PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Mesa Air Group operates as a regional air carrier under capacity purchase agreements with American and United, providing scheduled passenger service and mitigating fuel and passenger risks, despite COVID-19's impact on 2020 operations - Mesa Airlines operates as a regional air carrier, providing scheduled passenger service to **102 cities** in **39 states**, the District of Columbia, and Mexico[13](index=13&type=chunk) - All flights are operated as American Eagle or United Express under capacity purchase agreements, which provide guaranteed monthly revenue and mitigate exposure to fuel prices, ticket prices, and passenger fluctuations[13](index=13&type=chunk)[15](index=15&type=chunk) Fiscal Year 2020 Revenue Distribution by Major Airline Partner | Partner | Revenue Share | | :------ | :------------ | | American CPA | 52% | | United CPA | 48% | - The COVID-19 pandemic negatively affected revenue and operating results in fiscal 2020, with expected continued impact on financial condition and liquidity[17](index=17&type=chunk) - Key business strategies include maintaining a **low-cost structure**, offering attractive work opportunities, maintaining a **prudent capital structure**, and minimizing 'tail risk' on aircraft leases[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) General COVID-19 Pandemic Our Business Strategy Aircraft Fleet Capacity Purchase Agreements Maintenance and Repairs Competition Seasonality Aircraft Fuel Insurance Human Capital Management Safety and Security Facilities Foreign Ownership Government Regulation Legal Proceedings Corporate Information [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from high dependence on airline partners, substantial debt, pilot shortages, and the severe impact of the COVID-19 pandemic - The company is highly dependent on its capacity purchase agreements with American and United, which account for nearly all operating revenue. Termination or non-renewal of these agreements would severely impact the business[87](index=87&type=chunk)[88](index=88&type=chunk) - Reduced aircraft utilization levels, particularly due to the COVID-19 pandemic, have adversely impacted financial results and are expected to continue into 2021[90](index=90&type=chunk) Debt and Lease Obligations (as of September 30, 2020) | Obligation Type | Amount (in millions) | | :-------------- | :------------------- | | Total Long-Term Debt | **$743.3** | | Future Minimum Lease Payments | **$112.9** | | Debt Service Obligations | **$853.4** | - The supply of qualified pilots is limited due to FAA Qualification Standards, leading to increased labor costs and potential operational disruptions if pilot attrition rates exceed recruitment capabilities[106](index=106&type=chunk)[107](index=107&type=chunk)[110](index=110&type=chunk) - The COVID-19 pandemic has resulted in a severe decline in demand for air travel, leading to significant capacity cuts by major airline partners and a material adverse impact on the company's business, operating results, financial condition, and liquidity[148](index=148&type=chunk)[149](index=149&type=chunk)[152](index=152&type=chunk) [Item 1B. Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments are reported - No unresolved staff comments were reported[187](index=187&type=chunk) [Item 2. Properties](index=35&type=section&id=Item%202.%20Properties) The company operated a fleet of 146 aircraft as of September 30, 2020, and maintains various leased facilities suitable for its needs Aircraft Fleet as of September 30, 2020 | Aircraft Type | Owned | Leased | Total | Passenger Capacity | Average Age (years) | | :------------------ | :---- | :----- | :---- | :----------------- | :------------------ | | E-175 Regional Jet | 18 | 42 | 60 | 76 | 4.9 | | CRJ-900 Regional Jet| 48 | 16 | 64 | 76/79 | 14.0 | | CRJ-700 Regional Jet| 18 | 2 | 20 | 70 | 16.7 | | CRJ-200 Regional Jet| 1 | — | 1 | 50 | 26.7 | | Boeing 737 Cargo Jet| — | 1 | 1 | — | 26.1 | | **Total** | **85**| **61** | **146**| | | - The company's fleet size and mix are subject to change based on contract and lease expirations, growth opportunities, and transitions to other airline partners[187](index=187&type=chunk) Key Leased Facilities | Type | Location | Approximate Square Feet | | :--------------------- | :------------- | :---------------------- | | Corporate Headquarters | Phoenix, Arizona | 33,770 | | Training Center | Phoenix, Arizona | 23,783 | | Hangar | Houston, Texas | 74,524 | [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company faces two class action lawsuits regarding its 2018 IPO, but management expects no material adverse financial impact - The company is subject to two putative class action lawsuits alleging federal securities law violations in connection with its August 2018 IPO[190](index=190&type=chunk) - These lawsuits, filed in March and April 2020, claim materially false and misleading statements or omissions in