10-Q

Part I – Financial Information

Item 1. Financial Statements

MESA AIR GROUP, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts) (December 31, 2024 is unaudited)


	December 31,			September 30,
	2024			2024
ASSETS
Current assets:
Cash and cash equivalents	$	39,980		$	15,621
Restricted cash		3,004			3,009
Receivables, net ($1,808 and $1,883 from related party)		5,250			5,263
Expendable parts and supplies, net		29,172			28,272
Assets held for sale		80,723			5,741
Prepaid expenses and other current assets		2,577			3,371
Total current assets		160,706			61,277

Property and equipment, net		203,567			426,351
Lease and equipment deposits		524			1,289
Operating lease right-of-use assets		6,588			7,231
Deferred heavy maintenance, net		5,351			6,396
Assets held for sale		—			86,605
Other assets		6,829			7,709
Total assets	$	383,565		$	596,858

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance leases ($7,512 and $6,604 from related party)	$	143,275		$	50,455
Current portion of deferred revenue		4,955			3,932
Current maturities of operating leases		1,430			1,681
Accounts payable		60,932			72,096
Accrued compensation		6,705			12,797
Customer deposits		962			1,189
Other accrued expenses		34,819			32,308
Total current liabilities		253,078			174,458
Noncurrent liabilities:
Long-term debt and finance leases, excluding current portion ($25,505 and $30,914 from related party)		83,786			259,816
Noncurrent operating lease liabilities		6,484			6,863
Deferred credits from related party		2,036			3,020
Deferred income taxes		5,214			8,173
Deferred revenue, net of current portion		10,329			5,707
Other noncurrent liabilities		26,675			28,579
Total noncurrent liabilities		134,524			312,158
Total liabilities		387,602			486,616
Commitments and contingencies (Note 14)
Stockholders' equity:
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 41,331,719 (2025) and 41,331,719 (2024) shares issued and outstanding, 4,899,497 (2025) and 4,899,497 (2024) warrants issued and outstanding		272,655			272,376
Accumulated deficit		(276,692	)		(162,134	)
Total stockholders' equity		(4,037	)		110,242
Total liabilities and stockholders' equity	$	383,565		$	596,858

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share amounts) (Unaudited)


	Three Months Ended December 31,
	2024			2023
Operating revenues:
Contract revenue ($78,569 and $96,412 from related party)	$	80,678		$	101,100
Pass-through and other revenue		22,555			17,677
Total operating revenues		103,233			118,777

Operating expenses:
Flight operations		35,273			51,818
Maintenance		46,527			48,627
Aircraft rent		1,616			1,204
General and administrative		9,519			12,009
Depreciation and amortization		7,979			13,293
Asset impairment		65,665			40,384
Loss on sale of assets		46,691			386
(Gain) on extinguishment of debt		—			(2,954	)
Other operating expenses		760			2,458
Total operating expenses		214,030			167,225
Operating loss		(110,797	)		(48,448	)
Other expense, net:
Interest expense		(7,064	)		(11,160	)
Interest income		17			14
Unrealized (loss)/gain on investments, net		(42	)		2,451
Gain on debt forgiveness		4,500			—
Other (expense) income, net		(2,900	)		157
Total other expense, net		(5,489	)		(8,538	)
Loss before taxes		(116,286	)		(56,986	)
Income tax (benefit)/expense		(1,728	)		864
Net loss and comprehensive loss	$	(114,558	)	$	(57,850	)
Net loss per share attributable to
common shareholders
Basic	$	(2.77	)	$	(1.41	)
Diluted	$	(2.77	)	$	(1.41	)
Weighted-average common shares outstanding
Basic		41,332			40,940
Diluted		41,332			40,940

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Stockholders' Equity

(In thousands, except share amounts) (Unaudited)


	Three Months Ended December 31, 2023
					Common
					Stock and
					Additional
	Number of		Number of		Paid-In		Accumulated
	Shares		Warrants		Capital		Deficit			Total
Balance at September 30, 2023		40,940,326		4,899,497	$	271,155	$	(71,119	)	$	200,036

Stock compensation expense		—		—		427		—			427
Net loss		—		—		—		(57,850	)		(57,850	)
Balance at December 31, 2023		40,940,326		4,899,497		271,582		(128,969	)		142,612


	Three Months Ended December 31, 2024
					Common
					Stock and
					Additional
	Number of		Number of		Paid-In		Accumulated
	Shares		Warrants		Capital		Deficit			Total
Balance at September 30, 2024		41,331,719		4,899,497	$	272,376	$	(162,134	)	$	110,242

Stock compensation expense		—		—		279		—			279
Net loss		—		—		—		(114,558	)		(114,558	)
Balance at December 31, 2024	$	41,331,719	$	4,899,497	$	272,655	$	(276,692	)	$	(4,037	)

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)


	Three Months Ended December 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(114,558	)	$	(57,850	)
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:
Depreciation and amortization		7,979			13,293
Stock compensation expense		279			427
Unrealized loss/(gain) on investments, net		42			(2,451	)
Deferred income taxes		(2,958	)		428
Amortization of deferred credits		(984	)		(153	)
Amortization of debt discount and issuance costs and accretion of interest into long-term debt		1,390			2,291
Asset impairment		65,665			40,384
Loss on sale of assets		46,691			386
(Gain) on extinguishment of debt		—			(2,954	)
(Gain) on debt forgiveness		(4,500	)		—
Other		3,628			912
Changes in assets and liabilities:
Receivables		(2,934	)		2,736
Expendable parts and supplies		(900	)		415
Prepaid expenses and other operating assets and liabilities		954			2,604
Accounts payable		(11,164	)		(3,903	)
Deferred revenue		5,645			(3,002	)
Accrued expenses and other liabilities		(5,848	)		(1,513	)
Operating lease right-of-use assets and liabilities		12			109
Net cash used in operating activities		(11,561	)		(7,841	)

Cash flows from investing activities:
Capital expenditures		(2,065	)		(6,884	)
Proceeds from sale of aircraft and engines		117,685			53,489
Refund of equipment and other deposits		214			—
Net cash provided by investing activities		115,834			46,605

Cash flows from financing activities:
Proceeds from long-term debt		—			81,855
Principal payments on long-term debt and finance leases		(79,919	)		(137,489	)
Net cash used in financing activities		(79,919	)		(55,634	)

Net change in cash, cash equivalents and restricted cash		24,354			(16,870	)
Cash, cash equivalents and restricted cash at beginning of period		18,630			36,072
Cash, cash equivalents and restricted cash at end of period	$	42,984		$	19,202

Supplemental cash flow information
Cash paid for interest	$	5,686		$	6,948
Operating lease payments in operating cash flows	$	768		$	1,211
Supplemental non-cash operating activities
Right-of-use assets obtained in exchange for lease liabilities	$	—		$	339
Supplemental non-cash financing activities
Principal forgiven	$	4,500		$	—

See accompanying notes to these condensed consolidated financial statements.

MESA AIR GROUP, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Organization and Operations

About Mesa Air Group, Inc.

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 76 cities in 32 states, Cuba, and Mexico. As of December 31, 2024, Mesa operated a fleet of 60 regional aircraft consisting of 54 E-175 aircraft and six CRJ-900 aircraft with approximately 228 daily departures. The aircraft in Mesa’s fleet were operated under the Company’s Capacity Purchase Agreement ("CPA"), leased to a third party, held for sale, or maintained as operational spares. Mesa operates all of its flights as United Express pursuant to the terms of the CPA entered into with United. Except as set forth in the following sentence, all of the Company’s consolidated contract revenues for the three months ended December 31, 2024 and December 31, 2023 were derived from operations associated with the CPA, leases of aircraft to a third party, and Mesa Pilot Development ("MPD"). Revenues during the three months ended December 31, 2023 also included revenues derived from our Flight Services Agreement ("FSA") with DHL Network Operations (USA), inc. ("DHL"), which terminated in March 2024. Additionally, our leases of aircraft to a third party terminated upon the sale of such aircraft to United during the three months ended December 31, 2024.

The United CPA involves a revenue-guarantee arrangement whereby United pays fixed-fees for each aircraft under contract, departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time), and reimbursement of certain direct operating expenses in exchange for providing flight services. United also pays certain expenses directly to suppliers, such as fuel, ground operations and landing fees. Under the terms of the CPA, United controls route selection, pricing, and seat inventories, reducing our exposure to fluctuations in passenger traffic, fare levels, and fuel prices.

Merger Agreement

On April 4, 2025, the Company entered into an Agreement, Plan of Conversion and Plan of Merger (the "Merger Agreement") with Republic Airways Holdings, Inc., a Delaware corporation ("Republic"). Subject to the terms and conditions of the Merger Agreement, Republic will merge with and into the Company (the "Merger"), with the Company continuing as the surviving corporation following the Merger. In connection with the Merger, immediately prior to the effective time of the Merger (the "Effective Time"), the Company will convert from a Nevada corporation to a Delaware corporation pursuant to a Plan of Conversion (the "Conversion).

Effect on Capital Stock

At the Effective Time, each share of common stock (“Company Common Stock”), par value $0.001 per share, of the Company issued and outstanding immediately prior to the Effective Time (other than any Cancelled Shares (as defined in the Merger Agreement) and dissenting shares held by stockholders who (i) have not voted in favor of the Merger or consented to it in writing and (ii) have properly demanded appraisal of such shares of Company Common Stock in accordance with, and have complied in all respects with, the provisions of Section 262 of the Delaware General Corporation Law), shall thereupon be converted into the right to receive 584.90 validly issued, fully paid and non-assessable shares of common stock (“Mesa Common Stock”), no par value per share, of Mesa (the “Merger Consideration”).

Treatment of Equity Awards

Immediately prior to the Effective Time, (i) any vesting conditions applicable to each Parent RSU (as defined in the Merger Agreement) shall, automatically and without any required action on the part of the holder thereof, accelerate in full, and (ii) each Parent RSU shall, automatically and without any required action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Parent RSU to receive the number of shares of Mesa Common Stock subject to such Parent RSU immediately prior to the Effective Time.

Immediately prior to the Effective Time, (i) each outstanding Company RSU (as defined in the Merger Agreement) that has vested in accordance with its terms (including each outstanding Company RSU that will become vested upon the closing of the Merger) (a “Vested Company RSU”) shall, automatically and without any required action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Vested Company RSU to receive a number of whole shares of Company Common Stock (rounded up to the next whole share of Company Common Stock), which shares of Company Common Stock shall be converted into Mesa Common Stock, and (ii) each outstanding Company RSU that is not a Vested Company RSU (an “Unvested Company RSU”) shall, automatically and without any required action on the

part of the holder thereof, be assumed by Mesa and converted into the right to receive an award of restricted shares of Mesa Common Stock pursuant to the Parent Equity Award Plan (as defined in the Merger Agreement) (each, a “Parent Restricted Stock Award”) in an amount equal to the number of whole shares of Mesa Common Stock (rounded up to the next whole share of Mesa Common Stock) equal to the product obtained by multiplying (x) the Exchange Ratio by (y) the total number of shares of Company Common Stock subject to such Unvested Company RSU immediately prior to the Effective Time. Each Company RSU Award assumed and converted into a Mesa Restricted Stock Award shall continue to have, and shall be subject to, the same terms and conditions (including with respect to vesting) as applied to the corresponding Company RSU Award as of immediately prior to the Effective Time.

