MESA - Earnings call transcript Q1 2020

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Operator

Welcome and thank you for standing by. [Operator instructions] Today’s call is also being recorded.

If you have any objections, you may disconnect at this time. I would now like to turn today’s meeting over to your host, Jonathan Ornstein, Chairman and Chief Executive Officer. Sir, you may begin.

Jonathan Ornstein

sir. you, Thank

for everyone on call our First, joining today. thanks us

indicated, As Ornstein, this Chairman operator and Jonathan is the Officer. Chief Executive

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

Brian Gillman

Thanks, Jonathan.

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

in company are they no or update statements. to in such, should could materially which obligation also Any cautionary events filings with our statements revise with subject As the the and differ the to uncertainties Also included that our undertakes to Mesa future our you statements. forward-looking release, from forward-looking to in be results press SEC, conjunction actual read. those affect note these considered encourages the please factors risk statements

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

Jonathan Ornstein

is Okay. and to United begin fact am our deal we very with the Brian. discussion are forward. a incredibly Thank done you be Well, in I that regarding much, moving pleased able to discussion about

make a delivery of us for will of the which the preparing you Embraer I the bring XX of United type will for operators XXXs. largest believe XX know, total are we Airlines. that to As XXX, long-awaited the XX Embraer that us XXXs,

May. CRJ-XXX to very introduction the few take thing the to of in these Their our XXXs the the aircraft removal are we we of another XX aircraft will note, aircraft prepared to on XX added coincide and positioned incremental. and believe over beginning years leasing additional not past One well and operator. these have We are with

advantage which is XX largest as aircraft exceptionally believe structure, believe choice themselves. we our cost United would future of we with mentioned like is be industry leading is the performance Embraer Mesa. to I aircraft, We these We truly before, outstanding will to opportunities the to operational support trust United led present Mesa of the given well-positioned United. With their XXX operator management It confidence they thank of as the of our the their take that within has greatly appreciated. continuing and for

press we On improvement the American our release, side, significant operations. have in in our seen American as noted Eagle we have

have to We our of continue discussions regarding the capacity extension agreement. purchase

industry CRJ-XXXs Given are performance, and in structure operationally today’s and regional operating tremendous our our believe our we offer current value marketplace. attractive very leading airline cost

matures as debt over go these continue CRJ-XXX We next equity the and the our of aircraft. in build fleet the years significant the engine do that on in couple same to owned

about On fact entering business. the to have forward we looking are side, we cargo cargo that talked the the

and enter We We represents significant important particular. for advancement operations an opportunity XXXX. to plan company cargo for believe our in long-term to the develop continue pilots opportunities our these in

move to spent and with forward continue We FAA $XXX,XXX this quarter. certification

done, agree now good work Brad in-depth operations. team the I he in appreciate to along quite to more operational would to his over it’s turn want review, you a call with I I for think like which outstanding. will that the has really

Brad Rich

you, Thank Jonathan.

additional believe also access December improved we aircraft note with is of achieved an XXX%. a February due and unavailable previously month January, of to XX.X%, at Since completion has operations at American the factor XX.X%, concerned would to-date performance we as maintenance. aircraft operations. criteria is at in damage extended American heavy several summer significantly the result controllable all November update to I discussed, challenged on far aircraft, and As incidents our the as over were we’ve multiple regaining that the as primarily January the as in some

In and implementing are initiatives and will improvement improved aircraft confident operational identified we that these are the have at performance. American addition have several in identified, available to initiatives result continued we we

Express on situation. On release, approximately the factor and pointed departure the our both we pilot XX,XXX month X zero, on-time out in In the XX.XX% flights. quarter, update arrival scheduled portfolio bit United taking controllable out in as of operated Mesa in performance the operation, November, a of only led at press our we an completion zero of a United in cancellations

an report of to pilots net remain We in deliveries ability required and pleased the our in order new transition in the are past the staff XX of retain over which to EXXXs, begin attrition pilots increase XX to We May. confident X months. hire,

We good also several to last for the attrition, months. which we have projected lower some news relative remains than

as time We continue worth It’s also training think that training noting do access to additional the reduce have to as that implementing and both recurrent for and simulator their processes procedures way. on well streamlining are I new as training we hires, and the the EXXXs required footprint program upgrades, optimized new automation. the I events mentioned, our by forecasted training to training, meet transition to

hiring at We have also mechanics. had additional success

make is continued industry more that focus. area However, challenging conditions our an and retention and of mechanic hiring

like leadership attendants, Mike, I employees, time and our our team. to to Before as I headquarter staff would mechanics of our turn our as appreciation express well all our just to pilots, our the flight

are have team been As with and a he he gosh, who difference positive us happy we has and least have arrived. couple at with we a oh, Holt, making Brad for, joined since of decades him mentioned I earlier, to we worked has the

