1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995 Commission File
Number 0-15495
MESA AIR GROUP, INC.
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(Exact name of registrant as specified in its charter)
New Mexico 85-0302351
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2325 East 30th Street, Farmington, New Mexico 87401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 327-0271
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
On May 12, 1995, the Registrant had outstanding 32,859,261 shares of Common
Stock.
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PART I. FINANCIAL INFORMATION
Item 1.
MESA AIR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31 March 31
1995 1994 1995 1994
---- ---- ---- ----
Operating revenues:
-------------------------- -------------------------
Passenger $ 103,323 $ 90,747 $ 201,838 $ 180,197
Freight and other 1,817 1,705 3,753 3,288
Public service 1,295 1,341 2,672 2,771
--------- -------- --------- ---------
Total operating revenues 106,435 93,793 208,263 186,256
--------- -------- --------- ---------
Operating expenses:
Flight operations 41,693 30,608 79,549 61,616
Maintenance 17,465 14,458 35,307 28,691
Aircraft and traffic servicing 15,625 11,426 28,674 21,965
Promotion and sales 18,331 14,600 35,170 29,244
General and administrative 6,439 6,347 12,739 12,461
Depreciation and amortization 4,618 4,203 8,782 7,037
--------- -------- --------- ---------
Total operating expenses 104,171 81,642 200,221 161,014
--------- -------- --------- ---------
Operating income 2,264 12,151 8,042 25,242
========= ======== ========= =========
Non-operating income (expenses):
Interest expense (1,772) (1,680) (2,982) (3,192)
Interest income 377 1,282 1,093 2,279
Other (768) (1,603) (1,625) (1,522)
--------- -------- --------- ---------
Total non-operating expenses (2,163) (2,001) (3,514) (2,435)
--------- -------- --------- ---------
Earnings before income taxes 101 10,150 4,528 22,807
Income tax expense 38 3,857 1,720 8,677
--------- -------- --------- ---------
Earnings before extraordinary item 63 6,293 2,808 14,130
Extraordinary item - gain on extinguishment
of debt (net of income taxes of $252) -- -- -- 412
--------- -------- --------- ---------
Net earnings $ 63 $ 6,293 $ 2,808 $ 14,542
--------- -------- --------- ---------
Average common and common
equivalent shares outstanding 33,282 37,331 33,281 37,216
--------- -------- --------- ---------
Earnings per common and common
equivalent share:
Earnings before extraordinary item $ 0.00 $ 0.17 $ 0.08 $ 0.38
Extraordinary item -- -- -- 0.01
--------- -------- --------- ---------
Net earnings $ .00 $ 0.17 $ 0.08 $ 0.39
--------- -------- --------- ---------
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MESA AIR GROUP, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
March 31 September 30
1995 1994
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 26,199 $ 35,567
Marketable securities 30,940 63,044
Receivables, principally traffic 48,670 50,857
Expendable parts and supplies, net 23,619 19,401
Prepaid expenses and other current assets 10,129 9,037
-------- --------
Total current assets 139,557 177,906
Property and equipment, net 186,174 198,062
Non-compete agreement, net 1,500 1,650
Lease and equipment deposits 17,973 13,319
Intangibles, net 54,405 22,459
Other assets 4,411 6,506
-------- --------
Total assets $404,020 $419,902
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt and capital leases $ 8,236 $ 8,474
Accounts payable 13,514 10,720
Income taxes payable -- 616
Air traffic liability 3,553 3,926
Accrued compensation 3,315 8,140
Other accrued expenses 10,697 11,844
-------- --------
Total current liabilities 39,315 43,720
Long-term debt and capital leases, excluding current portion 86,979 91,772
Deferred credits 26,838 24,845
Deferred income taxes 20,499 25,249
Stockholders' equity:
Preferred stock of no par value, 2,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock of no par value, 75,000,000
shares authorized; 32,859,261 and 32,704,042
shares issued and outstanding 148,667 147,695
Unrealized gain on marketable securities, net 2,049 9,757
Retained earnings 79,673 76,864
-------- --------
Total stockholders' equity 230,389 234,316
-------- --------
Total liabilities and stockholders' equity $404,020 $419,902
======== ========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
(in thousands)
Six Months Ended March 31
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,808 $ 14,542
Adjustments to reconcile net earnings to
net cash flows from operating activities:
Depreciation and amortization 8,782 6,735
(Gain) Loss on disposal of property & equipment (29) --