the IPO registration statement and seek unspecified monetary damages[190](index=190&type=chunk) - Management believes the ultimate outcome of these lawsuits and other routine legal matters is not likely to have a material adverse effect on the company's financial position, liquidity, or results of operations[191](index=191&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to Mesa Air Group, Inc[192](index=192&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock trades on Nasdaq under "MESA" since 2018, with no dividends paid, and its performance has declined since IPO - Common stock has traded on The Nasdaq Global Select Market under "MESA" since August 10, 2018[194](index=194&type=chunk) - The company has not paid cash dividends and does not expect to in the foreseeable future, intending to retain future earnings and being subject to dividend restrictions in lease facilities[197](index=197&type=chunk) Indexed Returns (August 10, 2018 - September 30, 2020) | Company Name/Index | 8/10/2018 | 9/30/2020 | | :----------------- | :-------- | :-------- | | Mesa Air Group, Inc.| $100.00 | $25.11 | | NASDAQ Composite | $100.00 | $145.67 | | NASDAQ Transportation Index | $100.00 | $90.89 | [Item 6. Selected Financial Data](index=40&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes consolidated financial and operating data from 2016-2020, showing 2020 declines in revenue, net income, and operating metrics due to COVID-19 Selected Consolidated Statements of Operations Data (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | | :---------------------- | :---------- | :---------- | :---------- | | Operating revenues | $545,070 | $723,357 | $681,595 | | Operating income | $80,167 | $121,137 | $72,648 | | Net income | $27,464 | $47,580 | $33,255 | | Net income per share (Diluted) | $0.78 | $1.36 | $1.32 | | Total assets | $1,501,930 | $1,451,917 | $1,472,388 | | Long-term debt and financing leases, excluding current portion | $542,456 | $677,423 | $760,177 | | Stockholders' equity | $457,859 | $425,868 | $374,467 | Selected Operating Data | Metric | 2020 | 2019 | 2018 | | :---------------------- | :---------- | :---------- | :---------- | | Block hours | 313,110 | 456,247 | 410,974 | | Departures | 166,776 | 246,634 | 227,978 | | Passengers | 8,500,072 | 14,664,441 | 13,556,774 | | Available seat miles (thousands) | 7,581,506 | 10,863,623 | 9,713,877 | | Contract revenue per ASM (cents) | 6.68 ¢ | 6.29 ¢ | 6.58 ¢ | | Operating cost per ASM (cents) | 6.13 ¢ | 5.54 ¢ | 6.27 ¢ | Adjusted Non-GAAP Financial Data (in thousands) | Metric | 2020 | 2019 | 2018 | | :-------------- | :---------- | :---------- | :---------- | | Adjusted EBITDA | $163,306 | $208,652 | $164,778 | | Adjusted EBITDAR| $212,108 | $260,858 | $233,670 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial performance, liquidity, and operations, focusing on COVID-19's impact, revenue declines, cost measures, and CARES Act funding - Total operating revenue decreased by **$178.3 million (24.6%)** in fiscal year 2020 compared to 2019, primarily due to decreased flying across all fleets as a result of COVID-19[268](index=268&type=chunk) - Net income for fiscal year 2020 was **$27.5 million ($0.78 per diluted share)**, down from **$47.6 million ($1.36 per diluted share)** in 2019[232](index=232&type=chunk) - The company received **$95.2 million** in CARES Act Payroll Support Program (PSP) funds, with **$83.8 million** recognized in fiscal 2020 to offset payroll expenses[278](index=278&type=chunk) - Subsequent to year-end, the company secured a **$200.0 million** secured loan facility from the U.S. Treasury under the CARES Act, with **$195.0 million** borrowed by November 13, 2020[235](index=235&type=chunk)[328](index=328&type=chunk) - Cash and cash equivalents stood at **$99.4 million** as of September 30, 2020, with total unrestricted liquidity of **$99.4 million**[231](index=231&type=chunk)[334](index=334&type=chunk) Overview Impact of the COVID-19 Pandemic 2020 Financial Highlights Industry Trends Seasonality Components of Our Results of Operations Results of Operations Cautionary Statement Regarding Non-GAAP Measures Adjusted EBITDA and Adjusted EBITDAR Liquidity and Capital Resources Sources and Uses of Cash Restricted Cash Cash Flows Commitments and Contractual Obligations Off-Balance Sheet Arrangements Critical Accounting Policies Emerging Growth Company Status Recent Accounting Pronouncements [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk on variable-rate debt, with limited foreign currency and fuel price risk due to capacity agreements - The company is subject to interest rate risk on its variable-rate long-term debt, which is based on LIBOR[391](index=391&type=chunk) Interest Rate Risk Exposure (as of September 30, 2020) | Debt Type | Amount (in millions) | | :----------- | :------------------- | | Variable Rate| $486.6 | | Fixed Rate | $259.9 | - A hypothetical 50 basis point increase in market interest rates