Conditions to the Merger

Each of Mesa’s and the Company’s obligation to consummate the Merger is subject to a number of conditions, including, among others, the following, as further described in the Merger Agreement: (i) approval of the transactions contemplated under the Merger Agreement by (a) the holders of at least two-thirds of the outstanding shares of Company Common Stock entitled to vote thereon and (b) the holders of a majority of the outstanding shares of Mesa Common Stock, (ii) expiration of the waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) effectiveness of the registration statement relating to the transaction, (iv) the shares of Mesa Common Stock to be issued in the Merger being approved for listing on NASDAQ, (v) no governmental entity shall have enacted, issued, promulgated, enforced or entered any law or order that has the effect of making illegal, enjoining, or otherwise restraining or prohibiting the consummation of the transactions contemplated under the Merger Agreement, (vi) the receipt of requisite approvals from specified aviation authorities, (vii) the representations and warranties of the other party being true and correct, subject to the materiality standards contained in the Merger Agreement, (viii) material compliance by the other party with its covenants, (ix) no material adverse effect having occurred with respect to the other party since the signing of the Merger Agreement, (x) the satisfaction of certain specified conditions of the Three Party Agreement (as defined below), (xi) United shall not have materially breached the terms of the CPA Side Letter (as defined in the Merger Agreement) or provided Mesa or the Company with written notice of its intention not to perform or comply with any of the terms or conditions under the Go-Forward CPA (as defined in the Merger Agreement), and (xiii) the filing by Mesa of its Form 10-K for the period ended September 30, 2024 and Form 10-Q for the period ended December 31, 2024.

Representations and Warranties; Covenants

The Merger Agreement contains customary representations, warranties and covenants by Mesa and the Company. The Merger Agreement also contains customary pre-closing covenants, including the obligation of Mesa and the Company to conduct their respective businesses in the ordinary course consistent with past practice and to refrain from taking specified actions without the consent of the other party. Each of Mesa and the Company has agreed not to solicit any offer or proposal for specified alternative transactions, or, subject to certain exceptions relating to the receipt of unsolicited offers that may be deemed to be “superior proposals” (as defined in the Merger Agreement), to participate in discussions or engage in negotiations regarding such an offer or proposal with, or furnish any nonpublic information regarding such an offer or proposal to, any person that has made such an offer or proposal.

Termination and Termination Fee

The Merger Agreement contains certain customary termination rights, including, among others, (i) the right of either Mesa or the Company to terminate the Merger Agreement if Mesa or the Company’s stockholders fail to approve the Merger, (ii) the right of either Mesa or the Company to terminate the Merger Agreement if (a) the board of directors of the other party changes its recommendation to approve the transactions or (b) the other party materially breaches any of its representations, warranties or covenants contained in the Merger Agreement in a manner that causes certain conditions to closing to not be satisfied, (iii) the right of either Mesa or the Company to terminate the Merger Agreement if, prior to the receipt of such party’s stockholder approval, such party accepts a superior proposal and such party enters into a definitive agreement for such superior proposal and pays the termination fee to the other party, (iv) the right of either Mesa or the Company to terminate the Merger Agreement if the Merger has not occurred by January 5, 2026, and a further extension until April 6, 2026, in certain circumstances (the “Outside Date”), and (v) the right of the Company to terminate the Merger Agreement if there is a breach of the Three Party Agreement or the CPA Side Letter in a manner that causes certain conditions to closing to not be satisfied. If the Merger Agreement is terminated pursuant to certain termination rights, the terminating party will be required to pay a termination fee of $1.5 million to the non-terminating party.

Description of Merger Agreement Not Complete

The Merger Agreement and the above description have been included to provide investors and security holders with information regarding the terms of the Merger Agreement. They are not intended to provide any other factual information about Mesa or the Company. The representations, warranties, covenants and other agreements contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement; and may be subject to limitations agreed upon by the parties, including being qualified and modified by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them. Investors should be aware that the representations, warranties, covenants and other agreements or any description thereof may not reflect the actual state of facts or condition of Mesa or the Company. Moreover, information

concerning the subject matter of the representations, warranties, covenants and other agreements may change after the date of the Merger Agreement. Further, investors should read the Merger Agreement not in isolation, but only in conjunction with the other information that Mesa includes in reports, statements and other filings it makes with the Securities and Exchange Commission (the “SEC”).

Three Party Agreement

Concurrently with the execution and delivery of the Merger Agreement, Mesa, the Company and United, among other parties, entered into that certain Three Party Agreement (the “Three Party Agreement”), pursuant to which, among other things: (i) Mesa will take certain actions at or prior to the closing of the Merger to dispose of certain assets, extinguish certain liabilities and effectuate certain related transactions; (ii) United will take certain actions at or prior to the closing of the Merger to facilitate Mesa’s actions in the foregoing clause (i); and (iii) Mesa at the closing of the Merger will conduct a primary issuance of shares of Mesa Common Stock equal to six percent of the issued and outstanding shares of Mesa Common Stock after giving effect to the issuance of Mesa Common Stock in the Merger (the “Primary Issuance”), which Primary Issuance will (a) first become available to United to the extent of certain financial contributions made by United to Mesa at or prior to the effective time of the Merger, (b) second, to the extent of any remainder, become available to the surviving corporation to satisfy certain liabilities, and (c) third, to the extent of any remainder, become available on a pro rata basis to the persons who, as of immediately prior to the Effective Time, held shares of Mesa Common Stock.

Three Party Agreement

Concurrently with the execution of the Merger Agreement, the Company, Republic, and United, among other parties, entered into the Three Party Agreement, which provides for, among other things, the following, each subject to the completion of the Merger Agreement:

•

Termination of the United CPA.

•

The Company to sell or dispose of all remaining Eligible Assets (as defined in the Three Party Agreement).

•

The Company to extinguish all remaining debt with cash and sale of assets. Any remaining debt will be assumed by the surviving corporation or forgiven by United.

•

A three percent (3%) increase in CPA block hour rates, retroactive to January 1, 2025.

•

The transfer of all of the Company's rights and obligations under its agreements with Archer Aviation Inc. ("Archer") (as discussed in Note 15).

•

The issuance by the Company (referred to in the Three Party Agreement as the “Primary Issuance”) of shares of Company common stock equal to six percent (6%) of the issued and outstanding shares of Company common stock after giving effect to the issuance of Company common stock in the Merger, which shares will (a) first become available to United to the extent of certain financial contributions made by United to the Company at or prior to the effective time of the Merger, (b) second, to the extent of any remainder, become available to the surviving corporation to satisfy certain liabilities, and (c) third, to the extent of any remainder, become available on a pro rata basis to the persons who, as of immediately prior to the effective time of the Merger, held shares of Company common stock.

The foregoing description of the Merger Agreement and the Three Party Agreement is only a summary, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement and the Three Party Agreement, which are attached as Exhibit 2.1 and 10.1, respectively, to the Current Report on Form 8-K filed by the Company with the SEC on April 8, 2025.

Liquidity and Going Concern

During our three months ended December 31, 2024 and fiscal year ended September 30, 2024, the decrease in scheduled flying activity associated with the transition of our operations with American to United, increased costs associated with pilot wages, together with increasing interest rates adversely impacted our financial results, cash flows, financial position, and other key financial ratios. Additionally, United has asked us to accelerate the removal of our CRJ-900 aircraft and transition the pilots to our E-175 fleet. These events will lead to increased costs and impact our block hour capabilities while these pilots are in training.

eight E-175 aircraft and a $65.7 million impairment loss primarily related to the write down of net book value of 10 E-175 aircraft. These conditions and events raised concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months from the filing of this Form 10-Q.

To address such concerns, management developed and implemented several material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months. The following measures were implemented during the three months ended December 31, 2024, and through the date of issuance of the financial statements.

•

On April 4, 2025, the Company entered into the Three Party Agreement between United, Republic, and the Company, which provides for, among other things, the following, each subject to the completion of the Merger Agreement:

Termination of the United CPA.

The Company to sell or dispose of all remaining Eligible Assets (as defined in the Three Party Agreement).

The Company to extinguish all remaining debt with cash and sale of assets. Any remaining debt will be assumed by the surviving corporation or forgiven by United.

A three percent (3%) increase in CPA block hour rates, retroactive to January 1, 2025.

The transfer of all of the Company's rights and obligations under its agreements with Archer (as discussed in Note 15).

•

On April 4, 2025, we entered into the Sixth Amendment to the Third Amended and Restated Capacity Purchase Agreement with United which provides for the following:

The extension of the CPA rate increases agreed upon in the First Amendment to our Third Amended and Restated United CPA and the Second Amendment to our Third Amended and Restated United CPA, dated January 11, 2024, and January 19, 2024, respectively (the "January 2024 United CPA Amendments”), retroactive to January 1, 2025, through March 31, 2026.

The extension of incentives for achieving certain performance metrics, retroactive to July 1, 2024, through March 31, 2026.

•

On April 4, 2025, we entered into the Sixth Amendment to Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of an existing financial covenant default with respect to the period ended March 31, 2025, and a projected financial covenant default with respect to the periods ending June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026, each relating to a minimum liquidity requirement under our United Revolving Credit Facility.

•

On April 3, 2025, we entered into a purchase agreement with a third party which provides for the sale of 23 GE model CF34-8C engines to the third party for expected gross proceeds of $16.3 million, which will be used to pay down our UST Loan.

•

On December 31, 2024, we entered into an Aircraft Purchase Agreement with United which provides for the sale of 18 E-175 aircraft to United for gross proceeds of $227.7 million and net proceeds of $84.7 million after the retirement of debt. Subsequently, we closed the sale of all 18 aircraft to United.

•

On December 30, 2024, we received notice from United that $4.5 million of our Effective Date Revolving Loan balance under our United Revolving Credit Facility has been forgiven for achieving certain operational performance metrics outlined in the United CPA.

•

On December 24, 2024, we entered into a purchase agreement with a third party which provides for the sale of 15 CRJ-900 airframes to the third party for expected gross proceeds of $19.0 million, which will be used to pay down our UST Loan. On April 3, 2025, the purchase agreement was amended to include an additional 14 CRJ-900 airframes to be sold to the third party for expected gross proceeds of $9.1 million. The total expected gross proceeds of $28.1 million will be used to pay down our UST Loan.

