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What changed in REPUBLIC AIRWAYS HOLDINGS INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of REPUBLIC AIRWAYS HOLDINGS INC.'s 2022 and 2023 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 2023 report.

+490 added−532 removedSource: 10-K (2024-01-26) vs 10-K (2022-12-29)

Top changes in REPUBLIC AIRWAYS HOLDINGS INC.'s 2023 10-K

490 paragraphs added · 532 removed · 367 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

73 edited+48 added−62 removed42 unchanged
Biggest change(" Embraer "), as well as 737 cargo jets manufactured by Boeing. Mitsubishi Heavy Industries (“MHI”), who acquired the CRJ business from Bombardier, and Embraer are the primary manufacturers of regional jets operated in the United States, which allows us to enjoy operational, recruiting and cost advantages over other regional airlines that operate smaller regional aircraft from less prominent manufacturers.
Biggest changeMitsubishi 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.
Any similar outbreaks in the future may have a material impact on our financial condition, liquidity, and results of operations in future periods. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion regarding the impact of the COVID-19 pandemic on our financial results. Also, see “Part I. Item 1A.
Any similar outbreaks in the future may have a material impact on our financial condition, liquidity, and results of operations in future periods. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion regarding the impact of the COVID-19 pandemic on our financial results. Also, see “Part I. Item 1A.
In the United States, the FAA currently regulates the allocation of slots, slot exemptions, operating authorizations, or similar capacity allocation mechanisms at two (2) 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 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.
Airport Access Flights at three (3) major domestic airports are regulated through allocations of landing and takeoff authority (i.e., " slots " and " operating authorizations ") or similar regulatory mechanisms, which limit take-offs and landings at those airports. Each slot represents the authorization to land at or take off from the particular airport during a specified time period.
Airport Access Flights at three major domestic airports are regulated through allocations of landing and takeoff authority (i.e., "slots" and "operating authorizations") or similar regulatory mechanisms, which limit take-offs and landings at those airports. Each slot represents the authorization to land at or take off from the particular airport during a specified time period.
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.
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.
Capacity Purchase and Flight Services Agreements Our agreements consist of the following: ▪ Operation of CRJ-900 aircraft under our American CPA; ▪ Operation of E-175 aircraft 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.
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.
We maintain active, open lines of communication with the TSA at all of our locations to ensure proper standards for security of our personnel, equipment and facilities are exercised throughout our operations. 13 Facilities In addition to aircraft, we have office and maintenance facilities to support our operations.
We maintain active, open lines of communication with the TSA at all of our locations to ensure proper standards for security of our personnel, equipment and facilities are exercised throughout our operations. Facilities In addition to aircraft, we have office and maintenance facilities to support our operations.
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.
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.
Changes in U.S., Mexican, Canadian, Cuban, or Bahamian 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, 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.
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.
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.
This includes press releases and other information about financial performance, information on corporate governance and details related to our annual meeting of shareholders. The information contained on the websites referenced in this Annual Report on Form 10-K is not incorporated by reference into this filing. Further, our references to website URLs are intended to be inactive textual references only. 16
This includes press releases and other information about financial performance, information on corporate governance and details related to our annual meeting of shareholders. The information contained on the websites referenced in this Annual Report on Form 10-K is not incorporated by reference into this filing. Further, our references to website URLs are intended to be inactive textual references only. 19
In particular, there is still a degree of uncertainty about the future of scheduled commercial flight operations between the United States and Cuba as a result of changes in diplomatic relations between the two (2) governments, as well as travel and trade restrictions implemented by the U.S. government in 2017.
There is still a degree of uncertainty about the future of scheduled commercial flight operations between the United States and Cuba as a result of changes in diplomatic relations between the two governments, as well as travel and trade restrictions implemented by the U.S. government in 2017.
COVID-19 Pandemic Beginning in fiscal 2020, COVID-19 surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. The COVID-19 pandemic negatively affected our revenue and operating results during fiscal 2022, 2021, and 2020.
COVID-19 Pandemic Beginning in fiscal 2020, COVID-19 surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. The COVID-19 pandemic negatively affected our revenue and operating results during fiscal years 2023, 2022, 2021, and 2020.
Our competition includes, therefore, nearly every other domestic regional airline, including Air Wisconsin Airlines Corporation; 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") and Piedmont Airlines, Inc. ("Piedmont") (Envoy, PSA and Piedmont are owned by American); Horizon Air Industries, Inc.
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. Refer to “Impact of COVID-19 Pandemic” included in “Item 7.
The DOT frequently adopts new consumer protection regulations, such as rules to protect passengers addressing lengthy tarmac delays, chronically delayed flights, capacity purchase 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 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.
Our DHL FSA is subject to termination rights prior to its expiration in various circumstances including: ▪ If either party fails to comply with the obligations, warranties, representations, or undertakings under the DHL FSA, subject to certain notice and cure rights; ▪ If either party is declared bankrupt or insolvent; ▪ If we are unable to legally operate the aircraft under the DHL FSA for a specified number of days; ▪ At any time after the first anniversary of the commencement date of the first aircraft placed in service with 90 days’ written notice; ▪ If we fail to comply with performance standards for three (3) consecutive measurement periods; ▪ If we are subject to a labor incident that materially and adversely affects our ability to perform services under the DHL FSA for a specified number of days; ▪ Upon a change in control or ownership of the Company; and ▪ DHL may terminate the agreement for a specific aircraft if it is subject to a total loss and we do not provide alternate services at our expense, or if the aircraft becomes unavailable for more than 30 days due to unscheduled maintenance.
Our DHL FSA is subject to the following termination rights prior to its expiration: 12 ▪ If either party fails to comply with the obligations, warranties, representations, or undertakings under the DHL FSA, subject to certain notice and cure rights; ▪ If either party is declared bankrupt or insolvent; ▪ If we are unable to legally operate the aircraft under the DHL FSA for a specified number of days; ▪ At any time after the first anniversary of the commencement date of the first aircraft placed in service with 90 days' written notice. ▪ If we fail to comply with performance standards for three consecutive measurement periods. ▪ If we are subject to a labor incident that materially and adversely affects our ability to perform services under the DHL FSA for a specified number of days; ▪ Upon a change in control or ownership of the Company; and ▪ DHL may terminate the agreement for a specific aircraft if it is subject to a total loss and the Company does not provide alternate services at our expense, or if the aircraft becomes unavailable for more than 30 days due to unscheduled maintenance.
Risk Factors” for discussion of the risks and uncertainties associated with the COVID-19 pandemic. Our Business Strategy Our business strategy consists of the following elements: 5 Maintain Low-Cost Structure We have established ourselves as a low cost, efficient and reliable provider of regional airline and cargo flight services.
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.
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 capacity purchase agreements for passenger services with major airlines.
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.
Our international flights to Mexico are governed by a recently implemented liberalized bilateral air transport agreement which the DOT has determined has all of the attributes of an " open skies " agreement. Our flights to Canada, Cuba and the Bahamas 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 Canada, and Cuba are governed by bilateral air transport agreements between the United States and such countries.
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. 12 As of September 30, 2022 , approximately 66.9% 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, 2023, approximately 63.1% of our employees were represented by labor unions under collective-bargaining agreements, as set forth below.
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. Our major partners retain 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.
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 Office, Hangar Dallas, Texas Leased 30,440 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 Warehouse Tucson, Arizona Leased 10,590 Warehouse, Office Erlanger, Kentucky Leased 6,025 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 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.
The lower trip costs and operating efficiencies of regional aircraft, along with the competitive nature of the capacity purchase agreement 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.
(3) Two (2) of these Boeing 737 aircraft are subleased to us by DHL at nominal amounts and the third aircraft is leased to us by a third party.
(3) Three of these Boeing 737 aircraft are subleased to us by DHL at nominal amounts and the fourth aircraft is leased to us by a third party.
Our United CPA is subject to early termination prior to its expiration in various circumstances including : ▪ If certain operational performance factors fall below a specified percentage for a specified time, subject to notice under certain circumstances; ▪ If we fail to perform the material covenants, agreements, terms or conditions of our United CPA or similar agreements with United, subject to 30 days' notice and cure rights; ▪ If either United or we become insolvent, file bankruptcy, or fail to pay debts when due, the non-defaulting party may terminate the CPA; or ▪ If we merge with, or if control of us is acquired by another air carrier or a corporation directly or indirectly owning or controlling another air carrier; ▪ United, subject to certain conditions, including the payment of certain costs tied to aircraft type, may terminate the CPA in its discretion, or remove E-175 aircraft from service, by giving us notice of 90 days or more; ▪ If United elects to terminate our United CPA in its entirety or permanently remove certain aircraft from service, we are permitted to return any of the affected E-175 aircraft leased from United at no cost to us; and ▪ Commencing five (5) years after the actual in-serve date, United has the right to remove the E-175 aircraft from service by giving us notice of 90 days or more, subject to certain conditions, including the payment of certain wind-down expenses plus, if removed prior to the 10-year anniversary of the in-service date, certain accelerated margin payments..
Our United CPA is subject to early termination prior to its expiration in various circumstances including: ▪ If certain operational performance factors fall below a specified percentage for a specified time, subject to notice under certain circumstances; ▪ If we fail to perform the material covenants, agreements, terms or conditions of our United CPA or similar agreements with United, subject to 30 days' notice and cure rights; ▪ If either United or we become insolvent, file bankruptcy, or fail to pay debts when due, the non-defaulting party may terminate the agreement; ▪ If we merge with, or if control of us is acquired by another air carrier or a corporation directly or indirectly owning or controlling another air carrier; ▪ United, subject to certain conditions, including the payment of certain costs tied to aircraft type, may terminate the agreement in its discretion, or remove E-175 aircraft from service, by giving us notice of 90 days or more; and ▪ If United elects to terminate our United CPA in its entirety or permanently remove aircraft from service, we are permitted to return any of the affected E-175 aircraft leased from United at no cost to us.
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 capacity purchase and flight services agreements.
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.
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.
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.
Employee Groups Number of Employees Representative Labor Agreement Amendable As of Pilots 851 Air Line Pilots Association 10/17/2022 Flight Attendants 791 Association of Flight Attendants 8/30/2022 Dispatchers 35 Maintenance Department 478 Administrative 299 The Railway Labor Act (" RLA ") governs our relations with labor organizations.
