MESA AIR GROUP INC

Previous wording

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa", the "Company", "we", "our", or "us") is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 82 cities in 36 states, the District of Columbia, Canada, Cuba, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport. Mesa operated or maintained as operational spares a fleet of 84 aircraft with approximately 280 daily departures and 2,246 employees as of December 31, 2023. Mesa’s fleet were conducted under the Company’s Capacity Purchase Agreement ("CPA") and Flight Services Agreement ("FSA"), leased to a third party, held for sale, or maintained as operational spares. Mesa operates all of its flights as either United Express or DHL Express flights pursuant to the terms of the CPA entered into United and FSA with DHL (each, our “major partner”). All of the Company’s consolidated contract revenues for the three months ended December 31, 2023 and December 31, 2022 were derived from operations associated with the CPA, FSA, and leases of aircraft to a third party. Revenues during the period ended December 31, 2022 also included revenues derived from our CPA with American Airlines, Inc. ("American"), which terminated in April 2023.

Current wording

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa", the "Company", "we", "our", or "us") is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 79 cities in 36 states, the District of Columbia, Canada, Cuba, and Mexico. Mesa operated or maintained as operational spares a fleet of 84 aircraft with approximately 263 daily departures and 2,110 employees as of March 31, 2024. The aircraft in Mesa’s fleet were operated under the Company’s Capacity Purchase Agreement ("CPA") and Flight Services Agreement ("FSA"), leased to a third party, held for sale, or maintained as operational spares. Mesa operates all of its flights as either United Express or DHL Express flights pursuant to the terms of the CPA entered into United and FSA with DHL (each, our “major partner”). All of the Company’s consolidated contract revenues for the three and six months ended March 31, 2024 and March 31, 2023 were derived from operations associated with the CPA, FSA, leases of aircraft to a third party, and Mesa Pilot Development. Revenues during the three and six months ended March 31, 2023 also included revenues derived from our CPA with American Airlines, Inc. ("American"), which terminated in April 2023.

Previous wording

As of December 31, 2023, our fleet consisted of 112 aircraft which we operated under our CPA and FSA, leased to a third party, held for sale, or maintained as spares, with approximately 280 daily departures. As of December 31, 2023, we operated 54 E-175 and 26 CRJ-900 aircraft under our United CPA. We operated three Boeing 737-400F and one 737-800F aircraft under our DHL FSA. We leased two aircraft under our lease with a third party. As of December 31, 2023, approximately 93% of our aircraft in scheduled service were operated for United, approximately 5% were operated for DHL, and approximately 2% were leased to a third party. All of our operating revenue in our three months ended December 31, 2023 was derived from operations associated with our United CPA, DHL FSA, and from leases of aircraft to a third party.

Current wording

As of March 31, 2024, our fleet consisted of 112 aircraft which we operated under our CPA and FSA, leased to a third party, held for sale or maintained as spares, with approximately 263 daily departures. As of March 31, 2024, we operated 56 E-175 and 24 CRJ-900 aircraft under our United CPA. We operated three Boeing 737-400F and one 737-800F aircraft under our DHL FSA. We leased two aircraft under our lease with a third party. As of March 31, 2024, approximately 93% of our aircraft in scheduled service were operated for United, approximately 5% were operated for DHL, and approximately 2% were leased to a third party. All of our operating revenue in our three and six months ended March 31, 2024 was derived from operations associated with our United CPA, DHL FSA, and from leases of aircraft to a third party.

Previous wording

Under our DHL FSA, we receive a fee per block hour with a minimum monthly block hour guarantee in exchange for providing cargo flight services. Ground support including fueling and airport fees are paid directly by DHL.

Current wording

Prior to the wind-down and termination of our operations under the DHL FSA, we received a fee per block hour with a minimum monthly block hour guarantee in exchange for providing cargo flight services. Ground support including fueling and airport fees were paid directly by DHL.

Previous wording

Contract Revenue. Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our CPAs and FSA with our major partners, along with the additional amounts received based on the number of flights and block hours flown, and rental revenue for aircraft leased to GoJet Airlines L.L.C. Contract revenues we receive from our major partners are paid and recognized over time consistent with the delivery of service under our CPAs and FSA.

