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What changed in REPUBLIC AIRWAYS HOLDINGS INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of REPUBLIC AIRWAYS HOLDINGS INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+448 added−533 removedSource: 10-K (2025-05-14) vs 10-K (2024-01-26)

Top changes in REPUBLIC AIRWAYS HOLDINGS INC.'s 2024 10-K

448 paragraphs added · 533 removed · 336 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

69 edited+43 added−50 removed44 unchanged
Biggest changeThe January 2024 United CPA Amendments provide additional liquidity and certain other amendments described below: o Increased CPA rates, retroactive to October 1, 2023 through December 2024, which are projected to generate approximately $63.5 million in incremental revenue over the next twelve months. o Amended certain notice requirements for removal by United of up to eight CRJ-900 Covered Aircraft (as defined in the United CPA) from the United CPA. o Extended United's existing utilization waiver for the Company's operation of E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA) to June 30, 2024. • On January 11, 2024 and January 19, 2024, we entered into Amendment No. 4 to our Second Amended and Restated Credit and Guaranty Agreement, Amendment No. 1 to Stock Pledge Agreement and Limited Waiver of Conditions to Credit Extension and Waiver and Amendment No. 5 to our Second Amended and Restated Credit and Guaranty Agreement (collectively, the "January 2024 Credit Agreement Amendments"), respectively.
Biggest changeOn January 11, 2024 and January 19, 2024, we entered into the January 2024 United CPA Amendments which provide for the following: • Increased CPA rates, retroactive to October 1, 2023 through December 31, 2024. • Amended certain notice requirements for removal by United of up to eight CRJ-900 Covered Aircraft (as defined in the United CPA) from the United CPA. • Extended United's existing utilization waiver for the Company's operation of E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA) to June 30, 2024.
Our 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.
Our 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"); Piedmont Airlines, Inc. ("Piedmont") (Envoy, PSA and Piedmont are owned by American); Horizon Air Industries, Inc.
Management personnel directly involved in the supervision of flight operations, training, maintenance, and aircraft inspection must also meet experience standards prescribed by FAA regulations. All safety-sensitive employees are subject to pre-employment, random, and post-accident drug testing. The airline industry has from time to time experienced a shortage of qualified personnel, particularly with respect to pilots and maintenance technicians.
Management personnel directly involved in 14 the supervision of flight operations, training, maintenance, and aircraft inspection must also meet experience standards prescribed by FAA regulations. All safety-sensitive employees are subject to pre-employment, random, and post-accident drug testing. The airline industry has from time to time experienced a shortage of qualified personnel, particularly with respect to pilots and maintenance technicians.
Due to our current fleet size, we believe outsourcing all of our heavy maintenance, engine restoration, and major part repair is more economical than performing this work using our internal maintenance team. Competition We consider our primary competition to be U.S. regional airlines that currently hold or compete for CPAs for passenger services with major airlines.
Due to our current fleet size, we believe outsourcing all of our heavy maintenance, engine 13 restoration, and major part repair is more economical than performing this work using our internal maintenance team. Competition We consider our primary competition to be U.S. regional airlines that currently hold or compete for CPAs for passenger services with major airlines.
We intend 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 us from other carriers and make us an attractive place to work and build a career. Aircraft Fleet We fly only large regional jets manufactured by Bombardier Aerospace (“Bombardier”) and Embraer S.A.
We intend 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 us from other carriers and make us an attractive place to work and build a career. Aircraft Fleet We fly only large regional jets manufactured by Bombardier Aerospace ("Bombardier") and Embraer S.A. ("Embraer").
We are currently in compliance with these ownership provisions. Government Regulation Aviation Regulation The DOT and FAA have regulatory authority over air transportation in the United States and all international air service is subject to certain U.S. federal requirements and approvals, as well as the regulatory requirements of the appropriate authorities of the foreign countries involved.
We are currently in compliance with these ownership provisions. 16 Government Regulation Aviation Regulation The DOT and FAA have regulatory authority over air transportation in the United States and all international air service is subject to certain U.S. federal requirements and approvals, as well as the regulatory requirements of the appropriate authorities of the foreign countries involved.
We do not intend our use or display of other companies' trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us, by these companies. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this Annual Report on Form 10-K.
We do not intend our use or display of other companies' trade names, trademarks, or service marks to imply a relationship with, or endorsement or 18 sponsorship of us, by these companies. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this Annual Report on Form 10-K.
The DOT frequently adopts new consumer protection regulations, such as rules to protect passengers addressing lengthy tarmac delays, chronically delayed flights, CPA disclosure and undisclosed display bias, and is reviewing new guidelines to address the transparency of airline non-ticket fees and refunding baggage fees for delayed checked baggage.
The DOT frequently adopts new consumer protection regulations, such as 17 rules to protect passengers addressing lengthy tarmac delays, chronically delayed flights, CPA disclosure and undisclosed display bias, and is reviewing new guidelines to address the transparency of airline non-ticket fees and refunding baggage fees for delayed checked baggage.
The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA and FSA block hours, maintenance events, labor costs, and other relevant factors.
The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA block hours, maintenance events, labor costs, and other relevant factors.
We are committed to complying with future safety and security requirements. Our ongoing focus on safety relies on training our employees to proper standards and providing them with the tools and equipment they require so they can perform their job functions in a safe and efficient manner.
We are committed to complying with future safety and security requirements. 15 Our ongoing focus on safety relies on training our employees to proper standards and providing them with the tools and equipment they require so they can perform their job functions in a safe and efficient manner.
We are subject to the informational requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the SEC. Such reports and other information we file with the SEC are available free of charge at http://investor.mesa-air.com/financial-information/sec-filings when such 18 reports are available on the SEC's website.
We are subject to the informational requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the SEC. Such reports and other information we file with the SEC are available free of charge at http://investor.mesa-air.com/financial-information/sec-filings when such reports are available on the SEC's website.
The DOT has authority to issue certificates of public convenience and necessity, exemptions and other economic authority required for airlines to provide domestic and foreign air transportation. International routes and 16 international code-sharing arrangements are regulated by the DOT and by the governments of the foreign countries involved.
The DOT has authority to issue certificates of public convenience and necessity, exemptions and other economic authority required for airlines to provide domestic and foreign air transportation. International routes and international code-sharing arrangements are regulated by the DOT and by the governments of the foreign countries involved.
Under the terms of the American Amendment, during the Wind-down Period (i) we continued to receive a fixed minimum monthly amount per aircraft covered by the American CPA, plus additional amounts based on the number of flights and block hours flown during each month, subject to adjustment based on the Company’s controllable completion rate and certain other factors, and (ii) American agreed not to exercise certain termination or withdrawal rights under the American CPA if we failed to meet certain operational performance targets for the three consecutive month period ending January 31, 2023.
Under the terms of the American Amendment, during the Wind-down Period (i) we continued to receive a fixed minimum monthly amount per aircraft covered by the American CPA, plus additional amounts based on the number of flights and block hours flown during each month, subject to adjustment based on the Company’s controllable completion rate and certain other factors, and (ii) American agreed not to exercise certain termination or withdrawal rights under the American CPA if we failed to meet certain operational performance targets for the three consecutive month period ended January 31, 2023.
We are 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 our CPA.
We are largely sheltered from the economic impact changes to existing "open skies" agreements or volatility in U.S., Mexican, or Cuban aviation polices because United controls route selection and scheduling under our CPA.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are filed with the Securities and Exchange Commission (the "SEC").
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are filed with the SEC.
Changes in U.S., Mexican, Canadian or Cuban aviation policies could result in the alteration or termination of the corresponding air transport agreement, or otherwise affect our operations to and from these countries.
Changes in U.S., Mexican, or Cuban aviation policies could result in the alteration or termination of the corresponding air transport agreement, or otherwise affect our operations to and from these countries.
Each of our facilities are summarized in the following table: Type Location Ownership Approximate Square Feet Corporate Headquarters Phoenix, Arizona Leased 33,770 Training Center Phoenix, Arizona Leased 23,783 Parts/Stores Phoenix, Arizona Leased 12,000 Hangar Phoenix, Arizona Leased 22,467 Office, Hangar and Warehouse El Paso, Texas Leased 31,292 Parts Storage Dallas, Texas Leased 8,143 Hangar Houston, Texas Leased 74,524 Hangar Louisville, Kentucky Leased 26,762 Hangar Dulles, Washington Leased 28,451 Cargo Building Dulles, Washington Leased 1,475 Warehouse Tucson, Arizona Leased 13,276 Warehouse, Office Erlanger, Kentucky Leased 7,070 Our corporate headquarters and training facilities in Phoenix, Arizona are subject to long-term leases expiring on November 30, 2032 and May 31, 2025, respectively.
Each of our facilities are summarized in the following table: Type Location Ownership Approximate Square Feet Corporate Headquarters Phoenix, Arizona Leased 33,770 Training Center Phoenix, Arizona Leased 23,783 Parts/Stores Phoenix, Arizona Leased 12,000 Hangar Phoenix, Arizona Leased 22,467 Office, Hangar and Warehouse El Paso, Texas Leased 31,292 Parts Storage Dallas, Texas Leased 8,143 Hangar Houston, Texas Leased 74,524 Hangar Louisville, Kentucky Leased 26,762 Hangar Dulles, Washington Leased 28,451 Cargo Building Dulles, Washington Leased 1,475 Warehouse Tucson, Arizona Leased 13,276 Our corporate headquarters and training facilities in Phoenix, Arizona are subject to long-term leases expiring on November 30, 2032 and May 31, 2025, respectively.
Safety in the workplace targets several areas of our operation including dispatch, flight operations and maintenance. 15 The TSA and the U.S. Customs and Border Protection, each a division of the U.S.
Safety in the workplace targets several areas of our operation including dispatch, flight operations and maintenance. The TSA and the U.S. Customs and Border Protection, each a division of the U.S.
To address such concerns, management developed and implemented several material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months.
To address such concerns, management developed and implemented certain material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months.
As of September 30, 2023, our management believed the ultimate outcomes of other routine legal matters are not likely to have a material adverse effect on our financial position, liquidity, or results of operations. Corporate Information We are a Nevada corporation with our principal executive office located in Phoenix, Arizona.
As of September 30, 2024, our management believes the ultimate outcomes of other routine legal matters are not likely to have a material adverse effect on our financial position, liquidity, or results of operations. Corporate Information We are a Nevada corporation with our principal executive office located in Phoenix, Arizona.
Our 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. Our flights to Canada, and Cuba are governed by bilateral air transport agreements between the United States and such countries.
Our 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. Our flights to Cuba are governed by bilateral air transport agreements between the United States and Cuba.
We have taken many steps, both voluntarily and as mandated by governmental authorities, to increase the safety of our operations. Some of the safety and security measures we have taken with our major partners include aircraft security and surveillance, positive bag matching procedures, enhanced passenger and baggage screening and search procedures, and securing of cockpit doors.
We have taken many steps, both voluntarily and as mandated by governmental authorities, to increase the safety of our operations. Some of the safety and security measures we have taken with United includes aircraft security and surveillance, positive bag matching procedures, enhanced passenger and baggage screening and search procedures, and securing of cockpit doors.
We cannot assure that we will be able to recruit, train and retain the qualified employees that we need to carry out our expansion plans or replace departing employees. As of September 30, 2023, approximately 63.1% of our employees were represented by labor unions under collective-bargaining agreements, as set forth below.
We cannot assure that we will be able to recruit, train and retain the qualified employees that we need to carry out our expansion plans or replace departing employees. As of September 30, 2024, approximately 62.8% of our employees were represented by labor unions under collective-bargaining agreements, as set forth below.
Insurance We maintain insurance policies that we believe are of types customary in the airline industry and as required by the DOT, lessors and other financing parties, and our major partners under the terms of our CPA and FSA.
Insurance We maintain insurance policies that we believe are of types customary in the airline industry and as required by the DOT, lessors and other financing parties, and United under the terms of our CPA.
Should the turnover of employees, 14 particularly pilots and maintenance technicians continue at the rate that has occurred over the recent past and/or, sharply increase, the result will be significantly higher training costs than otherwise would be necessary, as well as a shortage in the required number of applicable personnel, and we may need to request a reduced flight schedule with our major partners, which may result in operational performance penalties under our CPA or FSA.
Should the turnover of employees, particularly pilots and maintenance technicians revert back to the rate that occurred over the recent past and/or, sharply increase, the result will be significantly higher training costs than otherwise would be necessary, as well as a shortage in the required number of applicable personnel, and we may need to request a reduced flight schedule with United, which may result in operational performance penalties under our CPA.
We believe we are in material compliance with the terms of our United CPA and DHL FSA. 9 We benefit from the revenue guarantee arrangement under our United CPA and DHL FSA because we are sheltered, to an extent, from some of the elements that cause volatility in airline financial performance, including variations in ticket prices, fluctuations in number of passengers and fuel prices.
We benefit from the revenue guarantee arrangement under our United CPA because we are sheltered, to an extent, from some of the elements that cause volatility in airline financial performance, including variations in ticket prices, fluctuations in number of passengers and fuel prices.
Employee Groups Number of Employees Representative Labor Agreement Amendable As of Pilots 807 Air Line Pilots Association 10/17/2022 Flight Attendants 647 Association of Flight Attendants 8/30/2022 Dispatchers 32 Maintenance Department 483 Administrative 334 The Railway Labor Act ("RLA") governs our relations with labor organizations.
Employee Groups Number of Employees Representative Labor Agreement Amendable As of Pilots 596 Air Line Pilots Association 10/17/2022 Flight Attendants 559 Association of Flight Attendants 8/30/2022 Dispatchers 32 Maintenance Department 447 Administrative 204 The Railway Labor Act ("RLA") governs our relations with labor organizations.
We were founded in 1982 and reincorporated in Nevada in 1996. In addition to operating Mesa Airlines, we also wholly own Mesa Air Group-Airline Inventory Management, LLC. ("MAG-AIM"), an Arizona limited liability company, which was established to purchase, distribute and manage Mesa Airlines' inventory of spare rotable and expendable parts. MAG-AIM's financial results are reflected in our consolidated financial statements.
We were founded in 1982 and reincorporated in Nevada in 1996. In addition to operating Mesa Airlines, we also wholly own Mesa Air Group-Airline Inventory Management, LLC. ("MAG-AIM"), an Arizona limited liability company, which was established to purchase, distribute and manage Mesa Airlines' inventory of spare rotable and expendable parts, and Mesa Pilot Development, LLC.
Major airlines typically offer CPAs to regional airlines on the basis of the following criteria: availability of labor resources; proposed contract economic terms; reliable and on-time flight operations; corporate financial resources including ability to procure and finance aircraft; customer service levels; and other factors. 13 Certain of our competitors are larger and have significantly greater financial and other resources than we do.
Major airlines typically offer CPAs to regional airlines on the basis of the following criteria: availability of labor resources; proposed contract economic terms; reliable and on-time flight operations; corporate financial resources including ability to procure and finance aircraft; customer service levels; and other factors.
We are not aware of any active material environmental investigations related to our assets or properties. Other Regulations Airlines are also subject to various other federal, state, local, and foreign laws and regulations. For example, the U.S. Department of Justice has jurisdiction over certain airline competition matters. Labor relations in the airline industry are generally governed by the RLA.
Other Regulations Airlines are also subject to various other federal, state, local, and foreign laws and regulations. For example, the U.S. Department of Justice has jurisdiction over certain airline competition matters. Labor relations in the airline industry are generally governed by the RLA.
The DOT also has authority to review certain joint venture agreements, code-sharing agreements (where an airline places its designator code on a flight operated by another airline) and wet-leasing agreements (where one airline provides aircraft and crew to another airline) between carriers and regulates other economic matters such as slot transactions. 17 Environmental Regulation We are subject to various federal, state, local and foreign laws and regulations relating to environmental protection matters.
The DOT also has authority to review certain joint venture agreements, code-sharing agreements (where an airline places its designator code on a flight operated by another airline) and wet-leasing agreements (where one airline provides aircraft and crew to another airline) between carriers and regulates other economic matters such as slot transactions.
Accordingly, we do not recognize fuel expenses or revenues for flying under our CPA and FSA and we face very limited exposure to fuel price fluctuations.
Accordingly, we do not recognize fuel expenses or revenues for flying under our CPA and we face very limited exposure to fuel price fluctuations. Fuel expenses relating to MPD are paid by the Company.
