About Mesa Air Group

Mesa Air Group, Inc., a regional air carrier, provides scheduled passenger service to 107 cities in 39 states, the District of Columbia, the Bahamas, and Mexico, as well as cargo services out of Cincinnati/Northern Kentucky International Airport. The company’s flights are operated as either American Eagle, United Express, or DHL Express flights pursuant to the terms of capacity purchase agreements (CPAs) entered into with American Airlines, Inc. (American) and United Airlines, Inc. (United), and pursuant to the terms of a Flight Services Agreement (FSA) with DHL Network Operations (USA), Inc. (DHL) (each, the company’s ‘major partner’). The company has a significant presence in several of its major partners' key domestic hubs and focus cities, including Dallas, Houston, Phoenix, and Washington-Dulles. The company is the holding company of Mesa Airlines, Inc. As of September 30, 2022, the company operated under the capacity purchase agreements (CPAs) and Flight Services Agreement (FSA), or maintained as operational spares, a fleet of 158 aircraft with approximately 306 daily departures. It also leased two aircraft to a third party as of September 30, 2022. The company operates 42 CRJ-900 aircraft under its capacity purchase agreement and as spares with American (the ‘American CPA’); 20 E-175LL, and 60 E-175 aircraft under its capacity purchase agreement with United (the ‘United CPA’); and three Boeing 737-400F aircraft under its flight services agreement with DHL Network Operations (USA), Inc. (DHL) (the ‘DHL FSA’). For the year ended September 30, 2022, approximately 45% of the company’s revenues were earned under the American CPA, approximately 48% were earned under the United CPA, approximately 5% were earned from leases of aircraft to a third party and approximately 2% were earned under the DHL FSA. All the company’s operating revenue in its year ended year ended September 30, 2022 was derived from operations associated with its American Airlines, Inc. (American) and United Airlines, Inc. (United) CPAs, DHL FSA, or from leases of aircraft to a third party. In providing regional flying and cargo flight services under its agreements, the company uses the logos, service marks, flight crew uniforms and aircraft paint schemes of its major partners. Aircraft Fleet The company flies only large regional jets manufactured by Bombardier Aerospace (Bombardier) and Embraer S.A. (Embraer), as well as 737 cargo jets manufactured by Boeing. Mitsubishi Heavy Industries (MHI), who acquired the CRJ business from Bombardier, and Embraer are the primary manufacturers of regional jets operated in the United States. As of September 30, 2022, the company had 158 aircraft (owned and leased). MHI and Embraer regional jets offer many of the amenities of larger commercial jet aircraft, including flight attendant service, a stand-up cabin, overhead and under seat storage, lavatories and in-flight snack and beverage service. The speed of MHI and Embraer regional jets is comparable to larger aircraft operated by major airlines, and they have a range of approximately 1,600 miles and 2,100 miles, respectively. The company does not have any existing arrangements with MHI or Embraer to acquire additional aircraft. Capacity Purchase and Flight Services Agreements The company’s agreements consist of the following: the operation of CRJ-900 aircraft under its American CPA; operation of E-175 aircraft under its United CPA; and operation of Boeing 737 aircraft under its DHL FSA (Flight Services Agreement). The financial arrangements between the company and its major partners include a revenue-guarantee arrangement. Its major partners retain all revenue collected from passengers carried on its flights. In providing regional flying under its capacity purchase agreements, and cargo flying under its flight services agreement, the company uses the logos, service marks and aircraft paint schemes of its major partners. American Capacity Purchase Agreement As of September 30, 2022, the company operated 42 CRJ-900 aircraft for American under its American CPA. In exchange for providing flight services under its American CPA, the company receives a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown during each month. In November 2020, the company entered into an Amended and Restated American Capacity Purchase Agreement (the ‘“Amended and Restated American CPA’ or the ‘American CPA’), which was effective as of January 1, 2021 and amended and restated the Code Share and Revenue Sharing Agreement dated as of March 20, 2001 (as amended, supplemented, and modified, the ‘Existing CPA’), between Mesa Airlines, Inc. (Mesa Airlines) and American. The Amended and Restated American CPA covers 40 CRJ-900 aircraft and provides for a new five-year term ending December 31, 2025. Under the American CPA, American has the option in its sole discretion to withdraw up to: 10 aircraft during calendar year 2021; five aircraft during each of 2022 and 2023; and during the period from January 1, 2024 to July 31, 2024, American can remove the first 20 aircraft to the extent not otherwise removed in 2021 – 2023, and thereafter American has the right to remove the last 20 aircraft. In June 2022, the company amended its American CPA, pursuant to Amendment No. 8 thereto, to modify certain commercial terms thereunder. In June 2022, the company amended its American CPA, pursuant to Amendment No. 9 thereto, which amended and restated Schedule 1 (Covered Aircraft) to the American CPA and set forth certain equipment modification requirements with respect to Covered Aircraft added to such Schedule. United Capacity Purchase Agreement As of September 30, 2022, the company operated 20 E-175LL and 60 E-175 aircraft for United under its