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.
Should the turnover of employees, particularly pilots and maintenance technicians, 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 capacity purchase agreements or flight services agreement.
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.
Human Capital Management As of September 30, 2022, we employed approximately 2,454 employees, consisting of 851 pilots or pilot recruits, 791 flight attendants, 35 flight dispatchers, 478 maintenance employees and 299 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, 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.
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.
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.
ITEM 1. BUSINESS General Mesa Air Group, Inc. is the holding company of Mesa Airlines, Inc., a regional air carrier providing scheduled passenger service to 107 cities in 39 states, the District of Columbia, the Bahamas, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport.
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.
For our fiscal year ended September 30, 2022, approximately 45% of our revenues were earned under the American CPA, approximately 48% were earned under the United CPA, approximately 5% were earned from leases of aircraft to a third party and approximately 2% were earned under the DHL FSA.
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.
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 (1) airline provides aircraft and crew to another airline) between carriers and regulates other economic matters such as slot transactions.
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.
In providing regional flying under our capacity purchase agreements, and cargo flying under our flight services agreement, we use the logos, service marks and aircraft paint schemes of our major partners.
In providing regional flying under our CPA, and cargo flying under our FSA, we use the logos, service marks and aircraft paint schemes of our major partners.
Impact of Pilot Shortage and Attrition During our fiscal year ended September 30, 2022, the severity of the pilot shortage and attrition and increasing costs associated with pilot wages adversely impacted our financial results, cash flows, financial position, and other key financial ratios.
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.
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.
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 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 (4) to six (6) years after the date of manufacture and introduction into our fleet, with subsequent engine maintenance every four (4) to six (6) years thereafter.
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.
The E-175 aircraft owned by United and leased to us have terms expiring between 2024 and 2028, and 18 E-175 aircraft owned by us have terms expiring in 2028. The E-175LL aircraft have terms expiring 2032 and 2033.
Under the United CPA, United owns 42 of our 60 E-175 aircraft. 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.
As of September 30, 2022, we operated under the CPAs and FSA, or maintained as operational spares, a fleet of 158 aircraft with approximately 306 daily departures. We also lease two (2) aircraft to a third party as of September 30, 2022.
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.
DHL reimburses us on a pass-through basis for all costs related to heavy maintenance including C-checks, off-wing engine 10 maintenance and overhauls including Life Limited Parts ( LLPs ) , landing gear overhauls and LLPs, thrust reverser overhauls, and APU overhauls and LLPs.
Under our DHL FSA, DHL leases two Boeing 737-400F aircraft and one 737-800F and subleases them to us at nominal amounts. DHL reimburses us on a pass-through basis for all costs related to heavy maintenance including C-checks, off-wing engine maintenance and overhauls including life limited parts (“LLPs”), landing gear overhauls and LLPs, thrust reverser overhauls, and APU overhauls and LLPs.
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.
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.
As a result of the pilot shortage and attrition, the Company has increased overall hourly pay by nearly 118% for captains and 172% for new-hire first officers.
A primary source of pilots for the major U.S. passenger and cargo carriers 5 are the U.S. regional airlines. As a result of the pilot shortage and attrition, the Company has increased overall hourly pay of nearly 118% for captains and 172% for new-hire first officers.
We benefit from our capacity purchase agreements, flight services agreement, and revenue guarantees 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 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.
Attractive Work Opportunities We believe our employees have been, and will continue to be, a key to our success. Our ability to attract, recruit, and retain pilots has supported our industry-leading fleet growth.
Attractive Work Opportunities We believe our employees have been, and will continue to be, a key to our success.
Previously, first officers were required to have only a commercial pilot certificate, which required 250 hours of flight time. The rule also mandates stricter rules to minimize pilot fatigue.
The FAA Qualification Standards, which became effective in August 2013, require first officers to hold an ATP certificate, requiring 1,500 hours total flight time as a pilot. Previously, first officers were required to have only a commercial pilot certificate, which required 250 hours of flight time. The rule also mandates stricter rules to minimize pilot fatigue.
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 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.
In addition, we are subject to certain legal actions which we consider routine to our business activities. As of September 30, 2022, 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.
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.
Additionally, the Company classified 11 CRJ-900 aircraft as assets held for sale during the year ended September 30, 2022. 6 The following table lists the aircraft we own and lease as of September 30, 2022 and the passenger capacity of such aircraft: Type of Aircraft Owned Leased Total Passenger Capacity E-175 Regional Jet 18 62 ( 2 ) 80 70-76 CRJ-900 Regional Jet 49 15 64 76-79 CRJ-700 Regional Jet 8 2 10 50-70 CRJ-200 Regional Jet 1 — 1 50 Boeing 737 Cargo Jet — 3 ( 3 ) 3 Total 76 82 158 (2) All 62 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, 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 FAA requires each commercial airline to obtain and hold an FAA air carrier certificate. We currently hold an FAR-121 air carrier certificate. In July 2013, as directed by the U.S.
The FAA requires each commercial airline to obtain and hold an FAA air carrier certificate. We currently hold an FAR-121 air carrier certificate. In July 2013, as directed by the U.S. Congress, the FAA issued more stringent pilot qualification and crew member flight training standards, which increased the required training time for new airline pilots (the "FAA Qualification Standards").
Major airframe maintenance checks consist of a series of more complex tasks that can take from one (1) to four (4) 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 (2) months.
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.
DHL has the option to extend the agreement with respect to one (1) or more aircraft for a period of one (1) year with 90 days’ advance written notice.
The DHL FSA expires five years from the commencement date of the first aircraft placed into service, which was in October 2020. DHL has the option to extend the agreement with respect to one or more aircraft for a period of one year with 90 days’ advance written notice.
Aircraft maintenance and repair consists of routine and non-routine maintenance, and work performed is divided into three (3) 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.
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.
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 to backfill the thousands of pilots whom they offered early retirements to at the beginning of the pandemic.
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.
(owned by Alaska Air Group, Inc.) (" Horizon "); SkyWest Inc., parent of SkyWest Airlines, Inc.; Republic Airways Holdings Inc.; and Trans States Airlines, Inc. 11 Major airlines typically offer capacity purchase arrangements 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.
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.
During August of 2022, we committed to a formal plan to sell 18 of our CRJ-700 aircraft and subsequently terminated the leases on such aircraft.
We ceased operating our CRJ-700 fleet in February 2021 in connection with the transfer of those aircraft into a lease agreement. During August of 2022, we committed to a formal plan to sell 18 of our CRJ-700 aircraft and terminated the leases on the 18 CRJ-700 aircraft, which have all subsequently been sold.
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.
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. Aircraft Fuel Our CPA and FSA provide that our major partners source, procure, and directly pay third-party vendors for all fuel used in the performance of those agreements.
DHL Flight Services Agreement On December 20, 2019, we entered into our DHL FSA. As of September 30, 2022, we operate three (3) Boeing 737-400F aircraft to provide cargo air transportation services to DHL. In exchange for providing such services, we receive a fee per block hour with a minimum block hour guarantee.
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.
The following table summarizes our available seat miles (" ASMs ") flown and contract revenue recognized under our capacity purchase agreements for our fiscal years ended September 30, 2022 and 2021, respectively: Year Ended September 30, 2022 Year Ended September 30, 2021 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 2,668,953 $ 234,184 ¢ 8.77 3,271,841 $ 221,986 ¢ 6.78 United 4,005,795 $ 207,003 ¢ 5.17 4,579,957 $ 198,212 ¢ 4.33 Other — $ 37,295 — — $ 14,320 — Total 6,674,748 $ 478,482 ¢ 7.17 7,851,798 $ 434,518 ¢ 5.53 7 American Capacity Purchase Agreement As of September 30, 2022, we operated 42 CRJ-900 aircraft for American under our 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, 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").
We are largely sheltered from the economic impact changes to existing " open skies " agreements or volatility in U.S., Mexican, Canadian, Cuban, or Bahamian aviation polices because our major partners control route selection and scheduling under our capacity purchase agreements. 14 The FAA is responsible for regulating and overseeing matters relating to the safety of air carrier flight operations, including the control of navigable air space, the qualification of flight personnel, flight training practices, compliance with FAA airline operating certificate requirements, aircraft certification and maintenance requirements and other matters affecting air safety.
The FAA is responsible for regulating and overseeing matters relating to the safety of air carrier flight operations, including the control of navigable air space, the qualification of flight personnel, flight training practices, compliance with FAA airline operating certificate requirements, aircraft certification and maintenance requirements and other matters affecting air safety.
Our agreements provide us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour (measured from takeoff to landing, including taxi time) and flight actually flown, and reimbursement of certain direct operating expenses in exchange for providing regional flying on behalf of our major partners.
The United CPA involves a revenue-guarantee arrangement whereby United pays fixed-fees for each aircraft under contract, departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time), and reimbursement of certain direct operating expenses in exchange for providing flight services.
Certain items such as fuel, de-icing fluids, landing fees, aircraft ground handling fees, en -route navigation fees and custom fees are paid directly to suppliers by DHL or otherwise reimbursed if incurred by us . The DHL FSA expires five (5) years from the commencement date of the first aircraft placed into service, which was in October 2020.
Certain items such as fuel, de-icing fluids, landing fees, aircraft ground handling fees, en-route navigation fees, and custom fees are paid directly to suppliers by DHL or otherwise reimbursed if incurred by us. A third Boeing 737-400F aircraft is leased to us under an operating lease by a third party.
The effect of economic downturns is somewhat mitigated by our reliance on capacity purchase agreements with revenue-guarantee provisions, but the renewal and continued profitability of these partnerships with our major partners is not guaranteed.
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.
We cannot predict what laws, regulations, interpretations, and policies might be considered in the future, nor can we judge what impact, if any, the implementation of any of these proposals or changes might have on our business. 15 Legal Proceedings The Company is subject to two (2) putative class action lawsuits alleging federal securities law violations in connection with its initial public offering in August 2018 (“ IPO ”) — one (1) in the Superior Court of the State of Arizona and one (1) in U.S.
We cannot predict what laws, regulations, interpretations, and policies might be considered in the future, nor can we judge what impact, if any, the implementation of any of these proposals or changes might have on our business. Legal Proceedings We are subject to certain legal actions which we consider routine to our business activities.