We expect to begin the initial planned engine maintenance overhauls on our new engine fleet approximately four to six years after the date of manufacture and introduction into our fleet, with subsequent engine maintenance every four to six years thereafter.
We maintain an inventory of spare engines to provide for continued operations during engine maintenance events. We expect to begin the initial planned engine maintenance overhauls on our new engine fleet approximately four to six years after the date of manufacture and introduction into our fleet, with subsequent engine maintenance every four to six years thereafter.
United reimburses us on a pass-through basis for certain costs related to heavy airframe and engine maintenance, landing gear, auxiliary power units (" APUs ") and component maintenance for the aircraft owned by United.
The E-175 aircraft owned by United and leased to us have terms expiring between 2024 and 2028, and the 18 E-175 aircraft owned by us have terms expiring in 2028. 11 United reimburses us on a pass-through basis for certain costs related to heavy airframe and engine maintenance, landing gear, auxiliary power units (" APUs ") and component maintenance for the aircraft owned by United.
The Company continues to monitor covenant compliance with its lenders as any noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations. See Sources and Uses of Cash in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional disclosure.
The Company continues to monitor covenant compliance with its lenders as any noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations. As of September 30, 2024, the Company is in compliance with all financial covenants. See Sources and Uses of Cash in “Part 9 II. Item 7.
However, we do not benefit from positive trends in ticket prices (including ancillary revenue programs), the number of passengers enplaned, or reductions in fuel prices. United retains all revenue collected from passengers carried on our flights.
However, we do not benefit from positive trends in ticket prices (including ancillary revenue programs), the number of passengers enplaned, or reductions in fuel prices. United retains all revenue collected from passengers carried on our flights. In providing regional flying under our CPA, we use the logos, service marks and aircraft paint schemes of United.
Under these agreements, AAR provides maintenance and engineering services on any aircraft that we designate during the term of the agreement, along with access to a spare parts inventory pool, in exchange for a fixed monthly fee. Line maintenance consists of routine daily and weekly scheduled maintenance checks on our aircraft.
We have long-term maintenance contracts with AAR to provide fixed-rate parts procurement and component overhaul services for our aircraft fleet. Under these agreements, AAR provides maintenance and engineering services on any aircraft that we designate during the term of the agreement, along with access to a spare parts inventory pool, in exchange for a fixed monthly fee.
Human Capital Management As of September 30, 2023, we employed approximately 2,303 employees, consisting of 807 pilots or pilot recruits, 647 flight attendants, 32 flight dispatchers, 483 maintenance employees and 334 employees in administrative or other roles. Our continued success is partly dependent on our ability to continue to attract and retain qualified personnel.
Human Capital Management As of September 30, 2024, we employed 1,838 employees, consisting of 596 pilots, 559 flight attendants, 32 flight dispatchers, 447 maintenance employees and 204 employees in administrative or other roles. Our continued success is partly dependent on our ability to continue to attract and retain qualified personnel.
Congress and the President have the authority to prevent "self-help" by enacting legislation that, among other things, imposes a settlement on the parties. The table above sets forth our employee groups and status of the collective bargaining agreements. Refer to “Impact of COVID-19 Pandemic” included in “Item 7.
Congress and the President have the authority to prevent "self-help" by enacting legislation that, among other things, imposes a settlement on the parties. The table above sets forth our employee groups and status of the collective bargaining agreements. Safety and Security We are committed to the safety and security of our passengers and employees.
ITEM 1. BUSINESS General Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa," the "Company," "we," "our," or "us") is the holding company of Mesa Airlines, a regional air carrier providing 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.
ITEM 1. BUSINESS General Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa," the "Company," "we," "our," or "us") is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 67 cities in 34 states, Cuba, and Mexico.
These conditions and events raised substantial doubt about our ability to continue to fund our operations and meet our debt obligations over the next twelve months.
These conditions and events raised concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months from the filing of this Form 10-K.
These laws and regulations govern such matters as environmental reporting, storage and disposal of materials and chemicals and aircraft noise. We are, and expect in the future to be, involved in various environmental matters and conditions at, or related to, our properties. We are not currently subject to any environmental cleanup orders or actions imposed by regulatory authorities.
We are, and expect in the future to be, involved in various environmental matters and conditions at, or related to, our properties. We are not currently subject to any environmental cleanup orders or actions imposed by regulatory authorities. We are not aware of any active material environmental investigations related to our assets or properties.
In exchange for providing cargo flight services, we receive a fee per block hour with a minimum block hour guarantee. We are eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance. Ground support expenses including fueling and airport fees are paid directly by DHL.
We were eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance. Ground support expenses including fueling and airport fees were paid directly by DHL.
Pursuant to the American Amendment, as no material breaches occurred during the wind-down period, American agreed to waive Mesa’s failure to meet certain past operational performance targets and other requirements, which triggered termination and withdrawal rights for American pursuant to the terms of American CPA.
No Material Breach (as defined in the American CPA) occurred that would have required the payment of liquidated damages. As a result, American agreed to waive Mesa’s failure to meet certain past operational performance targets and other requirements, which triggered termination and withdrawal rights for American pursuant to the terms of American CPA.
Line maintenance is performed at certain locations throughout our system and represents the majority of and most extensive maintenance we perform. Major airframe maintenance checks consist of a series of more complex tasks that can take from one to four weeks to accomplish and typically are required approximately every 28 months, on average, across our fleet.
Major airframe maintenance checks consist of a series of more complex tasks that can take from one to four weeks to accomplish and typically are required approximately every 28 months, on average, across our fleet. Engine overhauls and engine performance restoration events are quite extensive and can take two months.
Risk Factors” for a discussion of the risks and uncertainties associated with the COVID-19 pandemic. Our Business Strategy Our business strategy consists of the following elements: Maintain Low-Cost Structure We have established ourselves as a low cost provider of regional airline and cargo flight services.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional disclosure. Our Business Strategy Our business strategy consists of the following elements: Maintain Low-Cost Structure We have established ourselves as a low cost provider of regional airline and cargo flight services.
Our principal executive offices are located at 410 North 44 th Street, Suite 700, Phoenix, Arizona 85008, and our telephone number is (602) 685-4000. Our website is located at www.mesa-air.com. The information on, or accessible through, our website does not constitute part of, and is not incorporated into, this Annual Report on Form 10-K.
Our website is located at www.mesa-air.com. The information on, or accessible through, our website does not constitute part of, and is not incorporated into, this Annual Report on Form 10-K.
All CCF targets were met during the Wind-down Period, and there were no penalties associated with that performance metric. The parties executed a written mutual release of all claims and acknowledgment that no Material Breaches occurred. United Capacity Purchase Agreement Under the United CPA, we have the ability to fly up to 80 aircraft for United.
All CCF targets were met during the Wind-down Period, and there were no penalties associated with that performance metric. The parties executed a written mutual release of all claims and acknowledgment that no Material Breaches occurred. Maintenance and Repairs Airlines are subject to extensive regulation. We have a FAA mandated and approved maintenance program.
Mesa’s fleet were conducted under our 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.
("DHL"), leased to a third party, held for sale or maintained as operational spares. Mesa operates all of its flights as United Express flights pursuant to the terms of the CPA entered into with United.
All of the Company’s consolidated contract revenues for the twelve months ended September 30, 2023 and September 30, 2022 were derived from operations associated with the American CPA, the United CPA, FSA, and leases of aircraft to a third party.
All of the Company’s consolidated contract revenues for the fiscal years ended September 30, 2024 and September 30, 2023 were derived from operations associated with the United CPA (97% of revenue), DHL FSA (2%), leases of aircraft to a third party (0.4%), and the Company's pilot development program, Mesa Pilot Development ("MPD") (0.5%).
DHL Flight Services Agreement On December 20, 2019, we entered into a FSA with DHL (the “DHL FSA”). Under the terms of the DHL FSA, we operate four Boeing 737 aircraft to provide cargo air transportation services as of September 30, 2023.
DHL Flight Services Agreement 12 On December 20, 2019, we entered into a FSA with DHL (the "DHL FSA"). Under the terms of the DHL FSA, we operated four Boeing 737 aircraft to provide cargo air transportation services. In exchange for providing cargo flight services, we received a fee per block hour with a minimum block hour guarantee.
Maintenance and Repairs Airlines are subject to extensive regulation. We have 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. We also outsource certain aircraft maintenance and other operating functions.
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. We also outsource certain aircraft maintenance and other operating functions. We use competitive bidding among qualified vendors to procure these services.
Impact of Pilot Shortage and Transition of Operations to United During our twelve months ended September 30, 2023, the severity of the pilot shortage, elevated pilot attrition, the transition of our operations with American to United, and increasing costs associated with pilot wages adversely impacted our financial results, cash flows, financial position, and other key financial ratios.
Liquidity and Going Concern During our fiscal year ended September 30, 2024, the decrease in scheduled flying activity associated with the transition of our operations with American to United, increased costs associated with pilot wages, together with increasing interest rates adversely impacted our financial results, cash flows, financial position, and other key financial ratios.
The lower trip costs and operating efficiencies of regional aircraft, along with the competitive nature of the CPA bidding process, provide significant value to major airlines.
The lower trip costs and operating efficiencies of regional aircraft, along with the competitive nature of the CPA bidding process, provide significant value to major airlines. Merger Agreement On April 4, 2025, the Company entered into an Agreement, Plan of Conversion and Plan of Merger (the "Merger Agreement") with Republic Airways Holdings, Inc., a Delaware corporation ("Republic").
The following table summarizes our available seat miles ("ASMs") flown and contract revenue recognized under our CPAs for our fiscal years ended September 30, 2023 and 2022, respectively: Year Ended September 30, 2023 Year Ended September 30, 2022 Available Seat Miles Contract Revenue Contract Revenue per ASM Available Seat Miles Contract Revenue Contract Revenue per ASM (in thousands) (in cents) (in thousands) (in cents) American 790,513 $ 107,019 ¢ 13.54 2,668,953 $ 234,184 ¢ 8.77 United 3,444,900 $ 294,129 ¢ 8.54 4,005,795 $ 207,003 ¢ 5.17 Other — $ 20,150 — — $ 37,295 — Total 4,235,413 $ 421,298 ¢ 9.95 6,674,748 $ 478,482 ¢ 7.17 American Capacity Purchase Agreement In December 2022, we entered into Amendment No. 11 (the “American Amendment”) to our Amended and Restated Capacity Purchase Agreement previously entered into in November 2020 (as theretofore amended, the "American CPA").
The following table summarizes our available seat miles ("ASMs") flown and contract revenue recognized under our CPAs for our fiscal years ended September 30, 2024 and 2023, respectively: Year Ended September 30, 2024 Year Ended September 30, 2023 Available Seat Miles Contract Revenue Contract Revenue per ASM Available Seat Miles Contract Revenue Contract Revenue per ASM (in thousands) (in cents) (in thousands) (in cents) American — $ — — 790,513 $ 107,019 ¢ 13.54 United 3,898,559 $ 394,206 ¢ 10.11 3,444,900 $ 294,129 ¢ 8.54 Other (3) — $ 10,116 — — $ 20,150 — Total 3,898,559 $ 404,322 ¢ 10.37 4,235,413 $ 421,298 ¢ 9.95 (3) Includes revenue from the DHL FSA, GoJet lease, and MPD.
The following table lists the aircraft we own and lease as of September 30, 2023 and the passenger capacity of such aircraft: Type of Aircraft Owned Leased Total Passenger Capacity E-175 Regional Jet 18 42 (2) 60 70-76 CRJ-900 Regional Jet 54 — 54 76-79 CRJ-700 Regional Jet — 2 2 50-70 Boeing 737 Cargo Jet — 4 (3) 4 Total 72 48 120 (2) All 42 of these E-175 aircraft are owned by United and leased to us at nominal amounts.
The following table lists the aircraft we own and lease as of September 30, 2024 and the passenger capacity of such aircraft: Type of Aircraft Owned Leased Total Passenger Capacity E-175 Regional Jet 18 42 (2) 60 70-76 CRJ-900 Regional Jet 31 5 36 76-79 CRJ-700 Regional Jet — 2 2 50-70 Total 49 49 98 (2) All 42 of these E-175 aircraft are owned by United and leased to us at nominal amounts. 10 MHI and Embraer regional jets are among the quietest commercial jets currently available and 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 transaction is expected to close by the end of December 2024. • In addition to already executed agreements to sell aircraft, the Company is actively seeking arrangements to sell other surplus assets primarily related to the CRJ fleet including aircraft, engines, and spare parts to reduce debt and optimize operations. • We have delayed and/or deferred major spending on aircraft and engine maintenance to match the current and projected level of flight activity. 7 The Company believes the plans and initiatives outlined above have effectively alleviated the substantial doubt and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements.
Subsequent to September 30, 2024, we closed the sale of the two CRJ-700 aircraft to United. • Based on the most recent appraisal value of our spare parts, we have $12.4 million of borrowing capacity under our United Revolving Credit Facility. • In addition to already executed agreements to sell aircraft, the Company is actively seeking arrangements to sell other surplus assets primarily related to the CRJ fleet including aircraft, engines, and spare parts to reduce debt and optimize operations. • We have delayed and/or deferred major spending on aircraft and engine maintenance to match the current and projected level of flight activity.
We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations, as well as the liquidity created from the additional measures identified above.
Additionally, all outstanding principal amounts of $113.7 million as of September 30, 2024, under our UST Loan are due and payable in a single installment on October 30, 2025. We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations, and the liquidity created from the additional measures identified above.
Moreover, economic downturns, combined with competitive pressures, have contributed to a number of reorganizations, bankruptcies, liquidations, and business combinations among major and regional carriers. The effect of economic downturns is somewhat mitigated by our reliance on a CPA with revenue-guarantee provisions, but the renewal and continued profitability of our partnership with United is not guaranteed.
The effect of economic downturns is somewhat mitigated by our reliance on a CPA with revenue-guarantee provisions, but the renewal and continued profitability of our partnership with United is not guaranteed. Aircraft Fuel Our CPA provides that United sources, procures, and directly pays third-party vendors for all fuel used in the performance of the CPA.
In the United States, the FAA currently regulates the allocation of slots, slot exemptions, operating authorizations, or similar capacity allocation mechanisms at two of the airports we serve, 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.
In the United States, the FAA currently regulates the allocation of slots, slot exemptions, operating authorizations, or similar capacity allocation mechanisms at one of the airports we serve, LaGuardia Airport (LGA) in New York. Our operations at this airport generally requires the allocation of slots or analogous regulatory authorizations, which are obtained by United.
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 us to enjoy operational, recruiting and cost advantages over other regional airlines that operate smaller regional aircraft from less prominent manufacturers. 8 As of September 30, 2023, we had 120 aircraft (owned and leased) consisting of the following: Embraer Regional Jet-175 (70-76 seats) Canadair Regional Jet-700 (50-70 seats) Canadair Regional Jet-900 (76-79 seats) Boeing 737 (Cargo) Total United Express 54 — 26 — 80 DHL Express — — — 4 4 Held for sale — 15 — 15 Leased to third party — 2 — — 2 Subtotal 54 2 41 4 101 Unassigned 6 — 13 — 19 Total 60 2 54 4 120 (1) As of September 30, 2023, the Company has 15 CRJ-900 aircraft classified as assets held for sale.
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 us to enjoy operational, recruiting and cost advantages over other regional airlines that operate smaller regional aircraft from less prominent manufacturers.
("United") and FSA with DHL Network Operations (USA), Inc. ("DHL") (each, our “major partner”). Prior to the wind-down and termination of the Company's CPA with American Airlines, Inc. ("American") on April 3, 2023, Mesa also operated flights as American Eagle.
The Company also generated contract revenues for the fiscal year ended September 30, 2023 from the Company's CPA with American Airlines, Inc. ("American") prior to the wind-down and termination of the Company's CPA with American on April 3, 2023.
During the twelve months ended September 30, 2023, these challenges resulted in a negative impact on the Company’s financial results highlighted by cash flows used in operations of $24.1 million and net loss of $120.1 million including a non-cash impairment charge of $54.3 million related to the Company designating 14 CRJ-900 aircraft as held for sale and our customer relationship intangible asset.
During the fiscal year ended September 30, 2024, these challenges resulted in a negative impact on the Company’s financial results highlighted by net loss of $91.0 million, primarily due to impairment expense of $73.7 million related to held for sale assets during the year.