would have increased interest expense by approximately **$2.4 million** in fiscal year 2020[392](index=392&type=chunk) - The company has de minimis foreign currency risk and limited exposure to fuel price risk due to its capacity purchase agreements[394](index=394&type=chunk)[395](index=395&type=chunk) PART I – Financial Information [Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=71&type=section&id=Item%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents audited consolidated financial statements, including balance sheets, income statements, cash flows, and comprehensive notes, along with auditor reports - The consolidated financial statements for the year ended September 30, 2020, were audited by Ernst & Young LLP, who issued an unqualified opinion[403](index=403&type=chunk) - The company adopted ASU No. 2016-02, Leases (Topic 842), effective October 1, 2019, recognizing right-of-use assets and lease liabilities on the balance sheet[404](index=404&type=chunk)[507](index=507&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2020 | Sep 30, 2019 | | :---------------------- | :----------- | :----------- | | Cash and cash equivalents | $99,395 | $68,855 | | Total current assets | $155,591 | $157,841 | | Property and equipment, net | $1,212,415 | $1,273,585 | | Operating lease right-of-use assets | $123,251 | — | | Total assets | $1,501,930 | $1,451,917 | | Current portion of long-term debt and financing leases | $189,268 | $165,900 | | Current maturities of operating leases | $43,932 | — | | Total current liabilities | $353,326 | $256,706 | | Long-term debt and financing leases, excluding current portion | $542,456 | $677,423 | | Noncurrent operating lease liabilities | $62,531 | — | | Total liabilities | $1,044,071 | $1,026,049 | | Total stockholders' equity | $457,859 | $425,868 | Consolidated Statements of Operations Highlights (in thousands) | Metric | 2020 | 2019 | 2018 | | :---------------------- | :---------- | :---------- | :---------- | | Total operating revenues| $545,070 | $723,357 | $681,595 | | Total operating expenses| $464,903 | $602,220 | $608,947 | | Operating income | $80,167 | $121,137 | $72,648 | | Net income | $27,464 | $47,580 | $33,255 | | Basic EPS | $0.78 | $1.37 | $1.34 | | Diluted EPS | $0.78 | $1.36 | $1.32 | Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 2020 | 2019 | 2018 | | :-------------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $174,662 | $151,676 | $118,939 | | Net cash used in investing activities | $(26,667) | $(104,842) | $(138,563) | | Net cash provided by (used in) financing activities | $(117,655) | $(81,467) | $66,411 | | Net change in cash and cash equivalents | $30,340 | $(34,633) | $46,787 | 1. Organization and Operations 2. Summary of Significant Accounting Policies 3. Contract revenue and Pass- through and other 4. Recent Accounting Pronouncements 5. Concentrations 6. Intangible Assets 7. Balance Sheet Information 8. Fair Value Measurements 9. Long-Term Debt and Other Borrowings 10. Earnings Per Share 11. Common Stock 12. Income Taxes 13. Share-Based Compensation 14. Employee Stock Purchase Plan 15. Leases and Commitments 16. Contingencies 17. Selected Consolidated Quarterly Financial Data (unaudited) 18. Subsequent Events PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=113&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement[607](index=607&type=chunk) - The company has a code of conduct and ethics applicable to all employees and directors, available on its investor relations website[608](index=608&type=chunk) [Item 11. Executive Compensation](index=113&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference from the 2021 Proxy Statement - Executive compensation information is incorporated by reference from the 2021 Proxy Statement[609](index=609&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=113&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and related stockholder matters are incorporated by reference from the 2021 Proxy Statement - Security ownership information for beneficial owners and management is incorporated by reference from the 2021 Proxy Statement[610](index=610&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=113&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2021 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2021 Proxy Statement[611](index=611&type=chunk) [Item 14. Principal Accountant Fees and Services](index=113&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the 2021 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2021 Proxy Statement[612](index=612&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=114&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K, including consolidated financial statements, schedules, and a comprehensive exhibit index - The section includes consolidated financial statements and an exhibit index[614](index=614&type=chunk)[616](index=616&type=chunk) - Financial statement schedules are omitted as the required information is presented in the consolidated financial statements or notes[615](index=615&type=chunk) - The exhibit index details various agreements, including capacity purchase agreements with United and American, credit agreements, and employment agreements, many of which are incorporated by reference[617](index=617&type=chunk)[618](index=618&type=chunk)[619](index=619&type=chunk)[620](index=620&type=chunk)[621](index=621&type=chunk)[622](index=622&type=chunk)[623](index=623&type=chunk)[624](index=624&type=chunk)