We operate 42 CRJ-900 aircraft under our capacity purchase agreement and as spares with American (the " American CPA "); 20 E-175LL, and 60 E-175 aircraft under our capacity purchase agreement with United (the " United CPA "), and three (3) Boeing 737-400F aircraft under our flight services agreement with DHL (the “ DHL FSA ”).
We operate 54 E-175 and 26 CRJ-900 aircraft under our United CPA, and four Boeing 737-400F aircraft under our DHL FSA.
We are also eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance. Ground support including fueling and airport fees are paid directly by DHL. Under our DHL FSA, DHL leases two (2) Boeing 737-400F aircraft and subleases them to us at nominal amounts.
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.
(" 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. 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.
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.
Aircraft Fuel Our capacity purchase and flight services agreements provide that our major partners source, procure, and directly pay third-party vendors for all fuel used in the performance of those agreements. Accordingly, we do not recognize fuel expenses or revenues for flying under our capacity purchase and flight services agreements 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 FSA and we face very limited exposure to fuel price fluctuations.
All of our flights are operated as either American Eagle, United Express, or DHL Express flights pursuant to the terms of capacity purchase agreements (“ CPAs ”) entered into with American Airlines, Inc. (" American ") and United Airlines, Inc.
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.
Pursuant to the United CPA, we agreed to lease our CRJ-700 aircraft to another United Express service provider for a term of nine (9) years. We ceased operating our CRJ-700 fleet in February 2021 in connection with the transfer of those aircraft into a lease agreement.
See also Note 18 for a discussion regarding the amendment to the Company's bylaws as it relates to the Amended and Restated United CPA. Pursuant to the United CPA, we agreed to lease our CRJ-700 aircraft to another United Express service provider for a term of nine years.
All our operating revenue in our fiscal year 2022 and 2021 was derived from operations associated with our American and United CPAs, DHL FSA, or from leases of aircraft to a third party.
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.
In exchange for providing flight services under our American CPA, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown during each month.
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.
Removed
(" United "), and pursuant to the terms of a Flight Services Agreement (“ FSA ”) with DHL Network Operations (USA), Inc. (“ DHL ”) (each, our " major partner "). We have a significant presence in several of our major partners' key domestic hubs and focus cities, including Dallas, Houston, Phoenix, and Washington-Dulles.
Added
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.
Removed
Our agreements also shelter us, to an extent, from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of passengers.
Added
("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.
Removed
In providing regional flying and cargo flight services under our agreements, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of our major partners. Our major partners control route selection, pricing, seat inventories, marketing, and scheduling, and provide us with ground support services, airport landing slots and gate access.
Added
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.
Removed
These airlines now seek to increase their capacity to meet the growing demand for air travel as the global pandemic has moderated. A primary source of pilots for the major US passenger and cargo carriers are the US regional airlines.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

104 edited+24 added−22 removed125 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 our major partners experience events that negatively impact their 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 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. ▪ Increases in our labor costs may adversely affect our business, results of operations, and financial condition. ▪ Our major partners may expand their 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 our major partners' flight systems. ▪ 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 become involved in litigation that may materially adversely affect us. ▪ Maintenance costs will likely increase as the age of our jet fleet increases. ▪ 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. ▪ 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. 17 ▪ 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. ▪ 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. ▪ As an emerging growth company, reduced disclosure and regulatory requirements applicable to us may make our stock less attractive to investors. ▪ 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 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.
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 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. 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 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.
Our inability to successfully implement our growth strategies could have a material adverse effect on our business, financial condition, and results of operations and any assumptions underlying estimates of expected cost savings or expected revenues may be inaccurate. 26 We may not be able to make opportunistic acquisitions should we elect to do so as part of our growth strategy.
Our inability to successfully implement our growth strategies could have a material adverse effect on our business, financial condition, and results of operations and any assumptions underlying estimates of expected cost savings or expected revenues may be inaccurate. We may not be able to make opportunistic acquisitions should we elect to do so as part of our growth strategy.
This process continues until either the parties 23 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 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.
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 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, 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.
Treasury pursuant to the terms of the Loan and Guarantee Agreement dated October 30, 2020. The warrants have a term of five (5) 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 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.
There can be no assurance that we will be able to adequately address the pilot attrition issues or that our major partners will increase the utilization of our aircraft to historical levels in future periods if we do experience an improvement in pilot attrition.
However, there can be no assurance that we will be able to adequately address the pilot attrition issues or that our major partners will increase the utilization of our aircraft to historical levels in future periods if we do experience an improvement in pilot attrition.
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. 32
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.
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 2022 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 2023 created significant backlogs in training, further exacerbating an already challenging environment.
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.
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.
Acceleration of such indebtedness would also trigger cross-default clauses under our other indebtedness. It could also result in the termination of all commitments to extend further credit under the CIT Revolving Credit Facility. We currently do not have sufficient liquidity to repay all of our outstanding debt in full if such debt were accelerated.
Acceleration of such indebtedness would also trigger cross-default clauses under our other indebtedness. It could also result in the termination of all commitments to extend further credit under the United Revolving Credit Facility. We currently do not have sufficient liquidity to repay all of our outstanding debt in full if such debt were accelerated.
We are currently in compliance with all applicable foreign ownership restrictions. 30 Our corporate charter limits certain transfers of our stock, which limits are intended to preserve our ability to use our net operating loss carryforwards, and these limits could have an effect on the market price and liquidity of our common stock.
Treasury. We are currently in compliance with all applicable foreign ownership restrictions. Our corporate charter limits certain transfers of our stock, which limits are intended to preserve our ability to use our net operating loss carryforwards, and these limits could have an effect on the market price and liquidity of our common stock.
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, 2022 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, 2023 and each subsequent year.
W e are required to comply with certain ongoing financial and other covenants under certain credit facilities and leases, and if we fail to meet those covenants or otherwise suffer a default thereunder, our lenders and lessors may accelerate the payment of such obligations.
We are required to comply with certain ongoing financial and other covenants under certain credit facilities and leases, and if we fail to meet those covenants or otherwise suffer a default thereunder, our lenders and lessors may accelerate the payment of such obligations.
Any general reduction in airline passenger traffic could have a material adverse effect on our business, results of operations, and financial condition. 28 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. 34 Terrorist activities or warnings have dramatically impacted the airline industry and will likely continue to do so.
There has been significant press coverage during fiscal 2022 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 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.
Department of the Treasury, 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.
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.
Government Regulation” dramatically reduced the supply of qualified pilot candidates and negatively impacted our ability to hire pilots at a rate sufficient to support required utilization levels under our CPAs, resulting in certain cases issuing credits to our major partners, temporarily removing aircraft from service under a CPA, or performance penalties.
Government Regulation” dramatically reduced the supply of qualified pilot candidates and negatively impacted our ability to hire pilots at a rate sufficient to support required utilization levels under our CPAs, resulting in certain cases issuing credits to United, temporarily removing aircraft from service under a CPA, or performance penalties.
We face numerous challenges in implementing our growth strategy, including our ability to: ▪ provide regional flying to other airlines with hub cities that overlap with our existing airline partners; and ▪ enter into relationships with third parties to carry their cargo on terms that are acceptable to us.
We face numerous challenges in implementing this growth strategy in the future, including our ability to: ▪ provide regional flying to other airlines with hub cities that overlap with our existing airline partners; and ▪ enter into relationships with third parties to carry their cargo on terms that are acceptable to us.
Under our (i) credit and guaranty agreement with CIT (" CIT 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, (ii) credit agreement with EDC, we are required to comply with a minimum fixed charge coverage ratio at the end of each fiscal quarter during the term of such credit facility, (iii) aircraft lease facility (" RASPRO Lease Facility ") with RASPRO we are required to comply with minimum current ratio and debt ratio covenants and a minimum available cash covenant 20 until all amounts outstanding thereunder have been paid i n full, and (iv) loan and guarantee agreement with the U.S.
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, (ii) credit agreement with EDC, we are required to comply with a minimum fixed charge coverage ratio at the end of each fiscal quarter during the term of such credit facility, (iii) aircraft lease facility ("RASPRO Lease Facility") with RASPRO we are required to comply with minimum current ratio and debt ratio covenants and a minimum available cash covenant until all amounts outstanding thereunder have been paid in full, and (iv) loan and guarantee agreement with the U.S.
The value of our common stock may be materially adversely affected by additional issuances of common stock underlying our outstanding warrants. As of September 30, 2022, 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.
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.
Any additional consolidation or significant alliance activity within the airline industry could further limit the number of potential partners with whom we could enter into capacity purchase agreements. We are subject to significant governmental regulation. All interstate air carriers, including us, are subject to regulation by the DOT, the FAA and other governmental agencies, as described in “Item 1.
Any additional consolidation or significant alliance activity within the airline industry could further limit the number of potential partners with whom we could enter into CPAs. We are subject to significant governmental regulation. All interstate air carriers, including us, are subject to regulation by the DOT, the FAA and other governmental agencies, as described in “Item 1.
A termination or expiration of either of these agreements would likely have a material adverse effect on our financial condition, cash flows, ability to satisfy debt and lease obligations, operating revenues, and net income unless we are able to enter into satisfactory substitute arrangements for the utilization of the affected aircraft by other airline partners, or, alternatively, obtain the airport facilities, gates, ticketing and ground services and make the other arrangements necessary to fly as an independent airline.
A termination or expiration of this agreement would have a material adverse effect on our financial condition, cash flows, ability to satisfy debt and lease obligations, operating revenues, and net income unless we are able to enter into satisfactory substitute arrangements for the utilization of the affected aircraft by other airline partners, or, alternatively, obtain the airport facilities, gates, ticketing and ground services and make the other arrangements necessary to fly as an independent airline.
We depend on our major partners electing to contract with us instead of operating their own regional jets or operating their own " captive " regional airlines through wholly owned subsidiaries. Currently, the captive regional airlines include Endeavor (owned by Delta), Envoy (owned by American), PSA (owned by American), Piedmont (owned by American), and Horizon (owned by Alaska).
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. Currently, the captive regional airlines include Endeavor (owned by Delta), Envoy (owned by American), PSA (owned by American), Piedmont (owned by American), and Horizon (owned by Alaska).
