8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 10, 2020

Mesa Air Group, Inc.
(Exact name of registrant as specified in its charter)

Nevada	001-38626	85-0302351
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

410 North 44th Street, Suite 700	85008
Phoenix, Arizona	(Zip Code)
(Address of principal executive offices)

(602) 685-4000

(Registrant's telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange of Which Registered
Common Stock, no par value	MESA	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company   ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Item 2.02  Results of Operations and Financial Condition.

On August 10, 2020, Mesa Air Group, Inc. issued a press release announcing its financial and operating results for its third fiscal quarter ended June 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01  Financial Statements and Exhibits.

(d)Exhibits.

Exhibit Number	Description
99.1	Press Release, dated August 10, 2020, issued by Mesa Air Group, Inc.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: August 10, 2020	MESA AIR GROUP, INC.
	By:	/s/ Brian S. Gillman
	Name:	Brian S. Gillman
	Title:	Executive Vice President and General Counsel

EX-99.1

Exhibit 99.1

Mesa Air Group Reports Third Quarter Fiscal 2020 Results

August 10, 2020

PHOENIX, August 10, 2020 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported third quarter fiscal 2020 financial and operating results.

Mesa’s Q3 2020 results reflect net income of $3.4 million, or $0.10 per diluted share, compared to net income of $3.0 million, or $0.09 per diluted share for Q3 2019.  Mesa’s Q3 2020 pre-tax income was $4.9 million, compared to $3.9 million for Q3 2019. Mesa’s Q3 2020 adjusted pre-tax income¹ was $4.9 million, compared to $13.4 million for Q3 2019.   In addition, Mesa’s Adjusted EBITDA¹ for Q3 2020 was $35.9 million, compared to $58.8 million in Q3 2019, and Adjusted EBITDAR¹ was $51.5 million, compared to $58.8 million in Q3 2019.

The primary reason for the $8.5 million decrease in adjusted pre-tax income from Q3 2019 to Q3 2020 was $16.0 million of deferred revenue. The $16.0 million revenue deferral is a GAAP concept, which requires the Company to recognize revenue related to fixed monthly payments received under capacity purchase agreements over time, based on completed flights relative to the estimated number of flights expected over the term of the agreements. The deferred revenue will be recognized over the remainder of the capacity purchase agreements based on the estimated number of completed flights.

Total operating expense decreased by $105.3 million, or 64.5%, to $57.9 million in Q3 2020 as compared to Q3 2019.  The primary reason for the decrease was lower flight operations and maintenance expenses due to reduced flying as a result of COVID-19 and $43.0 million related to the Federal Grant received through the Payroll Support Agreement under the CARES Act. The Company recognized the Federal Grant received through the Payroll Support Agreement under the CARES Act as an offset to payroll expenses in Flight Operations, Maintenance and General and Administrative expense.

“Given the difficult operating environment, we are extremely pleased to be reporting both a profit and positive cash flow. We believe this is the result of our relentless focus on low costs and reliable operations, the construct of our agreements with our major partners, and the dedication and hard work of all our employees,” said Jonathan Ornstein, Mesa Air Group Chairman and Chief Executive Officer. “While we believe there are significant opportunities ahead, there remain COVID-19 related challenges; our fleets continue to be utilized below 60%, aircraft financing has become more difficult, and the recovery time projected for demand to return to pre-COVID-19 levels.”

“In addition to operating profitably, we operated the quarter without any controllable cancellations,” said Brad Rich, Executive Vice President and Chief Operating Officer. “Working together with our partners and regulatory authorities, we remain committed to the highest level of safety for our passengers and employees.  I would like to thank all of our employees for an outstanding job.”

From a fleet perspective, the twenty new E175s for United are scheduled for delivery beginning in September and will continue through June 2021. We are currently negotiating financing on the first ten aircraft. The CRJ-700 fleet of twenty aircraft will remain in the United CPA until the new E175s are

¹  See Reconciliation of non-GAAP financial measures

delivered.  After removal, the CRJ-700 aircraft are contracted with United to be leased to another United Express carrier or operated by Mesa.

Mesa ended the quarter at $64.9 million in unrestricted cash and equivalents compared to $52.4 million in Q2 FY2020. During the quarter we paid $12 million in capital expenditures offset by $14 million of returned deposits and paid $24.2 million in scheduled principal payments on aircraft and engine debt. As previously disclosed, Mesa was approved for $92.5 million in connection with the Payroll Support Program under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) covering the period April through September 2020. As of August 3^rd, Mesa has received $77.1 million under the program and expects to receive the final payment of $15.4 million on September 1^st. All the payments are grants with no requirement for any portion to be repaid.

Mesa has applied for a loan under the CARES Act and has been allocated $277.0 million. The Company is currently negotiating with the Treasury Department and their advisors to determine the final loan amount as well as the terms and conditions of the loan. Mesa will then evaluate its participation level in the loan program and the timing.

