Earnings call transcript Q4 2022

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Operator

Thank you for standing by, and welcome to Mesa Airlines Q4 and Full Year Fiscal Year 2022 Conference Call. [Operator Instructions] This call is being recorded.

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

I would now like to turn the call over to Doug Cooper, Head of Investor Relations. Mr. begin. now may you Cooper,

Doug Cooper

Thank you, Call Year Mesa's Conference everyone September and its Fiscal welcome for Fiscal XXXX. to Fourth XX, Earnings Ted, Quarter ended and

Chairman today On of with and the other Zubeck, Chief Lotz, Rich, are Chief and Michael President Chief Officer; management and Jonathan Executive the team. Vice Executive me members Ornstein, President; call Operating Financial Brad Officer; and Mesa's Torque Officer;

remarks, there sell-side will be session question-and-answer the prepared a analysts. for our Following

the everyone on statements significant remind with future call differ any today's on We company's forward-looking reports results cause to that risk from the could discussed also could and including risks of to materially the on undertake statements. discussion in contains a that the update be SEC. our want uncertainties performance. There to reflected guarantee no based are duty and are by We current file expectations not those actual factors forward-looking the statements, forward-looking

results today, to our In measures. refer all is release, our quarter earnings reconciliation for exclude fourth available of Please we which to the adjusting comparing non-GAAP our items. fiscal website special will be on periods

for With it that, turn to opening over I Jonathan? remarks. Jonathan will his

Jonathan Ornstein

and our operational have sheet. created to you, addressed thank balance Thank transformed charge and you, transitioned with results, United, Since its the impacts us today. Airlines business. American financial much pilot our from initiatives spoke for Doug, and position on stronger significant industry-wide a these Combined, have business and liquidity and everyone, these occurred agreements Collectively, new being transactions we several quarter's last at Mesa.

has what been through walk accomplished. Let's

at wind due part we and utilization in penalties pilot XXXX. Airlines uncovered as to finalized unprofitable down an As structure, situation we our a initiated to attrition. reimburse of for us to our to contract result leaving American ongoing American they subsidiaries, announced XX, us increases vulnerable by American and agreement led with wage in April required similar were our an Eagle at increases unprecedented action. operations initiated XX, increases untenable dramatic December on to Mesa and while unwilling to pay operation, Unfortunately, wage take pilot their own This

our over United years, Fortunately, based Airlines, United in with took our many relationship operational view and stepped performance strong a with combined flying. to CRJ-XXX the over consistent different on quickly American take

flying jet pilot Given increase block cities to EXXX the rural higher regional shortage. hours, the in supported of lost and many the service wages shortfall industry-wide to both CRJ-XXX United in smaller operations due and to and our have that intends

new depending As XX, on agreement the finalized a United of we EXXXs December we are covers operating. a on of result, our XX to CRJ-XXXs with X-year that number capacity up purchase

is because strong a years. view that United developed clear a very Mesa between and for decision, has While of made United's this business there possible the was case over relationship past XX

to bases smooth El along place a our Houston, ensure new Phoenix, Western incremental Denver had we expand base pilot maintenance an Louisville crew CRJ-XXX potentially will with and in additional crew services transition, in a Other remain in Paso added. base to be states. with To CRJ-XXX and in crew will bases Dallas,

continue crews locations and and pilots existing through will all Mesa the the of utilize in beyond. to transition its

under to attrition two have XXX new immediate our on to in pilot currently as XX proceeds. and approximately to will We over million, from to of million generating be also cash additional another to qualified we Mesa In additional impact significant $XX XX. $XX.X well purchase has on Concurrently, spare pipeline. is as new providing addition a Mesa attract these actions, December financial agreements facility, our an provide pilots training of ability which scale had and support net candidates. that United pay finalized $XX.X Mesa liquidity $XX liquidity engines One our million for million

reversal industry seat will past Mesa together. of in to [Mesa regional United in service to jet the to XX% to for also which years for momentum capitalizing XXX for the daily equity work a jet adding and substantial Mesa part markets, position X United smaller is look network. restore and I] and demand of regional will the service transaction, on Board. a have the airline the This their an We flying forward seen support, regional on important neglected receive we of As thank rural and over by reductions as flights X/X the United

