Mesa Air Group Reports $114.6 Million Net Loss and Declining Revenues in Latest Quarter

Mesa Air Group, Inc. reported significant financial challenges in its latest quarterly filing, revealing a net loss of $114.6 million for the three months ending December 31, 2024, compared to a net loss of $57.9 million during the same period in 2023. The company's total operating revenues decreased by 13.1% to $103.2 million, primarily driven by a 20.2% decline in contract revenue, which fell to $80.7 million. This decline was attributed to fewer aircraft under contract and the winding down of a Flight Services Agreement with DHL, which had contributed $3.9 million in revenue in the previous year.

The company's operating expenses surged by 28% to $214 million, largely due to a $65.7 million asset impairment charge related to the write-down of ten E-175 aircraft and a $46.7 million loss on the sale of eight E-175 aircraft. Despite a decrease in flight operations and general administrative expenses, the overall increase in operating costs significantly impacted profitability. The company also reported a decrease in block hours flown, down 16.3% to 39,035 hours, and a reduction in passenger counts by 18.9% to approximately 1.3 million.

In terms of strategic developments, Mesa Air Group is undergoing a transition in its operational structure, including a merger agreement with Republic Airways Holdings, which is expected to be finalized in 2025. This merger is part of a broader strategy to enhance operational efficiency and financial stability. Additionally, the company has entered into a Three Party Agreement with United Airlines and Republic, which includes provisions for the termination of the existing Capacity Purchase Agreement (CPA) and the sale of remaining eligible assets. The agreement also outlines a 3% increase in CPA block hour rates retroactive to January 1, 2025.

Operationally, Mesa Air Group has been focusing on reducing its fleet size and optimizing its asset base. As of December 31, 2024, the company operated a fleet of 60 aircraft, down from previous levels, and has classified $80.7 million in assets as held for sale. The company has also implemented measures to improve liquidity, including the sale of aircraft and engines, which generated significant cash inflows. For instance, the sale of 18 E-175 aircraft to United is expected to yield gross proceeds of $227.7 million.

Looking ahead, Mesa Air Group's management has expressed cautious optimism regarding its ability to meet cash obligations over the next twelve months, despite the current financial strain. The company plans to utilize cash on hand, ongoing cash flows, and proceeds from asset sales to address its $143.3 million in principal maturity payments due within the next year. However, the company acknowledges that its future performance is contingent on various factors, including market conditions and operational efficiencies, which could significantly impact its financial outlook.