Extraordinary gain on extinguishment of debt -- (664)
Stock bonus plan 385 --
Changes in assets and liabilities:
Receivables 2,187 (8,365)
Inventories (4,218) (7,335)
Prepaid expenses and other current assets (1,093) 1,004
Accounts payable 2,794 (2,445)
Other accrued liabilities (6,961) 4,207
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 4,655 7,679
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (32,372) (27,120)
Proceeds from sale of property and equipment 28,696 11,670
Proceeds from sale of marketable securities 24,397 --
Purchases of marketable securities, net -- (3,425)
Purchase of subsidiary, net of cash acquired -- (4,890)
Intangibles (31,113) --
Other assets 1,671 (1,246)
Lease and equipment deposits (3,155) 32
Collection of notes receivable 466 324
-------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES (11,410) (24,655)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and
obligations under capital leases (5,032) (6,687)
Proceeds from issuance of common stock 152 1,493
Proceeds from deferred credits 2,267 1,147
-------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES (2,613) (4,047)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (9,368) (21,023)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 35,567 36,121
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 26,199 $ 15,098
-------- --------
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended March 31
Supplemental disclosures of cash flow information:
Cash paid during the period for: 1995 1994
---- ----
Interest $ 2,932 $ 4,704
Income taxes 3,108 5,892
Mesa purchased fixed assets during the periods ended March 31 upon which debt
was assumed or incurred as follows:
1995 1994
---- ----
Assets purchased $ 32,372 $ 78,253
Debt assumed or incurred -- 51,133
----------- ----------
Net cash $ 32,372 $ 27,120
========== =========
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the six-month period ended March 31,
1995 are not necessarily indicative of the results that may be expected
for the year ending September 30, 1995.
2. The consolidated financial statements include the accounts of Mesa Air
Group, Inc. and its wholly owned subsidiaries WestAir Holding, Inc.,
Air Midwest, Inc., San Juan Pilot Training, Inc., and Four Corners
Aviation, Inc. All significant intercompany balances and transactions
have been eliminated in consolidation. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and related disclosures contained in Mesa's Annual
Report on Form 10-K for the year ended September 30, 1994, filed with
the Securities and Exchange Commission.
3. Income tax expense is based upon Mesa's annual effective tax rate of
38 percent.
4. Legal Proceedings
See Part II. Item 1
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
GENERAL
Mesa Air Group, Inc., ("Mesa") maintains six regional airline operations
utilizing low-cost high frequency "hub-and-spoke" route systems.
The Mesa Airlines unit operates within the Mountain West division independent of
any code-sharing agreement with a major carrier from a hub airport at
Albuquerque, New Mexico. In addition, the Mountain West division operates as
United Express and America West Express. United Express is operated by the
Mountain West division in the Rocky Mountain and in Western regions of the
United States pursuant to code-sharing arrangements with United Airlines, Inc.
("United") utilizing hubs in Denver and Los Angeles. The Southwest region of the
United States is operated by the Mountain West division as "America West
Express" pursuant to a code-sharing arrangement with America West Airlines, Inc.
utilizing a hub in Phoenix, Arizona. (See Subsequent Events regarding the
Columbus hub.)
WestAir Commuter Airlines, Inc., a wholly-owned subsidiary of WestAir Holding,
Inc. serves the West Coast region as a "United Express" carrier with hubs in San
Francisco, Portland and Seattle. WestAir Holding, Inc. is a wholly-owned
subsidiary of Mesa. (See Liquidity and Capital Resources-WestAir.)
Mesa operates as "USAir Express" in the Northeast, Southeast, Midwest and
Central regions of the United States pursuant to code-sharing arrangements with
USAir, Inc. ("USAir"). Mesa provides USAir Express service in the Northeast and
Southeast regions of the United States by its FloridaGulf Airlines division,
and expanded into the Northeast operations in the summer of 1993 utilizing hubs
in Boston, Philadelphia, Baltimore, Orlando, New Orleans and Tampa. The Midwest
and Central regions are served by Air Midwest, Inc., from a hub in Kansas City
and by the Liberty Express division acquired in February 1994, from a hub in
Pittsburgh, Pennsylvania.