Assumptions used in the forecast may change or not occur as expected. As of September 30, 2023, the Company has $163.6 million of principal maturity payments on long-term debt due within the next twelve months.
As of the issuance of this Form 10-K, we are in compliance with all financial covenants. As of September 30, 2024, the Company had $50.5 million of principal maturity payments on long-term debt due within the next twelve months.
As of September 30, 2023 we operated 54 E-175 and 26 CRJ-900 aircraft under our 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").
As of September 30, 2024, we operated 55 E-175 and 12 CRJ-900 aircraft under our United CPA. Under the United CPA, United owns 42 of our 60 E-175 aircraft.
Under these revenue-guarantee provisions, our major partners pay us a fixed minimum monthly amount per aircraft under contract, plus additional amounts related to departures and block hours flown. We also receive direct reimbursement of certain operating expenses, including insurance. Other expenses, including fuel and ground operations are directly paid to suppliers by our major partners.
We also receive direct reimbursement of certain operating expenses, including passenger liability insurance. Other expenses, including fuel and ground operations are directly paid to suppliers by United. We believe we are in material compliance with the terms of our United CPA.
The transaction is expected to close by the end of March 2024. • Subsequent to September 30, 2023, we entered into a purchase agreement with a third party which provides for the sale of 23 engines for gross proceeds of $11.5 million which will be used to pay down our UST Loan.
Subsequently, we closed the sale of all 18 aircraft to United. • On December 30, 2024, we received notice from United that $4.5 million of our Effective Date Revolving Loan balance under our United Revolving Credit Facility has been forgiven for achieving certain operational performance metrics outlined in the United CPA. • On December 24, 2024, we entered into a purchase agreement with a third party which provides for the sale of 15 CRJ-900 airframes to the third party for expected gross proceeds of $19.0 million, which will be used to pay down our UST Loan.
Capacity Purchase and Flight Services Agreements Our agreements consist of the following: ▪ Operation of E-175 and CRJ-900 under our United CPA; ▪ Operation of Boeing 737 aircraft under our DHL FSA. The financial arrangements between the Company and its major partners include a revenue-guarantee arrangement.
United Capacity Purchase Agreement Our agreement with United consists of the operation of E-175 and CRJ-900 aircraft under our United CPA. The financial arrangement between the Company and United includes a revenue-guarantee arrangement. Under the revenue-guarantee provisions, United pays us a fixed minimum monthly amount per aircraft under contract, plus additional amounts related to departures and block hours flown.
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 and approximately 2,303 employees.
As of September 30, 2024, Mesa operated a fleet of 67 regional aircraft consisting of 55 E-175 aircraft and 12 CRJ-900 aircraft with approximately 265 daily departures. During fiscal year 2024, Mesa’s fleet were conducted under our Capacity Purchase Agreement ("CPA") with United and Flight Services Agreement ("FSA") with DHL Network Operations (USA), inc.
Removed
All of the Company’s consolidated contract revenues for the twelve months ended September 30, 2023 and September 30, 2022 were derived from operations associated with the American CPA prior to April 3, 2023, the United CPA, DHL FSA, and leases of aircraft to a third party.
Added
Prior to the voluntary wind-down of the FSA with DHL on March 1, 2024, Mesa also operated flights as DHL Express flights pursuant to the terms of the FSA.
Removed
Under the CPA with United (the "United CPA") and FSA with DHL (the "DHL FSA"), we operated or maintained as operational spares a fleet of 120 aircraft as of September 30, 2023. We also lease two aircraft to a third party as of September 30, 2023.
Added
Subject to the terms and conditions of the Merger Agreement, Republic will merge with and into the Company (the "Merger"), with the Company continuing as the surviving corporation following the Merger.
Removed
We operate 54 E-175 and 26 CRJ-900 aircraft under our United CPA, and four Boeing 737-400F aircraft under our DHL FSA.
Added
In connection with the Merger, immediately prior to the effective time of the Merger (the "Effective Time"), the Company will convert from a Nevada corporation to a Delaware corporation pursuant to a Plan of Conversion (the "Conversion).
Removed
For our fiscal year ended September 30, 2023, approximately 23% of our revenues were earned under the American CPA, approximately 73% were earned under the United CPA, approximately 1% were earned from leases of aircraft to a third party and approximately 3% were earned under the DHL FSA.
Added
Effect on Capital Stock At the Effective Time, each share of common stock (“Company Common Stock”), par value $0.001 per share, of the Company issued and outstanding immediately prior to the Effective Time (other than any Cancelled Shares (as defined in the Merger Agreement) and dissenting shares held by stockholders who (i) have not voted in favor of the Merger or consented to it in writing and (ii) have properly demanded appraisal of such shares of Company Common Stock in accordance with, and have complied in all respects with, the provisions of Section 262 of the Delaware General Corporation Law), shall thereupon be converted into the right to receive 584.90 validly issued, fully paid and non-assessable shares of common stock (“Mesa Common Stock”), no par value per share, of Mesa (the “Merger Consideration”). 4 Treatment of Equity Awards Immediately prior to the Effective Time, (i) any vesting conditions applicable to each Parent RSU (as defined in the Merger Agreement) shall, automatically and without any required action on the part of the holder thereof, accelerate in full, and (ii) each Parent RSU shall, automatically and without any required action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Parent RSU to receive the number of shares of Mesa Common Stock subject to such Parent RSU immediately prior to the Effective Time.
Removed
Under our FSA with DHL, we receive 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.
Added
Immediately prior to the Effective Time, (i) each outstanding Company RSU (as defined in the Merger Agreement) that has vested in accordance with its terms (including each outstanding Company RSU that will become vested upon the closing of the Merger) (a “Vested Company RSU”) shall, automatically and without any required action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Vested Company RSU to receive a number of whole shares of Company Common Stock (rounded up to the next whole share of Company Common Stock), which shares of Company Common Stock shall be converted into Mesa Common Stock, and (ii) each outstanding Company RSU that is not a Vested Company RSU (an “Unvested Company RSU”) shall, automatically and without any required action on the part of the holder thereof, be assumed by Mesa and converted into the right to receive an award of restricted shares of Mesa Common Stock pursuant to the Parent Equity Award Plan (as defined in the Merger Agreement) (each, a “Parent Restricted Stock Award”) in an amount equal to the number of whole shares of Mesa Common Stock (rounded up to the next whole share of Mesa Common Stock) equal to the product obtained by multiplying (x) the Exchange Ratio by (y) the total number of shares of Company Common Stock subject to such Unvested Company RSU immediately prior to the Effective Time.
Removed
One of the primary factors contributing to the pilot shortage and attrition is the demand for pilots at major carriers, which are hiring at an accelerated rate. These airlines now seek to increase their capacity to meet the growing demand for air travel.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

86 edited+28 added−49 removed118 unchanged
Biggest changeRisk Factor Summary The following is a summary of the material risk factors that could adversely affect our business, financial condition, and results of operations: ▪ We are highly dependent on our agreements with our major partners and our operations may be negatively impacted if our major partners experience events that negatively impact their financial strength or operations. ▪ Reduced utilization levels of our aircraft under our agreements with our major partners would adversely impact our financial results. ▪ If United experiences events that negatively impact its financial strength or operations, our operations may be negatively impacted. ▪ We have a significant amount of debt and other contractual obligations, certain of which are subject to financial and other covenants. ▪ The potential impact of the deployment of 5G wireless telecommunications system to interfere with aviation equipment ▪ The loss of key personnel or the inability to attract additional qualified personnel could adversely affect our business. ▪ If the supply of pilots and mechanics to the airline industry remains constrained and pilot attrition continues to exceed historical levels, our results of operations and financial condition would be negatively impacted. ▪ Mechanic attrition and difficulty recruiting and retaining qualified maintenance technicians may negatively affect our operations and financial condition. ▪ Increases in our labor costs may adversely affect our business, results of operations, and financial condition. ▪ United may expand its direct operation of regional jets or seek other independent airlines to service their regional aircraft needs. ▪ We may be limited from expanding our flying within United's flight system. ▪ The residual value of our owned aircraft may be less than estimated in our depreciation policies. ▪ The amounts we receive under our agreements with our major partners may be less than the corresponding costs we incur. ▪ Strikes, labor disputes and increased unionization of our workforces may adversely affect our ability to conduct our business and reduce our profitability. ▪ We face tail risk in that we have aircraft lease commitments that extend beyond our existing contractual terms on certain aircraft, and may incur substantial maintenance costs as part of return obligations on leased aircraft. ▪ We may incur substantial maintenance costs as part of our leased aircraft return obligations. ▪ We may become involved in litigation that may materially adversely affect us. 20 ▪ Disagreements regarding the interpretation of our agreements with our major partners could have an adverse effect on our operating results and financial condition. ▪ If we face problems with any of our third-party service providers, our operations could be adversely affected. ▪ Maintenance costs will likely increase as the age of our jet fleet increases. ▪ Regulatory changes or tariffs could negatively impact our business and financial condition. ▪ The issuance of operating restrictions applicable to one of the fleet types we operate could negatively impact our business and financial condition. ▪ If we have a failure in our technology or security breaches of our information technology infrastructure our business and financial condition may be adversely affected. ▪ We are subject to various environmental and noise laws and regulations. ▪ Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited. ▪ We may not be able to successfully implement our growth strategy, or make opportunistic acquisitions. ▪ Our ability to obtain financing or access capital markets may be limited. ▪ Negative publicity regarding our customer service could have a material adverse effect on our business, results of operations and financial condition. ▪ Risks associated with our presence in international emerging markets may materially adversely affect us. ▪ Future public health threats similar to COVID-19 that negatively impact the demand for air travel could adversely impact our business. ▪ The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential major partners. ▪ We are subject to significant governmental regulation. ▪ Airlines are often affected by factors beyond their control including: air traffic congestion at airports; air traffic control inefficiencies; adverse weather conditions, such as hurricanes or blizzards; increased security measures; new travel-related taxes; or the outbreak of disease; any of which could have a material adverse effect on our business, results of operations, and financial condition. ▪ Terrorist activities or warnings have dramatically impacted the airline industry and are likely to continue to do so. ▪ The occurrence of an aviation accident involving our aircraft would negatively impact our operations and financial condition. ▪ If our common stock is delisted from Nasdaq and is traded over-the-counter, your ability to trade and the market price of our shares of common stock may be restricted and negatively impacted. ▪ The market price of our common stock may be volatile, which could cause the value of an investment in our stock to decline. ▪ If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our stock price and trading volumes could decline. ▪ Additional issuances of our common stock, whether by us or as a result of the exercise of our outstanding warrants, could materially affect the value of our common stock. ▪ Our corporate charter limits certain transfers of our stock, which could have an effect on the market price and liquidity of our common stock. 21 ▪ We currently do not intend to pay dividends on our common stock. ▪ The requirements of being a public company may strain our resources, increase our operating costs and divert management’s attention. ▪ We are required to assess our internal control over financial reporting on an annual basis, and any future adverse findings from such assessment could result in a loss of investor confidence in our financial reports and have a material adverse effect on our business.
Biggest changeRisk Factor Summary The following is a summary of the material risk factors that could adversely affect our business, financial condition, and results of operations: ▪ We are highly dependent on our agreement with United and our operations may be negatively impacted if United experiences events that negatively impacts its financial strength or operations. ▪ Reduced utilization levels of our aircraft under our agreements with United would adversely impact our financial results. ▪ If United experiences events that negatively impact its financial strength or operations, our operations may be negatively impacted. ▪ We have a significant amount of debt and other contractual obligations, certain of which are subject to financial and other covenants. ▪ The loss of key personnel or the inability to attract additional qualified personnel could adversely affect our business. ▪ If the supply of pilots and mechanics to the airline industry becomes constrained and pilot attrition levels increase, our results of operations and financial condition would be negatively impacted. ▪ Mechanic attrition and difficulty recruiting and retaining qualified maintenance technicians may negatively affect our operations and financial condition. ▪ Increases in our labor costs may adversely affect our business, results of operations, and financial condition. ▪ United may expand its direct operation of regional jets or seek other independent airlines to service their regional aircraft needs. ▪ We may be limited from expanding our flying within United's flight system. ▪ The residual value of our owned aircraft may be less than estimated in our depreciation policies. ▪ The amounts we receive under our agreement with United may be less than the corresponding costs we incur. ▪ Strikes, labor disputes and increased unionization of our workforces may adversely affect our ability to conduct our business and reduce our profitability. ▪ We may incur substantial maintenance costs as part of our leased aircraft return obligations. ▪ We may become involved in litigation that may materially adversely affect us. ▪ Disagreements regarding the interpretation of our agreement with United could have an adverse effect on our operating results and financial condition. ▪ If we face problems with any of our third-party service providers, our operations could be adversely affected. ▪ Maintenance costs will likely increase as the age of our jet fleet increases. 20 ▪ Regulatory changes or tariffs could negatively impact our business and financial condition. ▪ The issuance of operating restrictions applicable to one of the fleet types we operate could negatively impact our business and financial condition. ▪ If we have a failure in our technology or security breaches of our information technology infrastructure our business and financial condition may be adversely affected. ▪ We are subject to various environmental and noise laws and regulations. ▪ Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited. ▪ Our ability to obtain financing or access capital markets may be limited. ▪ Negative publicity regarding our customer service could have a material adverse effect on our business, results of operations and financial condition. ▪ Our failure to be current in our SEC filings could pose significant risks to our business, each of which could materially and adversely affect our financial condition and results of operations. ▪ Future public health threats that negatively impact the demand for air travel could adversely impact our business. ▪ The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential major partners. ▪ We are subject to significant governmental regulation. ▪ Airlines are often affected by factors beyond their control including: air traffic congestion at airports; air traffic control inefficiencies; adverse weather conditions, such as hurricanes or blizzards; increased security measures; new travel-related taxes; or the outbreak of disease; any of which could have a material adverse effect on our business, results of operations, and financial condition. ▪ Terrorist activities or warnings have dramatically impacted the airline industry and are likely to continue to do so. ▪ The occurrence of an aviation accident involving our aircraft would negatively impact our operations and financial condition. ▪ The market price of our common stock may be volatile, which could cause the value of an investment in our stock to decline. ▪ If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our stock price and trading volumes could decline. ▪ Additional issuances of our common stock, whether by us or as a result of the exercise of our outstanding warrants, could materially affect the value of our common stock. ▪ Our corporate charter limits certain transfers of our stock, which could have an effect on the market price and liquidity of our common stock. ▪ We currently do not intend to pay dividends on our common stock. ▪ The requirements of being a public company may strain our resources, increase our operating costs and divert management’s attention. ▪ We are required to assess our internal control over financial reporting on an annual basis, and any future adverse findings from such assessment could result in a loss of investor confidence in our financial reports and have a material adverse effect on our business.
In August 2022, we entered into a Letter of Agreement with the Airline Pilots Association (“ALPA”), which provided for increased overall hourly pay increases of nearly 118% for captains and 172% for new-hire first officers.
In August 2022, we entered into a Letter of Agreement with the Airline Pilots Association (“ALPA”), which provided for increased overall hourly pay increases of nearly 118% for captains and 172% for new-hire first officers.
The degree to which we are leveraged could have important consequences to holders of our securities, including the following: ▪ we must dedicate a substantial portion of cash flow from operations to the payment of principal and interest on applicable indebtedness which, in turn, reduces funds available for operations and capital expenditures; ▪ our flexibility in planning for, or reacting to, changes in the markets in which we compete may be limited; ▪ we may be at a competitive disadvantage relative to our competitors with less indebtedness; ▪ we are rendered more vulnerable to general adverse economic and industry conditions; ▪ we are exposed to increased interest rate risk given that a majority of our indebtedness obligations are at variable interest rates; and ▪ our credit ratings may be reduced, and our debt and equity securities may significantly decrease in value.
The degree to which we are leveraged could have important consequences to holders of our securities, including the following: ▪ we must dedicate a substantial portion of cash flow from operations to the payment of principal and interest on applicable indebtedness which, in turn, reduces funds available for operations and capital expenditures; ▪ our flexibility in planning for, or reacting to, changes in the markets in which we compete may be limited; ▪ we may be at a competitive disadvantage relative to our competitors with less indebtedness; 23 ▪ we are rendered more vulnerable to general adverse economic and industry conditions; ▪ we are exposed to increased interest rate risk given that a majority of our indebtedness obligations are at variable interest rates; and ▪ our credit ratings may be reduced, and our debt and equity securities may significantly decrease in value.