If the high levels of pilot attrition persist and we are unable to attract, hire and retain pilots at a rate sufficient to support required utilization levels under our CPAs, we may be required to issue credits or provide offsets to our major partners, as we have done in the past, and to reduced flight schedules with our major partners, which has resulted in and may continue to result in monetary performance penalties under our CPAs, as well as give rise to the ability of our major partners in certain circumstances to elect to remove aircraft from the scope of our CPAs.
If the high levels of pilot attrition return and we are unable to attract, hire and retain pilots at a rate sufficient to support required utilization levels under our CPA, we may be required to issue credits or provide offsets to United, as we have done in the past, and to reduced flight schedules with United, which has resulted in and may continue to result in monetary performance penalties under our CPA, as well as give rise to the ability of United in certain circumstances to elect to remove aircraft from the scope of our CPA.
We have no guarantee that in the future our major partners will choose to enter into contracts with us, or renew their existing agreements with us, instead of operating their own regional jets, allocating flying to their captive regional airlines, or entering into relationships with competing regional airlines.
We have no guarantee that in the future United will choose to enter into contracts with us, or renew their existing agreements with us, instead of operating their own regional jets, allocating flying to their captive regional airlines, or entering into relationships with competing regional airlines.
The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including: (i) announcements concerning our major partners, competitors, the airline industry, or the economy in general; (ii) strategic actions by us, our major partners, or our competitors, such as acquisitions or restructurings; (iii) media reports and publications about the safety of our aircraft or the types of aircraft we operate; (iv) new regulatory pronouncements and changes in regulatory guidelines; (v) announcements concerning the availability of the types of aircraft we use; (vi) significant volatility in the market price and trading volume of companies in the airline industry; (vii) changes in financial estimates or recommendations by securities analysts or failure to meet analysts' performance expectations; (viii) sales of our common stock or other actions by insiders or investors with significant shareholdings, including sales by our principal shareholders; and (ix) general market, political and other economic conditions.
The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including: (i) announcements concerning our major partners, competitors, the airline industry, or the economy in general; (ii) strategic actions by us, our major partners, or our competitors, such as acquisitions or restructurings; (iii) media reports and publications about the safety of our aircraft or the types of aircraft we operate; (iv) new regulatory pronouncements and changes in regulatory guidelines; (v) announcements concerning the availability of the types of aircraft we use; (vi) significant volatility in the market price and trading volume of companies in the airline industry; (vii) changes in financial estimates or recommendations by securities analysts or failure to meet analysts' performance expectations; (viii) sales of our common stock or other actions by insiders or investors with significant shareholdings, including sales by our principal shareholders; and (ix) general market, political and other economic conditions; and (x) in response to the risk factors described in this Annual Report on Form 10-K.
We may be limited from expanding our flying within our major partners' flight systems and there are constraints on our ability to provide services to airlines other than American and United.
We may be limited from expanding our flying within United flight systems and there are constraints on our ability to provide services to airlines other than United.
More recently, our operations have continued to be negatively impacted by the pilot shortages that have plagued the airline industry as whole, and by the associated pilot attrition that we believe has disproportionately impacted regional airlines, including us.
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.
Except as contemplated by our existing agreements, we cannot be sure that our major partners will contract with us to fly any additional aircraft. We may not have additional growth opportunities or may agree to modifications to our agreements that reduce certain benefits to us in order to obtain additional aircraft, or for other reasons.
Except as contemplated by our existing agreement, we cannot be sure that United will contract with us to fly any additional aircraft. We may not have additional growth opportunities or may agree to modifications to our agreement that reduce certain benefits to us in order to obtain additional aircraft, or for other reasons.
We may not be able to enter into substitute capacity purchase arrangements, 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.
We may become involved in litigation that may materially adversely affect us. From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including employment, commercial, product liability, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings.
From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including employment, commercial, product liability, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings.
We may not be successful in retaining key personnel or in attracting other highly qualified personnel. Among other things, the CARES Act imposes significant restrictions on executive compensation, which will remain in place through the date that is one (1) year after the amounts outstanding under our Loan and Guarantee Agreement with the U.S.
We may not be successful in retaining key personnel or in attracting other highly qualified personnel. Among other things, the CARES Act imposes significant restrictions on executive compensation, which will remain in place through the date that is one year after the amounts outstanding under our Loan and Guarantee Agreement with the U.S. Department of the Treasury are fully repaid.
To the extent that we experience disagreements regarding the interpretation of our capacity purchase or other agreements, 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 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.
Department of the Treasury are fully repaid. Such restrictions, over time, will likely result in lower executive compensation in the airline industry than is prevailing in other industries which may present retention challenges in the case of executives presented with alternative, non-airline opportunities.
Such restrictions, over time, will likely result in lower executive compensation in the airline industry than is prevailing in other industries which may present retention challenges in the case of executives presented with alternative, non-airline opportunities.
If we continue to experience pilot attrition above historic levels, we may experience further reductions in the block hours flown under our CPAs by our major partners, and we may not be able to maintain operating efficiencies previously obtained, each of which would negatively impact our operating results and financial condition.
If we continue to experience pilot attrition above historic levels, we may experience further reductions in the block hours flown under our United CPA, and we may not be able to maintain operating efficiencies previously obtained, each of which would negatively impact our operating results and financial condition.
During our fiscal years ended September 30, 2022, 2021, and 2020, our principal debt service payments totaled $114.9 million, $271.0 million, and $138.3 million, respectively. 19 We also have significant long-term lease obligations, primarily relating to our aircraft fleet, office space, and other facilities.
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.
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.
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.
No assurance can be given that the measures we are currently taking or may take in the future will enable us to attract, hire and train pilots at a rate necessary to support our operations.
No assurance can be given that the measures we have taken or may take in the future will enable us to attract, hire and train pilots at a rate necessary to support our operations.
Continued challenges with hiring, training, and retaining replacement pilots may lead to reduced utilization levels of our aircraft and additional penalties under our capacity purchase agreements and our operations and financial results could be materially and adversely impacted. Additionally, our major partners may change routes and frequencies of flights, which can negatively impact our operating efficiencies.
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.
During our fiscal year ended September 30, 2022, approximately $51.4 million, or 8.5%, 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, 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.
Additional growth opportunities within our major partners' flight systems are limited by various factors, including a limited number of independent regional aircraft that each such major partner can operate in its regional network due to " scope " clauses in the current collective bargaining agreements with their pilots that restrict the number and size of regional jets that may be operated in their flight systems not flown by their pilots.
Additional growth opportunities within United's flight system are limited by various factors, including a limited number of independent regional aircraft that United can operate in its regional network due to " scope " clauses in the current collective bargaining agreements with their pilots that restrict the number and size of regional jets that may be operated in their flight systems not flown by their pilots.
Any strike, labor dispute or increased unionization among our employees could disrupt our operations, reduce our profitability, or interfere with the ability of our management to focus on executing our business strategies. For example, if a labor strike were to continue for several consecutive days, our major partners may have cause to terminate the applicable CPA.
Any strike, labor dispute or increased unionization among our employees could disrupt our operations, reduce our profitability, or interfere with the ability of our management to focus on executing our business strategies. For example, if a labor strike were to continue for a specified number of consecutive days or longer, United may have cause to terminate the CPA.
Our growth strategy includes, among other things, providing regional flying to other airlines and/or entering into the cargo and express shipping business.
Our growth strategy has historically included, among other things, providing regional flying to other airlines and/or entering into the cargo and express shipping business.
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 capacity purchase agreements with our major partners.
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.
Operating an airline independently from our major partners 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. 18 Reduced utilization levels of our aircraft under our agreements with our major partners, to the extent they continue, would have a material adverse impact our results of operations and financial condition .
Operating an airline independently from our major partners 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. Reduced utilization levels of our aircraft under our United CPA would have a material adverse impact our results of operations and financial condition.
Our operations could be materially and adversely affected by the failure or inability of MHI, Boeing, Embraer or GE to provide sufficient parts or related maintenance and support services to us in a timely manner, or the interruption of our flight operations as a result of unscheduled or unanticipated maintenance requirements for our aircraft or engines. 24 Maintenance costs will likely increase as the age of our jet fleet increases.
Our operations could be materially and adversely affected by the failure or inability of MHI, Boeing, Embraer or GE to provide sufficient parts or related maintenance and support services to us in a timely manner, or the interruption of our flight operations as a result of unscheduled or unanticipated maintenance requirements for our aircraft or engines.
Notwithstanding the increase in demand for air travel, in recent periods our high level of pilot attrition and pilot training output limitations has resulted in a reduction of our block hours flown.
Notwithstanding the increase in demand for air travel during the second half of fiscal 2021 and thereafter, in recent periods our high level of pilot attrition and pilot training output limitations has resulted in a reduction of our block hours flown.
A decision by American or United to phase out or limit our capacity purchase agreements or to enter into similar agreements with our competitors could have a material adverse effect on our business, financial condition, or results of operations.
A decision by United to phase out or limit our CPA or to enter into similar agreements with our competitors would have a material adverse effect on our business, financial condition, or results of operations.
A termination of either our American or United capacity purchase agreements 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 capacity purchase agreements with American and United.
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.
Our capacity purchase agreements limit our ability to provide regional flying services to other airlines in certain major airport hubs of American and 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.
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.
As of September 30, 2022, we had 16 aircraft under operating leases (excluding aircraft leased at nominal amounts from United and DHL) in addition to other leases of facilities and equipment, with an average remaining term of 3.8 years.
As of September 30, 2023, we had one aircraft under operating leases (excluding aircraft leased at nominal amounts from United and DHL) in addition to other leases of facilities and equipment, with an average remaining term of 6.1 years.
Strategic transactions may not be accretive to our earnings and may negatively impact our results of operations as a result of, among other things, the incurrence of debt, one-time write-offs of goodwill and amortization expenses of other intangible assets. In addition, strategic transactions that we may pursue could result in dilutive issuances of equity securities.
Strategic transactions may not be accretive to our earnings and may negatively impact our results of operations as a result of, among other things, the incurrence of debt, one-time write-offs of goodwill and amortization expenses of other intangible assets.
As of September 30, 2022, future minimum lease payments due under all long-term operating leases were approximately $37.2 million and future debt service obligations were $720.7 million, including finance lease obligations and interest payments.