Current wording

Contract Revenue. Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our CPA and FSA with our major partners, along with the additional amounts received based on the number of flights and block hours flown, rental revenue for aircraft leased to GoJet Airlines L.L.C, and revenue from participants in Mesa Pilot Development. Contract revenues we receive from our major partners are paid and recognized over time consistent with the delivery of service under our CPAs and FSA.

Previous wording

Pass-Through and Other Revenue. Pass-through and other revenue consists of passenger and hull insurance, aircraft property taxes, landing fees, and other aircraft and traffic servicing costs received pursuant to our agreements with our major partners, as well as certain maintenance costs related to our E-175 aircraft.

Current wording

Pass-Through and Other Revenue. Pass-through and other revenue consists of passenger liability insurance, aircraft property taxes, landing fees, and other aircraft and traffic servicing costs received pursuant to our agreements with our major partners, as well as certain maintenance costs related to our E-175 aircraft.

Previous wording

Other Operating Expenses. Other operating expenses primarily consists of fuel costs for flying we undertake outside of our CPAs and FSA (including aircraft re-positioning and maintenance) as well as costs for aircraft and traffic servicing, such as aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by our major partners. All aircraft fuel and related fueling costs for flying under our CPAs and FSA are directly paid and supplied by our major partners. Accordingly, we do not record an expense or pass-through revenue for fuel supplied by American and United for flying under our CPAs or DHL under our FSA.

Current wording

Other Operating Expenses. Other operating expenses primarily consists of fuel costs for flying we undertake outside of our CPA and FSA (including aircraft re-positioning and maintenance) as well as costs for aircraft and traffic servicing, such as aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by our major partners. All aircraft fuel and related fueling costs for flying under our CPA and FSA are directly paid and supplied by our major partners. Accordingly, we do not record an expense or pass-through revenue for fuel supplied by United for flying under our CPA or DHL under our FSA.

Previous wording

Gain/Loss on Investments, Net. Gain/loss on investments consists of net gains or losses on our investments in equity securities resulting from changes in the fair value of the equity securities.

Current wording

Unrealized Gain/Loss on Investments, Net. Unrealized gain/loss on investments consists of net gains or losses on our investments in equity securities resulting from changes in the fair value of the equity securities.

Previous wording

While we operate under a capacity purchase agreement and a flight services agreement, we do not manage our business based on any performance measure at the individual contract level. Additionally, our CODM uses consolidated financial information to evaluate our performance, which is the same basis on which he communicates our results and performance to our Board of Directors. The CODM bases all significant decisions regarding the allocation of our resources on a consolidated basis. Based on the information described above and in accordance with the applicable literature, management has concluded that we are organized and operated as one operating and reportable segment.

Current wording

While we operate under a capacity purchase agreement, we do not manage our business based on any performance measure at the individual contract level. Additionally, our CODM uses consolidated financial information to evaluate our performance, which is the same basis on which he communicates our results and performance to our Board of Directors. The CODM bases all significant decisions regarding the allocation of our resources on a consolidated basis. Based on the information described above and in accordance with the applicable literature, management has concluded that we are organized and operated as one operating and reportable segment.

Previous wording

We had operating loss of $48.4 million in our three months ended December 31, 2023 compared to operating income of $2.4 million in our three months ended December 31, 2022. In our three months ended December 31, 2023, we had net loss of $57.9 million compared to net loss of $9.1 million in our three months ended December 31, 2022.

Current wording

We had operating income of $11.6 million in our three months ended March 31, 2024 compared to operating loss of $26.9 million in our three months ended March 31, 2023. In our three months ended March 31, 2024, we had net income of $11.7 million compared to net loss of $35.1 million in our three months ended March 31, 2023.

Previous wording

Flight Operations. Flight operations expense decreased $6.5 million, or 11.1%, to $51.8 million for our three months ended December 31, 2023 compared to our three months ended December 31, 2022. The decrease was primarily driven by decreased pilot training and lower pilot wages.

Current wording

Flight Operations. Flight operations expense decreased $5.5 million, or 10.0%, to $49.3 million for our three months ended March 31, 2024 compared to our three months ended March 31, 2023. The decrease was primarily driven by decreased pilot training expense and lower pilot wages.