In addition, if a corporation undergoes an "ownership change" (generally defined as a greater than 50% cumulative change in the equity ownership of certain shareholders over a rolling three-year period) under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), the corporation's ability to use its pre- change net operating loss carryforwards and other pre-change tax attributes to offset future taxable income or taxes may be limited.
In addition, if a corporation undergoes an 30 "ownership change" (generally defined as a greater than 50% cumulative change in the equity ownership of certain shareholders over a rolling three-year period) under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), the corporation's ability to use its pre- change net operating loss carryforwards and other pre-change tax attributes to offset future taxable income or taxes may be limited.
In future periods, if we fail to achieve and maintain an effective internal control environment, it could result in material misstatements in our financial statements and failure to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information and adversely impact our stock price. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 1C.
In future periods, if we fail to achieve and maintain an effective internal control environment, it could result in material misstatements in our financial statements and failure to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information and adversely impact our stock price. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
These pay increases have positively impacted our ability to attract, hire, and retain pilots in fiscal 2023, and attrition levels have dropped to a pre-COVID level. In addition to the foregoing, our pilot premium wage and bonus initiatives have substantially increased our labor costs and continue to negatively impact our operations and financial condition.
These pay increases have positively impacted our ability to attract, hire, and retain pilots in fiscal 2023 and 2024, and attrition levels have dropped to a pre-COVID level. In addition to the foregoing, our pilot premium wage and bonus initiatives have substantially increased our labor costs and continue to negatively impact our operations and financial condition.
This process continues until either the parties have reached agreement on a new collective bargaining agreement, or the parties have been released to "self-help" by the NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes.
This process continues until either the parties have reached agreement on a new 27 collective bargaining agreement, or the parties have been released to "self-help" by the NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes.
Our maintenance technicians may seek employment at mainline airlines, which generally offer higher salaries and more extensive benefit programs than regional airlines are financially able to offer. Should the turnover of maintenance technicians increase, we may not be able to hire sufficient maintenance technicians to replace those leaving.
Our maintenance technicians may seek employment at mainline airlines, which generally offer higher salaries and more extensive benefit programs than regional airlines are financially able to offer. Should the turnover of 25 maintenance technicians increase, we may not be able to hire sufficient maintenance technicians to replace those leaving.
To the extent that we experience disagreements regarding the interpretation of our CPA or FSA, we will likely expend valuable management time and financial resources in our efforts to resolve those disagreements. Those disagreements may result in litigation, arbitration, settlement negotiations, or other proceedings.
To the extent that we experience disagreements regarding the interpretation of our CPA, we will likely expend valuable management time and financial resources in our efforts to resolve those disagreements. Those disagreements may result in litigation, arbitration, settlement negotiations, or other proceedings.
We have incurred relatively low maintenance expenses on our E-175 aircraft because most of the parts are under multi-year warranties and a limited number of heavy airframe checks and engine overhauls have occurred.
We have incurred relatively low maintenance expenses on our E-175 aircraft because most of the parts are under multi-year warranties and a limited number of heavy airframe checks and engine overhauls have 28 occurred.
In the event of a decrease in United's financial or operational strength, United may seek to reduce, or be unable to make, the payments due to us under the United CPA. In addition, in some cases, they may reduce utilization of our aircraft.
In the event of a decrease in United's financial or operational strength, United may seek to reduce, or be unable to make, the payments due to us under the United CPA. In addition, in some cases, they may further reduce utilization of our aircraft.
These more significant maintenance activities will result in out-of-service periods during which aircraft are dedicated to maintenance activities and unavailable for flying under our agreements. Any unexpected increase in our maintenance costs as our fleet ages or decreased revenues resulting from out-of-service periods could have an adverse effect on our cash flows, operating results, and financial condition.
These more significant maintenance activities will result in out-of-service periods during which aircraft are dedicated to maintenance activities and unavailable for flying under our agreement. Any unexpected increase in our maintenance costs as our fleet ages or decreased revenues resulting from out-of-service periods could have an adverse effect on our cash flows, operating results, and financial condition.
Under our CPA with United and FSA with DHL, a portion of our compensation is based upon pre-determined rates typically applied to production statistics (such as departures and block hours flown). The primary operating costs intended to be compensated by the pre-determined rates include labor costs, including crew training costs, certain aircraft maintenance expenses and overhead costs.
Under our CPA with United, a portion of our compensation is based upon pre-determined rates typically applied to production statistics (such as departures and block hours flown). The primary operating costs intended to be compensated by the pre-determined rates include labor costs, including crew training costs, certain aircraft maintenance expenses and overhead costs.
These events have had, and continue to have, a negative impact on pilot scheduling, work hours, and the number of pilots required to support our operations.
These events have had a negative impact on pilot scheduling, work hours, and the number of pilots required to support our operations.
Our pilots continue to be recruited by other carriers, primarily the major carriers and heavy equipment cargo operators, which generally offer higher salaries and more extensive benefit programs. The magnitude of this attrition in fiscal 2023 created significant backlogs in training, further exacerbating an already challenging environment.
Our pilots continue to be recruited by other carriers, primarily the major carriers and heavy equipment cargo operators, which generally offer higher salaries and more extensive benefit programs. The magnitude of this attrition in fiscal years 2022 and 2023 created significant backlogs in training, further exacerbating an already challenging environment.
To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff. Management assessed the effectiveness of our internal control over financial reporting at September 30, 2023.
To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff. Management assessed the effectiveness of our internal control over financial reporting at September 30, 2024.
In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we maintained effective internal control over financial reporting as of September 30, 2023.
In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we maintained effective internal control over financial reporting as of September 30, 2024.
Our labor agreements with the ALPA and AFA are amendable as of September 30, 2023. We are also subject to various ongoing employment disputes outside of the collective bargaining agreements. We consider these disputes to not be material, but any current or future dispute could become material.
Our labor agreements with the ALPA and AFA are amendable as of September 30, 2024. We are also subject to various ongoing employment disputes outside of the collective bargaining agreements. We consider these disputes to not be material, but any current or future dispute could become material.
The issuance of FAA or manufacturer directives restricting or prohibiting the use of the aircraft types we operate could negatively impact our business and financial results. 30 If we have a failure in our technology or security breaches of our information technology infrastructure our business and financial condition may be adversely affected.
The issuance of FAA or manufacturer directives restricting or prohibiting the use of the aircraft types we operate could negatively impact our business and financial results. 29 If we have a failure in our technology or security breaches of our information technology infrastructure our business and financial condition may be adversely affected.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for our fiscal year ended September 30, 2023 and each subsequent year.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for our fiscal year ended September 30, 2024 and each subsequent year.
Any general reduction in airline passenger traffic could have a material adverse effect on our business, results of operations, and financial condition. 34 Terrorist activities or warnings have dramatically impacted the airline industry and will likely continue to do so.
Any general reduction in airline passenger traffic could have a material adverse effect on our business, results of operations, and financial condition. 32 Terrorist activities or warnings have dramatically impacted the airline industry and will likely continue to do so.
The airline industry has undergone substantial consolidation, including the mergers between Alaska Airlines and Virgin America Inc. in 2016, American and US Airways in 2013, Southwest Airlines Co. and AirTran Airways in 2011, United and Continental Airlines in 2010 and Delta and Northwest Airlines in 2008.
The airline industry has undergone substantial consolidation, including the mergers between Alaska Airlines and Hawaiian Airlines in 2024, Alaska Airlines and Virgin America Inc. in 2016, American and US Airways in 2013, Southwest Airlines Co. and AirTran Airways in 2011, United and Continental Airlines in 2010 and Delta and Northwest Airlines in 2008.
We have taken important steps to further attract, hire and retain qualified pilots, including the implementation of significant pilot wage and bonus increases, pilot retention initiatives, increases in training capacity, and other cost efficiency initiatives.
We have taken important steps to further attract, hire and retain qualified pilots, including the implementation of significant pilot wage and bonus increases, pilot retention initiatives, increases in training capacity, the initiation of MPD, and other cost efficiency initiatives.
While United pays us a fixed monthly revenue amount for each aircraft under contract, a significant reduction in the utilization levels of our fleet in the future or removal of aircraft from our United CPA at United's election could reduce our revenues based on the number of flights and block hours flown for United.
While United pays us a fixed monthly revenue amount for each aircraft under contract, a continuation of the low block hours flown in 2024 and/or a significant reduction in the utilization levels of our fleet in the future or removal of aircraft from our United CPA at United's election could reduce our revenues based on the number of flights and block hours flown for United.
In the event any transfer or issuance of shares of our capital stock to a non-U.S. citizen would result in non-U.S. citizens owning more than the above-described cap amounts, such transfer or issuance will be void and of no effect. 37 As of September 30, 2023, we had outstanding warrants to purchase 4,899,497 shares of our common stock, all of which were held by the U.S.
In the event any transfer or issuance of shares of our capital stock to a non-U.S. citizen would result in non-U.S. citizens owning more than the above-described cap amounts, such transfer or issuance will be void and of no effect. 34 As of September 30, 2024, we had outstanding warrants to purchase 4,899,497 shares of our common stock, all of which were held by the U.S.
Additionally, FAA regulations regarding personnel certification and qualifications, and potential future changes in FAA regulations, could limit the number of qualified new entrants that we could hire. In the event we are unable to hire and retain qualified mechanics, our business and financial condition could be adversely affected.
Additionally, FAA regulations regarding personnel certification and qualifications, and potential future changes in FAA regulations, could limit the number of qualified new entrants that we could hire. In the event we are unable to hire and retain qualified mechanics, our business, financial condition, or results of operations could be adversely affected.
Our technological systems and related data, and those of our major partners, may be vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers, and other security issues.
Our technological systems and related data, and those of United, may be vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers, and other security issues.
There has been significant press coverage during fiscal 2023 regarding the issues stemming from the pilot shortages (namely flight cancellations and delays by the major carriers), with no airline being immune to the issues created by the pilot shortage or the associated negative press.
There has been significant press coverage regarding the issues stemming from the pilot shortages (namely flight cancellations and delays by the major carriers), with no airline being immune to the issues created by the pilot shortage or the associated negative press.
However, US federal net operating losses generated in fiscal years 2018 and forward are not subject to expiration and, if not utilized by fiscal 2023, are only available to offset eighty percent of taxable income 31 each year due to changes in tax law attributable to the passage of Tax Cuts and Jobs Act.
However, US federal net operating losses generated in fiscal years 2018 and forward are not subject to expiration and are only available to offset eighty percent of taxable income each year due to changes in tax law attributable to the passage of Tax Cuts and Jobs Act.
Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, results of operations and financial condition. Disagreements regarding the interpretation of our agreements with our major partners could have an adverse effect on our operating results and financial condition.
Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, results of operations and financial condition. Disagreements regarding the interpretation of our CPA with United could have an adverse effect on our operating results and financial condition.
These pay increases have positively impacted our ability to attract, hire, and retain pilots in fiscal 2023, and attrition levels have dropped to a pre-COVID level.
These pay increases have positively impacted our ability to attract, hire, and retain pilots in fiscal 2023 and 2024, and attrition levels have dropped to pre-covid levels.
An impairment on any of the aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material negative impact to our financial results. For our fiscal year ended September 30, 2023, we recognized approximately $50.6 million of impairment losses on our owned aircraft and related assets.
An impairment on any of the aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material negative impact to our financial results. For our fiscal year ended September 30, 2024, we recognized approximately $73.7 million of impairment losses on our owned aircraft and related assets.
The performance and reliability of our technology, and the technology of our major partners, are critical to our ability to compete effectively. Any internal technological error or failure or large-scale external interruption in the technological infrastructure we depend on, such as power, telecommunications, or the internet, may disrupt our internal network.
The performance and reliability of our technology, and the technology of United, is critical to our ability to compete effectively. Any internal technological error or failure or large-scale external interruption in the technological infrastructure we depend on, such as power, telecommunications, or the internet, may disrupt our internal network.
See Note 8 – “Balance Sheet Information” in the notes to the audited 27 consolidated financial statements included in this Annual Report on Form 10-K for further discussion of our impairment of long-lived assets. The amounts we receive under our agreements may be less than the corresponding costs we incur.
See Note 7 – “Balance Sheet Information” in the notes to the audited consolidated financial statements included in this Annual Report on Form 10-K for further discussion of our impairment of long-lived assets. The amounts we receive under our United CPA may be less than the corresponding costs we incur.
Continued challenges with hiring, training, and retaining replacement pilots may lead to reduced utilization levels of our aircraft and additional penalties under our CPA and our operations and financial results could be materially and adversely impacted. Additionally, United may change routes and frequencies of flights, which can negatively impact our operating efficiencies.
Challenges with hiring, training, and retaining replacement pilots may also lead to reduced utilization levels of our aircraft and penalties under our CPA. Our operations and financial results could be materially and adversely impacted by such events. Additionally, United may change routes and frequencies of flights, which can negatively impact our operating efficiencies.
We may be directly affected by the financial and operating strength of United. Any events, such as new pandemics, that negatively impact the financial strength of United or have a long-term effect on the use of United by airline travelers would likely have a material adverse effect on our business, financial condition, and results of operations.
Any events, such as new pandemics, that negatively impact the financial strength of United or have a long-term effect on the use of United by airline travelers would likely have a material adverse effect on our business, financial condition, and results of operations.
Any inability to retain or attract significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations, and financial condition. If the supply of pilots to the airline industry remains constrained and pilot attrition continues to exceed historical levels, our results of operations and financial condition would be negatively impacted.
Any inability to retain or attract significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations, and financial condition. 24 If the supply of pilots to the airline industry becomes constrained and pilot attrition levels increase, our results of operations and financial condition would be negatively impacted.
The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, issuing debt, entering into other financing arrangements, restructuring of operations to grow revenues and decrease expenses, or selling the aircraft held for sale and our equity investments.
The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, issuing debt, entering into other financing arrangements, restructuring of operations to grow revenues and decrease expenses, or selling excess aircraft and related assets.
The duration and severity of the COVID-19 pandemic, and similar public health threats that we may face in the future, could result in additional adverse effects on our business, operating results, financial condition, and liquidity. 33 The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential major partners.
The duration and severity of a public health threat that we may face in the future could result in additional adverse effects on our business, operating results, financial condition, and liquidity. 31 The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential major partners. The airline industry is highly competitive.
This and other events, which are outside of our control, could have a material adverse effect on our business, financial condition, and results of operations. In addition, any negative events that impact other regional carriers and that affect public perception of such carriers generally could also have a material adverse effect on our business, financial condition, and results of operations.
In addition, any negative events that impact other regional 22 carriers and that affect public perception of such carriers generally could also have a material adverse effect on our business, financial condition, and results of operations.
The airline industry is highly competitive. We compete primarily with other regional airlines, some of which are owned by or operated by major airlines. In certain instances, our competitors are larger than us and possess significantly greater financial and other resources than we do.
We compete primarily with other regional airlines, some of which are owned by or operated by major airlines. In certain instances, our competitors are larger than us and possess significantly greater financial and other resources than we do.
More recently, our operations have continued to be negatively impacted by the severity of the pilot shortages that have plagued the airline industry as whole, and by the associated elevated pilot attrition that 25 we believe has disproportionately impacted regional airlines, including us.
More recently, our operations have been negatively impacted by the severity of the pilot shortages that have plagued the airline industry as whole, and by the associated elevated pilot attrition that we believe disproportionately impacted regional airlines, including us.
We rely on a limited number of aircraft types, including CRJ-700, CRJ-900, Boeing 737, and E-175 aircraft.
We rely on a limited number of aircraft types, including CRJ-900 and E-175 aircraft.
For a more complete discussion of the material risk factors relevant to us, see below. Risks Related to Our Business We are highly dependent on our agreements with our major partners. We derive substantially all of our operating revenue from our CPA with United and previously with American.
For a more complete discussion of the material risk factors relevant to us, see below. 21 Risks Related to Our Business We are highly dependent on our agreement with United. We derive substantially all of our operating revenue from our CPA with United.
Treasury, will be dilutive to our existing common shareholders. Sales of substantial amounts of our common stock in the public or private market, a perception in the market that such sales could occur, or the issuance of securities exercisable into our common stock, could adversely affect the prevailing price of our common stock.