Darren engagement, specifically of them and Hornberg Wilson, Tyler dedication for Ferverda, Kenley for efforts Zapfe. for the them Wansten, leadership and are of call and thank Cody all commitment We the Doug to grateful out Mike their Shockey, to also Thomas, Brown, I efforts: our team Amber Campbell, Bob want Kevin

for just their very of efforts. are We appreciative all

assignments had their and have some for and I We going continued changes leadership grateful in am a some lot engagement. realigned on

We and as [indiscernible] Holt team. the I time. grateful him of to the [indiscernible] expertise grateful many have Wilkinson is and of as with are decades has to team joined sourcing maintenance in the new member Again, a work also Brad are have addition who we and full for

will With to the turn performance. review that, Mike to I time our financial

Jonathan Ornstein

a I The been could you operation. with just outstanding. do Brad – add been in job – to know people him, past, turnaround challenges that and the really and have particularly the seen I it’s has we want as There a because to have been thank secret. have done American not great operational our that

needed additional spares. that we We felt some have always

those to performance the of skyrocketed confident truly to at we levels. have spares, you we we Now continue the up and see can very those that perform that heap feel has top the

for can’t all want but XXX%, people get the better operational job. going to much a to we Thank to are but I You we you. thank do great than everything try, doing can

Mike Lotz

and Thanks, Okay. thanks Jon Brad. It’s Mike.

So quarter-over-quarter of and we was reported for $XX.X XX.X% for maintenance. to XXXX, compares $XX financial income negative This the update scheduled the all last million of pre-tax pre-tax for variance the airframe heavy timing QX income to million. engine year. The of due quarter of same

million $X.XX accounting expense, purposes, any although million income million as pay of excess in in Additionally $XX.X usual, we income quick reflect will for And as of note cash on still share. of tax we $X.X net per tax $XXX reported we quarter, $X.X a for or expense have not income taxes for the the million we NOLs.

I scheduled to airframe for QX would touch XXXX. on like the maintenance and engine

which $XX airframe was heavy anticipated. million, in although came maintenance lower around last than scheduled just Our was year it than we higher

provided we into as some obviously, all was last that quarter all of was result of a $XX million, that QX if not guidance Our will around expense timing. push it

for our from over a or XX% contract block by down was block to little hour hour to expenses, pilot year-over-year over of pilot revenue. XX% expense $XXX $XXX a On X%

level. block the hour at to stay expecting are rates this We

if million As from XXX operating hope XXX Holt. those by to reduce to that year hour due training Keep around down specifically $XXX in the per almost reduced seeing that mind, by a $XXX are over the brought costs. to from by by $XXX reduce that to increased we equates block efficiencies begin this have a range $X Brad in X% we we transition X% QX, to we to pilot another to the

cargo remainder of the quarter, the $XXX,XXX and development spent XXXX. another over we approximately our are on operation expected During million to $X spend

As disclosed hours. have block in earlier press today, provided we release guidance forward-looking our some for additional

expenses of QX QX Our we or to than last the we hours projection and airframe guidance quarter. maintenance came about to our as those engine heavy maintenance, thought previous mentioned, from lower scheduled where expect year, midpoint block the the QX. and what came at remain I move heavy same of remainder to we the the provided On in in guidance right

airframe Full So and in review. still is our under we year QX have that reflected guidance. engine

the We QX have QX quarters. slightly top raised and the of of end each

On ended $XXX million, cash payments down $XX $XXX the during quarter. quarter balance million million, paid $XX.X from as in and sheet, we total we million debt liquidity, principal on at the down the

do million. total of $XXX For XXXX, have over we payments principal scheduled slightly

we our split and will new $XXX need XXXX E-XXX, the to be for CapEx For which finance approximately ‘XX call, mentioned and ‘XX. roughly XXXX, year between million, fiscal on XX-XX as last will we

We of are purchase all, E-XXXs. planning price to not if the finance most, the

CRJ-XXXs CRJ-XXX to XXXX, support fleet American. XX purchased the and we engines and plan at take XXXX for to Additionally, delivery leased of the and

split again, XX-XX per of ‘XX We between if are expect finance and all, $XXX not finance purchase million year most year and roughly we ‘XX to expecting price. to approximately fiscal again, the

of to which for allow a we X potentially a other at On are for be would will and as still we of the CPA, XXXs new finance refinancing side, rates period lower of an best unencumbered This us. operator and CRJ-XXXs our over seven-year another refinance extended XX the United XX us lease evaluating to term. our alternative CRJ-XXX result time will

to to over like now turn would back I Jonathan.