Mesa Air Group, Inc. (NASDAQ:MESA) Q4 2020 Results Earnings Conference Call December 9, 2020 4:30 PM ET Company Participants Jonathan Ornstein - Chairman and CEO Mike Lotz - President and CFO Brian Gillman - Executive VP and General Counsel Brad Rich - Chief Operating Officer Conference Call Participants Savi Syth - Raymond James Bert Subin - Stifel Mike Linenberg - Deutsche Bank Helane Becker - Cowen George Stien - Corre Partners Operator Good afternoon, and thank you for standing by. And welcome to the Fo ...

Financial Data and Key Metrics Changes - The company reported adjusted pre-tax income of $4.9 million, down from $13.4 million in the same quarter last year, primarily due to a $16 million deferred revenue adjustment [22] - Net income for the quarter was $3.4 million, or $0.10 per share [22] - Total debt decreased by $24 million to $764 million [23] - Cash at the end of the quarter increased to $65 million from $52 million [20] Business Line Data and Key Metrics Changes - Block hours were down 70% compared to the same quarter last year, but an 87% increase is expected in the current quarter, reaching about 54% of pre-COVID-19 levels [4] - The company has implemented cost-saving initiatives, including a hiring freeze and reduced training costs, saving approximately $4 million in the quarter [12] - The cargo business is expected to be slightly better than breakeven with two aircraft, with a forecasted startup cost of $5 million [18] Market Data and Key Metrics Changes - The company operates 100% of its business under CPAs, which cover a significant amount of costs with fixed monthly amounts [7] - The company is working collaboratively with partners like American and United to adjust rates and cash flow benefits due to reduced utilization [9][16] Company Strategy and Development Direction - The company believes it is well-positioned as a low-cost provider of regional jet service, emphasizing cost structure advantages in the current environment [5] - The company is focusing on opportunities in the regional jet market due to ongoing industry consolidation and the impact of COVID-19 on competitors [57] - The cargo business is seen as a growth opportunity, with plans to expand beyond the initial two aircraft [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenges posed by COVID-19 and highlighted the importance of maintaining a low-cost structure [25] - The company is optimistic about accessing a portion of the $277 million allocation under the CARES Act loan program, which would enhance liquidity [6][21] - Management noted that while the cargo business will take time to develop, there is significant growth potential [57] Other Important Information - The company has received $46.3 million from the Payroll Support Program and expects to receive additional funds [23] - The company is preparing to operate new Embraer 175 aircraft and is working on financing options [15] Q&A Session Summary Question: What are the expectations for lease and principal deferrals over the next 18 months? - The company does not project any further deferrals beyond existing debt schedules and has made adjustments with partners related to operating costs [28] Question: Is the reduction in minimums applicable beyond September 30? - The reduction in minimums is only applicable through September 30 [30] Question: What is the potential for growth in the cargo business with DHL? - The company believes there is significant growth potential beyond the initial two aircraft, as smaller aircraft can efficiently serve the market [36] Question: What are the expected terms for the $277 million CARES Act loan? - The company expects the loan terms to be in the range of LIBOR plus 300 to 450, but specific negotiations have not yet occurred [42][43] Question: How does the company plan to account for the DHL business? - The company will operate under a crew, maintenance, and insurance contract, with DHL responsible for fuel and cargo revenue [46] Question: What is the long-term growth opportunity between cargo and air travel? - The company sees greater long-term opportunities in the regional business due to ongoing consolidation and the impact of COVID-19 on competitors [57]

