Press Release: Mesa Air Group Reports Fourth Quarter 2008 Revenue and Earnings

PHOENIX, Jan. 13 /PRNewswire-FirstCall/ -- Mesa Air Group, Inc. (Nasdaq: MESA) (the "Company") announced today fourth quarter losses from continuing operations of $22.3 million ($0.83 per diluted share) on gross operating revenues of $325.3 million. This compares to losses from continuing operations of $62.2 million ($2.16 per diluted share) in the fourth quarter of 2007 on gross operating revenues of $327.8 million. Total operating revenues decreased $2.6 million year-over-year, or 0.8%, primarily as a result of a year-over-year decrease in capacity partially offset by an increase in fuel revenue. Total Pro Forma Net income for the fourth quarter 2008 was $3.1 million compared to $2.2 million for the same period of the prior year. Pro forma net income for the quarter includes adjustments for the following items on an after tax basis: $10.0 million of vendor settlements, $4.9 million related to lease return costs, $3.7 million for loss from equity method investments, $2.0 million expense from the Aloha Airlines settlement, $1.8 million for the adjustment to income tax valuation allowance, $1.5 million loss on disposal of assets, $0.9 million costs associated with our Chinese joint-venture, $0.4 million of legal expense for our go! operations and a net $0.2 million of additional pro forma items.

(Logo: [www.newscom.com] Available Seat Miles ("ASMs") for the fourth quarter of 2008 decreased 13.9% from the fourth quarter of 2007, primarily as a result of a decrease in the number of aircraft flown from 162 as of September 30, 2007 to 159 as of September 30, 2008. On September 30, 2008, Mesa's jet fleet was comprised of 45 Canadian Regional Jet (CRJ)-900's, 44 CRJ-200's, 20 CRJ-700's and 34 Embraer Regional-145's. The turboprop fleet consisted of 16 DeHavilland Dash 8's.

At September 30, 2008, the total balance of cash, cash equivalents, restricted cash, and marketable securities was $64.9 million.

Events during the fourth quarter included:

-- go! On November 28, 2008 Mesa announced entering into a settlement with the former controlling shareholder of Aloha Airlines concerning the Aloha Airlines lawsuit over Mesa's Hawaiian inter-island flight services operated under the go! brand name. Under the terms of the settlement and without admitting any wrongdoing, Mesa agreed to make a $2.0 million cash payment, issue shares of common stock equal to 10% of its outstanding shares and provide inter-island travel benefits to certain former Aloha Airlines employees. Under the terms of the settlement, if the shareholder is able to purchase the "Aloha" name in the upcoming bankruptcy court auction, it will license the "Aloha" name to Mesa.

Mesa continued to expand its inter-island Hawaiian operation, go! During the fourth quarter 2008, available seat miles increased 18.5% from the same quarter in the prior year.

-- Maintenance: In July 2008 Mesa entered into a new Time and Material Maintenance Program with GE. This agreement terminates the terms of a previous contract for the maintenance and repair of Mesa's owned or operated CF34-3B1 engines, settled Mesa's prior payment obligations and awarded a new exclusive 5-year contract for the maintenance repair, and overhaul of Mesa's CF34-3 engines. In accordance with the agreement, Mesa entered into a note payable for $22.0 million in addition to a $6.0 million payment for past due receivables.

-- Delta: On August 1, 2008, Delta notified Mesa of the termination of the CRJ-900 Delta Connection Agreement, citing an alleged failure to meet certain contractual benchmarks contained in the CRJ-900 Delta Connection Agreement. Mesa denies having violated the Delta Connection Agreement and intends to challenge Delta's decision. At year end, Mesa was operating seven CRJ-900's as Freedom Airlines under this Delta Connection Agreement. The Company subleased the Delta Connection CRJ-900 Aircraft from Delta for $1 per month per aircraft and these aircraft have been returned to Delta in connection with this termination with no further financial obligation to Mesa.

"2008 was a very challenging year operationally and financially for the Company," said Mesa Chairman and CEO, Jonathan Ornstein. "While many obstacles lay ahead, we are encouraged that the restructuring efforts begun in 2008 may permit the emergence of a reinvigorated company in 2009. We continue to execute our restructuring plan and take steps needed to improve the financial and operational performance of the Company."

