MESA AIR GROUP INC (MESA)
Mesa Air Group operates as a regional carrier under a revenue-guarantee Capacity Purchase Agreement (CPA) with United Airlines. As of Sept 30, 2024, Mesa flew 67 aircraft (55 E-175s, 12 CRJ-900s) and generated $476.4 M in total revenue (97% from United). It posted a net loss of $91.0 M, driven by...
Mesa Air Group: 2024 10-K Review and Investment Outlook
Mesa Air Group is a niche regional carrier operating under a Capacity Purchase Agreement (CPA) with United Airlines. In this 10-K review, we’ll explore Mesa’s business model, financial performance, risk factors, and near-term outlook, and arrive at an investment score reflecting its prospects.
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Table of Contents
- Business Model Overview
- Fleet and Operations
- Revenue Streams
- Key Financial Highlights
- Liquidity & Going Concern
- Income Statement Analysis
- Balance Sheet & Cash Flow
- Debt and Lease Obligations
- Recent Developments & Asset Sales
- Risk Factors
- Investment Outlook and Score
1. Business Model Overview
Mesa Air Group, headquartered in Phoenix, AZ, is a holding company for Mesa Airlines. As a regional carrier, Mesa:
- Operates 67 aircraft (55 Embraer E-175, 12 Bombardier CRJ-900)
- Flies to 67 cities in 34 states, Cuba, and Mexico
- Conducts almost all flights as “United Express” under a revenue‐guarantee CPA
Capacity Purchase Agreement (CPA)
Under the CPA with United Airlines:
- Revenue guarantee: Fixed monthly fees per aircraft + per-block-hour fees
- Cost pass-through: United pays fuel, ground handling, some maintenance
- Risk sharing: Mesa operates flights, United controls schedules, pricing, Inventory
This structure insulates Mesa from ticket price and load-factor risk, but leaves it with pilot, maintenance and overhead costs.
2. Fleet and Operations
As of 9 / 30 / 24, Mesa operated:
| Aircraft | Owned | Leased | Total | Seats | Avg Age |
|---|---|---|---|---|---|
| E-175 | 18 | 37 | 55 | 70–76 | 8.7y |
| CRJ-900 | 7 | 12 | 19 | 76–79 | 18.2y |
| Total Active | 25 | 49 | 74 |
Additional non-service and spares: 24 CRJ-900 airframes held for sale, 5 unassigned E-175.
Mesa also ran a pilot training subsidiary (MPD) to build a feed for its own cockpit decks — an important strategic asset given industry-wide pilot shortages.
3. Revenue Streams
- United CPA (97% of 2024 revenues)
- Base fees + block-hour fees + X-factor incentives
- Cost reimbursements (“pass-throughs”) for insurance, certain maintenance
- DHL FSA (2%) — wound down in March 2024
- Third-party leases (0.4%) — two CRJ-700s
- MPD (0.5%) — pilot training block hours
No fuel revenue or expense appears on Mesa’s books — fuel is paid by United.
4. Key Financial Highlights (2024 vs. 2023)
- Revenue: $476.4 M (down 4.3%)
- Net Loss: $(91.0 M) vs. $(120.1 M)
- Block Hours Flown: 176,236 (down 6.7%)
- EPS: $(2.21) vs. $(3.04)
- Cash Flow from Ops: +$34.2 M vs. –$24.1 M
2024’s narrower loss reflects cost discipline, lower pilot training expense, reduced maintenance pass-throughs and asset sales, partly offset by a $73.7 M impairment on CRJ-900s held for sale.
5. Liquidity & Going Concern
The Challenge
- Working capital deficit: $(113.2 M)
- Debt maturities: $50.5 M due in next 12 months + $113.7 M UST Loan due 10/ 25
- Net loss: $(91 M)
- Cash: $15.6 M + restricted $3 M
Management’s Plan
Since Sept 30, 2024:
- Merger & Three-Party Agreement w/Republic & United (signed Apr 4, 2025)
- Sell/dispose of assets, extinguish debt, 3% higher CPA rates
- Sale of 18 E-175s to United ($227.7 M gross, $84.7 M net proceeds)
- Spare engine & airframe sales — 23 CF34 engines ($16.3 M), 29 CRJ airframes ($28.1 M)
- UST Loan covenant relief — collateral coverage and minimum liquidity
- United CPA & Credit Facility Amendments — waived defaults, higher margins, rate extensions, performance incentives
- CRJ-700 buyouts — two aircraft for $11 M
These actions are expected to lift Mesa’s near-term cash position, align debt maturities with cash flows, and ensure covenant compliance for the next 12 months.