Previous wording

Maintenance. Aircraft maintenance expense increased $0.3 million, or 0.7%, to $48.6 million for our three months ended December 31, 2023 compared to our three months ended December 31, 2022. This increase was primarily driven by an increase in C-check maintenance expenses, partially offset by engine overhaul. Total pass-through maintenance expenses reimbursed by our major partners decreased by $1.2 million during our three months ended December 31, 2023 compared to our three months ended December 31, 2022.

Current wording

Maintenance. Aircraft maintenance expense decreased $1.7 million, or 3.7%, to $44.3 million for our three months ended March 31, 2024 compared to our three months ended March 31, 2023. This decrease was primarily driven by a decrease in pass-through engine overhaul and rotable and expendable parts, partially offset by an increase in pass-through C-check maintenance expenses. Total pass-through maintenance expenses reimbursed by our major partners increased by $0.2 million during our three months ended March 31, 2024 compared to our three months ended March 31, 2023.

Previous wording

General and Administrative. General and administrative expense decreased 2.0 million, or 14.1%, to $12.0 million for our three months ended December 31, 2023 compared to our three months ended December 31, 2022. The decrease is primarily driven by decreases in pass-through property taxes and legal fees.

Current wording

General and Administrative. General and administrative expense decreased $2.4 million, or 17.8%, to $11.1 million for our three months ended March 31, 2024 compared to our three months ended March 31, 2023. The decrease is primarily driven by decreases in pass-through property taxes and pass-through insurance costs.

Previous wording

Depreciation and Amortization. Depreciation and amortization expense decreased by $1.9 million, or 12.6%, to $13.3 million for our three months ended December 31, 2023 compared to our three months ended December 31, 2022 due to aircraft in our fleet being classified as non-depreciable assets held for sale.

Current wording

Depreciation and Amortization. Depreciation and amortization expense decreased by $6.7 million, or 40.6%, to $9.8 million for our three months ended March 31, 2024 compared to our three months ended March 31, 2023 due to aircraft in our fleet being sold or classified as non-depreciable assets held for sale.

Previous wording

Other Operating Expenses. Other operating expenses increased $1.3 million, or 118.3%, to $2.5 million for our three months ended December 31, 2023 compared to our three months ended December 31, 2022. The increase is primarily attributable to aircraft servicing expense during the three months ended December 31, 2023.

Current wording

Other Operating Expenses. Other operating expenses increased $1.1 million, to $1.3 million for our three months ended March 31, 2024 compared to our three months ended March 31, 2023. The increase is primarily attributable to aircraft servicing and fuel expense during the three months ended March 31, 2024.

Previous wording

The income tax benefit totaled $(0.9) million for the three months ended December 31, 2023 compared to a tax benefit of $0.9 million for the three months ended December 31, 2022. The effective tax rate ("ETR") from continuing operations was -1.5% for the three months ended December 31, 2023 compared to 9.3% for the three months ended December 31, 2022. Our ETR during the three months ended December 31, 2023 decreased from the three months ended December 31, 2022 due to permanent tax differences, state taxes, and changes in the valuation allowance against state net operating losses.

Current wording

The income tax expense totaled $0.1 million for the three months ended March 31, 2024 compared to a tax benefit of $2.1 million for the three months ended March 31, 2023. The effective tax rate ("ETR") from continuing operations was 0.5% for the three months ended March 31, 2024 compared to 5.6% for the three months ended March 31, 2023. Our ETR during the three months ended March 31, 2024 decreased from the three months ended March 31, 2023, primarily as a result of certain permanent tax differences, state taxes, and changes in the valuation allowance against federal and state net operating losses.

Previous wording

Our operating results for the three months ended December 31, 2023 worsened as a result of decreases in contract revenue due to reduced block hours flown and fewer aircraft under contract, partially offset by an increased United block hour compensation rate for our new pilot pay scale. Our operating expenses worsened primarily as a result of impairment charges associated with designating assets as held for sale. The increase in operating expense is partially offset due to (i) decreases in flight operations as a result of decreased pilot training and lower pilot wages; (ii) decreases in aircraft rent expense, due to the new agreement with RASPRO Trust entered into in December 2022 in which 15 of our CRJ-900 aircraft were reclassified from operating leases to finance leases; (iii) decreases in depreciation expense, primarily due to the retirement and sale of several aircraft; and (iv) the gain on extinguishment of debt in connection with the retirement of the EDC Loan and MHIRJ junior note.

