to use any such confidential information or data of the other party other than in connection with performing their respective obligations or enforcing their respective rights under this Agreement or any of the Ancillary Agreements, or as otherwise expressly permitted or contemplated by this Agreement or any of the Ancillary Agreements.  If either party is served with a subpoena or other process requiring the production or disclosure of any of such agreements or information, then the party receiving such subpoena or other process, before complying with such subpoena or other process, shall immediately notify the other parties hereto of the same and permit said other parties a reasonable period of time to intervene and contest disclosure or production.  Upon termination of this Agreement, each party must return to each other any confidential information or data received from the other which is still in the recipient’s possession or control.  Without limiting the foregoing, no party shall be prevented from disclosing the following terms of this Agreement: the number of aircraft subject hereto, the periods for which such aircraft are subject hereto, and any termination provisions contained herein.  The provisions of this Section 11.6 shall survive the termination of this Agreement for a period of ten (10) years.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  The Agreement may be executed by facsimile signature.

Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective (unless and until reformed automatically or replaced

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via good faith negotiations, as applicable, pursuant to the third sentence of this Section 11.8) to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.  Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  If (x) any term or provision of this Agreement is or is rendered or held invalid, illegal or incapable of being enforced by any jurisdiction, applicable law or public policy and (y) the parties agree that such term or provision is essential to this Agreement, then such term or provision will be reformed automatically in the applicable jurisdiction so as to comply with the applicable law or public policy and to effect the original intent of the parties as closely as possible; provided, however, that if, in the reasonable opinion of either party hereto, the reformation of such invalid, illegal or unenforceable term or provision materially adversely affects a party’s rights or duties hereunder, then the parties shall immediately begin good faith negotiations for a suitable replacement provision which effects the original intent of the parties as closely as possible; provided further, that if, after the good faith negotiations referenced in the immediately preceding proviso, the parties are unable to reach agreement as to a suitable replacement provision, then the party adversely affected by the reformation may immediately terminate this Agreement upon written notice to the other party hereto, upon which termination this Agreement shall be of no further force and effect and the provisions of Section 8.3 shall apply.

Nothing in this Agreement shall be interpreted or construed as establishing between the parties a partnership, joint venture, joint employment, agency or other similar arrangement.

This Agreement (including the exhibits and schedules hereto) and the Ancillary Agreements are intended by the parties as a complete statement of the entire agreement and understanding of the parties with respect to the subject matter hereof and all matters between the parties related to the subject matter herein or therein set forth.  This Agreement is made among, and for the benefit of, the parties hereto, and the parties do not intend to create any third-party beneficiaries hereby, and no other Person shall have any rights arising under, or interests in or to, this Agreement.

Except with respect to matters referenced in Section 11.15(e) (which shall be governed by and construed pursuant to the Federal Arbitration Act), this Agreement shall be governed by and construed in accordance with the laws of the State of Illinois (excluding Illinois choice of law principles that might call for the application of the law of another jurisdiction) as to all matters, including matters of validity, construction, effect, performance and remedies.  Subject to Section 11.15, any action arising out of this Agreement or the rights and duties of the parties arising hereunder may be brought, if at all, only in the state or federal courts located in the United States District Court for the Northern District of Illinois or the County of Cook, Illinois, as applicable.  Each party further agrees to waive any right to a trial by jury.

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If any party hereto shall be in default hereunder or under any Ancillary Agreement or any other agreement between the parties hereto relating to the provision of Contractor Services (including without limitation any ground handling agreement), then in any such case the non-defaulting party shall be entitled to set off from any payment owed by such non-defaulting party to the defaulting party hereunder any amount owed by the defaulting party to the non-defaulting party hereunder or thereunder; provided that contemporaneously with any such set-off, the non-defaulting party shall give written notice of such action to the defaulting party; provided further that the failure to give such notice shall not affect the validity of the set-off.  It is specifically agreed that (i) for purposes of the set-off by any non-defaulting party, mutuality shall be deemed to exist among the parties; (ii) reciprocity among the parties exists with respect to their relative rights and obligations in respect of any such set-off; and (iii) the right of set-off is given as additional security to induce the parties to enter into the transactions contemplated hereby and by the Ancillary Agreements.  Upon completion of any such set-off, the obligation of the defaulting party to the non-defaulting party shall be extinguished to the extent of the amount so set-off.  Each party hereto further waives any right to assert as a defense to any attempted set-off the requirements of liquidation or mutuality.  This set-off provision shall be without prejudice, and in addition, to any right of set-off, combination of accounts, lien or other right to which any non-defaulting party is at any time otherwise entitled (either by operation of law, contract or otherwise), including without limitation pursuant to Article III hereof.  In addition to the foregoing, United shall have a credit in the amount of [***] (representing [***] per month per aircraft for all [***] CRJ Covered Aircraft, less [***] per month per aircraft for [***] CRJ Covered Aircraft, for each of June, July and August, 2013), which amount shall be set off by United against any payments to be made to Contractor hereunder.

Contractor shall be responsible for filing all reports relating to its operations that are required by the DOT, FAA or other applicable government agencies (other than any such reports for which United, where permitted by law, has assumed in writing the responsibility to file on Contractor’s behalf), and Contractor shall promptly furnish United with copies of all such reports and such other available traffic and operating reports as United may request from time to time.  Each of the parties hereto agrees to use its commercially reasonable efforts to cooperate with each other party in providing necessary data, to the extent in the possession of the first party, required by such other party in order to meet any reporting requirements to, or otherwise in connection with any filing with or provision of information to be made to, any regulatory agency or other governmental authority.  If a party fails to provide any such data to the other party sufficiently in advance of the applicable deadline for such filings, and the other party is unable to submit such filings by the deadline because of such delay, the first party will reimburse the other party for any fines or penalties incurred by the other party as a result of its failure to submit such filings by the deadline.  Unless Contractor is otherwise notified by United in writing not less than 5 business days prior to the filing deadline (the “Tarmac Delay Notice”), Contractor and United agree that United will file the DOT filing required under 49 U.S.C. 42301(h) on Contractor’s behalf. United will be liable for any fines assessed by the DOT attributable to United’s failure to

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file this report by the deadline for such report, unless (i) that failure is caused by or otherwise results from Contractor’s failure to provide United in a timely manner with the necessary data required by United in connection with the filing or (ii) United had provided the Tarmac Delay Notice specified above.  The obligations under this Section 11.13 shall survive the termination of this Agreement.

Parent has previously executed a guarantee in favor of United in form of Exhibit K.  Parent hereby agrees that it shall not participate in any transaction or series of transactions if, after giving effect to such transaction or series of transactions, Contractor will become the Subsidiary of another Person, unless at the time such transactions are consummated such other Person executes and delivers to United a guarantee of the obligations of Contractor under this Agreement and the Ancillary Agreements substantially in the form of Exhibit K.

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IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Capacity Purchase Agreement to be duly executed and delivered as of the date and year first written above.

UNITED AIRLINES, INC.

 

 

 

MESA AIR GROUP, INC.

 

 

 

MESA AIRLINES, INC.

 

 

 

 

 

 

Signature Page to Amended and Restated Capacity Purchase Agreement

 

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SCHEDULE 1
Covered Aircraft

Table 1: E175 Covered Aircraft

 

Schedule 1-1

 

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Schedule 1-2

 

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Schedule 1-3

 

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Note 1 – Relating to all Covered Aircraft (except where specified otherwise):

Note 2 – Relating to all United Owned E175 Covered Aircraft:

The Scheduled Exit Dates set forth in the above table shall be adjusted from time to time to reflect any extension of the Term for any United Owned E175 Covered Aircraft pursuant to Section 10.2 of this Agreement.

Schedule 1-4

 

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Table 2 CRJ Covered Aircraft

 

Schedule 1-5

 

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Table 3 CRJ Covered Aircraft

 

 

Schedule 1-6

 

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Table 4 E175LL Covered Aircraft

 

 

Note 3 – Relating to E175LL Covered Aircraft:

The delivery dates and in-service dates for E175LL Covered Aircraft must satisfy the following conditions:

Schedule 1-7

 

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Schedule 1-8

 

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Table 5 CRJ550 Covered Aircraft

 

Schedule 1-9

 

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SCHEDULE 2A
E175 Covered Aircraft Compensation for Carrier Controlled Costs

Table 1 – United Owned E175 Covered Aircraft

The following Table 1 shall apply per corresponding year to United Owned E175 Covered Aircraft flown under this Agreement:

 

 

Schedule 2A-1

 

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Table 2 – Contractor Owned E175 Covered Aircraft

The following Table 2 shall apply per corresponding year to Contractor Owned E175 Covered Aircraft flown under this Agreement:

 

Schedule 2A-2

 

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Table 3 – E175LL Covered Aircraft

The following Table 3 shall apply per corresponding year to E175LL Covered Aircraft flown under this Agreement:

 

 

 

 

Schedule 2A-3

 

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Schedule 2A-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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SCHEDULE 2B
CRJ700 Covered Aircraft Compensation for Carrier Controlled Costs

The following rates shall apply to all CRJ700 Covered Aircraft flown under this Agreement with the November 1 effective date assumed to coincide the Effective Date of this agreement.:

 

 

 

 

 

 

 

Schedule 2B-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

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SCHEDULE 2C
CRJ550 Covered Aircraft Compensation for Carrier Controlled Costs

The following rates shall apply to all CRJ550 Covered Aircraft flown under this Agreement and shall become effective at the Actual In-Service Date for each CRJ550 Covered Aircraft:

 

 

 

Schedule 2C-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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SCHEDULE 3
Pass-Through Costs

 

*The “Prepayment Rates” reflected above in this Schedule 3 shall be determined annually by the parties acting reasonably and may be confirmed by e-mail exchange or other writing by the parties and may otherwise be adjusted from time to time, upon the mutual agreement of the parties (and confirmed by e-mail exchange or other writing), to reflect a closer approximation of the actual reconciled amounts of such Pass-Through Costs.

 

**Fuel Services shall constitute a Pass-Through Cost only if United shall not have elected to procure Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.12(b).

 

***Landing fees shall constitute a Pass-Through Cost only if United elects to have Contractor pay for landing fees pursuant to Section 4.24(b).

 

Schedule 3-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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SCHEDULE 4
On-Time Adjustment

Plus

Subject to the following defined terms (it being understood that, where the context requires, the terms below are defined in relation to the E175 Covered Aircraft, on the one hand, and the Bombardier Covered Aircraft, on the other hand, and the Scheduled Flights applicable to such respective fleets):

A = [***], provided that, following the date of this Agreement, such figure shall be adjusted on each June 1 of each calendar year as follows: the new rate, applicable beginning on June 1 of each calendar year, shall be equal the rate in effect on the date immediately preceding June 1 of each calendar year multiplied by [***].

B = [***], provided that, following the date of this Agreement, such figure shall be adjusted on each June 1 of each calendar year as follows: the new rate, applicable beginning on June 1 of each calendar year, shall be equal the rate in effect on the date immediately preceding June 1 of each calendar year multiplied by [***].

Z = for any month, the quotient obtained by dividing On-Time Departures during such month by Controllable Departures during such month

Hub Locations = the following, collectively, [***]

Departure = the departure of a Scheduled Flight, excluding Charter Flights, extra sections, unscheduled flights, maintenance flights, ferry flights, and other non-revenue flights.

Schedule 4-1

 

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On-Time Departure = a Departure to or from a Hub Location (without duplication for the applicable Scheduled Flight) no later than the scheduled departure time for the applicable Scheduled Flight.  For the avoidance of doubt, any hub-to-hub departures will only be included as an “On-Time Departure” for the departing hub.

Controllable Departures = the sum of all Departures to or from a Hub location (without duplication for the applicable Scheduled Flight), excluding any applicable Excused Departures.  For the avoidance of doubt, any hub-to-hub departures will only be included as a “Controllable Departure” for the departing hub.

Excused Departure = a Departure that is not an On-Time Departure solely because of one or more of the following: (i) weather, (ii) ATC, (iii) United’s written request for delay for such Departure, (iv) a late inbound aircraft (only with respect to the flight scheduled immediately prior to the Scheduled Flight for the Covered Aircraft subject to such Departure), or (v) as determined by United in accordance with United’s regular delay protocol, due solely to a factor beyond Contractor’s direct control.  The following charts depict the current delays codes for both controllable and uncontrollable delay codes, with “Excused Departures” representing flights coded with uncontrollable delay codes, it being understood that (x) no Departure with a delay code in the table below titled “Contractor Controllable Delay Codes” will be considered an “Excused Departure”, and (y) such tables shall be subject to change from time to time in United’s sole discretion to accommodate changes from time to time in United’s overall delay coding:

 

Schedule 4-2

 

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Short Controllable Delay = with respect to a Scheduled Flight to which an Excused Departure is not applicable, any delay of such flight that is less than [***] hours in duration

Long Controllable Delay = with respect to a Scheduled Flight to which an Excused Departure is not applicable, any delay of such flight that is greater than [***] hours in duration

Monthly Historical Percentage = as of any date of determination, the simple average value of Z for each of the last three completed calendar years prior to such date; provided, that, with respect to the applicable fleet type, for the purposes of calculating the Monthly Historical Percentage, for any month during the applicable period of measurement during which Contractor did not perform regional airline services under this Agreement using such fleet type hereunder at such Hub Location, the value of Z for any such month will instead be determined using the performance data for all regional aircraft Scheduled Flights that were operated by another/existing United Express carrier pursuant to the capacity purchase provisions of this Agreement with aircraft comparably-sized to such Covered Aircraft fleet type that were operated to or from such Hub Location as United Express; provided that (x) the determination of comparably-sized aircraft as referenced above will be made by United reasonably and (y) such determination will be made using historical performance data that United in good faith deems reliable and accurate; and provided further that the Monthly Historical Adjustment shall be further adjusted in accordance with the two tables set forth immediately below for Block Time w/0 (as defined in Exhibit A) and for System Turn Time (as defined in Exhibit A), it being understood an illustrative example follows such two tables.

The historical percentage will adjusted based on the following:

Schedule 4-3

 

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[***]

 

Note: Turn time calculations exclude any scheduled turns over [***] hours.

 

For illustrative purposes an example month has Short Controllable Delays totaling [***] and Long Controllable Delays of [***]. The sample month has [***] Controllable Departures. This would result in an on-time percentage or “Z” of [***]. When reviewing the historical [***] for the past [***] years of the target month, the Historical Monthly Percentage would be [***].

A = [***]              B = [***]           Z (or D [***]) = [***]            Monthly Historical Percentage target = [***]

[***]

Schedule 4-4

 

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A payment of [***] as a penalty for Short Controllable Delays is due to United in the above illustrative example. An additional [***] is due to United as a Long Controllable Delay penalty. If in the same month the actual [***] is scheduled for [***], the [***] monthly historical target would be adjusted lower by [***]. This would make the new Historical Monthly Percentage target of [***]. This lower threshold would result in an adjusted payment to United of [***] for Short Controllable Delays and [***] for Long Controllable Delays.

[***]

Schedule 4-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Schedule 5 – Ownership Rate Schedule¹

Schedule 5-1

 

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Schedule 5-2

 

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Schedule 5-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Schedule 5-4

 

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Schedule 5-5

 

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Schedule 6

Reserved.

 

Schedule 7-1

 

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Schedule 7 - Loan Payment Amount

 

 

Term of loans are 12 years with estimated end date provided above. Payments are made every 90 days with appropriate adjustments for holidays and weekends. Quarterly payments are included in the monthly prepayments to Contractor.

 

Junior loan is fixed rate loan with [***] equal principal payments and [***] interest. Senior loan schedule is calculated with a [***] amortization factor and average life [***] years. Interest payments based on outstanding balance, number of days in period over [***]and LIBOR + Fixed Rate above.

Schedule 7-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT A

Definitions

“2.4(a) Notice” – is defined in Section 2.4(a).

“2.4(b)(i) Notice” – is defined in Section 2.4(b)(i).

“2.4(b)(ii) Notice” – is defined in Section 2.4(b)(ii).

“2.4(c) Notice” – is defined in Section 2.4(c).

“2.4(d) Notice” – is defined in Section 2.4(d).

“3.5 Notice” – is defined in Section 3.5.

“AAA” – is defined in Section 11.15(a).

“Accommodating Aircraft Movement” – is defined in Section 4.6(a).

“Act of God” – means an unpreventable natural catastrophe resulting in material consequences, such as an earthquake, a tidal wave, a volcanic eruption, or a tornado (it being understood that Labor Strikes, labor disputes any other events or circumstances involving the action or inaction of human beings shall not constitute an Act of God).  For the avoidance of doubt, the parties agree that the term “Act of God” shall only be relevant in this Agreement specifically where it is used, namely Section 8.4 and Schedule 1.

“Actual Delivery Date” – is defined in Schedule 1.

“Actual In-Service Date” – is defined in Schedule 1.

“Aerodata Fees” – is defined in Section 3.6(b)(ii)(A).

“Agreement” – is defined in the first paragraph of the Agreement.  

“Aircraft Drinking Water Regulation” – means 40 CFR Part 141.

“Aircraft Property Taxes” – means all aircraft property taxes (however designated, including excise or franchise taxes imposed on the ownership of aircraft property, ad valorem taxes, and special assessments or levies) for aircraft, spare parts and engines, including rotables and consumables included in or constituting part of an aircraft or engine or spare parts. Aircraft property taxes do not include property tax related to ground equipment, real estate, or personal property or any other tax that is not for aircraft property, including without limitation income, profits, withholding, employment, social security, disability, occupation, severance, excise, ad valorem, sales, use or franchise taxes.

“Airframe Heavy Maintenance” – means all activities performed pursuant to the Aircraft Heavy Maintenance Support Agreement.

Exhibit A-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Airframe Heavy Maintenance Support Agreement” – means that certain airframe heavy maintenance agreement entered into by Contractor with a third party aircraft heavy maintenance service provider for the E175 Covered Aircraft, provided Contractor has received United’s written approval of the commercial terms of such agreement.

“Airport Authority” – means any municipal, county, state or federal governmental authority, or any private authority, owning or operating any Applicable Airport with authority to lease, convey or otherwise grant rights to use any Airport Facilities.

“Alcoholic Beverage Product” – means beer, wine, liquor or any other alcoholic beverages.  

“ALPA” – means the Air Line Pilots Association, International.  

“Ancillary Agreements” – means each of the Covered Aircraft Leases and each of the agreements entered into by United and/or Contractor substantially in the form of any of the exhibits hereto (including without limitation Exhibits D, K and O), together with all amendments, exhibits, schedules and annexes thereto.

“Annual Supplemental Rent Adjustment” – is defined in Section 2.5(c)(iii).

“Appeals Award” – is defined in Section 11.16(k).

“Applicable Airport” – means any airport into or from which Scheduled Flights are scheduled to arrive or depart.

“APU” – means an auxiliary power unit.

