MESA - Earnings call transcript Q4 2018

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Operator

Welcome and thank you for standing by. All participants are in a listen-only mode until the question-and-answer session of today’s call. [Operator Instructions] Also the conference is being recorded.

If you have any objections, you may disconnect at this time.

Now, I will turn the meeting over to your host, Mr. Ornstein. Jonathan

begin. may You

Jonathan Ornstein

much, call thanks today. very us for on our operator. you everyone And joining Thank

As Ornstein, Chief Airlines. I’m operator Chairman the indicated, and Executive this Officer, is Jonathan Mesa

and today Vice I’d Executive General like of to Darren Counsel; Chief Brian Mike me Zapfe, Gillman, the President, with read Ferverda, to Harbor Officer; call Officer, Brian ask the Lotz, On statement. the Finance. President Operating Chief Mike our Financial our President are Safe and Vice

Brian Gillman

contain information various management’s will statements to Thanks, that as on Jonathan. call This based forward-looking belief, assumptions are conference management. made currently well as by and available

correct. the are statements certain to projected may uncertainties call the reasonable, distributed actual from Although, call assumptions that or are covered those expectations assumptions prove and statements to this give prior materials risks, one or incorrect, and Thank you. or assumptions. can risks estimated, herein. expected. such be been no or these underlying assurance this forward-looking prove that all uncertainties discussed vary materially those more Such believes the Company it will of or such subject during reflected Company expectations results will All materialize Should anticipated, in have by materials to

Jonathan Ornstein

Hi, our public everybody. a second This is company. quarter as reporting

reduced We and in resulting attrition, increase our achieved results financial hour with ability production. in are our both pleased pilot and the hiring block we’ve to success

pilots allows their Program, I Path Career support. to for our like which move United would been United thank Our helpful. to has to very

we opportunities applicant the we adequate believe very are class fact and training have With from With pilot our reduced in as pilots in more we the present production, training results we’ve pilots primarily believe size We’re completing increased also an actually in attrition well training pool, efficient increase training availability. coming pleased increased low themselves. simulator the with forward. November, we reflecting of positioned timeline number the and that

quarter. for XXX,XXX current The all a with fourth third the this almost were increase from hours we’ve hour XXX,XXX with and fleet. block result, will aircraft. quarter block the X.X% of the second highest achieved is ‘XX, is quarter a XXX As I fiscal note, the production fleet over same done XX%

to quarter said, slight state increase of American had both Our previously and is is anticipated. XXX,XXX, we to given additional steady time. one believe where we for further are hour on United which forecast staffing which growth. previously lead our block targets, at capability, Based a their anticipated being us That improved sufficient achievable beyond are increase what production pilot X% have be without requested have we focused on we meeting

stage production structure additional Given existing and is to however, as length, network, our how possible. are uncertain, route much we

other new CPA cost regional we and Beyond of include advantage our potential continue opportunities to expansions that partnerships take to existing increased We explore operator, cargo. as are these previously believe flying discussed and including opportunities. we business, a low well-positioned

XX.X, we update, QX remain fiscal QX, our CPA have United Operationally, we’re on the fourth in and controllable productive was a to-date, quarter, we continue the with a at slightly extension performance, XX have factor CPA from XX.X to in United confident and operations discussions for For year XX.X completion down of slight on CRJ-XXXs. increase. ‘XX, that on

performance partner’s our always are operation being contractual have room increased. requirements. above well our improvement, to expectations in we regard there’s Although That for said,

financial to details. new some and of well. are exceed walk the working expectations Lotz meet hard as now will We Mike through those

Mike Lotz

Jonathan. Thanks,

million. before we of reported quarter, adjusted taxes fourth before we taxes quarter $XX.X for is this million, of So, from reported our previous earnings $XX.X a increase earnings the significant where

NOLs. shares. shares accounting We quarter $X.XX point current much expense rate, shares IPO pay out XXXX. our income our we per per income that or be share we weight than was for taxes cash mid-quarter, as be we a on done have had our And I’d million what $XXX calculation If tax Additionally, we $X.X million any earnings weighted for purposes, cash of $X.XX from per not the share. income of on which projections is per the believe we’ll was payer like XXXX share XX.X average our $X.X will of be XX.X of expense we million, since which not $XX.X of million. based still lower we million would approximately tax perspective, is run or reported the would based tax quarter the to average XX.X at although use $X.XX million outstanding income EPS of Also share. net for quarter that million in reflect in end an tax end,

million again, Our EBITDA $XX.X increases EBITDAR EBITDAR $XX.X $XX.X significant and are these was was and respectively. million. million, and $XX.X previous million quarter were where And adjusted EBITDA our from

CPA revenue reported million, increase of at For last versus revenue, or of contract revenue we X% $XXX.X quarter the an $XXX.X.