Current wording

Our operating results for the six months ended March 31, 2024 worsened as a result of decreases in contract revenue due to reduced block hours flown and fewer aircraft under contract, partially offset by an increased United block hour compensation rate. Our operating expenses improved primarily as a result of (i) decreases in flight operations as a result of decreased pilot training and lower pilot wages; (ii) decreases in aircraft rent expense, due to the new agreement with RASPRO Trust entered into in December 2022 in which 15 of our CRJ-900 aircraft were reclassified from operating leases to finance leases; (iii) decreases in depreciation expense, primarily due to the retirement and sale of several aircraft; and (iv) the gain on extinguishment of debt in connection with the retirement of the EDC Loan and MHIRJ junior note. The decreases in operating expenses were partially offset due to greater impairment charges associated with designating assets as held for sale.

Previous wording

Total operating revenue decreased by $28.4 million, or 19.3%, to $118.8 million for our three months ended December 31, 2023 as compared to our three months ended December 31, 2022. Contract revenue decreased by $27.4 million, or 21.3%, to $101.1 million primarily driven by reduced block hours flown and fewer aircraft under contract compared to the three months ended December 31, 2022. Our block hours flown during our three months ended December 31, 2023, decreased 8.4% compared to the three months ended December 31, 2022 due to a decrease in scheduled flying for United across the E-175 and CRJ fleet. Our pass-through and other revenue decreased by $1.0 million, or 5.6%, to $17.7 million compared to our three months ended December 31, 2022 due to a decrease in pass-through maintenance related to our E-175 fleet.

Current wording

Total operating revenue decreased by $18.6 million, or 6.9%, to $250.4 million for our six months ended March 31, 2024 as compared to our six months ended March 31, 2023. Contract revenue decreased by $17.3 million, or 7.5%, to $214.9 million primarily driven by reduced block hours flown and fewer aircraft under contract compared to the six months ended March 31, 2023, partially offset by an increased United block hour compensation rate. Our block hours flown during our six months ended March 31, 2024 decreased 9.3% compared to the six months ended March 31, 2024 due to a decrease in scheduled flying for United across the E-175 and CRJ fleet. Our pass-through and other revenue decreased by $1.3 million, or 3.6%, to $35.4 million compared to our six months ended March 31, 2023 due to a decrease in pass-through maintenance related to our E-175 fleet.

Previous wording

December 2022 agreement with RASPRO Trust pursuant to which 15 of our CRJ-900 aircraft were reclassified from operating leases to finance leases.

Current wording

Aircraft Rent. Aircraft rent expense decreased $2.3 million, or 46.9%, to $2.6 million for our six months ended March 31, 2024 compared to our six months ended March 31, 2023. The decrease is due to our December 2022 agreement with RASPRO Trust pursuant to which 15 of our CRJ-900 aircraft were reclassified from operating leases to finance leases, offset by an increase in engine leases expense during our six months ended March 31, 2024.

Previous wording

Asset Impairment. Asset impairment of $40.4 million was recorded for our three months ended December 31, 2023 related to eight CRJ-900 aircraft, 11 CRJ-900 airframes (without engines) and 48 GE model CF34-8C engines being designated as held for sale. There was $3.7 million of asset impairment recorded for the three months ended December 31, 2022, related to the write-off of our customer relationship intangible asset.

Current wording

Asset Impairment. Asset impairment of $43.0 million was recorded for our six months ended March 31, 2024 primarily related to eight CRJ-900 aircraft, 11 CRJ-900 airframes (without engines) and 48 GE model CF34-8C engines being designated as held for sale. There was $20.5 million of asset impairment recorded for our six months ended March 31, 2023, related to the write-off of our customer relationship intangible asset and seven CRJ-900 aircraft being designated as held for sale.

Previous wording

Gain on extinguishment of debt. A gain on the extinguishment of debt of $3.0 million was recorded for our three months ended December 31, 2023 related to the retirement of our EDC Loan and MHIRJ junior note. There was no gain on extinguishment of debt recorded for the three months ended December 31, 2022.