PART I – FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the period ended June 30, 2020, reflect the significant impact of the COVID-19 pandemic, showing declining revenues and net income supported by a CARES Act grant [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets slightly increased to **$1.495 billion**, with cash decreasing and liabilities rising to **$1.05 billion** due to new lease accounting standards Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | September 30, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $64,934 | $68,855 | | Total current assets | $112,557 | $157,841 | | Property and equipment, net | $1,233,727 | $1,273,585 | | Operating lease right-of-use assets | $131,480 | — | | **Total assets** | **$1,495,313** | **$1,451,917** | | **Liabilities & Equity** | | | | Total current liabilities | $308,046 | $256,706 | | Long-term debt and financing leases, net | $586,877 | $677,423 | | Noncurrent operating lease liabilities | $71,068 | — | | **Total liabilities** | **$1,049,819** | **$1,026,049** | | **Total stockholders' equity** | **$445,494** | **$425,868** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2020 operating revenues significantly decreased by **59.4%** to **$73.1 million** due to COVID-19, yet net income increased to **$3.4 million** primarily due to a **$43.0 million** CARES Act grant Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $73,099 | $180,224 | $437,030 | $535,527 | | Total operating expenses | $57,875 | $163,147 | $380,729 | $444,843 | | CARES Act grant recognition | ($43,018) | — | ($43,018) | — | | Operating income | $15,224 | $17,077 | $56,301 | $90,684 | | Net income | $3,419 | $3,007 | $16,089 | $35,337 | | Diluted EPS | $0.10 | $0.09 | $0.46 | $1.01 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity increased to **$445.5 million** by June 30, 2020, driven by net income and stock compensation, partially offset by share repurchases - Total stockholders' equity grew to **$445.5 million** as of June 30, 2020, up from **$425.9 million** at the start of the fiscal year[19](index=19&type=chunk) - During the nine months ended June 30, 2020, all remaining outstanding warrants were converted to common stock[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended June 30, 2020, operating activities provided **$103.6 million** in cash, while investing and financing activities used **$25.1 million** and **$82.6 million** respectively Cash Flow Summary (Nine Months Ended June 30, in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $103,601 | $114,077 | | Net cash used in investing activities | ($25,114) | ($96,033) | | Net cash used in financing activities | ($82,610) | ($41,622) | | **Net change in cash** | **($4,123)** | **($23,578)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the severe impact of COVID-19 on flight demand, reliance on capacity agreements, CARES Act assistance, new lease accounting, and debt obligations - The COVID-19 pandemic caused a material decline in block hours from both American and United partners starting in March 2020, with significant reductions in the June 2020 quarter[25](index=25&type=chunk) - The company received **$46.3 million** in payroll support grants under the CARES Act as of June 30, 2020, and is eligible for a **$277.0 million** secured loan, with discussions ongoing[28](index=28&type=chunk) - Due to a significant reduction in flights, the company deferred **$16.0 million** of revenue in the quarter, as fixed monthly payments from partners exceeded the revenue recognizable under GAAP based on flights completed[55](index=55&type=chunk) - The company adopted the new lease accounting standard (ASC 842) on October 1, 2019, recognizing **$154.6 million** in right-of-use assets and **$141.9 million** in lease liabilities on the balance sheet[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the severe impact of COVID-19, leading to significant revenue decline, and details cost-saving and liquidity-enhancing measures, including CARES Act relief, to maintain an adequate liquidity position [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q3 2020 operating revenue decreased by **59.4%** due to COVID-19, offset by a **64.5%** decrease in operating expenses, largely due to a **$43.0 million** CARES Act grant Q3 2020 vs Q3 2019 Operating Revenue (in thousands) | Revenue Type | Q3 2020 | Q3 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Contract | $71,648 | $170,366 | $(98,718) | (57.9)% | | Pass-through and other | $1,451 | $9,858 | $(8,407) | (85.3)% | | **Total** | **$73,099** | **$180,224** | **$(107,125)** | **(59.4)%** | - The decrease in Q3 revenue was primarily driven by a **72.3%** decrease in block hours flown due to the impact of COVID-19[152](index=152&type=chunk)[155](index=155&type=chunk) - Q3 maintenance costs decreased by **$31.7 million** (**58.4%**) due to fewer heavy maintenance events and reduced flying[160](index=160&type=chunk) - The company recognized a **$43.0 million** CARES Act grant, which offset payroll expenses and was a primary contributor to the reduction in total operating expenses[167](index=167&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company bolstered liquidity to **$65 million** by