Mesa recently signed a five-year agreement with DHL to operate two Boeing 737-400F cargo aircraft with service anticipated to start in October 2020. Mesa Is the first regional airline to enter the narrow-body cargo business.

Due to uncertainty related to COVID-19 the Company is not providing guidance at this time.

Reconciliation of non-GAAP financial measures

Although these financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), certain non-GAAP financial measures may provide investors with useful information regarding the underlying business trends and performance of Mesa’s ongoing operations and may be useful for period-over-period comparisons of such operations. The tables below reflect supplemental financial data and reconciliations to GAAP financial statements for the three months and nine months ended June 30, 2020 and the three months and nine months ended June 30, 2019. Readers should consider these non-GAAP measures in addition to, not a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures exclude some, but not all items that may affect the Company’s net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies.

Reconciliation of GAAP versus Non-GAAP Disclosures (unaudited)

(In thousands, except for per diluted share)

	Three months ended June 30, 2020
	Income Before Taxes			Income Tax (Expense)/Benefit			Net Income		Net Income per Diluted Share
GAAP Income	$	4,936		$	(1,517	)	$	3,419	$	0.10
Interest Expense		10,368
Interest Income		(1	)
Depreciation and Amortization		20,635
EBITDA		35,938
Aircraft Rent		15,582
EBITDAR		51,520

	Three months ended June 30, 2019
	Income Before Taxes			Income Tax (Expense)/Benefit			Net Income		Net Income per Diluted Share
GAAP Income	$	3,863		$	(856	)	$	3,007	$	0.09
FY19 Adjustments (1)		9,540			(2,114	)		7,426
Adjusted Income	$	13,403		$	(2,970	)	$	10,433	$	0.30
Interest Expense		13,496
Interest Income		(733	)
Depreciation and Amortization		19,761
EBITDA		45,927
Aircraft Rent		12,875
EBITDAR		58,802

	Nine months ended June 30, 2020
	Income Before Taxes			Income Tax (Expense)/Benefit			Net income		Net Income per Diluted Share
GAAP Income	$	22,448		$	(6,359	)	$	16,089	$	0.46
Interest Expense		34,668
Interest Income		(95	)
Depreciation and Amortization		61,656
Adjusted EBITDA		118,677
Aircraft Rent		39,196
Adjusted EBITDAR		157,873

	Nine months ended June 30, 2019
	Income Before Taxes			Income Tax (Expense)/Benefit			Net income		Net Income per Diluted Share
GAAP Income/(Loss)	$	46,228		$	(10,891	)	$	35,337	$	1.01
FY19 Adjustments (1) (2)		13,156			(2,915	)		10,241
Adjusted Income	$	59,384		$	(13,806	)	$	45,578	$	1.30
Interest Expense		42,110
Interest Income		(1,188	)
Depreciation and Amortization		57,528
Adjusted EBITDA		157,834
Aircraft Rent		41,104
Adjusted EBITDAR		198,938

Adjustments for three months and nine months ended June 30, 2020 and 2019:

1) Includes lease termination expense of $9.5 million related to the acquisition of ten CRJ-700 aircraft previously leased during the three months ended June 30, 2019

2) Includes adjustment for loss on extinguishment of debt of $3.6 million related to repayment of the Company’s Spare Engine Facility during the nine months ended June 30, 2019

Mesa Air Group will host a conference call with analysts on Monday, August10at 4:30pm ET/1:30pm PT. The conference call number is 888-469-2054 (Passcode: Phoenix). The conference call can also be accessed live via the web by visiting https://edge.media-server.com/mmc/p/ieyn2zi2. A recorded version will be available on Mesa’s website approximately two hours after the call for approximately 14 days.

About Mesa Air Group, Inc.

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. is the holding Company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 91 cities in 36 states, the District of Columbia and Mexico. As of July 31^st, 2020, Mesa operated a fleet of 145 aircraft with approximately 299 daily departures and 3,400 employees. Mesa operates all of its flights as either American Eagle or United Express flights pursuant to the terms of capacity purchase agreements entered into with American Airlines, Inc. and United Airlines, Inc.

Forward-Looking Statements

This news release contains forward looking statements, including, but not limited to the, (i) expected terms, timing and benefits of the CARES Act funding and the outcome of the Company’s meeting with the Treasury Department, (ii) fleet forecast for the fourth quarter of fiscal 2020 and year ended fiscal 2021, and (iii) expected delivery dates of the 20 E175s currently scheduled to begin in fourth quarter fiscal 2020, all of which involve risks and uncertainties that could cause actual results to differ materially from those currently expected. Risks and uncertainties that may affect future results include those that are described from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”).

