Mesa Airlines(MESA) - 2025 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial information, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements Presents unaudited condensed consolidated financial statements, reflecting significant asset and equity decreases, Q3 2025 net income, but a substantial 9M 2025 net loss from asset sales and impairments Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :-------------------------------- | :-------------------- | :------- | | Total assets | $178,649 | $596,858 | $(418,209) | -70.1% | | Total liabilities | $219,933 | $486,616 | $(266,683) | -54.8% | | Total stockholders' equity | $(41,284) | $110,242 | $(151,526) | -137.4% | | Cash and cash equivalents | $42,472 | $15,621 | $26,851 | 171.9% | | Property and equipment, net | $31,850 | $426,351 | $(394,501) | -92.5% | | Assets held for sale (current) | $60,311 | $5,741 | $54,570 | 950.5% | | Long-term debt and finance leases, excluding current portion | $28,245 | $259,816 | $(231,571) | -89.1% | - Total assets decreased significantly by 70.1% from $596.9 million to $178.6 million, primarily due to a 92.5% reduction in property and equipment, net, and a substantial increase in current assets held for sale[13] - Stockholders' equity turned negative, decreasing by 137.4% from $110.2 million to $(41.3) million, indicating a challenging financial position[13] Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (3M) | % Change (3M) | | :-------------------- | :------------------------------- | :------------------------------- | :---------- | :-------------- | | Total operating revenues | $92,784 | $110,793 | $(18,009) | -16.3% | | Total operating expenses | $92,930 | $119,820 | $(26,890) | -22.4% | | Operating loss | $(146) | $(9,027) | $8,881 | -98.4% | | Total other income (expense), net | $20,764 | $(11,691) | $32,455 | 277.6% | | Net income (loss) | $20,856 | $(19,908) | $40,764 | 204.8% | | Basic EPS | $0.50 | $(0.48) | $0.98 | 204.2% | | Metric (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change (9M) | % Change (9M) | | :-------------------- | :------------------------------ | :------------------------------ | :---------- | :-------------- | | Total operating revenues | $290,764 | $361,152 | $(70,388) | -19.5% | | Total operating expenses | $458,959 | $409,937 | $49,022 | 12.0% | | Operating loss | $(168,195) | $(48,785) | $(119,410) | 244.8% | | Total other income (expense), net | $10,034 | $(17,186) | $27,220 | 158.4% | | Net income (loss) | $(152,332) | $(66,097) | $(86,235) | 130.5% | | Basic EPS | $(3.68) | $(1.61) | $(2.07) | 128.6% | - For the three months ended June 30, 2025, the company reported a net income of $20.9 million, a significant improvement from a net loss of $19.9 million in the prior year, driven by a substantial increase in other income (expense), net[15] - For the nine months ended June 30, 2025, the company experienced a larger net loss of $152.3 million, compared to $66.1 million in the prior year, primarily due to increased operating expenses, including asset impairment and loss on sale of assets[15] Condensed Consolidated Statements of Stockholders' Equity | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------- | :------------ | :----------------- | | Common Stock and Additional Paid-In Capital | $273,183 | $272,376 | | Accumulated Deficit | $(314,467) | $(162,134) | | Total Stockholders' Equity | $(41,284) | $110,242 | - Total stockholders' equity decreased from $110.2 million at September 30, 2024, to a deficit of $(41.3) million at June 30, 2025, primarily due to accumulated net losses[18] - The accumulated deficit significantly worsened from $(162.1) million to $(314.5) million over the nine-month period[18] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash (used in) provided by operating activities | $(43,346) | $19,596 | | Net cash provided by investing activities | $193,662 | $112,918 | | Net cash used in financing activities | $(123,426) | $(149,301) | | Net change in cash, cash equivalents and restricted cash | $26,890 | $(16,787) | | Cash, cash equivalents and restricted cash at end of period | $45,520 | $19,285 | - Operating activities used $43.3 million in cash for the nine months ended June 30, 2025, a significant decline from $19.6 million provided in the prior year, primarily due to a larger net loss[20][204] - Investing activities provided $193.7 million, an increase from $112.9 million in the prior year, largely driven by $199.0 million in proceeds from the sale of aircraft and engines[20][207] - Financing activities used $123.4 million, primarily for principal payments on long-term debt and finance leases[20][210] Notes to Condensed Consolidated Financial Statements 1. Organization and Operations - Mesa Air Group, Inc. operates a fleet of 60 Embraer 175 (E-175) regional aircraft, providing scheduled passenger service to 79 cities in 31 states, Cuba, and Mexico, primarily under a Capacity Purchase Agreement (CPA) with United Airlines[22] - On April 4, 2025, Mesa entered into a Merger Agreement with Republic Airways Holdings, Inc., where Republic will merge into Mesa, with Mesa as the surviving corporation, subject to stockholder and regulatory approvals[24][29] - Concurrently, Mesa, Republic, and United entered into a Three Party Agreement, including termination of the existing United CPA (to be replaced by a new long-term CPA), sale/disposal of Mesa's remaining eligible assets, debt extinguishment, a 3% increase in CPA block hour rates retroactive to January 1, 2025, and transfer of Archer agreements[35][39] - The company faced liquidity concerns due to transition costs, increased pilot wages, and rising interest rates, resulting in a $152.3 million net loss for the nine months ended June 30, 2025, including a $54.4 million loss on aircraft sales and $111.8 million in asset impairment[37][38] - Management implemented several measures to address liquidity concerns, including the merger agreement, CPA amendments (rate increases, performance incentives), waiver of financial covenant defaults, sale of engines for $16.3 million to pay down debt, and delaying major maintenance spending[39][40][46] 2. Summary of Significant Accounting Policies - The company operates as a single operating and reportable segment, with the CEO using consolidated financial information to evaluate performance and allocate resources[53][145] - Contract revenue is recognized as flight services are provided under the CPA, based on fixed monthly amounts per aircraft, flights, and block hours, with additional incentives or penalties[55] - Pass-through revenue includes reimbursements for direct expenses like passenger liability insurance, property taxes, and major maintenance on United-leased aircraft[56] - Lease revenue associated with the CPA is accounted for as an operating lease, with $0.2 million and $26.1 million recognized for the three and nine months ended June 30, 2025, respectively[59] - Heavy maintenance costs for previously owned E-175 fleet were deferred and amortized, but upon sale of 18 E-175 aircraft to United, remaining deferred balances were written off, while other fleets use the direct expense method[67][68] 3. Recent Accounting Pronouncements - The company applied new disclosure requirements from ASU 2023-07 (enhanced segment disclosures) and ASU 2023-08 (additional income tax disclosures) during the nine months ended June 30, 2025[71][79] - The company is evaluating ASU 2024-03, effective in 2026, which requires disaggregation of operating expenses and additional disclosures[71] 4. Concentrations of Credit Risk - United Airlines accounted for approximately 98% of total revenue for the three and nine months ended June 30, 2025, and 96-98% for the same periods in 2024, indicating a significant concentration of credit risk[75] - A termination of the United CPA would have a material adverse effect on the company's business, financial condition, results of operations, and cash flows[75] 5. Assets Held for Sale - As of June 30, 2025, the company classified 21 airframes, 34 engines, and certain spare parts as held for sale, with a net book value of $60.3 million, all as current assets[78] - During the three months ended June 30, 2025, the company completed the sale of six CRJ-900 airframes, 13 GE Model CF34-8C engines, and certain spare parts[77] 6. Balance Sheet Information | Item (in thousands) | June 30, 2025 | September 30, 2024 | | :------------------ | :------------ | :----------------- | | Expendable parts and supplies, net | $16,172 | $28,272 | | Property and equipment, net | $31,850 | $426,351 | | Other assets | $5,466 | $7,709 | | Other accrued expenses | $23,015 | $32,308 | | Other noncurrent liabilities | $1,837 | $28,579 | - Property and equipment, net, decreased significantly from $426.4 million to $31.9 million, reflecting asset sales and reclassifications to held for sale[80] - Other noncurrent liabilities decreased substantially from $28.6 million to $1.8 million, primarily due to a write-off of warrant liabilities[80] - Depreciation of property and equipment decreased by 65.3% to $3.4 million for the three months ended June 30, 2025, and by 47.3% to $17.3 million for the nine months ended June 30, 2025, due to aircraft sales or reclassification as non-depreciable assets held for sale[86][157][172] 7. Fair Value Measurements - The estimated fair value of total long-term debt and finance leases (including current maturities) was $110.4 million as of June 30, 