“APU Support Agreement” – means that certain APU support agreement entered into by Contractor with a third party APU service provider for the E175 Covered Aircraft, provided Contractor has received United’s written approval of the commercial terms of such agreement.

“Assignment and Assumption Agreement” – is defined in Section 10.1(b)(vi)(A).

“Available to Schedule Aircraft” – means, at any time and from time to time, Covered Aircraft in revenue service and does not include the then-current quantity of Spare Aircraft, Non-Comp Aircraft or aircraft not available due to heavy maintenance, overhauls and modifications and the continuous maintenance line.

“Available to Schedule CRJ Covered Aircraft” – means, at any time and from time to time, CRJ Covered Aircraft in revenue service and does not include the then-current quantity of Spare Aircraft, Non-Comp Aircraft or aircraft not available due to heavy maintenance, overhauls and modifications and the continuous maintenance line.

“Available to Schedule E175 Covered Aircraft” – means, at any time and from time to time, E175 Covered Aircraft in revenue service and does not include the then-current quantity of Spare Aircraft, Non-Comp Aircraft or aircraft not available due to heavy maintenance, overhauls and modifications and the continuous maintenance line.

Exhibit A-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Average Peer Group Rate Increase” – means, with respect to any insurance coverage and as of any date of determination, (x) the insurance rates relating to passenger liability insurance and war risk insurance as set forth on Schedule 3, multiplied by (y) the average percentage increase or decrease, as appropriate, from January 1, 2013 to such date of determination, in the cost of such passenger liability insurance and war risk insurance coverage for the five regional airlines with annual revenue passenger miles closest to those of Contractor, as determined by available information obtained from public sources or reputable insurance brokers, excluding (i) any such regional airline that experienced a major loss within the previous three years, and (ii) any regional airline whose insurance rates are included with its major airline partner(s).

“Award” – is defined in Section 11.16(j).

“Base Locations” – means, collectively, [***]; provided, however, that, as of any date of determination, a location will only be a “Base Location” if, during the calendar month of such date of determination, such location has been a Contractor crew and maintenance base.

“Basic Rent” – is defined, with respect to any Covered Aircraft, in the Covered Aircraft Lease for such Covered Aircraft.

“Block 1 Contractor Owned E175 Covered Aircraft” – means the E175 Covered Aircraft identified as aircraft numbers 31 to 40 on Table 1 to Schedule 1.

“Block 2 Contractor Owned E175 Covered Aircraft” – means the E175 Covered Aircraft identified as aircraft numbers 41 to 45 on Table 1 to Schedule 1.

“Block 3 Contractor Owned E175 Covered Aircraft” – means the E175 Covered Aircraft identified as aircraft numbers 46 to 48 on Table 1 to Schedule 1.

“Block-Hour Adjustment Amount” – is defined in Section 3.6(b)(iii).

“Block-Hour Monthly Threshold” – is defined in Section 3.6(b)(iii).

“Block Time w/0” – means, with respect to E175 Covered Aircraft and CRJ Covered Aircraft, calculated separately, the percentage actual block time was less than the scheduled block time.

“Block-Hour Requirement” – is defined in Section 4.27(a).

“Bombardier CCF Adjustment” – is defined in Section 3.2(a).

“Bombardier Covered Aircraft” – means Covered Aircraft manufactured by Bombardier.

“Business Day” – means each Monday, Tuesday, Wednesday, Thursday and Friday unless such day shall be a day when financial institutions in New York, New York or Chicago, Illinois are authorized by law to close.

“Call Option” – is defined in Section 10.1(a).

Exhibit A-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Call Option Aircraft” – is defined in Section 10.1(a).

“Call Option Information” – is defined in Section 10.1(b)(iv).

“Call Option Notice” – is defined in Section 10.1(b)(ii).

“Call Option Request” – is defined in Section 10.1(b)(iii).

“Candidate” – is defined in Section 4.1(g).

“Cause” – means the following, each of which constitutes breach: (i) the suspension for three consecutive days or longer or the revocation of Contractor’s authority to operate as a scheduled airline, (ii) the ceasing of Contractor’s operations as a scheduled airline, other than as a result of a Labor Strike or the mandatory grounding of any of portion of the Covered Aircraft by the FAA, and other than any temporary cessation for not more than fourteen (14) consecutive days, (iii) the occurrence of a Labor Strike that shall have continued for seven (7) consecutive days or longer, (iv) a Controllable Completion Factor of [***] or below for each of any three consecutive calendar months, (v) an On-Time Departure Rate of [***] or below for each of any three consecutive calendar months, (vi) a Prohibited Transaction shall occur to which United shall not have consented in writing in advance, (vii) the occurrence of a willful or intentional material breach of this Agreement by Contractor that substantially deprives United of the benefits of this Agreement, which breach shall have continued for three (3) days after notice thereof is delivered by United to Contractor or, if Contractor has provided United reasonable assurance that such breach will be cured by Contractor within ten (10) days after delivery of such notice and for so long as Contractor is acting diligently in all respects to cure such breach within such period, for ten (10) days after notice thereof is delivered by United to Contractor, or (viii) the occurrence of a System Flight Disruption.

“CEO” – is defined in Section 5.3.

“Charter Flights” – means any flight by a Covered Aircraft for charter operations at the direction of United that may or may not be reflected in the Final Monthly Schedule.

“Claims” – is defined in Section 11.16(a).

“Commencement Date” – is defined in Section 8.1.

“Compensation for Carrier Controlled Costs” – is defined in Section 3.1.

Exhibit A-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Consent” – is defined in Section 10.1(b)(vi)(D).

“Consent Period” – is defined in Section 2.5(a).

“Contractor” – means Mesa Airlines, Inc., a Nevada corporation, and its successors and permitted assigns.

“Contractor Marks” – is defined in Exhibit F.

“Contractor Owned E175 Covered Aircraft” – means those E175 Covered Aircraft identified as Contractor owned E175 Covered Aircraft on Schedule 1.

“Contractor Owned E175 Removed Aircraft” – is defined in Section 2.4(b)(ii).

“Contractor Services” – means (i) Regional Airline Services and (ii) any other services provided by Contractor pursuant to this Agreement or any Ancillary Agreement.

“Contractor Terminal Facility” – means any Terminal Facility to the extent owned, leased, subleased or otherwise retained or used by Contractor as of the date hereof, and any Terminal Facility to the extent owned, leased, subleased or otherwise retained or used by Contractor pursuant to Section 4.10(a) after the date hereof, in either case, for the provision of Contractor Services.

“Controllable Cancellation” – means a cancellation of a Scheduled Flight that is not an Uncontrollable Cancellation (including flights deemed to have resulted in Controllable Cancellations pursuant to the last sentence of Section 2.1(c)).

“Controllable Completion Factor” – means, for any period of determination, the number of actual departures completed divided by the number of scheduled departures, excluding Uncontrollable Cancellations.

“Controllable Delays” – means a delay of a Scheduled Flight that is not an Uncontrollable Delay.

“Covered Aircraft” – means the E175 Covered Aircraft, the E175LL Covered Aircraft, the CRJ700 Covered Aircraft and the CRJ550 Covered Aircraft.

“Covered Aircraft Lease” – means an aircraft lease or sublease agreement, as the case may be, substantially in the form of United’s then-current (at the time of execution of such agreement by the parties) standard aircraft lease or sublease agreement, as the case may be, for transactions in which United is lessor or sublessor, as the case may be, which standard agreement shall contain, among other things, (w) provisions, whether financial, operational or otherwise, that are necessary to conform to the requirements of any mortgage, lease and/or other financing agreement relating to the applicable Covered Aircraft, to which United is a party and under which United is the mortgagor, lessee, borrower or similar party, as the case may be, (x) provisions, whether financial, operational or otherwise, that are necessary to conform to the requirements of the Embraer Purchase Agreement, including without limitation provisions effective to obligate Contractor to

Exhibit A-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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perform, or refrain from performing, any and all actions (including without limitation making and submitting reports, performing inspections, taking possession of the aircraft as directed by United, utilizing Embraer personnel, and communicating with Embraer and United) as may be required to preserve all of United’s rights and privileges arising under the provisions of the Embraer Purchase Agreement Excerpt (including without limitation rights relating to the delivery and acceptance of the aircraft, maintenance and dispatch reliability guarantees, ferry flight assistance and product support, and all other warranties and guarantees contained therein), (y) term and termination provisions that conform to the provisions of this Agreement (including a base term that conforms to the term set forth on Schedule 1 with respect to the applicable Covered Aircraft, termination provisions conforming to Article VIII and Section 2.4(b) and cross-default and term extension provisions), and (z) other economic terms, if any, that are commercially reasonable taking into account the financial condition of Contractor.

“CPA Records” – is defined in Section 3.5.

“CRJ Collateral” – is defined in Section 10.6(b).

“CRJ Covered Aircraft” – means all of the CRJ700 Covered Aircraft or CRJ550 Covered Aircraft listed on Schedule 1 (as amended from time to time pursuant to the provisions of this Agreement), or any acceptable substitute aircraft agreed to in writing by United and presented for Regional Airline Services by Contractor, as adjusted from time to time for withdrawals pursuant to Article VIII.  For the avoidance of doubt, as of the date of this amendment and restatement, the CRJ Covered Aircraft are comprised only of the CRJ700 Covered Aircraft.

“CRJ Lease Notice” – is defined in Section 2.5(a).

“CRJ Lien” – is defined in Section 10.6(b).

“CRJ Purchase Notice” – is defined in Section 2.5(a).

“CRJ Third Party Lessee” – is defined in Section 2.5(a).

Exhibit A-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“CRJ550 Accelerated Margin Payment” – means, with respect to any CRJ550 Removed Aircraft at any time from time to time, the product of (x) [***] multiplied by (y) the quotient obtained by dividing (i) [***] minus [***] to the power of negative “Y” (where “Y” equals the number of calendar months (prorated for partial months based on a [***] day month) [***] and (ii) [***]; provided, however, that, notwithstanding anything to the contrary above in this definition, if, as of the time that United delivers of a 2.4(d) Notice with respect to such aircraft, the average number of CRJ550 Covered Aircraft in scheduled service pursuant to the capacity purchase provisions of this Agreement for the prior [***] completed calendar months is greater than or equal to [***] CRJ550 Covered Aircraft, then, for each CRJ550 Removed Aircraft, the CRJ550 Accelerated Margin Payment shall be [***] if, as of the time that United delivers the 2.4(d) Notice with respect to such aircraft, the Controllable Completion Factor calculated for all CRJ Covered Aircraft for the prior [***] completed calendar months is less than [***]. As an example, and for illustrative purposes only, if there are [***] months remaining in the term, the formula for CRJ550 Accelerated Margin Payment would be (assuming the proviso set forth immediately above does not apply for the purposes of this example):

“CRJ550 Committed In-Service Date” – is defined in Section 2.5(b)(i).

“CRJ550 Conversion Notice” – is defined in Section 2.5(a).

“CRJ550 Covered Aircraft” – means all of the CRJ550 aircraft listed on Schedule 1 (as amended from time to time pursuant to the provisions of this Agreement), or any acceptable substitute aircraft agreed to in writing by United and presented for Regional Airline Services by Contractor, but such Schedule 1 shall be deemed automatically adjusted from time to time to account for any such aircraft that is withdrawn from the capacity purchase provisions of this Agreement effective beginning on the date of such withdrawal.

“CRJ550 Removed Aircraft” – is defined in Section 2.4(d).

“CRJ700 Covered Aircraft” – means all of the CRJ700 aircraft listed on Schedule 1 (as amended from time to time pursuant to the provisions of this Agreement), or any acceptable substitute aircraft agreed to in writing by United and presented for Regional Airline Services by Contractor, but such Schedule 1 shall be deemed automatically adjusted from time to time to account for any such aircraft that is withdrawn from the capacity purchase provisions of this Agreement effective beginning on the date of such withdrawal.

“CRJ700 Removed Aircraft” – is defined in Section 2.4(a).

“Customer Satisfaction Score” – means the score, as determined by surveys, measuring customer satisfaction on United’s mainline and regional flights, as such surveys or program may be altered or replaced from time to time by United in its sole discretion.

“Daily United Damages” – is defined in Section 8.4(e).

Exhibit A-7

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Deemed Bombardier CCF Adjustment” – is defined in Section 3.2(a).

“Deemed E175 CCF Adjustment” – is defined in Section 3.2(a).

“Delivery Location” – is defined in Section 10.1(b)(vi)(B).

“Design Changes” – means, following the initial entry of Covered Aircraft and crews into service for the provision of Contractor Services by Contractor, the expenses of Contractor relating to interior and exterior design changes to the Covered Aircraft and other product-related changes required by United, including the cost of changes uniforms and other livery, in each case that occur outside of Contractor’s normal uniform replacement and aircraft maintenance/refurbishment program.  For the avoidance of doubt, Design Changes shall not include (a) scheduled refresh paint to occur within normal paint standards (unless poor workmanship by, on behalf of, or directed by Contractor requires an additional event) or (b) initial paint on new aircraft.

“Designation Date” – is defined in Section 4.27(a)(ii).

“DG” – is defined in the definition of United Cargo Program.

“DHS” – means the United States Department of Homeland Security.

“DOT” – means the United States Department of Transportation.

“Drinking Water Requirements” – is defined in Section 4.19(b)(viii).

“E175 CCF Adjustment” – is defined in Section 3.2(a).

“E175 Collateral” – is defined in Section 10.6(a).

“E175 Covered Aircraft” – means all of the Embraer E175 aircraft listed on Schedule 1 (as amended from time to time pursuant to the provisions of this Agreement), or any acceptable substitute aircraft agreed to in writing by United and presented for Regional Airline Services by Contractor, but such Schedule 1 shall be deemed automatically adjusted from time to time to account for any such aircraft that is withdrawn from the capacity purchase provisions of this Agreement effective beginning on the date of such withdrawal and for exit date extensions pursuant to Section 10.2.

“E175 Lien” – is defined in Section 10.6(a).

“E175 Removed Aircraft” – is defined in Section 2.4(b).

“E175LL Accelerated Margin Payment” – means, with respect to any E175LL Removed Aircraft at any time from time to time, the product of (x) [***] multiplied by (y) the quotient obtained by dividing (i) [***] minus [***] to the power of negative “Y” (where “Y” equals [***] and (ii) [***]; provided, however, that, notwithstanding anything to the contrary above in this definition, if, as of the time that United delivers of a 2.4(c) Notice with respect to such aircraft, the average number

Exhibit A-8

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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of E175LL Covered Aircraft in scheduled service pursuant to the capacity purchase provisions of this Agreement for the prior [***] completed calendar months is greater than or equal to [***] E175LL Covered Aircraft, then, for each E175LL Removed Aircraft, the E175LL Accelerated Margin Payment shall be [***] if, as of the time that United delivers the 2.4(c) Notice with respect to such aircraft, the Controllable Completion Factor calculated for all E175 Covered Aircraft for the prior [***] completed calendar months is less than [***]. As an example, and for illustrative purposes only, if there are [***] months remaining in the term, the formula for E175LL Accelerated Margin Payment would be as follows (assuming the proviso set forth immediately above does not apply for the purposes of this example):

[***]

“E175LL Committed In-Service Date” – is defined in footnote 1(a) of Table 4 in Schedule 1 with respect to E175LL Covered Aircraft.

“E175LL Covered Aircraft” – means, subject to Section 3.3(a)(ii), all of the Embraer E175LL aircraft listed on Schedule 1 (as amended from time to time pursuant to the provisions of this Agreement), or any acceptable substitute aircraft agreed to in writing by United and presented for Regional Airline Services by Contractor, but such Schedule 1 shall be deemed automatically adjusted from time to time to account for any such aircraft that is withdrawn from the capacity purchase provisions of this Agreement effective beginning on the date of such withdrawal.  For the avoidance of doubt, as of the date of this amendment and restatement, the E175 Covered Aircraft are comprised of the United Owned E175 Covered Aircraft, the Contractor Owned E175 Covered Aircraft and the E175LL Covered Aircraft.

“E175LL Removed Aircraft” – is defined in Section 2.4(c).

“E175LL Scheduled Delivery Date” – is defined in footnote 1(a) of Table 4 in Schedule 1 with respect to E175LL Covered Aircraft.

“E175LL Termination Notice” – is defined in Section 2.4(c).

“EBR Cure Period” – is defined in Section 4.20.

“EBR Goal” – is defined in Section 4.20.

“EBR Payment” – is defined in Section 4.20.

“EBR Performance” – is defined in Section 4.20.

“EBR Period” – is defined in Section 4.20.

“EETC Aircraft” – is defined in Section 3.6(d).

“EETC Security Interest” – means a security interest granted on an EETC Aircraft in connection with the EETC Transaction.

Exhibit A-9

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“EETC Transaction” – means Contractor’s acquisition of EETC Aircraft on the terms set forth in the “Summary Mesa Airlines, Inc. (“Mesa”) EETC Transaction 2015-1” Execution Version.

“Effective Date” – is defined in Section 8.1.

“Embraer” – means Embraer SA, a Brazilian corporation.

“Embraer Confidentiality Agreement” – means that certain Confidentiality Agreement among Embraer, United and Parent, dated as of July 30, 2013.

“Embraer Purchase Agreement” – means that certain Purchase Agreement entered into by and United and Embraer as of April 29, 2013 for the purchase by United of the E175 Covered Aircraft.

“Embraer Purchase Agreement Excerpt” – means the portion of the Embraer Purchase Agreement disclosed to Contractor pursuant to the Embraer Confidentiality Agreement (as such provisions may be amended from time to time by United and Embraer; provided that United shall have notified Contractor in writing of such amendments, if any).

“Engine” – means any jet aircraft engine delivered with any Covered Aircraft (or any replacement engine thereof) that constitutes an “Engine,” as such term is defined in a Covered Aircraft mortgage, lease or sublease, as the case may be.

“Engine Maintenance Support Agreement” – means that certain engine maintenance support agreement entered into by Contractor with a third party maintenance service provider for the E175 Covered Aircraft, provided Contractor has received United’s written approval of the commercial terms of such agreement.

“Engine Swap Notice” – is defined in Section 2.5(c)(vi).

“Environmental Laws” – is defined in Section 4.19(a)(i).

“EPA” – means the Environmental Protection Agency.

“ERJ Margin Payment” – means the product of (x) [***] as set forth on Schedule 1 for each Contractor Owned E175 Removed Aircraft and (y) [***]; provided, however, that, notwithstanding anything to the contrary above in this definition, for each Contractor Owned E175 Removed Aircraft, the ERJ Margin Payment shall be [***] if, as of the time that United delivers the 2.4(b)(ii) Notice with respect to such aircraft, the Controllable Completion Factor calculated for all E175 Covered Aircraft for the prior [***] completed calendar months is less than [***].

“Estimated Idle Aircraft Time” – is defined in Section 2.5(b)(i).

