MESA - Earnings call transcript Q4 2019

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Operator

Welcome, and thank you for standing by. At this time, all participants are in listen-only mode. After the presentation, we will conduct the question-and-answer session. [Operator instructions] This call is being recorded.

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

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

may You begin.

Jonathan Ornstein

Thank joining interest. everyone, call you, you, Thank operator. for hours, greatly today. we us appreciate your After the on

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

with Officer will of Darren and Operating On college our unable Chief Vice Lotz, President and Unfortunately, us, had be Zapfe, our Brad as Chief Counsel; the graduation. flight to call Officer; and Brian General Mike to join behind President Finance. Rich, daughter's Financial to is Gillman, me today Executive VP we his attend our a

With Okay. open statements. to Brian to I'd that, ask forward-looking up with our like

Brian Gillman

Jonathan. Thanks,

of the the your begin, to presentation the call would conference and and the Before responses include questions comments to forward-looking that statements. in Mesa like statements may some remind you

future undertakes subject materially to uncertainties As statements. Company the statements. to could they those or update results from events such, actual affect differ these revise also no to and forward-looking obligation note our please are that Also,

forward-looking Mesa in filings the the our which statements in in to you in conjunction release factors with should considered and Any cautionary press our the SEC, with risk be read. encourages statements included

today's Investor on to call. press refer will non-GAAP of please additional addition, In disclosures reconciliations used Mesa's release section in our website the of and find that to financial be measures

Jonathan Ornstein

but delighted was worth United. giving you have going any of tell not into took to you capacity be We more it you, the I It wait. new place. us we longer that anticipated. update. complicated Well, thank like start think United weeks. am two Brian. lot transaction, than well in would to to know Thank it's to I was it and believe are important a We We a Okay. put have pleased it's certainly we purchase our to we

will have Mesa. be for XX aircraft These XX-year a owned aircraft We XXX by term. new Embraer

the the of improved XXX. We extended on the give term we contract Embraer XX owned new believe In addition, reliability us will XXX. and United profitability

our of on a risk configuration. the this aircraft. period In appreciate we largest versus or years the margin operator CRJ-XXXs United higher actually is the agreed another for to lease in We XX addition, operating Mesa will greatly to at CRJ-XXXs believe potentially significantly leases lower confidence and their operator. for Embraer equal We seven in of be XXXs us. CRJ-XXX

for confidence a us We will believe growth vehicle. from be of contract fleet more new making strong a type vote United. is our a attractive operations, single We United the

as cetera. a fleet pieces On there know, been removed American, you have lot aircraft, aircraft, American damaged et moving on of spares, the

voluntarily costs I'd So we with X, are under one CPA. with began our the of two amended aircraft to we aircraft removed On to On terms like amended CPA. XXXX, be splitting first, April American. aircraft under additional CPA. terms agreed January aircraft exactly X, We the November will XXXX, XXXX, additional the the were of On the removed our two American in remove XX where on recap fleet.

three XXXX, have spares under will aircraft unassigned January which will we five operational CPA, in of So have XX aircraft. we are our and

XXXX, block note. line our United. American these in One changes, at after slightly for higher XXXX item hour estimates slightly are Even important fleet and with to lowered

more coinciding November minute. the three operational go a in Xnd, remove into operational going performance. right improvements the to further has up we a have I'm aircraft operational based American to to additional with aircraft. on access since to seen Additionally, maximum of But significant performance

in cargo. like on I'd moment update to to now you take efforts a our

XXXX. into entering growth represents remain opportunity. the to We cargo cargo in continue long-term business believe a We on optimistic significant

CMI's or We well particularly and of with structure current the conflict business. Given is suited existing no our our cost this ACMI of make the believe our business. nature to cargo it's that one benefits business the enter

an will the aircraft critical to major pilots, airline we believe importance opportunity fact, retain fly is improve to larger partners. both our In our which of gauge recruit ability and to

Other we following. has while discussed, is the look Scope United include relief. believe scope probably positioned this as XXXX relief industry opportunities United, best achieve into to that we long at been

CRJ-XXXs We with the potentially Mesa probably the are also operated to for down the best larger potential believe and opportunity option gauge regional of XX CRJ-XXXs seats, seat to are jets. looking backfill some to at a provide American We XX the aircraft. by

opportunities. daughter, Brad apologies. We which to to He matter take have and good has his is issue Unfortunately, important and with here he not ready a very wants an very enthusiastic, highly a obviously efficient is thing. on me his workforce, energized additional personal send

to I'm well. on operational update. the So going with importantly, of can touch issues some we as Most American start

not be can as meet and primary as extended While spares The performance events. our aircraft mentioned, expectations. ground fourth lack damage recently to press I we our reason have mentioned the the attributed continued significant of we available checks quarter American heavy experienced improvement, multiple through in did due release, still to quarter the

