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 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.

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 73 cities in 32 states, Cuba, and Mexico. Mesa operated a fleet of 73 aircraft with approximately 279 daily departures and 1,992 employees as of June 30, 2024. As of June 30, 2024, we operated 55 E-175 and 18 CRJ-900 aircraft under our United CPA and leased two aircraft under our lease with a third party. All of the Company’s consolidated contract revenues for the three and nine months ended June 30, 2024 and June 30, 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 nine months ended June 30, 2023 also included revenues derived from our CPA with American, which terminated in April 2023.

Previous 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.

Current wording

Contract Revenue. Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our CPA with United, 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 CPA.

Previous 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.

Current wording

Other Operating Expenses. Other operating expenses primarily consists of fuel costs for flying we undertake outside of our CPA (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 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.

Previous wording

Operating segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing operating performance. In consideration of ASC 280, Segment Reporting, we are not organized around specific services or geographic regions. We currently operate in one service line providing scheduled flight services in accordance with our CPAs and FSA.

Current wording

Operating segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing operating performance. In consideration of ASC 280, Segment Reporting, we are not organized around specific services or geographic regions. We currently operate in one service line providing scheduled flight services in accordance with our CPA.

Previous 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.

Current wording

We had operating loss of $9.0 million in our three months ended June 30, 2024 compared to operating loss of $40.2 million in our three months ended June 30, 2023. In our three months ended June 30, 2024, we had net loss of $19.9 million compared to net loss of $47.6 million in our three months ended June 30, 2023.

Previous wording

Our operating results for the three months ended March 31, 2024 improved as a result of increases in contract revenue due to an increased United block hour compensation rate effective October 1, 2023. We recognized the revenue block hour rate increases for the three months ended December 31, 2023 and March 31, 2024 during the quarter. This was partially offset by reduced block hours flown and fewer aircraft under contract. Our operating expenses improved as a result of (i) decreased impairment charges as a result of not designating any assets as held for sale; (ii) decreases in flight operations expense as a result of decreased pilot training and lower pilot wages; and (iii) decreases in depreciation expense, primarily due to the retirement and sale of several aircraft.

Current wording

Our operating results for the three months ended June 30, 2024 improved as a result decreases in operating expenses due to (i) decreased impairment charges; (ii) decreases in flight operations expense as a result of decreased pilot training and lower pilot wages; (iii) decreases in maintenance expense, primarily due to a decrease in pass-through engine overhaul on our E-175 fleet; and (iv) decreases in depreciation expense, primarily due to the retirement and sale of several aircraft. Our contract revenue slightly improved due to an increased United block hour compensation rate effective October 1, 2023. This was partially offset by fewer aircraft under contract, higher deferred revenue, and the wind-down of the DHL FSA.

Previous wording

Total operating revenue increased by $9.7 million, or 8.0%, to $131.6 million for our three months ended March 31, 2024 as compared to our three months ended March 31, 2023. Contract revenue increased by $10.0 million, or 9.7%, to $113.8 million, primarily driven by the increase in United block hour compensation rate effective October 1, 2023. We recognized the revenue block hour rate increases for the three months ended December 31, 2023 and March 31, 2024 during the quarter. This was partially offset by lower block hours and fewer aircraft under contract. Our block hours flown during our three months ended March 31, 2024, decreased 10.2% compared to the three months ended March 31, 2023 due to a decrease in scheduled flying for United across the E-175 and CRJ fleet. Our pass-through and other revenue decreased by $0.3 million, or 1.6%, to $17.8 million compared to our three months ended March 31, 2023 due to a decrease in pass-through maintenance related to our E-175 fleet.