partners the We to reported has is quarter, pass-through pass-through and fourth also our revenue, this no we it timing the of these $X.X maintenance down all million, expenses. P&L to last revenue $XX.X included impact. reimbursed, million related directly from pass-through quarter, And for

timeline pilots continue as number increased of flight see On a operations, than the pilot the pay. to expense higher training, our result and expense training and of incentive side, elevated normal we

certainly still While our reduction prior are our seeing higher a normalized expenses we are rates. than versus quarter,

expect pilots number in we our increased of operations to to training, flight continued the out see hours. expense relative cost reduced of With coming block

providing from ‘XX predictable quarter, which and year-to-year. a from significantly similar quarter-to-quarter down million is we’re varies $X.X expense, QX forecast, On Our hours guidance and to guidance last QX. quarter, engine expense. expense was $X million and the next quarter, engine only this Again, on for block

the XXX,XXX. million, ended down year mentioned, ‘XX million we is hour million -- has at forecast $X.X add cash block was $XXX.X and engine cash; like for $XXX from As non-pass-through for debt forecast $XX non-engine QX. is our our In QX for in Jonathan QX I’d liquidity, expense million. total

with the to a reducing credit more CIT, still pay is outstanding million of full we by During rates. in interest $X.X term the credit facility revolving $XX quarter expense available. in million are per negotiations with revolving our fact, that of The CIT did at $XX.X million And facility of down year. balance extend favorable we about our facility of

XX we the We’re also going interest we forward. of This the associated result or and calendar finalizing primarily roughly be higher for is $XX maintenance by negotiations And to And years. cost and $XX and QX a this approximately engine that did in we’re previous X of purchases, I I’d have by of $X over $XX will believe looking to positive to ‘XX. purchase turn fiscal $X aircraft Recently, debt, up on to engines, which to -- to package. in end year. in about $XX engine to expense and reductions This we spare now currently and March million purchase two were refinance aircraft related spare of million. close on refinance paid million including at per of in also debt. our $XX.X our purchased questions to ‘XX of expected forward, these Other for million again, engines lease close expect expect year, to CapEx -- year. require impact million further million the will the in range like XX we similar on with earnings, lease that’s the we next about to in it for completed ‘XX for fiscal X our roughly Jonathan, per purchases, Also over in the going expect those It have cash back be expect CapEx. and will $XX million this $X.X cash to in engines plan answers. we to million, addition million buyout we we open

Jonathan Ornstein

Hi, everybody.

questions, any we happy the we’d be them. to If to can you best to them take answer have

Operator

Participants over the from question Our come we begin will the phone, will James. Instructions] session. Raymond first question-and-answer [Operator now

line. have open You an

Unidentified Analyst

good you morning. Thank and

anxiety if know to out getting you to what side. returning that, talk of the little of United on aircraft? kind handle United kind the on about on the follow-up secret were I that Just -- Could contract. a from comments bit at your logistics there’s of of confidence the you those to need to point there? And just maybe your would know, not investor extend

Jonathan Ornstein

consternation appreciate I maybe there the that the fact can this is that anticipated. certainly Hi. out we Yes. regarding longer than taking

to fit those transactions other -- about this. to be pieces waiting to are might United are potentially we’re this point fair say only will mind we it’s that’s my think is that delaying in I we tied that looking that be at confident we together. things to remaining see how And all highly talking extended. And these thing that the could are potential

potentially So, may we’re at XX confident. remain build transaction on this in transactions lead that that other very I the to of terms Again, to point. just XXXs, yet hoping

Unidentified Analyst

on just the pilot And latest mentioned. two, [ph] position to cost on down Any year you additional Mike, on pilot the over your class? that how next based that the trend might thoughts or training recovery,

Mike Lotz

the quarters. look, these getting have the out the again, of class be pay, most training start as will with of to reduction It’s come pilots. of we And to of down the paying in with amount last size the pilots in the premium two and reduced combined our that November,

as is X%, that to of percentage where X% again X ours a revenue, over I We’re are normal expecting below probably which get the we quarters. back X today to like next rate, think CPA run

Operator

come question from Becker. will next Helane Our

line. open an have You

Helane Becker

Yes. for guys. much very Thanks so you Hi, the Thank much, operator. time.

and a couple questions, Mike. just Jonathan of So,

September March As grow aircraft? ability and you December should able think without the we we about then and pretty think block it in and December grow hours quarter, for kind mean, then March? should think additional your adding actually were to you significantly quarter, how of how I about quarter so, about to

Jonathan Ornstein

about our say, to is think and obviously Well, we let talk me this something partners.

hubs, Midcontinent restriction additional capacity, because just in growth of in have lengths. which hours, of words, other block stage some terms level of We have