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.
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.
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.
As of September 30, 2022, we had approximately $615.3 million in total long-term principal balance (including current portion of $97.2 million, of which $2.7 million pertain to finance lease obligations) and $19.4 million available for borrowing under our CIT Revolving Credit Facility. Substantially all of our long-term debt was incurred in connection with the acquisition of aircraft and aircraft engines.
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.
In that event, we intend to pursue alternative uses for those aircraft over the remaining portions of their leases including, but not limited to, operating the aircraft with another major airline under a negotiated capacity purchase agreement, subleasing the aircraft to another operator or marketing them for sale.
In 28 that event, we intend to pursue alternative uses for those aircraft over the remaining portions of their leases including, but not limited to, operating the aircraft with another major airline under a negotiated CPA, subleasing the aircraft to another operator or marketing them for sale. Additionally, we may negotiate an early lease return agreement with an aircraft's lessor.
The compromise of our technology systems resulting in the loss, disclosure, misappropriation of, or access to, employees' or business partners' information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disruption to our operations and damage to our reputation, any or all of which could adversely affect our business and financial condition. 25 We are subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition.
The compromise of our technology systems resulting in the loss, disclosure, misappropriation of, or access to, employees' or business partners' information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disruption to our operations and damage to our reputation, any or all of which could adversely affect our business and financial condition.
Additionally, we may negotiate an early lease return agreement with an aircraft's lessor. In such event, we may incur cash and non-cash early lease termination costs that would negatively impact our operations and financial condition.
In such event, we may incur cash and non-cash early lease termination costs that would negatively impact our operations and financial condition.
As of September 30, 2022, we had aggregate federal and state net operating loss (“NOL”) carryforwards of approximately $591.4 million and $247.0 million, which expire in fiscal years 2027-2038 and 2022-2042, respectively. Approximately $180.9 million of our federal NOL carryforwards are not subject to expiration.
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.
Any events, such as COVID-19 or other pandemics, that negatively impact the financial strength of our major partners or have a long-term effect on the use of our major partners by airline travelers would likely have a material adverse effect on our business, financial condition, and results of operations.
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.
These lease return costs are recorded in the period in which they are incurred. We estimate the cost of maintenance lease return obligations and accrue such costs over the remaining lease term when the expense is probable and can be reasonably estimated. Any unexpected increase in maintenance return costs may negatively impact our financial position and results of operations.
We estimate the cost of maintenance lease return obligations and accrue such costs over the remaining lease term when the expense is probable and can be reasonably estimated. Any unexpected increase in maintenance return costs may negatively impact our financial position and results of operations. We may become involved in litigation that may materially adversely affect us.
If our capacity purchase agreements with American or United were terminated or not renewed, we would be significantly impacted and likely would not have an immediate source of revenue or earnings to offset such loss. Neither American nor United are under any obligation to renew their respective capacity purchase agreements with us.
If our United CPA is terminated or not renewed, we would be significantly impacted and likely would not have an immediate source of revenue or earnings to offset such loss. United is not under any obligation to renew its CPA with us.
Given the competitive nature of the airline industry, we believe limited growth opportunities may result in competitors accepting reduced margins and less favorable contract terms in order to secure new or additional capacity purchase operations.
Given the competitive nature of the airline industry, we believe limited growth opportunities may result in competitors accepting reduced margins and less favorable contract terms in order to secure new or additional capacity purchase operations. Even if we are offered growth opportunities by United, those opportunities may involve economic terms or financing commitments that are unacceptable to us.
If pilot attrition persists, we may experience additional declines in utilization levels, which would in turn have a material adverse impact on our financial condition and results of operations. Our American CPA establishes minimum levels of flight operations.
If pilot attrition persists, we may experience additional declines in utilization levels, which would in turn have a material adverse impact on our financial condition and results of operations. 22 Our United CPA does not require United to schedule any specified minimum level of flight operations for our aircraft.
We have not historically paid dividends on shares of our common stock and do not expect to pay dividends on such shares in the foreseeable future. Additionally, 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.
We have not historically paid dividends on shares of our common stock and do not expect to pay dividends on such shares in the foreseeable future. Additionally, our United CPA, certain of our aircraft lease facilities, and our loan with the U.S.
In the event of a decrease in the financial or operational strength of any of our major partners, such partner may seek to reduce, or be unable to make, the payments due to us under their capacity purchase or flight services agreement. 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 reduce utilization of our aircraft.
Management assessed the effectiveness of our internal control over financial reporting at September 30, 2022. 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).
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.
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 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 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.
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.
This shortage of pilots has driven up our pilot salaries and sign-on bonuses and resulted in a material increase in our labor costs. A continued shortage of pilots could require us to further increase our labor costs, which would result in a material reduction in our earnings.
This shortage of pilots has driven up our pilot salaries and sign-on bonuses and resulted in a material increase in our labor costs.
We are required to disclose, to the extent material, changes made in our internal control over financial reporting on a quarterly basis. 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.
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.
We may incur substantial maintenance costs as part of our leased aircraft return obligations. Our aircraft lease agreements contain provisions that require us to return aircraft airframes and engines to the lessor in a specified condition or pay an amount to the lessor based on the actual return condition of the equipment.
Our aircraft lease agreements contain provisions that require us to return aircraft airframes and engines to the lessor in a specified condition or pay an amount to the lessor based on the actual return condition of the equipment. These lease return costs are recorded in the period in which they are incurred.
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.
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.
Changes in schedules may increase our flight costs, which could exceed the reimbursed rates paid by our major partners. Reduced utilization levels of our aircraft or other changes to our schedules under our capacity purchase agreements would adversely impact our operating results and financial condition.
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.
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.
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.
Although we receive guaranteed monthly revenue for each aircraft under contract and a fixed fee for each block hour or flight actually flown, our major partners are not required to schedule any specified level of flight operations for our aircraft.
Although we receive guaranteed monthly revenue for each aircraft under contract and a fixed fee for each block hour or flight actually flown, United is not required to schedule any specified level of flight operations for our aircraft. If United becomes bankrupt, our agreement with them may not be assumed in bankruptcy and could be terminated.
The average age of our E-175, CRJ-900, Boeing 737 and CRJ-700 type aircraft is approximately 6.9, 16.0, 29.0, and 17.5 years, respectively. 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 occurred.
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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeEight (8) of these CRJ-700 aircraft are classified as assets held for sale, and the remaining two (2) aircraft were leased to a third party. ▪ CRJ-200s – As of September 30, 2022, our fleet included one (1) CRJ-200 aircraft that has been classified as held for sale during fiscal year 2022. ▪ Boeing 737 Cargo Jets – As of September 30, 2022, we leased one (1) Boeing 737 aircraft from a third party and subleased two Boeing 737 aircraft from DHL under our DHL FSA.
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.
The DHL FSA expires five (5) years from the commencement date of the first aircraft placed into service. The first revenue generating flight took place in October 2020. 33 Facilities In addition to aircraft, we have office and maintenance facilities to support our operations.
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.
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, 2022, we operated 42 CRJ-900 aircraft under our American CPA and 11 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, 2023, we operated 26 CRJ-900 aircraft under our United CPA and 28 CRJ-900 aircraft as operational spares.
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, 2022, we operated 60 E-175 and 20 E-175LL 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 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.
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 Office, Hangar Dallas, Texas Leased 30,440 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 Warehouse Tucson, Arizona Leased 10,590 Warehouse, Office Erlanger, Kentucky Leased 6,025 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 Warehouse, Office Erlanger, Kentucky Leased 7,070 We believe our facilities are suitable and adequate for our current and anticipated needs.
As part of our amended and restated United CPA, we agreed to extend the term of 42 of our E-175 aircraft (owned by United) for an additional five (5) years which will now expire between 2024 and 2028, subject to United's early termination rights.
As part of our Amended and Restated United CPA, we agreed to extend the term of 42 of our E-175 aircraft (owned by United) for an additional five years which will now expire between 2024 and 2028, subject to United's early termination rights. United also has the right to extend the term of these aircraft for four additional three-year increments.
PROPERTIES Flight Equipment As of September 30, 2022, 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 62 80 70-76 2,100 530 6.9 CRJ-900 Regional Jet 49 15 64 76-79 1,500 530 16.0 CRJ-700 Regional Jet 8 2 10 50-70 1,600 530 17.5 CRJ-200 Regional Jet 1 — 1 50 1,500 530 28.7 Boeing 737 Cargo Jet — 3 3 2,600 530 29.0 Total 76 82 158 Several factors impact our fleet size, including contract expirations, lease expirations, growth opportunities and opportunities to transition to an alternative airline partner.
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.
United also has the right to extend the term of these aircraft for four (4) additional three-year increments. In addition, 18 of the E-175 aircraft (owned by us) operating under our United CPA expire between January 2028 and November 2028, subject to United's early termination rights.
In addition, 18 of the E-175 aircraft (owned by us) operating under our United CPA expire between January 2028 and November 2028, subject to United's early termination rights.
Removed
In the current period, we added 20 E-175LL aircraft under the United CPA with a term of 12 years.
Removed
Our American CPA will expire in 2025 unless otherwise extended or amended. Our American CPA is subject to termination prior to that date, subject to our right to cure, in various circumstances.
Removed
Eleven (11) of these CRJ-900 aircraft have been classified as held for sale during fiscal year 2022. ▪ CRJ-700s – As of September 30, 2022, our fleet included 10 CRJ-700 aircraft.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs of September 30, 2022, our management believed that the ultimate outcome of the two (2) putative class action lawsuits and such other routine legal matters are not likely to have a material adverse effect on our financial position, liquidity, or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 34 PART II
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.
Removed
ITEM 3. LEGAL PROCEEDINGS We are subject to two (2) putative class action lawsuits alleging federal securities law violations in connection with our IPO, one (1) in the Superior Court of the State of Arizona and one (1) in U.S. District Court of Arizona.
Added
MINE SAFETY DISCLOSURES Not applicable. 41 PART II
Removed
These purported class actions were filed in March and April 2020 against the Company, certain current and former officers and directors, and certain underwriters of the Company’s IPO.
Removed
The state and federal lawsuits each make the same or similar allegations of violations of the Securities Act of 1933, as amended, for allegedly making materially false and misleading statements in, or omitting material information from, our IPO registration statement.