June 30, 2020, through credit facility draws, **$46.3 million** in CARES Act support, and deferred debt and tax payments, expecting adequacy for the next 12 months - Drew **$23.0 million** from the undrawn revolving credit facility with CIT Bank, N.A[194](index=194&type=chunk) - Received **$46.3 million** of a **$92.5 million** CARES Act payroll support grant, with the remainder expected by September 2020[197](index=197&type=chunk) - Deferred **$28.0 million** in principal debt payments until September 30, 2020, and expects to defer approximately **$7.0 million** of employer social security taxes[195](index=195&type=chunk)[200](index=200&type=chunk) - As of June 30, 2020, the company had **$64.9 million** in cash and cash equivalents and five unencumbered CRJ-700 aircraft available for potential financing[201](index=201&type=chunk)[207](index=207&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate volatility on **$510.4 million** of variable-rate debt, with fuel price risk largely mitigated by capacity purchase agreements - The company is subject to interest rate risk on **$510.4 million** of variable-rate debt. A hypothetical 50 basis point change in interest rates would affect annual interest expense by approximately **$2.6 million**[226](index=226&type=chunk) - The company faces uncertainty related to the planned discontinuation of LIBOR after 2021, which could affect interest payable on its debt[228](index=228&type=chunk)[229](index=229&type=chunk) - Fuel price risk is largely sheltered because fuel for flights under capacity purchase agreements is directly paid for by major airline partners[231](index=231&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[232](index=232&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the third quarter of fiscal 2020[233](index=233&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending two class action lawsuits alleging federal securities law violations related to its IPO, with management not expecting a material adverse impact - The company is defending two class action lawsuits alleging securities law violations in connection with its IPO[236](index=236&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section updates significant risk factors, primarily concerning the severe impact of COVID-19 on air travel demand, substantial debt, financing challenges for new aircraft, and retention of key personnel - The COVID-19 pandemic has caused a severe decline in air travel demand, which has had and will continue to have a material adverse impact on the business, operating results, and financial condition[240](index=240&type=chunk)[241](index=241&type=chunk) - The company has a significant amount of debt (**$777.7 million** as of June 30, 2020) and may require additional liquidity. Its ability to raise capital may be difficult due to its debt level and non-investment grade credit ratings[248](index=248&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - A significant risk is the inability to secure financing for twenty new Embraer E-175 aircraft scheduled for delivery starting in September 2020, which could result in forfeiting the aircraft and adversely affecting business prospects[256](index=256&type=chunk) - CARES Act restrictions on executive compensation may make it challenging to retain key management personnel, which could adversely affect the business[255](index=255&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **112,587** common shares for **$0.5 million** during the nine months ended June 30, 2020, to cover income tax obligations from vested equity awards and warrant exercises - The Company repurchased **112,587** shares of its common stock for **$0.5 million** to cover income tax obligations on vested employee equity awards and warrant exercises[257](index=257&type=chunk) [Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities occurred[258](index=258&type=chunk) [Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - Not applicable[258](index=258&type=chunk) [Other Information](index=47&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported under this item[259](index=259&type=chunk) [Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including an amendment to a code-share agreement, CEO/CFO certifications, and Inline XBRL data files - Filed exhibits include the Twenty-First Amendment to the Code Share and Revenue Sharing Agreement, CEO/CFO certifications, and XBRL data[261](index=261&type=chunk)

Mesa Air Group, Inc. (NASDAQ:MESA) Q1 2020 Earnings Conference Call May 11, 2020 4:30 PM ET Company Participants Jonathan Ornstein - Chairman & Chief Executive Officer Mike Lotz - President & Chief Financial Officer Brian Gillman - Executive Vice President & General Counsel Brad Rich - Chief Operating Officer Conference Call Participants Savi Syth - Raymond James Helane Becker - Cowen Mike Linenberg - Deutsche Bank Operator Welcome, and thank you for standing by. At this time, all participants are in a list ...