Current wording

Total operating revenue decreased by $3.9 million, or 3.4%, to $110.8 million for our three months ended June 30, 2024 as compared to our three months ended June 30, 2023. Contract revenue increased by $1.2 million, or 1.3%, to $95.6 million, primarily driven by the increase in the United block hour compensation rate, partially offset by fewer aircraft under contract, higher deferred revenue, and the wind-down of the DHL FSA. Our block hours flown during our three months ended June 30, 2024, decreased 3.3% compared to the three months ended June 30, 2023 due to a decrease in scheduled flying on our CRJ fleet. Our pass-through and other revenue decreased by $5.1 million, or 25.3%, to $15.2 million compared to our three months ended June 30, 2023 due to a decrease in pass-through maintenance related to our E-175 fleet.

Previous 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.

Current wording

Flight Operations. Flight operations expense decreased $6.1 million, or 11.8%, to $45.5 million for our three months ended June 30, 2024 compared to our three months ended June 30, 2023. The decrease was primarily driven by decreased pilot training expense and lower pilot wages as a result of decreases in headcount.

Previous 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.

Current wording

Maintenance. Aircraft maintenance expense decreased $6.8 million, or 13.3%, to $44.3 million for our three months ended June 30, 2024 compared to our three months ended June 30, 2023. This decrease was primarily driven by a decrease in pass-through engine overhaul and a decrease in wages. Total pass-through maintenance expenses reimbursed by our major partners decreased by $3.2 million during our three months ended June 30, 2024 compared to our three months ended June 30, 2023.

Previous wording

Aircraft Rent. Aircraft rent expense increased $0.6 million, or 68.6%, to $1.4 million for our three months ended March 31, 2024 compared to our three months ended March 31, 2023. The increase is primarily due to greater engine lease costs during our three months ended March 31, 2024.

Current wording

Aircraft Rent. Aircraft rent expense increased $0.8 million, or 94.9%, to $1.7 million for our three months ended June 30, 2024 compared to our three months ended June 30, 2023. The increase is primarily due to greater engine lease costs during our three months ended June 30, 2024.

Previous wording

General and Administrative. General and administrative expense decreased $4.4 million, or 15.9%, to $23.1 million for our six months ended March 31, 2024 compared to our six months ended March 31, 2023. The decrease is primarily driven by decreases in pass-through property taxes and pass-through insurance costs.

Current wording

General and Administrative. General and administrative expense decreased $1.6 million, or 14.4%, to $9.7 million for our three months ended June 30, 2024 compared to our three months ended June 30, 2023. The decrease is primarily driven by decreases in wages and pass-through insurance costs, partially offset by increased consulting fees.

Previous 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.

Current wording

Depreciation and Amortization. Depreciation and amortization expense decreased by $5.6 million, or 36.5%, to $9.7 million for our three months ended June 30, 2024 compared to our three months ended June 30, 2023 due to aircraft in our fleet being sold or classified as non-depreciable assets held for sale.

Previous wording

Asset Impairment. Asset impairment of $2.7 million was recorded for our three months ended March 31, 2024 primarily related to a true-up adjustment on 737 rotable parts. There was $16.7 million of asset impairment recorded for the three months ended March 31, 2023 related to seven CRJ-900 aircraft being designated as held for sale.

Current wording

Asset Impairment. Asset impairment of $7.9 million was recorded for our three months ended June 30, 2024 primarily related to designating 13 engines as held for sale. There was $30.5 million of asset impairment recorded for the three months ended June 30, 2023 related to seven CRJ-900 aircraft being designated as held for sale.

Previous 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.

Current wording

Other Operating Expenses. Other operating expenses increased $0.1 million, to $1.1 million for our three months ended June 30, 2024 compared to our three months ended June 30, 2023. The increase is primarily attributable to higher interrupted trip expense during the three months ended June 30, 2024.

Previous 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.

Current wording

The income tax benefit totaled $0.8 million for the three months ended June 30, 2024 compared to a tax benefit of $2.8 million for the three months ended June 30, 2023. The effective tax rate ("ETR") from continuing operations was 3.9% for the three months ended June 30, 2024 compared to 5.5% for the three months ended June 30, 2023. Our ETR during the three months ended June 30, 2024 decreased from the three months ended June 30, 2023, primarily as a result of certain tax depreciation differences, state taxes, and changes in the valuation allowance against federal and state net operating losses.