Our route has potentially years. pump-up the additional Dallas almost stage to we’re length couple know network little the a at at over United looking miles XXX bit that declined I utilization. last in restructuring

crews We this have point. the at

carrying and the I XXX that of training. I we’ve as getting pilots. because that overstaffed. in in had we And actually fact, success XX issue longer about extra But, time XX of block XX the average to into -- those our to being that so November, In a to the able schedules having in being moved minutes hire us a Like what’s with example, -- pilots XX we American allow Dallas, that think to be happened want can for took be up we’re Embraer mentioned XXXs, to new don’t flown, lot is I come real We as said, lot went through that we’ve can just routes haul routes classes; to haul great the CRJ-XXX to normally reduced they our don’t down of shorter XX mind utilization. flight. people

to to hurt take utilization, to on still have aircraft So, turn the you that’s return still and the you going it. that ground because hour

we’ve talking they’re at real this somewhat the Mike, on based think and aircraft hours do the we going to Is confirm. the heard that of we point you’re any going how to it’s much know and know be different don’t highest I I can able longer system? flying give routings, get schedule. that So, restrictions, be United under utilization. about March can we really be I -- us you just further maybe haul ever the flying out. think creative. Again, particularly pump would on it to American as summer function I up We is block that flown maybe have a

Mike Lotz

will Yes, it be.

Jonathan Ornstein

lead lead records. thing time. days they the used we past. setting So, through time, pilots the it biggest need as just it XX-XX do not it. get that have XXX. pilots new lead continue we -- need now If something, because have training, to in to it’s rates new significantly to about to among know, above done time probably And takes you to some need do closer The what hire failure we be be we can we are just and is we

Mike Lotz

the March the the and it into And closing already. just quarter December Helane, this months -- is December for Mike, on is quarter, two

So, forecast again, here that our we put XXX,XXX. is

to almost partners with going March point. this that’s the even change for filed quarter, at I where we’ve schedules So, And March obviously through already. our got not mean

maybe And hours so, level, higher. same a the we X,XXX, be should X,XXX about

Helane Becker

that in Does like allow Okay. weather March? for

Mike Lotz

Yes.

Helane Becker

opportunity and with and talk flying. have, lot regional than Dallas, I this when I opportunities then is Okay. going big I they a And have don’t. for TCA, lot that I the I and question as more mean, know other that’s airport both jets? and there gates of a larger at adding opens you and -- apologize gates about a that’s you should the the opportunities? And think that’s that mean, new imagine talked -- But, a talking going I you allow so about probably TCA, they’re but XX all opportunities right, about regional about, of I American to for more then, they Dallas are you? -- are there maybe to these

Jonathan Ornstein

to extent they I to have. the to they at different options Well, American think will fly that has continue that more, look

can the do highest exist. is then American most I aircraft think cognizant we at little think have into the that. And owned situation we say it’s to order United, good operators. of outside level a us move by all competitive has using that, lowest continued if it’s carrier regionals, that I different that, their the that think and environment, in continue the we to fair possible do opportunities to I And to But, in those costs. pretty at We feel for who would to wholly are maybe operate at possible margin. we’re

Helane Becker

appreciate Okay, guys. your Thanks, right. great. All I time.

Mike Lotz

Helane. you. Thank

Jonathan Ornstein

Thank you.

Operator

a have we of have Instructions] [Operator questions Bert question don’t queue. the [ph]. time, any on As coming Zubeen this from We

Your line is open.

Unidentified Analyst

could if the sort acquisition to timing rationale now? behind to of of anything you do decided why these this you the aircraft, talk XX wondering, of and Just the maybe around sort

Mike Lotz

Sure.

off we to And all to in -- the opposed we from as of us, aircraft to those given interest lease out avoid would The the X go to lease. would what the rates that that we and done that that market, to economics aircraft where financing P&L costs the own is the quarter So, play full owning interest pretty lease. much depreciation into the leasing. to June to any economics charged aircraft did as to are buy available pay, purchased would have decision fact see return this fact conditions similar rate, the compared we these we’ve to of and that we and easy and gets aircraft forward these the prefer lease we

get timeframe. So, the it from it saying timing a standpoint, to think, likely March done in probably January we done, would or be I’m I XXXX, expect more February of by to

Unidentified Analyst

And more question. just maybe one

contracts having or a near-term ULCC market just if of if any it’s capacity wondering Just slowing still? growth matter really is regional scope impact on to

Jonathan Ornstein

No.

matter think, interaction the mean, the really our not scope. has I ULCCs much is, routes. it’s majors, routes, to with larger do the the I really on the fact is capacity of the so and

to because most that is don’t cities go just of the these smaller. flying We’re traffic ULCC

want contacted some, they continue might what regional correlation see And perspective. ULCCs into they don’t to my on get business. from and say, regional the The to been issue has degree how a I ULCCs real So, at looking we’ve there, is to the expand the heard to and flying couple least expand. of by been there their a I’ve

mean certainly. at things, I direct don’t anything change point, dynamic But would that correlation. any I -- the any this see So,