•

On December 23, 2024, we entered into an agreement with the United States Department of the Treasury (the "UST") to lower the minimum collateral coverage ratio ("CCR") covenant to .99 to 1.0 effective as of November 22, 2024 through February 28, 2025. After such date, the CCR will revert to 1.55 to 1.0. The agreement also requires the Company to use its reasonable best efforts to cause counterparties to all Receivables (as defined in the Treasury Loan) (whether or not constituting “Eligible Receivables” (as defined in the Treasury Loan)) of the Company to be paid to the Eligible Receivables Account (as defined in the Treasury Loan). Receivables

generated from the sale of assets that are not Collateral (as defined in the Treasury Loan) are excluded from the scope of the foregoing requirement. As a result of the lower CCR covenant, we are in compliance with this covenant as of September 30, 2024. Additionally, on March 18, 2025, we entered into a new CCR Modification Agreement with the UST to lower the minimum CCR covenant to .91 to 1.0 effective as of February 28, 2025 through the maturity date of the loan.

•

On December 23, 2024, we entered into a Waiver to Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of an existing financial covenant default with respect to the period July 1, 2024 to December 23, 2024 and a projected financial covenant default with respect to the period December 24, 2024 to December 31, 2024, each relating to a minimum liquidity requirement under our United Revolving Credit Facility.

•

On December 23, 2024, we entered into the Fourth Amendment to our Third Amended and Restated United CPA which provides for the following:

Amended certain scheduled exit dates for our E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA).

Added provisions relating to the reimbursement by United of up to $14.0 million of pilot training costs incurred by the Company with respect to its E-175 aircraft.

•

Based on the most recent appraisal value of our spare parts, we have $12.4 million of borrowing capacity under our United Revolving Credit Facility.

•

In addition to already executed agreements to sell aircraft, the Company is actively seeking arrangements to sell other surplus assets primarily related to the CRJ fleet including aircraft, engines, and spare parts to reduce debt and optimize operations.

•

We have delayed and/or deferred major spending on aircraft and engine maintenance to match the current and projected level of flight activity.

The Company believes the plans and initiatives outlined above have effectively alleviated the financial concerns and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements. The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA block hours, maintenance events, labor costs, and other relevant factors. Assumptions used in the forecast may change or not occur as expected.

As of December 31, 2024, the Company has $143.3 million of principal maturity payments on long-term debt due within the next twelve months. We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations, and the liquidity created from the additional measures identified above. If our plans are not realized, we intend to explore additional opportunities to create liquidity by refinancing and deferring repayment of our principal maturity payments that are due within the next twelve months. The Company continues to monitor covenant compliance with its lenders as any noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations.

United Capacity Purchase Agreement

Under the United CPA, we currently have the ability to fly up to 60 aircraft for United. As of December 31, 2024, we operated 54 E-175 and 6 CRJ-900 aircraft under our Third Amended and Restated Capacity Purchase Agreement with United dated December 27, 2022, which amended and restated the Second Amended and Restated Capacity Purchase Agreement dated November 4, 2020 (as amended, the “United CPA” or the "Amended and Restated United CPA"). Under the United CPA, United owned 50 of the E-175 aircraft as of December 31, 2024. The E-175 aircraft owned by United and leased to us have terms expiring between 2024 and 2028. The 10 E-175 aircraft owned by us as of December 31, 2024 and subsequently sold to United have terms expiring in 2028.

In exchange for providing flight services under our United CPA, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based on exceeding established goals for certain operational metrics. United also reimburses us for certain costs on an actual basis, including property tax per aircraft and passenger liability insurance. Other expenses, including fuel and landing fees, are directly paid to suppliers by United.

United reimburses us on a pass-through basis for certain costs related to heavy airframe and engine maintenance, landing gear, auxiliary power units ("APUs") and component maintenance for the aircraft owned by United. Our United CPA permits United, subject to certain conditions, including the payment of certain costs tied to aircraft type, to terminate the agreement in its discretion, or remove aircraft from service, by giving us notice of 90 days or more. If United elects to terminate our CPA in its entirety or permanently remove select aircraft from service, we are permitted to return any of the affected aircraft leased from United at no cost to us.

During and subsequent to the three months ended December 31, 2024, we amended our United CPA, providing for the following:

•

The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments through March 31, 2026.

•

The extension of incentives for achieving certain performance metrics through March 2026.

•

The commitment of a combined fleet of 60 CRJ-900 and E-175 aircraft through February 2025, and an entirely E-175 fleet by March 2025.

•

Reimbursement of up to $14.0 million of expenses related to the transition to an entirely E-175 fleet.

•

Amendment of certain scheduled exit dates for our E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA).

In January 2024, the Amended and Restated United CPA was amended with the January 2024 United CPA Amendments which provide for the following:

•

Increased CPA rates for E-175 aircraft, retroactive to October 1, 2023 through December 31, 2024;

•

Amended certain notice requirements for removal by United of up to eight CRJ-900 Covered Aircraft (as defined in the United CPA) from the United CPA;

•

Extended United's existing utilization waiver for the Company's operation of E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA) to June 30, 2024.

Additionally, in January 2023, in consideration for entering in the Amended and Restated United CPA and providing the revolving line of credit, discussed in Note 8, the Company (i) granted United the right to designate one individual to the Company's board of directors (the "United Designee"), which occurred effective May 2, 2023 with the appointment of Jonathan Ireland and (ii) issued to United 4,042,061 shares of the Company’s common stock equal to approximately 10% of the Company’s issued and outstanding capital stock on such date (the "United Shares"). United's board designee rights will terminate at such time as United's equity ownership in the Company falls below five percent (5%) of the Company's issued and outstanding stock.

United was also granted pre-emptive rights relating to the issuance of any equity securities by the Company and certain registration rights, set forth in a definitive registration rights agreement with United, granting United customary demand registration rights in respect of publicly registered offerings of the Company, subject to usual and customary exceptions and limitations.

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. We ceased operating our CRJ-700 fleet in February 2021 in connection with the transfer of those aircraft into a lease agreement.

Our United CPA is subject to termination prior to its expiration, including under the following circumstances:

•

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.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company and its wholly owned operating subsidiaries. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). All intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto as of and for the year ended September 30, 2024 included in the Company's Annual Report on Form 10-K for the year ended September 30, 2024 on file with the U.S. Securities and Exchange Commission (the "SEC"). Information and footnote disclosures normally included in financial statements have been condensed or omitted in these condensed consolidated financial statements pursuant to the rules and regulations of the SEC and GAAP. These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented.

Segment Reporting

As of December 31, 2024, our chief operating decision maker was the Chief Executive Officer. While we operate under a capacity purchase agreement, we do not manage our business based on any performance measure at the individual contract level. Our chief operating decision maker uses consolidated financial information to evaluate our performance and allocate resources, which is the same basis on which he communicates our results and performance to our Board of Directors. Accordingly, we have a single operating and reportable segment.

Use of Estimates

The preparation of the Company's condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results could differ from those estimates.

Contract Revenue and Pass-through and Other Revenue

We recognize contract revenue when the service is provided under our CPA. Under the CPA, United generally pays for each departure, flight hour or block hour incurred, and an amount per aircraft in service each month with additional incentives or penalties based on flight completion, on-time performance, and other operating metrics. Our performance obligation is met as each flight is completed, and revenue is recognized and reflected in contract revenue.

We recognize pass-through revenue when the service is provided under our CPA. Pass-through revenue represents reimbursements for certain direct expenses incurred including passenger liability insurance, property taxes, other direct costs defined within the agreements, and major maintenance on aircraft leased from United at nominal rates. Our performance obligation is met when each flight is completed or as the maintenance services are performed, and revenue is recognized and reflected in pass-through and other revenue.

We record deferred revenue when cash payments are received or are due from United in advance of our performance. During the three months ended December 31, 2024, we deferred approximately $5.6 million in revenue. Deferred revenue is recognized as flights are completed over the remaining terms of the respective contracts.

The deferred revenue balance as of December 31, 2024 represents our aggregate remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied, and is expected to be recognized as revenue as follows (in thousands):


Periods Ending September 30,	Total Deferred Revenue
2025 (remainder of)	$	3,695
2026		5,449
2027		4,131
2028		2,009
Total	$	15,284

A portion of our compensation under our CPA with United is designed to reimburse the Company for certain aircraft ownership costs. Such costs include aircraft principal and interest debt service costs, aircraft depreciation, and interest expense or aircraft lease expense costs while the aircraft is under contract. We have concluded this component of the compensation under these agreements is lease revenue, as such agreements identify the "right of use" of a specific type and number of aircraft over a stated period of time. We account for the non-lease component 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.

The lease revenue associated with our CPA is accounted for as an operating lease and is reflected as contract revenue in the condensed consolidated statements of operations and comprehensive loss. We recognized $20.2 million and $34.9 million of lease revenue for the three months ended December 31, 2024 and December 31, 2023, respectively. We have not separately stated aircraft rental income in the condensed consolidated statements of operations and comprehensive loss because the use of the aircraft is not a separate activity from the total service provided under our CPA.

Leases

We determine if an arrangement is a lease at inception. As a lessee, we have lease agreements with lease and non-lease components and have elected to account for such components as a single lease component. Our operating lease activities are recorded in operating lease right-of-use assets, current maturities of operating leases, and noncurrent operating lease liabilities in the condensed consolidated balance sheets. As of December 31, 2024, we did not have any leases determined to be finance leases.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Certain variable lease payments are not included in the calculation of the right-of-use assets and lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. In determining the present value of lease payments, we use either the implicit rate in the lease when it is readily determinable or our estimated incremental borrowing rate, based on information available at the lease commencement. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease costs are recognized on a straight-line basis over the lease term, while finance leases result in a front-loaded expense pattern.

As a lessee, we have elected a short-term lease practical expedient on all classes of underlying assets, permitting us to not apply the recognition requirements of ASC 842 to leases with terms of 12 months or less.

We lease, at nominal rates, certain aircraft from United under our CPA, which are excluded from operating lease assets and liabilities as they do not represent embedded leases under ASC 842. Other than such leases at nominal amounts, five of our aircraft are leased from third parties. In the event that we or United decide to exit an activity involving leased aircraft, losses may be incurred. In the event that we exit an activity that results in exit losses, these losses are accrued as each aircraft is removed from operations for early termination penalties, lease settle up and other charges. Additionally, any remaining ROU assets and lease liabilities are written off.

Contract Liabilities

Contract liabilities consist of deferred credits for cost reimbursements from United related to aircraft modifications and pilot training associated with the CPA. The deferred credits are recognized over time depicting the pattern of the transfer of control of services resulting in ratable recognition of revenue over the remaining term of the CPA.

Current and non-current deferred credits are recorded in other accrued expenses and non-current deferred credits in the condensed consolidated balance sheets. Our total current and non-current deferred credit balances at December 31, 2024 and September 30, 2024 were $3.1 million and $4.1 million, respectively. We recognized $1.0 million and $1.0 million of the deferred credits within contract revenue during the three months ended December 31, 2024 and December 31, 2023, respectively.