Current wording

Gain on extinguishment of debt. A gain on extinguishment of debt of $3.0 million was recorded for our six months ended March 31, 2024 related to the retirement of our EDC Loan and MHIRJ junior note. There was no gain on extinguishment of debt recorded for the six months ended March 31, 2023.

Previous wording

During our three months ended December 31, 2023 and fiscal year ended September 30, 2023, the severity of the pilot shortage, elevated pilot attrition, the transition of our operations with American to United, and increasing costs associated with pilot wages adversely impacted our financial results, cash flows, financial position, and other key financial ratios. One of the primary factors contributing to the pilot shortage and attrition is the demand for pilots at major carriers, which are hiring at an accelerated rate. These airlines now seek to increase their capacity to meet the growing demand for air travel as the global pandemic has moderated. A primary source of pilots for the major U.S. passenger and cargo carriers are the U.S. regional airlines.

Current wording

During our three and six months ended March 31, 2024 and fiscal year ended September 30, 2023, the severity of the pilot shortage, elevated pilot attrition, the transition of our operations with American to United, and increasing costs associated with pilot wages adversely impacted our financial results, cash flows, financial position, and other key financial ratios. One of the primary factors contributing to the pilot shortage and attrition is the demand for pilots at major carriers, which are hiring at an accelerated rate. These airlines now seek to increase their capacity to meet the growing demand for air travel as the global pandemic has moderated. A primary source of pilots for the major U.S. passenger and cargo carriers are the U.S. regional airlines. As a result of the pilot shortage and attrition, the Company has increased overall hourly pay by nearly 118% for captains and 172% for new hires.

Previous wording

As a result of pilot shortage and attrition, we produced less block hours to generate revenues. During the three months ended December 31, 2023, these challenges resulted in a negative impact on the Company’s financial results highlighted by cash flows used in operations of $7.8 million and net loss of $57.9 million including a non-cash impairment charge of $40.4 million related to the Company designating eight CRJ-900 aircraft, 11 CRJ-900 airframes (without engines), and 48 spare engines as held for sale. These conditions and events raised financial concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months.

Current wording

As a result of pilot shortage and attrition, we produced less block hours to generate revenues. During the six months ended March 31, 2024, these challenges resulted in a negative impact on the Company’s financial results highlighted by net loss of $46.2 million including a non-cash impairment charge of $43.0 million related to the Company designating eight CRJ-900 aircraft, 11 CRJ-900 airframes (without engines), and 48 spare engines as held for sale. These conditions and events raised financial concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months.

Previous wording

To address such concerns, management developed and implemented several material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months. The Company implemented the following measures during the three months ended December 31, 2023.

Current wording

To address such concerns, management developed and implemented several material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months. The Company implemented the following measures during or subsequent to the three months ended March 31, 2024.

Previous wording

On December 1, 2023, we entered into an agreement with a third party to sell 12 surplus GE model CF34-8C aircraft engines and related parts. Subsequent to December 31, 2023, we closed the sale of all 12 engines for gross proceeds of $54.2 million and $15.9 million of net proceeds after the retirement of debt.

Current wording

During the three months ended March 31, 2024, we closed the sale of 12 GE model CF34-8C engines and related parts to a third party for gross proceeds of $54.2 million and $15.9 million of net proceeds after the retirement of debt.

Previous wording

Increased CPA rates, retroactive to October 1, 2023 through December 31, 2024. We generated an additional approximately $20.4 million in incremental revenue from October 1, 2023 through April 30, 2024, and are projected to generate an additional $26.8 million in incremental revenue from May 1, 2024 through December 31, 2024. We received additional payments of $8.8 million in January related to the block hour rate increase from October 1, 2023 through December 31, 2023, and $21.3 million in additional payments related to the block hour rate increase from October 1, 2023 through April 30, 2024.

Current wording

Increased CPA rates, retroactive to October 1, 2023 through December 31, 2024. We generated an additional approximately $20.4 million in incremental revenue from October 1, 2023 through April 30, 2024, and are projected to generate an additional $26.8 million in incremental revenue from May 1, 2024 through December 31, 2024. We received additional payments of $21.3 million related to the block hour rate increase from October 1, 2023 through April 30, 2024.