Sales of substantial amounts of our common stock in the public or private market, a perception in the market that such sales could occur, or the issuance of securities exercisable into our common stock, could adversely affect the prevailing price of our common stock.
As of September 30, 2023, future minimum lease payments due under all long-term operating leases were approximately $15.2 million and future debt service obligations were $619.5 million, including finance lease obligations and interest payments.
As of September 30, 2024, future minimum lease payments due under all long-term operating leases were approximately $10.5 million and future debt service obligations were $363.6 million, including finance lease obligations and interest payments.
Changes in schedules may increase our flight costs, which could exceed the reimbursed rates paid by United. Reduced utilization levels of our aircraft or other changes to our schedules under our CPA would adversely impact our operating results and financial condition. If United experiences events that negatively impact its financial strength or operations, our operations also may be negatively impacted.
Changes in schedules may increase our flight costs, which could exceed the reimbursed rates paid by United. Reduced utilization levels of our aircraft or other changes to our schedules under our CPA would adversely impact our business, financial condition, and results of operations.
If one or more of these analysts ceases to cover our company or fails to publish reports on us regularly, demand for our stock could decrease, which may cause the trading price of our common stock and the trading volume of our common stock to decline.
If one or more of these analysts ceases to cover our company or fails to publish reports on us regularly, demand for our stock could decrease, which may cause the trading price of our common stock and the trading volume of our common stock to decline. 33 The value of our common stock may be materially adversely affected by additional issuances of common stock underlying our outstanding warrants.
During our fiscal year ended September 30, 2023, approximately $77.5 million, or 13.4%, of our operating costs under our agreements were pass-through costs, excluding fuel which is paid directly to suppliers by our major partners.
During our fiscal year ended September 30, 2024, approximately $72.1 million, or 13.3%, of our operating costs under our agreements were pass-through costs, excluding fuel which is paid directly to suppliers by United.
As of September 30, 2023, we had aggregate federal and state net operating loss (“NOL”) carryforwards of approximately $562.6 million and $233.5 million, which expire in fiscal years 2027-2038 and 2022-2042, respectively. Approximately $194.2 million of our federal NOL carryforwards are not subject to expiration.
As of September 30, 2024, we had aggregate federal and state net operating loss ("NOL") carryforwards of approximately $511.7 million and $226.9 million, which expire in fiscal years 2027-2038 and 2024-2044, respectively. Approximately $194.2 million of our federal NOL carryforwards are not subject to expiration.
This, in turn, could materially reduce or eliminate our ability to use our losses or tax attributes to offset future taxable income or tax and have an adverse effect on our future cash flows. We may not be able to successfully implement our growth strategy.
This, in turn, could materially reduce or eliminate our ability to use our losses or tax attributes to offset future taxable income or tax and have an adverse effect on our future cash flows. Our ability to obtain financing or access capital markets may be limited.
This shortage of pilots has driven up our pilot salaries and sign-on bonuses and resulted in a material increase in our labor costs.
This shortage of pilots has driven up our pilot salaries and sign-on bonuses and resulted in a material increase in our labor costs. Another pilot shortage could require us to further increase our labor costs, which could result in a material reduction in our earnings.
In addition, as a part of our ordinary business operations, we collect and store sensitive data, including personal information of our employees and information of our major partners. Our information systems are subject to an increasing threat of continually evolving cybersecurity risks.
In addition, as a part of our ordinary business operations, we collect and store sensitive data, including personal information of our employees and information of United. Our information systems are subject to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to our systems or information through fraud or other means of deception.
Maintenance costs will likely increase as the age of our jet fleet increases. 29 The average age of our E-175, CRJ-900, Boeing 737 and CRJ-700 type aircraft is approximately 7.9, 18.1, 30.0, and 16.4 years, respectively.
Maintenance costs will likely increase as the age of our jet fleet increases. The average age of our E-175 and CRJ-900 aircraft is approximately 8.7 and 18.2 years, respectively.
Treasury pursuant to the terms of the Loan and Guarantee Agreement dated October 30, 2020. The warrants have a term of five years from the date of issuance and an initial exercise price of $3.98 per share. Any future warrant exercises by the U.S. Treasury, or any authorized transferee of the U.S.
The warrants have a term of five years from the date of issuance and an initial exercise price of $3.98 per share. Any future warrant exercises by the U.S. Treasury, or any authorized transferee of the U.S. Treasury, will be dilutive to our existing common shareholders.
We are required to assess our internal control over financial reporting on an annual basis, and any future adverse findings from such assessment could result in a loss of investor confidence in our financial reports, result in significant expenses to remediate any internal control deficiencies and have a material adverse effect on our business, results of operations and financial condition.
Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation. 37 We are required to assess our internal control over financial reporting on an annual basis, and any future adverse findings from such assessment could result in a loss of investor confidence in our financial reports, result in significant expenses to remediate any internal control deficiencies and have a material adverse effect on our business, results of operations and financial condition.
As a public company, we incur significant legal, accounting, and other expenses, including costs associated with public company reporting requirements. 38 We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act of 2002, as amended, the Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules implemented or to be implemented by the SEC and the Nasdaq Global Select Market.
We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act of 2002, as amended, the Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules implemented or to be implemented by the SEC and the Nasdaq Capital Market. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing.
The Company's substantial level of indebtedness, non-investment grade credit ratings, and the availability of Company assets as collateral for future loans or other indebtedness, which available collateral would be reduced under other future liquidity-raising transactions and was reduced during our fiscal year ended September 30, 2021 as a result of CARES Act loan program borrowings, may make it difficult for the Company to raise additional capital if required to meet its liquidity needs on acceptable terms, or at all. 23 Although the Company's cash flows from operations and its available capital, including the proceeds from financing transactions, have been sufficient to meet its obligations and commitments to date, the material uncertainties arising from the impact of the pilot shortage and attrition and ongoing transition of American operations to United earlier this year raised substantial doubt as to the Company’s ability to continue as a going concern.
The Company's substantial level of indebtedness, non-investment grade credit ratings, and the availability of Company assets as collateral for future loans or other indebtedness, which available collateral would be reduced under other future liquidity-raising transactions and was reduced during our fiscal year ended September 30, 2021 as a result of CARES Act loan program borrowings under our UST Loan, may make it difficult for the Company to raise additional capital if required to meet its liquidity needs on acceptable terms, or at all.
Furthermore, there can be no assurance that any or all of those proceedings, if commenced, would be resolved in our favor or that we would be able to exercise sufficient leverage in any proceeding relative to our major partner to achieve a favorable outcome.
Furthermore, there can be no assurance that any or all of those proceedings, if commenced, would be resolved in our favor or that we would be able to exercise sufficient leverage in any related proceeding to achieve a favorable outcome. An unfavorable result in any such proceeding could have adverse financial consequences or require us to modify our operations.
The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly and divert management's time and attention from revenue-generating activities to compliance activities.
We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly and divert management's time and attention from revenue-generating activities to compliance activities.
Increases in our labor costs, which constitute a substantial portion of our total operating costs, may adversely affect our business, results of operations and financial condition. As a result of the FAA Qualification Standards, the supply of qualified pilots has been dramatically reduced.
Increases in our labor costs, which constitute a substantial portion of our total operating costs, may adversely affect our business, results of operations and financial condition.
Department of the Treasury (the "UST Loan"), we are required to comply with a minimum collateral coverage ratio, measured monthly during the term of such credit facility, and a minimum liquidity level, measured at the close of any business day during the term of such credit facility.
Under our (i) credit and guaranty agreement with United (the "United Revolving Credit Facility"), we are required to comply with a minimum consolidated interest and rental coverage ratio at the end of each fiscal quarter during the term of such credit facility and a minimum liquidity level, measured at the close of any business day during the term of such credit facility, and (ii) loan and guarantee agreement with the UST Loan, we are required to comply with a minimum collateral coverage ratio, measured monthly during the term of such credit facility, and a minimum liquidity level, measured at the close of any business day during the term of such credit facility.
Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that our operations are less safe or reliable than other airlines. Risks Related to Owning Our Common Stock We are currently not in compliance with the Nasdaq continued listing requirements.
Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that our operations are less safe or reliable than other airlines. Risks Related to Owning Our Common Stock The market price of our common stock may be volatile, which could cause the value of an investment in our stock to decline.
During our fiscal years ended September 30, 2023, 2022, and 2021, our principal debt service payments totaled $203.0 million, $114.9 million, and $271.0 million, respectively. We also have significant long-term lease obligations, primarily relating to our aircraft fleet, office space, and other facilities.
During our fiscal year ended September 30, 2024, 2023, and 2022, our principal payments on debt totaled $286.3 million, $203.0 million, and $114.9 million, respectively. We also have significant long-term lease obligations, primarily relating to our office space and other facilities (excluding aircraft leased at nominal amounts from United), with an average remaining term of 6.5 years.
An unfavorable result in any such proceeding could have adverse financial consequences or require us to modify our operations. Such disagreements and their consequences could have an adverse effect on our operating results and financial condition. We rely on third-party suppliers as the sole manufacturers of our aircraft and aircraft engines.
Such disagreements and their consequences could have an adverse effect on our operating results and financial condition. We rely on third-party suppliers as the sole manufacturers of our aircraft and aircraft engines. We depend upon MHI, Boeing, and Embraer as the sole manufacturers of our aircraft and GE as the sole manufacturer of our aircraft engines.
A termination of our United CPA would have a material adverse effect on our business prospects, financial condition, results of operations, and cash flows. See “Item 1. Business” for additional information on our CPAs with American and United.
United accounted for approximately 97% and 73% of our revenue for our fiscal years ended September 30, 2024 and 2023, respectively. A termination of our United CPA would have a material adverse effect on our business prospects, financial condition, results of operations, and cash flows. See "Item 1. Business" for additional information on our CPA with United.
Consequently, your only opportunity to achieve a positive return on your investment in us will be if the market price of our common stock appreciates. General Risk Factors The requirements of being a public company may strain our resources, increase our operating costs, divert management's attention, and affect our ability to attract and retain qualified board members or executive officers.
General Risk Factors The requirements of being a public company may strain our resources, increase our operating costs, divert management's attention, and affect our ability to attract and retain qualified board members or executive officers. We became a public company in August 2018.
Unauthorized parties may attempt to gain access to our systems or information through fraud or other means of deception. The methods used to obtain unauthorized access, disable, or degrade service or sabotage systems are constantly evolving, and may be difficult to anticipate or to detect for long periods of time.
The methods used to obtain unauthorized access, disable, or degrade service or sabotage systems are constantly evolving, and may be difficult to anticipate or to detect for long periods of time. We may not be able to prevent all data security breaches or misuse of data.
If we do not meet our major partners' expectations with respect to reliability and service, our and our major partners' brand and product could be negatively impacted, which could result in customers deciding not to fly with our major partners or with us.
If we do not meet United's expectations with respect to reliability and service, our and United's brand and product could be negatively impacted, which could result in customers deciding not to fly with United or with us. If we are unable to provide consistently high-quality customer service, it could have an adverse effect on our relationships with United.
Our business strategy includes the implementation of our major partners' brand and product in order to increase customer loyalty and drive future ticket sales. In addition, we also receive certain amounts under our United CPA upon the results of passenger satisfaction surveys. However, we may experience a high number of passenger complaints related to, among other things, our customer service.
Our business strategy includes the implementation of United's brand and product in order to increase customer loyalty and drive future ticket sales. In addition, we also receive certain amounts or incur penalties under our United CPA upon the results of certain performance metrics.
These complaints, together with delayed and cancelled flights, and other service issues, are reported to the public by the DOT.
However, we may experience a high number of passenger complaints related to, among other things, our customer service. These complaints, together with delayed and cancelled flights, and other service issues, are reported to the public by the DOT.
Our United CPA limits our ability to provide regional flying services to other airlines in certain major airport hubs of United. These restrictions may make us a less attractive partner to other major airlines whose regional flying needs do not align with our geographical restrictions.
These restrictions may make us a less attractive partner to other major airlines whose regional flying needs do not align with our geographical restrictions. 26 The residual value of our owned aircraft may be less than estimated in our depreciation policies.
Additionally, our CPA limits our ability to provide regional flying services to other airlines in certain major airport hubs of United. These restrictions may make us a less attractive partner to other major airlines whose regional flying needs do not align with our geographical restrictions.
Additionally, our CPA limits our ability to provide regional flying services to other airlines in certain major airport hubs of United.
The value of our common stock may be materially adversely affected by additional issuances of common stock underlying our outstanding warrants. 36 As of September 30, 2023, we had outstanding warrants to purchase an aggregate of 4,899,497 shares of our common stock, all of which were issued to the U.S.
As of September 30, 2024, we had outstanding warrants to purchase an aggregate of 4,899,497 shares of our common stock, all of which were issued to the U.S. Treasury pursuant to the terms of the Loan and Guarantee Agreement dated October 30, 2020.
We may not be able to enter into substitute CPAs, and any such arrangements we might secure may not be as favorable to us as our current agreements.
We may not be able to enter into substitute CPAs, and any such arrangements we might secure may not be as favorable to us as our current agreements. Operating an airline independently from United would be a significant departure from our business plan and would likely require significant time and resources, which may not be available to us when needed.
As of September 30, 2023, we had approximately $538.3 million in total long-term principal balance (including current portion of $163.6 million, of which $57.7 million pertain to finance lease obligations) and $20.1 million available for borrowing under our United Revolving Credit Facility. Substantially all of our long-term debt was incurred in connection with the acquisition of aircraft and aircraft engines.
We also have $13.2 million available for borrowing under our United Revolving Credit Facility as of September 30, 2024. Substantially all of our long-term debt was incurred in connection with the acquisition of aircraft and aircraft engines.
The residual value of our owned aircraft may be less than estimated in our depreciation policies. As of September 30, 2023, we had approximately $698.0 million of property and equipment and related assets, net of accumulated depreciation, of which $569.9 million relates to owned aircraft.
As of September 30, 2024, we had approximately $426.4 million of property and equipment and related assets, net of accumulated depreciation, of which $353.7 million relates to owned aircraft.
In August 2022, we entered into a Letter of Agreement with the ALPA, which provided for increased overall hourly pay increases of nearly 118% for captains and 172% for new-hire first officers. These pay increases have positively impacted our ability to attract, hire, and retain pilots in fiscal 2023, and attrition levels have dropped to a pre-COVID level.
As a result of the FAA Qualification Standards and other events described above in August 2022, we entered into a Letter of Agreement with the ALPA, which provided for increased overall hourly pay increases of nearly 118% for captains and 172% for new-hire first officers, the supply of qualified pilots has been dramatically reduced.
A continued shortage of pilots could require us to further increase our labor costs, which could result in a material reduction in our earnings. 26 United may expand its direct operation of regional jets or seek other independent airlines to service their regional aircraft needs, thus limiting the expansion of our relationships with them.
United may expand its direct operation of regional jets or seek other independent airlines to service their regional aircraft needs, thus limiting the expansion of our relationships with them. We depend on United electing to contract with us instead of operating their own regional jets or operating their own " captive " regional airlines through wholly owned subsidiaries.
Management's Discussion and Analysis of Financial Condition and Results of Operations” of this report for additional information regarding the Company's liquidity and capital resources as of September 30, 2023. The deployment of 5G communications systems by telecommunication service providers could interfere with aviation equipment, potentially creating a material adverse effect on our business, results of operations, and financial condition.
Management's Discussion and Analysis of Financial Condition and Results of Operations” of this report for additional information regarding the Company's liquidity and capital resources as of September 30, 2024.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs part of our Amended and Restated United CPA, we may operate up to 38 CRJ-900 aircraft on behalf of United, dependent on the number of E-175 aircraft we are operating. ▪ CRJ-700s – As of September 30, 2023, our fleet included two CRJ-700 aircraft which were leased to a third party. ▪ Boeing 737 Cargo Jets – As of September 30, 2023, we leased one Bowing 737 aircraft from a third party and subleased three Boeing 737 aircraft from DHL under our DHL FSA.
Biggest changeSubsequent to September 30, 2024, we entered into an agreement with United which provides for the removal from CRJ-900 aircraft from the CPA. ▪ CRJ-700s – As of September 30, 2024, our fleet included two CRJ-700 aircraft which were leased to a third party.