6. Income Statement Analysis
| Category | 2024 | 2023 | Change | % |
|---|---|---|---|---|
| Contract Revenue | $ 404.3 M | $ 421.3 M | $(17.0 M) | (4.0) |
| Pass-Through Revenue | $ 72.1 M | $ 76.8 M | $(4.7 M) | (6.1) |
| Total | $ 476.4 M | $ 498.1 M | $(21.7 M) | (4.4) |
| Flight Ops | $ 184.5 M | $ 216.7 M | $(32.3 M) | (14.9) |
| Maintenance | $ 184.7 M | $ 199.6 M | $(14.9 M) | (7.5) |
| Aircraft Rent | $ 7.8 M | $ 6.2 M | $1.6 M | 25.8 |
| G&A | $ 44.2 M | $ 48.8 M | $(4.5 M) | (9.3) |
| Dep’n & Amort | $ 40.0 M | $ 60.4 M | $(20.3 M) | (33.7) |
| Asset Impairment | $ 73.7 M | $ 54.3 M | $ 19.4 M | 35.6 |
| Other Op (Gain)/Exp | $ 7.2 M | $(2.3 M) | $ 9.5 M | n/a |
| Op Loss | $(65.8 M) | $(84.3 M) | 18.5 M | (21.9) |
Notable Items
- Asset Impairments: $73.7 M in 2024 on CRJ-900s & CF34 engines held for sale
- Depreciation: down 34% as fleet sales & retirements reduce base
- Maintenance: lower pass-through engine overhauls, albeit higher others
Net impact: Op loss narrowed, but cash burn and non-cash charges remain high.
7. Balance Sheet & Cash Flow
Key Drivers
- Assets: $597 M total; $426 M PPE (down from $698 M)
- Liabilities: $487 M total, heavy debt ($309 M principal + interest estimate)
- Equity: $110 M (down from $200 M) from losses
Cash Flow:
| Source / Use | 2024 | 2023 | 2022 |
|---|---|---|---|
| Op Cash Flow | +$34.2 M | –$24.1 M | +$13.4 M |
| Investing (Capex, sales) | +148.8 M | +142.3 M | +$1.4 M |
| Financing (debt, stock) | –200.5 M | –143.1 M | –$77.6 M |
Mesa raised $158 M net from asset sales in 2024, more than covering the $20 M capex program. Financing flows reflect debt prepayments of $ 286 M offsetting new borrowings of $ 87 M.
8. Debt and Lease Obligations
Long-Term Debt & Finance Leases
- Total term debt facility: $195 M UST Loan (due Oct 2025)
- Equipment notes & SAP facilities: $113 M principal (due 2025–2028)
- Finance leases: $4.7 M for two CRJ-700s
Credit Facilities
- United Revolver: $35 M revolver + $10 M bridge, now $50.7 M capacity
- Lien on expendable & rotable inventories (52 M parts consigned)
Operating Leases
- Hangars, offices, training: $10.5 M minimum commitments
Covenant Relief & Waivers
- UST Loan: CCR reduced to 0.99:1 and subsequently to 0.91:1
- United revolver: liquidity waiver to Dec 31, 2024; covenant waivers through Mar 31, 2026
Mesa ontinues to work with lenders to solidify covenant compliance and push maturities out where possible.
9. Recent Developments & Asset Sales
- Sale of 18 E-175s to United (Dec 2024): $227.7 M gross, $84.7 M net proceeds
- Sale of 23 CF34 engines (Apr 2025): $16.3 M proceeds
- Sale of 29 CRJ airframes (Dec 2024 & Apr 2025): $28.1 M proceeds
- CRJ-700 buyout (Sept 2024): $11 M, $4.5 M debt paydown
- Archer & Heart forward contracts: optional eVTOL / electric orders up to $1.4 B
These transactions demonstrate Mesa ccelerating asset monetization to meet debt obligations and refocus on its core E-175 network.
10. Risk Factors
Mesa faces significant risks, including:
- Customer concentration: 97% United revenue exposure
- Pilot & mechanic attrition: industry-wide shortages pressuring costs & ops
- Debt load & covenants: heavy maturities, has required waivers
- Fleet transition: no CRJCPAs after Feb 2025 increases transition costs
- Residual values: older fleet faces lower salvage; impairment risk
- Regulation & airports: slot controls, FAA rules, security & environmental
- Labor: 62% unionized; costs & strikes
- Liquidity: working capital deficit & $50 M 2025 maturities
Details on these and other risks appear in Item 1A of the 10-K.
11. Investment Outlook and Score
Pros
- Predictable revenue model under United CPA
- Recent rate increases and incentives extended through 2026
- Aggressive asset sales improving near-term liquidity
- Crew training program (MPD) as a long-term talent pipeline
- Merger with Republic promises scale synergies
Cons
- Heavy near-term debt maturities (2025) & working capital deficits
- Depressed net income due to impairments and fleet run-off
- Dependency on United; limited redirection opportunities
- Unionized workforce; rising labor costs
- No near-term runway for asset investment; flight hours down 7%
Investment Score: 3.5 / 10 (High risk, modest upside)
Mesa ir Group must carefully execute its asset sales, CPA renewal negotiations, and merger integration with Republic to restore financial footing. The stock remains a speculative turnaround play.
Disclosure: This report is for informational purposes and does not constitute investment advice. Always conduct your own due diligence.
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