Previous wording

The repayment in full of the Company's $10.5 million Effective Date Bridge Loan obligations, and the prepayment (and corresponding reduction) of approximately $2.1 million in Revolving Loans (as defined therein), with the proceeds from the sale, assignment, or transfer of the Company's vested investment in Heart Aerospace Incorporated. Subsequent to December 31, 2023, the Company transferred its vested investment in Heart Aerospace Incorporated to United and realized a gain on the investment of $7.2 million.

Current wording

The repayment in full of the Company's $10.5 million Effective Date Bridge Loan obligations, and the prepayment (and corresponding reduction) of approximately $2.1 million in Revolving Loans (as defined therein), with the proceeds from the sale, assignment, or transfer of the Company's vested investment in Heart Aerospace Incorporated. On January 31, 2024, the Company transferred its vested investment in Heart Aerospace Incorporated to United and realized a gain on the investment of $7.2 million, net of transaction costs.

Previous wording

As a result of the repayment of the Effective Date Bridge Loan and pay down of the Revolving Loans, the shares of capital stock of Archer Aviation, Inc. held by the Company were released as collateral for the United credit facility, as provided in Amendment No. 4.

Current wording

As a result of the repayment of the Effective Date Bridge Loan and pay down of the Revolving Loans, the shares of capital stock of Archer Aviation, Inc. held by the Company were released as collateral for the United credit facility, as provided in Amendment No. 4. Subsequent to March 31, 2024, the Company sold 140 thousand shares of Archer for approximately $0.6 million. We expect to sell the remaining shares of Archer, with a fair value of approximately $6.9 million as of June 14, 2024, by the end of July 2024.

Previous wording

We have 15 aircraft under the RASPRO finance lease with a buyout obligation of $50.3 million at the end of March 2024. We entered into purchase agreements with two separate parties to purchase the RASPRO aircraft and related engines. One agreement is for 30 engines for a total of $19.5 million. The second agreement is for 15 airframes (without engines) for a total of $18.8 million. Both of these transactions are expected to be completed by the end of March 2024, with net cash from these transactions expected to be approximately $(12.1) million. Subsequent to December 31, 2023, the Company entered into a binding Memorandum with RASPRO to defer the $50.3 million buyout obligation until September 2024, subject to the payment of certain commitment fee amounts which are due in May, July, and August, along with certain RASPRO Trust administration fee amounts.

Current wording

We have 15 aircraft under the RASPRO finance lease with a buyout obligation of $50.3 million. On April 22, 2024, we entered into a binding Memorandum with RASPRO Trust ("RASPRO") that provides for the payment of certain commitment fee amounts by the Company, along with certain RASPRO administration fee amounts, in consideration for the deferral of the $50.3 million buyout obligation over the period of June 2024 to September 2024. Certain of the commitment fee amounts and Trust fees otherwise payable will be waived if the Company completes its purchase obligations with respect to all 15 airframes and 30 engines as set forth in the agreement. During the first fiscal quarter of 2024, we entered into purchase agreements with two separate parties to purchase the RASPRO aircraft and related engines. One agreement is for 30 engines for a total of $19.5 million. The second agreement is for 15 airframes (without engines) for a total of $18.8 million. Both of these transactions are expected to be completed by the end of September 2024, with net cash from these transactions expected to be approximately $(12.1) million.

Previous wording

We entered into a purchase agreement with a third party which provides for the sale of 23 spare engines for gross proceeds of $11.5 million which will be used to pay down our UST Loan. The transaction is expected to close by the end of December 2024.

Current wording

On May 29, 2024, we entered into a purchase agreement with a third party providing for the sale of nine GE model CF34-8C engines for expected gross proceeds of approximately $8.8 million which will be used to pay down our UST Loan.

Previous wording

The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA and FSA block hours, maintenance events, labor costs, and other relevant factors. Assumptions used in the forecast may change or not occur as expected.

Current wording

The Company believes the plans and initiatives outlined above have effectively alleviated the financial concerns and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements. The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA block hours, maintenance events, labor costs, and other relevant factors. Assumptions used in the forecast may change or not occur as expected.

