Mesa Airlines(MESA)2024-10-15 20:58Financial Performance - For the three months ended June 30, 2024, operating revenues decreased by 110.8 million compared to the same period in 2023 [118]. - Contract revenue increased by 95.6 million, primarily due to an increased United block hour compensation rate [118]. - Pass-through and other revenue decreased by 15.2 million, attributed to a decrease in pass-through maintenance related to the E-175 fleet [118]. - Operating loss for the three months ended June 30, 2024, was 40.2 million in the same period in 2023 [114]. - Total operating revenue decreased by 361.2 million for the nine months ended June 30, 2024, compared to the same period in 2023 [129]. - Contract revenue decreased by 310.5 million for the nine months ended June 30, 2024, primarily due to reduced block hours flown and fewer aircraft under contract [129]. - Operating loss improved to 64.1 million for the same period in 2023 [125]. - The company reported a net loss of 50.9 million [144]. Operating Expenses - Total operating expenses decreased by 119.8 million for the three months ended June 30, 2024 [119]. - Flight operations expense decreased by 45.5 million, driven by reduced pilot training expenses and lower pilot wages [119]. - Maintenance expense decreased by 44.3 million, primarily due to a decrease in pass-through engine overhaul costs [119]. - General and administrative expense decreased by 9.7 million for the three months ended June 30, 2024, driven by decreases in wages and pass-through insurance costs [121]. - Depreciation and amortization expense decreased by 9.7 million for the three months ended June 30, 2024, due to aircraft being sold or classified as non-depreciable assets [121]. - Total operating expenses decreased by 409.9 million for the nine months ended June 30, 2024, compared to the same period in 2023 [131]. - Total maintenance costs decreased by 137.2 million for the nine months ended June 30, 2024, compared to 6.0 million, or 15.5%, to 14.2 million, or 30.2%, to 48.5 million, with an impairment recorded of 50.9 million was recorded for the nine months ended June 30, 2024, primarily related to 19 CRJ-900 airframes and 77 GE model CF34-8C engines designated as held for sale [136]. - The company is actively seeking arrangements to sell surplus assets related to the CRJ fleet to reduce debt and optimize operations [146]. - The company expects to close the sale of the final engine by the end of October 2024, with gross proceeds expected to be 19.6 million, compared to a net cash used of 112.9 million for the nine months ended June 30, 2024, with proceeds from the sale of aircraft and engines totaling 149.3 million for the nine months ended June 30, 2024, with principal repayments on long-term debt amounting to 16.3 million in cash and cash equivalents and 72.8 million in principal maturity payments on long-term debt due within the next twelve months, which will be met through cash on hand and ongoing cash flows [147]. - As of July 16, 2024, the company was not in compliance with a financial covenant related to a minimum liquidity requirement of 230.4 million of variable-rate debt, with a hypothetical 100 basis point change in market interest rates potentially affecting interest expense by approximately 136.2 million of fixed-rate debt as of June 30, 2024, and a hypothetical 100 basis point change in market interest rates would not impact interest expense or materially affect the fair value of these instruments [164]. - The transition from LIBOR to SOFR for the company's debt arrangements was completed between July 31, 2023, and December 31, 2023, with $160.4 million of borrowings based on SOFR as of June 30, 2024 [166]. - The company does not purchase or hold derivative instruments to protect against interest rate changes [164]. Market and Operational Risks - The company is subject to market risks including interest rate risk and limited commodity price risk related to foreign exchange transactions [163]. - The company has de minimis foreign currency risks related to station operating expenses, primarily in Canadian dollars, with revenue denominated in U.S. dollars [166]. - The company has not had a formal hedging program for foreign currency, and a 10% change in current exchange rates would not materially affect financial results [166]. - The company's agreements largely shelter it from fuel price volatility, as fuel is directly paid and supplied by major partners [166]. - The sensitivity analysis provided does not consider the effects of adverse changes on overall economic activity or additional actions the company may take to mitigate exposure [163]. - There have been no material changes to the critical accounting estimates as explained in the Annual Report for the fiscal year ended September 30, 2023 [162].