“Excess Delayed Flights” – is defined in Section 3.6(c)(vi).

“FAA” – means the United States Federal Aviation Administration.

Exhibit A-10

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Fair Market Value” – means, as of any date of determination, (u) the then-current market value of the aircraft mutually determined by the parties; or (v) failing mutual agreement between the parties, the average of the then-current market value of the aircraft as determined by [***] independent International Society of Transport Aircraft Trading certified appraiser, [***] selected by Contractor, within ten (10) Business Days after either party requests such an appraiser be selected.  All determinations made as provided in this definition shall be binding upon Contractor and United.  All such appraisal costs will be shared equally between Contractor and United.      

“Final Monthly Schedule” – means the final schedule of Scheduled Flights for the applicable calendar month delivered by United to Contractor pursuant to Section 2.1(c).

“First Event Settlement Amount” - is defined in Section 2.5(c)(iii).

“Forecasted Passengers” – means, for any month, the forecasted Revenue Onboards derived from the Final Monthly Schedule for such month.

“Foreign Costs” – means the one-time third-party fees and expenses reasonably incurred by Contractor and paid to government agencies in connection with its initial provision of Regional Airline Services to a foreign country, and recurrent mandatory fees imposed by foreign governmental or regulatory authorities in connection with the provision of Scheduled Flights into or out of such foreign jurisdiction.

“Fuel Services” – means the act of putting fuel product into an aircraft and taking fuel product out of an aircraft, and any other incidental tasks as are customarily required from time to time in connection therewith; provided that the cost of aircraft fuel shall not be included as a cost of Fuel Services.

“GAAP” – means generally accepted accounting principles in the United States of America, consistently applied.

“Ground Handling Services” – means the ground handling services performed in connection with Regional Airline Services and as determined by United or United’s designee in United’s or United’s designee’s, sole option and discretion, which services will typically (but not necessarily) include without limitation the following: (i) gate check-in activities, (ii) passenger enplaning/deplaning activities, (iii) sky cap and wheelchair services, (iv) aircraft loading/unloading services, (v) passenger ticketing, (vi) jetbridge maintenance, (vii) janitorial services, (viii) deicing services, (ix) pushback, (x) airstarts, and (xi) aircraft overnight cleaning, including lavatory service and water service; provided that the foregoing list shall typically (but not necessarily) exclude turn cleaning unless otherwise directed by United, and towing services provided by Contractor pursuant to Section 4.6.

Exhibit A-11

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Hazardous Materials” – is defined in Section 4.19(a)(ii).

“Hub Airport” – means, as of any date of determination, (i) each of [***], and (ii) any other airport at which United and its subsidiaries, together with all other operators operating under United’s livery or a derivative thereof, operate an average of at least [***] flights per day at such airport during the [***] period prior to such date of determination.

“Identification” – means the United Marks, the aircraft livery set forth on Exhibit E, the United flight code and other trade names, trademarks, service marks, graphics, logos, employee uniform designs, distinctive color schemes and other identification selected by United in its sole discretion for the Regional Airline Services to be provided by Contractor, whether or not such identification is copyrightable or otherwise protected or protectable under federal law.

“Idle Aircraft Cost” – is defined in Section 2.5(b)(iii).

“Idle Aircraft Time” – is defined in Section 2.5(b)(iii).

“Incentive Program” – is defined in Section 3.2.

“Indemnifying Party” – is defined in Section 7.3.

“Indemnity Notice” – is defined in Section 7.3.

“Initial Proposed Monthly Schedule” – is defined in Section 2.1(c).

“Insurance Baseline” – is defined in Section 3.6(b)(ii)(A)(3).

“IOSA” – is defined in Section 4.9.

“Labor Strike” – means a labor dispute, as such term is defined in 29 U.S.C. Section 113(c) involving Contractor and some or all of its employees, which dispute results in a union-authorized strike resulting in a work stoppage.

“Landing Fees” – consists of all airport landing fees, Aircraft Rescue Fire Fighter (ARFF) charges or similar charges, apron fees, and any other fees charged by airport operators to cover airfield costs or other airport facilities. Unscheduled flights operated by Contractor for aircraft repositioning, maintenance or any purpose other than carrying revenue passengers will not be reimbursed.

“Landing Gear Support Agreement” – means that certain landing gear support agreement entered into by Contractor with a third party landing gear service provider for the E175 Covered Aircraft, provided Contractor has received United’s written approval of the commercial terms of such agreement.

“Lead Director” – is defined in Section 5.3.

“Lease Documents” – is defined in Section 10.1(b)(vi)(A).

Exhibit A-12

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Leased Call Option Aircraft” – is defined in Section 10.1(b)(iv).

“Lessor Time” - is defined in Section 2.5(c)(iii).

“Letter of Agreement” – is defined in Section 4.1(e).

“LLP Swap Notice” – is defined in Section 2.5(c)(vii).

“Maintenance Location” – means, as of any date of determination, a Base Location or any other location that is a Contractor maintenance base.

“Mexico Regulatory Rendered Services” – means 24 hour on call service personnel required for the performance of maintenance activities in Mexico in accordance (i) with local law or regulation and (ii) Contractors maintenance agreements.

“Modified EBR Goal” – is defined in Section 4.20(b)(ii)(B).

“Modified EBR Payment” – is defined in Section 4.20(b)(ii)(C).

“Modified EBR Performance” – is defined in Section 4.20(b)(ii)(C).

“Modified EBR Period” – is defined in Section 4.20(b)(ii)(A).

“Monthly Incentive Adjustment” – is defined in Section 3.2.

“Navigation Fees” – means navigation charges invoiced from Canadian/Mexican authorities to operate flights in the air space (NavCanada and Services a la Navigation en el Espacio Aereo Mexicano (SENEAM)) and fees and reasonable third party expenses to file schedules in foreign country.

“New Aircraft” – is defined in Section 10.4.

“Non-Comp Aircraft” – means the quantity of Covered Aircraft that are designated as or become “Non-Comp Aircraft” in accordance with Section 4.27, provided that the designation of a Covered Aircraft as a Non-Comp Aircraft is subject to change as provided in Section 4.27; provided, further, that Non-Comp Aircraft are not Spare Aircraft and shall not be included in determining the number of Spare Aircraft pursuant to Section 2.1(d).

Exhibit A-13

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“On-Time Adjustment” – is defined in Section 3.2(b).

“On-Time Departure” – means a flight departing on-time or earlier than scheduled departure time during such period.  For the avoidance of doubt, On-Time Departures shall exclude all flights which do not depart on-time or earlier than scheduled departure time, without regard to any circumstance whatsoever, and specifically without regard to whether the failure to depart on-time or earlier was within Contractor’s control or outside of Contractor’s control.

“On-Time Departure Rate” – means, for any period of determination and for any number of flights, the quotient, expressed as a percentage, obtained by dividing (x) the number of such flights that are On-Time Departures by (y) the total number of such flights.  For example, Contractor’s On-Time Departure Rate for Scheduled Flights for a particular month would equal the number of Scheduled Flights for such month that were On-Time Departures divided by the total number of Scheduled Flights for such month.

“Original Agreement” – is defined in the Recitals.

“Outstanding Debt Balance” – means the aggregate principal and interest owing with respect to any note, mortgage or other instrument evidencing a debt obligation of Contractor incurred in order to pay the purchase price of a Call Option Aircraft plus any and all out-of-pocket fees and expenses required to be incurred in order to pay the same, including without limitation termination, make-whole, prepayment (or similar) penalty or fee, breakage, third party attorney’s fees and costs, trustee and wind-up fees and recording/filing fees, in each case pursuant to obligations in effect on the earlier of the date of the applicable Call Option Request or the termination to which such Call Option Request relates, but in each case only to the extent that such fees and expenses have been disclosed as part of the Call Option Information in a timely manner as required hereunder, and, for the avoidance of doubt, shall not include any changes in income tax position, including loss of deductions, increased income tax expense or other income and other tax losses.

“Owned Call Option Aircraft” – is defined in Section 10.1(b)(iv).

“Ownership Rate” – is defined in Section 3.6(d).

“Panel” – is defined in Section 11.16(d).

“Parent” – means Mesa Air Group, Inc., a Nevada corporation, and its successors and permitted assigns.

“Parts Support Agreement” – means that certain parts support agreement entered into by Contractor with a third party parts service provider for the E175 Covered Aircraft, provided Contractor has received United’s written approval of the commercial terms of such agreement.

Exhibit A-14

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Passenger-Related Terminal Facilities” – shall mean all passenger-related terminal facilities and spaces leased, subleased or otherwise retained or used by a party at an Applicable Airport, including without limitation all passenger lounges, passenger holding areas, aircraft parking positions (which may or may not be adjacent to a passenger holding area) and associated ramp spaces, gates (including loading bridges and associated ground equipment parking areas), ticketing counters and curbside check-in facilities.

“Pass-Through Costs” – is defined in Section 3.6(b)(ii)(A).

“Person” – means an individual, partnership, limited liability company, corporation, joint stock company, trust, estate, joint venture, association or unincorporated organization, or any other form of business or professional entity.

“Pilot Requirement” – is defined in Section 4.27(b).

“PMSI Lender” – is defined in Section 10.6(a).

“Prepayment” – is defined in Section 3.6(a).

“Prohibited Person” – means an air carrier (other than United and its successors and any Subsidiary thereof), or a corporation directly or indirectly owning or controlling or directly or indirectly owned or controlled by an air carrier.

“Prohibited Transaction” – means any transaction described in clauses (I), (II) or (III) below:

Exhibit A-15

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“QE Amount” - is defined in Section 2.5(c)(iii).

“Qualifying Event” - is defined in Section 2.5(c)(iii).

“Reasonable Operating Constraints and Conditions” – means the operating constraints and conditions for the operation of Scheduled Flights reasonably imposed by the aircraft type, maintenance requirements, crew training requirements, aircraft rotation requirements, and route authorities, slots, and other applicable regulatory restrictions on flight schedule, in each case as evidenced by industry practice and custom.

“Regional Airline Services” – means the provisioning by Contractor to United of Scheduled Flights and all other flights contemplated in this Agreement, including, ground returns (completed and uncompleted), air returns (completed and uncompleted), permitted ferrying and maintenance flights, and delayed flights (including Excess Delayed Flights) using the Covered Aircraft in accordance with this Agreement.

“Release” – is defined in Section 10.1(b)(v)(A).

“Rent Obligation” – is defined in Section 2.5(c)(i).

“Replaced CRJ Covered Aircraft” – is defined in Section 2.5(a).

Exhibit A-16

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Revenue Onboard” – means one revenue-generating passenger on one flight segment, regardless of whether such flight segment is all or part of such passenger’s entire one-way flight itinerary.

“RON Aircraft” – means, with respect to each applicable fleet (E175 Covered Aircraft or CRJ Covered Aircraft) and each Base Location, the quantity of the Total Aircraft for which the last flight of the day terminates either (x) at such Base Location or (y) a Maintenance Location that is not such Base Location.

“RON Capture Rate” – means (i) with respect to E175 Covered Aircraft and each Base Location from which E175 Covered Aircraft operate, the percentage of Total Aircraft that are RON Aircraft  and (ii) with respect to CRJ Covered Aircraft and each Base Location from which CRJ Covered Aircraft operate, the percentage of Total Aircraft that are RON Aircraft.

“Rules” – is defined in Section 11.16(a).

“Scheduled ASMs” – means, for any period of calculation, the greater of (x) the number of available seat miles for all Scheduled Flights set forth on the Initial Proposed Monthly Schedule and (y) the number of available seat miles for all Scheduled Flights set forth on the Final Monthly Schedule, it being understood that each of the Initial Proposed Monthly Schedule and the Final Monthly Schedule shall be determined pursuant to Section 2.1(c) herein and are subject to Reasonable Operating Constraints and Conditions as set forth therein.

“Scheduled Exit Date” – is defined in footnote 1(g) of Table 1 of Schedule 1 with respect to E175 Covered Aircraft and shall be the date set forth under the caption “CRJ Scheduled Exit Date” of Table 3 of Schedule 1 with respect to CRJ Covered Aircraft.

“Scheduled Flight” – means a flight as determined by United pursuant to Section 2.1(c) (including all Charter Flights).

“Second Panel” – is defined in Section 11.16(k).

“Secured Loan Agreement” – means a loan agreement entered into by Contractor, as borrower, as part of a Secured Loan Transaction.

“Secured Loan Aircraft” – means each Secured Loan Eligible Aircraft that is financed pursuant to a Secured Loan Transaction.

“Secured Loan Eligible Aircraft” – means Aircraft Number 34 through and including Aircraft Number 40 in Block 1 Contractor Owned E175 Covered Aircraft and Aircraft Number 48 in Block 3 Contractor Owned E175 Covered Aircraft.

“Secured Loan Ownership Rate” – is defined in Section 3.6(e).

“Secured Loan Security Interest” – means a security interest granted on a Secured Loan Aircraft in connection with a Secured Loan Transaction.

Exhibit A-17

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Secured Loan Transaction” – means the financing of any Secured Loan Eligible Aircraft. For the avoidance of doubt, the financing of each such aircraft shall be a separate Secured Loan Transaction.

“Senior Lender” – is defined in Section 10.6(b).

“Spare Aircraft” – is defined in Section 2.1(d).

“Special Cause” – means the following,  each  of  which  constitutes  breach:  (i) a Controllable Completion Factor of [***] (in the case of E175 Covered Aircraft) or [***](in the case of CRJ Covered Aircraft) or below for each of any three consecutive calendar months or for each of any four calendar months during any period of seven consecutive calendar months, (ii) an On-Time Departure Rate of [***] or below for each of any four consecutive calendar months or for each of any four calendar months during any period of seven consecutive calendar months; provided that all departure delays or cancellations caused by United and resulting from a material and extraordinary event that causes a departure delay or cancellation to similarly situated United or United Express flights not operated by Contractor or its affiliates shall be excluded from such calculation  in  this  clause (ii), and  that, for  the  avoidance  of  doubt  and  without  limitation, Weather and ATC Delays and Cancels shall not be considered delays caused by United, or (iii) a Controllable Completion Factor below [***] and an On-Time Departure Rate below [***] for a period of six (6) consecutive calendar months.

“SR” – is defined in Section 2.5(c)(iii).

“Subsidiary” – means, as to any Person, (a) any corporation more than [***] of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (b) any partnership, association, joint venture, limited liability company, joint stock company or any other form of business or professional entity, in which such Person directly or indirectly through Subsidiaries has more than [***] equity interest at any time.  

“Supplemental Rent” – is defined in Section 2.5(c)(iii).

“System Flight Disruption” – means the failure by Contractor to complete at least [***] of the aggregate Scheduled ASMs in any [***] calendar months, or at least [***] of the aggregate Scheduled ASMs in any [***] day period, in each case excluding the effect of Uncontrollable Cancellations; provided, that if the average number of Block Hours flown per Covered Aircraft during such period is more than the average number of Block Hours flown per Covered Aircraft during the three consecutive calendar months immediately preceding the period first measured, then the calculation for purposes of this definition shall disregard that number of Scheduled ASMs for such period as is necessary to reduce the average number of Block Hours flown per Covered Aircraft during such period to the average number of Block Hours flown per Covered Aircraft during such prior three consecutive calendar month period; provided further, that a System Flight

Exhibit A-18

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Disruption shall be deemed to continue until the next occurrence of a single calendar month in which Contractor completes at least [***] of the aggregate Scheduled ASMs; and provided further, that completions and cancellations of Scheduled Flights on any day during which a Labor Strike is continuing shall not be taken into account in the foregoing calculations.

“System Turn Time” – means, with respect to E175 Covered Aircraft and CRJ Covered Aircraft, calculated separately, the average time between a scheduled arrival and a scheduled departure.

“Target” – is defined in Section 3.2(a).

“Term” – has the meaning set forth in Section 8.1, as earlier terminated pursuant to Section 8.2, if applicable, and any Wind-Down Period.

“Terminal Facilities” – means (i) all Passenger-Related Terminal Facilities and (ii) all other terminal facilities and spaces leased, subleased or otherwise retained or used by a party at an Applicable Airport, including without limitation all baggage makeup areas, inbound baggage areas and other terminal facilities.

“Termination Date” – means the date of early termination of this Agreement, as provided in a notice delivered from one party to the others pursuant to Section 8.2, or, if no such early termination shall have occurred, the date of the end of the Term.

“Termination Event” – means any event or circumstance which provides United a right to terminate this Agreement pursuant to Article VIII.

“Total Aircraft” – means, with respect to each Base Location, the sum of (A) the quantity of aircraft for which the last flight of the day for such aircraft originates or terminates at such Base Location, excluding Spare Aircraft, plus (B) the quantity of aircraft located at such Base Location for which there is no flight, excluding Spare Aircraft, plus (C) the quantity of aircraft for which the last flight of the day does not originate or terminate at any Base Location (including Base Locations other than the Base Location in respect of which “Total Aircraft” is being determined) and for which the last Base Location from which such aircraft departed on such day was such Base Location (i.e., the Base Location in respect of which “Total Aircraft” is being determined), excluding Spare Aircraft; provided that Total Aircraft at each Base Location will be calculated separately for the E175 Covered Aircraft, on the one hand, the CRJ Covered Aircraft, on the other hand.  For illustrative purposes, if an aircraft flies from Houston (IAH) to Oklahoma City and subsequently terminates in Omaha (all on the same day), then such aircraft shall be included in the calculation of “Total Aircraft” under clause (C) for Houston (IAH). 

“Total Monthly Scheduled Block-Hours” – is defined in Section 3.6(b)(iii).

“Total Time” – is defined in Section 2.5(c)(iii).

“Touch Time” – [***].

Exhibit A-19

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Towing Baseline” – is defined in Section 4.6(b).

“Transfer” – is defined in Section 4.10(a)(v).

“Transition” – is defined in Section 2.5(b)(i).

“TSA” – means the United States Transportation Security Administration.

“UCC” – is defined in Section 10.6(a).

“UCH” – means United Continental Holdings, Inc., a Delaware corporation, and its successors and permitted assigns.

“Uncompleted Maintenance Tasks” - is defined in Section 2.5(c)(iii).

“Uncontrollable Cancellation” – means:

 

and;

 

in each case of (i), (ii) and (iii) above, as coded on United’s operations reports in accordance with United’s standard coding policies; it being further understood and agreed that if United’s operations or other United Express Operations are subject to the same circumstances giving rise to such Scheduled Flight cancellation, and such United or other United Express flights are not canceled as a result, then such Scheduled Flight cancellation shall not be an Uncontrollable Cancellation.

Exhibit A-20

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Uncontrollable Delays” – means a delay of a Scheduled Flight for any reason that, if it resulted in the cancellation of such flight, would constitute an Uncontrollable Cancellation.

“United” – means United Airlines, Inc., a Delaware corporation and subsidiary of UCH, and its successors and permitted assigns.

