Name: MESA AIR GROUP INC Q1 2024 Earnings Call
Start: 2024-01-26T00:00:00.000Z

Executive Summary

Q1 FY2024 revenues were $118.8M, down 19.3% YoY, with GAAP diluted EPS of $(1.41) driven by $40.4M of asset impairments; adjusted diluted EPS was $(0.53) .
Contract economics improved: United agreed to significantly higher E-175 block‑hour rates, and management expects an adjusted net profit in Q2 FY2024 and breakeven cash flow for the remainder of FY2024, a potential catalyst for sentiment shift .
Operations strengthened: United controllable completion factor was 99.92% and on‑time arrivals within 14 minutes were 87.6% in Q1 FY2024; block hours rose ~5% vs Q4 FY2023, aided by improved pilot attrition and training throughput .
Balance sheet actions continued: $39.2M debt paid down in Q1 via surplus CRJ asset sales, with additional engine and airframe sale transactions and lease renegotiations subsequent to quarter end supporting deleveraging .

What Went Well and What Went Wrong

What Went Well
- Strong operational performance with United: controllable completion 99.92% and on‑time arrivals 87.6%, underpinning service reliability .
- Contract rate uplift and trajectory to profitability: “United Airlines agreed to significantly higher block‑hour rate on E‑175 flying” and “we expect to report an adjusted net profit for the first time in ten quarters” (Q2), with breakeven cash flow expected for the rest of FY2024 .
- Deleveraging momentum: Q1 debt paydown of $39.2M; subsequent engine sales/forgiveness/lease renegotiations reduced obligations and improved liquidity profile .
What Went Wrong
- Revenue decline and mix pressure: total revenue fell 19.3% YoY; contract revenue down 21.3% primarily from lower CRJ‑900 block hours and fewer aircraft under contract; pass‑through revenue decreased 5.6% .
- Large non‑cash impairments: $40.4M asset impairment losses related to assets held for sale drove operating loss and GAAP EPS decline; adjusted EBITDA fell to $5.1M vs $21.8M in Q1 FY2023 .
- Cargo exit: Mesa and DHL agreed to wind down cargo operations as of February 2024, highlighting demand softness; transition executed but removes diversification .

Metric	Q3 2023	Q4 2023	Q1 2024
Total Operating Revenues ($USD Millions)	$114.7	$114.4	$118.8
Operating Income (Loss) ($USD Millions)	$(40.2)	$(20.2)	$(48.4)
Operating Margin (%)	(35.1%)	(17.7%)	(40.8%)
GAAP Net Income (Loss) ($USD Millions)	$(47.6)	$(28.3)	$(57.9)
GAAP Diluted EPS ($USD)	$(1.17)	$(0.69)	$(1.41)
Adjusted Net Income (Loss) ($USD Millions)	$(27.2)	$(26.4)	$(21.8)
Adjusted Diluted EPS ($USD)	$(0.67)	$(0.64)	$(0.53)
Adjusted EBITDA ($USD Millions)	$(1.8)	$(2.9)	$5.1
Adjusted EBITDAR ($USD Millions)	$(0.9)	$(2.5)	$6.3

Revenue breakdown

Revenue Component ($USD Millions)	Q3 2023	Q4 2023	Q1 2024
Contract Revenue	$94.4	$94.7	$101.1
Pass-through and Other Revenue	$20.3	$19.7	$17.7
Deferred Revenue Recognized (GAAP)	$2.0	$1.7	$3.0

KPIs

KPI	Q3 2023	Q4 2023	Q1 2024
Block Hours	45,301	44,519	46,658
Departures	24,555	24,894	26,254
Passengers	1,500,634	1,517,871	1,608,170
United Controllable Completion Factor (%)	98.83%	99.54%	99.92%
United Total Completion Factor (%)	96.39%	97.75%	99.20%
On-time Arrivals (≤14 min) (%)	N/A	79.5%	87.6%

Fleet mix

Aircraft Mix	Q3 2023	Q4 2023	Q1 2024
E‑175 Count	56	54	54
CRJ‑900 Count	24	26	26
737 Cargo Aircraft	4	4	4

Estimates comparison (S&P Global)