These forward-looking statements represent the judgment of the Company, as of the date of this release, and the Company disclaims any intent or obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws. MESA AIR GROUP, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts) (Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
Operating revenues:
Contract revenue	$	71,648		$	170,366		$	409,228		$	510,586
Pass-through and other		1,451			9,858			27,802			24,941
Total operating revenues		73,099			180,224			437,030			535,527
Operating expenses:
Flight operations		29,664			53,025			135,199			155,636
Fuel		146			211			504			433
Maintenance		22,591			54,322			145,021			139,504
Aircraft rent		15,582			12,875			39,196			41,104
Aircraft and traffic servicing		538			978			2,938			2,977
General and administrative		11,737			12,435			39,233			38,121
Depreciation and amortization		20,635			19,761			61,656			57,528
Lease termination		—			9,540			—			9,540
CARES Act Grant Recognition		(43,018	)		—			(43,018	)		—
Total operating expenses		57,875			163,147			380,729			444,843
Operating income		15,224			17,077			56,301			90,684
Other (expenses) income, net:
Interest expense		(10,368	)		(13,496	)		(34,668	)		(42,110	)
Interest income		1			733			95			1,188
Loss on extinguishment of debt		—			—			—			(3,616	)
Other (expense) income, net		79			(451	)		720			82
Total other (expense), net		(10,288	)		(13,214	)		(33,853	)		(44,456	)
Income before taxes		4,936			3,863			22,448			46,228
Income tax expense		1,517			856			6,359			10,891
Net income	$	3,419		$	3,007		$	16,089		$	35,337
Net income per share attributable to common shareholders
Basic	$	0.10		$	0.09		$	0.46		$	1.02
Diluted	$	0.10		$	0.09		$	0.46		$	1.01
Weighted-average common shares outstanding
Basic		35,299			34,835			35,154			34,683
Diluted		35,299			35,112			35,248			35,051

MESA AIR GROUP, INC.

Condensed Consolidated Balance Sheets

(In thousands, except shares) (Unaudited)

	June 30, 2020		September 30, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	64,934	$	68,855
Restricted cash		3,444		3,646
Receivables, net		14,618		23,080
Expendable parts and supplies, net		22,418		21,337
Prepaid expenses and other current assets		7,143		40,923
Total current assets		112,557		157,841
Property and equipment, net		1,233,727		1,273,585
Intangibles, net		8,407		9,532
Lease and equipment deposits		2,121		2,167
Operating Lease right-of-use assets		131,480		—
Other Assets		7,021		8,792
TOTAL ASSETS	$	1,495,313	$	1,451,917
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and financing leases	$	176,896	$	165,900
Current maturities of operating leases		43,219		—
Accounts payable		39,918		49,930
Accrued compensation		10,350		11,988
Other accrued expenses		37,663		28,888
Total current liabilities		308,046		256,706
NONCURRENT LIABILITIES:
Long-term debt and financing leases - excluding current portion		586,877		677,423
Noncurrent operating lease liabilities		71,068		—
Deferred credits		9,355		12,134
Deferred income taxes		61,203		55,303
Deferred revenue, net of current portion		12,240		—
Other noncurrent liabilities		1,030		24,483
Total noncurrent liabilities		741,773		769,343
Total liabilities		1,049,819		1,026,049
STOCKHOLDERS' EQUITY:
Preferred stock of no par value, 5,000,000 shares authorized; no shares issued    and outstanding		—		—
Common stock of no par value and additional paid-in capital, 125,000,000    shares authorized; 35,194,902 (2020) and 31,413,287 (2019) shares issued    and outstanding, and 0 (2020) and 3,600,953 (2019) warrants    issued and outstanding		241,782		238,504
Retained earnings		203,712		187,364
Total stockholders' equity		445,494		425,868
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,495,313	$	1,451,917

Operating Highlights (unaudited)

	Three months ended
	June 30
	2020		2019		Change
Available Seat Miles (thousands)		783,702		2,724,961		-71.2	%
Block Hours		31,622		114,042		-72.3	%
Departures		18,092		61,798		-70.7	%
Average Stage Length (miles)		567		580		-2.2	%
Passengers		548,705		3,770,683		-85.4	%

Source: Mesa Air Group, Inc.

Mesa Air Group, Inc.
Investor Relations
Brian Gillman
Investor.Relations@mesa-air.com
(602) 685-4010

XML

Document and Entity Information	Aug. 10, 2020
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 10, 2020
Entity Registrant Name	Mesa Air Group, Inc.
Entity Central Index Key	0000810332
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity File Number	001-38626
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	85-0302351
Entity Address, Address Line One	410 North 44th Street
Entity Address, Address Line Two	Suite 700
Entity Address, City or Town	Phoenix
Entity Address, State or Province	AZ
Entity Address, Postal Zip Code	85008
City Area Code	602
Local Phone Number	685-4000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	MESA
Security Exchange Name	NASDAQ