“United Cargo Program” – means United’s “QuickPak” and “Petsafe” programs and/or any additional or replacement cargo program implemented by United from time to time, pursuant to which: (i) Contractor shall accept for carriage all baggage and shipments, whether from the ticket counter or cargo facility, that are permitted under United’s DOT and FAA approved Dangerous Goods (“DG”) management program, (ii) Contractor shall have access to United’s required training records and DG procedures and/or forms as necessary to permit Contractor to integrate such procedures into its existing flight crew training and acceptance procedures, (iii) Contractor shall accept and maintain compliance with United’s Hazardous Training Program for Scheduled Flights, and any training in connection therewith may be utilized to meet Contractor’s requirements under 14 CFR 121.1001-1007, Subpart Z and (iv) Contractor shall be permitted to transport its aircraft parts which are shipped as Company Material (COMAT) on Scheduled Flights, which shipments shall be tendered and/or accepted for shipment only by United’s employees or agents who have satisfactorily completed United’s required DG training and are authorized to perform such tendering and/or acceptance functions.

“United Directed Cancelled Flight” – is defined in Section 2.1(c).

“United Express Operations” – means, with respect to any contractor or service provider, all of the flights and other related operations of such contractor or service provider performed under the livery and/or the brand of “United Express.”

“United Marks” – is defined in Exhibit E.

“United Owned E175 Covered Aircraft” – means those E175 Covered Aircraft identified as United owned E175 Covered Aircraft on Schedule 1.

“Unsatisfied Operational Improvement Metric” – is defined in Section 4.28.

“Utilization Requirement” – is defined in Section 4.27(b).

“Weather and ATC Delays and Cancels” – means a delay or cancellation of a Scheduled Flight as a result of weather or air traffic control as coded on United’s operations reports in accordance with United’s standard coding policies consistently applied to all domestic operations of United and its related United Express operators.

“Wind-Down Expenses” – means, with respect to an aircraft, (i) [***]; provided, however, that, notwithstanding anything to the contrary in this Agreement, (x) if, as of the time that United delivers the applicable notice under Section 2.4 with respect to such aircraft, the average number of Covered Aircraft in scheduled service pursuant to the capacity purchase provisions of this Agreement for the prior [***] completed calendar months for the applicable fleet subject to the

Exhibit A-21

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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applicable removal notice under Section 2.4 is greater than or equal to [***] Covered Aircraft, then, for each Covered Aircraft, [***].

“Wind-Down Period” – means, as the context may require, (i) with respect to any specific Covered Aircraft, the period after the Termination Date and until the time when such Covered Aircraft has been withdrawn from the capacity purchase provisions of this Agreement, and (ii) with respect to the Agreement as a whole, the period after the Termination Date and until the time when the last Covered Aircraft has been withdrawn from the capacity purchase provisions of this Agreement.

“Wind-Down Schedule” – means the schedule, determined as provided in Article VIII of this Agreement, for Covered Aircraft to be withdrawn from the capacity purchase provisions of this Agreement.

 

Exhibit A-22

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT B

Terms of Codeshare Arrangements

1.Contractor’s use of United designated code.  During the Term of the Agreement, United shall place its designator code, “UA”, on all Scheduled Flights operated by Contractor.  United may suspend the display of its code on flights operated by Contractor if Contractor is in breach of any of its safety-related obligations, or material breach of any of its operational obligations, under the Agreement during the period that such breach continues.  All Contractor operated flights that display the United designated code are referred to herein as “UA* Flights”.

2.Contractor’s display of United designated code.

(a)All UA* Flights will be included in the schedule, availability and fare displays of all computerized reservations systems in which United and Contractor participate, the Official Airline Guide (to the extent agreed upon) and United's and Contractor’s internal reservation systems, under the UA code, to the extent possible.  United and Contractor will take the appropriate measures necessary to ensure the display of the schedules of all UA* Flights in accordance with the preceding sentence.

(b)United and Contractor will disclose and identify the UA* Flights to the public as actually being a flight of and operated by Contractor, in at least the following ways:

(i)a symbol will be used in timetables and computer reservation systems indicating that UA* Flights are actually operated by Contractor;

(ii)to the extent reasonable, messages on airport flight information displays will identify Contractor as the operator of flights shown as UA* Flights;

(iii)United and Contractor advertising concerning UA* Flights and United and Contractor reservationists will disclose Contractor as the operator of each UA* Flight; and

(iv)in any other manner prescribed by law.

3.Terms and Conditions of Carriage.  In all cases the contract of carriage between a passenger and a carrier will be that of the carrier whose code is designated on the ticket.  United and Contractor shall each cooperate with the other in the exchange of information necessary to conform each carrier’s contract of carriage to reflect service offered by the other carrier.

Exhibit B-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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4.Notification of irregularities in operations. Contractor shall promptly notify United of all irregularities involving a UA* Flight which result in any material damage to persons or property as soon as such information is available and shall furnish to United as much detail as practicable.  For purposes of this section, notification shall be made as follows:

United Airlines Dispatch
233 South Wacker Drive, 27^th Floor
Chicago, IL  60606
Attention: Operations Director
Phone no.: (847) 700-4190
Fax no.: (872) 825-0985
Ops Spec A008

5.Code Sharing License.

(a)Grant of License.  Subject to the terms and conditions of the Agreement, United hereby grants to Contractor a nonexclusive, nontransferable, revocable license to use the UA* designator code on all of its flights operated as a UA* Flight.

(b)Control of UA* Flights.  Subject to the terms and conditions of the Agreement, Contractor shall have sole responsibility for and control over, and United shall have no responsibility for, control over or obligations or duties with respect to, each and every aspect of Contractor’s operation of UA* Flights.

6.Display of other codes.  During the Term of the Agreement, United shall have the exclusive right to determine which other airlines (“Alliance Airlines”), if any, may place their two letter designator codes on flights operated by Contractor with Covered Aircraft and to enter into agreements with such Alliance Airlines with respect thereto.  Contractor will cooperate with United and any Alliance Airlines in the formation of a code share relationship between Contractor and the Alliance Airlines and enter into reasonably acceptable agreements and make the necessary governmental filings, as requested by United, with respect thereto.

7.Customer Commitment.  During the period that United places its designator code on flights operated by Contractor, Contractor will adopt and follow plans and policies comparable (to the extent applicable and permitted by law and subject to operational constraints) to United’s Customer Commitment as presently existing and hereafter modified.  Contractor acknowledges that it has received a copy of United’s presently existing Customer Commitment.  United will provide Contractor with any modifications thereto promptly after they are made.

 

 

Exhibit B-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT C

Non-Revenue Pass Travel

United will have the sole right to design, implement and oversee a pass travel program for the Regional Air Services.

 

Exhibit C-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT D

Fuel Services

AGREEMENT FOR FUEL SERVICES

This Agreement for Fuel Services (this “Agreement”), dated __________ (the “Effective Date”) is entered into by and between ____________________, a __________ __________with its principal offices at ____________________ (“Airline”) and __________, with its principal offices at ____________________ (“Service Provider”).  

Exhibit D-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-7

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-8

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Months after Fuel Services are performed:    % due:

 

Exhibit D-9

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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5.REPRESENTATIONS AND WARRANTIES

Exhibit D-10

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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7.RECORDS

Exhibit D-11

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-12

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-13

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-14

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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11.INSURANCE

It is understood and agreed that the insurance coverages required herein will neither limit nor expand Service Provider’s duty to defend, indemnify and hold harmless pursuant to this Agreement.  It is further understood and agreed that the designation of Airline as an additional insured of Service Provider will not increase or expand Service Provider’s defense and indemnification obligations beyond what is required under the terms of this Agreement, nor will it limit or expand Service Provider’s sole responsibility for payment of any deductible or self-insured retention amounts under the Insurance.  Except as expressly provided in this Agreement, the aforementioned insurance coverages required of the Service Provider shall be subject to all coverage limitations, exclusions, definitions, conditions, endorsements and other requirements, limitations and obligations set forth in Service Provider’s insurance policies.

Service Provider will obtain and maintain insurance of the following types and amounts:

Exhibit D-15

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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All insurance policies required to be carried by the Service Provider will (i) be written on an occurrence basis by companies of recognized responsibility and otherwise reasonably acceptable to Airline; (ii) be subject to such deductibles, increases in limits and coverages as Airline may from time to time reasonably request; (iii) name Airline, its directors and officers, agents and employees as additional insureds; (iv) include a provision that no act or omission of Service Provider or any party acting under its direction will affect or limit the obligations of the insurance company in respect to any additional insured; (v) provide appropriate cross liability and severability of interest clauses (vi) be deemed primary without right of contribution of any insurance that Airline may carry and the liability assumed by Service Provider has been specifically insured under the liability policy; and  (vii) provide that the prescribed coverages may not be reduced, canceled, or non-renewed without at least thirty (30) days’ prior written notice to Airline (7 days’ notice with respect to war risk), except in the case of a cancellation for nonpayment of premium, in which case only ten (10) days’ prior written notice will be sufficient. Certificates evidencing such insurance and clauses will be provided to Airline prior to or upon execution of this agreement.

Exhibit D-16

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-17

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-18

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit D-19

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Notwithstanding anything in this Agreement to the contrary, this Agreement may be assigned, in whole or in part, to any entity into which Airline, or its parent, may be merged or consolidated, or which may succeed to the business of Airline, or its parent, as well as any entity that is an affiliate, subsidiary, parent, or successor of Airline or its parent.

Exhibit D-20

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Notices shall be effective upon receipt, or upon attempted delivery where delivery is refused or mail is unclaimed. Any notices from Service Provider to Airline regarding termination of the agreement or changes in the terms and conditions of this agreement shall be directed to Airline’s corporate headquarters at the above mailing addresses.

Exhibit D-21

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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THE PROTECTION OR LIMITATION AGAINST LIABILITY AFFORDED BY THIS SECTION 14(L) SHALL APPLY REGARDLESS OF WHETHER THE DAMAGES ARE SOUGHT IN CONTRACT, TORT, STATUTE OR

Exhibit D-22

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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OTHERWISE, AND IRRESPECTIVE OF WHETHER SOLE, CONCURRENT OR OTHER NEGLIGENCE (ACTIVE OR PASSIVE) OR STRICT LIABILITY IF INVOLVED OR IS ASSERTED, AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.  TO THE EXTENT NOT PROHIBITED BY LAW, ANY STATUTORY REMEDY INCONSISTENT WITH THE FOREGOING IS HEREBY WAIVED.

[Remainder of This Page Intentionally Left Blank; Signature Page(s) Follow]

Exhibit D-23

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement for Fuel Services to be duly executed and delivered as of the date and year first written above.

 

 

 

 

 

 

Exhibit D-24

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT A

 

Location and Compensation

 

 

Airport

City

State of

 

 

 

*Above rates are plus all applicable taxes and airport fees except those specifically excluded in Section 4(D) of this Agreement.

 

 

Invoices should be directed to:

 

Airline

[Insert address]

 

Exhibit D-25

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT B

 

Licensed Premises

 

 

Exhibit D-26

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT E

Use of United Marks and Other Identification

 

 

 

 

 

Exhibit E-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit E-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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UNITED EXPRESS

UNITED EXPRESS’S LOGO (DESIGN) IN COLOR
UNITED EXPRESS’S LOGO (DESIGN) IN BLACK AND WHITE

 

 

 

All aircraft delivered per Schedule 1 shall be delivered in United livery as of the Actual Delivery Date. If Contractor does not deliver aircraft in United livery on the Actual Delivery Date, then Contractor agrees to backfill the aircraft and its associated lines of flying at no additional cost to United while the scheduled aircraft is being painted. For avoidance of doubt United will incur no additional ownership and United will not reduce lines of flying to accommodate paint.

 

 

Exhibit E-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT F

Use of Contractor Marks

Exhibit F-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit F-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT G

Catering Standards

INFLIGHT PRODUCT SALES PROGRAM

United will market a portfolio of inflight products for purchase on United Express flights which includes liquor, beer, wine, food, or other product offerings. Contractor will administer the program related to such in-flight sales (the “Inflight Product Sales Program”) as United’s representative following all policies and procedures of United. The initial policies and procedures established by United for the sale of products onboard Contractor’s flights under the Agreement with United are set forth below. United reserves the right to change the product offerings, policies and procedures associated with the Inflight Product Sales Program at any time and in its sole discretion.

Station Services

Onboard Services

Exhibit G-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit G-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit G-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit G-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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TECHNOLOGY

The sale of product onboard Contractor’s flights under the Agreement will involve non-cash transactions. United will provide a single hand held device (each such device, an “HHD” and collectively, the “HHD units”) necessary to process credit and debit card transactions for each aircraft in Contractor’s fleet operating as United Express. Contractor shall only swipe the customer’s credit or debit card into the HHD unit for the purpose of processing the customer’s transaction and shall not otherwise use or record the customer information. The HHD units provided by United shall only be used for United’s business purposes.

The HHD units and the information contained therein shall be deemed the confidential and proprietary equipment and information of United and its licensors and shall be subject to the confidentiality terms and conditions set forth in the Agreement for other types of confidential information of United. Contractor shall not, and shall not permit others to, reverse engineer, decompile, disassemble or translate the HHD units, including any firmware or software that is loaded upon the units, or otherwise attempt to view, display or print the source code embedded in the HHD units, or any firmware or software loaded on the HHD units. Contractor shall ensure that any and all HHD units and all other supplies and equipment of United or its licensors that are provided by or on behalf of United in connection with United’s Inflight Product Sales Program remain free and clear from any liens attributable to Contractor.

Upon the earlier to occur of (i) the termination of United’s Inflight Product Sales Program, (ii) the termination of this Agreement, or (iii) the cessation of the use of the HHD units by Contractor, as determined by United in its sole discretion, Contractor shall cooperate with United or its designated vendor for the collection and return of all HHD units to United at the address designated by United, at United’s cost. Contractor shall return the HHD units in as good a condition as reasonably possible, except for reasonable wear and tear thereof.

Contractor shall use commercially reasonable efforts to keep secure the HHD on each aircraft. Contractor agrees to notify United whenever any HHD unit has been, or Contractor reasonably

Exhibit G-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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believes or suspects that any HHD unit has been, lost, acquired, destroyed, modified, used, disclosed or accessed by any person in an unauthorized manner or for an unauthorized purpose (collectively, “Security Breach”).  Contractor further agrees to provide all reasonable assistance requested by United or United’s designated representatives, in the furtherance of any correction, remediation, investigation, enforcement or litigation with respect to a Security Breach, including but not limited to, any notification that United may determine appropriate to send to individuals impacted or potentially impacted by a Security Breach.

Lost equipment will be replaced by United.  Replacement costs will be borne by Contractor. Any equipment that is unaccounted for and for which no transactions have been logged for 48 hours will be considered “lost” and, if United shows that such equipment is lost due to Contractor’s negligence, United reserves the right to set-off the replacement cost of such lost equipment by taking a credit of such excess replacement cost pursuant to the procedures set forth in Section 11.13 of the Agreement.

Any HHD unit that is damaged beyond reasonable wear and tear which is shown by United to be due to Contractor’s negligence, will be replaced at Contractor’s expense. United reserves the right to set-off the replacement cost associated with such damaged HHD unit by taking a credit of such excess replacement cost pursuant to the procedures set forth in Section 11.13 of the Agreement.

United, at its cost, will provide or cause to be provided by a vendor of United’s choice the maintenance and battery replacement for the HHD units. Such maintenance and battery replacement will be provided at predetermined intervals designed to maximize HHD and battery useful life, and Contractor will have the right to request maintenance at different times than the predetermined intervals or additional battery replacement at United’s cost upon request.  In the event Contractor’s request for maintenance is related to a faulty or defective HHD unit, United shall pay the vendor directly for such non-routine service call.

United will provide at its sole cost and expense (including all out of pocket costs and reimbursement of Contractor’s labor costs) for initial “train the trainer” training to a reasonable number of Contractor-designated “trainers” on the use of the HHD. Such cost will be negotiated and agreed upon by the parties. Contractor will be required to (i) retain the training skill beyond the initial “train the trainer” training provided by United and (ii) provide training to Contractor’s crew personnel at Contractor’s own expense.

PRODUCT LOSS AND PILFERAGE

United will establish procedures aimed at limiting product loss. At a minimum, it is required that Contractor’s Flight Attendants record opening and closing inventories of each product to be sold onboard, accounting for all sales and complimentary items distributed.

Seals may be required to prevent tampering with product inventories and to deter pilferage. United will monitor all inventories and reserves the right to charge Contractor for identified loss (including breakage and other damage) and pilferage on a cost (non mark-up) basis determined monthly. Any discrepancies in inventories, seal numbers recorded, or excessive complimentary

Exhibit G-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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activity for any product sold must be reported at the hub for use in pilferage investigations by United. Contractor’s failure to provide documentation as reasonably requested by United or its representatives will result in Contractor being charged for pilferage as reasonably determined by United on a cost basis. United reserves the right to set off the value of the loss and/or pilferage on a cost (non mark-up) basis, by taking a credit of such loss and/or pilferage pursuant to the procedures set forth in Section 11.13 of the Agreement.  All reasonable product loss and pilferage procedures established by United must be adhered to by Contractor.

United may, at any time during normal operating hours inspect, monitor, or audit Contractor’s administration of the Inflight Product Sales Program described in this Appendix or in other policies and procedures, in order to verify that Contractor is in compliance, in all material respects, with United’s requirements for the Inflight Product Sales Program. Contractor will work with United to ensure reasonably appropriate controls exist designed to comply with United’s requirements and will ensure corrective actions are in place as necessary.

LIQUOR, BEER AND WINE PROGRAM

The Alcoholic Beverage Products offering will be determined by United and provided for by United in the liquor kit supplied to each aircraft. Except as prohibited by law or otherwise agreed by United and Contractor due to the various applicable liquor license laws and regulations, the Alcoholic Beverage Products will be purchased by United prior to being placed onboard Contractor’s aircraft and sold onboard all United Express flights designated by United.

Once onboard Contractor’s aircraft, liquor drawers, bags or other liquor containment mechanisms used by Contractor, as determined by Contractor, are considered a part of ship’s equipment and will be used for the distribution of United’s inflight products.

Contractor shall not serve any Alcoholic Beverage Product(s) on the ground without United’s consent. Contractor will obtain and maintain liquor licenses in the states where they board and/or unload any Alcoholic Beverage Product. Unless otherwise agreed by the parties, Contractor will not board or unload any Alcoholic Beverage Products in Virginia but in the event it is agreed that Contractor will board or unload any Alcoholic Beverage Products in Virginia, the parties shall comply with the procedures for Virginia below.