Previous wording

As of December 31, 2023, the Company has $156.8 million of principal maturity payments on long-term debt due within the next twelve months. We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations, as well as the liquidity created from the additional measures identified above. If our plans are not realized, we intend to explore additional opportunities to create liquidity by refinancing and deferring repayment of our principal maturity payments that are due within the next twelve months. The Company continues to monitor covenant compliance with its lenders as any noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations.

Current wording

As of March 31, 2024, the Company has $94.4 million of principal maturity payments on long-term debt due within the next twelve months. We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations, as well as the liquidity created from the additional measures identified above. If our plans are not realized, we intend to explore additional opportunities to create liquidity by refinancing and deferring repayment of our principal maturity payments that are due within the next twelve months. The Company continues to monitor covenant compliance with its lenders as any noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations.

Previous wording

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect the current market conditions and our projected demand. Our capital expenditures are primarily directed toward our aircraft fleet and flight equipment including spare engines. Our capital expenditures, net of purchases of rotable spare parts and aircraft and spare engine financing for the three months ended December 31, 2023 were approximately 4.3% of our revenue during the same period. We expect to incur capital expenditures to support our business activities. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

Current wording

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect the current market conditions and our projected demand. Our capital expenditures are primarily directed toward our aircraft fleet and flight equipment including spare engines. Our capital expenditures, net of purchases of rotable spare parts and aircraft and spare engine financing for the six months ended March 31, 2024 were approximately 2.9% of our revenue during the same period. We expect to incur capital expenditures to support our business activities. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

Previous wording

As of December 31, 2023, our principal sources of cash have been cash and cash equivalents of $16.1 million, restricted cash of $3.1 million as of December 31, 2023, and $132.6 million in assets held for sale as of December 31, 2023. As of December 31, 2023, we had $412.4 million in secured indebtedness incurred primarily in connection with our financing of aircraft and related equipment. As of December 31, 2023, we had $97.9 million of current debt, excluding finance leases, and $305.8 million of long-term debt excluding finance leases.

Current wording

As of March 31, 2024, our principal sources of cash have been cash and cash equivalents of $18.5 million, restricted cash of $3.0 million as of March 31, 2024, and $80.3 million in assets held for sale as of March 31, 2024. As of March 31, 2024, we had $339.4 million in secured indebtedness incurred primarily in connection with our financing of aircraft and related equipment. As of March 31, 2024, we had $43.0 million of current debt, excluding finance leases, and $289.7 million of long-term debt excluding finance leases.

Previous wording

As of December 31, 2023, we had $3.1 million in restricted cash. We have an agreement with a financial institution for a letter of credit facility and to issue letters of credit for particular airport authorities, worker's compensation insurance, property and casualty insurance and other business needs as required in certain lease agreements. Pursuant to the term of this agreement, $3.1 million of outstanding letters of credit are required to be collateralized by amounts on deposit.

Current wording

As of March 31, 2024, we had $3.0 million in restricted cash. We have an agreement with a financial institution for a letter of credit facility and to issue letters of credit for particular airport authorities, worker's compensation insurance, property and casualty insurance and other business needs as required in certain lease agreements. Pursuant to the term of this agreement, $3.0 million of outstanding letters of credit are required to be collateralized by amounts on deposit.

Previous wording

The following table presents information regarding our cash flows for each of the three months ended December 31, 2023 and December 31, 2022 (in thousands):

Current wording

The following table presents information regarding our cash flows for each of the six months ended March 31, 2024 and March 31, 2023 (in thousands):

Previous wording

During our three months ended December 31, 2023, we had cash flow used in operating activities of $7.8 million. We had net loss of $57.9 million adjusted for the following significant non-cash items: depreciation and amortization of $13.3 million, stock-based compensation of $0.4 million, deferred income taxes of $0.4 million, net gains on investments in equity securities of $(2.5) million, amortization of deferred credits of $(0.2) million, amortization of debt discount and financing costs and accretion of interest of $2.3 million, asset impairment of $40.4 million, loss on sale of assets of $0.4 million, gain on extinguishment of debt of $(3.0) million, and $0.9 million in miscellaneous operating cash flow items. We had a net change of $(2.6) million within other net operating assets and liabilities largely driven by decreases in accounts payable, deferred revenue, and accrued expenses and other liabilities which were offset primarily by decreases in receivables and prepaid expenses in accrued expenses and other liabilities.