Consensus EPS and revenue for Q1 FY2024 were unavailable at the time of request due to S&P Global API limits; therefore, estimate benchmarking could not be performed. Values retrieved from S&P Global were unavailable.*

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Net Income	Q2 FY2024	N/A	“Expect adjusted net profit”	Raised/provided
Cash Flow	FY2024 (remainder)	N/A	“Expect to generate breakeven cash flow”	Provided
E‑175 Block‑Hour Rate	Effective 10/1/2023	Prior CPA rates	“Significantly higher block‑hour rate”	Raised
Cargo Operations (DHL)	As of Feb 2024	Ongoing	“Mutually agreed to wind down cargo” (DHL reimbursing certain costs)	Lowered/exited
CRJ‑900 Fleet	By Aug 2024	26 under CPA	“Initiated reduction of 12 CRJ‑900s from contracted fleet”	Lowered

Topic	Previous Mentions (Q3 FY2023, Q4 FY2023)	Current Period (Q1 FY2024)	Trend
Pilot attrition & staffing	Targeting United block‑hour utilization by end FY2024; improved scheduling with United	Attrition “less than half” YoY in May; expect lower training expense and better utilization	Improving
Fleet transition away from CRJ‑900	Agreements to sell surplus CRJ‑900s; paid down $27M debt with engine sales	Initiated reduction of 12 CRJ‑900s by Aug 2024; continued surplus asset sales	Accelerating
United CPA economics	Projected ~$63.5M incremental revenue from rate increase (12 months)	United agreed to significantly higher E‑175 block‑hour rate; profitability outlook improves	Positive
Cargo operations	4x 737 cargo aircraft active	Wind‑down with DHL; cost reimbursements	Exiting
Deleveraging	$566.3M debt at Q3; sale proceeds to reduce ~$74.3M debt ahead	$39.2M debt repaid in Q1; subsequent engine/lease actions further reduce obligations	Material deleverage
Regulatory/listing	—	Regained NASDAQ minimum bid price compliance (June 4, 2024)	Stabilizing
Advanced aviation investments	—	Received 283,734 XTIA shares; holdings in Archer, Heart, REGENT, Elroy Air	Ongoing portfolio

“We have successfully completed the majority of our surplus CRJ asset sales. Over the past 19 months, we have finalized approximately $390 million of CRJ asset sales, which we used to pay down approximately $265 million of debt.” — Jonathan Ornstein, Chairman & CEO .
“Pilot attrition has improved…our attrition for May 2024 is less than half of what it was a year ago…we expect to see lower training expenses and better utilization of our fleet.” — Jonathan Ornstein .
“For the second fiscal quarter of 2024, we expect to report an adjusted net profit…We also expect to generate breakeven cash flow for the remainder of the fiscal year.” — Jonathan Ornstein .

No Q1 FY2024 earnings call transcript was available in the document repository; Mesa did not host a call for Q4 FY2023 and provided releases for Q1 FY2024 results .

S&P Global consensus EPS and revenue for Q1 FY2024 were unavailable due to API request limits at time of retrieval; as a result, we cannot quantify beats/misses versus Street. Values retrieved from S&P Global were unavailable.*

Non‑cash impairments obscured underlying operational progress; excluding impairments, operating expenses declined (to $126.8M vs $141.0M YoY), reflecting lower flight ops, D&A, and aircraft rent .
Contract rate uplift and productivity gains set up near‑term profitability inflection (management guides adjusted net profit in Q2 and breakeven cash flow for the rest of FY2024) — a key stock catalyst .
Reliability remained strong with United (99.92% controllable completion; 87.6% on‑time), supporting rate increases and potential incentive economics .
Deleveraging is progressing via asset sales and lease optimization; Q1 debt paydown ($39.2M) plus subsequent transactions and forgiveness materially reduced total debt to $400.0M by 3/31/24 from $621.6M YoY .
Strategic exit from cargo (DHL) should reduce complexity and refocus resources on higher‑margin E‑175 flying; DHL reimburses certain wind‑down costs .
Watch execution on CRJ‑900 reductions by August and pilot pipeline throughput; both drive block‑hour production and training costs .
With NASDAQ minimum bid compliance regained and United relationship strengthened, equity narrative hinges on sustained operational performance and avoidance of further large impairments .