2025, compared to a carrying value of $113.7 million[89] - The fair value of debt is determined using the discounted cash flow method and is classified as Level 3 due to unobservable inputs[89][90] 8. Long-Term Debt, Finance Leases, and Other Borrowings | Debt Type (in thousands) | June 30, 2025 | September 30, 2024 | | :----------------------- | :------------ | :----------------- | | Gross long-term debt, including current maturities | $113,744 | $315,210 | | Net long-term debt, including current maturities | $112,970 | $310,271 | | Current portion, net | $(84,725) | $(50,455) | | Net long-term debt | $28,245 | $259,816 | - Gross long-term debt, including current maturities, decreased significantly from $315.2 million to $113.7 million between September 30, 2024, and June 30, 2025[91] - Principal maturities of long-term debt for the next five years include $86.5 million in 2026, $6.2 million in 2027, $4.8 million in 2028, and $16.2 million in 2029[91] - The company has no obligations under the Enhanced Equipment Trust Certificate (EETC) note as of June 30, 2025, as United assumed the remaining balance of $73.4 million[92] - The United Revolving Credit Facility was amended to increase revolving commitments to $50.7 million and includes a deemed prepayment of $15 million with potential forgiveness upon achieving certain block hours and maintaining a high completion factor[95][96] - The Treasury Loan, with an outstanding balance of $80.7 million as of June 30, 2025, matures in October 2025 and requires compliance with a minimum collateral coverage ratio (CCR), which was lowered to 0.91 to 1.0 effective February 28, 2025[97][99][101] 9. Earnings/(Loss) Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income/(loss) | $20,856 | $(19,908) | $(152,332) | $(66,097) | | Basic EPS | $0.50 | $(0.48) | $(3.68) | $(1.61) | | Diluted EPS | $0.50 | $(0.48) | $(3.68) | $(1.61) | - Basic and diluted EPS for the three months ended June 30, 2025, were $0.50, a positive shift from $(0.48) in the prior year[104] - For the nine months ended June 30, 2025, basic and diluted EPS were $(3.68), worsening from $(1.61) in the prior year[104] - Approximately 1.0 million unvested restricted shares and 4.9 million warrants were excluded from diluted EPS calculations in loss periods due to their anti-dilutive effect[105] 10. Common Stock - As of June 30, 2025, 4,899,497 warrants to purchase common stock at an exercise price of $3.98 per share were issued and outstanding to the U.S. Treasury[108] - The company has not historically paid dividends, and the Treasury Loan contains restrictions limiting or prohibiting dividend payments[109] 11. Income Taxes | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income tax (benefit) expense | $(238) | $(810) | $(5,829) | $126 | | Effective Tax Rate (ETR) | -1.2% | 3.9% | 3.7% | -0.2% | - The company maintains a valuation allowance on a portion of its federal and state net operating losses (NOLs)[111][162][177] - As of June 30, 2025, aggregate federal NOL carryforwards were approximately $277.6 million (expiring 2030-2038) and state NOL carryforwards were $150.6 million (expiring 2024-2043)[112][163][178] 12. Share-Based Compensation | RSU Activity (Nine Months Ended June 30, 2025) | Number of Shares | Weighted Average Grant Date Fair Value | | :--------------------------------------------- | :--------------- | :------------------------------------- | | Unvested at September 30, 2024 | 975,415 | $1.83 | | Granted | 550,247 | $1.04 | | Vested | (532,397) | $1.92 | | Forfeited | (29,575) | $1.88 | | Unvested at June 30, 2025 | 963,690 | $1.32 | - Total unrecognized compensation cost related to unvested share-based awards was $1.2 million as of June 30, 2025, expected to be recognized over a weighted-average period of 1.6 years[115] - Share-based compensation expense was $0.3 million for the three months ended June 30, 2025, and $0.8 million for the nine months ended June 30, 2025[116] 13. Leases | Lease Cost Component (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Operating lease costs | $639 | $810 | $2,000 | $3,233 | | Variable and short-term lease costs | $1,261 | $2,581 | $5,907 | $5,543 | | Interest expense on finance lease liabilities | $- | $746 | $48 | $3,291 | | Amortization expense of finance lease assets | $- | $365 | $54 | $5,001 | | Total lease costs | $1,900 | $4,502 | $8,009 | $17,068 | - Total lease costs decreased by 57.8% to $1.9 million for the three months ended June 30, 2025, and by 53.0% to $8.0 million for the nine months ended June 30, 2025, primarily due to reduced finance lease expenses[119] - As of June 30, 2025, operating leases had a remaining weighted average lease term of 5.8 years and were measured using a weighted average