Category Archives: Mesa Air Group

Mesa Air Group announces commencement of IPO

Mesa Air Group, Inc. has announced the commencement of its initial public offering (IPO) of 10,700,000 shares of its common stock, at an anticipated initial public offering price between $14.00 and $16.00 per share, pursuant to a registration statement on Form S-1 previously filed with the U.S. Securities and Exchange Commission (SEC). The Company and the selling shareholders named in the registration statement granted the underwriters a 30-day over-allotment option to purchase up to an additional 1,605,000 shares of the Company’s common stock. If the overallotment option is exercised in full, 938,333 shares will be purchased directly from the Company, and 666,667 shares will be purchased directly from the selling shareholders. The Company has been approved to list its common stock on the Nasdaq Global Select Market (Nasdaq) under the symbol “MESA,” subject to official notice of issuance.

The Company intends to use the net proceeds from the offering received by it to repay certain outstanding indebtedness, to pay fees and expenses related to the offering and the remainder for general corporate purposes. The Company will not receive any proceeds from the offering of the common stock by the selling shareholders.

Raymond James and BofA Merrill Lynch are acting as lead book-running managers for the proposed offering. Cowen, Stifel and Imperial Capital are acting as additional book-running managers for the proposed offering.

This offering will be made only by means of a written prospectus.

Mesa Air Group is the parent of Mesa Airlines.

All images by Mesa.

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Mesa Air Group files to go public

United Express-Mesa Airlines Embraer ERJ 170-200LR (ERJ 175) N88327 (msn 17000479) RDU (Ton Jochems). Image: 942825.

Mesa Air Group has filed to go public with it Initial Public Offering (IPO):

Here are excerpts of the Prospectus:

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary sets forth the material terms of the offering, but does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully before making an investment decision, especially the risks of investing in our common stock described under “Risk Factors.” Unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Mesa” refer to Mesa Air Group, Inc. and its predecessors, direct and indirect subsidiaries and affiliates. Our airline operations are conducted through our subsidiary, Mesa Airlines, Inc. (“Mesa Airlines”). Certain terms related to the airline industry are described under “Glossary of Airline Terms” at the end of this prospectus.

Our Company

Mesa Airlines is a regional air carrier providing scheduled passenger service to 110 cities in 38 states, the District of Columbia, Canada, Mexico and the Bahamas. All of our flights are operated as either American Eagle or United Express flights pursuant to the terms of capacity purchase agreements we entered into with American Airlines, Inc. (“American”) and United Airlines, Inc. (“United”) (each, our “major airline partner”). We have a significant presence in several of our major airline partners’ key domestic hubs and focus cities, including Dallas, Houston, Phoenix and Washington-Dulles. We have been the fastest growing regional airline in the United States over our last five fiscal years, based on fleet growth, with a cumulative increase in aircraft of 137%.

As of March 31, 2018, we operated a fleet of 145 aircraft with approximately 610 daily departures. We operate 64 CRJ-900 aircraft under our capacity purchase agreement with American (the “American Capacity Purchase Agreement”) and 20 CRJ-700 and 60 E-175 aircraft under our capacity purchase agreement with United (the “United Capacity Purchase Agreement”). Over the last five calendar years, our share of the total regional airline fleet of American and United has increased from 7% to 11% and from 4% to 15%, respectively. Driven by this fleet growth, our total operating revenues have grown by 55% from $415.2 million in fiscal 2013 to $643.6 million in fiscal 2017, respectively. We believe we have expanded our share with our major airline partners because of our competitive cost structure, access to pilots under our labor agreements and track record of reliable performance. All of our operating revenue in our 2017 fiscal year and the six months ended March 31, 2018 was derived from operations associated with our American and United Capacity Purchase Agreements.

Our long-term capacity purchase agreements provide us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour and flight flown, and reimbursement of certain direct operating expenses, in exchange for providing regional flying on behalf of our major airline partners. Our capacity purchase agreements 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. In providing regional flying under our capacity purchase agreements, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of our major airline partners. Our major airline partners control route selection, pricing, seat inventories, marketing and scheduling, and provide us with ground support services, airport landing slots and gate access, allowing us to focus all of our efforts on delivering safe, reliable and cost-competitive regional flying.