Virginia Alcoholic Beverage Handling Procedures

Contractor will comply with Virginia’s liquor purchase procedures. In Virginia, Contractor will board and/or unload only Alcoholic Beverage Products that Contractor owns. To that end, in the event it is agreed by the parties that Contractor will board and/or unload any Alcoholic Beverage Products in Virginia, Contractor will purchase such Alcoholic Beverage Products directly. Contractor will timely pay the supplier of such Alcoholic Beverage Products directly for such order(s). Once out of Virginia airspace, Contractor will transfer to United the title to the purchased Alcoholic Beverage Products.  United will be responsible for any sales tax attributable to the foregoing title transfer.

Exhibit G-7

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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FOOD AND OTHER PRODUCTS

United reserves the right to introduce other products for sale onboard including food offerings. Food offerings may come in a variety of packaging options and will be integrated into the entire portfolio with regards to specifications and procedures established by United.

Provisioning of product offering will follow United’s procedures at distribution points.

 

Exhibit G-8

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT H

Fuel Efficiency Program

Contractor shall use commercially reasonable efforts to develop and maintain a comprehensive fuel efficiency program, acceptable to United, in a timely manner and with the overall objective of operating and maintaining the Covered Aircraft in a manner that maximizes fuel efficiency, with due consideration to other performance objectives.  The program will include applicable data collection and trend analysis, and will set and track target metrics.  United shall audit Contractor’s program at its discretion, but at no less than annual intervals, and Contractor and United shall work together to revise and adjust such program from time to time so that such program remains acceptable to United.  Such audits will be based on the IATA Fuel and Emissions Efficiency Checklist, supplemented by the IATA Guidance Material and Best Practices for Fuel and Environmental Management, any applicable manufacturer material, United’s own fuel efficiency program applicable to its own fleet, and any other material standard in the industry.

 

Contractor’s Fuel efficiency program shall emphasize at least the following (subject to revisions and adjustments as referenced above):

 

 

 

 

 

Exhibit H-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit H-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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In addition to the above, Contractor agrees to provide the following to United:

 

 

 

Exhibit H-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT I

IT Requirements

Contractor shall adhere to the IT system and data reporting standards described in this Exhibit I, as they may be changed or supplemented by United from time to time (the “IT Requirements”).

Network Connectivity

United, at its sole expense, will provide and maintain or arrange for the provision of network connectivity with sufficient bandwidth to Contractor, including without limitation redundancy and firewall changes that may be required from time to time.  This connectivity will include a minimum of one (1) dedicated circuit. If only one (1) dedicated circuit is used, then Contractor must also use a backup connection or virtual product network via the internet.  United, at its sole discretion, shall have the right to determine the optimal number of network connections and to remove any network connections determined to be in excess.

Business Continuity Site

Contractor, at its sole expense, will provide and maintain a valid dispatch office site with network connectivity for business continuity purposes. Contractor will test the site annually to ensure that it is functional for its purposes. Contractor will be solely responsible for, and United will have no obligations or duties with respect to, the dispatch of Contractor’s flights. For the purposes of this Exhibit I, the term “dispatch” shall include, but will not be limited to, all planning of aircraft itineraries and routings, fueling and flight release.

United ID Numbers

Contractor, at its sole expense, will participate in United’s automated vendor identification number process. This process is a daily file in a specific format which manages the United vendor identification numbers. The identification numbers are used for system access and pass travel benefits.

Flight Information

Contractor, at its sole expense, will provide accurate real time flight and crew information to the designated United system (including without limitation updates of irregularities) via the designated transmission mechanism.

Data shall include, but not be limited to:

Exhibit I-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Partner Flight Ops System

Contractor, at its sole expense, will provide United’s designated representatives web access to its Flight Operations System for Flight/Crew Departure Papers and other necessary data requested by United.

United Systems

United will provide access to the following:

IT Support

Contacts

Contractor will provide a 24/7 technical support contact and contacts for United to escalate IT issues.

Exhibit I-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Change Management

Contractor will comply with United’s change management processes and system freezes.  The change freeze restricts IT system changes during specific periods (Example – 1 week prior to 1 week after a major holiday). Contractor will notify United at least three (3) days prior to any scheduled system or network outage.

IT System Automated Monitoring/Alerting

Contractor, at its sole expense, will provide and maintain or arrange for the provision of automated monitoring and alerting for IT system and network issues. This service must be programmed to page or call a valid on-call contact with any IT system or network issue being experienced by Contractor.

Notification

Contractor will notify United’s designated Service desk (24/7) (accessible at [***] or [***]or any other phone number provided by United from time to time) with any outages or technical issues that impact flights operated by Contractor in the provision of Regional Airline Services.

 

 

Exhibit I-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT J

Aircraft Cleanliness and Refurbishment Standards

Aircraft Cleanliness Standards

United requires Contractor to adhere to certain aircraft interior deep clean standards provided by United to Contractor from time to time (the “Deep Clean Scope of Work”).  With the exception of certain heavy cleaning events which will occur during heavy Maintenance and shall be incorporated into the C-Check schedule, the elements of the Deep Clean Scope of Work shall be performed by Contractor according to a work schedule set forth by United but no less than every [***] days.  The Deep Clean Scope of Work is comprised of the minimum required interior deep clean work required of Contractor and identifies the items in scope for all interior aircraft cleaning work over and above routine Remain Over Night (“RON”) cleaning standards, including, but not limited to, carpets, seats, cabin interior, lavatories etc.  Contractor will audit the deep clean provider and provide monthly written results to United in a format determined by United.  United retains the right to audit Contractor’s compliance with United’s deep clean standards and the performance of the deep clean provider, as well as any of the aircraft upon the completion of the Deep Clean Scope of Work.  Items identified through United’s audit will be corrected by Contractor within five (5) days of United’s written notification or any other mutually agreed upon date. United will charge Contractor [***] for each day that the Deep Clean Scope of Work standards are not corrected after the later of such five (5) day correction period or such other mutually agreed upon date. 

At the end of each flight, the flight attendants will ensure that the aircraft is left in a clean condition. If this is not accomplished by other personnel at the station, then the flight attendants are responsible for:

United Express Deep Clean Minimum Specifications

 

The minimum standards outlined here serve as an auditable baseline standardizing this clean type. Contractor is responsible for the Deep Clean programs and cycle times and may choose to have standards above and beyond those listed in this section. Any audits performed on United Express Deep Clean missions will be based on these minimum standards.

Deep Cleans are the most intense and thorough clean missions, including complete provisioning change out of linens, headsets, etc., with new or refurbished product. Scheduled at approved intervals, Deep Clean events are performed in designated stations during the aircraft’s overnight layover by authorized personnel that receive scheduled available aircraft.

 

Exhibit J-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Interior Cabin Security Search

 

Flight Deck

Exhibit J-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Cabin

1 - SAFETY INFORMATION CARD – As required by Contractor

2 - MAGAZINE(S) – As required by Contractor

3 - AIR SICK BAG – As required by Contractor

Replace soiled blankets with clean ones and place neatly on top as designated in the provisioning chart (UF only on 2-cabin AC).

Exhibit J-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Galley

 

Exhibit J-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Lavatory

 

Entrance Areas and Doors

 

Carpets and Curtains (When Applicable)

 

Exhibit J-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Aircraft Refurbishment Standards

United requires Contractor to adhere to certain aircraft interior cabin refurbishment standards described in this Exhibit J, which such standards are outlined in the table below (the “Refurbishment Scope of Work”). The elements of the Refurbishment Scope of Work shall be performed by Contractor according to a work schedule set forth by United. The Refurbishment Scope of Work is comprised of the minimum required interior cabin refurbishment work required of Contractor, itemized by type of aircraft service visit, e.g., Heavy Maintenance, RON (as such term is defined in this Exhibit J). The Refurbishment Scope of Work identifies the items in scope for all interior refurbishment work, e.g., carpets, seats, cabin decor/interior, lavatories etc., as specifically set forth in the table below, as well as the timing of when such refurbishment work shall be performed by Contractor.

Subject to the consent of Contractor (such consent not to be unreasonably withheld or delayed), United may change the Refurbishment Scope of Work. Upon such consent of Contractor, such change shall be made part of the Refurbishment Scope of Work.

All refurbishment work performed by Contractor with respect to the Refurbishment Scope of Work set forth below, whether replacement, repair, or reconditioning/cleaning, must result in like-new interior cabin condition of the refurbished aircraft. United may, from time-to-time, or at any time, monitor and audit the interior cabin refurbishment work undertaken by Contractor pursuant to the Refurbishment Scope of Work, in order to ensure that the interior cabins of the Contractor-refurbished aircraft are in like-new condition post-refurbishment. If United reasonably determines that any Contractor-refurbished interior cabins are not returned to like-new condition, then United will require Contractor to repeat the refurbishment work on that specific aircraft, whether such work requires replacement, repair, or reconditioning/cleaning, at Contractor’s sole cost and expense, until such aircraft interior cabin is returned to like-new condition.  Items identified through United’s audit will be corrected by Contractor within five (5) days of United’s written notification or any other mutually agreed upon date.  United will charge Contractor [***] for each day that the Refurbishment Scope of Work standards are not corrected after the later of such five (5) day correction period or such other mutually agreed upon date.

Interval for refurbishment work by type of aircraft service visit:

Note: These definitions/intervals are guidelines and are subject to change by United, with any such change subject to consent of the Contractor (such consent not to be unreasonably withheld or delayed).

Exhibit J-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Aircraft paint

In addition to aircraft interior refurbishment, Contractor is required to maintain aircraft paint in good condition.  Aircraft will be painted in the aircraft livery as set forth in Section 8 of Exhibit E hereto, at an interval of [***] years or less.  Aircraft with significant paint degradation will be identified and directed for immediate paint at Contractor’s expense.  Contractor, at its own expense, shall execute aircraft paint requirements without impact to Scheduled Flights and will be communicated to United for the planning of carrier’s scheduled operations. Contractor may be required to substitute other aircraft into the scheduled line of flying at its own expense in order not to impact Scheduled Flights.  In addition, Contractor, at its own expense, shall cause the CRJ Covered Aircraft to be painted in the United livery as set forth in Section 8 of Exhibit E hereto, no later than December 31, 2013 and failure to do so shall result in a fine of [***] per aircraft per day for each day thereafter that any such aircraft remains non-compliant.

Exhibit J-7

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Statement of Work  Heavy Maintenance Intermediate Visits I n-Se rvi ce/Ove rnight Floor Coverings  Carpet Galley Flooring Lav Flooring Replace All Replace All Replace All Replace Aisle/Heavy Traffic Areas or All on Condition Replace On Condition Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition Se ats  Seat Covers (Fabric) Seat Covers (Leather) Seat Cushions Headrest Covers Headrest Cushions Tray Tables Literature Pockets (seat back) Armrests Recline Actuation Safety Belt Webbing Seat Overhaul Replace All with new/cleaned Replace All with new/cleaned Replace All Replace All with new/cleaned Replace All Cleaned/Replace On Condition Replace All with new/cleaned Cleaned/Replace On Condition Repaired to function properly Replace All Completed Dry Cleaned/Replace On Condition Cleaned/Replace On Condition Replace On Condition Cleaned/Replace On Condition Replace On Condition Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition Repaired to function properly Cleaned/Replace On Condition As needed Cleaned/Replace On Condition Cleaned/Replace On Condition Replace On Condition Cleaned/Replace On Condition Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition Repaired to function properly Cleaned/Replace On Condition As needed Cabin Decor  Bulkhead Decor Bulkhead Literature Pockets Seat/Row Placards Passenger SerVce Units Dado Panel Decor Weather Curtain Seat Track Covers Cabin Curtain Dividers Replace On Condition Replace All Replace On Condition Repaired to function properly Replace On Condition Replace On Condition Replace All Replace On Condition Replace On Condition Replace On Condition Replace On Condition Repaired to function properly Replace On Condition Cleaned/Replace On Condition Replace if missing or damaged Replace On Condition Replace On Condition Replace On Condition Replace On Condition Repaired to function properly Replace On Condition Cleaned/Replace On Condition Replace if missing or damaged Replace On Condition Lavatories  Flush Sink Drain Faucet Lighting Infant Changing Tables Door Lock Indicators Door Thresholds Repaired to function properly Repaired to function properly Repaired to function properly Repaired to function properly Replace All Repaired to function properly Replace All Replace All Repaired to function properly Repaired to function properly Repaired to function properly Repaired to function properly Replace On Condition Repaired to function properly Replace On Condition Replace On Condition Repaired to function properly Repaired to function properly Repaired to function properly Repaired to function properly Replace On Condition Repaired to function properly Replace On Condition Replace On Condition Cabin Interiors  Cabin Lighting Sidewall Panels Placards Lighted La^tory In-Use Indicators Overhead Bins Window Shades Stairs Windows Replace All Cleaned/Replace On Condition Replace All Clean/Repair to proper functionality Cleaned/Paint/Repair to proper functionality Clean/Repair to proper functionality Clean/Repair to proper functionality Clean/Repair damage Cleaned/Replace On Condition Replace On Condition Clean/Repair to proper functionality Cleaned/Paint/Repair to proper functionality Clean/Repair to proper functionality Clean/Repair to proper functionality Clean/Repair as needed Cleaned/Replace On Condition Replace On Condition Clean/Repair to proper functionality Cleaned/Paint/Repair to proper functionality Repair to proper functionality Repair to proper functionality Cleaned/Repair as needed  On Condition: | -worn, torn, ripped, soiled, scratched, pilled, fraying, dented, gouged, soaked -altered from original installation state -not functioning for intended use  Assumption: A separate cleaning program is in place for daily, intermediate, and heavy cleaning at various levels.

 

Exhibit J-8

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT K

Form of Parent Guarantee

THIS GUARANTEE AGREEMENT (as may be amended from or supplemented from time to time, this “Guarantee”), effective as of November 25, 2019 (the “Effective Date”) by Mesa Air Group, Inc., a Nevada corporation (“Guarantor”), for the benefit of UNITED AIRLINES, INC., a Delaware corporation (“United”).

RECITALS

WHEREAS United, Guarantor and Mesa Airlines, Inc., a Nevada corporation (“Contractor”) are prepared to enter into that certain Amended and Restated Capacity Purchase Agreement, dated as of November 25, 2019 (as amended from time to time, the “CPA”);

WHEREAS, pursuant to the CPA, Contractor is obligated, among other things, to provide Contractor Services (as such term is defined in the CPA) to United and, in certain circumstances, to make certain reconciliation or indemnity payments to United;

WHEREAS, United, Guarantor and Contractor are prepared to enter into the Ancillary Agreements (as such term is defined in the CPA) pursuant which Contractor is obligated, among other things, to provide ground handling and other services to United and, in certain circumstances, to make certain payments to United;

WHEREAS, Contractor is the wholly-owned subsidiary of Guarantor; and

WHEREAS, it is a condition precedent to United’s execution and delivery of the CPA and the Ancillary Agreements and Guarantor is fully informed, understands and acknowledges that it is a requisite inducement for United to enter into the CPA and the Ancillary Agreement that Guarantor execute and deliver this Guarantee;

NOW, THEREFORE, for and in consideration of the benefits, rights and interests to Contractor derived from the CPA and the Ancillary Agreements, for a necessary inducement to United to enter into the CPA and the Ancillary Agreements, and for other good and valuable consideration, the receipt and sufficiency of which Guarantor acknowledges, Guarantor, fully aware that United in relying hereupon, fully covenants and agrees for the benefit of United as follows:

ARTICLE I
DEFINITIONS

Section 1.01Certain Definitions.  Any terms not defined herein shall have the definition given such term in the CPA.  As used in this Guarantee, the following terms have the following meanings:

Exhibit K-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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“Beneficiaries” has the meaning given to that term in Section 3.07.

“Contractor” has the meaning given to that term in the Recitals.

“CPA” has the meaning given to that term in the Recitals.

“Default Interest” has the meaning given to that term in Section 3.06.

“Documents” has the meaning given to that term in Section 2.02(a).

“Effective Date” has the meaning given to that term in the preamble.

“Enforcement Expenses” has the meaning given to that term in Section 3.06.

“Guarantee” has the meaning given to that term in the preamble.

“Guarantor” has the meaning given to that term in the preamble.

“United” has the meaning given to that term in the preamble.

Section 1.02Other Definitions.  Other terms defined in this Guarantee have the meanings so given them.  Capitalized terms used but not defined herein shall the same meaning herein as in the CPA.

Section 1.03Terminology.  Unless the context of this Guarantee clearly requires otherwise, (a) pronouns, wherever used herein, and of whatever gender, shall include natural persons and corporations, partnerships, limited liability companies and entities of every kind and character, (b) the singular shall include the plural wherever and as often as may be appropriate, (c) the word “includes” or “including” shall mean “including without limitation”, and (d) the words “hereof”, “herein”, “hereunder”, and similar terms in this Guarantee shall refer to this Guarantee as a whole and not any particular section or article in which such words appear.  The section, article, and other headings in this Guarantee are for reference purposes and shall not control or affect the construction of this Guarantee or the interpretation hereof in any respect.  Article, section, subsection, and exhibit references are to this Guarantee unless otherwise specified.  All exhibits attached to this Guarantee constitute a part of this Guarantee and are incorporated herein.  All references to a specific time of day in this Guarantee shall be based upon Central Standard Time or Central Daylight Time, whichever is applicable.

ARTICLE II
GUARANTEE

Section 2.01Guarantee of Obligations.  Guarantor unconditionally, absolutely and irrevocably guarantees unto the Beneficiaries the timely payment and performance by Contractor

Exhibit K-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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of all of its obligations under the CPA and the Ancillary Agreements, including without limitation the obligation to provide Regional Airlines Services, and to make all indemnification payments and reconciliation payments that Contractor is required to make pursuant to the CPA and the Ancillary Agreements.

Section 2.02Guarantee Absolute.  This Guarantee is absolute, continuing and independent of, and in addition to, any and all rights and remedies United may have under the CPA or any Ancillary Agreement and any other guaranties or documents now or hereafter given in connection therewith by Guarantor or others. Without limiting any of the provisions of this Guarantee or the CPA, including without limitation, Section 5.2 thereof, it is acknowledged that Guarantor is not currently a certificated airline and that therefore Guarantor may be required to cause its obligations hereunder to be performed rather than performing them directly. Except as otherwise expressly herein provided, the enforceability of Guarantor’s obligations hereunder in accordance with the terms hereof shall not in any way be discharged, impaired or otherwise affected by:

(a)Any change in the time, manner or place of payment of amounts due under the CPA or any Ancillary Agreement, or any other change or modification in or of any terms, provisions, covenants or conditions of any or all of them;

(b)The entering into, or the modification or amendment in or of, any lease or sublease of any aircraft or engine, any contract or arrangement for the maintenance or refurbishment of any aircraft or engine, any contract or arrangement for the provision of ground handling services, any lease, sublease or other agreement relating to the use of any terminal or non-terminal airport facility, or any loan agreement, note, deed of trust, assignment, contract or other document or agreement entered into by Contractor or Guarantor relating to the provision of Contractor Services (together with the CPa and the Ancillary Agreements, the “Documents”);

(c)Any lack of validity or enforceability of any of the Documents;

(d)Any release or amendment or waiver of or consent to the modification of any other guarantee of payment or performance of all or any obligations under the CPA or any Ancillary Agreement, or any sale or transfer by Contractor of any of its interest in the CPA or any Ancillary Agreement (without implying that Contractor has consented or will consent to any such sale or transfer);

(e)Any sale or transfer by Guarantor of any of its interest in Contractor (without implying that Guarantor has consented or will consent to any such sale or transfer);

(f)Any release or waiver of or delay in the enforcement of rights against Contractor, Guarantor or any other person or entity under any of the Documents or against any security thereunder;

Exhibit K-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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(g)The exercise by United of any of its rights or remedies under any one or more of the Documents; or

(h)Any other circumstance which might otherwise constitute a defense available to, or discharge of, Guarantor.

