Mesa Air Group, Inc. (Mesa), a regional air carrier, provides scheduled passenger service to 86 cities in 36 states, the District of Columbia, Canada, Cuba, and Mexico, as well as cargo services out of Cincinnati/Northern Kentucky International Airport.
As of September 30, 2023, Mesa operated a fleet of 80 regional aircraft consisting of 54 E-175 aircraft and 26 CRJ-900 aircraft with approximately 296 daily departures, four 737 cargo aircraft. Mesa’s fleet were conducted under the company’s Cap...
Mesa Air Group, Inc. (Mesa), a regional air carrier, provides scheduled passenger service to 86 cities in 36 states, the District of Columbia, Canada, Cuba, and Mexico, as well as cargo services out of Cincinnati/Northern Kentucky International Airport.
As of September 30, 2023, Mesa operated a fleet of 80 regional aircraft consisting of 54 E-175 aircraft and 26 CRJ-900 aircraft with approximately 296 daily departures, four 737 cargo aircraft. Mesa’s fleet were conducted under the company’s Capacity Purchase Agreements (CPAs) and Flight Services Agreement (FSA), leased to a third party, held for sale or maintained as operational spares. Mesa operates all of its flights as either United Express or DHL Express flights pursuant to the terms of the CPA entered into United Airlines, Inc. (United) and FSA with DHL Network Operations (USA), Inc. (DHL) (each, major partner).
Under the CPA with United (the United CPA) and FSA with DHL (the DHL FSA), the company operated or maintained as operational spares a fleet of 120 aircraft as of September 30, 2023. The company also leases two aircraft to a third party as of September 30, 2023. The company operates 54 E-175 and 26 CRJ-900 aircraft under its United CPA, and four Boeing 737-400F aircraft under its DHL FSA.
The United CPA involves a revenue-guarantee arrangement whereby United pays fixed-fees for each aircraft under contract, departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time), and reimbursement of certain direct operating expenses in exchange for providing flight services. United also pays certain expenses directly to suppliers, such as fuel, ground operations and landing fees. Under the terms of the CPA, United controls route selection, pricing, and seat inventories, reducing the company’s exposure to fluctuations in passenger traffic, fare levels, and fuel prices. Under its FSA with DHL, the company receives a fee per block hour with a minimum block hour guarantee in exchange for providing cargo flight services. Ground support expenses, including fueling and airport fees are paid directly by DHL.
Capacity Purchase and Flight Services Agreements
The company’s agreements consist of the following: Operation of E-175 and CRJ-900 under its United CPA; and Operation of Boeing 737 aircraft under its DHL FSA.
Business Strategy
The company’s business strategy is to attractive work opportunities. 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, which allows it to enjoy operational, recruiting and over other regional airlines that operate smaller regional aircraft from less prominent manufacturers. As of September 30, 2023, the company had 120 aircraft (owned and leased).
American Capacity Purchase Agreement
In December 2022, the company entered into Amendment No. 11 (the American Amendment) to its Amended and Restated Capacity Purchase Agreement previously entered into in November 2020 (as theretofore amended, the American CPA). The American Amendment provided for the termination and wind-down of the American CPA by April 3, 2023 (the Wind-down Period), at which time all Covered Aircraft (as defined in the American CPA) were removed from the American CPA. In March 2023, the company began to transition aircraft operated under the American CPA to the United CPA. The American CPA was previously set to expire by its terms on December 31, 2025.
United Capacity Purchase Agreement
Under the United CPA, the company has the ability to fly up to 80 aircraft for United. The aircraft can be a mix of any number of E-175 or CRJ-900 aircraft so long as the number of aircraft operating at any given time does not exceed 80. As of September 30, 2023, the company operated 54 E-175 and 26 CRJ-900 aircraft under its Third Amended and Restated CPA with United dated December 27, 2022, which amended and restated the Second Amended and Restated CPA dated November 4, 2020 (as amended, the United CPA or the Amended and Restated United CPA). Under the United CPA, United owns 42 of the company’s 60 E-175 aircraft. The E-175 aircraft owned by United and leased to the company have terms expiring between 2024 and 2028, and the 18 E-175 aircraft owned by it have terms expiring in 2028. Additionally, United leased 20 E-175LL aircraft to the company at nominal amounts during the year ended September 30, 2023. The E-175LL aircraft were removed from the CPA beginning in February 2023, with the last E-175LL aircraft being removed in April 2023.
On December 27, 2022, the company entered into the Amended and Restated United CPA, which provides, among other things, for various amended terms.
DHL Flight Services Agreement
On December 20, 2019, the company entered into a FSA with DHL (the DHL FSA). Under the terms of the DHL FSA, the company operates four Boeing 737 aircraft to provide cargo air transportation services as of September 30, 2023. Under its DHL FSA, DHL leases two Boeing 737-400F aircraft and one 737-800F and subleases them to the company at nominal amounts.
Maintenance and Repairs
The company has a FAA 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: line maintenance, heavy maintenance, and component service. 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.
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 it 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 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 U.S. citizens.
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.
Trademarks
Mesa Airlines, the Mesa Airlines logo and the company’s other registered or common law trade names, trademarks, or service marks of it.
Competition
The company’s competition includes, therefore, nearly every other domestic regional airline, including Air Wisconsin Airlines Corporation; Commuetair, Inc. (Commuteair); Endeavor Air, Inc. (owned by Delta) (Endeavor); Envoy Air, Inc. (Envoy), PSA Airlines, Inc. (PSA) and Piedmont Airlines, Inc. (Piedmont) (Envoy, PSA and Piedmont are owned by American); 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.
Government Regulation
The company’s international flights to Mexico are governed by a bilateral air transport agreement which the DOT has determined has all of the attributes of an open skies agreement. The company’s flights to Canada, and Cuba are governed by bilateral air transport agreements between the United States and such countries. There is still a degree of uncertainty about the future of scheduled commercial flight operations between the United States and Cuba as a result of changes in diplomatic relations between the two governments, as well as travel and trade restrictions implemented by the U.S. government in 2017. The company is a largely sheltered from the economic impact changes to existing open skies agreements or volatility in U.S., Mexican, Canadian, or Cuban aviation polices because United controls route selection and scheduling under its capacity purchase agreement (CPA).
History
Mesa Air Group, Inc. was founded in 1982.