Removed
On March 2, 2022, the parties in the federal lawsuit attended a mediation and reached an agreement in principle to settle all claims asserted in that action for the sum of $5 million, which will be paid by the Company’s directors’ and officers’ insurance carriers. The settlement is subject to preliminary and final approval by the federal court.
Removed
The motion for preliminary approval was filed on May 6, 2022, and no objections to the settlement were filed by the deadline for such objections. The parties are waiting for the Court to schedule a date for the preliminary approval hearing.
Removed
If preliminary and final approval is obtained, the claims of all putative class members, whether asserted in the federal or state actions, will be extinguished, unless and only to the extent that a particular class member takes affirmative steps to have its claims excluded.
Removed
In addition, we are subject to certain legal actions which we consider routine to our business activities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities 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 2023 Annual Meeting of Shareholders (" 2023 Proxy Statement ") to be filed with the SEC within 120 days of our fiscal year ended September 30, 2022. 35 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.
Biggest changeSecurities 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.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors, subject to applicable laws, and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our Board of Directors considers relevant.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors, subject to applicable laws and financial covenants, and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our Board of Directors considers relevant.
The graph assumes an investment of $100.00 in each of the above on the close of market on August 10, 2018. 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, 2019. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance.
Holders of Record As of November 11, 2022, there were approximately 75 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.
Holders 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.
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 August 10, 2018, and ends on September 30, 2022, 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, 2019, and ends on September 30, 2023, the end of our fiscal year.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the three months ended September 30, 2022, the Company repurchased a total of 14,957 shares of its common stock for $0.1 million to cover the income tax obligation on vested employee equity awards.
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.
The Company repurchased a total of 147,108 shares of its common stock for $0.5 million to cover the income tax obligation on vested employee equity awards during the fiscal year ended September 30, 2022. ITEM 6. [RESERVED] 36
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
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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeAccordingly, you are cautioned not to place undue reliance on this information. 50 Adjusted EBITDA and Adjusted EBITDAR The following table presents a reconciliation of net (loss) income to Adjusted EBITDA and Adjusted EBITDAR for the period presented: Year Ended September 30, 2022 2021 2020 (in thousands) Reconciliation: Net (loss) income $ (182,678 ) $ 16,588 $ 27,464 Income tax expense (51,990 ) 5,828 9,531 Income before taxes $ (234,668 ) $ 22,416 $ 36,995 Adjustments ( 1)(2)(3)(4)(5) 170,918 3,558 — Loss on investments, net ( 6) 13,715 6,816 — Adjusted income before taxes $ (50,035 ) $ 32,790 $ 36,995 Interest expense 35,289 34,730 44,120 Interest income (139 ) (365 ) (105 ) Depreciation and amortization 81,508 82,847 82,296 Adjusted EBITDA 66,623 150,002 163,306 Aircraft rent 36,989 39,345 48,802 Adjusted EBITDAR $ 103,612 $ 189,347 $ 212,108 (1) Our financial results include a loss of $3.2 million from write off of lease incentive assets for the fiscal year ended September 30, 2022, related to termination of the CRJ-700 leases to GoJet.
Biggest changeAccordingly, you are cautioned not to place undue reliance on this information. 60 Adjusted EBITDA and Adjusted EBITDAR The following table presents a reconciliation of net (loss) income to Adjusted EBITDA and Adjusted EBITDAR for the period presented: Year Ended September 30, 2023 2022 2021 Reconciliation: Net loss $ (120,116 ) $ (182,678 ) $ 16,588 Income tax benefit (8,745 ) (51,990 ) 5,828 Loss before taxes (128,861 ) (234,668 ) 22,416 Unrealized (gain)/loss on investments, net (5,408 ) 13,715 6,816 Adjustments (1)(2)(3)(4)(5)(6)(7)(8)(9) 48,357 170,918 3,558 Adjusted loss before taxes (85,912 ) (50,035 ) 32,790 Interest expense 49,921 35,289 34,730 Interest income (146 ) (139 ) (365 ) Depreciation and amortization 60,359 81,508 82,847 Adjusted EBITDA $ 24,222 $ 66,623 $ 150,002 Aircraft rent 6,200 36,989 39,345 Adjusted EBITDAR $ 30,422 $ 103,612 $ 189,347 (1) $0.2 million and $4.5 million lease termination expense during the fiscal year ended September 30, 2022 and 2021, respectively.
Our tax rate can vary depending on changes in tax laws, adoption of accounting standards, the amount of income we earn in each state and the state tax rate applicable to such income, as well as any valuation allowance required on our state net operating losses.
Our tax rate can vary depending on changes in tax laws, adoption of accounting standards, the amount of income we earn in each state and the state tax rate applicable to such income, as well as any valuation allowance required on our state net operating losses.
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 state net operating losses, expired state attributes, disallowed unrealized losses, and changes in state apportionment and statutory rates.
The following table presents information regarding our aircraft maintenance costs during our fiscal years ended September 30, 2022 and 2021: Year Ended September 30, 2022 2021 Change Engine overhaul $ 1,924 $ 14,598 $ (12,674 ) (86.8 )% Pass-through engine overhaul 21,710 16,815 4,895 29.1 % C-check 18,910 30,593 (11,683 ) (38.2 )% Pass-through C-check 3,173 20,549 (17,376 ) (84.6 )% Component contracts 26,223 25,890 333 1.3 % Rotable and expendable parts 26,967 26,741 226 0.8 % Other pass-through 20,358 15,963 4,395 27.5 % Labor and other 82,665 66,497 16,168 24.3 % Total $ 201,930 $ 217,646 $ (15,716 ) (7.2 )% Aircraft Rent.
The following table presents information regarding our aircraft maintenance costs during our fiscal years ended September 30, 2022 and 2021: 2022 2021 Change Engine overhaul $ 1,924 $ 14,598 $ (12,674 ) (86.8 )% Pass-through engine overhaul 21,710 16,815 4,895 29.1 % C-check 18,910 30,593 (11,683 ) (38.2 )% Pass-through C-check 3,173 20,549 (17,376 ) (84.6 )% Component contracts 26,223 25,890 333 1.3 % Rotable and expendable parts 26,967 26,741 226 0.8 % Other pass-through 20,358 15,963 4,395 27.5 % Labor and other 82,665 66,497 16,168 24.3 % Total $ 201,930 $ 217,646 $ (15,716 ) (7.2 )% Aircraft Rent.
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.
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.
As part of candidates’ commitment to flying for Mesa Airlines, flight costs will be repaid over three (3) years during the term of their employment. No assurance can be given that the measures we are currently taking or may take in the future will enable us to attract, hire and train pilots at a rate necessary to support our operations.
As part of candidates’ commitment to flying for Mesa Airlines, flight costs will be repaid over three years during the term of their employment. No assurance can be given that the measures we are currently taking or may take in the future will enable us to attract, hire and train pilots at a rate necessary to support our operations.
On October 30, 2020, the Company borrowed $43.0 million under the Treasury Loan and on November 13, 2020, the Company borrowed an additional $152.0 million. No additional sums are available for borrowing under the Treasury Loan. The obligations under the Treasury Loan are secured by certain aircraft, aircraft engines, accounts receivable, ground service equipment, and tooling (collectively, the “Collateral”).
On October 30, 2020, the Company borrowed $43.0 million under the Treasury Loan and on November 13, 2020, the Company borrowed an additional $152.0 million. No additional sums are available for borrowing under the Treasury Loan. The obligations under the 61 Treasury Loan are secured by certain aircraft, aircraft engines, accounts receivable, ground service equipment, and tooling (collectively, the “Collateral”).
The contracts also include reimbursement of certain costs incurred by the Company in performing flight services. These costs, known as " pass-through costs, " may include passenger and hull insurance as well as aircraft property taxes and other flight service expenditures defined in our agreements with our major partners.
The contracts also include reimbursement of certain costs incurred by the Company in performing flight services. These costs, known as "pass-through costs," may include passenger liability and hull insurance as well as aircraft property taxes and other flight service expenditures defined in our agreements with our major partners.
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.
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.
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.
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.
See Note 13 - " 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.
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.
On June 1, 2022, Mesa Airlines, as lessee, entered into two (2) agreements for the lease of two CRJ-700 aircraft (the “Aircraft Leases”). Basic rent on this lease is paid monthly and at the end of the lease term.
On June 1, 2022, Mesa Airlines, as lessee, entered into two agreements for the lease of two CRJ-700 aircraft (the “Aircraft Leases”). Basic rent on this lease is paid monthly and at the end of the lease term.
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.
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.
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. 42 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.
For our fiscal years ended September 30, 2022 and 2021, $8.2 million and $15.1 million, respectively, of our insurance and property tax expenses were reimbursed by our major partners. 45 Depreciation and Amortization.
For our fiscal years ended September 30, 2022 and 2021, $8.2 million and $15.1 million, respectively, of our insurance and property tax expenses were reimbursed by our major partners. Depreciation and Amortization.
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.
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.
If the calculated collateral coverage ratio is less than 1.6 to 1.0, Mesa Airlines will be required either to provide additional Collateral (which may include cash collateral) to secure its obligations under the Treasury Loan or repay the term loans under the Treasury Loan, in such amounts that the recalculated collateral coverage ratio, after giving effect to any such additional Collateral or repayment, is at least 1.6 to 1.0.
If the calculated collateral coverage ratio is less than 1.55 to 1.0, Mesa Airlines will be required either to provide additional Collateral (which may include cash collateral) to secure its obligations under the Treasury Loan or repay the term loans under the Treasury Loan, in such amounts that the recalculated collateral coverage ratio, after giving effect to any such additional Collateral or repayment, is at least 1.55 to 1.0.
If the Company fails to accept delivery of the spare engines when duly tendered, the Company may be assessed a minimum cancellation charge based on the engine price determined as of the date of scheduled engine delivery to the Company. 55 Electric Aircraft Forward Purchase Commitments As described in Note 8, in February 2021, the Company entered into a forward purchase contract with Archer Aviation, Inc.
If the Company fails to accept delivery of the spare engines when duly tendered, the Company may be assessed a minimum cancellation charge based on the engine price determined as of the date of scheduled engine delivery to the Company. 66 Electric Aircraft Forward Purchase Commitments As described in Note 8, in February 2021, the Company entered into a forward purchase contract with Archer Aviation, Inc.