Maintenance Expense

We operate under an FAA approved continuous inspection and maintenance program. The cost of non-major scheduled inspections and repairs and routine maintenance costs for all aircraft and engines are charged to maintenance expense as incurred.

We account for heavy maintenance and major overhaul costs on our owned E-175 fleet under the deferral method whereby the cost of heavy maintenance and major overhaul is deferred and amortized until the earlier of the end of the useful life of the related asset or the next scheduled heavy maintenance event. Amortization of heavy maintenance and major overhaul costs charged to depreciation and amortization expense was $1.1 million and $0.8 million for the three months ended December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024 and September 30, 2024, our deferred heavy maintenance balance, net of accumulated amortization, was $5.4 million and $6.4 million, respectively.

We account for heavy maintenance and major overhaul costs for all other fleets under the direct expense method whereby costs are expensed to maintenance expense as incurred, except for certain maintenance contracts where labor and materials price risks have been transferred to the service provider and require payment on a utilization basis, such as flight hours. Costs incurred for maintenance and repair for utilization maintenance contracts where labor and materials price risks have been transferred to the service provider are charged to maintenance expense based on contractual payment terms.

Engine overhaul expense totaled $10.1 million and $5.8 million for the three months ended December 31, 2024 and December 31, 2023, respectively, of which $10.1 million and $5.7 million, respectively, was pass-through expense. Airframe C-check expense totaled $8.4 million and $6.4 million for the three months ended December 31, 2024 and December 31, 2023, respectively, of which $7.7 million and $3.8 million, respectively, was pass-through expense.

Assets Held for Sale

We classify assets as held for sale when our management approves and commits to a formal plan of sale that is probable of being completed within one year. Assets designated as held for sale are recorded at the lower of their current carrying value or their fair market value, less costs to sell, beginning in the period in which the assets meet the criteria to be classified as held for sale. See Note 5 for further discussion of our assets classified as held for sale as of December 31, 2024.

Recent Accounting Pronouncements

We continue to evaluate recent accounting pronouncements and the effect that new standards and guidance has on our consolidated financial statements. During the three months ended December 31, 2024, the Company applied new

disclosure requirements as described in Accounting Standards Update 2023-07. There are no other recent accounting pronouncements that apply to the Company.

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents that are primarily held by financial institutions in the United States and accounts receivable. Amounts on deposit with a financial institution may at times exceed federally insured limits. We maintain our cash accounts with high credit quality financial institutions and, accordingly, minimal credit risk exists with respect to the financial institutions.

As of December 31, 2024, we had $3.0 million in restricted cash. We have an agreement with a financial institution for a letter of credit facility and to issue letters of credit for particular airport authorities, worker's compensation insurance, property and casualty insurance and other business needs as required in certain lease agreements. Pursuant to the terms of this agreement, $3.0 million of outstanding letters of credit are required to be collateralized by amounts on deposit.

Significant customers are those which represent more than 10% of our total revenue or net accounts receivable balance at each respective balance sheet date. All of our revenue for the three months ended December 31, 2024 and December 31, 2023 was derived from the United CPA, DHL FSA, leases of our CRJ-700 aircraft to a third party, and MPD. Substantially all of our accounts receivable at December 31, 2024 and September 30, 2024 was derived from these agreements.

United accounted for approximately 98% and 96% of our total revenue for the three months ended December 31, 2024 and December 31, 2023, respectively. A termination of the United CPA would have a material adverse effect on our business prospects, financial condition, results of operations, and cash flows.

Amounts billed under the United CPA are subject to our interpretation of the applicable agreement and are subject to audit by United. Periodically, our United disputes amounts billed and pay amounts less than the amount billed. Ultimate collection of the remaining amounts not only depends upon the Company prevailing under the applicable audit, but also upon the financial well-being of United. As such, we review amounts due based on historical collection trends, the financial condition of United, and current external market factors and record a reserve for amounts estimated to be uncollectible in accordance with the applicable guidance for expected credit losses. Our allowance for doubtful accounts was not material as of December 31, 2024 or September 30, 2024. If our ability to collect these receivables and the financial viability of United is materially different than estimated, our estimate of the allowance for credit losses could be materially impacted.

Assets Held for Sale

During the three months ended December 31, 2024, management continued our plan to sell certain of our aircraft and related parts. As of September 30, 2024, the Company had a total of 26 airframes, 55 engines, two CRJ-700 aircraft, and certain spare parts classified as held for sale. The Company completed the sale of two CRJ-700 aircraft, and four GE Model CF34-8C engines during the three months ended December 31, 2024. Additionally, during the three months ended December 31, 2024, the Company agreed to sell 18 E-175 aircraft to United and completed the sale of eight of the 18 aircraft. The remaining ten E-175 aircraft as part of the sale were still in use, and as such, not considered held for sale as of December 31, 2024.

During the three months ended December 31, 2024, the Company determined that two additional CRJ-900 airframes met the criteria to be classified as assets held for sale. We have a total of 28 airframes, 51 engines, and certain spare parts classified as held for sale as of December 31, 2024 with a net book value of $80.7 million, all of which is classified as current assets on our condensed consolidated balance sheet.

Balance Sheet Information

Certain significant amounts included in the condensed consolidated balance sheets consisted of the following (in thousands):


	December 31,			September 30,
	2024			2024
Expendable parts and supplies, net:
Expendable parts and supplies	$	39,404		$	39,089
Less: expendable parts warranty		(5,574	)		(6,079	)
Less: obsolescence		(4,658	)		(4,738	)
	$	29,172		$	28,272
Property and equipment, net:
Aircraft and other flight equipment	$	319,831		$	591,421
Other equipment		9,788			9,503
Total property and equipment		329,619			600,924
Less: accumulated depreciation		(126,052	)		(174,573	)
	$	203,567		$	426,351
Other assets:
Investments in equity securities	$	300		$	300
Lease incentives		—			812
Contract asset		5,400			6,081
Other		1,129			516
	$	6,829		$	7,709
Other accrued expenses:
Accrued property taxes	$	4,722		$	4,650
Accrued interest		3,207			2,997
Accrued vacation		7,308			7,421
Accrued lodging		3,847			4,433
Accrued maintenance		1,911			2,493
Accrued employee benefits		1,528			1,075
Accrued fleet operating expense		3,118			2,751
Other		9,178			6,488
	$	34,819		$	32,308
Other noncurrent liabilities:
Warrant liabilities	$	25,225		$	25,225
Lease incentive obligations		—			1,050
Long-term employee benefits		537			485
Other		913			1,819
	$	26,675		$	28,579

Impairment of Long-lived Assets

The Company monitors for any indicators of impairment of the long-lived fixed assets. When certain conditions or changes in the economic situation exist, the assets may be impaired and the carrying amount of the assets exceed their fair value. The assets are then tested for recoverability of carrying amount. The Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired, the undiscounted net cash flows estimated to be generated by those assets are less than the carrying amount of those assets, and the net book value of the assets exceeds their 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 impairment indicators exist with respect to any of the 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.

During the three months ended December 31, 2024, the Company assessed whether any indicators of impairment existed in any of our long-lived asset groups and noted that impairment indicators existed i.) due to the removal of CRJ-900

aircraft from the United CPA and ii.) due to estimated proceeds on the expected sale of 10 E-175 aircraft being significantly less than the carrying value. The Company concluded that the net book value of our E-175 aircraft was impaired and recorded a $60.7 million impairment adjustment. The Company concluded that no impairment was necessary on its CRJ-900 aircraft.

During the three months ended December 31, 2024, the Company reevaluated the fair value of our held for sale assets and recorded a net impairment true-up adjustment of $3.5 million. The Company additionally reclassified two CRJ-900 airframes to held for sale during the period and recorded an impairment loss of $1.5 million. No other indicators of impairment were present during the quarter and no further steps were determined to be necessary.

The Company’s assumptions about future conditions relevant to the assessment of potential impairment of its long-lived assets are subject to uncertainty, and the Company will continue to monitor these conditions in future periods as new information becomes available, and will update its analyses accordingly.

Depreciation Expense on Property and Equipment:

Depreciation of property and equipment totaled $8.0 million and $13.3 million for the three months ended December 31, 2024 and December 31, 2023, respectively.

Fair Value Measurements

Fair value is an exit price representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Accounting standards include disclosure requirements relating to the fair values used for certain financial instruments and establish a fair value hierarchy. The hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels:


Level 1	—	Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2	—	Inputs, other than quoted prices in active markets, which are observable either directly or indirectly; and
Level 3	—	Unobservable inputs in which there is little or no market data, requiring an entity to develop its own assumptions.

Other than our assets held for sale, investments in equity securities, and warrant liabilities, described in Notes 5, 6, and 14, respectively, we did not measure any of our assets or liabilities at fair value on a recurring or nonrecurring basis as of December 31, 2024 and September 30, 2024.

The carrying values reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments.

Our debt agreements are not traded on an active market. We have determined the estimated fair value of our debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable and, therefore, could be sensitive to changes in inputs. We utilize the discounted cash flow method to estimate the fair value of Level 3 debt.

The carrying value and estimated fair value of our total long-term debt and finance leases, including current maturities, were as follows (in millions):



	December 31, 2024				September 30, 2024
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Long-term debt and finance leases, including current maturities(1)	$	230.6	$	219.9	$	315.2	$	305.3

(1) Current and prior period long-term debts' carrying and fair values exclude net debt issuance costs.

Long-Term Debt, Finance Leases, and Other Borrowings

Long-term debt as of December 31, 2024 and September 30, 2024, consisted of the following (in thousands):


	December 31,			September 30,
	2024			2024

Notes payable to secured parties, due in semi-annual installments, interest based on SOFR plus interest spread at 4.75% to 6.25% through 2028, collateralized by the underlying aircraft	$	85,469		$	85,469
Notes payable to secured parties, due in quarterly installments, interest based on SOFR plus interest at spread 2.20% to 2.32% for senior note & 4.50% for subordinated note through 2028, collateralized by the underlying aircraft		—			73,884
Revolving credit facility, quarterly interest based on SOFR plus interest spread at 4.50% through 2028		33,018			37,520
Other obligations due to financial institution, monthly and/or quarterly interest due from 2022 through 2031, collateralized by the underlying equipment		—			4,681
Notes payable to the UST, quarterly interest based on SOFR plus interest spread at 3.50% through 2025		112,121			113,656
Gross long-term debt, including current maturities		230,608			315,210
Less unamortized debt issuance costs		(1,433	)		(2,395	)
Less notes payable warrants		(2,114	)		(2,544	)
Net long-term debt, including current maturities		227,061			310,271
Less current portion, net of unamortized debt issuance costs		(143,275	)		(50,455	)
Net long-term debt	$	83,786		$	259,816

Principal maturities of long-term debt as of December 31, 2024, and for each of the next five years are as follows (in thousands):


Periods Ending September 30,	Total Principal
2025 (remainder of)	$	30,326
2026		144,055
2027		31,725
2028		11,961
2029		12,541
	$	230,608

The carrying value of collateralized aircraft and equipment as of December 31, 2024 was approximately $217.4 million.