PART I – FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements as of March 31, 2020, reflecting decreased net income from maintenance and COVID-19 impacts [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $1.51 billion due to new lease standard adoption; cash and equivalents decreased to $52.4 million | | March 31, 2020 (In thousands) | September 30, 2019 (In thousands) | | :--- | :--- | :--- | | **Total current assets** | $98,311 | $157,841 | | **Total assets** | $1,511,740 | $1,451,917 | | **Total current liabilities** | $300,609 | $256,706 | | **Total liabilities** | $1,070,388 | $1,026,049 | | **Total stockholders' equity** | $441,352 | $425,868 | - The company adopted a new lease standard (Topic 842) effective October 1, 2019, recognizing **$140.8 million** in operating lease right-of-use assets and corresponding lease liabilities[46](index=46&type=chunk)[110](index=110&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net income sharply declined for both three and six months ended March 31, 2020, primarily due to increased maintenance expenses | Metric (In thousands, except per share) | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Total operating revenues** | $179,896 | $177,147 | $363,931 | $355,303 | | **Total operating expenses** | $166,004 | $142,770 | $322,854 | $281,696 | | **Operating income** | $13,892 | $34,377 | $41,077 | $73,607 | | **Net income** | $1,885 | $13,249 | $12,670 | $32,330 | | **Diluted EPS** | $0.05 | $0.38 | $0.36 | $0.92 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity increased to $441.4 million, driven by net income and stock compensation, with all warrants converted - Stockholders' equity grew to **$441.4 million** as of March 31, 2020, up from **$425.9 million** at the start of the fiscal year[20](index=20&type=chunk) - As of March 31, 2020, all outstanding warrants had been converted to common shares[92](index=92&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow slightly decreased; significant cash used in financing for debt payments, ending with $55.8 million cash | Cash Flow Activity (In thousands) | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $65,202 | $69,770 | | **Net cash used in investing activities** | ($24,773) | ($18,491) | | **Net cash used in financing activities** | ($57,090) | ($77,024) | | **Net change in cash, cash equivalents and restricted cash** | ($16,661) | ($25,745) | | **Cash, cash equivalents and restricted cash at end of period** | $55,840 | $81,389 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail COVID-19 impacts, reliance on capacity purchase agreements, new lease standard, and CARES Act support - The COVID-19 pandemic caused a material decline in demand for block hours from both American and United Airlines, with April 2020 block hours dropping **72.4%** year-over-year[27](index=27&type=chunk)[128](index=128&type=chunk) - Subsequent to the quarter end, the company was granted **$92.5 million** in payroll support under the CARES Act and applied for additional secured loans[121](index=121&type=chunk)[123](index=123&type=chunk) | Partner | Revenue Contribution (6 Months Ended Mar 31, 2020) | | :--- | :--- | | American Airlines | 51% | | United Airlines | 49% | - As of March 31, 2020, the company operated **145 aircraft** under capacity purchase agreements: **59 CRJ-900s** for American and a mix of **20 CRJ-700s** and **60 E-175s** for United[25](index=25&type=chunk)[33](index=33&type=chunk)[40](index=40&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses COVID-19's adverse impact on demand and revenue, highlighting increased maintenance costs and liquidity measures [COVID-19 Pandemic Impact and Response](index=29&type=section&id=COVID-19%20Pandemic%20Impact%20and%20Response) The pandemic severely impacted revenues and financial position, leading to cost-saving initiatives and liquidity bolstering actions - The pandemic caused an unprecedented and materially adverse impact on revenues and financial position, with a significant reduction in variable revenue based on block hours[135](index=135&type=chunk) - The company drew **$23.0 million** from its revolving credit facility to increase liquidity[33](index=33&type=chunk)[136](index=136&type=chunk) - In April 2020, the company was granted **$92.5 million** in emergency relief through the CARES Act payroll support program[33](index=33&type=chunk)[136](index=136&type=chunk) [Results of Operations - Three Months Ended March 31, 2020](index=32&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20March%2031%2C%202020) Operating income significantly declined due to a 41.8% surge in maintenance expenses, despite a slight revenue increase | Metric (In thousands) | Q2 2020 | Q2 2019 | % Change | | :--- | :--- | :--- | :--- | | **Contract Revenue** | $165,781 | $169,771 | (2.4)% | | **Total Operating Revenues** | $179,896 | $177,147 | 1.6% | | **Maintenance Expense** | $64,335 | $45,380 | 41.8% | | **Total Operating Expenses** | $166,004 | $142,770 | 16.3% | | **Operating Income** | $13,892 | $34,377 | (59.6)% | - The primary driver of increased operating expenses was a **$19.0 million** rise in maintenance costs, stemming from more engine overhauls and airframe C-checks[163](index=163&type=chunk) [Results of Operations - Six Months Ended March 31, 2020](index=35&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20March%2031%2C%202020) Operating