OPERATING DATA:

Three Months Ended       Twelve Months Ended
                             ------------------       -------------------
                            Sep. 30,     Sep. 30,    Sep. 30,      Sep. 30,
                              2008         2007        2008          2007
    Passengers              3,139,094    3,948,287   13,453,831   15,993,110
    Available seat miles
     ("ASM") (000's)        1,890,870    2,196,057    8,027,966    8,996,959
    Revenue passenger
     miles (000's)          1,475,901    1,702,926    6,020,008    6,879,624
    Load factor                  78.1%        77.5%        75.0%        76.5%
    Yield per revenue
     passenger mile (cents)      22.0         19.3         22.0         18.9
    Revenue per ASM (cents)      17.2         14.9         16.5         14.4
    Operating cost per ASM
     (cents)                     18.0         18.7         16.4         15.2
    Average stage length
     (miles)                      412          392          403          392
    Number of operating
     aircraft in fleet            159          162          159          162
    Gallons of fuel
     consumed              33,922,360   44,218,985  154,814,813  201,526,868
    Block hours flown         106,568      134,722      476,368      564,379
    Departures                 69,351       90,652      310,956      378,291



                               MESA AIR GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                     (In thousands, except per share amounts)

                                                         Three Months Ended
                                                            September 30,
                                                          ----------------
                                                           2008      2007
                                                           ----      ----
                                                             (Unaudited)
                                                            (In thousands,
                                                       except per share data)
    Operating revenues:
      Passenger                                           $322,795  $325,161
      Freight and other                                      2,481     2,682
                                                             -----     -----
      Total operating revenues                             325,276   327,843
    Operating expenses:
      Flight operations                                     91,334    99,239
      Fuel                                                 134,042   106,206
      Maintenance                                           65,688    64,476
      Aircraft and traffic servicing                        15,773    20,589
      Promotion and sales                                    1,254       639
      General and administrative                            22,770    24,112
      Depreciation and amortization                          8,795     9,428
      Loss contingency and settlement of lawsuit                 -    86,870
      Bankruptcy and vendor settlements                          -         -
      Impairment and restructuring  (credits)                  209         -
                                                               ---   -------
        Total operating expenses                           339,865   411,559
                                                           -------   -------
      Operating income (loss)                              (14,589)  (83,716)
    Other income (expense):
      Interest expense                                      (8,682)  (10,383)
      Interest income                                          868     2,903
      Gain on extinguishment of debt                             -         -
      Loss from equity method investments                   (3,987)     (658)
      Other income (expense)                                (2,732)   (1,645)
                                                            ------    ------
        Total other expense                                (14,532)   (9,783)
                                                           -------    ------
    Income (loss) from continuing operations before taxes  (29,121)  (93,499)
    Income tax provision (benefit)                          (6,863)  (31,343)
                                                            ------   -------
    Net income (loss) from continuing operations           (22,258)  (62,156)

    Loss from discontinued operations, net of taxes         (8,356)   (6,036)
                                                            ------    ------

    Net income (loss)                                     $(30,614) $(68,192)
                                                          ========  ========

    Basic income (loss) per common share:
      Income (loss) from continuing operations              $(0.83)   $(2.16)
      Loss from discontinued operations                      (0.31)    (0.21)
                                                             -----     -----
      Net income (loss) per share                           $(1.15)   $(2.37)
                                                            ======    ======

    Diluted income (loss) per common share:
      Income (loss) from continuing operations              $(0.83)   $(2.16)
      Loss from discontinued operations                      (0.31)    (0.21)
                                                             -----     -----
      Net income (loss) per share                           $(1.15)   $(2.37)
                                                            ======    ======



                                                             Three Months
                                                          Ended September 30,
                                                           -----------------
                                                           2008         2007
                                                           ----         ----
    PRO FORMA (After tax):

    Net income (loss) from continuing operations         $(22,258)  $(62,156)
      Adjustment to income tax valuation allowance          1,837          -
      Net gain on securities                                  (46)      (191)
      Loss on disposal                                      1,452        229
      (Gain) on extinguishment of debt                          -          -
      Lease return costs                                    4,872      1,659
      Vendor settlements                                   10,015          -
      Severance                                               200          -
      go! legal expenses                                      433      1,259
      Start up costs on China JV                              909      2,968
      Loss contingency - Aloha/Hawaiian settlement          1,988     57,749
      Loss from equity method investments                   3,665        724
                                                            -----        ---
    Pro forma net income from continuing operations        $3,067     $2,241
                                                           ======     ======