Regional aircraft are optimal for short and medium-haul scheduled flights that connect outlying communities with larger cities and act as “feeders” for domestic and international hubs. In addition, regional aircraft are well suited to serve larger city pairs during off-peak times when load factors on larger jets are low. 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. According to the Regional Airline Association, we were the fifth largest regional airline company in the United States in 2016, as measured by passenger enplanements, and our flights accounted for approximately 8.4% of all passengers carried on U.S. regional airlines.

Regional airlines play a daily, essential role in the U.S. air travel system. According to the Regional Airline Association, 42% of all scheduled passenger flights in the United States in 2016 were operated by regional airlines. Of all the U.S. airports with passenger airline service, 64% are served exclusively by regional airlines. Some of the most popular U.S. airports have more than half of all their flights on regional airlines, including New York-LaGuardia, Philadelphia, Washington-Dulles, Charlotte, Houston-Bush and Chicago-O’Hare.

Our Competitive Strengths

We believe that our primary strengths are:

Low-Cost Operator. We believe that we are among the lowest cost operators of regional jet service in the United States. There are several key elements that contribute to our cost efficiencies:

 

Efficient Fleet Composition. We exclusively operate large regional aircraft with 70+ passenger seats on a single Federal Aviation Administration (the “FAA”) certificate. Operating large regional aircraft allows us to enjoy unit cost advantages over smaller regional aircraft. Larger regional aircraft require less fuel and crew resources per passenger carried, and may also have maintenance cost efficiencies.

 

Cost Effective, Long-Term Collective Bargaining Agreements. Our pilots and flight attendants ratified new four-year collective bargaining agreements effective as of July 13, 2017 and October 1, 2017, respectively, which are among the longest in the regional airline industry and include labor rate structures through 2023 for our pilots and 2022 for our flight attendants. We believe that our collective bargaining agreements and favorable labor relationships are critical for pilot retention and will provide more predictable labor costs into 2023. We derive cost advantages from efficient work rules and the relatively low average seniority of our pilots.

 

Low Corporate Overhead. Our general and administrative expenses per block hour have decreased by more than 35% over the five-year period ended September 30, 2017. We have significantly reduced our overhead costs by operating with a modest administrative and corporate team, offering cost-effective benefit programs and implementing automated solutions to improve efficiency.

 

Competitive Procurement of Certain Operating Functions. We have long-term maintenance agreements with expirations extending from December 2020 to December 2027 with AAR Aircraft Services, Inc. (“AAR”), GE Engine Services, LLC (“GE”), StandardAero Limited (“StandardAero”), Aviall Services, Inc. (“Aviall”) and Bombardier Aerospace (“Bombardier”), respectively, to provide parts procurement, inventory and engine, airframe and component overhaul services. We expect that our long-term agreements with these and other strategic vendors will provide predictable high-quality and cost-effective solutions for most maintenance categories over the next several years. In prior periods, we also invested in long-term engine overhauls on certain aircraft, which we believe will reduce related maintenance obligations in future periods.

 

Advantages in Pilot Recruitment and Retention. We believe that we are well positioned to attract and retain qualified pilot candidates. Following the ratification of our collective bargaining agreements in July 2017, the average number of new pilot applications per month has increased by 45.3% compared to the six months prior to such ratification. In addition, our average pilot attrition has decreased by 16.2% over the same period.

The following chart presents our cumulative increase in new pilots who have completed training, net of attrition, from July 2017 through June 2018:

 

LOGO

We believe that the increased number of new pilot applications per month will continue with the introduction of our Career Path Program (“CPP”) with United. In addition to offering competitive compensation, bonuses and benefits, we believe the following elements contribute to our recruiting advantage:

 

Career Path Program. We recently announced our CPP with United, which is designed to provide our qualified current and future pilots a path to employment as a pilot at United. We believe that our CPP will help us continue to attract qualified pilots, manage natural attrition and further strengthen our decades-long relationship with United.