Enhanced Equipment Trust Certificate ("EETC")

In December 2015, an Enhanced Equipment Trust Certificate ("EETC") pass-through trust was created to issue pass-through certificates to obtain financing for new E-175 aircraft. As of December 31, 2024, we had $85.5 million of equipment notes outstanding issued under the EETC financing included in long-term debt in the condensed consolidated balance sheets. The structure of the EETC financing consists of a pass-through trust created by Mesa to issue pass-through certificates, which represent fractional undivided interests in the pass-through trust and are not obligations of Mesa.

The proceeds of the issuance of the pass-through certificates were used to purchase equipment notes which were issued by Mesa and secured by its aircraft. The payment obligations under the equipment notes are those of Mesa. Proceeds received from the sale of pass-through certificates were initially held by a depositary in escrow for the benefit of the certificate holders until Mesa issued equipment notes to the trust, which purchased such notes with a portion of the escrowed funds.

We evaluated whether the pass-through trust formed for the EETC financing is a Variable Interest Entity ("VIE") and required to be consolidated. We have determined we do not have a variable interest in the pass-through trust, and therefore, we have not consolidated the pass-through trust with our financial statements.

Subsequent to December 31, 2024, United assumed the EETC note as part of its purchase of the remaining 10 E-175 aircraft in the E-175 Aircraft Purchase Agreement with United.

United Revolving Credit Facility

On December 27, 2022, in connection with entering into the Amended and Restated United CPA, (i) United agreed to purchase and assume all of First Citizens’ rights and obligations as a lender under the Existing Facility pursuant to an Assignment and Assumption Agreement, (ii) United and CIT Bank agreed to amend the Existing Facility pursuant to an Amendment No. 1, dated December 27, 2022 (“Amendment No. 1”), and an Amendment No. 2, dated January 27, 2023 (“Amendment No. 2”; the Existing Facility as amended by Amendment No. 1 and Amendment No. 2, the "Amended Facility"), and (iii) Wilmington Trust, National Association agreed to assume all of CIT Bank’s rights and obligations as Administrative Agent pursuant to an Agency Resignation, Appointment and Assumption Agreement, dated as of January 27, 2023. Amendment No. 1, among other things, extends the Maturity Date from the earlier to occur of November 30, 2028, or the date of the termination of the Amended and Restated United CPA; provides for a revolving loan of $10.5 million plus fees and expenses, which is due January 31, 2024, subject to certain mandatory prepayment requirements; provides for Revolving Commitments equal to $30.7 million plus the original principal amount of the $10.5 million revolving loan; amortization of the obligations outstanding under the existing CIT Agreement commencing quarterly until March 31, 2025; and a covenant capping Restricted Payments (as defined in the Amended Facility) at $5.0 million per fiscal year, a consolidated interest and rental coverage ratio of 1.00 to 1.00 covenant, and a Liquidity (as defined in the Amended Facility) requirement of not less than $15.0 million at the close of any business day. Subsequent to June 30, 2024, United agreed to grant the Company a waiver on the $15.0 million minimum liquidity requirement through December 31, 2024. Interest assessed under the Amended Facility is 3.50% for Base Rate Loans and 4.50% for Term SOFR Loans (as such terms are defined in the Amended Facility). Amendment No. 2, among other things, amends the definition of Controlled Account (as defined in the Amended Facility). Amounts borrowed under this Amended Facility are secured by a collateral pool consisting of a combination of expendable parts, rotable parts and engines and a pledge of the Company’s stock in certain aviation companies. United funded $25.5 million as of the closing date of Amendment No. 1, to be used for general corporate purposes.

The United line of credit contains an additional deemed prepayment of $15 million with potential forgiveness upon the achievement of a certain number of block hours as well as maintaining a CCF of at least 99.3% over any rolling four-month period from April 2023 through December 2025. In order to earn forgiveness on the deemed prepayment, we must also have repaid the bridge loan in full. During fiscal year 2024, the bridge loan was repaid in full, and $10.5 million of the potential $15 million achieved was recognized as a deemed prepayment. The remaining $4.5 million was recognized as a deemed prepayment during the three months ended December 31, 2024.

On September 6, 2023, the Company amended the existing United Credit Facility to (i) permit the Company to re-draw approximately $7.9 million of the Effective Date Bridge Loan (as defined in the United Credit Facility) previously repaid; (ii) increased the amount of Revolving Commitments (as defined in the United Credit Facility) from $30.7 million to $50.7 million, in each case, plus the original principal amount of the Effective Date Bridge Loan and subject to the Borrowing Base (as defined in the United Credit Facility); and (iii) amended the calculation of the Borrowing Base. Amounts borrowed under this facility bear interest at 3.50% for Base Rate Loans and 4.50% per annum for Term SOFR Loans. Amounts borrowed under the Amended Credit Facility are secured by a collateral pool consisting of a combination of expendable parts, rotable parts and engines, a pledge of certain of the Company’s bank accounts and a pledge of the Company’s stock in certain aviation companies.

Loan Agreement with the United States Department of the Treasury

On October 30, 2020, we entered into a loan and guarantee agreement with the U.S. Department of the Treasury (the “U.S. Treasury”) for a secured loan facility of up to $200.0 million that matures in October 2025 (“the Treasury Loan”). During the first quarter of fiscal 2021, we borrowed an aggregate of $195.0 million. No further borrowings are available under the Treasury Loan.

The Treasury Loan bears interest at a variable rate equal to (a)(i) the SOFR rate divided by (ii) one minus the Eurodollar Reserve Percentage plus (b) 3.50%. Accrued interest on the loans is payable in arrears, or paid-in-kind by increasing the principal balance of the loan by such interest payment, on the first business day following the 14th day of each March, June, September, and December. As of December 31, 2024, the all-in rate was 8.12%.

All principal amounts outstanding under the Treasury Loan are due and payable in a single installment on October 30, 2025. Commencing in June 2022, we initiated the payment of interest in lieu of increasing the principal amount of the loan. Our obligations under the Treasury Loan are secured by certain aircraft, aircraft engines, accounts receivable, ground service equipment, flight simulators, and tooling (collectively, the “Collateral”). The obligations under the Treasury Loan are guaranteed by the Company and Mesa Air Group Inventory Management. The proceeds were used for general corporate purposes and operating expenses, to the extent permitted by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Voluntary prepayments of the Treasury Loan may be made, in whole or in part, without premium or penalty, at any time and from time to time. Amounts prepaid may not be reborrowed. Mandatory prepayments of the Treasury Loan are required, without premium or penalty, to the extent necessary to comply with the covenants discussed below, certain dispositions of the Collateral, certain debt issuances secured by liens on the Collateral, and certain insurance payments related to the Collateral. In addition, if a “change of control” (as defined in the Treasury Loan) occurs with respect to Mesa Airlines, we will be required to repay the loans outstanding under the Treasury Loan.

The Treasury Loan requires us, under certain circumstances, including within 10 business days prior to the last business day of March and September of each year beginning March 2021, to appraise the value of the Collateral and recalculate the collateral coverage ratio. If the calculated collateral coverage ratio is less than 1.55 to 1.0, we are required either to provide additional Collateral (which may include cash collateral) to secure the 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. On December 23, 2024, we entered into an agreement with the UST to lower the minimum collateral coverage ratio ("CCR") covenant to .99 to 1.0 effective as of November 22, 2024 through February 28, 2025. After such date, the CCR will revert to 1.55 to 1.0. The agreement also requires the Company to use its reasonable best efforts to cause counterparties to all Receivables (as defined in the Treasury Loan) (whether or not constituting “Eligible Receivables” (as defined in the Treasury Loan)) of the Company to be paid to the Eligible Receivables Account (as defined in the Treasury Loan). Receivables generated from the sale of assets that are not Collateral (as defined in the Treasury Loan) are excluded from the scope of the foregoing requirement. We are in compliance with this covenant as of December 31, 2024.

The Treasury Loan contains two (2) financial covenants, a minimum collateral coverage ratio and a minimum liquidity level. The Treasury Loan also contains customary negative and affirmative covenants for credit facilities of this type, including, among others: (a) limitations on dividends and distributions; (b) limitations on the creation of certain liens; (c) restrictions on certain dispositions, investments, and acquisitions; (d) limitations on transactions with affiliates; (e) restrictions on fundamental changes to the business, and (f) restrictions on lobbying activities. Additionally, we are 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.

In connection with the Treasury Loan and as partial compensation to the U.S. Treasury for the provision of financial assistance under the Treasury Loan, we issued to the U.S. Treasury warrants to purchase an aggregate of 4,899,497 shares of our common stock at an exercise price of $3.98 per share, which was the closing price of the common stock on April 9, 2020. The exercise price and number of shares of common stock issuable under the warrants are subject to adjustment as a result of anti-dilution provisions contained in the warrants for certain stock issuances, dividends, and other corporate actions. The warrants expire on the fifth anniversary of the date of issuance and are exercisable either through net share settlement or net cash settlement, at our option. The fair value of the warrants was estimated using a Black-Scholes option pricing model and recorded in stockholders' equity with an offsetting debt discount to the Treasury Loan in the condensed consolidated balance sheets.

Loss Per Share

Calculations of net loss per common share were as follows (in thousands, except per share amounts):


	Three Months Ended December 31,
	2024			2023
Net loss	$	(114,558	)	$	(57,850	)
Basic weighted average common shares outstanding		41,332			40,940
Diluted weighted average common shares outstanding		41,332			40,940
Net loss per common share attributable to Mesa Air Group:
Basic	$	(2.77	)	$	(1.41	)
Diluted	$	(2.77	)	$	(1.41	)

Basic income or loss per common share is computed by dividing net income or loss attributable to Mesa Air Group by the weighted average number of common shares outstanding during the period.

The number of incremental shares from the assumed issuance of shares relating to restricted stock and exercise of warrants is calculated by applying the treasury stock method. Share-based awards and warrants whose impact is anti-dilutive under the treasury stock method are excluded from the diluted net income or loss per share calculation. In loss periods, these incremental shares are excluded from the calculation of diluted loss per share, as the inclusion of approximately 1.0 million unvested restricted shares and 4.9 million warrants would have an anti-dilutive effect.

10.

Common Stock

As discussed in Note 8, we issued warrants to the U.S. Treasury to purchase shares of our common stock, no par value, at an exercise price of $3.98 per share. The exercise price and number of shares issuable under the warrants are subject to adjustment as a result of anti-dilution provisions contained in the warrants for certain stock issuances, dividends, and other corporate actions. The warrants expire on the fifth anniversary of the date of issuance and are exercisable either through net share settlement or net cash settlement, at our option. The warrants were accounted for within equity at a grant date fair value determined under the Black-Scholes option pricing model. As of December 31, 2024, 4,899,497 warrants were issued and outstanding.