Section 2.03Guarantee of Payment.  This Guarantee is a guarantee of payment and performance and not merely a guarantee of collection, and Guarantor’s liabilities and obligations under this Guarantee are and shall at all times continue to be absolute, irrevocable and unconditional in all respects in accordance with the terms of this Guarantee, and shall at all times be valid and enforceable without set off, deduction or counterclaim irrespective of any other agreements or circumstances of any nature whatsoever which might otherwise constitute a defense to this Guarantee or the obligations of Guarantor under this Guarantee.

Section 2.04Financial Statements.  Not later than ninety (90) days following the end of each calendar year, Guarantor shall deliver to United a copy of Guarantor’s audited consolidated financial statements for such calendar year, certified by Guarantor as being true, correct and complete, together with a report thereon of Guarantor’s independent auditors; provided, that Guarantor shall not be required to deliver financial statements pursuant to this sentence if it is a reporting issuer pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and such financial statements are timely filed with the Securities and Exchange Commission pursuant thereto.

Section 2.05Representations.  Guarantor represents, warrants and covenants that:

(a)All financial statements heretofore delivered to United with respect to Guarantor are, and all financial statements hereafter delivered to United by Guarantor will be, true and correct in all material respects and fair presentations of Guarantor as of the respective dates thereof;

(b)No material adverse change has occurred in the financial condition of Guarantor since December 31, 2018;

(c)Guarantor is a duly organized and validly existing corporation in good standing under the laws of the State of Nevada.  Guarantor has the corporate power and authority to enter into and perform its obligations under this Guarantee.  Guarantor is duly qualified to do business as a foreign corporation under the laws of each jurisdiction that requires such qualification;

(d)This Guarantee has been duly executed and delivered by Guarantor and constitutes the legal, valid and binding obligation of Guarantor, fully enforceable against

Exhibit K-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Guarantor in accordance with the terms hereof except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors and subject to the principles of equity;

(e)Neither the execution or delivery of this Agreement nor the performance by Guarantor of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Guarantor’s certificate of incorporation, by-laws, or any provision of, or result in the acceleration of any obligation under, any material contract, sales commitment, license, purchase order, security agreement, mortgage, note, deed, lien, lease or other agreement to which Guarantor is a party or by which any of them or any of their respective properties or assets may be bound, (ii) result in the creation or imposition of any lien, charge or encumbrance in favor of any third person or entity, (iii) violate any law, statute, judgment, decree, order, rule or regulation of any governmental authority or body, or (iv) constitute any event which, after notice or lapse of time or both, would result in such violation, conflict, default, acceleration or creation or imposition of liens, charges or encumbrances;

(f)No consent of any other person and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority, bureau or agency is required in connection with the execution, delivery or performance by Guarantor, the enforceability against Guarantor, or the validity, of this Guarantee;

(g)Guarantor has, independently and with advice of counsel of Guarantor’s choice and without reliance upon United, and based upon such documents and information as Guarantor has deemed appropriate, made its own analysis and decision to enter into this Guarantee;

(h)The financial statements (including the related notes and supporting schedules) of Guarantor delivered (or, if filed with the Securities and Exchange Commission, made available) to United immediately prior to the date hereof fairly present in all material respects the consolidated financial position of Guarantor and its results of operations as of the dates and for the periods specified therein.  Since the date of the latest of such financial statements, there has been no material adverse change nor any development or event involving a prospective material adverse change with respect to Guarantor.  Such financial statements have been prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved, except to the extent disclosed therein;

(i)Guarantor is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts and with such deductibles as are customary in the businesses in which it is engaged, and Guarantor has not received notice of cancellation or non-renewal of such insurance.  All such insurance is outstanding and duly in force on the date

Exhibit K-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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hereof.  Guarantor has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on Guarantor;

(j)No litigation, arbitration, investigation or administrative proceeding of or before any court, arbitrator or governmental authority, bureau or agency is currently pending or, to the knowledge of Guarantor, threatened: (i) with respect to this Guarantee or any of the transactions contemplated by this Guarantee; (ii) with respect to the CPA or any Ancillary Agreement or any of the transactions contemplated thereby; or (iii) against or affecting Guarantor, or any of its property or assets, which, if adversely determined, would have a material adverse effect on the ability of Guarantor to perform its obligations hereunder; and

(k)Guarantor has filed or caused to be filed all tax returns required to be filed, and has paid all taxes due on said returns or on any assessments made against Guarantor, which if not filed or not paid would have a material adverse effect on the business, operations, assets or condition, financial or otherwise, of Guarantor (other than those being contested in good faith by appropriate proceedings for which adequate reserves have been provided for in accordance with generally accepted accounting principles).

Without limiting the other remedies of the Beneficiaries as a result of a breach of any of the foregoing representations and warranties, Guarantor hereby agrees to indemnify the Beneficiaries, their Affiliates and their respective officers, directors, partners, members, employees and agents, and hold them harmless from and against any and all losses, claims, damages, liabilities, expenses (including without limitation reasonably legal fees and expenses), judgments, fines and settlements any of them may incur as a result of any material breach of any representation or warranty contained herein.

Section 2.06Reinstatement.  This Guarantee shall continue to be effective, or be reinstated (as the case may be) if at any time payment by Contractor or Guarantor of all or any part of any sum payable pursuant to the CPA or any Ancillary Agreement, this Guarantee or the other Documents is rescinded or otherwise must be returned by United upon Contractor’s insolvency, bankruptcy or reorganization, all as though such payment had not been made. Until all of the obligations guaranteed hereunder shall have been paid or performed in full, Guarantor shall have no right of subrogation or any other right to enforce any remedy which any of the Beneficiaries now has or may hereafter have against Contractor.  

Section 2.07Self-Help Rights.  If Guarantor fails or refuses to perform any or all monetary or non-monetary obligations that are guaranteed hereunder and, in the case of any non-monetary obligations, such failure or refusal continues for twenty (20) days following written notice thereof to Guarantor, then, in addition to any other rights and remedies which any

Exhibit K-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Beneficiary may have hereunder or elsewhere, and not in limitation thereof, any Beneficiary shall have the right (but without any obligation so to do) to take action (including the payment of amounts due to any third party) to satisfy such obligation either before or after the exercise of any right or remedy of United against Contractor or Guarantor.  The amounts of any and all expenditures so made by United in satisfaction of such obligation (including any such expenditure arising from or in connection with United’s negligence in taking such action, but excepting any such expenditures to the extent proven to have been caused by or arising from the gross negligence or willful misconduct of United) shall be immediately due and payable to United by Guarantor.

ARTICLE III
MISCELLANEOUS

Section 3.01Exhausting Recourse.  United shall not be obligated to pursue or exhaust its recourse against Contractor or any other Person or guarantor, or any security it may have for satisfaction of the obligations guarantied hereunder, before being entitled to performance by Guarantor of each and every one of the obligations hereunder.  No delay on the part of Beneficiaries in exercising any right or remedy under this Guarantee or failure to exercise the same shall operate as a waiver in whole or in part of any such right or remedy.  No notice to or demand on Contractor or failure to give any such notice to or make any such demand on Contractor shall be deemed to be a waiver of the obligations of Guarantor hereunder or of the right of Beneficiaries to take further action without notice or demand as provided in this Guarantee.  No course of dealing between Guarantor and Beneficiaries shall change, modify or discharge, in whole or in part, this Guarantee or any of the obligations of Guarantor hereunder.

Section 3.02Guarantee Remains Effective.  This Guarantee shall remain in full force and effect, notwithstanding any invalidity, irregularity, or unenforceability of any one or more of the CPA and the Ancillary Agreements.  No release or discharge of Contractor in any receivership, bankruptcy, winding-up or other creditor proceedings shall affect, diminish or otherwise impair or otherwise be a defense to the enforcement of this Guarantee by the Beneficiaries.  The liability of Guarantor shall not be affected by United causing work necessary for the provision of Contractor Services to be done, or by United’s pursuing any other remedies provided for in the Documents.

Section 3.03No Conditions.  This Guarantee has been delivered free of any conditions and, except as otherwise expressly set forth herein, no representations have been made to Guarantor affecting or limiting the liability of Guarantor hereunder except as expressly provided herein.

Exhibit K-7

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Section 3.04No Bar or Defense; Waiver of Defenses.  No action or proceeding brought or instituted under this Guarantee and no recovery in pursuance thereof shall be a bar or defense to any further action or proceeding which may be brought under this Guarantee by reason of any further default or defaults hereunder or in the performance and observance of the terms, covenants, conditions, and provisions in the Documents.  

Guarantor hereby waives all suretyship defenses and defenses in the nature thereof.  Guarantor hereby further waives presentment, protest, notice, demand, or action or delinquency in respect to any obligation hereby guarantied except as expressly provided herein.  Guarantor waives acceptance of this Guarantee. Without limiting the generality of the foregoing, Guarantor specifically waives any requirements imposed by or to which Guarantor may otherwise be entitled by virtue of the suretyship laws of the State of Illinois or any other relevant state of the United States.

Section 3.05Liability Independent.  The liability of Guarantor hereunder is independent of any other bonds or guaranties or other obligations at any time in effect with respect to the Documents and may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guaranties or other obligations.

Section 3.06Expenses.  Guarantor shall pay all costs, fees and expenses (including reasonable attorneys’ fees) incurred by United in enforcing this Guarantee, provided that United prevails in such enforcement (the “Enforcement Expenses”).  Any and all amounts due and owing by Guarantor to United hereunder that are not paid in full to United within ten (10) days following the earlier of the due date or demand therefor shall bear interest from the date such amounts were due hereunder until paid in full at the highest contract rate of interest permitted by applicable law (the “Default Interest”).

Section 3.07Binding Effect.  Neither this Guarantee nor any provisions hereof may be amended, modified, waived, discharged, or terminated orally, except by an instrument in writing duly signed by or on behalf of the party against whom enforcement of such amendment, modification, waiver, discharge or termination is sought.  This Guarantee shall inure to the benefit of United and its successors and assigns (collectively, the “Beneficiaries”), and shall be binding upon Guarantor and its successors and assigns; provided, however, that Guarantor shall in no event have the right to assign or transfer Guarantor’s obligations and liabilities under this Guarantee in whole or part and any such attempted assignment or transfer without the prior written consent of United shall be null and void and of no force or effect.  This Guarantee is intended to be for the benefit of, and shall be enforceable by, only the Beneficiaries and not by any third parties (including creditors of the Beneficiaries).

Section 3.08Entire Agreement.  This Guarantee, together with the CPA and the Ancillary Agreements, to the extent references are made thereto in this Guarantee, contain the undersigned’s sole and entire understanding and agreement with respect to its entire subject matter, and all prior

Exhibit K-8

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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negotiations, discussions, commitments, representations, agreements and understandings heretofore had between United and Guarantor with respect thereto are merged herein.

Section 3.09Governing Law.  This instrument shall be governed by and construed in accordance with the laws of the State of Illinois.

Section 3.10Reliance.  Guarantor acknowledges that United will rely upon this Guarantee in entering into the CPA and the Ancillary Agreements.

Section 3.11Notices.  All notices made pursuant to this Guarantee shall be in writing and shall be deemed given upon (a) a transmitter’s confirmation of a receipt of a facsimile transmission (but only if followed by confirmed delivery by a standard overnight courier the following business day or if delivered by hand the following business day), (b) confirmed delivery by a standard overnight courier or delivered by hand or (c) e-mail delivery, provided that, in the case of any such notice or communication transmitted by e-mail delivery, such notice or communication shall not be in compliance with this Section 3.11 unless such e-mail (i) includes in its subject line the following: “United Guarantee – Important Notice” and (ii) the sender of such email has received a reply which both has not been automatically generated and includes explicit acknowledgement of the e-mail received, to the parties at the following addresses:

Exhibit K-9

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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or to such other address as last designated by a party by notice in writing to the other party hereto.

Section 3.12Waiver of Jury Trial.  Guarantor and United each hereby knowingly, voluntarily and intentionally waive the right to a trial by jury in respect of any litigation based hereon, arising out of, under or in connection with this Guarantee.  This waiver is a material inducement for Guarantor to deliver and United to accept this Guarantee.

Section 3.13Drafting of Guarantee.  Guarantor represents and warrants that (i) it was represented by counsel of its choice, who has reviewed this Guarantee and advised it of the contents and meaning; (ii) it is signing this Guarantee voluntarily and with full understanding of its contents and meaning; (iii) it waives any claim or defense that this Guarantee should be construed more strictly against the other party as the drafter thereof.

Section 3.14Severability.  If any provision of this Guarantee or its application to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of this Guarantee and the application of that provision to other Persons or circumstances is not affected in that provision shall be enforced to the greatest extent permitted by law.

Exhibit K-10

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Section 3.15Further Assurances.  In connection with this Guarantee and the transactions contemplated by it, Guarantor shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Guarantee and those transactions.

Section 3.16Multiple Counterparts.  This Guarantee may be executed in any number of counterparts and with the same effect as if all signing parties had signed the same document.  All counterparts shall be construed together and constitute the same instrument.

EXECUTED as of the Effective Date.

 

 

 

 

Exhibit K-11

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT L

Exhibit L-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Letter of Agreement

Exhibit L-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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LOA 11United Express Job Opportunities for Furloughed United Pilots LETTER OF AGREEMENT between UNITED AIRLINES, INC. and THE AIR LINE PILOTS in the service of UNITED AIRLINES, INC. as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between UNITED AIRLINES, INC. (hereinafter referred to as "the Company" or "United") and the AIR LINE PILOTS in the service of UNITED AIRLINES, INC., as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter referred to as "the Association" or "ALPA"). The Company and the Association agree that furloughed United pilots shall be offered job opportunities at United Express carriers operating jet aircraft with seating capacity in excess of fifty (50) seats under the following conditions: 1. Definitions a. United "United Express Carrier" means a Carrier that has contracted with the Company to operate Aircraft in accordance with the conditions of Section 1 of the Agreement. b. "Eligible Furloughed Pilot" means a Pilot whose name appears on the United Express Carrier Opportunity List and who is on furlough or who has received notice of furlough. c. "United Express Carrier Opportunity List" means the list maintained by the UAL-MEC Furloughed Pilot Coordinator after review by United Express Carriers performing flying in the service of the Company pursuant to the terms of Section 1 of the Agreement. 2. United Express Carriers shall make offers for new hire positions to Eligible Furloughed Pilots in a number equal to five (5) times the number of aircraft operated in the service of the Company and subject to the limits of Section 1 of the Agreement. Of these five (5) offers, at least three (3) shall be offers for new hire positions in aircraft with seating capacity in excess of 50 seats and not more than 76 seats, and operated pursuant to the terms of Section 1 of the Agreement. Once such offers have been made, even if the United Express Carrier subject to the obligations of Section 1 of the Agreement and this Letter of Agreement has not been provided with a sufficient number of Eligible Furloughed Pilots to fill the new hire positions, the Participating United Express Carrier's obligation to make offers for the purpose of LOA 11 Page 387

Exhibit L-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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operating Aircraft under the terms of Section 1 of the Agreement and this Letter of Agreement shall be satisfied. 3.  In the event that a United Express Carrier making offers of employment pursuant to Section 1 of the Agreement and this Letter of Agreement receives an insufficient number of Eligible Furloughed Pilots to fill offers for new hire Pilot positions, the Carrier shall continue to extend offers of employment under the terms of this Letter of Agreement until Eligible Furloughed Pilots have accepted a number of positions equal to the number of job offers the Carrier is reqUnited uired to make under Paragraph 2 of this Letter of Agreement. a.  A United Express Carrier shall make such employment offers stated in Paragraph 3 of this Letter of Agreement as new hire positions become available in the normal course of business. b.  A United Express Carrier's ability to operate Aircraft under the terms of Section 1 and this Letter of Agreement is dependent on extending employment offers as required per Paragraph 2 of this Letter of Agreement and Section 1-C-l-j of the Agreement, but is not dependent on Eligible Furloughed Pilots accepting the employment offers as provided in Paragraph 3 of this Letter of Agreement. 4.  A Pilot who is interviewed and accepts an offer of employment and who subsequently declines this offer shall count toward the United Express Carrier's number of job offers required by Paragraph 2 and the number of accepted offers required by Paragraph 3 of this Letter of Agreement. 5.  When preparing to select pilots for new hire positions pursuant to this Letter of Agreement, the United Express Carrier shall contact the UAL-MEC Furloughed Pilot Coordinator to receive a list of names from the United Express Carrier Opportunity List, a.  To be an Eligible Furloughed Pilot, a United Pilot must i) be on furlough or have received notice of furlough, and ii) have not previously rejected an offer of employment (following an interview under this agreement) from a United Express Carrier pursuant to this Letter of Agreement b.  Working through the UAL-MEC Furloughed Pilot Coordinator, an Eligible Furloughed Pilot may designate i) carrier(s) to which he would like his name forwarded, ii) carrier(s) from which he would like his name withheld, and iii) criteria that would result in bypassing him for certain new hire positions. An Eligible Furloughed Pilot whose name is forwarded to a United Express Carrier consistent with his designations and who is offered a position is required to accept such position and, if he declines, shall be ineligible for any future employment opportunities with that United Express Carrier under the terms of this Letter of Agreement. c.  Monthly, the MEC Furloughed Pilot Coordinator shall provide the Company with a current copy of the annotated United Express Carrier Opportunity List and an update on the activity associated with the names. 6.  Eligible Furloughed Pilots whose names are forwarded to a United Express Carrier pursuant to this Letter of Agreement shall be required to complete all new hire paper work, meet all LOA 11 Page 388