Operator

[indiscernible]. Our next from question will come

line open. Your is

Unidentified Analyst

additional do have any regular Jonathan, level color kind of appetite still kind And if thoughts that’s of in curious, the CPA cargo have or that? updated any air all on Just the the the you opportunity. on up given of the same side, you on

Jonathan Ornstein

Sure.

put and as so have at operators, larger like point, we continue aircraft. small much transactions. we could The move forward conversations, this We couple both going Obviously a we we aircraft feel aircraft to have with on just operators smaller to I days, we’re XX hold -- talking them of for and temporarily. a When and year as also with time on, say very busy partners, XX we on on side our maybe it’s those well. temporarily, basically the financing

minute. felt maybe we take a should step everybody that just a So, for back

On the on that months. is XX XX larger aircraft. lead The to time

And we’ve work process to together. so, put that and process, begun that on to already start enter

the I the stage other on about And haul have the in additional up flying]. role really XXX. example XXX Mesa for -- of fact -- the length is and And significant greater pretty side compares carriers are back started in RFP. pick together very out a situation easy go frankly that plays miles, X% actually utilization to process utilization. you on mention have X% utilization. still two wanted stage over is putting or to additional have some a is length we when [long major do to XXX, you that one the terms that, just terms to to to of point -- that American jet And a that to are just So, aircraft opportunity interest have larger over you in where required of them

at going improve sometimes number mix somewhat us we’re of ways can of flying better be to So, will a and we different help utilization; that talking that. do

times often fly longer can with do you have you less if actually fewer basically can pilots. You departures more hauls, but and utilization,

it been performance the we’ve as we’re things takes much possible our to that we’d we’re as exploring, So, to mix. that. into put the good And sure as as levels. aircraft I we the do do as the possible. that working support and get be like all at of make they do we need price, possible going cooperatively to we’re things and on hours And and Certainly those whatever going again -- to those be because how to can best that partners the a put just at that obviously many with think -- partners providing what are best question possibly

continue certainly and to So, to we there hours. work numbers, pilots that going staffing those just to can add with that have adequate It’s work take are need internally block that happen. partners we to make and ways here our to

Operator

Eric have line. will Soderlund. open [Ph] question an next come from You Our

Unidentified Analyst

just I on guys. some of to wanted numbers. the Hi, clarification some get

of terms confirm, just believe million, I so pilot million, have of said pay then confirm we’re -- lease basically the buyout then three the Mike as you was those spare I over refi well that to out, But $X.X want million and you new about utilization. you just then think, and The kind I I one the you $XX an engine kind them to addition normalized have laying million. and had of debt of in talking million want right? down, $X.X $X to savings, as of is numbers, $X helping savings. you

Mike Lotz

right. are Those Yes.

Unidentified Analyst

kind And throwing that numbers of you’re us? these new kind of at are out

Mike Lotz

Well, all they’re of the in we’ve in our terms previous about new spoken -- and in S-X these, of certainly quarter. even

So, they the again, certainly today those are of we not actuals discussed -- of things savings. current haven’t But in numbers new before. reflect don’t don’t terms type

Operator

As have time, of don’t we [Operator as of on Instructions] any Speakers queue. queue. don’t the speakers, we have on time, this this the questions questions any

proceed. may You

Jonathan Ornstein

much very I Okay. I’d joining always exceed you the month results A operating up Thank us back were but of continue you XX% to had requirements is back, financial nice pleased now, to challenges in the and and look targets it I’m years tell ago say that a of was those our our much has shifted. great business, and terms everyone this now day for there and see it’s it, contracts higher, wrap will completion meet to that business. a from bad was considered to It to signed for performance. -- very very in tough move us. in in continue considered all month. be rate thank -- the levels performance folks The or like quarter. XX partners with you

continue continuous to sure can. just that we that the be where have we to And always doing and things the process it’s just best So, do just those to move the you up of have and and improvement again, have possible. work one job hard working you’re to best making

is to that we expectations. I’d for all worked like our thankful And the all We’re these new meet we’ve They turn really regional really have vendors all gotten the the to job what very the that that system around airline country from helping cost in us a work people. the thank hard cooperation right with, that leading the done and great Mesa and around become folks low now. we have think

to partners. very news of business have in much. that things should again, personnel out our So, see of you to just right more be and now, us. hopefully sticking to and terms some We new where the kinds all people our needs putting But and thank it some the we’re shortly like and to do our thing right of sort operation from continue knitting by

great you So, much, a thank very have week. and

Operator

you, you speakers. today’s for Thank concludes all conference participating. that And Thank call.

You may now disconnect.

Mesa Air (MESA) 4 Dec 182018 Q4 Earnings call transcript