Mesa has recently established a new division known as Desert Sun Airlines to
operate two Fokker 70 jet aircraft capable of carrying 78 passengers. The
aircraft are to be delivered in the spring of 1995. Passenger service is
scheduled to commence in June 1995. Desert Sun Airlines has options to acquire
six additional Fokker 70 aircraft.
The following table sets forth selected operating data of Mesa for the periods
indicated:
Three Months Ended Six Months Ended
------------------ ----------------
March 31 March 31
-------- --------
1995 1994 1995 1994
---- ---- ---- ----
Operating Data Category:
- ------------------------
Passengers 1,402,019 1,170,361 2,827,651 2,359,228
Available seat miles (ASMs) (000) 555,038 460,730 1,088,316 913,630
Revenue passenger miles (000) 264,743 227,943 529,477 458,150
Load factor 47.7% 49.5% 48.7% 50.1%
Yield per revenue passenger mile 39.0 cent(s) 39.8 cent(s) 38.1 cent(s) 39.3 cent(s)
Operating cost per available seat mile 18.8 cent(s) 17.7 cent(s) 18.3 cent(s) 17.6 cent(s)
Revenue per available seat mile 19.2 cent(s) 20.4 cent(s) 19.1 cent(s) 20.4 cent(s)
Average stage length 161 164 161 165
Number of aircraft in fleet 182 163 182 163
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Three Months Ended March 31, 1995 Versus Three Months Ended March 31, 1994
Three Months Ended
March 31
------------------
1995 1994
---- ----
Percent of Percent of
Cost total operating Cost total operating
per ASM revenues per ASM revenues
------- -------- ------- --------
Operating Expense Category:
- ---------------------------
Flight operations 7.5 cent(s) 39.2% 6.6 cent(s) 32.6%
Maintenance 3.2 cent(s) 16.4% 3.1 cent(s) 15.4%
Aircraft and traffic servicing 2.8 cent(s) 14.7% 2.5 cent(s) 12.2%
Promotion and sales 3.3 cent(s) 17.2% 3.2 cent(s) 15.6%
General and administrative 1.2 cent(s) 6.0% 1.4 cent(s) 6.8%
Depreciation and amortization 0.8 cent(s) 4.3% 0.9 cent(s) 4.5%
Total operating expenses 18.8 cent(s) 97.8% 17.7 cent(s) 87.1%
Interest expense 0.3 cent(s) 1.7% 0.4 cent(s) 1.8%
Mesa generated a 13.4 percent growth in revenues from $93.8 million during the
three-month period ended March 31, 1994 to $106.4 million during the three-month
period ended March 31, 1995. This growth in revenue can be attributed to the
addition of Liberty Express, a division of Mesa, in February 1994 as a USAir
Express carrier with a hub in Pittsburgh. In addition, the expansion of the
FloridaGulf Airlines division, which encompassed new routes obtained with the
purchase of certain assets from USAir Allegheny Commuter subsidiary operating
hubs in Boston, Philadelphia and Baltimore, contributed to an increase in
revenue over the same period in the prior year. Additional passengers from the
Denver hub resulting from reduced service by Continental and Continental Express
in Denver also contributed to the increased revenues.
Passengers carried during the quarter increased by 19.8 percent, but revenue
increased by only 13.4 percent as a result of a five percent decrease in the
average ticket price from $77.54 to $73.70. In addition to competitive
conditions in local markets, ticket prices are affected by Mesa's share of fares
set by its code-sharing partners. The primary causes of the decrease in average
ticket price was fare discounting in the Eastern region of the United States by
USAir in response to competition from Continental Lite and Continental Express
and in the Western region in response to increased competition between United
Airlines Shuttle by United and Southwest Airlines, Inc. Additionally, extensive
negative publicity regarding the safety of regional airlines following the crash
of a USAir jet in September 1994 and crashes of two turboprop airliners in late
1994 caused a significant decline in the number of passengers carried. Extensive
air fare discounting resulted in order to stimulate traffic which further
contributed to the decline in average ticket price.