December, access number see will not worked a new Holt, closely our controllable On to complement, cancel. has a joining have additional Brad have November American Senior continue that and positive aircraft, note, us full the although, initiatives of these not was allow MESA, factor instituted however, XX improved results. had VP and days to and our since to first controllable we the we gaining Operations, for single of of Since XX.X% Brad with Rich believe completion

factor. all XX.XX% Mesa has remarkable Express operators of all the United business. a United of Since of I'd like produced our member, to update. outstanding controllable United performance. in the month job Again, on side American time Express United thank for both led people October X, the doing operation completion on and And in our our truly an

items operational Other importance. of

reliability hire, ability partners. our acquire in pleased an pilots and produce year-over-year, of retain, both expected order report in pilots remain by and to to are confident to We increase line XXX the utilization we our

significantly footprint training improved substantially have XX backlog training and over our last our the reduced pilot days. We

become We've to additional challenging. also which hiring operations, more has the had success mechanics support

XX or Our has almost headcount increased mechanic year-over-year. XX% by

note However, continued it's the have vendor, issues retention In of of providers. maintenance we replaced alternative focus. and on that we last subsequently important challenging with more area heavy hire discussed conditions industry call, the we which had mechanic make maintenance, an with to vendor and quarter area

our I'd like it through to over Lotz walk now performance. Mike to turn to financial

Mike Lotz

Thanks, Jonathan.

of maintenance the $X same $XX.X of timing primarily quarter approximately For is This million. of variance income $XX.X the to compares The for airframe year. the maintenance of pre-tax reported due the we million quarter-over-quarter quarter, million. income fourth pre-tax and scheduled heavy last

the million for income million per for $X.X $XX.X quarter, reported tax we or $X.XX Additionally, expense of in net share. income

per or million out, Excluding adjusted net special to as items, on cargos. touched point share. was like also income I'd our Jonathan $XX.X $X.XX

in During $X cargo the quarter, operations. expensed and we million the about did invest

$X.XX expenses at been share. around would cargo, this have Excluding per

Just tax a our on quick note expense. also income

Although, income we tax million a any purposes, will still significant we pay taxes do reflect we $XXX expense as have for million not of cash $X.X NOLs. accounting in

XXXX. million, increasing the EBITDAR was the XX%. year. revenue XX% Adjusted up $XX overall, essentially virtually from For $XXX was XXXX on Contract by over million. showed up fleet were X%, last up million XX%. utilization from same was Adjusted we every aircraft. the of hours Year-over-year, saw was Adjusted $XX.X area. million up improvements to Block up we income up XX% pre-tax EBITDA $XX in significant improvement

previously cost Pre-tax by had of to million, aircraft, million repaid margins Rent we increased offset down leased. which million XX XX%. secured as five and was as refinance facility. debt $XX $XX our result points high reduced of credit which $X was from buying X% by we approximately was depreciation a Interest

Pilot percentage down of to XXX over from $XXX XX%. contract expenses as a block a hour, were X% revenue, per from down block and of hour to little XX%

We range million see in down the to and QX level continue to approximately will block previously which at we stay another or potential the expensed efficiencies. pointed QX pilot $X that will in as and are in hour expecting we be was cargo XXXX. training to primarily X%, by invested getting this $XXX out, I around until driven And operations, XXXX, rate

So the impact on issues challenges and we minimized well through clearly all-in-all, control, reasonably we that of believe operational given profitability. were the our some of worked outside these

release As have guidance earlier forward share We're today, XXXX. and for for looking and our to press from $X.XX per we share looking provided earnings at XXXX, we in $X.XX of some additional $X.XX per in disclosed range a $X.XX.

XXXX. hours that's we For and be block hours, about had aircraft expecting than to the XXXX we're XXXX block in with as same less again,

guidance Heavy For than basis. higher Maintenance, million a quarter-by-quarter Airframe will on $X information provided XXXX. be Engine We've XXXX that we also this to Scheduled million $XX and provided

of with million XXXX. operation upon $X how than associated from pilots almost dependent going So additional transitioning be XXXX the the EXXX. many a estimates, between to we've level XXXX, Combined, related better overall, roughly for at transfer and the it's included to $X to the fleets. XXXX. high In our share be $X.XX expenses pilots That which almost million represent cargo these obviously investments per for CRJ-XXX slightly will we number