Jonathan Ornstein

a to At best answer. do would can might Thank of happy we to to anyone lot any will pieces, open good questions up have. be point, is give that on, you, moving but Mike. lot There the a you we this going we a

Operator

question Syth. [Operator comes instructions] My first Savi from

open. is line Your

Savi Syth

afternoon. Hey, good

whitetail a the kind to right congrats expect the that or do that? complete is American performance in the to that you know handle some are just of discussions get kind or able of contract? wondering, moving you that discussions need this as do of spare on there. it’s that of less And when right you off on with direction when I the days, for do aircraft Just aircraft be tied early American but on of do to somewhat you number still XXXX kind the kind the start of with to coming

Jonathan Ornstein

Okay.

me and it’s on think in may don’t spares, piece of your the first you history, surprise interesting. number different will which the why regarding the at of representing start have this piece I you, opinion know, question answer financial and time because set Brad, spares the a the point? I the what’s view You might Brad, let Brad for operational but

Brad Rich

Well, by occurred of we now. with agreement or first four or of have all, most right answer I available. should had by Through this airplanes. then saying improvement spare we eight time, operating the improvement have the by all we majority of maybe that even seen have never many five spares though of actually aircraft guess been And period, the less has that the of that it’s

So of I we full to without it operation. have complement achieved run need spares a the many fact, And honestly, that in think spares. look, we don’t eight

Jonathan Ornstein

time that is difference say, we need, myself spares sure first we the XXX% the make that side and the don’t keep the need just operational but don’t hit I now all being And person think I other many spares every it’s the we care, says month. on Right. where I’ll

short if And agree but a two aircraft, So with three know all clearly as don’t for without we I either, was with number are that hubs had think in right spares you come kidding literally we the a was years we and and American. not find will doubt, answer, to going the know is time eight make number. want be a somewhere we a that for the middle, by frankly, you XX-year-old see we last mistake were you but we will because a maybe with like three in not I many three right the literally flying no point have one, and an long, that the if mistake, will where make good And only discussion tell we spares. I summer long don’t but with being when of aside, Brad we to out, problem I position spares. extra one, a will actually

spares. the on that’s the think I So, answer

In tell. potential the it’s say operational aircraft the from extension. American I in we believe on literally non-stop. can very you remained let attractive discussion terms our contract of are contract, We mean always with an me just as both partners

for to today. believe are months, great. the north And planes XX.X% month. the We from are regional think I XXX% are perspective, running we jet of continue cost the large a few that service this cost jet, last lowest in our CRJ-XXXs that regional Operationally,

said, position for a conversations light particularly and that of these aircraft strong we often being many good that aware, said, These have our we the anticipated. are marketplace. it’s in that they as jet are However, longer United you regional of think lasted being complicated example far than discussions protracted. That within are and

has know, as you addition Bombardier exited business. the In

the these fronts supply to regional So now right all tight across jets. on large continues be

are which not we add of a emphasis they can and but tell attendants, has supply as we And day-to-day a much have for we tightened people, on been pilots, do these is are people. industry that across retain as maintenance people have attract more a on, all but to group like very – have highly these always now to at even folks also who very of become I put valuable, of something flight basis we that pleased you valuable may motivated lot able I would folks are dispatchers. always Mesa become the or all

an in We valuable our to decline to attrition levels see itself that are partners. delighted presents we and think asset our that incredibly

Savi Syth

color. that appreciate all I

to kind the if were the is queue, wondering of was I was a provided, of last on is initially of there in what just kind reiterating know this but hour the I and hop the change block guidance. on before time kind or maintenance you update, you provided a clarification I Just provided that? EPS

Mike Lotz

out putting release. don’t that anything not and changes have the to in any We we press are

Savi Syth

Alright.

Sounds good. Thank you.

Operator

Cowen. you. And question our Thank next Helane comes Becker, from

is Your open. line

Helane Becker

thank much, very everybody, time. you operator. and Thanks Hi, the for

questions. two Just

forward. just on will I understand Mike, run going or the increase that million does be maintenance fall from $XX Is So, it that there? this, so year-over-year great new costs, the rate, as

Mike Lotz

for XXXX. just That’s

out looks But of at and XXXX. more hit to put is We much XXXX. it this initial Again, XXXX not have anything yet push into going put we haven’t our decide kind XXXX, like year we anything how look we much until for year. out than how could next

Helane Becker

to my Thank it. the question got And Okay, other with attrition. respect you. then is

airlines think that’s their you that retain? and and to ground, just and how coming on the people are much pilots. I being that the great are of that the hiring is attract think you retaining some of do your major But is ability because how because slowed MAX much

Brad Rich

could going continues, do some are lend So, that least probably that, MAX. And it to on Helane, look, is our long looks we feel of spot does, does, we I a as to position. the And is you lot long itself but here think know probably this as with what about attrition mean it that similar I for How good on debate it on have think with into a go rates. will it type we good if at really will about it time future. these like the I

Helane Becker

Right. Got it, okay.