United CPA. United owns 42 of the 60 E-175 aircraft and all of the E-175LL aircraft and leases them to the company at nominal amounts. The E-175 aircraft owned by United and leased to the company have terms expiring between 2024 and 2028, and 18 E-175 aircraft owned by it have terms expiring in 2028. The E-175LL aircraft have terms expiring 2032 and 2033. Pursuant to the United CPA, the company agreed to lease its CRJ-700 aircraft to another United Express service provider for a term of nine years. It ceased operating its CRJ-700 fleet in February 2021 in connection with the transfer of those aircraft into a lease agreement. During August of 2022, the company committed to a formal plan to sell 18 of its CRJ-700 aircraft and subsequently terminated the leases on such aircraft. In December 2022, the company entered into the Third Amended and Restated Capacity Purchased Agreement with United, which amended and restated the existing United CPA (the ‘Amended and Restated United CPA’). DHL Flight Services Agreement In December 2019, the company entered into its DHL FSA. As of September 30, 2022, the company operated three Boeing 737-400F aircraft to provide cargo air transportation services to DHL. In exchange for providing such services, the company receives a fee per block hour with a minimum block hour guarantee. It is also eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance. Ground support, including fueling and airport fees are paid directly by DHL. Under the company’s DHL FSA, DHL leases two Boeing 737-400F aircraft and subleases them to it. The DHL FSA expires five years from the commencement date of the first aircraft placed into service, which was in October 2020. DHL has the option to extend the agreement with respect to one or more aircraft for a period of one year with 90 days’ advance written notice. Maintenance and Repairs The company has a FAA (the United States Federal Aviation Administration) mandated and approved maintenance program. Aircraft maintenance and repair consists of routine and non-routine maintenance, and work performed is divided into three general categories, such as line maintenance, heavy maintenance, and component service. The company also outsources certain aircraft maintenance and other operating functions. The company has long-term maintenance contracts with AAR to provide fixed-rate parts procurement and component overhaul services for its aircraft fleet. Under these agreements, AAR provides maintenance and engineering services on any aircraft that the company designates during the term of the agreement, along with access to a spare parts inventory pool, in exchange for a fixed monthly fee. Business Strategy The key elements of the company's strategy include to continue to offer competitive compensation packages, foster a positive and supportive work environment and provide opportunities to fly state-of-the-art, large-gauged regional jets to differentiate it from other carriers and make it an attractive place to work and build a career; and minimize tail risk. Seasonality The company’s operations are somewhat favorably affected by increased utilization of its aircraft in the summer months and are unfavorably affected by increased fleet maintenance and by inclement weather during the winter months. Government Regulation The company’s international flights to Mexico are governed by an implemented liberalized bilateral air transport agreement, which the United States Department of Transportation (DOT) has determined has all of the attributes of an ‘open skies’ agreement. In the United States, the FAA regulates the allocation of slots, slot exemptions, operating authorizations, or similar capacity allocation mechanisms at two of the airports the company serves, Ronald Reagan Washington National Airport (DCA) in Washington, D.C., and New York's LaGuardia Airport (LGA). In addition, John Wayne Airport (SNA) in Orange County, California, has a locally imposed slot system. The company’s operations at these airports generally require the allocation of slots or analogous regulatory authorizations, which are obtained by its major partners. The United States Transportation Security Administration (TSA) and the U.S. Customs and Border Protection, each a division of the U.S. Department of Homeland Security, are responsible for certain civil aviation security matters, including passenger and baggage screening at the U.S. airports, and international passenger prescreening prior to entry into or departure from the U.S. international flights are subject to customs, border, immigration, and similar requirements of equivalent foreign governmental agencies. The company is in compliance with all directives issued by such agencies. Under DOT regulations and federal law, the company must be owned and controlled by the U.S. citizens. Intellectual Property Mesa Airlines, the Mesa Airlines logo, and the company’s other registered or common law trade names, trademarks, or service marks are its intellectual property. Customers American accounted for approximately 45% of the company’s total revenue for the year ended September 30, 2022. United accounted for approximately 48% of the company’s revenue for the year ended September 30, 2022. Competition The company’s competition includes Air Wisconsin Airlines Corporation; Endeavor Air, Inc. (owned by Delta) (Endeavor); Envoy Air, Inc. (Envoy); PSA Airlines, Inc. (PSA); Piedmont Airlines, Inc. (Piedmont); Horizon Air Industries, Inc. (owned by Alaska Air Group, Inc.) (Horizon); SkyWest Inc., parent of SkyWest Airlines, Inc.; Republic Airways Holdings Inc.; and Trans States Airlines, Inc. Envoy, PSA and Piedmont are owned by American. History Mesa Air Group, Inc. was founded in 1982. The company was incorporated in 1996.