We invested $16.7 million in spare engines, $1.3 million in aircraft, $18.4 million in inventory, $4.4 million in tools, vehicles, equipment and other miscellaneous projects, and $7.6 million in net payments on equipment and other deposits. Additionally, we invested a total of $0.2 million in equity securities and received a total of $50.0 million from sale of 10 CRJ-700 aircraft.
We invested $16.7 million in spare engines, $2.2 million in aircraft, $18.4 million in inventory, $4.4 million in tools, vehicles, equipment and other miscellaneous projects. and $7.6 million in net payments on equipment and other deposits. Additionally, we invested a total of $0.2 million in equity securities and received a total of $50.0 million from sale of 10 CRJ-700 aircraft.
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 on behalf of our major partners.
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.
Flight costs of $25 per hour, per pilot, will be fully financed by us with zero interest, providing no upfront out-of-pocket expense for flight time while the candidate is accruing the required hours to earn their Airline Transport Pilot (“ATP”) certificate.
Flight costs of $50 per hour, per pilot, will be fully financed by us with zero interest, providing no upfront out-of-pocket expense for flight time while the candidate is accruing the required hours to earn their Airline Transport Pilot (“ATP”) certificate.
Segment Reporting Operating segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“ CODM ”) in deciding how to allocate resources and in assessing operating performance. In consideration of ASC 280, Segment Reporting , we are not organized around specific services or geographic regions.
Segment Reporting Operating segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing operating performance. In consideration of ASC 280, Segment Reporting, we are not organized around specific services or geographic regions.
The Treasury Loan contains two (2) financial covenants, a minimum collateral coverage ratio and a minimum liquidity level.
The Treasury Loan contains two financial covenants, a minimum collateral coverage ratio and a minimum liquidity level.
Working Capital Line of Credit In August 2016, we, as guarantor, our wholly owned subsidiaries, Mesa Airlines and MAG-AIM, as borrowers, CIT, as administrative agent, and the lenders party thereto (the “ CIT Lenders ”), entered into the CIT Revolving Credit Facility, pursuant to which the CIT Lenders committed to lend to Mesa Airlines and MAG-AIM revolving loans in the aggregate principal amount of up to $35.0 million.
Working Capital Line of Credit In August 2016, we, as guarantor, our wholly owned subsidiaries, Mesa Airlines and MAG-AIM, as borrowers, CIT, as administrative agent, and the lenders party thereto (the “CIT Lenders”), entered into the CIT Revolving Credit Facility, pursuant to which the CIT Lenders committed to lend to Mesa Airlines and MAG-AIM revolving loans in the aggregate principal amount of up to $35.0 million.
The decrease is primarily attributable to a portion of our fleet being classified as held for sale during the twelve months ended September 30, 2022, offset by an increase in rotable part s and spare engine depreciation expense as well as amortization of deferred heavy maintenance. Asset Impairment.
The decrease is primarily attributable to a portion of our fleet being classified as held for sale during the twelve months ended September 30, 2022, offset by an increase in rotable parts and spare engine depreciation expense as well as amortization of deferred heavy maintenance. Asset Impairment.
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, 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.
Our financial performance could be negatively impacted by any adverse changes to the rates, number of aircraft or utilization under our capacity purchase agreements. Labor . The airline industry is heavily unionized. The wages , benefits and work rules of unionized airline industry employees are determined by collective bargaining agreements.
Our financial performance could be negatively impacted by any adverse changes to the rates, number of aircraft or utilization under our CPA. Labor. The airline industry is heavily unionized. The wages, benefits and work rules of unionized airline industry employees are determined by collective bargaining agreements.
Restricted Cash As of September 30, 2022, we had $3.3 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, 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.
The Company entered into lease agreements with GoJet Airlines LLC (“GoJet”) to lease CRJ-700 aircraft as of September 30, 2021. The lease agreements are accounted for as operating leases and have a term of nine (9) years beginning on the delivery date of each aircraft.
The Company entered into lease agreements with GoJet Airlines LLC (“GoJet”) to lease CRJ-700 aircraft as of September 30, 2021. The lease agreements are accounted for as operating leases and had a term of nine years beginning on the delivery date of each aircraft.
Leases Effective October 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842) (" ASU 2016-02 " or “ ASC 842 ”) which provides guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases with terms of less than 12 months.
Leases Effective October 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02" or “ASC 842”) which provides guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases with terms of less than 12 months.
As discussed generally above, we have announced a new pay structure whereby starting September 15, 2022, we will 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. 38 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. 47 Economic Conditions, Challenges and Risks Market Volatility.
Major airlines typically award capacity purchase agreements to regional airlines based on the following criteria: ability to fly contracted schedules, availability of labor resources including pilots, low operating cost, financial resources, geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages, and the overall image of the regional airline.
Major airlines typically award CPAs to regional airlines based on the following criteria: ability to fly contracted schedules, availability of labor resources including pilots, low operating cost, financial resources, geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages, and the overall image of the regional airline.
These estimates are utilized by management in making computations as required by existing accounting standards that determine whether the lease is classified as an operating lease or a finance lease. All of our aircraft leases have been classified as operating leases, which results in rental payments being charged to expense over the terms of the related leases.
These estimates are utilized by management in making computations as required by existing accounting standards that determine whether the lease is classified as an operating lease or a finance lease. Our aircraft leases classified as operating leases results in rental payments being charged to expense over the terms of the related leases.
For a listing and discussion of our accounting policies, see Note 2 - " Summary of Significant Accounting Policies " in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 61
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
Contract revenue increased by $44.0 million, or 10.1%, primarily due to normalized contractual rates from our major partners and recognition of higher deferred revenue, partially offset by reduced block hours flown and partner utilization penalties compared to the twelve months ended September 30, 2021.
Contract revenue increased by $44.0 million, or 10.1%, primarily due to normalized contractual rates from United and recognition of higher deferred revenue, partially offset by reduced block hours flown and partner utilization penalties compared to the twelve months ended September 30, 2021.
We account for the non-lease component of our capacity purchase agreements under ASC 606 and account for the lease component under ASC 842. We allocate the consideration in the contract between the lease and non-lease components based on their stated contract prices, which is based on a cost-basis approach representing our estimate of the stand-alone selling prices.
We account for the non-lease component of our CPAs under ASC 606 and account for the lease component under ASC 842. We allocate the consideration in the contract between the lease and non-lease components based on their stated contract prices, which is based on a cost-basis approach representing our estimate of the stand-alone selling prices.
As of September 30, 2022, approximately 66.9% 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, 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.
If impairment indicators exist with respect to any of our asset groups, we estimate future cash flows based on projections of capacity purchase or flight services agreement, 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 or FSA, block hours, maintenance events, labor costs and other relevant factors.
We believe that cash flow from operating activities coupled with existing cash and cash equivalents, existing credit facilities, financing arrangements, and government assistance, will be adequate to fund our operating and capital needs, as well as enable us to maintain compliance with our various debt agreements, through at least the next 12 months.
We believe that cash flow from operating activities coupled with existing cash and cash equivalents, existing credit facilities, financing arrangements, and anticipated asset sales, will be adequate to fund our operating and capital needs, as well as enable us to maintain compliance with our various debt agreements, through at least the next 12 months.
The increase in rates compared to the twelve months ended September 30, 2021 is attributable to temporarily reduced rates from our major partners impacting the twelve months ended September 30, 2021 as a result of lower labor costs due to government assistance received during the same period .
The increase in rates compared to the twelve months ended September 30, 2021 is attributable to temporarily reduced rates from United impacting the twelve months ended September 30, 2021 as a result of lower labor costs due to government assistance received during the same period.
From a lessor perspective, our capacity purchase agreements 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 capacity purchase agreements is designed to reimburse the Company for certain aircraft ownership costs of these aircraft.
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.
Depreciation and amortization expense decreased by $ 1.3 million, or 1.6 %, to $ 81.5 million for our fiscal year ended September 30, 202 2 , compared to our fiscal year ended September 30, 2021 .
Depreciation and amortization expense decreased by $1.3 million, or 1.6%, to $81.5 million for our fiscal year ended September 30, 2022, compared to our fiscal year ended September 30, 2021.
See Note 8 - "Balance Sheet Information" in the notes to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further discussion of our investments in equity securities.
See Note 8 – “Balance Sheet Information” in the notes to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further discussion of our investments in equity securities.
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 capacity purchase agreements with our major partners 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.
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 a profit margin on certain reimbursable costs, as well as a profit margin, incentives and penalties based on certain operational benchmarks.
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's individual flights flown under the capacity purchase and flight services agreements are deemed to be distinct and the flight service promised in the capacity purchase and flight services agreements 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 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.
All revenue recognized under these contracts is presented as the gross amount billed to the major partners. Under the capacity purchase and flight services agreements, the Company has committed to perform various activities that can be generally classified into in-flight services and maintenance services.
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.
Basic rent on this lease is paid monthly and at the end of the lease term. At the end of the lease term, Mesa Airlines will not have the option to purchase the engine. This lease is reflected as finance lease obligations of $0.6 million on our consolidated balance sheet as of September 30, 2022.
At the end of the lease term, Mesa Airlines will not have the option to purchase the engine. This lease is reflected as finance lease obligations of $0.6 million on our consolidated balance sheet as of September 30, 2022.
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, 2023 resulted in an effective tax rate of 6.9%, 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.
Net Cash Flows Provided by (Used in) Investing Activities Our investing activities generally consist of capital expenditures for aircraft and related flight equipment, deposits paid or returned for equipment and other purchases, and strategic investments. During our fiscal year ended September 30, 2022, our net cash flow provided by investing activities was $1.4 million.
Net Cash Flows Provided by (Used in) Investing Activities Our investing activities generally consist of capital expenditures for aircraft and related flight equipment, deposits paid or returned for equipment and other purchases, and strategic investments. During our fiscal year ended September 30, 2023, our net cash flow provided by investing activities was $142.3 million.
Additionally, for the E-175 aircraft owned by United, the capacity purchase agreement provides that United will reimburse the Company for heavy airframe and engine maintenance, landing gear, APUs and component maintenance.