Exhibit L-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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United

new hire airman and medical qualifications, satisfy background checks and participate in an interview. An Eligible Furloughed Pilot shall not be required to perform a flight test. An Eligible Furloughed Pilot who, in conjunction with the establishment of the United Express Carrier Opportunity List, is identified by a United Express Carrier as being in a "no rehire" status shall not have his name forwarded to that United Express Carrier. 7.  While Eligible Furloughed Pilot names shall be forwarded in seniority order (modified by the qualifiers permitted above) once such pilots have accepted employment at a United Express Carrier pursuant to this Letter of Agreement, their seniority, longevity and all other terms and conditions of employment at that Carrier shall be governed by the rules of that carrier that apply to all new hires, except as set forth in Paragraph 9 of this Letter of Agreement. 8.  An Eligible Furloughed Pilot who accepts employment under the terms of this agreement shall serve the required new-hire contractual and/or company policy required probationary period. Should a situation occur during the probationary period where an Eligible Furloughed Pilot, in the opinion of the United Express Carrier, fails to perform at an acceptable level and faces termination for such failure, the Pilot shall be afforded the due process considerations provided by that United Express Carrier's pilot collective bargaining agreement and/or company policy. 9.  An Eligible Furloughed Pilot who accepts employment under the terms of this Letter of Agreement shall receive a minimum salary equal to that United Express Carrier's second year First Officer pay rate for the largest Equipment permitted under Section 1 of the Agreement operated by that carrier in its United Express operations. The Carrier shall pay its applicable hourly rate for the position held and United Airlines shall, on a monthly basis, pay the furloughed Pilot any salary difference required under this Paragraph. This monthly payment shall be subject to all applicable federal, state and local payroll taxes. The monthly payment shall not, however, have any impact on the Pilot’s employment status at United and it shall not be considered earnings for the purpose of any United Airlines employee benefit plans. 10.  A United Express Carrier shall not require an Eligible Furloughed Pilot who accepts employment pursuant to this Letter of Agreement to resign his United seniority number. 11.  An Eligible Furloughed Pilot who accepts employment with a United Express Carrier pursuant to this Letter of Agreement and who subsequently desires to leave shall give as much notice as possible but not less than three (3) months' notice. Should an Eligible Furloughed Pilot resign his employment with a United Express Carrier prior to the satisfaction of any training note obligation for the sole purpose of recall to United Airlines, the Company shall pay any remaining obligation on the note. 12.  If an Eligible Furloughed Pilot is hired by a United Express Carrier and subsequently leaves that carrier, the United Express Carrier shall replace that Pilot by offering a job opportunity to another Eligible Furloughed Pilot as new hire positions become available in the normal course of business. The provisions of this Letter of Agreement shall apply to these Eligible Furloughed Pilots except for Paragraphs 2, 3 and 9 of this Letter of Agreement. The United Express Carrier's ability to operate Aircraft under Section 1 of the Agreement and the terms of this Letter of Agreement is not dependent on Eligible Furloughed Pilots accepting these LOA 11 Page 389

 

Exhibit L-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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United employment offers. This Paragraph shall only apply after Eligible Furloughed Pilots have accepted the number of positions required in Paragraph 3 of this Letter of Agreement. 13. While all United Express Carriers are committed to complying with the job opportunity provisions of this Letter of Agreement, adherence to these job opportunity provisions would be problematic if circumstances were such that the United Express Carrier may have to furlough pilots at the same time that they were required to hire furloughed United pilots. Should this circumstance occur, the Company and the Association agree to meet and discuss acceptable solutions to mitigate the impact of such circumstances which would be agreeable to the parties and maintain the integrity of this Letter of Agreement. AGREED, this 18th day of December, 2012.  For United Airlines, Inc.  For the Air Line Pilots Association, International: s'  l/M^. Captain 'Fred Abbott Senior Vice President Flight Opej^tkrfisTN V Captain Donald L. Moak President Air Line Pilots Association, International P. Douglas IvtcKeeiN- Senior Vice Presjaent Labor Relations  coo   Captajjww preffte Chaiiffiafi LOA 11 Page 390

 

 

Exhibit L-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT M

Career Path Program for Pilots

United and Contract each agree to the following:  

Exhibit M-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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For a new pilot at Contractor who may elect to participate in the Program, the structured interview and the HPI will be conducted as part of Contractor’s recruiting process. For existing pilot employees of Contractor who seek to participate in the Program, the structured interview and HPI will be conducted at such time as such employees meet the other requirements set forth above. For the period beginning as of the Effective Date of this Agreement to and including the term of Contractor’s Capacity Purchase Agreement (CPA) with United, Program Participants shall only fly aircraft in United Express service.

 

Exhibit M-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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provided that if the number of candidates meeting all of the criteria in Section 4 above in a particular calendar year is less than the Minimum Number of Positions as set forth in the foregoing clause (i) or (ii), as applicable, then the Minimum Number of Positions for such year shall be reduced on a [***] basis to the extent of such shortfall.

Exhibit M-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit M-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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For purposes of this paragraph, but without limiting any rights in favor of United under agreements related to Contractor’s flying for United, a “Major Regional Flying Agreement” shall be defined as an agreement between Contractor and another carrier under which Contractor agrees to operate on behalf of such carrier on average no less than [***] aircraft per day in commercial scheduled passenger or cargo service.

Notwithstanding the foregoing, but without limiting any rights in favor of United under agreements related to Contractor’s flying for United, nothing contained herein shall limit Contractor’s ability to place pilots employed by Contractor that do not participate in the Program into similar programs offered by carriers that do not have a major regional flying agreement with Contractor (“Other Programs”) as long as the total number of pilots participating in the Other Programs, when aggregated, do not exceed [***] percent [***] annually of Contractor’s pilots.

 

 

Exhibit M-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT N

Safety Standards for United and United Express Carriers

 

Contractor agrees and, as applicable, represents and warrants, to each of the following:

Exhibit N-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit N-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT O

Form of Assignment Agreement

This Agreement (this “Agreement”) is made and entered into, and is to be effective on, this the ____ day of ____________ (the “Effective Date”), by ____________, a ____________ corporation (“Assignor”) and ____________, a ____________ corporation (“Assignee”), [and the ____________ (“Airport Lessor”)].

 

W I T N E S S E T H:

 

WHEREAS, Assignor leases space], designated on Exhibit(s) _____ attached hereto and made a part hereof (together the “Premises”), at ____________ at the ____________ Airport, ____________ (the “Airport”) under a certain [Airport Use and Lease Agreement dated ____________, (as amended, hereinafter referred to as the “Lease”)] between Assignor and the Airport Lessor;

 

WHEREAS, a copy of the Lease has been provided to Assignee and is incorporated herein by reference;

 

WHEREAS, Assignee operates at the Airport and from portions of the Premises;

 

WHEREAS, Assignor desires to assign to Assignee [all] [a portion] of Assignor’s remaining right, title and interest in the Lease [insofar (and only insofar) as the Lease pertains to certain leased premises and improvements described on the attached Annex 1], such space herein called the “Assigned Space” and the improvements located within the Assigned Space are herein called the “Assigned Space Improvements”.  The Assigned Space and Assigned Space Improvements are herein called the “Assigned Premises”;

 

WHEREAS, Assignee desires to accept such assignment from Assignor;

 

[WHEREAS, such assignment requires the prior written consent of the Airport Lessor];

 

[WHEREAS, pursuant to the Lease, such assignment does not require the consent of the Airport Lessor (but written notice of such assignment is required to be given to the Airport Lessor)].  

 

NOW, THEREFORE, in consideration of the assignment herein made and of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows:

 

1.DEMISE AND USE

 

Effective on the Effective Date, Assignor hereby assigns to Assignee all of the interest of the lessee under the Lease [insofar (and only insofar) as the Lease pertains to the Assigned Premises].

 

Exhibit O-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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2.ACCEPTANCE OF ASSIGNMENT

 

Assignee accepts the foregoing assignment of the Lease [insofar (and only insofar) as the Lease pertains to the Assigned Premises] and covenants with Assignor, from and after the Effective Date, to pay all rent and other charges provided for in the Lease, as amended and to perform and observe all of the other covenants, conditions and provisions in the Lease, as amended, to be performed or observed by or on the part of Assignor as tenant under the Lease [in respect of the Assigned Premises].

 

3.WARRANTIES

 

Assignor hereby warrants and covenants that (i) except for the rights and interests of the Airport Lessor under the Lease, Assignor is now the sole owner of all rights and interests in and to the Assigned Premises, (ii) the Lease[, as it relates to the Assigned Premises,] is in full force and effect, (iii) Assignor has complied with all terms and provisions of the Lease [as it relates to the Assigned Premises] and same is not currently in default and Assignor knows of no condition which with the passage of time or giving of notice might constitute a default under the Lease by any party, and (iv) the Assigned Premises and the Lease [, insofar as it relates to the Assigned Premises,] are free from all liens and encumbrances.  A copy of the Lease (and all amendments thereto) are attached as Annex 2.

 

Subject to the foregoing, Assignee accepts the Assigned Premises and equipment thereon “AS IS” and acknowledges that there is, with respect to the Assigned Premises and equipment thereon, NO WARRANTY, REPRESENTATION, OR CONDITION OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTY OF HABITABILITY, MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE, and that none shall be implied by law. Except as stated in this Agreement, Assignee acknowledges that Assignor has made no representations with respect to the Assigned Premises or equipment. Final determination of the suitability of the Assigned Premises or equipment for the use contemplated by Assignee is the sole responsibility of Assignee, and Assignor shall have no responsibility in connection with such suitability.

 

4.ASSIGNEE TO COMPLY WITH LEASE TERMS

 

Assignee agrees to perform and observe all of the covenants, conditions and terms of the Lease relating to the period of time from and after the Effective Date [(insofar, but only insofar, as the same related to the Assigned Premises)], and to protect, defend, indemnify and hold harmless Assignor from and against all claims, damages, and expenses of any kind asserted by any person or entity, including the Airport Lessor, arising out of the nonperformance, nonobservance or improper performance or observance of the covenants, conditions or terms of the Lease [(insofar, but only insofar, as the same relates to the Assigned Premises)].  Assignor shall comply with all remaining terms of the Lease, to the extent any non-compliance could adversely affect Assignee rights in or to the Assigned Premises. Assignor agrees to protect, defend, indemnify and hold harmless Assignee from and against all claims, damages, and expenses of any kind asserted by any person or entity, including the Airport Lessor, arising out of the nonperformance, nonobservance or improper performance or observance prior to the Effective Date of the covenants, conditions or terms of the Lease [(insofar, but only insofar as the same relates to or effects the Assigned Premises)].  Nothing herein shall be construed as to obligate Assignee to be responsible in any

Exhibit O-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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way for any hazardous material located in, or the environmental condition of, the Assigned Premises as of the Effective Date to the extent not caused by or arising from Assignee’s operations.

 

5.APPROVALS

 

[This Agreement shall not become effective unless and until the consent of the Airport Lessor is given by execution of consents for the assignments herein made, which consents shall be requested on the standard form for such consents by the lessor as attached hereto as Annex 3.  Assignor and Assignee hereby mutually agree to expeditiously take any and all actions, and to cooperate fully with each other, with respect to obtaining any approvals, authorizations, licenses or similar items that may be necessary or desirable in order to carry out the agreements set forth herein or contemplated hereby.  The parties hereto agree to request the consent of the Lessor on the consent form attached hereto as Annex 3.  The parties agree to make such reasonable changes to such form as may be required by Airport Lessor.]

 

[Consent by Airport Lessor.  Airport Lessor, as evidenced by its execution below, does hereby consent to this Assignment, [releases Assignor from all of its responsibilities and obligations under the Lease that are attributable to the period of time after the Effective Date, and] agrees to look solely to Assignee for performance of all obligations thereafter under the Lease [as it relates to the Assigned Premises].]

 

[Acknowledgement. Assignor and Airport Lessor hereby represent to Assignee that the Lease is currently in full force and effect, and that they know of no events of default relating to the Lease or the Assigned Premises as of the date hereof.]  

 

6.APPLICABLE LAW

 

[The laws of the State where the Assigned Premises are located shall be used in interpreting this Agreement and in determining the rights of the parties under it.]

 

7.SEVERABILITY

 

If any part of this Agreement is held to be invalid by final judgment of any court of competent jurisdiction, the part held invalid shall be modified to the extent necessary to make it valid or, if necessary, excised, and the remainder of the Agreement shall continue to remain effective.

 

8.ENTIRE AGREEMENT

 

This Agreement contains the entire agreement between the parties with respect to its subject matter and may not be changed in any way, except by a written instrument executed by the parties and, if necessary, approved by the Airport Lessor.  

 

9.SUCCESSORS AND ASSIGNS

 

The provisions of this Agreement shall be binding on the parties, their successors and assigns.

 

Exhibit O-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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IN WITNESS WHEREOF, the parties have properly executed this Agreement effective the date first above written.

 

 

 

Exhibits to be Attached:

 

Annex 1 – Description of Assigned Space

Annex 2 – Copy of Lease

Annex 3 – Request for Consent

Exhibit O-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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ANNEX 1

to the Form of Assignment

 

DESCRIPTION OF ASSIGNED SPACE

 

Exhibit O-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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ANNEX 2

to the Form of Assignment

 

COPY OF LEASE

Exhibit O-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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ANNEX 3

to the Form of Assignment

 

REQUEST FOR CONSENT TO ASSIGNMENT

____________, a ____________ corporation (“Assignor”) and ____________, a ____________ corporation (“Assignee”) hereby apply to the [____________] (the “Airport Lessor”) for its consent to an Assignment attached as Exhibit “A” and dated ____________ (the “Effective Date”), for premises described therein (the “Assigned Premises”) as required by the [____________ Use and Lease Agreement] (the “Agreement”) with ____________ for certain premises at ____________ Airport.  As consideration for the granting of the aforesaid consent and without limitation of any right or remedy of the Airport Lessor as set out in the Agreement, Assignor and Assignee agree with the Airport Lessor as follows:

 

 

 

 

 

4.In addition, it is expressly understood and agreed as follows:

 

 

 

Exhibit O-7

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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The parties accept the foregoing acknowledgments and agreements and the Airport Lessor hereby consents to the Assignment attached as Exhibit “A”.  However, the terms of the Agreement and this Request for Consent shall prevail over any conflicting terms or provisions contained in Exhibit “A” hereto.

 

 

 

 

 

Exhibit O-8

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT P

 

Charter Flight Operations

 

Subject to the provisions of Section 2.1 establishing, without limitation, that United shall, in its sole discretion, establish all schedules for Charter Flights, including determining the city-pairs served, frequencies, utilization and timing of scheduled arrivals and departures, and shall, in its sole discretion, make all determinations regarding the establishment and scheduling of any Charter Flights, and that Contractor shall operate such Charter Flights pursuant to the terms of the Agreement, each of Contractor and United agrees to the following:

 

 

 

 

 

 

 

Exhibit P-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit P-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT Q

 

Ground Handler Indemnity

 

Unless superseded by another agreement between a United Ground Handler (as defined below) and Contractor, the following provisions shall apply with respect to the actions of United or any of United’s affiliates, in each case only to the extent that such person is acting directly in the capacity as a ground handler (a “United Ground Handler”) for Contractor pursuant to this Agreement.

 

 

 

 

 

Exhibit Q-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT R

 

CRJ Lease Return Conditions

 

 

 

Exhibit R-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Attachment A to Schedule I KEtURN OP THE AIRCRAFT (a) (Senerai At the time of such retain, <i) the Aircraft shall he registered under the am of the United States with the FAA is the name of lessor or Its designee unless such registration is prohibited by reason of the failure of Lessor, fee Owner Participant ta Lessor's designee to he eligible qn such date to own an’ aircraft registered with the PAA and (ii) the Airframe will be fully equipped with the Engines Installed thereon. At the time of such istura, such Airframe and Engines; (A)  shall have a valid certificate of airworthiness issued by the PAA and he eligible for operation under Part 121 or any successor regulation, . £S) shall be free and clear of all liens (other than Lessor Liens (including for ' ^ Ms propose Liens that would he Lessor Liens but for the proviso to the definition of Lessor Liens)); {€) shall be in a regular passenger configuration used by lessee and in as good condition as when originally delivered to Lessee, ordinary wear^and tear excepted, and otherwise m the condition, mpitd to ee malntaiaed under Lessee’s PAA-apprwed maintenance program; (p> shall have all of Lessee's exterior insignia painted over or removed in a good and workmanlike manner (and any repainted or stripped down areas shall match the existing exterior colors) and all of lessee's interior - markings removed in accordance with industry standards; (B) shall be in a state of cleanliness suitable safer Losee's normal standard* for as© in its fleet operations and by t!-S< commercial airline standards, (F) shall fee maintained by cleaning and treating ait mild and moderate corrosion and correcting afl severe or exfoliate corrosion in accordant* with Lessee's BAA-approved maintenance program or Mmwacwrera structural repair macros}; and (G) shall be cleared throegh sit applicable costoss; sad « ail &ch ease# th* Air&nSt stall not have been discriminated against m m ma^wnstwe, vis* or operation by tmmm of it? leased status.