 

Modern, Large-Gauged Regional Jets. We exclusively operate large regional aircraft with advanced flight deck avionics. We believe that pilot candidates prefer advanced flight deck avionics because they are similar to those found in the larger commercial aircraft types flown by major airlines.

 

Opportunities for Advancement. We believe that our career progression is among the most attractive in the regional airline industry. During fiscal 2017, our pilots had the opportunity to be promoted from first officer to captain in as little as 12 months.

 

Stable Labor Relations. Throughout our long operating history, we believe that we have had constructive relationships with our employees and their labor representatives. We have never been the subject of a labor strike or labor action that impacted our operations.

 

Enthusiastic and Supportive Culture. Our “pilots helping pilots” philosophy helps us attract, retain and inspire our next generation of pilots. Our team-oriented culture, as demonstrated by the mentorship of our senior pilots, is both encouraged and expected. We strive to create an environment for our personnel where open communication is customary and where we celebrate our successes together.

Stable, Long-Term Revenue-Guarantee Capacity Purchase Agreements. We have long-term capacity purchase agreements with American and United that extend beyond 2020 for 94 of our 144 aircraft in scheduled service (with 34 aircraft expiring between June and December 2019 and 16 aircraft expiring between January and August 2020, if not extended prior to contract expiration). Both of our capacity purchase agreements are “capacity purchase,” rather than revenue sharing arrangements. This contractual structure provides us with a predictable revenue stream and allows us to increase our profit margin to the extent that we are able to lower our operating costs below the costs anticipated by the agreements. In addition, we are not exposed to price fluctuations for fuel, certain insurance expenses, ground operations or landing fees as those costs are either reimbursed under our capacity purchase agreements or paid directly to suppliers by our major airline partners.

Fleet Exclusively Comprised of Large, Efficient Regional Jets. We exclusively operate large regional aircraft with 70+ passenger seats. These aircraft are the highest in demand across the regional airline industry and provide us with best-in-class operating efficiencies, providing our major airline partners greater flexibility in route structuring and increased passenger revenues. As of March 31, 2018, we had 145 aircraft (owned and leased) consisting of the following:

 

Embraer
Regional

Jet-175
(76  seats)
Canadair
Regional

Jet-700
(70 seats)
Canadair
Regional

Jet-900
(76-79  seats)
Canadair
Regional

Jet-200
(50  seats)(1)
Total
American Eagle 64 64
United Express 60 20 80
Subtotal 60 20 64 144
Unassigned 1 1
                   
Total 60 20 64 1 145

 

(1) CRJ-200 is an operational spare not assigned for service under our capacity purchase agreements.

Longstanding Relationships with American and United. We began flying for United in 1991 and American, through its predecessor entities, in 1992. Since 2013, we have added 26 aircraft to our American Capacity Purchase Agreement and 60 aircraft to our United Capacity Purchase Agreement.

Strong Recent Record of Operational Performance. In January 2018, the U.S. Department of Transportation (“DOT”) recognized us as the number one regional airline for on-time performance. In addition, we believe that we were the number one regional airline for on-time performance in 2016 and 2017 based on a comparison of our internal data to publicly available DOT data for reporting airlines. Under our capacity purchase agreements, we may receive financial incentives or incur penalties based upon our operational performance, including controllable on-time departures and controllable completion percentages.

Experienced, Long-Tenured Management Team. Our senior management team has extensive operating experience in the regional airline industry. Our Chief Executive Officer and President/Chief Financial Officer have served us in senior officer positions since 1998, and our management team has helped us navigate through and emerge successfully from bankruptcy in early 2011.

Top Copyright Photo (all others by Mesa): United Express-Mesa Airlines Embraer ERJ 170-200LR (ERJ 175) N88327 (msn 17000479) RDU (Ton Jochems). Image: 942825.