Additionally, for the E-175 aircraft owned by United, the CPA provides that United will reimburse the Company for heavy airframe and engine maintenance, landing gear, APUs and component maintenance.
The Company's capacity purchase agreements and flight services agreement 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 capacity purchase agreements and flight services agreement also contain terms with respect to covered aircraft, services provided, and compensation as described in Note 1.
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 increase is attributable to impairment charges on certain CRJ aircraft, both held for sale and held for use, and intangible assets of customer relationship during the year ended September 30, 2022. Lease Termination .
The increase is attributable to impairment charges on certain CRJ aircraft, both held for sale and held for use, and intangible assets of customer relationship during the year ended September 30, 2022. Other Operating Expenses.
The deferred revenue balance as of September 30, 2022 of $24.1 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, 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 income tax provision for our fiscal year ended September 30, 2020 resulted in an effective tax rate of 25.8%, which differed from the U.S. federal statutory rate of 21% primarily due to the impact of state taxes and permanent 49 differences between financial statement and taxable income.
The income tax provision for our fiscal year ended September 30, 2022 resulted in an effective tax rate of 22.2%, 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.
Revenue Recognition The Company recognizes revenue when the service is provided under its capacity purchase agreements and flight services agreement. Under these agreements, the major partners generally pay a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown.
Revenue Recognition The Company recognizes revenue when the service is provided under its CPA and FSA. Under these agreements, the major partners generally pay a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown.
The Company's revenues could be impacted by a number of factors, including amendment or termination of its capacity purchase agreements or flight services agreement, 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 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.
As of September 30, 2022 , $ 50.6 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. 40 The average age of our E-175, CRJ-900 , Boeing 737, and CRJ-700 type aircraft is approximately 6.9 , 16 .0 , 29 . 0 , and 1 7 . 5 years, respectively.
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.
Overview Mesa Airlines is a regional air carrier providing scheduled passenger service to 107 cities in 39 states, the District of Columbia, the Bahamas, and Mexico, as well as cargo services out of Cincinnati/Northern Kentucky International Airport.
Overview Mesa Airlines is 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.
We had net change of $4.8 million within other net operating assets and liabilities largely driven by accrued liabilities, accounts payable, deferred revenue, receivables, and operating leases during our fiscal year ended September 30, 2021. During our fiscal year ended September 30, 2020, we had cash flow provided by operating activities of $174.7 million.
We had net change of $4.8 million within other net operating assets and liabilities largely driven by accrued liabilities, accounts payable, deferred revenue, receivables, and operating leases during our fiscal year ended September 30, 2021.
Operating Revenues Year Ended September 30, 2022 2021 Change Operating revenues ($ in thousands): Contract $ 478,482 $ 434,518 $ 43,964 10.1 % Pass-through and other 52,519 69,073 (16,554 ) (24.0 )% Total operating revenues $ 531,001 $ 503,591 $ 27,410 5.4 % Operating data ( 1) : Available seat miles—ASMs (thousands) 6,674,748 7,851,798 (1,177,050 ) (15.0 )% Block hours 271,511 323,219 (51,708 ) (16.0 )% Revenue passenger miles— RPMs (thousands) 5,549,595 5,893,195 (343,600 ) (5.8 )% Average stage length (miles) 509 661 (152 ) (23.0 )% Contract revenue per available seat mile—CRASM (in cents) ¢ 7.18 ¢ 5.53 ¢ 1.65 29.8 % Passengers 8,083,870 8,881,431 (797,561 ) (9.0 )% (1) The definitions of certain terms related to the airline industry used in the table can be found under " Glossary of Airline Terms " above.
See Note 13 - "Income Taxes" in the notes to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 56 Results of Operations Comparison of our Fiscal Years Ended September 30, 2022 and 2021 Operating Revenues Year Ended September 30, 2022 2021 Change Operating revenues ($ in thousands): Contract $ 478,482 $ 434,518 $ 43,964 10.1 % Pass-through and other 52,519 69,073 (16,554 ) (24.0 )% Total operating revenues $ 531,001 $ 503,591 $ 27,410 5.4 % Operating data: Available seat miles—ASMs (thousands) 6,674,748 7,851,798 (1,177,050 ) (15.0 )% Block hours 271,511 323,219 (51,708 ) (16.0 )% Revenue passenger miles—RPMs (thousands) 5,549,595 5,893,195 (343,600 ) (5.8 )% Average stage length (miles) 509 661 (152 ) (23.0 )% Contract revenue per available seat mile—CRASM (in cents) ¢ 7.18 ¢ 5.53 ¢ 1.65 29.8 % Passengers 8,083,870 8,881,431 (797,561 ) (9.0 )% (1) The definitions of certain terms related to the airline industry used in the table can be found under "Glossary of Airline Terms" above.
Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our capacity purchase agreements and flight services agreement 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 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.
Aircraft and traffic servicing expense includes expenses related to our capacity purchase agreements and flight services agreement, 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 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.
At the end of the lease term, Mesa Airlines will have the option to purchase both aircraft for a total of $1.5 million. The Aircraft Leases are reflected as finance lease obligations of $15.1 million on our consolidated balance sheet as of September 30, 2022.
At the end of the lease term, Mesa Airlines will have the option to purchase both engines for a total of $1.8 million. The Engine Leases are reflected as finance lease obligations of $2.3 million on our consolidated balance sheet as of September 30, 2022.
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 capacity purchase agreement, flight services agreement, and fleet-type 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 and FSA level (i.e., the lowest level for which there are identifiable cash flows).
Liquidity and Capital Resources As of September 30, 2022, the Company has $99.1 million of principal maturity payments on long-term debt due within the next twelve months.
Liquidity and Capital Resources 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 September 30, 2022, we had 16 aircraft on operating leases (excluding aircraft leased at nominal amount from United and DHL) with remaining lease terms of up to 3.8 years. Future minimum lease payments due under all long-term operating leases were approximately $37.2 million as of September 30, 2022.
As of September 30, 2023, we had one aircraft on operating leases (excluding aircraft leased at nominal amount from United and DHL) with remaining lease terms of up to 6.1 years. Future minimum lease payments due under all long-term operating leases were approximately $15.2 million as of September 30, 2023.
In providing regional flying under our capacity purchase agreements, and cargo flight services under our flight services agreement, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of our major partners. Our major partners control route selection, pricing, seat inventories, marketing, and scheduling, and provide us with ground support services, airport landing slots and gate access.
In providing regional flying under our CPAs, and cargo flight services under our FSA, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of our major partners. United controls route selection, pricing, seat inventories, marketing, and scheduling, and provides us with ground support services, airport landing slots and gate access.
The increase is primarily due to the loss associated with derecognition of lease incentive assets when the Company terminated the leases of CRJ-700 aircraft to GoJet during the fiscal year ended September 30, 2022. Government Grant Recognition.
The decrease is partially offset by 58 loss associated with derecognition of lease incentive assets when the Company terminated the leases of CRJ-700 aircraft to GoJet during the fiscal year ended September 30, 2022. Government Grant Recognition.
Our capacity purchase and flight services agreements also shelter us from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of passengers.
Our CPAs and FSAs also shelter us from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of passengers.
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. Approximately $180.9 million of our federal NOL carryforwards are not subject to expiration.
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.
Additionally, any remaining ROU assets and lease liabilities will be written off. As a lessee, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e., leases with terms of 12 months or less).
As a lessee, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e., leases with terms of 12 months or less).
The Company's capacity purchase agreements and flight services agreement contain an option that allows its major partners to assume the contractual responsibility for procuring and providing the fuel necessary to operate the flights that it operates for them. The Company's major partners have exercised this option.
The Company's CPA and FSA contain an option that allows its major partners to assume the contractual responsibility for procuring and providing the fuel necessary to operate the flights that it operates for them. The Company's major partners have exercised this option.
Property and Equipment The Company’s property and equipment, which primarily consists of aircraft and related flight equipment, had a net book value of $865.3 million as of September 30, 2022.
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.
These government grant programs were no longer available during our fiscal year ended September 30, 2022. Other Expense Other expense increased by $4.2 million, or 10.2%, to $44.9 million for our fiscal year ended September 30, 2022, compared to our fiscal year ended September 30, 2021.
These government grant programs were no longer available during our fiscal year ended September 30, 2022. Other Expense Other expense increased by $8.9 million, or 21.8%, to $49.7 million for our fiscal year ended September 30, 2022, compared to our fiscal year ended September 30, 2021.
As of September 30, 2022, we had variable rate debt representing 73.7% 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.
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.
Additionally, the Company is required to comply with the relevant provisions of the CARES Act, including limits on employment level reductions after September 30, 2020, restrictions on dividends and stock buybacks, limitations on executive compensation, and requirements to maintain certain levels of scheduled service. 52 The CARES Act provides for deferred payment of the employer portion of social security taxes through the end of 2020.
Additionally, the Company is required to comply with the relevant provisions of the CARES Act, including limits on employment level reductions after September 30, 2020, restrictions on dividends and stock buybacks, limitations on executive compensation, and requirements to maintain certain levels of scheduled service.
Fuel expense includes fuel and related fueling costs for flying we undertake outside of our capacity purchase agreements and flight services agreement , including aircraft repositioning and maintenance. All aircraft fuel and related fueling costs for flying under our capacity purchase agreements were directly paid and supplied by our major partners.
Fuel expense includes fuel and related fueling costs for flying we undertake outside of our CPA and FSA, including aircraft repositioning and maintenance. All aircraft fuel and related fueling costs for flying under our CPAs were directly paid and supplied by our major partners.
We currently operate in one service line providing scheduled flight services in accordance with our capacity purchase agreements and flight services agreement. While we operate under two (2) separate capacity purchase agreements and one (1) flight services agreement, 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 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.
In our year ended September 30, 2022, we had a net loss of $182.7 million compared to net income of $16.6 million in our year ended September 30, 2021.
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.

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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 capacity purchase agreements and flight services agreement largely shelter us from volatility related to fuel prices, which are directly paid and supplied by our major partners. 62
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
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, 2022, we had $167.9 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 $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.
We do not purchase or hold any derivative instruments to protect against the effects of changes in interest rates. As of September 30, 2022, we had $453.2 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, 2023, we had $303.8 million of variable rate debt including current maturities.

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