plan on smaller with only and strong Mesa the for aircraft will our path We exclusive and leveraging fastest as believe will we transition provide to reliable, the United participation particular, for preferred to relationship most communities. congested with further a large United carrier significant forward care. our announced provide United growth look Mesa's electric Moreover, address previously will industry-leading in be the jets. to regional believe aviators the United's regional technology major We operating the opportunities after In transition, future carrier. new Aviate program, in with a commercial to combined co-investments needs the in

that of fully United, and by with Once attendants. unaffected In DHL. the agreement was to will also like aviation our I to we and other signed relationship with Mesa are integrated with American continue regional also strong we be in the for pilots a well our note the path operation as maintain DHL career United flight our as quarter, employee our with new most operations attractive a all would X-year agreements, groups.

balance to fully XX% approximately to if December from the approximately associated The notes terms January also reducing debt we has $X.X to capital XX, structure. Bank we agreed next-gen XXXX. number mid-December, strengthen Canada renegotiated on completed CRJ-XXX aircraft, a XXXX Additionally, with service by Export XXXX. have to with of X prior are $XX or junior debt of Development transactions noteholder, improved note EDC, million Mitsubishi, and the repaid outstanding December forgive conditions our In million

X CRJ-XXXs January $XX on agreement effect to an CRJ-XXXs by $XX.X we Additionally, sales rates. million. on resulting the CRJ-XXX million. net Canadian sales expected and party, reduce by XXXX aircraft, the Mesa's Mesa of finance in at surplus plans approximately in on company of million These by XX March third leases and reduces or Concurrently, million annual treasury prior remaining to which expense a at purchase special-purpose price to interest of $X.X approximately are negotiated approximately United the proceeds lease with of a our XX RASPRO, closing termination $XX cash XXXX; U.S. current debt reduce to

our Brad quarter. this details performance the that, will over to to of of more Rich go With hand I update over on an operational

Brad Rich

everyone. XXXX Jonathan, to start by on XX% Thank reviewing forecast quarter, in good with I'd our In like call. XX,XXX the afternoon June September results. flew to quarterly last our quarter's below line quarter hours, and we block operating you, the

Our December quarter quarter. block hours September are X% the be XX,XXX, projected below roughly to

hours, quarter, forecasting XX,XXX block the slight quarter. are we the over For currently December March a increase

Consistent the been with regional the has limited hour to shortage. the challenges throughout block due industry, pilot our production

As has and future. filling we come materially, down classes attrition mentioned are previously, our into the

training and with additional additional pilot spring and coming is an instructors we in XXXX CRJ capabilities to expand our the in continue Our and focus, simulator E-Jet the E-Jet both of production fleet. major a

provide support with we CAE In our contracted to training addition for our to have additional own efforts. hiring,

maintenance. with We in United are facilities, working transition of and making on our crews preparations focusing out and cooperatively for American

March to XX approximately X cease we to lines reduce From flying. will through X, operate through our we schedule expect by current of Beginning will operating by the April We for XX have with April XXXX. of X. schedule expect lines February our for on will and May and lines American operating X operations X, March United begin XX XX%, American

agreement agreement, and will the rebrand United as the CRJ-XXX to reconfigure -- expenses As of part of the the transition transition pay with United part aircraft.

our associated same United, of to flying transition look we CRJ-XXX we fleet. maintaining forward with As integrity our level schedule to the ERJ

to now through I'd like to walk call the turn that, to over performance. financial our With Torque

Torque Zubeck

Great. thank today results. work patience Thank we on Brad, our for call quarterly to as release you, fiscal you and to your year and everyone the

finalized see, flying that As the debt lease that you agreements was of transactions obligations. our well our restructure as number meaningfully and a can to as were due being delay

the our like summarize As Jonathan items transactions, few touch a of already on covered has and most just expectations. I'd to