Mike Lotz

in to come be Mike. slow to come it back. if like and could is be it does months. happen back, looks process add, going three Also, will This something when if a that I is it It’ll

Helane Becker

your MAX necessarily pilots, to want Right. guess, No, I make disagree. comes retain back. I sure continues the just even don’t after to I that ability

Jonathan Ornstein

I think I would agree. Yes,

saw agreement the United. an with we We instituted it back, goes on a That really had attrition really when pulled and comes eye in big impact, flow-through MAX we the drop there. keep but the really attrition what when have to on

Helane Becker

Well, thank Okay, alright. I you, color. guys. appreciate the

Operator

Thank you.

comes Linenberg. question from next Michael Our

line is open. Your

Koosh Patel

for guys. Mike. Hey, on This is Patel Koosh

Just walk transaction? for thinking the you one just and year, here, saw we through SpaceJet can that order the us last behind rationale the

Jonathan Ornstein

basically, was while for order, think customer they available We with launch the now, jet that on we’re a in right time, opportunity some to which that old. give re-fleet. six, good and think an a we CRJs book. CRJ, think assuming the bad done probably marketplace that a mean, providing supplier in the we years thing. at the XXX. five, to love on the just is mean, point not do only And is is it terms this us I other marketplace felt XX hedge think years in in having the out are one Embraer of one is I just position the Sure. There I I us was seven I And aircraft basis, in

Koosh Patel

Thank great. you. Okay,

Operator

you. Thank

question DeNardi Stifel. next of Our from comes Joseph

open. is line Your

Joseph DeNardi

evening. guidance, under Yes, trying have year, fleet assuming kind reconcile, you is Good I think contract? with be? or that better quo, next aircraft one count what Mike, want aircraft of will of actually on that those aren’t just Just on coming thanks. have the you status maybe do sure into some assuming the Thanks. make the additional just like visibility fleet announced your would you American. competitors to when I from those to actually

Mike Lotz

Well, I and all goes in under fleet mean, we American in discussions we CPA. aircraft are with out the believe, release, look, just press And QX, put I extension. are mentioned, through about Jonathan as potential the those that plan

Joseph DeNardi

aircraft – XXXX. the Does you Okay. Yes, September have actually of that contract? under I was some through just quo or referring other forecast assume a just out status to the fleet of those

Mike Lotz

quo. It is the status in extended

Operator

Syth. a do question Savi follow-up have from We

line is Your open.

Savi Syth

Hey, thanks.

you if still starting Just said of you forward know fiscal on the are an kind on curious of if the moving with next plan year. you just but that that Amazon Sun your have that, – early kind agreement view kind I or your kind – side, you seeing positioning? update did view cargo of on if of on an the of And all with kind Country also, is kind opportunity at changes saw of you of that on I

Jonathan Ornstein

Country, mean, see prior I and a respect that now over friend, same a the year. we think is to offer structure think Mr. as and actually our operators. tremendous we we there, Mesa The we has fiscal that is those feel that our Sun I No. cost because encourages result, Country room announcement superior new while confident implement Sun services and be this entrants, believe other plan the even at Siegel there Chairman for end to would for we can of have a more that discount us to good

Savi Syth

the something operator is the aircraft partner sufficient secures the or And MAX is curious aircraft of secure that or the cargo a you out there. or with just cargo kind

Jonathan Ornstein

The of aircraft to transaction and cargo be where aircraft behalf operate is the are looking we type provided us. that one would on of at would we operation,

Savi Syth

the appreciate Alright, Thanks. color.

Jonathan Ornstein

Sure.

Operator

I showing And queue no time. am further in this questions at

Jonathan Ornstein

everyone, Alright. you Well, taking much time. thank again, the for very

here. away plug to It work is up and we something every constantly continue on. We get day

and tremendous at aircraft the to we opportunities where and, and have grow both cost operational at is Brad And think continue our opportunity we know right done carriers. other terrific United there to look I focusing to of a profitably. American, type and and would and our again, a business operate job. I leverage Our on structure both people to we that continue now, like Brian Mike

very look our on thank forward your for Bye-bye. So, talking you call. and you quarterly to much next to interest we

Operator

today’s conference. concludes that And you. Thank

at time. You may this disconnect all

Mesa Air (MESA) 10 Feb 202020 Q1 Earnings call transcript