Mesa Airlines(US:MESA)2024-10-15 20:58Financial Performance - For the three months ended June 30, 2024, operating revenues decreased by $3.9 million, or 3.4%, to $110.8 million compared to the same period in 2023 [118]. - Contract revenue increased by $1.2 million, or 1.3%, to $95.6 million, primarily due to an increased United block hour compensation rate [118]. - Pass-through and other revenue decreased by $5.1 million, or 25.3%, to $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 $9.0 million, an improvement from a loss of $40.2 million in the same period in 2023 [114]. - Total operating revenue decreased by $22.5 million, or 5.9%, to $361.2 million for the nine months ended June 30, 2024, compared to the same period in 2023 [129]. - Contract revenue decreased by $16.1 million, or 4.9%, to $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 $48.8 million for the nine months ended June 30, 2024, compared to an operating loss of $64.1 million for the same period in 2023 [125]. - The company reported a net loss of $66.1 million for the nine months ended June 30, 2024, including a non-cash impairment charge of $50.9 million [144]. Operating Expenses - Total operating expenses decreased by $35.1 million, or 22.7%, to $119.8 million for the three months ended June 30, 2024 [119]. - Flight operations expense decreased by $6.1 million, or 11.8%, to $45.5 million, driven by reduced pilot training expenses and lower pilot wages [119]. - Maintenance expense decreased by $6.8 million, or 13.3%, to $44.3 million, primarily due to a decrease in pass-through engine overhaul costs [119]. - General and administrative expense decreased by $1.6 million, or 14.4%, to $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 $5.6 million, or 36.5%, to $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 $37.9 million, or 8.5%, to $409.9 million for the nine months ended June 30, 2024, compared to the same period in 2023 [131]. - Total maintenance costs decreased by $8.2 million, or 5.6%, to $137.2 million for the nine months ended June 30, 2024, compared to $145.3 million for the same period in 2023 [134]. - General and administrative expenses decreased by $6.0 million, or 15.5%, to $32.9 million for the nine months ended June 30, 2024, primarily driven by decreases in pass-through property taxes and insurance costs [135]. - Depreciation and amortization expense decreased by $14.2 million, or 30.2%, to $32.8 million for the nine months ended June 30, 2024, due to aircraft being classified as non-depreciable assets held for sale [135]. Asset Management - The total value of assets reclassified to held for sale was $48.5 million, with an impairment recorded of $23.0 million [102]. - Asset impairment 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 $0.7 million [145]. Cash Flow and Liquidity - Net cash provided by operating activities for the nine months ended June 30, 2024, was $19.6 million, compared to a net cash used of $13.8 million for the same period in 2023 [153][156]. - Net cash flow provided by investing activities totaled $112.9 million for the nine months ended June 30, 2024, with proceeds from the sale of aircraft and engines totaling $127.1 million [157]. - Net cash used in financing activities was $149.3 million for the nine months ended June 30, 2024, with principal repayments on long-term debt amounting to $235.2 million [159]. - The company has $16.3 million in cash and cash equivalents and $3.0 million in restricted cash as of June 30, 2024 [151]. - The company has $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 $15.0 million but reached an agreement with United for a waiver through December 31, 2024 [143]. - The company entered into a Waiver Agreement to address a projected financial covenant default for the fiscal quarter ending June 30, 2024 [145]. Debt and Interest Rate Management - As of June 30, 2024, the company had $230.4 million of variable-rate debt, with a hypothetical 100 basis point change in market interest rates potentially affecting interest expense by approximately $2.3 million [164]. - The company had $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].