United Express-Mesa aircraft slide show:

Route Map:

Mesa Airlines to add 15 Embraer 175s to the United contract

Mesa Airlines, Inc. (Phoenix) has announced an agreement with United Airlines (Chicago) to add 15 Embraer 175 aircraft to Mesa’s United Express fleet. Mesa currently operates 30 Embraer aircraft for United Airlines. In addition to the E175s, Mesa operates 20 Bombardier CRJ700 aircraft under the United Express brand.

 

The E175’s 76-seat dual-class configuration features 12 First-Class, 16 Premium Economy and 48 Coach seats. The aircraft has Inflight Wi-Fi connectivity, leather seating and electric outlets in First Class.

Copyright Photo: Brian McDonough/AirlinersGallery.com. Mesa Airlines’ Embraer ERJ 170-200LR (ERJ 175) N85320 (msn 17000454) arrives at Washington Reagan National Airport (DCA).

United Express-Mesa aircraft slide show: AG Airline Slide Show

AG Hang one of our framable prints

Bombardier delivers the first of seven new CRJ900s to Mesa Airlines

American Eagle-Mesa CRJ900 delivery ceremony (Bombardier)(LRW)

Bombardier Commercial Aircraft (Montreal) has announced it has delivered the first of seven CRJ900 aircraft to Mesa Air Group, Inc. of Phoenix, Arizona (Mesa Airlines). Mesa will operate the aircraft for American Airlines under the American Eagle brand. The aircraft delivered is one of a firm order for seven announced on March 12, 2015.

Bombardier logo

The CRJ900 delivery ceremony held on June 30 at Bombardier’s Mirabel, Québec facility, was attended by executives of both Mesa Airlines and Bombardier Commercial Aircraft.

Mesa 2015 logo

 

The aircraft delivered will increase Mesa’s fleet of CRJ900 regional jets to 58, reconfirming the airline’s standing as one of the largest operators of this aircraft model. Mesa’s new CRJ900 aircraft are configured with 76 seats in a dual-class interior. The airline also operates 20 CRJ700 aircraft with 70 seats in a three-class interior. By September 2015, Mesa’s currently scheduled deliveries will bring its regional jet fleet total to 115.

As of March 31, 2015, Bombardier had recorded firm orders for 1,865 CRJ Series aircraft, including 391 CRJ900 aircraft.

Mesa Airlines orders seven more Bombardier CRJ900 aircraft

Mesa Airlines, Inc. (Phoenix) has announced it has reached an agreement in principle, subject to definitive documentation, with Montreal-based Bombardier Inc. for the purchase of seven new CRJ900 NextGen aircraft to operate under a long-term capacity purchase agreement with a major U.S. airline. The aircraft will be purchased new from Bombardier and will bring the total number of CRJ900 aircraft operated by the Company to 64. The Company expects delivery of the seven additional aircraft in 2015. The agreement also includes an undisclosed number of options to purchase additional CRJ900 aircraft.

American Airlines is expanding the agreement with Mesa for these seven new CRJ900s. All 64 CRJ900s will eventually be operated under the American Eagle brand.

Mesa currently operates its CRJ900s as an American Eagle and US Airways Express carrier.

Mesa was the launch customer for the CRJ900 aircraft in 2001 and is one of the largest operators of CRJ900 aircraft in the world.

The addition of these seven aircraft and 11 new E-175s scheduled for delivery later this year will bring Mesa’s fleet total to 115 aircraft by October of 2015.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Bombardier CRJ900 (CL-600-2D24) N948LR (msn 15118) climbs away from Los Angeles International Airport.