Revenue First, quarter $XXX.X fourth million or XXXX for XXXX. QX of fourth quarter. $X.X million, in from in our was a million of the fiscal year decrease the a $XXX.X performance negative X.X%

expense Our X% contract rising $X.X revenue Pass-through by other fell due primarily P&L expense. maintenance no year, And year-over-year. impact. revenue maintenance has remained million reminder, and pass-through to last the pass-through relatively as a to flat

remaining terms be QX results remaining of XXXX. $XX.X recognition $X.X the million million GAAP, deferred are contract. of QX recognized of revenue Mesa's $X.X flights 'XX per deferred The of versus will the the in million over the completed as previously balance deferral revenue of include

up fleet million XXXX, expense operating was million $XXX.X in the Maintenance of administrative $XXX.X longer-term at expense were were the impaired the around for levels relative XXXX. QX supporting $XX.X a QX of relatively $X.X overhauls overall Group, by COVID. at heavy of of down remaining short number and expenses XXXX that million, General deferred onetime as million On million uncertainty $XX.X and QX passed $XX.X primarily $XX.X Airlines normal beginning versus increase the This with expenses versus expenses below continued the side, the contract engine means to costs duration and we or was XXXX. million, high $XXX.X related driven American American driven Asset the assets and of adjustment for assets. of Maintenance utilization tax million QX million. C-checks by CRJ-XXX

the for hour assets million million to to are adjusted basis, CPA. loss 'XX. supporting PSP the million decrease net group of adjusted of block Mesa On loss year-over-year It's to and that primarily excludes for impairment to QX that due important was for of a production an the QX a pretax compared pretax loss American million $XXX.X the $XX.X of loss lower The of the 'XX impact primarily $XX.X program. reported note pretax QX related $X.X

for compared year of per year net $X.XX loss quarter fiscal $XXX.X XXXX, $X.X net adjusted Excluding fourth reported $X.XX loss a to diluted net of is of share of loss per million ago. loss for a And million compared XXXX. QX $X.XX item, a share share million to or $X.XX or million $XX.X or the a this diluted or net per per share $X.X we

Cash expected on quarter, balance loan any by increased close our for and turn week, cash United to not calendar XX $XX million million June projected quarter, the me includes This this from are $XX.X the million. until liquidity. million. to year. excluding funding let prior XXXX, $X.X $XX.X to cash, restricted proceeds December that sales from is XX, new cash the other the the So Based

of the from at was $XXX.X down quarter million, prior debt quarter. the million the end Total $XX.X

importantly, combined, early reduce Most sales During XXXX. the quarter, million $XX million. transactions by debt by payments will our as as made we scheduled March $XX.X of debt

have We XXXX also of payments of $XX projected $XXX approximately million year resulting principal in scheduled million. 'XX in of debt fiscal end

given looking guidance to the today, earlier. major not hours block full at time we we XXXX, So the Brad Mesa be year developments at other that than discussed this providing specific financial will that discussed

With Jonathan now closing that, I'd to back it over for to turn like remarks.

Jonathan Ornstein

you, Torque. But summary, particular. in many around. challenging XXXX the in industry year strides a Thank regional was business for past towards turning important Mesa we few In our months made the for and

in sheet we To American, cash. to recap, seized through for shore scale implemented balance we and we shed reduction operational United, up our pay with and agreements and with new business significant opportunity our reached increases employees in loss-making our a debt major financial

for over such other as and Mesa. FTI the To Austin decades the RASPRO continued as like Canada, end assistance shareholders past representing well I'd U.S. and Mitsubishi Development United of United as representing again its call, Treasury X our -- thank well to the as as this Export stakeholders, Department, support Sidley

us our the of future optimize employees especially setting for up operations, helping are our We Mesa thankful all efforts success. towards for and rebuild

questions At field I'd this open up that as may to please operator, like analysts the point, call any have.