and of side, we million. cash That's aircraft primarily quarter the around was $XX million balance engine with as the engine. Total million down million cash. $XXX in $XXX ended for year-end aircraft debt in XXXX. million about and the On and liquidity million That's the $XX at sheet $XX.X debt, $XXX in on September

million in million in was engine debt which lease we the added principal year, $XX the aircraft During financings. $XXX that million paid and by payments, buyout offset we of spare $XX with

of have we $XXX million. principal payments XXXX, For scheduled

that will split purchase XXXX if That to approximately CapEx probably And include we new most, planning for were million XXXX. EXXXs finance for XXXX all, XX-XX $XXX be the will be of not and XXXX the will XX between United. $XXX price. and to million obviously

purchase American. XX-XX to $XXX year XX XXXX. and between leased million XXXX split will and we per fleet the for This engines roughly XXXX, the Additionally, CRJ-XXXs CRJ-XXXs and at XXXX to support plan be XX to approximately

we the which XXX% past. the engines, the price, purchase are in we finance done planning of have to On

lease On operator the for seven at to years. over -- unencumbered we rates. as period the a result XX will an refinance CRJ-XXXs to us of finance potential financing five aircraft other CRJ-XXX and CPA, extended refinancing United lower will XX the our of new time aircraft CRJ allow This another side,

secured cash, credit facility which Lastly, have $XX extended currently and was is still we XXXX our million, of through untapped. on

back over I'd like to it turn Jonathan. to now

Jonathan Ornstein

up. this happy be And financial you for field from come at Okay, listeners. round point, Thank that of to the we'd operator, any any the questions Mike.

Operator

speakers. Thank you,

the [Operator Instructions]. will session question-and-answer We now begin

is first Our Michael, of the now Michael. came line line open. from your question

You may begin.

KateLyness

Linenberg. EPS that? your business, cargo new This guide, about the of Lyness block a underlying for drivers of you. like any if bit wondering more some is on just into go you the XXXX little growth, Kate could maybe I detail hour was please Thank

Jonathan Ornstein

we aircraft. that the fact pilots with clarify, bit To we some take talked are up These and start begin let's Well, to business. cargo. the additional pre-operating all start train investment expenses of as a the have in Mike on more expense little about then to training cargo

We to approximately that the million expect be $X year. for

So one potential that's driver.

spoken we at being capabilities our the what about at On to able block basically, project point, estimate going hours, the are, what forward. I number are. past. have this based we're with And block getting I think our partners on hour expectations think, good And an we've their pretty

on In Mike? of for one the you regarding visibility. variable where again, the I But some area decent this think quarterly anything, maintenance impact add often something, the us. I has always other numbers, guess, of to said, terms issues Did big want There biggest as is we earnings. some has we is timing. our have again, That's

Mike Lotz

also that And of Most are will our expecting first will be the up that for of finish quarter we behind No. early transition us. XXXX. XXXX, in

our additional now growth, between assumption normalized will pretty from we have benefit kind in having any a don't we that's of see given -- So not we given expense XXXX. think any flight us big as I operations for the growth

Jonathan Ornstein

warranty which there's certainty fair aircraft be profitability into first out that under of least of provide of new the higher amount will four at covered year for a will Yes, older aircraft, coming us period. the levels and with newer aircraft

why reasons XXXX. and XXXX terms we things improve So confident into of and that in continue to is feel the of some how

Operator

Thank you.

Our from next line of came your speaker is line now Savi. is, the open. Savi,

may You begin.

Unidentified Analyst

Matt is that Maybe This Savi. Savi. was me? for Can hear you for

Jonathan Ornstein

Hey, Sure. Matt.

Unidentified Analyst

on great see. congrats that the United deal, First was to

and guys Moving expectations takes you by maintenance, a maybe some now talk into puts about I that. But moving Could the know bit quarter along you little XXXX? out XXXX. that? your laid from beyond other

Jonathan Ornstein

quarter-over-quarter. much I mean, now, provided we right that have consistent Yes, any guidance. respect XXXX to XXXX into But the visibility that's we haven't pretty quarterly timings, we don't be why

Unidentified Analyst

have all calls. to to EXXX, the regards basically in the, for CRJ-XXX prior longer your previously pilot higher based training you on than maintained and anticipated pretty And at transitioning hiring levels