discount rate of 5.4%[119] 14. Commitments and Contingencies - The company is subject to routine legal actions, but management believes the outcomes are not likely to have a material adverse effect on financial position, liquidity, or results of operations[120][226] - In February 2021, Mesa entered into a forward purchase contract with Archer for eVTOL aircraft with an aggregate base commitment of $200.0 million, which the company agreed to transfer or have United assume during Q3 2025, leading to a write-off of the associated liability[121] - In July 2021, Mesa entered into a forward purchase contract with Heart for fully electric aircraft, with a maximum aggregate base commitment of $1,200.0 million, subject to future terms and conditions[122] 15. Subsequent Events - Subsequent to June 30, 2025, the company sold five CRJ-900 airframes and eight GE Model CF34-8C engines for $11.7 million, with proceeds used to pay down the UST Loan[124] - On July 4, 2025, the 'One Big Beautiful Bill Act' (OBBBA) was signed into law, which includes permanent extension of certain Tax Cuts and Jobs Act provisions and modifications to international tax framework, with the company assessing its impact[125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, detailing revenue and expense trends, liquidity, capital resources, and non-GAAP measures, highlighting strategic changes and asset sales impact Overview - Mesa Airlines operates 60 E-175 regional aircraft under a Capacity Purchase Agreement (CPA) with United, which provides guaranteed monthly revenue and shields the company from fuel price and passenger traffic volatility[127][128] - All consolidated contract revenues for the three and nine months ended June 30, 2025, were derived from the United CPA, aircraft leases to a third party, and Mesa Pilot Development (MPD)[127] Components of Results of Operations - Operating revenues consist of contract revenue (fixed monthly amounts, flight/block hour fees, rental revenue) and pass-through and other revenue (reimbursements for insurance, property taxes, landing fees, etc.)[130][131][132] - Operating expenses include flight operations (pilot wages, training), maintenance (engine overhauls, airframe, pass-through costs), aircraft rent, general and administrative, depreciation and amortization, asset impairment, and other operating expenses[133][134][137][138][139] Segment Reporting - The company operates as a single operating and reportable segment, as the Chief Operating Decision Maker (CODM) evaluates performance and allocates resources on a consolidated basis[143][144][145] Results of Operations Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 | Metric (in thousands) | 3M Ended June 30, 2025 | 3M Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------- | :--------------------- | :----- | :------- | | Total operating revenues | $92,784 | $110,793 | $(18,009) | -16.3% | | Contract revenue | $69,940 | $95,596 | $(25,656) | -26.8% | | Pass-through and other revenue | $22,844 | $15,197 | $7,647 | 50.3% | | Total operating expenses | $92,930 | $119,820 | $(26,890) | -22.4% | | Flight operations | $36,551 | $45,455 | $(8,904) | -19.6% | | Maintenance | $41,417 | $44,266 | $(2,849) | -6.4% | | Aircraft rent | $98 | $1,684 | $(1,586) | -94.2% | | Depreciation and amortization | $3,377 | $9,730 | $(6,353) | -65.3% | | Asset impairment | $(52) | $7,880 | $(7,932) | -100.7% | | Operating loss | $(146) | $(9,027) | $8,881 | -98.4% | | Net income (loss) | $20,856 | $(19,908) | $40,764 | 204.8% | - Net income improved significantly to $20.9 million from a $19.9 million net loss, primarily due to a $32.5 million increase in other income (expense), net, driven by the write-off of warrant liabilities and lower interest expense[146][160] - Total operating revenues decreased by 16.3% to $92.8 million, mainly due to a 26.8% decrease in contract revenue from fewer aircraft under contract, partially offset by a 50.3% increase in pass-through and other revenue[152] - Total operating expenses decreased by 22.4% to $92.9 million, driven by lower flight operations (decreased pilot training and wages), a 94.2% reduction in aircraft rent, and a 65.3% decrease in depreciation and amortization[153][154][156][157] Nine Months Ended June 30, 2025 Compared to Nine Months Ended June 30, 2024 | Metric (in thousands) | 9M Ended June 30, 2025 | 9M Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------- | :--------------------- | :----- | :------- | | Total operating revenues | $290,764 | $361,152 | $(70,388) | -19.5% | | Contract revenue | $219,041 | $310,516 | $(91,475) | -29.5% | | Pass-through and other revenue | $71,723 | $50,636 | $21,087 | 41.6% | | Total operating expenses | $458,959 | $409,937 | $49,022 | 12.0% | | Flight operations | $108,021 | $146,602 | $(38,581) | -26.3% | | Maintenance | $131,483 | $137,165 | $(5,682) | -4.1% | | Aircraft rent | $3,038 | $4,296 | $(1,258) | -29.3% | | Depreciation and amortization | $17,311 | $32,846 | $(15,535) | -47.3% | | Asset impairment | $111,786 | $50,923 | $60,863 | 119.5% | | Loss on sale of assets | $54,397 | $150 | $54,247 | 36164.7% |\ | Operating loss | $(168,195) | $(48,785) | $(119,410) | 244.8% | | Net loss | $(152,332) | $(66,097) | $(86,235) | 130.5% | - Net loss worsened by 130.5% to $152.3 million, primarily due to a 244.8% increase in operating loss, driven by significant asset impairment ($111.8 million) and loss on sale of assets ($54.4 million)[164][165][173] - Total operating revenues decreased by 19.5% to $290.8 million, mainly due to a 29.5% decrease in contract revenue from reduced block hours and fewer aircraft under contract, partially offset by a 41.6% increase in pass-through and other revenue[166][167] - Total operating expenses increased by 12.0% to $459.0 million, despite decreases in flight operations (26.3%), maintenance (4.1%), and depreciation and amortization (47.3%), due to the large asset impairment and loss on sale of assets[168][169][172][173] Cautionary Statement Regarding Non-GAAP Measures - The company presents Adjusted EBITDA and Adjusted EBITDAR as non-GAAP measures, which are used by management, investors, and analysts for industry comparisons[179] - Adjusted EBITDA is defined as net income or loss before interest, income taxes, and depreciation and amortization, adjusted for gains/losses on investments, lease termination costs, impairment charges, and gains/losses on debt extinguishment[180] - Adjusted EBITDAR further adjusts Adjusted EBITDA by excluding aircraft rent[181] - These non-GAAP measures have limitations, as they do not reflect cash expenditures for capital, working capital, debt service, or the need for asset replacement, and may not be comparable to similarly titled measures used by other companies[182][183] Adjusted EBITDA and Adjusted EBITDAR | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income/(loss) | $20,856 | $(19,908) | $(152,332) | $(66,097) | | Adjusted EBITDA | $6,001 | $8,948 | $25,329 | $40,800 | | Adjusted EBITDAR | $6,099 | $10,632 | $28,367 | $45,096 | - Adjusted EBITDA decreased by 32.9% to $6.0 million for the three months ended June 30, 2025, and by 37.9% to $25.3 million for the nine months ended June 30, 2025[184] - Adjusted EBITDAR decreased by 42.6% to $6.1 million for the three months ended June 30, 2025, and by 37.1% to $28.4 million for the nine months ended June 30, 2025[184] Liquidity and Capital Resources Going Concern - The company's financial results for the nine months ended June 30, 2025, including a $152.3 million net loss, raised concerns about its ability to fund operations and meet debt obligations over the next twelve months[190][191] - Management implemented several material changes, including the Merger Agreement and Three Party Agreement with United and Republic, which involve a new CPA, asset disposals, debt extinguishment, and a 3% increase in CPA block hour rates[192] - Other measures include waivers for financial covenant defaults, sale of engines for $16.3 million to reduce UST Loan, and delaying major maintenance spending[192] - The company believes these plans have alleviated financial concerns and will enable it to meet cash obligations for the next twelve months, though forecasts involve significant judgment and estimates[193] Sources and Uses of Cash - Primary cash requirements include operating expenses, working capital, capital expenditures, aircraft pre-delivery payments, maintenance, aircraft rent, and debt service[195] - Principal sources of liquidity are cash on hand, cash generated from operations, and external borrowings[195] - As of June 30, 2025, the company had $42.5 million in cash and cash equivalents and $60.3 million in assets held for sale[199] Restricted Cash - As of June 30, 2025, the company had $3.0 million in restricted cash, collateralizing outstanding letters of credit for airport authorities, insurance, and other business needs[200][201] Cash Flows | Cash Flow Activity (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash (used in) provided by operating activities | $(43,346) | $19,596 | | Net cash provided by investing activities | $193,662 | $112,918 | | Net cash used in financing activities | $(123,426) | $(149,301) | | Net change in cash, cash equivalents and restricted cash | $26,890 | $(16,787) | - Net cash used in operating activities was $43.3 million for the nine months ended June 30, 2025, compared to $19.6 million provided in the prior year, primarily due to a net