We have not historically paid dividends on shares of our common stock. Additionally, the Treasury Loan contains restrictions that limit our ability to or prohibit us from paying dividends to holders of our common stock.

11.

Income Taxes

Our effective tax rate ("ETR") from continuing operations was 1.5% and -1.5% for the three months ended December 31, 2024 and 2023, respectively. The Company’s ETR during the three months ended December 31, 2024 decreased from the prior year tax rate, primarily as a result of certain tax depreciation differences, state taxes, and changes in valuation allowance against federal and state net operating losses.

We continue to maintain a valuation allowance on a portion of our federal and state net operating losses in jurisdictions with shortened carryforward periods or in jurisdictions where our operations have significantly decreased as compared to prior years in which the net operating losses were generated.

As of December 31, 2024, the Company had aggregate federal and state net operating loss carryforwards of approximately $371.7 million and $176.1 million, respectively, which expire in 2030-2038 and 2024-2043, respectively. Approximately $1.2 million of state net operating loss carryforwards are expected to expire in the current fiscal year.

12.

Share-Based Compensation

Restricted Stock

We grant restricted stock units (“RSUs”) as part of our long-term incentive compensation to employees and non-employee members of the Board of Directors. RSUs generally vest over a period of three to five years for employees and

one year for members of the Board of Directors. The restricted common stock underlying RSUs are not deemed issued or outstanding upon grant, and do not carry any voting rights.

The restricted share activity for the three months ended December 31, 2024 is summarized as follows:


				Weighted-
				Average
	Number			Grant Date
	of Shares			Fair Value
Restricted shares unvested at September 30, 2024		975,415		$	1.83
Granted		35,000		$	1.03
Vested		—		$	—
Forfeited		(3,000	)	$	3.72
Restricted shares unvested at December 31, 2024		1,007,415		$	1.79

As of December 31, 2024, there was $1.2 million of total unrecognized compensation cost related to unvested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.7 years.

Compensation cost for share-based awards is recognized on a straight-line basis over the vesting period. Share-based compensation expense for the three months ended December 31, 2024 and December 31, 2023 was $0.3 million and $0.4 million, respectively.

13.

Leases

As of December 31, 2024, we leased 24 aircraft, airport facilities, office space, and other property and equipment under non-cancelable operating leases. The leases generally require us to pay all taxes, maintenance, insurance, and other operating expenses. Operating leased expense is recognized as a rental expense on a straight-line basis over the lease term, net of lessor rebates and other incentives.

Aggregate rental expense under all aircraft, equipment and facility leases totaled approximately $3.3 million and $8.0 million for the three months ended December 31, 2024 and December 31, 2023, respectively.

The components of our lease costs were as follows (in thousands):


	Three Months Ended December 31,
	2024		2023
Operating lease costs	$	781	$	1,278
Variable and short-term lease costs		2,386		1,279
Interest expense on finance lease liabilities		48		1,289
Amortization expense of finance lease assets		54		4,123
Total lease costs	$	3,269	$	7,969

As of December 31, 2024, our operating leases have a remaining weighted average lease term of 6.5 years and our operating lease liabilities were measured using a weighted average discount rate of 6.0%.

14.

Commitments and Contingencies

Litigation

We are subject to certain legal actions which we consider routine to our business activities. As of December 31, 2024, our management believed the ultimate outcomes of other routine legal matters are not likely to have a material adverse effect on our financial position, liquidity or results of operations.

Electric Aircraft Forward Purchase Commitments

In February 2021, we entered into a forward purchase contract with Archer for a number of eVTOL aircraft. The aggregate base commitment for the eVTOL aircraft is $200.0 million, with an option to purchase additional aircraft. Our obligation to purchase the eVTOL aircraft is subject to the Company and Archer first agreeing in the future to a number of terms and conditions, which may or may not be met.

In July 2021, we entered into a forward purchase contract with Heart for a number of fully electric aircraft. The maximum aggregate base commitment for the aircraft is $1,200.0 million, with an option to purchase additional aircraft. Our obligation to purchase the aircraft is subject to the Company and Heart first agreeing in the future to a number of terms and conditions, which may or may not be met.

Other Commitments

We have certain contracts for goods and services that require us to pay a penalty, acquire inventory specific to us or purchase contract-specific equipment, as defined by each respective contract, if we terminate the contract without cause prior to its expiration date. Because these obligations are contingent on our termination of the contract without cause prior to its expiration date, no obligation would exist unless such a termination occurs.

15.

Subsequent Events

Merger Agreement

On April 4, 2025, the Company entered into the Merger Agreement with Republic. Subject to the terms and conditions of the Merger Agreement, Republic will merge with and into the Company, with the Company continuing as the surviving corporation following the Merger. In connection with the Merger, immediately prior to the Effective Time, the Company will convert from a Nevada corporation to a Delaware corporation pursuant to the Conversion.

Three Party Agreement

Concurrently with the execution of the Merger Agreement, the Company entered into the Three Party Agreement between United, Republic, and the Company, which provides for, among other things, the following, each subject to the completion of the Merger Agreement:

•

Termination of the United CPA.

•

The Company to sell or dispose of all remaining Eligible Assets (as defined in the Three Party Agreement).

•

The Company to extinguish all remaining debt with cash and sale of assets. Any remaining debt will be assumed by the surviving corporation or forgiven by United.

•

A three percent (3%) increase in CPA block hour rates, retroactive to January 1, 2025.

•

The transfer of all of the Company's rights and obligations under its agreements with Archer (as discussed below).

•

The issuance by the Company (referred to in the Three Party Agreement as the "Primary Issuance") of shares of Company common stock equal to six percent (6%) of the issued and outstanding shares of Company common stock after giving effect to the issuance of Company common stock in the Merger, which shares will (a) first become available to United to the extent of certain financial contributions made by United to the Company at or prior to the effective time of the Merger, (b) second, to the extent of any remainder, become available to the surviving corporation to satisfy certain liabilities, and (c) third, to the extent of any remainder, become available on a pro rata basis to the persons who, as of immediately prior to the effective time of the Merger, held shares of Company common stock.

Sixth Amendment to our Third Amended and Restated United CPA

On April 4, 2025, we entered into the Sixth Amendment to our Third Amended and Restated United CPA which provides for the following:

•

The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments, retroactive to January 1, 2025, through March 31, 2026.

•

The extension of incentives for achieving certain performance metrics, retroactive to July 1, 2024, through March 31, 2026.

Transfer of Archer Obligations

In connection with the Three Party Agreement, the Company has agreed to transfer all rights and obligations associated with its Archer warrants and aircraft purchase agreement obligations. If the Company is unable to transfer such rights and obligations, the Company will work with United to either cancel or transfer any remaining obligations to United. The Company will be released from its liability associated with Archer obligations due to the transfer due United

Waiver to Second Amended and Restated Credit and Guaranty Agreement

Sale of Engines

On April 3, 2025, we entered into an agreement with a third party which provides for the sale of 23 GE model CF34-8C engines to the third party for expected gross proceeds of $16.3 million, which will be used to pay down our UST Loan.

•

The Company expects to record an impairment loss of approximately $14.7 million associated with held for sale accounting treatment of the 23 engines, which will be reflected in our financial statements for the second quarter of fiscal year 2025.

Sale of Airframes

On April 3, 2025, our airframe purchase agreement with a third party was amended to include an additional 14 CRJ-900 airframes to be sold to the third party for expected gross proceeds of $9.1 million.

Assets Held for Sale

Subsequent to December 31, 2024, the Company closed the sale of one CRJ-900 airframe, five GE model CF34-8C engines, and certain spare parts that were classified as held for sale as of December 31, 2024. The Company received $6.8 million in gross proceeds from the sale of such assets, $6.5 million of which was used to pay down our UST Loan.

Minimum CCR Covenant

On March 18, 2025, we entered into a new CCR Modification Agreement with the UST to lower the minimum CCR covenant to .91 to 1.0 effective as of February 28, 2025, through the maturity date of the loan.

Held for Sale Inventory

Subsequent to December 31, 2024, the Company reclassified certain spare parts related to its CRJ asset fleet to held for sale.

•

The Company expects to record an impairment loss of approximately $25.4 million associated with held for sale accounting treatment of the spare parts, which will be reflected in our financial statements for the second quarter of fiscal year 2025.

Aircraft Sale to United and Assumption of EETC Note by United

On January 31, 2025, the Company closed the sale of the remaining 10 E-175 aircraft to United, a related party, for gross proceeds of $122.9 million and net proceeds of $49.4 million after the assumption of debt by United. The Company recorded a loss of approximately $7.3 million on the sale of the remaining 10 aircraft, which will be reflected in our financial statements for the second quarters of fiscal year 2025.

•

As part of the sale of the remaining 10 aircraft, United assumed our EETC note with a remaining balance of $73.4 million at the time of assumption.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements, the accompanying notes, and the other financial information included elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties such as our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the sections titled "Cautionary Notes Regarding Forward-Looking Statements" above and "Risk Factors" below.

Overview

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 76 cities in 32 states, Cuba, and Mexico. Mesa operated a fleet of 60 aircraft with approximately 228 daily departures and 1,582 employees as of December 31, 2024. As of December 31, 2024, we operated 54 E-175 and 6 CRJ-900 aircraft under our United CPA. All of the Company’s consolidated contract revenues for the three months ended December 31, 2024 and December 31, 2023 were derived from operations associated with the CPA, leases of aircraft to a third party, and MPD. Revenues during the three months ended December 31, 2023 also included $3.9 million in revenues derived from our FSA with DHL, which terminated in March 2024.

Our United CPA provides us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour (the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination) and flights actually flown, and reimbursement of certain direct operating expenses in exchange for providing regional flying on behalf of United. Our CPA also shelters 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 CPA, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of United. United controls route selection, pricing, seat inventories, marketing and scheduling, and provide us with ground support services, airport landing slots and gate access.

Components of Results of Operations

The following discussion summarizes the key components of our condensed consolidated statements of operations and comprehensive loss.

Operating Revenues

Our operating revenues consist primarily of contract revenue as well as pass-through and other revenues.

Contract Revenue. Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our CPA with United, along with the additional amounts received based on the number of flights and block hours flown, rental revenue for aircraft leased to a third party, and revenue from participants in Mesa Pilot Development. Contract revenues we receive from our United are paid and recognized over time consistent with the delivery of service under our CPA.

Pass-Through and Other Revenue. Pass-through and other revenue consists of passenger liability insurance, aircraft property taxes, landing fees, and other aircraft and traffic servicing costs received pursuant to our agreements with United.