    Pro forma income per common share:
      Basic                                                 $0.11      $0.08
      Diluted                                               $0.11      $0.08



                             MESA AIR GROUP, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                   (In thousands, except per share amounts)

                                                     Year Ended September 30,
                                                     -----------------------
                                                         2008        2007
                                                         ----        ----
                                                            (Unaudited)
                                                       (In thousands, except
                                                           per share data)
    Operating revenues:
      Passenger                                       $1,313,436  $1,313,220
      Freight and other                                   12,675      10,168
                                                          ------      ------
        Gross operating revenues                       1,326,111   1,323,388
      Impairment of contract incentives                        -     (25,324)
                                                         -------     -------
        Net operating revenues                         1,326,111   1,298,064
    Operating expenses:
      Flight operations                                  364,659     382,504
      Fuel                                               517,907     438,010
      Maintenance                                        262,868     254,626
      Aircraft and traffic servicing                      76,284      82,248
      Promotion and sales                                  4,682       3,605
      General and administrative                          83,115      71,818
      Depreciation and amortization                       37,674      39,354
      Loss contingency and settlement of lawsuits        (31,265)     86,870
      Bankruptcy and vendor settlements                      (27)        434
      Impairment and restructuring charges                   209      12,367
                                                             ---      ------
        Total operating expenses                       1,316,106   1,371,836
                                                       ---------   ---------
      Operating income (loss)                             10,005     (73,772)
    Other income (expense):
      Interest expense                                   (36,081)    (39,380)
      Interest income                                      6,511      14,314
      Gain on extinguishment of debt                      14,680           -
      Loss from equity method investments                 (5,446)     (3,868)
      Other income (expense)                               8,919      (6,216)
                                                           -----      ------
        Total other expense                              (11,417)    (35,150)
                                                         -------     -------
    Income (loss) from continuing operations
     before taxes                                         (1,412)   (108,922)
    Income tax provision (benefit)                         4,323     (37,384)
                                                           -----     -------
    Net income (loss) from continuing operations          (5,735)    (71,538)

    Loss from discontinued operations, net of
     taxes                                               (23,425)    (10,023)

                                                        --------    --------
    Net income (loss)                                   $(29,160)   $(81,561)
                                                        ========    ========

    Basic income (loss) per common share:
      Income (loss) from continuing operations            $(0.21)     $(2.31)
      Loss from discontinued operations                    (0.86)      (0.32)
                                                           -----       -----
      Net income (loss) per share                         $(1.07)     $(2.63)
                                                          ======      ======

    Diluted income (loss) per common share:
      Income (loss) from continuing operations            $(0.21)     $(2.31)
      Loss from discontinued operations                    (0.86)      (0.32)
                                                           -----       -----
      Net income (loss) per share                         $(1.07)     $(2.63)
                                                          ======      ======



                                                              Year Ended
                                                             September 30,
                                                            --------------
                                                            2008      2007
                                                            ----      ----
    PRO FORMA (After tax):

    Net income (loss) from continuing operations          $(5,735)  $(71,538)
      Adjustment to income tax valuation allowance          1,837        $ -
      Net (gain) loss on securities                        (5,487)     1,980
      Loss (gain) on disposal                               1,632        229
      (Gain) on extinguishment of debt                     (9,046)         -
      Lease return costs                                   10,866      2,975
      Vendor/code share partner settlements                12,345      1,678
      Severance                                               200          -
      go! legal expenses                                    2,255      1,259
      Start up costs associated with China joint venture    2,650      3,074
      Loss contingency - Aloha/Hawaiian settlement        (19,024)    57,749
      Loss from equity method investments                   3,842      2,835
      Impairment charges                                        -     23,445
                                                           ------     ------
    Pro forma net income from continuing operations       $(3,665)   $23,686
                                                          =======    =======

    Pro forma income per common share:
      Basic                                                $(0.14)     $0.76
      Diluted                                              $(0.14)     $0.66

Source: PRNewsWire

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