Operating costs increased from 17.7 cent(s) to 18.8 cent(s) per ASM resulting in
an increase of approximately $22.5 million in operating expenses for the current
period over the same period in 1994. Mesa believes that the primary reasons for
the increase in operating expenses were increases in flight operations expense
from 6.6 cent(s) per ASM to 7.5 cent(s) per ASM due to de Havilland Dash 8 and
Fokker 70 fleet integration costs all of which are being expensed as they are
incurred along with an increase in lease expense resulting from expansion of the
aircraft fleet. Aircraft and traffic service costs have increased from 2.5
cent(s) per ASM to 2.8 cent(s) per ASM due in part to additional expenses
resulting from obtaining FAR Part 121 certification and operating costs of the
new airport in Denver, Colorado. Depreciation and amortization expense has
decreased from .9 cent(s) per ASM to 0.8 cent(s) per ASM as a result of the sale
and leaseback of 17 Beech 1900D aircraft. Interest expense has decreased from
0.4 cent(s) per ASM to .3 cent(s) per ASM as a result of fleet refinancing.
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Operating profits decreased from $12.2 million in the three-month period ended
March 31, 1994 to $2.3 million in the three-month period ended March 31, 1995.
This decrease is the result of the effects of negative publicity discussed
above and various one-time costs such as integration costs of de Havilland Dash
8 and Fokker 70 aircraft and resolution of pending disputes at Mesa's WestAir
subsidiary.
Six Months Ended March 31, 1995 Versus Six Months Ended March 31, 1994
Six Months Ended
March 31
----------------
1995 1994
---- ----
Percent of Percent of
Cost total operating Cost total operating
per ASM revenues per ASM revenues
------- -------- ------- --------
Operating Expense Category:
- ---------------------------
Flight operations 7.3 cent(s) 38.2% 6.7 cent(s) 33.1%
Maintenance 3.2 cent(s) 17.0% 3.1 cent(s) 15.4%
Aircraft and traffic servicing 2.6 cent(s) 13.8% 2.4 cent(s) 11.8%
Promotion and sales 3.2 cent(s) 16.9% 3.2 cent(s) 15.7%
General and administrative 1.2 cent(s) 6.1% 1.4 cent(s) 6.7%
Depreciation and amortization 0.8 cent(s) 4.2% 0.8 cent(s) 3.8%
Total operating expenses 18.3 cent(s) 96.2% 17.6 cent(s) 86.4%
Interest expense 0.3 cent(s) 1.4% 0.3 cent(s) 1.7%
Mesa generated 11.8% growth in revenues from $186.3 million during the
six-month period ended March 31, 1994 to $208.3 million during the six-month
period ended March 31, 1995.
Passengers carried during the six months ended March 31, 1995 increased
approximately 19.9% relative to the six months ended March 31, 1994, while
revenues grew approximately 11.8%, reflecting a decrease in the average ticket
price from $76.38 to $71.38. In addition to competitive conditions affecting the
industry discussed previously, ticket prices were affected by Mesa's share of
the fares set by its code-sharing partners.
Operating expenses incurred for the six months ended March 31, 1995 were 18.3
cent(s) per ASM compared to 17.6 cent(s) per ASM for the six months ended March
31, 1994. An increase in flight operation expenses from 6.7 cent(s) per ASM to
7.3 cent(s) per ASM is the major component of the increase in operating
expenses. The increase is primarily a result of the sale and leaseback of 17
1900D aircraft and de Havilland Dash 8 and Fokker 70 aircraft integration costs.
Operating income decreased from approximately $25.2 million in the six-month
period ended March 31, 1994 to approximately $8.0 million for the same period in
1995 due to decreased average fares and increased operating expenses discussed
in the three-month comparison.
Consolidated net earnings for the six-month period ended March 31, 1995
decreased to $2.8 million from $14.5 million during the six- month period ended
March 31, 1994 as a result of factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Mesa's cash and marketable securities at March 31, 1995 were $57.1 million as
compared to $98.6 million at September 30, 1994. This decrease is the result of
approximately $32 million in expenditures to United in conjunction with the
acquisition of aircraft and the extension of its code-sharing agreement with the
Mountain West division. In addition, deposits on aircraft of
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approximately $3.2 million were paid during the first six months of the fiscal
year. The remainder of the decrease is related to rotable and expendable
inventory purchases in conjunction with de Havilland Dash 8 fleet and other
airplane operating requirements. For the six-month period ended March 31, 1995,
net cash flows generated from operations was $4.7 million as compared to $7.7
million for the same period in 1994. At March 31, 1995 approximately $7.4
million of cash was pledged to secure a note payable.