Previous wording

As of March 31, 2024, the Company had aggregate federal and state net operating loss carryforwards of approximately $477.5 million and $215.7 million, respectively, which expire in 2030-2038 and 2024-2043, respectively. Approximately $4.2 million of state net operating loss carryforwards are expected to expire in the current fiscal year.

Current wording

As of June 30, 2024, the Company had aggregate federal and state net operating loss carryforwards of approximately $475.6 million and $214.7 million, respectively, which expire in 2030-2038 and 2024-2043, respectively. Approximately $4.1 million of state net operating loss carryforwards are expected to expire in the current fiscal year.

Previous wording

We had operating loss of $36.8 million in our six months ended March 31, 2024 compared to operating loss of $24.4 million in our six months ended March 31, 2023. In our six months ended March 31, 2024, we had net loss of 46.2 million compared to net loss of $44.2 million in our six months ended March 31, 2023.

Current wording

We had operating loss of $48.8 million in our nine months ended June 30, 2024 compared to operating loss of $64.1 million in our nine months ended June 30, 2023. In our nine months ended June 30, 2024, we had net loss of 66.1 million compared to net loss of $91.8 million in our nine months ended June 30, 2023.

Previous 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.

Current wording

Our operating results for the nine months ended June 30, 2024 improved as a result decreases in operating expenses as a result of (i) decreases in flight operations expense as a result of decreased pilot training and lower pilot wages; (ii) decreases in maintenance expense, primarily due to a decrease in pass-through engine overhaul on our E-175 fleet; (iii) decreases in general and administrative expenses, primarily due to a decrease in pass-through property tax; and (iv) decreases in depreciation expense, primarily due to the retirement and sale of several aircraft. This was partially offset by a decrease in contract revenue due to reduced block hours flown, fewer aircraft under contract, and the wind-down of the DHL FSA, partially offset by an increased United block hour compensation rate.

Previous 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.

Current wording

Total operating revenue decreased by $22.5 million, or 5.9%, to $361.2 million for our nine months ended June 30, 2024 as compared to our nine months ended June 30, 2023. Contract revenue decreased by $16.1 million, or 4.9%, to $310.5 million primarily driven by reduced block hours flown, fewer aircraft under contract, and the wind-down of the DHL FSA compared to the nine months ended June 30, 2023, partially offset by an increased United block hour compensation rate. Our block hours flown during our nine months ended June 30, 2024 decreased 7.4% compared to the nine months ended June 30, 2024 due to a decrease in scheduled flying on our CRJ fleet. Our pass-through and other revenue decreased by $6.5 million, or 11.3%, to $50.6 million compared to our nine months ended June 30, 2023 due to a decrease in pass-through maintenance related to our E-175 fleet.

Previous wording

Flight Operations. Flight operations expense decreased $12.0 million, or 10.6%, to $101.1 million for our six months ended March 31, 2024 compared to our six months ended March 31, 2023. The decrease was primarily driven by decreased pilot training expense and lower pilot wages as a result of fewer block hours flown.

Current wording

Flight Operations. Flight operations expense decreased $18.1 million, or 11.0%, to $146.6 million for our nine months ended June 30, 2024 compared to our nine months ended June 30, 2023. The decrease was primarily driven by decreased pilot training expense and lower pilot wages as a result of fewer block hours flown and decreases in headcount.

Previous wording

Maintenance. Aircraft maintenance expense decreased $1.4 million, or 1.5%, to $92.9 million for our six months ended March 31, 2024 compared to our six 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 other pass-through costs and C-check maintenance expenses. Total pass-through maintenance expenses reimbursed by our major partners decreased by $1.0 million during our six months ended March 31, 2024 compared to our six months ended March 31, 2023.

Current wording

Maintenance. Aircraft maintenance expense decreased $8.2 million, or 5.6%, to $137.2 million for our nine months ended June 30, 2024 compared to our nine months ended June 30, 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 other pass-through costs and C-check maintenance expenses. Total pass-through maintenance expenses reimbursed by our major partners decreased by $4.2 million during our nine months ended June 30, 2024 compared to our nine months ended June 30, 2023.