Current wording

During our six months ended March 31, 2024, we had cash flow provided by operating activities of $8.4 million. We had net loss of $46.2 million adjusted for the following significant non-cash items: depreciation and amortization of $23.1 million, stock-based compensation of $0.8 million, deferred income taxes of $0.5 million, gains on investments in equity securities of $(7.2) million, net unrealized losses on investments in equity securities of $4.0 million, amortization of deferred credits of $(0.6) million, amortization of debt discount and financing costs and accretion of interest of $5.4 million, asset impairment of $43.0 million, loss on sale of assets of $0.2 million, gain on debt forgiveness of $(10.5) million, gain on extinguishment of debt of $(3.0) million, and $2.4 million in miscellaneous operating cash flow items. We had a net change of $(3.6) million within other net operating assets and liabilities largely driven by decreases in accounts payable, deferred revenue, and accrued expenses and other liabilities which were offset primarily by decreases in receivables and prepaid expenses in accrued expenses and other liabilities.

Previous wording

During our three months ended December 31, 2022, we had cash flow used in operating activities of $6.0 million. We had net loss of $9.1 million adjusted for the following significant non-cash items: depreciation and amortization of $15.2 million, stock-based compensation of $0.7 million, net losses on investments in equity securities of $1.7 million, deferred income taxes of $(1.0) million, amortization of deferred credits of $(0.2) million, amortization of debt discount and financing costs and accretion of interest of $1.4 million, and asset impairment of $3.7 million. We had a net change of $(18.4) million within other net operating assets and liabilities largely driven by decreases in accounts payable and receivables, which were offset primarily by an increase in accrued expenses and other liabilities.

Current wording

During our six months ended March 31, 2023, we had cash flow used in operating activities of $8.6 million. We had net loss of $44.2 million adjusted for the following significant non-cash items: depreciation and amortization of $31.7 million, stock-based compensation of $1.4 million, net gains on investments in equity securities of $(0.4) million, deferred income taxes of $(3.2) million, amortization of deferred credits of $0.2 million, amortization of debt discount and financing costs and accretion of interest of $2.8 million, and asset impairment of $20.5 million. We had a net change of $(18.3) million within other net operating assets and liabilities largely driven by decreases in accounts payable and receivables, which were offset primarily by an increase in accrued expenses and other liabilities.

Previous wording

During our three months ended December 31, 2023, net cash flow provided by investing activities totaled $46.6 million. Proceeds from the sale of aircraft and engines totaled $53.5 million and we invested $6.9 million in capital expenditures, primarily consisting of rotable parts and costs associated with transferring our CRJ-900 aircraft to United operations.

Current wording

During our six months ended March 31, 2024, net cash flow provided by investing activities totaled $94.5 million. Proceeds from the sale of aircraft and engines totaled $107.7 million, we invested $(13.2) million in capital expenditures, primarily consisting of rotable parts and costs associated with transferring our CRJ-900 aircraft to United operations, paid $(0.4) million in investment transaction costs, and received $0.3 million in refunds of equipment and other deposits.

Previous wording

During our three months ended December 31, 2022, net cash flow used in investing activities totaled $16.6 million. We invested $16.7 million in capital expenditures primarily consisting of spare engines, rotable parts, and other equipment, and $0.1 million in refunds of equipment and other deposits.

Current wording

During our six months ended March 31, 2023, net cash flow provided by investing activities totaled $61.8 million. Proceeds from the sale of aircraft and engines totaled $86.1 million. We invested $(24.5) million in capital expenditures primarily consisting of spare engines, rotable parts, and other equipment, and received $0.2 million in refunds of equipment and other deposits.

Previous wording

During our three months ended December 31, 2023, net cash flow used in financing activities was $55.6 million. We received $81.9 million of proceeds from long-term debt and made $137.5 million of principal repayments on long-term debt.

Current wording

During our six months ended March 31, 2024, net cash flow used in financing activities was $117.5 million. We received $86.9 million of proceeds from long-term debt, made $(203.4) million of principal repayments on long-term debt, and paid $(0.9) million for debt prepayment costs.