As of March 31, 1995, Mesa had aggregate indebtedness of $95.2 million payable
to various entities under promissory notes issued in connection with the
purchase of aircraft and related equipment. The notes have maturities ranging up
to 2006 with monthly installments of approximately $1.4 million. Mesa also has a
$5 million line of credit with Norwest Bank New Mexico. No amounts were advanced
against this line of credit at March 31, 1995. The $5 million line of credit
expired on April 30, 1995 and was renewed in the amount of $11 million.
As of March 31, 1995, Mesa had 49 Beechcraft 1900D aircraft on order. These
aircraft are to be delivered at the rate of approximately 18 per year. The
purchase agreement between Beech and Mesa allows Mesa to trade in existing
Beechcraft 1900C aircraft in an "as-is" condition for new 1900D aircraft. Beech
Acceptance Corporation has agreed to finance the purchase or lease of each new
aircraft. Mesa's WestAir division has 15 Embraer EMB-120 Brasilia aircraft on
order. (See WestAir)
During March 1995, Mesa entered into an agreement with Bombardier, Inc. to
acquire 25 de Havilland Dash 8-200 aircraft with deliveries beginning in
February 1996 through March 1997. Based on current market conditions, the
monthly lease payments are anticipated to be approximately $72,000 per plane.
Mesa will trade in seven Dash 8-300 aircraft, five Dash 8-100 aircraft and 13
Embraer Brasilia aircraft in exchange for the 25 Dash 8-200 aircraft. Bombardier
will participate as needed to finance the new aircraft deliveries. Mesa also
has an option to acquire 25 additional de Havilland Dash 8-200 aircraft.
Mesa has significant lease obligations on existing aircraft operated by Mesa.
These leases are classified as operating leases and therefore are not reflected
as liabilities on the balance sheet. At March 31, 1995, 153 aircraft were leased
by Mesa with remaining terms ranging up to 14 years. Future minimum lease
payments due under all aircraft operating leases were approximately $589 million
at March 31, 1995.
The FAA has issued a Notice of Proposed Rule making, which, if enacted, would
require commuter airlines with aircraft with 30 passenger seats or less
operating under FAR Part 135 rules to begin operating those aircraft under FAR
Part 121 regulations. Mesa is unable to determine the expense to be incurred in
implementation of these changes until the final rules are issued. The new rules
will apply to all commuter airlines and Mesa management anticipates the entire
industry will attempt to recover such cost increases through increased fares.
WESTAIR
Increased competition on the West Coast between the Shuttle by United and
Southwest Airlines, Inc., in addition to extensive negative publicity regarding
the safety of regional airlines has resulted in lower airfares, decreased
passenger traffic, negative operating results and negative operating cash flow
at Mesa's WestAir subsidiary. Many routes operated by WestAir have become
unprofitable as a result of this increased competition from jet carriers and it
is unknown if the market will return to prior service levels. Although
management cannot predict how long WestAir will remain unprofitable, management
is committed to restoring the long-term earnings potential of WestAir.
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WestAir's management is in the process of making significant operational
changes it believes necessary to attain profitable operations and generate
sufficient cash flow to meet its obligations. There can be no assurance that
such changes will be sufficient to return WestAir to profitability and generate
the cash flow necessary to meet its obligations.
Mesa has agreed to provide WestAir an advance of up to 85% of qualifying
accounts receivable; based primarily upon airline ticket stock with the
outstanding balance payable at the end of each calendar month to meet its
operating needs. The remaining balance of 15% will be held by Mesa for 90 days
to secure itself against non-payment or rejection of accounts receivable by the
Airline Clearing House or other parties. This loan will replace a $4,000,000
line of credit from a bank which expired on April 30, 1995 and will bear
interest at the rate of prime plus 1/2%.
WestAir has agreed with United, its code-sharing partner, to convert certain of
its markets to a fee per departure, which is based upon cost plus a fixed profit
margin. WestAir has also arranged with United to terminate service in several
markets resulting in the withdrawal from WestAir's fleet of seven Embraer
Brasilia aircraft by June 1, 1995. It is the present intention of Mesa to assist
WestAir by including the seven aircraft to be parked by WestAir in the aircraft
to be traded in under Mesa's order from one of its aircraft suppliers.
WestAir's management is also in the process of executing extensive work force
and overhead reductions sufficient to match or exceed the reduction in size of
the WestAir fleet. Work rules under the amendable Airline Pilots Association
contract (ALPA) are being renegotiated to provide for a reduction in the number
of crews per plane from four to three and one quarter crews per plane. Such
targeted work rules would be comparable to present work rules in other unionized
Mesa divisions. Although it is possible that a strike may result before the
issues are resolved, Mesa and WestAir management believe it preferable to avoid
a strike. However, both Mesa and WestAir management are prepared to deal with
the consequences of a strike or a lockout if necessary.