Each of our facilities are summarized in the following table: Type Location Ownership Approximate Square Feet Corporate Headquarters Phoenix, Arizona Leased 33,770 Training Center Phoenix, Arizona Leased 23,783 Parts/Stores Phoenix, Arizona Leased 12,000 Hangar Phoenix, Arizona Leased 22,467 Office, Hangar and Warehouse El Paso, Texas Leased 31,292 Parts Storage Dallas, Texas Leased 8,143 Hangar Houston, Texas Leased 74,524 Hangar Louisville, Kentucky Leased 26,762 Hangar Dulles, Washington Leased 28,451 Cargo Building Dulles, Washington Leased 1,475 Warehouse Tucson, Arizona Leased 13,276 Warehouse, Office Erlanger, Kentucky Leased 7,070 We believe our facilities are suitable and adequate for our current and anticipated needs.
Each of our facilities are summarized in the following table: Type Location Ownership Approximate Square Feet Corporate Headquarters Phoenix, Arizona Leased 33,770 Training Center Phoenix, Arizona Leased 23,783 Parts/Stores Phoenix, Arizona Leased 12,000 Hangar Phoenix, Arizona Leased 22,467 Office, Hangar and Warehouse El Paso, Texas Leased 31,292 Parts Storage Dallas, Texas Leased 8,143 Hangar Houston, Texas Leased 74,524 Hangar Louisville, Kentucky Leased 26,762 Hangar Dulles, Washington Leased 28,451 Cargo Building Dulles, Washington Leased 1,475 Warehouse Tucson, Arizona Leased 13,276 We believe our facilities are suitable and adequate for our current and anticipated needs.
Below is a summary of our fleet by aircraft type. Our actual future fleet size and mix of aircraft types will likely vary, and may vary materially, from our current fleet size. ▪ E-175s – As of September 30, 2023, we operated 54 E-175 aircraft under our United CPA.
Below is a summary of our fleet by aircraft type. Our actual future fleet size and mix of aircraft types may vary materially from our current fleet size. ▪ E-175s – As of September 30, 2024, we operated 55 E-175 aircraft under our United CPA.
Our United CPA permits United, subject to certain conditions, including the payment of certain costs tied to aircraft type, to terminate the United CPA in its discretion, or remove aircraft from service, by giving us 90 days’ notice. ▪ CRJ-900s – As of September 30, 2023, we operated 26 CRJ-900 aircraft under our United CPA and 28 CRJ-900 aircraft as operational spares.
Our United CPA permits United, subject to certain conditions, including the payment of certain costs tied to aircraft type, to terminate the United CPA in its discretion, or remove aircraft from service, by giving us 90 days’ notice. ▪ CRJ-900s – As of September 30, 2024, we operated 12 CRJ-900 aircraft under our United CPA.
PROPERTIES Flight Equipment As of September 30, 2023, our aircraft fleet consisted of the following : Average Passenger Flight Cruising Average Aircraft Type Owned Leased Total Capacity Range (miles) Speed (mph) Age (years) E-175 Regional Jet 18 42 60 70-76 2,100 530 7.9 CRJ-900 Regional Jet 54 — 54 76-79 1,500 530 18.1 CRJ-700 Regional Jet — 2 2 50-70 1,600 530 16.4 Boeing 737 Cargo Jet — 4 4 2,600 530 30.0 Total 72 48 120 Several factors impact our fleet size, including contract expirations, lease expirations, growth opportunities and opportunities to transition to an alternative airline partner.
PROPERTIES Fleet As of September 30, 2024, our active aircraft fleet consisted of the following : Average Passenger Flight Cruising Average Aircraft Type Owned Leased Total Capacity Range (miles) Speed (mph) Age (years) E-175 Regional Jet 18 37 55 70-76 2,100 530 8.7 CRJ-900 Regional Jet 7 5 12 76-79 1,500 530 18.2 CRJ-700 Regional Jet — 2 2 50-70 1,600 530 17.4 Total 25 44 69 Several factors impact our fleet size, including contract expirations, lease expirations, growth opportunities and opportunities to transition to an alternative airline partner.
Removed
The DHL FSA expires five years from the commencement date of the first aircraft placed into service. The first revenue generating flight took place in October 2020. 40 Facilities In addition to aircraft, we have office and maintenance facilities to support our operations.
Added
Subsequent to September 30, 2024, we entered into an agreement with United to buy the aircraft out of their lease with the third party and to purchase them for $11.0 million. 40 Facilities In addition to aircraft, we have office and maintenance facilities to support our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are subject to certain legal actions which we consider routine to our business activities. As of September 30, 2023, our management believed the ultimate outcomes of other routine legal matters are not likely to have a material adverse effect on our financial position, liquidity, or results of operations. ITEM 4.
Biggest changeITEM 3. LEGAL PROCEEDINGS We are subject to certain legal actions which we consider routine to our business activities. As of September 30, 2024, our management believed the ultimate outcomes of other routine legal matters are not likely to have a material adverse effect on our financial position, liquidity, or results of operations. ITEM 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Record As of December 26, 2023, there were approximately 84 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, as a result, we are unable to estimate the total number of stockholders represented by these record holders.
Biggest changeBecause many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, as a result, we are unable to estimate the total number of stockholders represented by these record holders. The transfer agent and registrar for our common stock is ComputerShare Trust Company, N.A.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our definitive proxy statement for our 2024 Annual Meeting of Shareholders ("2024 Proxy Statement") to be filed with the SEC within 120 days of our fiscal year ended September 30, 2023. 42 Stock Performance Graph The following Performance Graph and related information shall not be deemed "soliciting material" or "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our definitive proxy statement for our 2025 Annual Meeting of Shareholders ("2025 Proxy Statement") to be filed with the SEC within 120 days of our fiscal year ended September 30, 2024. 42 Stock Performance Graph The following Performance Graph and related information shall not be deemed "soliciting material" or "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.
The graph assumes an investment of $100.00 in each of the above on the close of market on July 31, 2019. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance.
The graph assumes an investment of $100.00 in each of the above on the close of market on July 31, 2020. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance.
The following graph compares the cumulative total return on our common stock with that of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Stock Market Transportation Index. The period shown commences on July 31, 2019, and ends on September 30, 2023, the end of our fiscal year.
The following graph compares the cumulative total return on our common stock with that of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Stock Market Transportation Index. The period shown commences on July 31, 2020, and ends on September 30, 2024, the end of our fiscal year.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has traded on The Nasdaq Global Select Market under the symbol "MESA" since August 10, 2018. Prior to that date, there was no public market for our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock traded on The Nasdaq Global Select Market under the symbol "MESA" from August 10, 2018 to May 6, 2024. On such date, our common stock began trading on the Nasdaq Capital Market.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the three months ended September 30, 2023, the Company repurchased a total of 10,443 shares of its common stock for $17 thousand to cover the income tax obligation on vested employee equity awards.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The Company repurchased a total of 8,772 and 112,698 shares of its common stock for $12 thousand and $138 thousand to cover the income tax obligation on vested employee equity awards during the three months and fiscal year ended September 30, 2024, respectively. ITEM 6. [RESERVED] 43
Additionally, our United CPA, certain of our aircraft lease facilities, and our loan with the U.S. Treasury contain restrictions that limit our ability to or prohibit us from paying dividends to holders of our common stock.
Treasury contain restrictions that limit our ability to or prohibit us from paying dividends to holders of our common stock.
The transfer agent and registrar for our common stock is ComputerShare Trust Company, N.A. Dividends We have not declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any cash dividends on our common stock for the foreseeable future.
Dividends We have not declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any cash dividends on our common stock for the foreseeable future. Additionally, our United CPA, certain of our aircraft lease facilities, and our loan with the U.S.
Removed
The Company repurchased a total of 204,486 shares of its common stock for $0.4 million to cover the income tax obligation on vested employee equity awards during the fiscal year ended September 30, 2023. 43 ITEM 6. [RESERVED] 44
Added
Prior to August 10, 2018, there was no public market for our common stock. Holders of Record As of December 5, 2024, there were approximately 84 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating Revenues Year Ended September 30, 2023 2022 Change Operating revenues ($ in thousands): Contract $ 421,298 $ 478,482 $ (57,184 ) (12.0 )% Pass-through and other 76,767 52,519 24,248 46.2 % Total operating revenues $ 498,065 $ 531,001 $ (32,936 ) (6.2 )% Operating data: Available seat miles—ASMs (thousands) 4,235,413 6,674,748 (2,439,335 ) (36.5 )% Block hours 188,947 271,511 (82,564 ) (30.4 )% Revenue passenger miles—RPMs (thousands) 2,705,920 5,549,595 (2,843,675 ) (51.2 )% Average stage length (miles) 552 509 43 8.4 % Contract revenue per available seat mile—CRASM (in cents) ¢ 9.95 ¢ 7.18 ¢ 2.77 38.6 % Passengers 6,310,730 8,083,870 (1,773,140 ) (21.9 )% (1) The definitions of certain terms related to the airline industry used in the table can be found under "Glossary of Airline Terms" above.
Biggest changeThese decreases were partially offset by (i) impairment expense of $73.7 in our fiscal year ended September 30, 2024 compared to impairment expense of $54.3 million in our fiscal year ended September 30, 2023; and (ii) a decrease in contract revenue due to reduced block hours flown, fewer aircraft under contract, and the wind-down of the DHL FSA, partially offset by an increased United block hour compensation rate. 52 Operating Revenues/Statistics Year Ended September 30, 2024 2023 Change Operating revenues ($ in thousands): Contract $ 404,322 $ 421,298 $ (16,976 ) (4.0 )% Pass-through and other 72,087 76,767 (4,680 ) (6.1 )% Total operating revenues $ 476,409 $ 498,065 $ (21,656 ) (4.3 )% Operating data: Available seat miles—ASMs (thousands) 3,898,559 4,235,413 (336,854 ) (8.0 )% Block hours 176,236 188,947 (12,711 ) (6.7 )% Revenue passenger miles—RPMs (thousands) 3,261,349 3,541,712 (280,363 ) (7.9 )% Average stage length (miles) 538 552 (14 ) (2.5 )% Contract revenue per available seat mile—CRASM (in cents) ¢ 10.37 ¢ 9.95 ¢ 0.42 4.2 % Passengers 5,980,033 6,310,730 (330,697 ) (5.2 )% (1) The definitions of certain terms related to the airline industry used in the table can be found under "Glossary of Airline Terms" above.
The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statements of operations and comprehensive (loss) income because the use of the aircraft is not a separate activity of the total service provided.
The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statements of operations and comprehensive loss because the use of the aircraft is not a separate activity of the total service provided.
We had net loss of $182.7 million adjusted for the following significant non-cash items: 68 asset impairment of $171.8 million, depreciation and amortization of $81.5 million, stock-based compensation expense of $2.8 million, deferred income taxes of $(52.0) million, losses on investments in equity securities of $13.7 million, amortization of deferred credits of $(0.9) million, amortization of debt discount and issuance costs and accretion of interest of $9.7 million, loss on extinguishment of debt of $0.4 million, gain on disposal of assets of $(4.7) million, provision for obsolete expendable parts and supplies of $0.6 million, and loss on lease termination of $0.2 million.
We had net loss of $182.7 million adjusted for the following significant non-cash items: asset impairment of $171.8 million, depreciation and amortization of $81.5 million, stock-based compensation expense of $2.8 million, deferred income taxes of $(52.0) million, losses on investments in equity securities of $13.7 million, amortization of deferred credits of $(0.9) million, amortization of debt discount and issuance costs and accretion of interest of $9.7 million, loss on extinguishment of debt of $0.4 million, gain on disposal of assets of $(4.7) million, provision for obsolete expendable parts and supplies of $0.6 million, and loss on lease termination of $0.2 million.
Our ability to service our long-term debt obligations, including our equipment notes, to remain in compliance with the various covenants contained in our debt agreements and to fund our working capital, capital expenditures and business development efforts will depend on our ability to generate cash from operating activities, which is subject to, among other things, our future operating performance, as well as to other factors, some of which may be beyond our control.
Our ability to service our long-term debt obligations, including our equipment notes, to remain in compliance with the various covenants contained in our debt agreements and to fund our working capital, capital expenditures and business development efforts will depend on our ability to generate cash from 58 operating activities, which is subject to, among other things, our future operating performance, as well as to other factors, some of which may be beyond our control.
Although we target maintenance staffing levels above our projected needs in order to account for attrition, which is widespread in the industry, from time to time we have experienced attrition with our maintenance technicians, who have the option to seek employment at mainline airlines, which generally offer higher salaries and more extensive benefit programs than regional airlines are financially able to offer.
Although we target maintenance staffing levels above our projected needs in order to account for attrition, which is widespread in the industry, from time to time we have experienced attrition with our maintenance technicians, who have the option to seek employment at mainline airlines, which generally offer higher salaries and more extensive 45 benefit programs than regional airlines are financially able to offer.
Amounts borrowed under this Amended Facility are secured by a collateral pool consisting of a combination of expendable parts, rotable parts and engines 65 and a pledge of the Company’s stock in certain aviation companies. United funded $25.5 million as of the closing date of Amendment No. 1, to be used for general corporate purposes.
Amounts borrowed under this Amended Facility are secured by a collateral pool consisting of a combination of expendable parts, rotable parts and engines and a pledge of the Company’s stock in certain aviation companies. United funded $25.5 million as of the closing date of Amendment No. 1, to be used for general corporate purposes.
We received $39.8 million of proceeds from borrowings under the Treasury Loan. We made 69 $114.9 million of principal repayments on long-term debt during the period. We incurred $2.4 million of costs related to debt financing and $0.5 million of payments of tax withholding for restricted stock units.
We received $39.8 million of proceeds from borrowings under the Treasury Loan. We made $114.9 million of principal repayments on long-term debt during the period. We incurred $2.4 million of costs related to debt financing and $0.5 million of payments of tax withholding for restricted stock units.
Pilot and Mechanic Attrition. In recent years, we have experienced significant volatility in our attrition as a result of pilot wage and bonus increases at other regional air carriers, the growth of cargo, low-cost and ultra-low-cost carriers, and the number of pilots at major airlines reaching the statutory mandatory retirement age of 65 years.
In recent years, we have experienced significant volatility in our attrition as a result of pilot wage and bonus increases at other regional air carriers, the growth of cargo, low-cost and ultra-low-cost carriers, and the number of pilots at major airlines reaching the statutory mandatory retirement age of 65 years.
These pay increases have positively impacted our ability to attract, hire, and retain pilots in fiscal 2023, and attrition levels have dropped to a pre-COVID level. In September 2022, we entered into a Letter of Agreement with AFA to extend the term of our agreement by two years.
These pay increases have positively impacted our ability to attract, hire, and retain pilots in fiscal years 2023 and 2024, and attrition levels have dropped to a pre-COVID level. In September 2022, we entered into a Letter of Agreement with AFA to extend the term of our agreement by two years.
The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA and FSA block hours, maintenance events, labor costs, and other relevant factors.
The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA block hours, maintenance events, labor costs, and other relevant factors.
The Company is eligible to receive incentive compensation upon the achievement of certain performance criteria defined in the agreements. At the end of each period during the term of an agreement, the Company calculates the incentives achieved during that period and recognizes revenue attributable to the agreement during the period accordingly, subject to the variable constraint guidance under ASC 606.
The Company is eligible to receive incentive compensation upon the achievement of certain performance criteria defined in the agreement. At the end of each period during the term of an agreement, the Company calculates the incentives achieved during that period and recognizes revenue attributable to the agreement during the period accordingly, subject to the variable constraint guidance under ASC 606.
See "Risk Factors" for a discussion of these factors and other risks. 51 Seasonality Our results of operations for any interim period are not necessarily indicative of those for the entire year since the airline industry is subject to seasonal fluctuations and general economic conditions.
See "Risk Factors" for a discussion of these factors and other risks. Seasonality Our results of operations for any interim period are not necessarily indicative of those for the entire year since the airline industry is subject to seasonal fluctuations and general economic conditions.
As a result of using the direct expense method for heavy maintenance on the majority of our fleets, the timing of maintenance expense reflected in the financial statements may vary significantly from period to period. Aircraft Rent. Aircraft rent expense includes costs related to leased engines and aircraft. 52 Aircraft and Traffic Servicing.
As a result of using the direct expense method for heavy maintenance on the majority of our fleets, the timing of maintenance expense reflected in the financial statements may vary significantly from period to period. Aircraft Rent. Aircraft rent expense includes costs related to leased engines and aircraft. Aircraft and Traffic Servicing.
