Financially struggling Mesa Air Group has reached new agreements with partner United Airlines and continues selling off spare aircraft and engines as the company risks being de-listed from the US stock market.
The parent of US regional carrier Mesa Airlines disclosed on 18 January that it has amended its capacity purchase agreement with United to “significantly improve Mesa’s operating income and liquidity”.
Under the new agreements, United has increased Mesa’s block-hour rate retroactively to 1 October 2023 and extending through 31 December 2024, which Mesa estimates will generate $63.5 million of additional revenue.
United has extinguished $12.6 million of Mesa’s debt in exchange for that airline’s equity investment in privately held Heart Aerospace, originally purchased for $5 million. Mesa also released its investment in publicly traded air taxi developer Archer Aviation as collateral.
The Phoenix-based company has also been selling off aircraft in an attempt to firm its financial footing. Since September, Mesa has sold or agreed to sell 29 of its “excess” Bombardier CRJ-900 aircraft and dozens of engines for a combined $198 million, which is being used to pay down $174 million in debt.
Chief executive Jonathan Ornstein says the aircraft sales and agreements with United will generate more contract revenue and increase the company’s margins.
“While the situation remains challenging, this stability is critical as we continue to restore our pilot capabilities, drive increased fleet utilisation and step up block-hour production,” he says.
The carrier also explained why it has yet to report its fiscal fourth-quarter results for the period ending 30 September, which prompted the Listing Qualifications Department of the Nasdaq Stock Market to issue a 4 January notice that the regional carrier was at risk of de-listing from the stock exchange.
Mesa had originally scheduled its earnings call for 14 December. On that date, it submitted a notification of late filing with the US Securities and Exchange Commission, which automatically granted the company a 15-day extension. At the time, the company said it expected to file its results “no later” than the 29 December deadline, and that it would soon announce a new date for its conference call.
But that date passed without a fiscal fourth quarter report from Mesa, and the airline still has not released those figures.
Now, Mesa reveals that it discovered a ”$30 million factual balance sheet mis-statement” related to classification of debt.
”The company’s management has concluded that, in light of the classification error described above, a material weakness exists in the company’s internal control over financial reporting and that the company’s disclosure controls and procedures were not effective,” the carrier says.
Mesa has scheduled a conference call on 19 January to discuss its financial situation in greater detail.