Exhibit R-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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(b) Airworfhiness. Directivcs. AU FAA Airworthiness Derectuves and amonchments* or Changes [the Federal Aviation Regulations applicable to the Airframe, Engines (or Accepcable Alterdate Engines) or parts* as Well as all mandatory service bulletins applicable to any of the foregoing' shall have been acconrplished by terminating action in cmpliance with the isauting agebcy's or the jmaufuctiorer's specific instructions, regardless of any waivers that the- Lessee may have nogotiared with the FAA, as the case may be, to the extent that any that any such directives, regulations or bulletins have an effective, dare for terminating compliance (i) prior to the date of return, or (ii) after the date of return but only if Lessee has begun termination action in regard on other aircraft in Lessee's fleet and such termination action is accomplished by Lessee concurrently With a particular type of maintenance precedere, and the Aircraft is sheduled (or in the normal course-would be scheduled) for such maintenance procedure prior to the date of retrun and, in all casest without discrimination against the Aircraft by reason of its leased status (c) Scheduled Maintenande, At the time of return of the Airframe shall  to fresh from IT block “C1' check in With  the Lessee,s then applicable VAA-approved As used berein, and notwithstanding the then applicable reunenctaturt, the term  1 C check" shall be deemed at all times to refer to maintenance procedures of the- same type and scope as constitute'C check,r under the Lessee’s FAA-approved maintenance program as in (d) Engines. At the time of return, the Engines shall meet the following requirements; (i) each Engine shall have remaining no less than [***] flight horn's ustil the next on-condition and next scheduled  removal  for  life limited parts (based on Lessee experience for engine  refurbishment  during  the  three (3) immedialely preceding year before the date of returm;  (ii) the lessor (or its designated representative) shall perform a external visual inspection and internal beroscope of the "Engined. The lessee shall promptly correct, no prome the correction of, any discrepancies found which are beyond the engine manufacturer's maintenance manual in -service limits limits  which are subject to reduced interval and/or special inspeetion in accordence with the engine manufacturer's maintenance manual; (iii) each Engine shall have a video boroscope inspection preferred in accordance  with the applicable engine manufacturer's maintenance  manual. Horoscope inspection  findings shall be within the engine manufacturer's maintenance manual limitations, Any cornporient or part found during the boroscope inspection that has  a published limitation apeclfied in  the applicable engine  manufacturer's maintenance  manual of less than [***]  horrs remaining life due to its condition shall be repaired or by the Lessee, in with applicable; engine manufactures's maintenance manual, A performance run will be conducted in accordance  with the applicable engine  manufacturer's maintenance manual to ensure that the Engine has a  bn - 20 degree Celsius margins remaning in accordance  with Paragraph (v) Engine operating

 

Exhibit R-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Parameters i,e., EGT, oil pressure, oil consumption and vibration, shall be wihtib the engine manufacturer's maintenance manual limits:  (iv) the Aircraft shall be capable of certificated, full rated performance without limitations throughout the entire operating enbelope as defied if the Air plane Flight Manual. Perfromance compliance will be demonstrated at the time of the acceptance flight test by on-wing static with the engine mamafacturer,s maintenance manual; (v) each Engine shall have a positive EGT margin at a 20 degees Celsius outside air temperature at sea level and standed atmospheric pressure condition of no less than 20 degree Celsius , as calculated per the engine manufacturer,s  recommendation at full ested thrust take-off and the Lessee and Lessee agree theat the 20 degree positive EGT margin shall be adfusted at the date of the return based of an average of the engine manufacturer’s and Lessee’s then Engine Trend Monitoring date to support a remaining on-wing life of [***] flight hours for an assumed operation of 1 hour to 1 cycle; and  (vi) each instailed Engine shall have no single life limited part with less than [***] cycles life remainig in accordance with  the engine manufacturer’s maintenance manual, Chapter 5 total approved lives. In respect of Engines, for each life limited part, the Lessor and Lessee shall agree as follows: At the date of return ,for each life limited part with cycles since new in excess of [***] of the manufacturer’s total appoved life, Lessee shall pay an amount to Lessor calculated as follows: A  (A/B) x C where Part cycles since new minus [***] of manufacture’s total approved life  B  [***] of manufacturer’s  total approved life C   The then current manufactuere’s  price to Mesa for a new replacement of that part   In respect of installed Engines, for Engine refurbishment, the Lessor and lessee shall agree as follows, assuming lessee’s hour to cycle ratio is 1 to 1  At the  date of renum for each Engine with flight houre since last core perfomanace restoration in excess of [***] of the Lessee’s 12 month rolling sverage shop visit rate s [***] hours), the lessee shall pay an amout to the Lessor calculatecd as follows:      E  (E.F) x G where Engine flight hours since last core performance restoration F  [***] of the lessee’s 12 month rolling average shop visit rate x [***] hours

Exhibit R-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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G = $K, the core performance restoration supplemental rent Engime flight hour based on Lessee’s cost for engine refurbisgnent during the three (3) immediately preceding years before the date of reforn. (E)     Return of the Engine. In the enent that an Acceptable Alternate Engine shall be deliverd with the returned Airframe, Lessee, concurrently with such delivery will, at no cost to Lessor, furnish or cause to be furnished to lessor a full warranty (as to title) bill of sale with respect to escb such Acceptable Alternate Engine, in frm and substance reasonably satesfactory to Lessor (together with an opinion of coursel (which may be an employee of Lewssee or Guarantor) to the effect that such full warranty bill of sale has been duly authorized and delivered, and is enforceable in accordance with its terms and that such Acceptable Altermative Engine are free and clear of all Liens other than Lessor Liens (including for this purpose Liens that would be Lessor Liens but for the provisoto the definition fo Lessor Liens), against receipt from Lessor of a bill of a bill of sale evidencing the transter, without recourse or warranty (except as to the absence of Lessor Liens (including for this Purpose Liens that would be Lessee Liens but for the proviso to the definition of lessor )) by Lessor to Lssee or its designee of all of Lessor’s right title and interest in and to any Ingime not installed of the Airframe at the time of the return of the Airframe. (f)  Structual Inspection Tasks. Along with th “C” check the Airframe shall have accomplished all structural tasks due through the next scheduted “C” check Thereafter. (g)  Landing  Gear life. The main gear and the nose landing gear shall have at least [***] percent [***] of the landings remaining of  [***] landings whichever is less, since its last removal and overshall or original installaton for the main gear and the nose landing gear in the Lessee’s FAA-approved maintenance program. (h)  Tires and Brakes. The tires and brakes shall have remaining [***] Perent [***] or more of the full service life. (i)  Condition of controlled Components. Aircraft and angine hour and/or chcle controlled components at time of return to lessor shall have remaining as a minimum one half life and/or [***] Percent [***] of the manufacture’s recommended overhaul interval in hours or cycle, whichever is applicable before ant scheduled removals for lverhaul, test or disassembly. All components controlde on a calendar basts shall have remaining at least half-time before scheduted removal for testing of overhaul, Such houscycle or calendar controlled components are defined as those components controlled undr Lessee’s FAA-approved maintenance program. (j)  Deferred Maintenance. There shall be no open, outstanding or deferred maintenance items, scheduled or unscheduled, against the Aircraft. (K) Manuals. Upon the return of the Aircraft upon any tennination of this Lease in accordance with Paragraph (a) of Section 5 the Lease Lessee shall deliver of cause to be delivered to Lessor all current logs, manual and dats and maintenance, inspection, modlflecation and over record and similar records incorporation the latest revisions required to be maintained with reapect to the Aircft and pars under  FAA rules under  Part 121 the Lessee’s FAA-approved maintenance program and all other applicable faws and applicable rules and

Exhibit R-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Regulations of each country under the laws of which the Aircraft has been registered during the period of operation thereof, which logs, manuals, records and other data shall be in the English language or accompanied by an English translation thereof, if any such logs, manuals records or other data are missing, incomplete or otherwise not in accordance with FAA standards applicable to lessee, lessee shall reaccomplish the maintenance tasks under Part 121 necessary to produce such records in accordance with its FAA-approved maintenance program prior to return of the aircraft or otherwise perform all necessary acts (without regard to any applicable waivers or deferrals) to obtain such records in a manner satisfactory to the FAA.  (I) Storage upon return. If, at least 15 days prior to expiration of the lease at the end of the basic term or any renewal term or prior to a termination pursuant to section 9(b) or section 15 of the lease, lessee receives from lessor a written request for storage of the aircraft upon its return hereunder, lessee will provide lessor, or cause lessor to be provided, with storage facilities for the aircraft (x) at lessee’s risk and expense for a period not exceeding 30 days, and (y) thereafter at lessor’s risk and at lessor’s cost for insurance, maintenance and lessee’s out-of- pocket expenses plus a reasonable parking fee for such storage for a period not exceeding 60 days commencing on the date of such expiration or termination; in the case of each of (x) and (y), at Lessee’s facility at phoenix, Arizona or at any other location in the continental united states selected by lessee and used by lessee as a location for the long-term parking or storage of aircraft; provided that the period set forth in clause (y) may, at lessor’s option, be extended for an additional 60 day period if such storage facilities  are available.  (m) severable parts. at any time after lessee has advised lessor that it has determined not to renew this lease or purchase the aircraft, or the aircraft is otherwise to be returned to lessor, lessee shall,at lessor’s request, advice lessor of the nature and condition of all severable nonproprietary parts (other than parts otherwise required by section 7 or 8 of the lease to be maintained on the aircraft) owned by lessee which have been used by lessee during the prior six months and which lessee has or intends to remove from the aircraft in accordance with section 8 of the lease. Lessor may, at its option, upon 30 days notice to lessee, purchase any or all of such nonproprietary parts from lessee upon the expiration of the tern at their fair market value.  (n) Acceptance flights, lessee shall provide for acceplance test flights, each not to exceed one (1) hour in duration, as necessary to demonstate the airworthness ot the aircraft (including for this purpose acceptable alternate engines to be reurned) and the proper functioning of all systems and components in accordance with the manufacturer’s flight functional procedures. The lessee shall pay for any costs associated with the first such flight and any subsequent. Flights limited to, costs for fuel, oil, airport fees, insurance, takcoff/landing fees, customs duties, and any other costs incurred by the lessor. Lessee shall permit not than two (2) lessor’s representatives onboured during any flight rests as direct observers of the functional tests. (o) appraisal procedure. Following expiration of the 60-day cure period provided for in section 14(d) of the lease, if there retains any dispue between lessee and lessor as to compliance with the provisions of section 5 of the lessee and the parties are unable to agree on the cost necessary to unreddy such disputed items, lessee and lessor shall submit such dispute to the appranesal procedure.has defined to the residual agreement and lessee shall pay to lessor  

 

Exhibit R-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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any adjustment Amount (as defined in the residual agreement) determined to be due as a results of such deficiency, if   any, as determined by appraisal procedure I, without duplication of any amount otherwise payable under the preceding provision of this attachment A,

 

Exhibit R-7

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Attachment A to Schedule I   RETURN OF THE AIRCRAFT  (a) General. At the time of such return, (i) the Aircraft shall be registered under the laws of the United States with the FAA in the name of Lessor or its designee unless such registration is prohibited by reason of the failure of Lessor, the Owner Participant or Lessor’s designee to be eligible on such date to own an aircraft registered with the FAA and (ii) the Airframe will be fully equipped with the Engines installed thereon.  At the time of such return, such Airframe and Engines:  (A) shall have a valid certificate of airworthiness issued by the FAA and be eligible for operation under Part 121 or any successor regulation;  (B) shall be free and clear of all Liens (other than Lessor liens (including for this purpose Liens that would be Lessor Liens but for the proviso to the definition of Lessor Liens));  (C) shall be in a regular passenger configuration used by Lessee and in as good condition as when originally delivered to Lessee, ordinary wear and tear excepted, and otherwise in the condition required to be maintained under Lessee’s FAA-approved maintenance program;  (D) shall have all of Lessee’s exterior insignia painted over or removed in a good and workmanlike manner (and any repainted or stripped down areas shall match the existing exterior colors) and all of Lessee’s interior markings removed in accordance with industry standards;  (E) shall be in a state of cleanliness suitable under Lessee’s normal standards for use in its fleet operations and by U.S. commercial airline standards;  (F) shall be maintained by cleaning and treating all mild and moderate corrosion and correcting all severe or exfoliate corrosion in accordance with lessee’s FAA-approved maintenance program or Manufacturer’s structural repair manual; and  (G) shall be cleared through all applicable customs;

 

 

Exhibit R-8

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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EXHIBIT S
United Wi-Fi

 

United has contracted with Gogo, Inc. (“Gogo”) to provide air-to-ground internet service inflight (“United’s Wi-Fi Agreement”). Pursuant to United’s Wi-Fi Agreement, Gogo or one of its subcontractors will install the Gogo Wi-Fi and inflight entertainment equipment, including associated software (“Wi-Fi Equipment”) on the CRJ700 and E175 Aircraft.   For purposes of this Amendment, Wi-Fi and inflight entertainment services will be defined as “Wi-Fi Services”.  As of the date of this Amendment, Gogo has subcontracted with STS Line Maintenance (“STS”) to perform the actual installation of the Wi-Fi Equipment. Contractor and United agree that the Wi-Fi Equipment will be installed on selected Contractor aircraft that provide United Express regional airline services as such aircraft are determined by United from time to time; such initially selected aircraft are defined by tail number and identified in Attachment 1 attached and may be referred to throughout this Amendment as “Equipped Aircraft”. United has purchased, or will purchase, all Wi-Fi Equipment installed.  Contractor agrees that United shall remain the sole owner of the Wi-Fi Equipment installed on Contractor aircraft and Contractor agrees not to assert any claim of ownership or a lien on such Wi-Fi Equipment. United will purchase all Wi-Fi Equipment from Gogo.  Contractor agrees to use its commercially reasonable efforts to make its selected aircraft available to Gogo and/or STS (or other installation vendor as applicable) to enable the installation of the Wi-Fi Equipment to occur as expeditiously as possible without interfering with Contractor’s operations (and United agrees to reasonably cooperate with Contractor in this regard with respect to scheduling of the aircraft to facilitate such installation).  

Contractor acknowledges and agrees that all revenues generated from or in connection with the sale of Wi-Fi Services onboard Equipped Aircraft  are the sole property of and shall be retained by United (or, if received by Contractor, shall be promptly remitted without set-off to United, free and clear of any claims or liens created by Contractor or any third party arising by, through or under Contractor or its affiliates).  Contractor agrees that it shall reasonably cooperate with United so as to permit United to receive all revenues of the type described above.

 

Contractor shall issue a no-cost  Wi-Fi purchase order to Gogo in accordance with, and subject to, the provisions of United’s Wi-Fi Agreement as such provisions have been provided by United to Contractor for (i) the quantity of shipsets ordered; (ii) requested delivery dates; (iii) point of delivery; (iv) a listing of the  aircraft (by tail number) onto which the Wi-Fi Equipment is to be installed; (v) any special requirements relating to the order; and (vi) a purchase order number and date. Each such purchase order shall be at no stated cost to Contractor, and Gogo will issue invoices related to such purchase order(s) issued by Contractor directly to United pursuant to and in accordance with the terms and

Exhibit S-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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conditions of United’s Wi-Fi Agreement. If there is any information missing from the purchase order at the time of issuance, Contractor understands that it may affect Gogo’s ability to process and accept the purchase order.

 

Contractor will comply with all laws and regulations applicable to Contractor in performing Contractor’s obligations under this Agreement and will cooperate, to the extent reasonably necessary, with Gogo, at no cost or charge to Gogo or United, for Gogo and Gogo subcontractors to comply with all laws and regulations applicable to Gogo and its subcontractors.  Contractor will also provide Gogo or its subcontractors, at no cost or charge to Gogo or United, with access to the Equipped Aircraft and provide such assistance as Gogo reasonably requests to obtain and maintain any legally required certification of the Wi-Fi Equipment and Gogo Services at all times during the Term.

Contractor shall notify United and Gogo promptly when it becomes aware of any failure in performance, malfunction, defect, loss of or damage to the Wi-Fi Equipment with reasonable details (it being acknowledged that United may be precluded from claiming a breach of the warranty included in the United Wi-Fi Agreement without such information). Contractor shall not take any action that would (i) cause a failure or defect of the Wi-Fi Equipment by combining it with equipment, software, or services not supplied, authorized or specified by Gogo,  (ii) cause Wi-Fi Equipment to be subjected to any misuse, neglect, accident or improper  maintenance by Contractor  or subcontractors, or (iii) cause an infringement or misappropriation of a third party’s intellectual property by combining the Wi-Fi Equipment with any content, materials, equipment or software provided by or on behalf of Contractor that is not authorized or approved by Gogo.  Contractor shall not itself, nor knowingly permit any other party to, modify or tamper with the Wi-Fi Equipment, other than Gogo or its subcontractors.

In the event of a defect in the Wi-Fi Equipment covered by the warranty, Contractor agrees to use its commercially reasonable efforts to ship such Wi-Fi Equipment to Gogo within forty-eight (48) hours if requested by Gogo to do so (and the reasonable shipping costs shall be reimbursed to Contractor by United).

For a period of time under the United Wi-Fi Agreement, Gogo or its subcontractor will provide touch labor to correct any malfunctioning or defective Wi-Fi Equipment, including any associated software.  Following the expiration of this initial warranty period, United may either (i) continue to have Gogo or its subcontractor provide touch labor or (ii) elect to provide touch labor for maintenance of Wi-Fi Equipment on Equipped Aircraft.  Gogo may dispatch Gogo personnel or its subcontractors to the Contractor’s designated Wi-Fi Equipment maintenance location to troubleshoot maintenance issues with such Wi-Fi Equipment; the cost of such maintenance services shall be mutually agreed upon between United and Gogo and will be at United expense.

 

Exhibit S-2

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit S-3

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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With respect to any Equipped Aircraft (leased by Contractor from third parties or owned by Contractor) that ceases operating as United Express service, unless otherwise agreed by United and Contractor at such time, Contractor acknowledges that United or its subcontractors may elect to de-install the Wi-Fi Equipment from such aircraft, at United’s expense. Contractor shall make the Equipped Aircraft available for such deinstallation services as and where reasonably required by United or Gogo, in a timely manner.

 

Contractor and United agree that in the course of performing this Amendment, each party will be bound by the non-disclosure agreement dated August 1, 2014 among United, Gogo and Contractor.  Any confidential information of Gogo provided to Contractor by either United and/or Gogo shall be deemed Confidential Information of United for purposes of Article 11.7 of the Agreement.

 

Contractor  shall promptly notify United and Gogo of any damage (except normal wear and tear), destruction, loss (including after any event of default under a Contractor financing agreement that results in the loss of such Wi-Fi Equipment, including as a result of the foreclosure of any lien or the exercise of remedies by any financing party), theft, or governmental taking of any Wi-Fi Equipment or spare parts in Contractor’s custody upon Contractor’s becoming aware thereof and, whether or not covered by Contractor’s insurance (“Event of Loss”).  If an Event of Loss occurs, Contractor shall be responsible for the cost of any necessary repair or replacement of such Wi-Fi Equipment or spare parts unless such Event of Loss was caused by a defect or malfunction of such Wi-Fi Equipment.   When an Event of Loss is caused by Contractor, such repair or replacement shall not be considered part of Gogo’s maintenance obligations, but Gogo or United may coordinate and oversee repair or replacement performed by a third-party on a “Pass-Through Expenses” basis from United to Contractor as a set-off per the Agreement, or have such repair or replacement performed by Gogo at Gogo’s agreed-upon prices, in each case at Contractor’s expense.

 

Exhibit S-4

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit S-5

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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United agrees to timely purchase and pay for all materials, consumables, equipment, shipping and reasonable labor costs for the installation project, including all engineering and certification services, necessary or appropriate to complete the installation of the Wi-Fi Equipment as quickly as possible. United will reimburse Contractor for those reasonable costs incurred by Contractor related to the items in this Section 15, provided that they have been approved by United in advance and in writing.  

 

At United’s cost and expense, United may remove the Wi-Fi Equipment at any time, and upon any such removal, United shall repair any damage to the Contractor aircraft caused by such removal, except to the extent any such cost or expense is caused by or is resulting from the negligence or willful misconduct of Contractor or its agents, which shall be borne by Contractor.

 

Exhibit S-6

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit S-7

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Attachment 1

 

 

 

Exhibit S-8

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Attachment 2

 

 

 

Exhibit S-9

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

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Exhibit T

 

Operational Improvement Plan

 

 

Note – CRJ700 Covered Aircraft initiatives dependent on delivery of a CRJ550 Conversion Notice from United pursuant to Section 2.5.

Exhibit T-1

 

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jonathan G. Ornstein, certify that:

 

 

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Lotz, certify that:

 

 

 

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jonathan G. Ornstein, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of Mesa Air Group, Inc. for the fiscal quarter ended December 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Mesa Air Group, Inc.

 

 

 

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Lotz, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of Mesa Air Group, Inc. for the fiscal quarter ended December 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Mesa Air Group, Inc.