income decreased by 44.2%, primarily due to a 43.7% increase in maintenance expenses over the six-month period | Metric (In thousands) | Six Months 2020 | Six Months 2019 | % Change | | :--- | :--- | :--- | :--- | | **Contract Revenue** | $337,580 | $340,220 | (0.8)% | | **Total Operating Revenues** | $363,931 | $355,303 | 2.4% | | **Maintenance Expense** | $122,430 | $85,182 | 43.7% | | **Total Operating Expenses** | $322,854 | $281,696 | 14.6% | | **Operating Income** | $41,077 | $73,607 | (44.2)% | - Maintenance costs for the six-month period increased by **$37.2 million**, primarily due to a **173.9%** increase in engine overhaul expenses[180](index=180&type=chunk)[181](index=181&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company bolstered liquidity with credit facility draws, debt deferrals, and CARES Act aid, expecting adequate funding for 12 months - Key liquidity actions include drawing **$23.0 million** from a credit facility, deferring **$28 million** in debt payments, and receiving **$92.5 million** in CARES Act aid[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk) - The company expects to defer approximately **$7.0 million** in employer social security tax payments under the CARES Act[196](index=196&type=chunk) - The company believes cash on hand, cash from operations, and government assistance will be adequate to fund operating and capital needs for at least the next 12 months[201](index=201&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate risk on $533.1 million variable-rate debt, with minimal foreign currency and fuel price risks - As of March 31, 2020, the company had **$533.1 million** of variable-rate debt; a **50 basis point** change in interest rates would impact annual interest expense by about **$2.7 million**[222](index=222&type=chunk) - The company acknowledges the risk associated with the planned discontinuation of LIBOR after 2021, which could affect interest payments on its variable-rate debt[224](index=224&type=chunk)[225](index=225&type=chunk) - Fuel price risk is largely mitigated as fuel costs for flights under capacity purchase agreements are directly paid by major airline partners[227](index=227&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2020 - Based on an evaluation as of the end of the reporting period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[229](index=229&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company faces two class action lawsuits alleging federal securities law violations related to its IPO - The company is facing two class action lawsuits alleging securities law violations in connection with its IPO, claiming false or misleading statements in the registration statement[232](index=232&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) A new primary risk factor is the COVID-19 pandemic, severely impacting demand, block hours, and financial condition - A new primary risk factor is the COVID-19 pandemic, which has caused a severe decline in air travel demand, adversely affecting the company's partners and its own operations[236](index=236&type=chunk) - As a result of partner capacity reductions due to COVID-19, the company's block hours in April 2020 dropped by **72.4%** compared to April 2019[238](index=238&type=chunk) - The company's receipt of financial assistance under the CARES Act comes with conditions, including restrictions on involuntary furloughs, dividends, share repurchases, and executive compensation[241](index=241&type=chunk) [Other Information (Items 2-6)](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales, defaults, or other material information, and listed exhibits - The company reported no unregistered sales of equity securities, defaults upon senior securities, or other material information during the reporting period[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk)

Mesa Air Group, Inc. (NASDAQ:MESA) Q1 2020 Earnings Conference Call February 10, 2020 4:30 PM ET Company Participants Jonathan Ornstein - Chairman and Chief Executive Officer Mike Lotz - President and Chief Financial Officer Brian Gillman - Executive Vice President and General Counsel Brad Rich - Chief Operating Officer Darren Zapfe - Vice President, Finance Conference Call Participants Savi Syth - Raymond James Helane Becker - Cowen Koosh Patel - Deutsche Bank Joseph DeNardi - Stifel Operator Welcome and t ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-38626 MESA AIR GROUP, INC. (Exact name of registrant as specified in its charter) Nevada 85-0302351 (State or other jurisdict ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2019 PHOENIX, ARIZONA 85008 85008 (Address of principal executive offices) (Zip Code) OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from______________ to ___________. Commission File Number 001-38626 MESA AIR GROUP, INC. (Exact n ...

Mesa Air Group, Inc. (NASDAQ:MESA) Q4 2019 Results Conference Call December 11, 2019 4:30 PM ET Company Participants Jonathan Ornstein - Chairman and Chief Executive Officer Mike Lotz - President and Chief Financial Officer Brian Gillman - Executive Vice President and General Counsel Darren Zapfe - Vice President of Finance Conference Call Participants Kate Lyness - Deutsche Bank Conor Cunningham - Cowen and Company Operator Welcome, and thank you for standing by. At this time, all participants are in liste ...