" DOT " means the United States Department of Transportation. " FAA " means the United States Federal Aviation Administration. " FTE " means full-time equivalent employee. " Load factor " means the percentage of aircraft seat miles actually occupied on a flight (RPMs divided by ASMs). " NMB " means the National Mediation Board.
" DOT " means the United States Department of Transportation. " FAA " means the United States Federal Aviation Administration. " FTE " means full-time equivalent employee. " Load factor " means the percentage of aircraft seat miles actually occupied on a flight (RPMs divided by ASMs). 44 " NMB " means the National Mediation Board.
Our operations are somewhat favorably affected by increased utilization of our aircraft in the summer months and are unfavorably affected by increased fleet maintenance and by inclement weather during the winter months. Components of Our Results of Operations The following discussion summarizes the key components of our consolidated statements of operations and comprehensive (loss) income.
Our operations are somewhat favorably affected by increased utilization of our aircraft in the summer months and are unfavorably affected by increased fleet maintenance and by inclement weather during the winter months. Components of Our Results of Operations The following discussion summarizes the key components of our consolidated statements of operations and comprehensive loss.
Adjusted EBITDA. We define Adjusted EBITDA as net income or loss before interest, income taxes, depreciation and amortization, adjusted for gains and losses on investments, lease termination costs, loss on extinguishment of debt, and write-off of associated financing fees. Adjusted EBITDAR.
Adjusted EBITDA. We define Adjusted EBITDA as net income or loss before interest, income taxes, depreciation and amortization, adjusted for gains and losses on investments, lease termination costs, loss on extinguishment of debt, and write-off of associated financing fees. 55 Adjusted EBITDAR.
Amendment No. 1, among other things, extends the Maturity Date from the earlier to occur of November 30, 2028, or the date of the termination of the Amended and Restated United CPA; provides for a revolving loan of $10.0 million plus fees and expenses, which is due January 31, 2024, subject to certain mandatory prepayment requirements; provides for Revolving Commitments equal to $30.7 million plus the original principal amount of the $10 million revolving loan; amortization of the obligations outstanding under the existing CIT Agreement commencing quarterly until March 31, 2025; and a covenant capping Restricted Payments (as defined in the Amended Facility) at $5.0 million per fiscal year, a consolidated interest and rental coverage ratio of 1.00 to 1.00 covenant, and a Liquidity (as defined in the Amended Facility) requirement of not less than $15.0 million at the close of any business day.
Amendment No. 1, among other things, extends the Maturity Date from the earlier to occur of November 30, 2028, or the date of the termination of the Amended and Restated United CPA; provides for a revolving loan of $10.0 million plus fees and expenses, which was due January 31, 2024, subject to certain mandatory prepayment requirements; provides for Revolving Commitments equal to $30.7 million plus the original principal amount of the $10 million revolving loan; amortization of the obligations 60 outstanding under the existing CIT Agreement commencing quarterly until March 31, 2025; and a covenant capping Restricted Payments (as defined in the Amended Facility) at $5.0 million per fiscal year, a consolidated interest and rental coverage ratio of 1.00 to 1.00 covenant, and a Liquidity (as defined in the Amended Facility) requirement of not less than $15.0 million at the close of any business day.
The Treasury Loan requires the Company, under certain circumstances, including within one business days prior to the last business day of March and September of each year, beginning March 2021, to appraise the value of the Collateral and recalculate the collateral coverage ratio.
The Treasury Loan requires the Company, under certain circumstances, including within one business day prior to the last business day of March and September of each year, beginning March 2021, to appraise the value of the Collateral and recalculate the collateral coverage ratio.
The Company monitors for 72 any indicators of impairment of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate that the related carrying amount may be impaired.
The Company monitors for any indicators of impairment of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate that the related carrying amount may be impaired.
In addition to the state effective tax rate impact, other state impacts include changes in the valuation allowance against state net operating losses, expired state attributes, disallowed unrealized losses, and changes in state apportionment and statutory rates.
In addition to the state effective tax rate impact, other state impacts include changes in the valuation allowance against federal and state net operating losses, expired state attributes, disallowed unrealized losses, and changes in state apportionment and statutory rates.
In addition to the state effective tax rate impact, other state impacts include changes in the valuation allowance against state net operating losses, expired state attributes, disallowed unrealized losses, and changes in state apportionment and statutory rates.
In addition to the state effective tax rate impact, other state impacts include changes in the valuation allowance against federal and state net operating losses, expired state attributes, disallowed unrealized losses, and changes in state apportionment and statutory rates.
Therefore, the in-flight services and 71 maintenance services are inputs to that combined integrated flight service. Both services occur over the term of the agreement and the performance of maintenance services significantly affects the utility of the in-flight services.
Therefore, the in-flight services and maintenance services are inputs to that combined integrated flight service. Both services occur over the term of the agreement and the performance of maintenance services significantly affects the utility of the in-flight services.
Our ability to renew our existing agreements and earn additional flying opportunities in the future will depend, in significant part, on our ability to maintain a low-cost structure competitive with other regional air carriers. Maintenance Contracts, Costs and Timing. Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at their respective maintenance facilities.
Our ability to renew our existing agreement and earn additional flying opportunities in the future will depend, in significant part, on our ability to maintain a low-cost structure competitive with other regional air carriers. Maintenance Contracts, Costs and Timing. Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at their respective maintenance facilities.
On September 25, 2019, the Company extended the term on its $35.0 million working capital draw loan by three years, which now terminates in December 2022. Interest is assessed on drawn amounts at one-month LIBOR plus 3.75%. In June 2020, $23.0 million was drawn to cover operational needs.
On September 25, 2019, the Company extended the term on its $35.0 million working capital draw loan by three years, which now terminates in December 2022. Interest is assessed on drawn amounts at one-month SOFR plus 3.75%. In June 2020, $23.0 million was drawn to cover operational needs.
As such, no impairment charges were recorded to our fleet. Income Taxes Income taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
As such, no impairment expenses were recorded to our fleet. Income Taxes Income taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
The January 2024 Credit Agreement Amendments provide for the following: • The repayment in full of the Company's $10.5 million Effective Date Bridge Loan obligations, and the prepayment (and corresponding reduction) of approximately $2.1 million in Revolving Loans (as defined therein), with the proceeds from the sale, assignment, or transfer of the Company's vested investment in Heart Aerospace Incorporated. • As a result of the repayment of the Effective Date Bridge Loan and pay down of the Revolving Loans, the shares of capital stock of Archer Aviation, Inc. held by the Company are being released as collateral for the United credit facility, subject to certain conditions. • The waiver of certain financial covenant defaults with respect to the fiscal quarters ended June 30, 2023, September 30, 2023, and December 31, 2023 and the waiver of projected financial covenant defaults with respect to the fiscal quarter ending March 31, 2024. • An increase in the Applicable Margin (as defined in the United credit facility) during a specified period of time for borrowings under the Credit Agreement. • Loan prepayment requirements in connection with the sale of four specified aircraft engines and the addition of such engines as collateral for the United credit facility for a specified period of time.
The January 2024 Credit Agreement Amendments provide for the following: • The repayment in full of the Company's $10.5 million Effective Date Bridge Loan obligations, and the prepayment (and corresponding reduction) of approximately $2.1 million in Revolving Loans (as defined therein), with the proceeds from the sale, assignment, or transfer of the Company's vested investment in Heart Aerospace Incorporated. • As a result of the repayment of the Effective Date Bridge Loan and pay down of the Revolving Loans, the shares of capital stock of Archer Aviation, Inc. held by the Company were released as collateral for the United credit facility. • The waiver of certain financial covenant defaults with respect to the fiscal quarters ended June 30, 2023, September 30, 2023, and December 31, 2023 and the waiver of projected financial covenant defaults with respect to the fiscal quarter ending March 31, 2024. • An increase in the Applicable Margin (as defined in the United credit facility) during a specified period of time for borrowings under the Credit Agreement. • Loan prepayment requirements in connection with the sale of four specified aircraft engines and the addition of such engines as collateral for the United credit facility for a specified period of time.
If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its estimated fair value. We group assets at the CPA and FSA level (i.e., the lowest level for which there are identifiable cash flows).
If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its estimated fair value. We group assets at the CPA level (i.e., the lowest level for which there are identifiable cash flows).
Aircraft and traffic servicing expense includes expenses related to our CPAs and FSA, including aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by our major partners. General and Administrative.
Aircraft and traffic servicing expense includes expenses related to our CPA and FSA, including aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by our major partners. General and Administrative.
For a listing and discussion of our accounting policies, see Note 2 - "Summary of Significant Accounting Policies" in the notes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 74
For a listing and discussion of our accounting policies, see Note 2 - "Summary of Significant Accounting Policies" in the notes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 68
Our extension with AFA provided, among other things, an increase in compensation for our flight attendants.
Our extension with AFA provided, among other things, an 48 increase in compensation for our flight attendants.
To address such concerns, management developed and implemented several material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months.
To address such concerns, management developed and implemented certain material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months.
General and administrative expense includes insurance and taxes, the majority of which are pass-through costs, non-operational administrative employee wages and related expenses, building rents, real property leases, utilities, legal, audit and other administrative expenses. Depreciation and Amortization. Depreciation expense is a periodic non-cash charge primarily related to aircraft, engine, and equipment depreciation.
General and administrative expense includes insurance and taxes, the majority of which are pass-through costs, non-operational administrative employee wages and related expenses, building rents, real property leases, utilities, legal, audit and other administrative expenses. Depreciation. Depreciation expense is a periodic non-cash charge primarily related to aircraft, engine, aircraft improvement, and equipment depreciation. Impairment.
All principal amounts outstanding under the Treasury Loan are due and payable in a single installment on October 30, 2025 (the “Maturity Date”) and all accrued interest is payable in arrears on the first business day following the 14th day of each March, June, September and December (beginning with December 15, 2020), and on the Maturity Date.
All principal amounts outstanding under the Treasury Loan are due and payable in a single installment on October 30, 2025 (the "Maturity Date") and all accrued interest is payable in arrears on the first business day following the 14th day of March, June, September, and December (beginning with December 15, 2020), and on the Maturity Date.
Our capital expenditures, which includes purchases of spare engines, aircraft, inventory, tools, vehicles, equipment and miscellaneous projects for the year ended September 30, 2023 were approximately 7.4% of annual revenues. We expect to continue to incur capital expenditures to support our business activities. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.
Our capital expenditures, which includes purchases of spare engines, aircraft, inventory, tools, vehicles, equipment and miscellaneous projects for the year ended September 30, 2024 were approximately 4.3% of annual revenues. We expect to continue to incur capital expenditures to support our business activities. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.
Restricted Cash As of September 30, 2023, we had $3.1 million in restricted cash. We have an agreement with a financial institution for a $6.0 million letter of credit facility and to issue letters of credit for landing fees, worker's compensation insurance and other business needs.
Restricted Cash As of September 30, 2024, we had $3.0 million in restricted cash. We have an agreement with a financial institution for a $6.0 million letter of credit facility and to issue letters of credit for landing fees, worker's compensation insurance and other business needs.
See Note 13 - "Income Taxes" 73 in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. See also "Management's Discussion and Analysis—Results of Operations—Income Taxes" for additional information.
See Note 12 - "Income Taxes" in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. See also "Management's Discussion and Analysis—Results of Operations—Income Taxes" for additional information.
The income tax provision for our fiscal year ended September 30, 2021 resulted in an effective tax rate of 26.0%, which differed from the U.S. federal statutory rate of 21%, primarily due to the impact of state taxes and permanent differences between financial statement and taxable income.
The income tax provision for our fiscal year ended September 30, 2024 resulted in an effective tax rate of (0.6)%, which differed from the U.S. federal statutory rate of 21%, primarily due to the impact of state taxes and permanent differences between financial statement and taxable income.
Therefore, revenue is recognized when each flight is completed. In allocating the transaction price, variable payments (i.e., billings based on flights and block hours flown, pass-through costs, etc.) that relate specifically to the Company's efforts in performing flight services are recognized in the period in which the individual flight is completed.
In allocating the transaction price, variable payments (i.e., billings based on flights and block hours flown, pass-through costs, etc.) that relate specifically to the Company's efforts in performing flight services are recognized in the period in which the individual flight is completed.
The Company believes the plans and initiatives outlined above have effectively alleviated the substantial doubt and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements.
The Company believes the plans and initiatives outlined above have effectively alleviated the financial concerns and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements.
The Company's CPA and FSA are renewable periodically and contain provisions pursuant to which the parties could terminate their respective agreements, subject to certain conditions, as described in Note 1. The CPA and FSA also contain terms with respect to covered aircraft, services provided, and compensation as described in Note 1.
The Company's CPA is renewable periodically and contain provisions pursuant to which the parties could terminate their respective agreements, subject to certain conditions, as described in Note 1. The CPA also contains terms with respect to covered aircraft, services provided, and compensation as described in Note 1.
We currently operate in one service line providing scheduled flight services in accordance with our CPAs and FSA. While we operate under one CPA and one FSA, we do not manage our business based on any performance measure at the individual contract level.
We currently operate in one service line providing scheduled flight services in accordance with our CPA. While we operate under a CPA, we do not manage our business based on any performance measure at the individual contract level.
From a lessor perspective, our CPAs identify the "right of use" of a specific type and number of aircraft over a stated period-of-time. A portion of the compensation in the CPAs is designed to reimburse the Company for certain aircraft ownership costs of these aircraft.
From a lessor perspective, our CPA identifies the "right of use" of a specific type and number of aircraft over a stated period-of-time. A portion of the compensation in the CPA is designed to reimburse the Company for certain aircraft ownership costs of these aircraft.
If our plans are not realized, we will be required to explore additional opportunities to create liquidity by refinancing and deferring repayment of our principal maturity payments that are due within the next twelve months.
If our plans are not realized, we intend to explore additional opportunities to create liquidity by refinancing and deferring repayment of our principal maturity payments that are due within the next twelve months.
As of September 30, 2023, approximately 63.1% of our workforce was represented by the ALPA and AFA. In August 2022, we entered into a three-year Letter of Agreement with ALPA, which provided for increased overall hourly pay increases of nearly 118% for captains and 172% for new-hire first officers.
As of September 30, 2024, approximately 62.8% of our workforce was represented by the ALPA and AFA. In August 2022, we entered into a three-year Letter of Agreement with ALPA, which provided for increased overall hourly pay increases of nearly 118% for captains and 172% for new-hire first officers.
As discussed generally above, we implemented a new pay structure whereby as of September 15, 2022, we offer starting wages of $100 an hour for entry-level first officers, and $150 an hour for first-year captains while captains with 20 years of experience will be paid $215 an hour to remain competitive and attract and retain experienced, qualified pilots. 47 Economic Conditions, Challenges and Risks Market Volatility.
As discussed generally above, we implemented a new pay structure whereby as of September 15, 2022, we offer starting wages of $100 an hour for entry-level first officers, and $150 an hour for first-year captains while captains with 20 years of experience will be paid $215 an hour to remain competitive and attract and retain experienced, qualified pilots.
The Company also receives compensation under its agreements for heavy maintenance expenses at a fixed hourly rate or per aircraft rate for all aircraft in scheduled service other than the E-175 aircraft owned by United. The contracts also include incentives and penalties based on certain operational benchmarks.
The Company also receives compensation under its agreement for heavy maintenance expenses at a fixed hourly rate or per aircraft rate for all aircraft in scheduled service other than the E-175 aircraft owned by United. The contract also includes incentives and penalties based on certain operational benchmarks.
The Company's individual flights flown under the CPA and FSA are deemed to be distinct and the flight service promised in the CPA and FSA represents a series of services that is accounted for as a single performance obligation. This single performance obligation is satisfied over time as the flights are completed.
The Company's individual flights flown under the CPA are deemed to be distinct and the flight service promised in the CPA represents a series of services that is accounted for as a single performance obligation. This single performance obligation is satisfied over time as the flights are completed. Therefore, revenue is recognized when each flight is completed.
The deferred revenue balance as of September 30, 2023 of $21.0 million (current and non-current portion) represents our aggregate remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied (as flights are completed over the remaining contract term).
The deferred revenue balance as of September 30, 2024 of $9.6 million (current and non-current portion) represents our aggregate remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied (as flights are completed over the remaining contract term).