American Eagle-Mesa Airlines aircraft slide show:

AG Thank you

 

go! won’t fly after April 1, Mesa gives up on Hawaii

Mesa Air Group, Inc. (Phoenix) has announced it will cease its Hawai’i operations under the go! (Honolulu) brand effective April 1, 2014. According to Mesa, “Since June 2006, go! has served its nearly five million passengers with safe, reliable and low fare service.” The group continued:

The decision to cease operations in Hawaii follows significant growth in the Company’s flight operations on the mainland and was a strategic decision to focus the organization on maximizing its growth in the capacity purchase “codeshare” operations which comprise over 98 percent of the Company’s business

“While this was an extremely difficult decision to reach, we believe it is in the best interest of Mesa’s long term strategic objectives, particularly given the Company’s ongoing expansion of aircraft in service with United Airlines and US Airways. Mesa will be placing into service 30 Embraer EMB 175 aircraft with United beginning in June 2014, and is adding 4 Bombardier CRJ900 aircraft with US Airways in 2014, having added 9 CRJ900s in 2013,” said Jonathan Ornstein, Chairman and Chief Executive Officer. “With the significant expansion opportunities in flying large regional jets in contracted service, we are re-deploying the go! aircraft to support our existing mainland operations. An additional factor that we accounted for was the long term increase in the cost of fuel, which has more than doubled since go! began service and has caused sustained profitability to be elusive” continued Ornstein.

Under the terms of an agreement with Hawaiian Airlines, go! will be able to re-book passengers ticketed through go! for travel scheduled between April 1, 2014 and June 30, 2014 in specified fare classes on Hawaiian’s Interisland network. go! will refund tickets for passengers who cannot be accommodated on Hawaiian Airlines, or for passengers holding tickets for travel after June 30, 2014. All ticket holders will be contacted by go! reservations representatives regarding the re-accommodations. Customers and travel agents needing additional information may call 1-888-435-9462 or visit the website at .

go! will continue to provide its passengers with safe and reliable transportation through its last day of service, and will work with our passengers and Hawaiian Airlines to minimize the impact that this announcement will have on our passengers,” noted Chris Pappaioanou, President of go!.

“On behalf of Mesa Air Group, I would like to thank all of our many loyal passengers and the continued hard work and dedication of our employees – all of whom will be given an opportunity to continue their employment with Mesa Airlines. While we say goodbye to our many passengers in Hawaii, we look forward to serving you on the mainland through our significant codeshare operations,” continued Ornstein.

Mesa currently operates 71 aircraft with approximately 407 daily system departures to 85 cities, 36 states, the District of Columbia, Canada and Mexico. Mesa operates as US Airways Express and United Express under contractual agreements with US Airways and United Airlines, respectively. The Company was founded by Larry and Janie Risley in New Mexico in 1982.

Meanwhile, Mokulele Airlines has announced it is honoring the flights purchased on go! Airlines for travel on Mokulele where available. For go! flights that were purchased on Mokulele’s website for travel to Kaua’i and Hilo, passengers should contact Mokulele for refunds. Mokulele Airlines has had a code share agreement with go! since November 2011 when TransPac Aviation purchased the turbo prop division from Mesa Air Group.

Copyright Photo: Ivan K. Nishimura/Blue Wave Group. The go! CRJ fleet is pictured at Honolulu.

go!: AG Slide Show

Current Route Map:

go! 3.2014 Route Map

Mesa Air Group to expand its partnership with US Airways

Mesa Air Group, Inc. (Mesa Airlines) (Phoenix has announced it has reached an agreement with US Airways, Inc. (Phoenix) to extend the term covering its original 38 Bombardier CRJ900 aircraft currently in operation and for the addition of four CRJ900 aircraft to its current fleet of 47 aircraft under the US Airways Express contract. The term of the agreement covering the 38 aircraft was extended until 2021 and the term for the 4 additional aircraft is 8 years from their induction date. No further details of the agreement were released.

Mesa currently operates 69 aircraft with approximately 396 daily system departures to 77 cities, and recently announced an additional 30 Embraer 175 aircraft will be flying for United Airlines. Mesa operates as US Airways Express and United Express under contractual agreements with US Airways and United Airlines, respectively, and independently as go!.

Eventually the company will become a new American Eagle branded operator with the final merger of the two AOCs into one for American Airlines.

Copyright Photo: Bruce Drum/AirlinersGallery.com. Bombardier CRJ900 (CL-600-2D24) N919FJ (msn 15019) of Mesa departs from the Charlotte hub.

US Airways Express-Mesa: AG Slide Show