Operating Expenses

Our operating expenses consist of the following items:

Flight Operations. 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.

Maintenance. Maintenance expense includes costs related to engine overhauls, airframe, landing gear and normal recurring maintenance, which includes pass-through maintenance costs related to our E-175 aircraft. Heavy maintenance and major overhaul costs on our owned E-175 fleet are deferred and amortized until the earlier of the end of the useful life of the related asset or the next scheduled heavy maintenance event. All other maintenance costs are expensed as incurred, except for certain maintenance contracts where labor and materials price risks have been transferred to the service provider

and require payment on a utilization basis, such as flight hours. Costs incurred for maintenance and repair for utilization maintenance contracts where labor and materials price risks have been transferred to the service provider are charged to maintenance expense based on contractual payment terms. 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.

General and Administrative. General and administrative expense includes insurance and taxes, the majority of which are pass-through costs, non-operational administrative employee wages and related expenses, building rents, real property leases, utilities, legal, audit and other administrative expenses.

Depreciation and Amortization. Depreciation expense is a periodic non-cash charge primarily related to aircraft, engine, and equipment depreciation. Amortization expense is a periodic non-cash charge related to our customer relationship intangible asset.

Asset Impairment. Asset impairment includes charges for impairments of assets either designated as held for sale or assets that are held and used but determined to have been impaired.

Other Operating Expenses. Other operating expenses primarily consists of fuel costs for flying we undertake outside of our CPA (including aircraft re-positioning and maintenance) as well as costs for aircraft and traffic servicing, such as aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by United. All aircraft fuel and related fueling costs for flying under our CPA are directly paid and supplied by United. Accordingly, we do not record an expense or pass-through revenue for fuel supplied by United for flying under our CPA. Fuel expenses relating to MPD are paid by the Company.

Other Income (Expense), Net

Interest Expense. Interest expense is interest on our debt incurred to finance purchases of aircraft, engines, and equipment, including amortization of debt financing costs and discounts.

Interest Income. Interest income includes interest income on our cash and cash equivalent balances.

Gain on Debt Forgiveness. Gain on debt forgiveness consists of gains resulting from the forgiveness earned on our deemed prepayment associated with the United line of credit for the achievement of certain performance metrics.

Other Expense. Other expense includes expense derived from activities not classified in any other area of the condensed consolidated statements of operations and comprehensive loss.

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. We currently operate in one service line providing scheduled flight services in accordance with our CPA.

While we operate under a capacity purchase agreement, we do not manage our business based on any performance measure at the individual contract level. Additionally, our CODM uses consolidated financial information to evaluate our performance, which is the same basis on which he communicates our results and performance to our Board of Directors. The CODM bases all significant decisions regarding the allocation of our resources on a consolidated basis. Based on the information described above and in accordance with the applicable literature, management has concluded that we are organized and operated as one operating and reportable segment.

Results of Operations

Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023

We had operating loss of $110.8 million in our three months ended December 31, 2024 compared to operating loss of $48.4 million in our three months ended December 31, 2023. In our three months ended December 31, 2024, we had net loss of $114.6 million compared to net loss of $57.9 million in our three months ended December 31, 2023.

Our operating results for the three months ended December 31, 2024 slightly worsened as a result of the loss recorded on the sale of aircraft, greater impairment, and a decrease in contract revenue. This was partially offset due to decreases in operating expenses from (i) decreases in flight operations expense as a result of decreased pilot training and lower pilot wages; and (ii) decreases in depreciation expense, primarily due to the retirement and sale of several aircraft. Our contract revenue decreased due to fewer aircraft under contract, higher deferred revenue, and the wind-down of the DHL FSA.

Operating Revenues


	Three Months Ended December 31,
	2024		2023		Change
Operating revenues ($ in thousands):
Contract	$	80,678	$	101,100	$	(20,422	)	(20.2	)%
Pass-through and other		22,555		17,677		4,878		27.6	%
Total operating revenues	$	103,233	$	118,777	$	(15,544	)	(13.1	)%

Operating data:
Available seat miles—ASMs (thousands)		873,214		1,026,800		(153,586	)	(15.0	)%
Block hours		39,035		46,658		(7,623	)	(16.3	)%
Revenue passenger miles—RPMs (thousands)		725,900		865,287		(139,387	)	(16.1	)%
Average stage length (miles)		549		535		14		2.6	%
Contract revenue per available seat mile—CRASM (in cents)	¢	9.24	¢	9.85	¢	(0.61	)	(6.2	)%
Passengers		1,303,614		1,608,170		(304,556	)	(18.9	)%

"Available seat miles" or "ASMs" means the number of seats available for passengers multiplied by the number of miles the seats are flown.

"Average stage length" means the average number of statute miles flown per flight segment.

“Block hours” means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination.

"CRASM" means contract revenue divided by ASMs.

"RPM" means the number of miles traveled by paying passengers.

Total operating revenue decreased by $15.5 million, or 13.1%, to $103.2 million for our three months ended December 31, 2024 as compared to our three months ended December 31, 2023. Contract revenue decreased by $20.4 million, or 20.2%, to $80.7 million, primarily due to fewer aircraft under contract, higher deferred revenue, and the wind-down of the DHL FSA. Our block hours flown during our three months ended December 31, 2024, decreased 16.3% compared to the three months ended December 31, 2023 due to a decrease in scheduled flying on our CRJ fleet. Our pass-through and other revenue increased by $4.9 million, or 27.6%, to $22.6 million compared to our three months ended December 31, 2023 due to an increase in pass-through maintenance related to our E-175 fleet.

Operating Expenses


	Three Months Ended December 31,
	2024		2023			Change
Operating expenses ($ in thousands):
Flight operations	$	35,273	$	51,818		$	(16,545	)	(31.9	)%
Maintenance		46,527		48,627			(2,100	)	(4.3	)%
Aircraft rent		1,616		1,204			412		34.2	%
General and administrative		9,519		12,009			(2,490	)	(20.7	)%
Depreciation and amortization		7,979		13,293			(5,314	)	(40.0	)%
Asset impairment		65,665		40,384			25,281		62.6	%
Loss on sale of assets		46,691		386			46,305		11996.1	%
(Gain) on extinguishment of debt		—		(2,954	)		2,954		(100.0	)%
Other operating expenses		760		2,458			(1,698	)	(69.1	)%
Total operating expenses	$	214,030	$	167,225		$	46,805		28.0	%
Operating data:
Available seat miles—ASMs (thousands)		873,214		1,026,800			(153,586	)	(15.0	)%
Block hours		39,035		46,658			(7,623	)	(16.3	)%
Average stage length (miles)		549		535			14		2.6	%
Departures		21,351		26,254			(4,903	)	(18.7	)%

Flight Operations. Flight operations expense decreased $16.5 million, or 31.9%, to $35.3 million for our three months ended December 31, 2024 compared to our three months ended December 31, 2023. The decrease was primarily driven by decreased pilot training expense and lower pilot wages as a result of decreases in headcount.

Maintenance. Aircraft maintenance expense decreased $2.1 million, or 4.3%, to $46.5 million for our three months ended December 31, 2024 compared to our three months ended December 31, 2023. This decrease was primarily driven by a decrease in wages. Total pass-through maintenance expenses reimbursed by United increased by $7.4 million during our three months ended December 31, 2024 compared to our three months ended December 31, 2023.

The following table presents information regarding our maintenance costs during the three months ended December 31, 2024 and December 31, 2023 (in thousands):


	Three Months Ended December 31,
	2024		2023		Change
Engine overhaul	$	—	$	54	$	(54	)	(100.0	)%
Pass-through engine overhaul		10,149		5,707		4,442		77.8	%
C-check		648		2,620		(1,972	)	(75.3	)%
Pass-through C-check		7,739		3,804		3,935		103.4	%
Component contracts		5,460		5,611		(151	)	(2.7	)%
Rotable and expendable parts		1,573		4,114		(2,541	)	(61.8	)%
Other pass-through		4,473		5,439		(966	)	(17.8	)%
Labor and other		16,485		21,278		(4,793	)	(22.5	)%
Total	$	46,527	$	48,627	$	(2,100	)	(4.3	)%

Aircraft Rent. Aircraft rent expense increased $0.4 million, or 34.2%, to $1.6 million for our three months ended December 31, 2024 compared to our three months ended December 31, 2023. The increase is primarily due to greater engine lease costs during our three months ended December 31, 2024.

General and Administrative. General and administrative expense decreased $2.5 million, or 20.7%, to $9.5 million for our three months ended December 31, 2024 compared to our three months ended December 31, 2023. The decrease is primarily driven by decreases in wages and pass-through insurance costs, partially offset by increased consulting fees.

Depreciation and Amortization. Depreciation and amortization expense decreased by $5.3 million, or 40.0%, to $8.0 million for our three months ended December 31, 2024 compared to our three months ended December 31, 2023 due to aircraft in our fleet being sold or classified as non-depreciable assets held for sale.

Asset Impairment. Asset impairment of $65.7 million was recorded for our three months ended December 31, 2024 related to the impairment of 10 E-175 aircraft and held for sale airframes. There was $40.4 million of asset impairment recorded for the three months ended December 31, 2023 related to held for sale airframes and engines.

Loss on Sale of Assets. A loss on sale of assets of $46.7 million was recorded for our three months ended December 31, 2024 primarily related to the difference in sales price versus net book value of the eight E-175 aircraft sold to United.

Other Operating Expenses. Other operating expenses decreased by $1.7 million, to $0.8 million for our three months ended December 31, 2024 compared to our three months ended December 31, 2023. The decrease is primarily attributable to lower interrupted trip expense during the three months ended December 31, 2024.

Other Expense

Other expense decreased $3.0 million, or 35.7%, to $5.5 million for our three months ended December 31, 2024, compared to our three months ended December 31, 2023. The decrease is primarily attributable lower interest expense and a $4.5 million gain on debt forgiveness, partially offset by a $42 thousand unrealized loss on investments for our three months ended December 31, 2024, versus a $2.5 million unrealized gain on investments for our three months ended December 31, 2023.

Income Taxes

The income tax benefit totaled $1.7 million for the three months ended December 31, 2024 compared to a tax expense of $0.9 million for the three months ended December 31, 2023. The effective tax rate ("ETR") from continuing operations was 1.5% for the three months ended December 31, 2024 compared to -1.5% for the three months ended December 31, 2023. Our ETR during the three months ended December 31, 2024 increased from the three months ended December 31, 2023, primarily as a result of certain tax depreciation differences, state taxes, and changes in the valuation allowance against federal and state net operating losses.

Cautionary Statement Regarding Non-GAAP Measures

We present Adjusted EBITDA and Adjusted EBITDAR, which are not recognized financial measures under GAAP, in this Quarterly Report on Form 10-Q as supplemental disclosures because our senior management believes that they are well-recognized valuation metrics in the airline industry that are frequently used by companies, investors, securities analysts and other interested parties in comparing companies in our industry.