Operator

first queue Bank. from Linenberg with [Operator is Instructions] Deutsche Michael question we the in have The

Shannon Doherty

actually on for Doherty is This Mike. Shannon

operation the airplanes couple will ones here. to can to how in stabilize many fly Just quickly be How American a transition total? finalized, you United? from and expected And to once United of quick guys

Jonathan Ornstein

is Jonathan. This

by of that the done when going the Our will in to with pardon our have long of just operation, -- the X first training the we do for aircraft be would still be finalized, -- the excuse that but with -- be And CRJ step be -- April. plan XX we're basically We in that's American and as be know we me. the begin And me, relationship me, the just and mid going United would that United. excuse in don't -- as in operation, forward CRJ-XXXs have is the transition pilots. E-XXX cycle March in to operating April

Shannon Doherty

That's doesn't scope implications for And any more my seaters to maybe From explain have due you helpful. limitations? any room fleet. may in Jonathan its that can exist XX understanding, United

So you restriction. moving scope without violating are over how exactly the synergies

Jonathan Ornstein

misunderstanding a there. violate that throughout a to scope I There's one's restriction. system. there are parked just United the mean It's no going aircraft

that example, CPA move taking fill are And counted of that pulled in as a those towards that the the just up breach shortage. pilots ourselves there where gap time. why filling we're have pilot the term. these over are due is to that's aircraft the basically been happens it's out short aircraft. valuable Our And today. own, obviously of for very And Training not something and aircraft to not are others And exists spool that the as having and scope. that's lack result of that

Operator

Our next Syth is in Raymond queue James. the with question Savi from

Savi Syth

Syth Inc., Analyst Division Raymond – James Airlines & Research Associates,

I that know what forward? see cash of I American kind and you're of was on year of this of kind about replacing the think United how kind With earnings you as here what going like with flying. about flow. you're But just basically transition, It curious, I like the curious, versus thinking quarter seems changes you'll fiscal should fourth of we cadence flying earnings the was in not some in saw the of -- both giving I guidance. commentary then kind

equal, captain kind of the those increasing similar you see where utilization? should a the can up you get to we pilot supply can until all -- levels trend So start

Jonathan Ornstein

have $X have be rate flying money. we're period run things be, going contract No. United lose how first. on United the not the you that mean numbers dynamics million basis to of The profitable. the a And transition I we're I we losing at why. which will there'll be the a I'll month loss-making, obviously, based -- primarily, tell couple in not mean, flying, I the changed United get a that fact, view a on roughly but will American mean, operation, where and will we in

debt also cash benefit In earnings. million add I through we and Treasury addition, shedding quite will are U.S. is -- help the $X of a process a year. debt, million this of alone believe, bit That obviously savings and just both $X flow

But to transition there still period was to operations, training $X like loss-making significant. month, say million shedding that. a it's extremely to high, again, a require it's the some time, through pretty going is I that fair said, actually think some about that's there I going time to are and take is which work are expenses, which But and

of system that to of well the And American now as the the remember rates offered that we that the were -- the transaction, as wage offered that -- was American pilots which to throughout at part soul will is really and has the heart the be United agreed of of XXXX. former we United the we're United the behalf United. transaction that same very forward pay as as see additional is biggest has I value that on this did, moved summer and the that to way obviously March this deal themselves and being the singularly well pleased flying head for done as some reason into and just that thankful it seen flying mean

care solely performance will a And of successful on operational numbers that fair forward, I So believe think we the moving are transition. we themselves. say focusing to terms of it's in take

Savi Syth

fairly color. of pick of dynamic question This a to you forward might, on That TA more it's just would from in you kind you reflect that views just on not there after views start your kind the you'll the pay? that is airline that to sense, something increase you'll rates obviously, of away risk side, how yet slowed the are. And bit any I makes now moves again the down. again level a pay Jonathan. Spirit of see see Is pilot and start that appreciate the the a what on move kind I said if attrition of And attrition saw is Or big regional that pay. a industry? ULCC put up

Jonathan Ornstein

be that absolutely impact. could I there an think

not be schedule. United pilots to good proposition a And of will the the that we to people a period with think short rates to that realize than are think United I just time. that a crapshoot actually in most lower really I but little offers move specific numbers. will them with ability on but That's part here their on coming moving of a very agreement maybe with new of Mesa rates bit those