So how the EXXX? CRJ-XXX transition of that the with the to really is helped

Jonathan Ornstein

So bit. changed when helpful I'll CRJ to to more XXXs have XXX it's the a found and will we began pilots American in become stay, we little we which of I very back on When the bit, have the over, pretty United But we think and over-hired times go will some this that have for we Embraer that sure, important difficult. choose so the things will moved knew how be one we knew side more we be important, that program, was qualified pilots. of history little significantly. Obviously, to

to have pilots pretty a hiring. help have, And and that be And three planes is we number that's forward. be in two month, can demonstrate we those and a positioned of a do piece to numbers, backfill to extremely that we excess, The there surplus do Because but operate from we to occurs. huge when of scope prepared. will coming really we order because those that backfill contracts feel quickly, whether to E-Jet are at we fact are in think due. relief we certain all they just so biggest the not prepare coming for need begun well moving to come growth, that expect, we We that in levels it future or want United continue the

that has one reputation we're and to for cost. I'd know, a make why Mesa low points And positioned. you well of the like

and low difficult, growing workforce, an other are on for what employees. in I think industry now. airlines, our have been impossible, to Mesa a regional that will where important the Lot level is why juniority of to catch think year employees, given in to carrier another we last a terms call, you're is of, we degree, seniority if have based I that compared the big have we it it's costs two or six over of are note built-in because be that And a our because to wages fact years. at one, large reason benefit in consistently And junior. three us right not cost, we seven

Unidentified Analyst

you've on made I leadership can extra Certainly, hires talk detail there. side, American Okay. another And lot year. all I a and the appreciate if about good sneak now the one certainly of this

could measurement key periods? about the of So are could you results regard, or changes where around any some the there succeeding, that then see the specifically, the of you've And in American you deal you've forward? changes from benchmarks made just for those feel seen kind talk how and strategy about when current is know we those it that are you dates either going if,

Jonathan Ornstein

fleet. of almost things mean, a I been right the that Well, need, the years number American to of there's is which been we've has count a XX of aircraft in our given fleet old we spare age the not we now. average think get level done, least our that to our

signed that. spares. getting ourselves, we the I every of additional We had Three came original was probably when fine, this for XX. we have But conclude spares. one for we the three to think, So best benefit us that spares fleet older, American both with to see contract,

since damage C-checks. which helped pretty we spares of to aircraft on-time will also see, in. significantly And also rates. of and now come some opportunity good completion spares already of on complement full as But operate results, in again, what think terms we be We're the focusing never we've these the came with are performance, had out, can because ground extended these of these

-- part have where in we the a in staffing staffing. we spent been that large fact, have staffing, into American that have, on, maintenance done areas went call, XX%, lot almost big the we increased of maintenance in One as of the mentioned a

hub, We Dallas, do which are had facility we which had have find the to also And in started very since to We we benefit. to something will literally operating that. think our there. new hangar now, a in a a having were we benefit able fortunate big [indiscernible] that is wanted we something is

build been maintenance Paso, which to staff up able other El in and very been We've Texas space has successful. our further and

So aircraft overtime, our inure of going to things, spare all the they're the for to sure. which benefit these greatest think, I additional and being

Another come piece into with of requirements our that, as agreement part understood that in and of maintenance of aircraft American, terms our of they number time the maintenance. touch

in as All we it fluctuate as those things the much has think past. beneficial. doesn't are that So

XXX a since month, level but best month, And That's only that the day, had know we I we it's point, talking the day you're last And time. again, a when very XX this think some over last about XX I ran fact departures in cancel. quite X%. haven't

I the those very we're see American the to helpful some of So been we hard beginning that already initiatives along and of benefit think has been so worked way. involved as that actually

of I to those see things -- this you'll continued think performance. level will start So all

Operator

Excuse accurate me you. me next allow to get the speakers, participant. please Thank the you. Thank of moment one name

the Our of Conor, next may from question line Conor. begin. came you

Conor Cunningham

Hey everybody. are This from How is Cowen. Conor you? Cunningham

Jonathan Ornstein

how you? are Hey

Conor Cunningham

Good.

I little on leased the being on on know you some, just economics? a Could better. little you give about talked potentially bit a the Just aircraft. color

where on color if is curious any out potentially could you we And side? Like, like bigger years? there lessor you. dry line this next the have expect give a couple over you the Just see being you to and there? going item further also, could Thank guys regional would a growth

Jonathan Ornstein

put would service The have be too with first only you the XXXs, besides being the in aircraft American, suitable program. purposes, gauging class. that be into for fact, seats of they're program. CRJ-XXXs they're in that aircraft to heavy down fact The they're XX know put to the those for are would we United's XX where which able On and that XX

aircraft relative XXXs our In seats, the XX view we less as XX significant those lease reduction better terms significantly operations. operation, to given leasing E-Jets off terms more attractive on side, for needed that of of was of the their terms the ultimately in would you pilot particularly the us United to order is the in imagine in terms with that and It expense fly some additional were risk the in associated aircraft aircraft fairly the just profitability, be can the to aircraft. the see on

mentioned, we of that aircraft will the unencumbered, are aircraft And that we that currently get for more there fact five time, As off even example. in have making transaction are attractive. number the over paid