" Utilization " means the percentage derived from dividing (i) the number of block hours actually flown during a given month under a particular CPA by (ii) the maximum number of block hours that could be flown during such month under the particular CPA. 2023 Financial Highlights For our fiscal year ended September 30, 2023, we had total operating revenues of $498.1 million, a 6.2% decrease, compared to $531.0 million for our fiscal year ended September 30, 2022.
" Utilization " means the percentage derived from dividing (i) the number of block hours actually flown during a given month under a particular CPA by (ii) the maximum number of block hours that could be flown during such month under the particular CPA. 2024 Financial Highlights For our fiscal year ended September 30, 2024, we had total operating revenues of $476.4 million, a 4.3% decrease, compared to $498.1 million for our fiscal year ended September 30, 2023.
Pass-through and other revenue consists of passenger and hull insurance, aircraft property taxes, landing fees, and other aircraft and traffic servicing costs received pursuant to our agreements with our major partners, as well as certain maintenance costs related to United owned E-175 aircraft. Operating Expenses Our operating expenses consist of the following items: Flight Operations.
Pass-through and other revenue consists of passenger insurance, aircraft property taxes, landing fees, and other aircraft and traffic servicing costs received pursuant to our United CPA, as well as certain maintenance costs related to the United owned E-175 aircraft. 50 Operating Expenses Our operating expenses consist of the following items: Flight Operations.
Contract revenues we receive from our major partners are paid on a weekly basis and recognized over time consistent with the delivery of service under our agreements. Pass-Through and Other Revenue.
Contract revenues we receive from United are paid on a weekly basis and recognized over time consistent with the delivery of service under our CPA. Pass-Through and Other Revenue.
Furthermore, as of September 30, 2023, we also had $470.6 million in secured indebtedness incurred primarily in connection with our financing of aircraft. Our primary uses of liquidity are capital expenditures, operating lease payments, and debt repayments.
Furthermore, as of September 30, 2024, we also had $310.5 million in secured indebtedness incurred primarily in connection with our financing of aircraft. Our primary uses of liquidity are capital expenditures, operating lease payments, and debt repayments.
All revenue recognized under these contracts is presented as the gross amount billed to the major partners. Under the CPA and FSA, the Company has committed to perform various activities that can be generally classified into in-flight services and maintenance services.
All revenue recognized under the CPA is presented as the gross amount billed to United. Under the United CPA, the Company has committed to perform various activities that can be generally classified into in-flight services and maintenance services.
As of September 30, 2023, our principal sources of liquidity were cash and cash equivalents of $32.9 million. In addition, we had restricted cash of $3.1 million as of September 30, 2023. Restricted cash includes certificates of deposit that secure letters of credit issued for particular airport authorities as required in certain lease agreements.
As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents of $15.6 million. In addition, we had restricted cash of $3.0 million as of September 30, 2024. Restricted cash includes certificates of deposit that secure letters of credit issued for particular airport authorities as required in certain lease agreements.
We recorded an income tax benefit of $8.7 million and $52.0 million for the fiscal years ended September 30, 2023 and 2022, respectively.
We recorded an income tax provision of $0.5 million and an income tax benefit of $8.7 million for the fiscal years ended September 30, 2024 and 2023, respectively.
Results of Operations Comparison of our Fiscal Years Ended September 30, 2023 and 2022 We had an operating loss of $84.3 million in our year ended September 30, 2023, compared to an operating loss of $185.0 million in our year ended September 30, 2022.
Results of Operations Comparison of our Fiscal Years Ended September 30, 2024 and 2023 We had an operating loss of $65.8 million in our year ended September 30, 2024, compared to an operating loss of $84.3 million in our year ended September 30, 2023.
Our long-term agreements provide us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour and flight actually flown, and reimbursement of certain direct operating expenses in exchange for providing regional flying and cargo services on behalf of our major partners.
Our long-term agreement with United provides us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour and flight actually flown, and reimbursement of certain direct operating expenses in exchange for providing regional flying services on behalf of United.
The effect of economic cycles and trends may be somewhat mitigated by our reliance on CPAs. If, however, United experiences a prolonged decline in the number of passengers or is negatively affected by low ticket prices or high fuel prices, it may seek rate reductions in future CPAs, or materially reduce our scheduled flights in order to reduce its costs.
If, however, United experiences a prolonged decline in the number of passengers or is negatively affected by low ticket prices or high fuel prices, it may seek rate reductions in future CPAs, or materially reduce our scheduled flights in order to reduce its costs.
Income Taxes In our fiscal year ended September 30, 2023, our effective tax rate was 6.9% compared to 22.2% in our fiscal year ended September 30, 2022.
Income Taxes In our fiscal year ended September 30, 2024, our effective tax rate was (0.6)% compared to 6.9% in our fiscal year ended September 30, 2023.
The lease revenue associated with the Company's CPA is accounted for as an operating lease and is reflected as contract revenue on the Company's consolidated statements of operations and comprehensive (loss) income. The Company recognized $144.7 million, $158.4 million, and $170.2 million of lease revenue for the year ended September 30, 2023, 2022, and 2021, respectively.
The lease revenue associated with the Company's CPA is accounted for as an operating lease and is reflected as contract revenue on the Company's consolidated statements of operations and comprehensive loss. The Company recognized $123.0 million, $144.7 million, and $158.4 million of lease revenue for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.
Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our CPA and FSA with our major partners, along with the additional amounts received based on the number of flights and block hours flown, and rental revenue for aircraft leased to a third party.
Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our United CPA, along with the additional amounts received based on the number of flights and block hours flown, rental revenue for aircraft leased to a third party, and revenue received from pilots in the MPD program.
Our primary uses of cash used in operating activities are for maintenance costs, personnel costs, operating lease payments, and interest payments. During our fiscal year ended September 30, 2023, we had cash flow used in operating activities of $24.1 million.
Our primary uses of cash used in operating activities are for maintenance costs, personnel costs, operating lease payments, and interest payments. During our fiscal year ended September 30, 2024, we had cash flow provided by operating activities of $34.2 million.
Lease revenue for fixed monthly rent payments is recognized on a straight-line basis within contract revenue. Lease revenue for supplemental rent is deferred and recognized within contract revenue when it is probable that amounts received will not be reimbursed for future qualifying maintenance events over the lease term.
Lease revenue for supplemental rent is deferred and recognized within contract revenue when it is probable that amounts received will not be reimbursed for future qualifying maintenance events over the lease term.
Property and Equipment The Company’s property and equipment, which primarily consists of aircraft and related flight equipment, had a net book value of $698.0 million as of September 30, 2023.
Property and Equipment The Company’s property and equipment, which primarily consists of aircraft and related flight equipment, had a net book value of $426.4 million as of September 30, 2024.
The Company's revenues could be impacted by a number of factors, including amendment or termination of its CPA or FSA, contract modifications resulting from contract renegotiations, its ability to earn incentive payments contemplated under applicable agreements, and settlement of reimbursement disputes with the Company's major partners.
The CPA is amended from time to time to change, add, or delete terms of the agreements. The Company's revenues could be impacted by a number of factors, including amendment or termination of its CPA, contract modifications resulting from contract renegotiations, its ability to earn incentive payments contemplated under applicable agreements, and settlement of reimbursement disputes with United.
As of September 30, 2023, $59.8 million of parts inventory was consigned to us by AAR and Aviall under long-term contracts that is not reflected in our consolidated balance sheet. 50 The average age of our E-175, CRJ-900, Boeing 737, and CRJ-700 type aircraft is approximately 7.9, 18.1, 30.0, and 16.4 years, respectively.
As of September 30, 2024, $52.3 million of parts inventory was consigned to us by AAR and Aviall under long-term contracts that is not reflected in our consolidated balance sheet. The average age of our E-175, CRJ-900, and CRJ-700 type aircraft is approximately 8.7, 18.2, and 17.4 years, respectively.
Actual interest commitments will change based on the actual variable interest. Operating Leases We have significant long-term operating lease obligations primarily relating to our aircraft fleet, as well as leases of office and hangar space.
As of September 30, 2024, we had variable rate debt representing 69.0% of our total long-term debt. Actual interest commitments will change based on the actual variable interest. Operating Leases We have significant long-term operating lease obligations primarily relating to our aircraft fleet, as well as leases of office and hangar space.
Ground support including fueling and airport fees are paid directly by DHL. 45 Glossary of Airline Terms Set forth below is a glossary of industry terms used in this Annual Report on Form 10-K: " Available seat miles " or " ASMs " means the number of seats available for passengers multiplied by the number of miles the seats are flown.
Glossary of Airline Terms Set forth below is a glossary of industry terms used in this Annual Report on Form 10-K: " Available seat miles " or " ASMs " means the number of seats available for passengers multiplied by the number of miles the seats are flown.
In our year ended September 30, 2023, we had a net loss of $120.1 million compared to a net loss of $182.7 million in our year ended September 30, 2022.
In our year ended September 30, 2024, we had a net loss of $91.0 million compared to a net loss of $120.1 million in our year ended September 30, 2023.
Flight operations expense includes costs related to salaries, bonuses and benefits earned by our pilots, flight attendants, and dispatch personnel, as well as costs related to technical publications, lodging of our flight crews, and pilot training expenses. Fuel.
Flight operations expense includes costs related to salaries, bonuses and benefits earned by our pilots, flight attendants, and dispatch personnel, as well as costs related to technical publications, lodging of our flight crews, and pilot training expenses. Fuel. Fuel expense includes fuel and related fueling costs for flying we undertake outside of our CPA, including aircraft repositioning and maintenance.
When possible, we prefer to finance aircraft through debt rather than operating leases, due to lower operating costs, extended depreciation period, opportunity for aircraft equity, absence of lease return conditions and greater flexibility in renewing the aircraft under our CPA with our major partner after paying off the principal balance.
When possible, we prefer to finance aircraft through debt rather than operating leases, due to lower operating costs, extended depreciation period, opportunity for aircraft equity, absence of lease return conditions and greater flexibility in renewing the aircraft under our CPA with our major partner after paying off the principal balance. 49 Subsequent to the initial acquisition of an aircraft, we may also refinance the aircraft or convert one form of financing to another (e.g., replacing an aircraft lease with debt financing).
As a result of operating losses and the transition of operations from American to United, we evaluated our fleet for impairment as of September 30, 2023, and determined that future cash flows from the operation of our fleet through the respective remaining useful life exceeded the carrying value of the fleet.
As a result of operating losses and the removal of CRJ-900 aircraft from the United CPA, we evaluated our fleet for impairment as of September 30, 2024, and determined that future cash flows from the operation of our fleet through the remaining useful life exceeded the carrying value of the fleet.
As of September 30, 2022, we had aggregate federal and state net operating loss carryforwards of approximately $591.4 million and $247.0 million, which expire in 2027-2038 and 2022-2042, respectively, with approximately $1.1 million of state net operating loss carryforwards that expired in 2022.
As of September 30, 2024, we had aggregate federal and state net operating loss carryforwards of approximately $511.7 million and $226.9 million, which expire in 2027-2038 and 2024-2044, respectively, with approximately $4.0 million of state net operating loss carryforwards that expired in 2024.
Net loss for our fiscal year ended September 30, 2023 was $120.1 million, or $3.04 per diluted share, compared to net loss of $182.7 million, or $5.06 per diluted share, for our fiscal year ended September 30, 2022.
Net loss for our fiscal year ended September 30, 2024 was $91.0 million, or $2.21 per diluted share, compared to net loss of $120.1 million, or $3.04 per diluted share, for our fiscal year ended September 30, 2023.
The fuel and related cost for flying under our DHL FSA were directly paid and supplied by DHL. Accordingly, we do not record an expense or the related revenue for fuel supplied by American and United for flying under our CPAs or DHL under our FSA except fuel costs incurred for controllable ferry flights for American and United. Maintenance.
Accordingly, we do not record an expense or the related revenue for fuel supplied United for flying under our CPA or DHL under our FSA except fuel costs incurred for controllable ferry flights for United. Fuel expenses relating to MPD are paid by the Company. Maintenance.
We had net income of $16.6 million adjusted for the following significant non-cash items: depreciation and amortization of $82.8 million, stock-based compensation expense of $3.1 million, deferred income taxes of $5.7 million, losses on investments in equity securities of $6.8 million, amortization of deferred credits of $(2.4) million, amortization of debt discount and issuance costs and accretion of interest of $11.4 million, gain on extinguishment of debt of $(1.0) million, and loss on lease termination of $4.5 million.
We had net loss of $91.0 million adjusted for the following significant non-cash items: asset impairment of $73.7 million, depreciation of $40.0 million, stock-based compensation expense of $1.3 million, net unrealized losses on investments in equity securities of $6.1 million, net gains on investments of $(8.0) million, amortization of deferred credits of $(1.1) million, amortization of debt discount and issuance costs and accretion of interest of $8.3 million, gain on extinguishment of debt of $(3.0) million, gain on debt forgiveness of $(10.5) million, and $4.7 million in net other operating cash flow adjustments.
If impairment indicators exist with respect to any of our asset groups, we estimate future cash flows based on projections of capacity purchase or FSA, block hours, maintenance events, labor costs and other relevant factors.
If impairment indicators exist with respect to any of our asset groups, we estimate future cash flows based on projections of capacity purchase block hours, maintenance events, labor costs and other relevant factors. The Company’s assumptions about future conditions are important to its assessment of potential impairment of its long-lived assets.
These conditions and events raised substantial doubt about our ability to continue to fund our operations and meet our debt obligations over the next twelve months.
These conditions and events raised concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months from the filing of this Form 10-K.
The Aircraft Leases are reflected as finance lease obligations of $15.1 million on our consolidated balance sheet as of September 30, 2022. 64 In December 2022, the Company entered into an agreement with RASPRO Trust, reducing the buyout pricing on all 15 aircraft at lease termination by a total of $25 million.
In December 2022, the Company entered into an agreement with RASPRO Trust, reducing the buyout pricing on all 15 aircraft at lease termination by a total of $25 million. Under the terms of the new agreement, the Company reclassified these leases as finance leases.
(6) $7.2 million and $4.7 million gain on the sale of aircraft, engines, and other assets during the fiscal year ended September 30, 2023 and 2022, respectively. (7) $46.9 million and $58.6 million impairment loss related to certain of our aircraft which were classified as held for sale during the fiscal year ended September 30, 2023 and 2022, respectively.
(5) $0.7 million loss, $7.2 million gain, and $4.7 million gain on the sale of aircraft, engines, and other assets during the fiscal years ended September 30, 2024, 2023, and 2022, respectively. (6) $77.4 million, $46.9 million and $58.6 million impairment loss on held for sale accounting treatment during the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeUnlike other airlines, our CPA and FSA largely shelter us from volatility related to fuel prices, which are directly paid and supplied by our major partners. 75
Biggest changeUnlike other airlines, our CPA largely shelters us from volatility related to fuel prices, which are directly paid and supplied by United. 69
A hypothetical 100 basis point change in market interest rates would not impact interest expense or have a material effect on the fair value of our fixed rate debt instruments as of September 30, 2022. Foreign Currency Risk.
A hypothetical 100 basis point change in market interest rates would not impact interest expense or have a material effect on the fair value of our fixed rate debt instruments as of September 30, 2024. Foreign Currency Risk.
We are subject to market risk associated with changing interest rates on our variable rate long-term debt; the variable interest rates are based on LIBOR. The interest rates applicable to variable rate notes may rise and increase the amount of interest expense on our variable rate long-term debt.
We are subject to market risk associated with changing interest rates on our variable rate long-term debt; the variable interest rates are based on SOFR. The interest rates applicable to variable rate notes may rise and increase the amount of interest expense on our variable rate long-term debt.
We do not purchase or hold any derivative instruments to protect against the effects of changes in interest rates. As of September 30, 2023, we had $303.8 million of variable rate debt including current maturities.
We do not purchase or hold any derivative instruments to protect against the effects of changes in interest rates. As of September 30, 2024, we had $217.4 million of variable rate debt including current maturities.
A hypothetical 100 basis point change in market interest rates would have increased interest expense by approximately $1.1 million in our fiscal year ended September 30, 2022. As of September 30, 2023, we had $234.5 million of fixed rate debt, including current maturities.
A hypothetical 100 basis point change in market interest rates would have increased interest expense by approximately $2.2 million in our fiscal year ended September 30, 2024. As of September 30, 2024, we had $97.9 million of fixed rate debt, including current maturities.

Other RJET 10-K year-over-year comparisons