Mesa Air Group's Second Quarter 2021 Results

U.S. regional airline Mesa has reported its second quarter fiscal 2021 financial and operating results showing a pre-tax income of $7.6 million, net income of $5.7 million.

Highlights for the quarter:

Pre-tax income of $7.6 million, net income of $5.7 million or $0.14 per diluted share1

Adjusted pre-tax income of $12.1 million, adjusted net income of $9.1 million or $0.23 per diluted share 1

Letter of Intent to lease an additional 737-400F cargo aircraft

Invested in Archer Aviation’s eVTOL electric aircraft along with United Airlines

Letter of Intent with Gramercy Partners to develop a European-based regional airline

Named to Forbes’ list of America’s Best Midsize Employers for 2021

Mesa's Q2 2021 results reflect net income of $5.7 million, or $0.14 per diluted share, compared to net income of $1.9 million, or $0.05 per diluted share for Q2 2020. Mesa’s results include a one-time non-cash $4.5 million lease termination expense resulting from the purchase of a previously leased CRJ-900 aircraft. Adjusting for this, Mesa’s Q2 2021 quarterly net income per diluted share would have increased to $0.231.

Mesa's Q2 2021 pre-tax income was $7.6 million, compared to $3.2 million for Q2 2020. Mesa's Q2 2021 adjusted pre-tax income1 was $12.1 million, compared to $3.2 million for Q2 2020. Mesa’s Q2 2021 results include, per GAAP, the deferral of $4.9 million of revenue, all of which was billed and paid by American and United during the quarter and will be recognized over the remaining terms of the contracts. The primary reason for the $8.9 million increase in adjusted pre-tax income from Q2 2020 to Q2 2021 was $56.0 million of benefit from the Payroll Support Program (“PSP2”) under the CARES Act largely offset by temporarily reduced rates offered to our partners related to the PSP2 program.

Mesa's Adjusted EBITDA1 for Q2 2021 was $41.5 million, compared to $35.3 million in Q2 2020, and Adjusted EBITDAR1 for Q2 2021 was $51.5 million, compared to $47.6 million in Q2 2020.

1 See Reconciliation of non-GAAP financial measures

Jonathan Ornstein, Chairman and CEO, said, “The last year has emphasized the importance of innovation in the face of significant challenges. Given change is the one constant of our industry, we have focused on positioning the company for the future and taken the regional industry’s initial steps toward sustainability and de-carbonization of air travel. Our first strategic initiative this fiscal year was an investment with United Airlines in Archer Aviation, a leader in the development of electric air-mobility vehicles. Since our founding, Mesa has been an innovator and we continue to evaluate other opportunities in green technology. Additionally, we began to diversify our business model by starting a cargo operation and are flying two 737-400F with DHL. We have signed a letter of intent this quarter, partnering with Gramercy Partners for European flying and are planning to use existing CRJ-900 aircraft.”

Brad Rich, Mesa’s Chief Operating Officer, added, “During the past quarter, we continued to improve our operational performance and believe we are well-positioned with both American and United to assist in the pandemic recovery. Our operational performance improved, especially on our American flying, where block hours increased 6.8% from last quarter despite flying fewer aircraft.”

March quarter financial results:

Total operating revenue decreased by $82.6 million, or 45.9%, to $97.3 million for our three months ended March 31, 2021 as compared to our three months ended March 31, 2020. Contract Revenue decreased by $84.1 million, or 50.7%, to $81.7 million due to the impact of COVID-19, fewer aircraft at American, lower temporary contract rates, and the winter storm and subsequent power outages in Texas. Our pass-through and other revenue increased during our three months ended March 31, 2021 by $1.5 million, or 10.6%, to $15.6 million primarily due to pass-through maintenance revenue related to our E-175 fleet.

Total operating expense decreased by $85.5 million, or 51.5%, to $80.5 million for our three months ended March 31, 2021 as compared to the three months ended March 31, 2020. The reduction is primarily due to $56.0 million of PSP2 funds that are recorded as an offset to wages. Additionally, flight operations expense decreased in the three months ended March 31, 2021 due to reduced crew costs associated with less flying and training. Our maintenance expense decreased primarily due to fewer heavy engine maintenance events and lower component contracts, parts, and labor expense, offset by higher c-check expense and pass-through maintenance. In addition, general and administrative expense decreased primarily due to lower pass-through property taxes.

Fleet:

All of our operating revenue in the three months ended March 31, 2021 was derived from operations associated with our American and United Capacity Purchase Agreements and DHL Flight Services Agreement. For the three months ended March 31, 2021, 53% of the Company’s total revenue was derived from United, 45% from American, and 2% from DHL.

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