Mesa Airlines(US:MESA)2020-08-11 02:41Financial 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]