Home » AIRLINE NEWS » Mesa Air Group Reports Net Loss of .9 Million in Q1 2024 with Block Hours Up by 5% Mesa Air Group Reports Net Loss of $57.9 Million in Q1 2024 with Block Hours Up by 5%
Monday, May 20, 2024
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Mesa Air Group has released its financial and operating results for the first quarter of fiscal 2024. The company’s performance metrics provide insight into its operational efficiency and financial health during this period.
In its latest report, Mesa Air Group detailed key figures, including revenue, operating expenses, and net income. These results reflect the company’s strategies and market conditions, offering stakeholders a comprehensive overview of its economic position.
First Quarter Fiscal 2024 Highlights:
- Total operating revenues: $118.8 million
- Pre-tax loss: $57.0 million
- Net loss: $57.9 million, or $(1.41) per diluted share
- Adjusted net loss¹: $21.8 million², or $(0.53) per diluted share
- Adjusted EBITDAR¹: $6.3 million
- Block hours: 46,658 (approximately 5% increase from fourth quarter fiscal 2023)
- Debt reduction: $39.2 million paid down using surplus CRJ asset sale proceeds
Post-Quarter Developments:
- United Airlines Agreement: United Airlines agreed to significantly higher block-hour rates for E-175 flying, effective January 2024.
- Cargo Operation Wind-Down: Due to reduced cargo demand, Mesa and DHL mutually agreed to wind down their cargo operation as of February 2024. DHL will reimburse certain costs associated with the wind-down, and pilots from the cargo operation are transitioning to Mesa’s E-175 aircraft.
- Fleet Reduction: Initiated reduction of 12 CRJ-900s from the contracted fleet by August 2024, consistent with long-term fleet planning.
- Pilot Development Program: Launched a new location in Prescott, AZ, for the Mesa Pilot Development program, increasing the Pipistrel training fleet to 28. Approximately 120 pilots are currently enrolled in the program.
- Equity Receipts: Received 283,734 common shares for vested warrants in XTI Aerospace, Inc.
Surplus CRJ Asset Sale Updates (Post-Quarter):
- Engine Sales: Closed the sale of twelve CF34-8C engines for gross proceeds of $54.4 million, with net proceeds of $15.9 million after debt reduction.
- LOI for Additional Engine Sales: Received a letter of intent for the purchase of twelve additional surplus CF34-8C engines for $24.6 million, primarily to pay down United States Treasury debt.
- Lease Obligations: Revised purchase obligations under the finance lease for 15 CRJ-900s, extending from March 2024 to between May and September 2024.
Jonathan Ornstein, Chairman and CEO, said, “While it has been a long road, we have successfully completed the majority of our surplus CRJ asset sales. Over the past 19 months, we have finalized approximately $390 million of CRJ asset sales, which we used to pay down approximately $265 million of debt. We are in discussions with multiple parties to address the remaining surplus assets.
Ornstein continued, “In addition to the progress we have made on debt reduction and the block-hour rate increase we negotiated with United, another significant reason for our optimism moving forward is the substantial reduction in attrition across our work groups, especially pilots. Pilot attrition has improved sequentially over the past several months, and our attrition for May 2024 is less than half of what it was a year ago. Combined with increased monthly pilot training output, we expect to see lower training expenses and better utilization of our fleet, which should lead to improved operational performance and financial results. Additionally, we are pleased to report that our Mesa Pilot Development time-building program achieved profitability in its first year of operations and has already provided Mesa with new-hire first officers. It is currently our intent to source all future new-hire pilots from Mesa Pilot Development.
“For the second fiscal quarter of 2024, we expect to report an adjusted net profit for the first time in ten quarters. We also expect to generate breakeven cash flow for the remainder of the fiscal year. As our business turns the corner, we can focus on longer-term strategic opportunities to enhance shareholder value as well as job security and career advancement for our people.”
First Quarter Fiscal 2024 Details
Mesa Air Group, Inc. (NASDAQ: MESA) reported its financial and operating results for the first quarter of fiscal 2024.
Financial Highlights:
- Total Operating Revenues: $118.8 million, down $28.4 million (19.3%) from $147.2 million in Q1 2023. The decrease was primarily due to a reduction in CRJ-900 block hours and fewer aircraft under contract. Contract revenue fell by $27.4 million (21.3%), and pass-through revenue decreased by $1.0 million (5.6%), driven by lower maintenance pass-throughs for the E-175 fleet.
- Deferred Revenue Recognition: $3.0 million recognized in Q1 2024, down from $5.3 million in Q1 2023. The remaining deferred revenue balance of $18.0 million will be recognized as flights are completed over the remaining term of the United contract.
- Operating Expenses: $167.2 million, up $22.5 million (15.6%) from Q1 2023, mainly due to $40.4 million of asset impairment losses related to assets held for sale. Excluding these losses, operating expenses were $126.8 million, compared to $141.0 million in Q1 2023. This reflects a $6.5 million decrease in flight operations expenses to $51.8 million, lower pilot training and wage expenses, a $1.9 million decrease in depreciation and amortization, and $2.9 million lower aircraft rent.
- Net Loss: $57.9 million, or $(1.41) per diluted share, compared to a net loss of $9.1 million, or $(0.25) per diluted share, in Q1 2023.
- Adjusted Net Loss: $21.8 million, or $(0.53) per diluted share, versus an adjusted net loss of $4.3 million, or $(0.12) per diluted share, in Q1 2023.
- Adjusted EBITDA: $5.1 million, down from $21.8 million in Q1 2023.
- Adjusted EBITDAR: $6.3 million, compared to $25.9 million in Q1 2023.
Operating Performance:
- Completion Factor: 99.92% for United, compared to 99.96% in Q1 2023. This metric excludes cancellations due to weather and air traffic control.
- On-Time Performance: 87.6% of arrivals within 14 minutes.
- Revenue from United Contract: Approximately 96% of total revenue in Q1 2024. The CPA with United includes 80 large jets (E-175s and CRJ-900s). The fleet mix in Q1 2024 was 54 E-175s, 26 CRJ-900s, and four 737 cargo aircraft.
Balance Sheet and Cash Flow:
- Unrestricted Cash and Equivalents: $16.1 million at the end of the December quarter.
- Total Debt: $481.0 million, secured primarily with aircraft and engines.
- Debt Payments: $41.3 million related to CRJ asset sales, $11.4 million repaid to the United States Treasury, and $7.7 million in scheduled debt payments. An additional $3.0 million of MHI debt was forgiven, and $5.0 million was drawn from the revolving credit facility.
- Unrestricted Cash and Equivalents (March 31, 2024): $18.5 million.
Sustainable Aviation Equity Investments:
- XTI Aerospace: Received 283,734 common shares in XTI Aerospace in exchange for equity warrants. XTI Aerospace was formed from the merger of XTI and Inpixon on March 12, 2024.
- Other Investments:
- Archer Aviation, Inc.: 2.27 million common shares and 1.17 million unvested equity warrants.
- Heart Aerospace Incorporated: 222,222 unvested equity warrants. Previously held $5.0 million in preferred stock, sold to United in exchange for extinguishing $12.6 million of debt.
- REGENT: Investments in all-electric passenger seagliders.
- Elroy Air: Investments in autonomous aircraft systems for air cargo and other applications.