loss of $152.3 million[204] - Net cash provided by investing activities increased to $193.7 million, mainly from $199.0 million in proceeds from the sale of aircraft and engines[207] - Net cash used in financing activities was $123.4 million, primarily for principal payments on long-term debt and finance leases[210] Critical Accounting Estimates - There have been no material changes to the critical accounting estimates previously disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2024[213] Recently Issued Accounting Pronouncements - A description of recently issued accounting pronouncements is disclosed in Note 3 to the unaudited condensed consolidated financial statements[214] Item 3. Quantitative and Qualitative Disclosures About Market Risk Outlines exposure to market risks, primarily interest rate risk on variable-rate debt and minimal foreign currency risk, with fuel price risk largely mitigated by capacity purchase agreements Interest Rate Risk - The company is exposed to interest rate risk on its variable-rate long-term debt, which is based on SOFR[216] - As of June 30, 2025, the company had $113.7 million of variable-rate debt, and a hypothetical 100 basis point change in market interest rates would affect interest expense by approximately $1.1 million for the nine months ended June 30, 2025[217] - The company transitioned from LIBOR to SOFR for its debt arrangements after June 30, 2023, and does not use derivative instruments to hedge interest rate risk[216][218] Foreign Currency Risk - The company has de minimis foreign currency risks related to station operating expenses denominated in currencies other than the U.S. dollar, primarily the Canadian dollar[219] - Foreign currency transaction gains and losses have not been material, and the company does not have a formal hedging program[219] Fuel Price Risk - The company's capacity purchase agreements largely shelter it from volatility related to fuel prices, as fuel is directly paid and supplied by its major partners[220] Item 4. Controls and Procedures Details management's evaluation of disclosure controls and internal control over financial reporting, concluding effectiveness with no material changes, while acknowledging inherent limitations Evaluation of Disclosure Controls and Procedures - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[221] Changes in Internal Control Over Financial Reporting - There were no changes in internal control over financial reporting during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[223] Inherent Limitations on Effectiveness of Controls - The effectiveness of any internal control system is subject to inherent limitations, including judgment in design and operation, and the inability to eliminate misconduct or unintentional error completely[224] PART II – OTHER INFORMATION This section addresses legal proceedings, risk factors, equity sales, defaults, and other miscellaneous disclosures Item 1. Legal Proceedings The company is involved in routine legal actions, but management believes outcomes will not materially adversely affect financial position, liquidity, or operations - The company is subject to routine legal actions, but management believes the ultimate outcomes are not likely to have a material adverse effect on its financial position, liquidity, or results of operations[226] Item 1A. Risk Factors Refers to previously filed documents for comprehensive risk factors, confirming no material changes to those disclosed in the 2024 Form 10-K and March 2025 Form 10-Q - Readers are referred to 'Item 1A. Risk Factors' in the Annual Report on Form 10-K for the fiscal year ended September 30, 2024, and the Quarterly Report on Form 10-Q for the three months ended March 31, 2025, for important risk factors[227] - There have been no material changes to the risk factors previously disclosed in the 2024 Form 10-K and March 2025 10-Q[227] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - No unregistered sales of equity securities or use of proceeds occurred during the period[228] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities occurred during the period[229] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[230] Item 5. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[231] Item 6. Exhibits Provides a list of exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL documents - The exhibit index includes certifications from the Principal Executive Officer and Principal Financial Officer, Inline XBRL documents, and the Cover Page Interactive Data File[233] SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report - The report was duly signed on behalf of Mesa Air Group, Inc. by Michael J. Lotz, Chief Financial Officer, on August 13, 2025[236][238]