Previous wording

The following table presents information regarding our maintenance costs during the six months ended March 31, 2024 and March 31, 2023 (in thousands):

Current wording

The following table presents information regarding our maintenance costs during the nine months ended June 30, 2024 and June 30, 2023 (in thousands):

Previous 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.

Current wording

Aircraft Rent. Aircraft rent expense decreased $1.5 million, or 25.7%, to $4.3 million for our nine months ended June 30, 2024 compared to our nine months ended June 30, 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 nine months ended June 30, 2024.

Previous 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.

Current wording

General and Administrative. General and administrative expense decreased $6.0 million, or 15.5%, to $32.9 million for our nine months ended June 30, 2024 compared to our nine months ended June 30, 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 $8.6 million, or 27.2%, to $23.1 million for our six months ended March 31, 2024 compared to our six months ended March 31, 2023 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 $14.2 million, or 30.2%, to $32.8 million for our nine months ended June 30, 2024 compared to our nine months ended June 30, 2023 due to aircraft in our fleet being classified as non-depreciable assets held for sale.

Previous 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.

Current wording

Asset Impairment. Asset impairment of $50.9 million was recorded for our nine months ended June 30, 2024 primarily related to 19 CRJ-900 airframes (without engines) and 77 GE model CF34-8C engines being designated as held for sale. There was $51.0 million of asset impairment recorded for our nine months ended June 30, 2023, related to the write-off of our customer relationship intangible asset and 14 CRJ-900 aircraft being designated as held for sale.

Previous wording

Other expense decreased $10.4 million, or 100.9%, to $(0.1) million for our three months ended March 31, 2024, compared to our three months ended March 31, 2023. The decrease is primarily attributable to realized gains on investments in equity securities of $7.2 million, gain on debt forgiveness of $10.5 million, and decreases on interest expense. The decrease is partially offset by $6.5 million in unrealized losses on investments in equity securities for our three months ended March 31, 2024 compared to a $2.1 million unrealized gain on investments in equity securities for our three months ended March 31, 2023.

Current wording

Other expense decreased $16.3 million, or 48.6%, to $17.2 million for our nine months ended June 30, 2024, compared to our nine months ended June 30, 2023. The decrease is primarily attributable to realized gains on investments in equity securities of $6.5 million, gain on extinguishment of debt of $3.0 million, gain on debt forgiveness of $10.5 million, and decreases on interest expense. The decrease is partially offset by $6.1 million in unrealized losses on investments in equity securities for our nine months ended June 30, 2024 compared to $3.3 million in unrealized gains on investments in equity securities for our nine months ended June 30, 2023.

Previous wording

The income tax expense totaled $0.9 million for the six months ended March 31, 2024 compared to a tax benefit of $3.0 million for the six months ended March 31, 2023. The effective tax rate ("ETR") from continuing operations was -2.1% for the six months ended March 31, 2024 compared to 6.4% for the six months ended March 31, 2023. Our ETR during the six months ended March 31, 2024 decreased from the six months ended March 31, 2023 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 nine months ended June 30, 2024 as compared to a tax benefit of $5.8 million for the nine months ended June 30, 2023. The effective tax rate ("ETR") from continuing operations was -0.2% for the nine months ended June 30, 2024 compared to 5.9% for the nine months ended June 30, 2023. Our ETR during the nine months ended June 30, 2024 decreased from the nine months ended June 30, 2023 due to permanent tax differences, state taxes, and changes in the valuation allowance against federal and state net operating losses.

Previous wording

As of March 31, 2024, the Company had aggregate federal and state net operating loss carryforwards of approximately $477.5 million and $215.7 million, respectively, which expire in 2030-2038 and 2024-2043, respectively. Approximately $4.2 million of state net operating loss carryforwards are expected to expire in the current fiscal year.