I we think been that to terms to as and larger having ability our how engine the think in launch on the shoot part overall a aircraft on the than for what be the jets, depend CRJ-XXX, large replace, do configuration. regards big are engines these a in in I financials, works. in XX better a operating leased But feel seat customer our to first of have will the to again, And on will transaction the be. good transaction fact overalls going in very on the the own our we handle regional that that expenses the confident

Conor Cunningham

but Okay, not… it's

Jonathan Ornstein

American plan of we the is as this a of much other withdrawn to system. At point, terms leave them of In aircraft our have number the aircraft, out spares.

out debt. we that a is to amount brings the up significant down of point paying One are of this things

transaction traded higher amount pretty in money, from completed, of doesn't $X million, assume going million, the $X of this those that. is some own, big than significant even outright an -- have last the But CRJ-XXXs some the outright believe traded aircraft, bulk on and million, we're anywhere nearly a aircraft, by even XX.And extension. time for those of place American $X market to We or the I

were those of parted Some out. just aircraft

So we value those we debt think down of aircraft as fairly that are with aircraft. the pay a creating overtime associated continue amount do to significant in we the

Conor Cunningham

for the And deseeding potential American. the for XXXs you've just then I think mentioned

a be conversation that? it like potential timeline just how is on three Thanks might thing? decision Is more near-term it that a a again. for what curious -- there? made be than And is Just year started? Or then to potential it

Jonathan Ornstein

No, for We American XX purposes. how aircraft both the tremendous goes has they we'll move against It's count to point, just potentially discussion. seat as In And, that, had sense not fly see something parties. count that think their scope advantage. forward. is a larger this that for that have aircraft it's a just, at ability makes we and

no, And any But any something and certainly that as way, we're or the of firm I know American cognizant by one there's is. way any now of decisions, other. stretch,

Operator

you, Thank Conor.

may came is line Savi. from line next Savi, of the begin. you Our

Unidentified Analyst

again. Matt it's Hey,

Sorry, I'd sneak more I figured in. one

or into kind operations 'XX? fleet block again how of per on moving perform into XXXX. now? at count operations just right seems on Do think you would any Looking like how flight block But have hour would you about color be steady. the It the

Mike Lotz

Mike. Yes, this is

so said So down -- my in going I looking to let quick at like we're look a -- take at Yes, its to me just XXX it. XXXX, in range. it's going outline,

down another So to XXX, It'd in be XXXs it's XXXX. go in going XXXX. X% mid

Operator

At time have Thank we in any questions speakers, you. queue. don't this

Jonathan Ornstein

Well, Okay. certainly has your happened. deal, in very folks the Mesa. All again right. about the We're appreciate finally pleased which interest United we

of at XXXX, help launching Company. We will to transactions has our tremendous, we at focus benefit help us expense, the forward of to which continue the financial overall, We maturities, flow at half and Company. look continue in cash various that lower performance be been interest cargo tremendous to extend do optimistic second in operating the a our terms American, look operations just and

take I'd thank one our all like always, of to to second, people. as

this to employees our have as leadership, just our flight union union attendant all pilot as today is want We job. reason boat have leadership, just but who well very where a in it our with, the only same good same rolling direction. I work we're done great a just have It's -- that all And not all the they of made Mesa the have employees fabulous think, just in really, I possible. is why to is only group line and thank, been

So you your interest. support your for again, thank and

please anytime. free questions, you have additional you. any If to call us, we're Thank feel available

Operator

There Jonathan. dialed the participant who line Scott still you, of came Buck. just one Thank from is in. It's

Jonathan Ornstein

Okay.

Operator

I'm got his he disconnected. Oh, sorry, he Maybe question. canceled

Jonathan Ornstein

Okay, All you, thank right, no problem. operator.

Operator

You're That conference. all else say? there to for Thank you concludes that anything welcome. you want today's participating. Is

may You disconnect. now

Jonathan Ornstein	Chairman and Chief Executive Officer
Mike Lotz	President and Chief Financial Officer
Brian Gillman	Executive Vice President and General Counsel
Darren Zapfe	Vice President of Finance
Kate Lyness	Deutsche Bank
Conor Cunningham	Cowen and Company

Mesa Air (MESA) 11 Dec 192019 Q4 Earnings call transcript