I coming long over and further there's that doubt term to be term, particularly to going are career, think by the of far ahead looks Mesa anyone at United. a to they the that that over no transitioning

And there farm I feel does should team becomes the don't for to to us this take frankly, and not that why happen. and I we that be lose would not allowing say the to want to action we'll the that ULCC. fact that a reality, be ULCCs also sitting think And it's does reasons in are idly that United pilots future fair think if by strategic

to acted history And greatest United circumstance. mean, United. plans the from I this there's that in why Mesa ensure pilot the United continue they flow aviation. that of particular won't reason now I So into no growth act see decisively has has a commercial and very goes decisively in literally to

is United that. I of the and They heard double of some been X on fastest-growing future XX Ryanair year. in remarkable. was that having the familiarity, did looking they put airlines at what years has in the one in past, airplanes

for pilots. is there big So demand a

do that everything as of views team, low-cost think to to Mesa and that. the we anyone And way I intends happen. can the get United we farm see to let think don't intend carriers in their I

think So that. be we'll do United of I supportive what it takes. would And

Operator

queue question Helane in from Cowen. the next is The Becker with

Helane Becker

of Just a couple questions.

Jonathan, that's I that forward? Is in XX-K opinion. that noticed all coming and Mr. going qualified of are the just the are liquidity issues give do not a So the there no they comfortable you auditors because in

Jonathan Ornstein

Yes.

the enhanced the it were U.S. United auditors or place, with the losses, new put credit pay debtors. had at the the and was with agreement with flying the I agreements of the of eliminating the Treasury. the lessors that we other The debt in whether breadth the think debt looked down agreement that that

I of the of our of the those the about think think mean of engines the pretty by a go was I in talking -- I will a that that net aircraft. I additional well, done, things is restructuring engines all big that part going undoubtedly -- is XX and over will pay between down the proceeds the XX And the was now the with coming United a debt estimate significant. conservative finalize because would think it and for sale wayside we $XX from think million, what think, we're sale XX seeing issue combined perspective, concern balance their our sheet. lot is that, off why I aircraft

engines. we the we very going I engine started again, and we were a distinct engines. lot or overemphasize, buying ago, years where into path X very, go went decided effectively to can't own of We so business And a that on

engines what's the to all United that? more to off. will that be engines, access to these to those or I sales additional of can Some close those engines proceeds. as did that all -- And see now. Yes, sell paid out XX are think -- XX now XX And our at being requirements we you engines. And XX sell. the And off I of have said, I the are paid we we on engines looking probably think

that liquidity. So see we I continue opportunities think to for enhanced

Helane Becker

What there going Is -- you are about. that thinking helpful. that operation? hold? European everything unrelated about Is moving on to one very question That's just How been we've the forward? about that? Is talking

Jonathan Ornstein

We've having the service successful. being been initially, be Well, be the our now with there. able able bit opportunity same do has is operation for little way think, And I interesting we I the that there, excess that now which CRJs here there only think CRJs. can off pilot makes proven very sell to -- for clearly pay the to a maybe but thought there it But of we have issues, flying and us and I will because that cash. actually foothold think that into very I European do debt, ultimately, regional something was generate put is there demand not sense. not to CRJs a

I to move as it's fair navigate environmental to think geography the may still and also be in platform the great aircraft it's electric this also say road. this to And early take that that what's and I that in going electric technology but well. be the it that quicker on could technology And launch the the fact And a the demographically down would road, just down Europe green bit the with we to given little a be new extent seriously. and think think some issue of easier We they these aircraft.

joined role. but when Mesa, XX So mean, length. first now, it plays you the we obviously know, I small passenger, be And I back stage on XXX-mile flying unpressurized It were look I comes. think future may I and a turbines

jets. stage XX We now think. than are and faster The future X,XXX-mile you comes length flying passenger

be part of part European So to a strategy, important all will forward. moving I that think it's operation big the continue think of our and I

Operator

in James. The next the Syth from with question Raymond Savi queue is

Savi Syth

Thanks for the followup.