Current wording

As of June 30, 2024, the Company had aggregate federal and state net operating loss carryforwards of approximately $475.6 million and $214.7 million, respectively, which expire in 2030-2038 and 2024-2043, respectively. Approximately $4.1 million of state net operating loss carryforwards are expected to expire in the current fiscal year.

Previous 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.

Current wording

As a result of the decrease in scheduled flying activity, we produced less block hours to generate revenues. During the nine months ended June 30, 2024, these challenges resulted in a negative impact on the Company’s financial results highlighted by net loss of $66.1 million, including a non-cash impairment charge of $50.9 million primarily related to the Company designating eight CRJ-900 aircraft, 11 CRJ-900 airframes (without engines), and 61 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 from the filing of this Form 10-Q.

Previous 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.

Current wording

We had 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 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 outflows from these transactions expected to be approximately $12.1 million.

Previous wording

Subsequent to March 31, 2024, we purchased six airframes and 15 engines from RASPRO for $22.3 million and sold them to third parties for $16.4 million. We expect to purchase and subsequently sell the remainder of the RASPRO assets by the end of July 2024.

Current wording

During the three months ended June 30, 2024, we purchased six airframes and 15 engines from RASPRO for $22.3 million and sold them to third parties for $17.3 million. Subsequent to June 30, 2024, we purchased the remaining nine airframes and 15 engines from RASPRO for $23.2 million, completely paying off our obligation under the RASPRO finance lease. Subsequent to June 30, 2024, we sold all of the associated airframes and 14 of the engines to third parties for $20.4 million. We expect to close the sale of the final engine by the end of October 2024, with gross proceeds expected to be $0.7 million on the sale.

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 $21.3 million related to the block hour rate increase from October 1, 2023 through April 30, 2024.

Current wording

During the three months ended June 30, 2024, we generated an additional approximately $9.6 million in incremental revenue from increased CPA rates agreed upon in the January 2024 United CPA Amendments. We are projected to generate an additional $46.0 million in incremental revenue from September 1, 2024 through August 31, 2025.

Previous 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.

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 following the issuance of its financial statements 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 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.

Current wording

As of June 30, 2024, the Company has $72.8 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, and 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 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.

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 nine months ended June 30, 2024 were approximately 3.2% 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 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.

Current wording

As of June 30, 2024, our principal sources of cash have been cash and cash equivalents of $16.3 million, restricted cash of $3.0 million as of June 30, 2024, and $77.4 million in assets held for sale as of June 30, 2024. As of June 30, 2024, we had $335.8 million in secured indebtedness incurred primarily in connection with our financing of aircraft and related equipment. As of June 30, 2024, we had $45.4 million of current debt, excluding finance leases, and $284.6 million of long-term debt excluding finance leases.

Previous 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):

Current wording

The following table presents information regarding our cash flows for each of the nine months ended June 30, 2024 and June 30, 2023 (in thousands):

Previous wording

Our primary source of cash from operating activities is cash collections from our major partners pursuant to our CPA and FSA. Our primary uses of cash from operating activities are for maintenance costs, personnel costs, operating lease payments, and interest payments.

Current wording

Our primary source of cash from operating activities is cash collections from United pursuant to our CPA. Our primary uses of cash from operating activities are for maintenance costs, personnel costs, operating lease payments, and interest payments.

Previous 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.

Current wording

During our nine months ended June 30, 2024, we had cash flow provided by operating activities of $19.6 million. We had net loss of $66.1 million adjusted for the following significant non-cash items: depreciation and amortization of $32.8 million, stock-based compensation of $1.0 million, deferred income taxes of $(0.4) million, gains on investments in equity securities of $(6.5) million, net unrealized losses on investments in equity securities of $6.1 million, amortization of deferred credits of $(0.8) million, amortization of debt discount and financing costs and accretion of interest of $6.2 million, asset impairment of $50.9 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 $3.2 million in miscellaneous operating cash flow items. We had a net change of $6.3 million within other net operating assets and liabilities largely driven by decreases in accounts receivable and prepaid expenses and increases in accounts payable and accrued expenses, partially offset by decreases in deferred revenue.