WestAir has notified British Aerospace of its intent to exercise its early lease
termination rights on twenty-one Jetstream 31 aircraft currently under lease. If
the early termination rights are exercised, WestAir will incur approximately
$1.8 million in termination costs plus aircraft refurbishment expenses. As an
alternative, WestAir is willing to renegotiate the Jetstream 31 leases to reduce
monthly lease expense to an economically feasible level. If economically
feasible monthly lease payments cannot be renegotiated with British Aerospace
and WestAir exercises it turnback rights, alternative aircraft may be placed in
service which could result in aircraft integration costs.
WestAir has an outstanding order with Embraer Aircraft Corporation for fifteen
new Embraer Brasilia aircraft to be delivered at the rate of approximately four
per year through 1998. Embraer has been informed that Mesa has no obligation to
and is unwilling to guarantee WestAir's obligations under the order, and that
WestAir management believes its fleet cannot absorb additional aircraft because
of competitive factors in its operating environment. Embraer and WestAir are
presently discussing ways to resolve these issues. Embraer has agreed to defer
two of the four scheduled 1995 deliveries until 1997, assist with or provide
financing for two 1995 deliveries, consider assuming the obligation for two used
WestAir Brasilia aircraft and to continue to negotiate a resolution for the
remaining aircraft on order. If WestAir is forced to take delivery of and make
payments on the remaining thirteen aircraft on order, this could have a material
adverse affect on the operations of WestAir.
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SUBSEQUENT EVENTS
The flight attendants of the Mountain West operating division of Mesa voted to
join AFA (Association of Flight Attendants) during April 1995. The pilots of the
Mountain West operating division are still in initial contract negotiations with
ALPA.
During April 1995, Mountain West Airlines, a division of Mesa, announced the
discontinuation of its America West Express operations at the Columbus, Ohio hub
effective May 31, 1995. The Columbus-based fleet will be redeployed to the West
Coast as United Express under a fixed fee per departure contract effective June
1, 1995. Mesa does not anticipate a material cost to the Mountain West division
related to discontinuation of the Columbus-based operation.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The contents of Item 3. Legal Proceedings from the Form 10-K
filed for the fiscal year ended September 30, 1994 has been
incorporated by reference.
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
a. At the Annual meeting of Shareholders held on March
14, 1995, the following was approved:
-- All directors were elected as listed in the 1995
Proxy Statement for the 1994 fiscal year.
Voted for Abstain/Withhold
--------- ------- --------
Larry L. Risley 25,000,219 1,502,031
E. Janie Risley 24,941,947 1,560,303
Blaine M. Jones 25,050 943 1,451,307
George W. Pennington 25,029,996 1,472,254
Richard C. Poe 25,012,311 1,489,939
Jack Braly 24,915,896 1,586,354
-- Ratification of an amendment to the Restated
Articles of Incorporation changing the Company name
from Mesa Airlines, Inc., to Mesa Air Group, Inc.
Voted for: 24,805,478; voted against: 144,916;
abstain: 1,551,856.
-- Approval of the Additional Outside Directors Stock
Option Plan dated December 9, 1994. Voted for:
22,658,269; voted against: 2,148,701; abstain:
1,695,280.
-- Approval of selection of KPMG Peat Marwick LLP as
independent auditors for Mesa during fiscal 1995.
Voted for: 25,388,749; voted against: 63,554;
abstain: 1,049,947.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Form 8-K filed January 17, 1995 and Form 8-K filed April 5,
1995.
Exhibit 10.79 - Purchase Agreement B95-7701-PA-299
between Bombardier, Inc. and Mesa
Airlines, Inc.
Exhibit 27 - Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mesa Air Group, Inc.
Registrant
Date: 5/12/95 /s/ W. Stephen Jackson
--------------------------------------
W. Stephen Jackson
Chief Financial Officer, Treasurer and
Vice President of Finance
(Principal Accounting Officer)
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15
MESA AIR GROUP
COMMISSION FILE NO. 0-15495
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
NO. DESCRIPTION
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10.79 BOMBARDIER PURCHASE AGREEMENT
27 FINANCIAL DATA SCHEDULE