flying. just tied assets, a fleet, the tail bit; CRJ-XXX unencumbered on the Just have there? doesn't a what's the guessing, Are of again, that contract other assets there's the other than I'm unencumbered And Because overall to your white moving on United, parts the to little kind of that you any XX lot sell? there engines risk increase here. the

So the funds fleet. from there cover really your E-XXX

the what is. CRJ-XXX tail kind So curious I was risk of

Jonathan Ornstein

Well, we I I think clarify. mean, should off, first

unencumbered on of as It's most the depreciate. to they debt, debt. pay are we that down engines assets the that do thumb, of as the engines, a unencumbered being of or as just basically twice rule close have fast but Some

which So in and by on the the there's value no a paid we is course of residual the are half of least debt and more years, the generally, engines engines, the debt X the time we for those worth them, finish at engine. to little paying bit off what

the other aircraft aircraft will mean, obviously, the those On of it's had note literally were XX aircraft, time think we important I different be it tail-by-tail. sold, X sold, engine I that But to that kind them. remaining on

worst we're a the bit aircraft, the of to potentially those with pay actually So our and associated and debt still of off able aircraft little generate cash.

bad So now. about given I we fleet, feel the on think pretty CRJ stand we the environment good so particularly being where right

at But through. think way us tail reduction, those. feel again, time us at associated that is with terminate, gives And of our our with some government confident not the again, also of in significant we're work to those EDC. value we these and debt gives that work I and leases to is primarily to amount did looking debt, of be pretty example, just sort with time those we in RASPRO, aircrafts of which some And the risk And the time. a for terms going when only transactions negotiate interest through that with way all that RASPRO new

Savi Syth

just issue And longer last not issue captain supply term, or pilot forever. is helpful. supply going That's thinking to

the kind of kind fleet that new if the kind of that on were of a of So normal the normal? profitability insights any to utilizing of what Is you level you back previously? there there of is new levels kind kind get --

Jonathan Ornstein

will flying projected, because hours think generally our we that basically we think the increased have, they new roughly of an of that cost. to the number we same amount payments the United I have labor with by Well, I the agreement the profitability that level fact, were us if in be

the a you again, an XX,XXX. I you nutshell, big years improvements. made flew a of X talking And hard profitability. hours yet company to we get to To just have last still in to picture, something at flew and When to block lot ago, month, going Mike back And to a the was we're idea, work we've under month. XX,XXX we look give

of that. go a go So see room will to a us you for a made say, importantly, an there There's to we to return train, who there's through pathway. But carrier to demonstrated clearly, a that help to -- hire, has United of have pilots lot them to lot profitability. a for clearly us through of think pilots and can there's I lot us to forward, liquidity a important will to going transition. transition support And we're to here, be most this I

Operator

no And time. further I'm showing this questions at

Jonathan Ornstein

Okay. Well, thanks, Albert.

these regional Let me They're to think we that see cities. cutbacks in on It would growing and terms They rural see really really throughout just too really company. company. witnessed focus of committed regional United have leadership And close aviation just to the committed our this, will important around. our that operations at the and help know aviation. Look, like grow to with in us turn appreciate. dramatic things people it's improved I that to is focus having opportunity and I on now their are partnership United. United

aviation think them to deals. of with technology. we of And be that along United would that forefront I like and love Mesa United's of the think part that. a also has a implementation We'd we of co-invested rural doing always the to now carrier. we've terms with been in on could thing be green committed planet, to for a the and the technology that right number at

go going a to clearly security, beneficiaries I Airlines as great have mean the that be The for just for step to hold Aviate this looking we job long can't a step this enhanced better industry. Mesa. But road will feel I well than So the you to be is United program, Mesa to Hopefully, with tell our folks we for security, how this feel don't there's I a place sure. into a and people that think great opportunity. for of strongly that enhanced of get all aviation

overall, very So we're it. enthusiastic about

the our as all parties and seeing we to for reflected We that this that are help forward some value look back well. of happen, shareholders to thankful very make

have you thank a and Year. much, So very Happy New great

Operator

you today's Thank concludes your This call. participation. for

You time. may disconnect at this

Mesa Air (MESA) 29 Dec 222022 Q4 Earnings call transcript