Adjusted EBITDA. We define Adjusted EBITDA as net income or loss before interest, income taxes, and depreciation and amortization, adjusted for gains and losses on investments, lease termination costs, impairment charges, and gains or losses on extinguishment of debt including write-off of associated financing fees.

Adjusted EBITDAR. We define Adjusted EBITDAR as net income or loss before interest, income taxes, depreciation and amortization, and aircraft rent, adjusted for gains and losses on investments, lease termination costs, impairment charges, and gains or losses on extinguishment of debt including write-off of associated financing fees.

Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools. Some of the limitations applicable to these measures include: (i) Adjusted EBITDA and Adjusted EBITDAR do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; (ii) Adjusted EBITDA and Adjusted EBITDAR do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (iii) Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, our working capital needs; (iv) Adjusted EBITDA and Adjusted EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future; (vi) Adjusted EBITDA and Adjusted EBITDAR do not reflect gains and losses on investments, which are non-cash gains and losses but will occur in periods

when there are changes in the value of our investments in equity securities; and (vii) Adjusted EBITDA and Adjusted EBITDAR do not reflect any cash requirements for such replacements and other companies in our industry may calculate Adjusted EBITDA and Adjusted EBITDAR differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. In addition, Adjusted EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. For the foregoing reasons, each of Adjusted EBITDA and Adjusted EBITDAR has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information.

Adjusted EBITDA and Adjusted EBITDAR

The following table presents a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDAR (in thousands):


	Three Months Ended December 31,
	2024			2023
Reconciliation:
Net loss	$	(114,558	)	$	(57,850	)
Income tax (benefit)/expense		(1,728	)		864
Loss before taxes		(116,286	)		(56,986	)
Adjustments(1)(2)(3)(4)(5)(6)(7)(8)(9)		112,266			37,640
Adjusted loss before taxes		(4,020	)		(19,346	)
Interest expense		7,064			11,160
Interest income		(17	)		(14	)
Depreciation and amortization		7,979			13,293
Adjusted EBITDA	$	11,006		$	5,093
Aircraft rent		1,616			1,204
Adjusted EBITDAR	$	12,622		$	6,297

(1) $3.0 million gain on extinguishment of debt during the three months ended December 31, 2023.
(2) $0.1 million loss and $2.5 million gain resulting from changes in the fair value of the Company's investments in equity securities during the three months ended December 31, 2024 and 2023, respectively.
(3) $4.9 million and $40.4 million impairment loss related to held for sale assets during the three months ended December 31, 2024 and 2023, respectively.
(4) $0.7 million and $2.0 million in third party costs associated with significant, non-recurring transactions during the three months ended December 31, 2024 and 2023, respectively.
(5) $0.7 million and $0.3 million loss on deferred financing costs related to the retirement of debts during the three months ended December 31, 2024 and 2023, respectively.
(6) $46.7 million and $0.4 million net loss on the sale of assets during the three months ended December 31, 2024 and 2023, respectively.
(7) $2.9 million loss on the write off of interest related to the sale of aircraft during the three months ended December 31, 2024.
(8) $60.7 million impairment loss related to the write down of net book value of certain aircraft during the three months ended December 31, 2024.
(9) $4.5 million gain on forgiveness of debt during the three months ended December 31, 2024.

Liquidity and Capital Resources

Going Concern

As a result of the decrease in scheduled flying activity for United, we produced less block hours to generate revenues. During the three months ended December 31, 2024, these challenges resulted in a negative impact on the Company’s financial results highlighted by net loss of $114.6 million, primarily due to a $46.7 million loss recorded related to the sale of eight E-175 aircraft and a $65.7 million impairment loss primarily related to the write down of net book value of 10 E-175 aircraft. These conditions and events raised concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months from the filing of this Form 10-Q.

•

Termination of the United CPA.

The Company to sell or dispose of all remaining Eligible Assets (as defined in the Three Party Agreement).

The Company to extinguish all remaining debt with cash and sale of assets. Any remaining debt will be assumed by the surviving corporation or forgiven by United.

A three percent (3%) increase in CPA block hour rates, retroactive to January 1, 2025.

The transfer of all of the Company's rights and obligations under its agreements with Archer (as discussed in Note 15).

•

On April 4, 2025, we entered into the Sixth Amendment to the Third Amended and Restated Capacity Purchase Agreement with United which provides for the following:

The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments, retroactive to January 1, 2025, through March 31, 2026.

The extension of incentives for achieving certain performance metrics, retroactive to July 1, 2024, through March 31, 2026.

•

On December 23, 2024, we entered into an agreement with the UST to lower the minimum CCR covenant to .99 to 1.0 effective as of November 22, 2024 through February 28, 2025. After such date, the CCR will revert to 1.55 to 1.0. The agreement also requires the Company to use its reasonable best efforts to cause counterparties to all Receivables (as defined in the Treasury Loan) (whether or not constituting “Eligible Receivables” (as defined in the Treasury Loan)) of the Company to be paid to the Eligible Receivables Account (as defined in the Treasury Loan). Receivables generated from the sale of assets that are not Collateral (as defined in the Treasury Loan) are excluded from the scope of the foregoing requirement. As a result of the lower CCR covenant, we are in compliance with this covenant as of September 30, 2024. Additionally, on March 18, 2025, we entered into a new CCR Modification Agreement with the UST to lower the minimum CCR covenant to .91 to 1.0 effective as of February 28, 2025 through the maturity date of the loan.

•

On December 23, 2024, we entered into the Fourth Amendment to our Third Amended and Restated United CPA which provides for the following:

Amended certain scheduled exit dates for our E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA).

Added provisions relating to the reimbursement by United of up to $14.0 million of pilot training costs incurred by the Company with respect to its E-175 aircraft.

•

Based on the most recent appraisal value of our spare parts, we have $12.4 million of borrowing capacity under our United Revolving Credit Facility.

•

We have delayed and/or deferred major spending on aircraft and engine maintenance to match the current and projected level of flight activity.

Sources and Uses of Cash

We require cash to fund our operating expenses and working capital requirements, including outlays for capital expenditures, aircraft pre-delivery payments, maintenance, aircraft rent, and debt service obligations, including principal and interest payments. Our cash needs vary from period to period primarily based on the timing and costs of significant maintenance events. Our principal sources of liquidity are cash on hand, cash generated from operations and funds from external borrowings.

We believe that the key factors that could affect our internal and external sources of cash include:

•

Factors that affect our results of operations and cash flows, including the impact on our business and operations as a result of changes in demand for our services, competitive pricing pressures, and our ability to achieve further reductions in operating expenses; and

•

Factors that affect our access to bank financing and the debt and equity capital markets that could impair our ability to obtain needed financing on acceptable terms or to respond to business opportunities and developments as they arise, including interest rate fluctuations, macroeconomic conditions, sudden reductions in the general availability of lending from banks or the related increase in cost to obtain bank financing, and our ability to maintain compliance with covenants under our debt agreements in effect from time to time.

Our ability to service our long-term debt obligations, including our equipment notes, to remain in compliance with the various covenants contained in our debt agreements and to fund our working capital requirements, capital expenditures and business development efforts will depend on our ability to generate cash from operating activities, which is subject to, among other things, our future operating performance, as well as other factors, some of which may be beyond our control.

If we fail to generate sufficient cash from operations, we may need to raise additional equity or borrow additional funds to achieve our longer-term objectives. There can be no assurance that such equity or borrowings will be available or, if available, will be at rates or prices acceptable to us.

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect the current market conditions and our projected demand. Our capital expenditures are primarily directed toward our aircraft fleet and flight equipment including spare engines. Our capital expenditures, net of purchases of rotable spare parts and aircraft and spare engine financing for the three months ended December 31, 2024 were approximately 2.0% of our revenue during the same period. We expect to incur capital expenditures to support our business activities. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

As of December 31, 2024, our principal sources of cash are cash and cash equivalents of $40.0 million, restricted cash of $3.0 million as of December 31, 2024, and $80.7 million in assets held for sale as of December 31, 2024. Further, 10 aircraft which are in use as of December 31, 2024, and therefore not classified as held for sale, will be sold to United for expected gross proceeds of $122.9 million. As of December 31, 2024, we had $230.6 million in secured indebtedness incurred primarily in connection with our financing of aircraft and related equipment. As of December 31, 2024, we had $143.3 million of current debt, excluding finance leases, and $83.8 million of long-term debt excluding finance leases.

Restricted Cash

As of December 31, 2024, we had $3.0 million in restricted cash. We have an agreement with a financial institution for a letter of credit facility and to issue letters of credit for particular airport authorities, worker's compensation insurance, property and casualty insurance and other business needs as required in certain lease agreements. Pursuant to the term of this agreement, $3.0 million of outstanding letters of credit are required to be collateralized by amounts on deposit.

Cash Flows

The following table presents information regarding our cash flows for each of the three months ended December 31, 2024 and December 31, 2023 (in thousands):


	Three Months Ended December 31,
	2024			2023
Net cash used in operating activities	$	(11,561	)	$	(7,841	)
Net cash provided by investing activities		115,834			46,605
Net cash used in financing activities		(79,919	)		(55,634	)
Net increase/(decrease) in cash, cash equivalents and restricted cash		24,354			(16,870	)
Cash, cash equivalents and restricted cash at beginning of period		18,630			36,072
Cash, cash equivalents and restricted cash at end of period	$	42,984		$	19,202

Net Cash Used in Operating Activities

Our primary source of cash from operating activities is cash collections from United pursuant to our CPA. Our primary uses of cash from operating activities are for maintenance costs, personnel costs, operating lease payments, and interest payments.

During our three months ended December 31, 2024, we had cash flow used in operating activities of $11.6 million. We had net loss of $114.6 million adjusted for the following significant non-cash items: depreciation and amortization of $8.0 million, stock-based compensation of $0.3 million, deferred income taxes of $(3.0) million, amortization of deferred credits of $(1.0) million, amortization of debt discount and financing costs and accretion of interest of $1.4 million, asset impairment of $65.7 million, loss on sale of assets of $46.7 million, gain on debt forgiveness of $(4.5) million, and $3.7 million in miscellaneous operating cash flow items. We had a net change of $(14.2) million within other net operating assets and liabilities largely driven by decreases in accounts receivable and prepaid expenses and increases in accounts payable and accrued expenses, partially offset by decreases in deferred revenue.


Nevada		85-0302351
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

410 North 44th Street, Suite 700 Phoenix, Arizona 85008		85008
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	MESA	Nasdaq Capital Market


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☐

		Emerging growth company	☐


Exhibit No.		Exhibit Description

31.1		Certification of Principal Executive Officer pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1*		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)


	MESA AIR GROUP, INC.

Date: May 16, 2025	By:	/s/ Michael J. Lotz
		Michael J. Lotz Chief Financial Officer (Principal Financial Officer)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934