Mesa Air Group Inc. (MESA, Financial) filed Quarterly Report for the period ended 2009-03-31.
Mesa Air Group operates as America West Express in the Southwest as US Airways Express throughout the East and Midwest and independently as Mesa Airlines in New Mexico Texas and Colorado. Mesa is a member of Regional Aviation Partners. Mesa Air Group Inc. has a market cap of $17.7 million; its shares were traded at around $0.167 with a P/E ratio of 0.8.
The Company recorded consolidated net loss from continuing operations of $37.3 million and $21.8 million for the three and six months ending March 31, 2009, respectively. This represented basic ($0.43 and $0.38) and diluted ($0.43 and $0.38) loss per share from continuing operations, respectively. This compares to consolidated net income from continuing operations of $17.5 million and $14.7 million for the three and six months ending March 31, 2008 or per basic ($0.65 and $0.53) and diluted ($0.51 and $0.45) share in the three and six months ended March 31, 2008.
In the quarter ended March 31, 2009, fuel expense decreased by $68.4 million, or 57.6%, to $50.3 million from $118.8 million for the quarter ended March 31, 2008. On an ASM basis, fuel expense decreased 50.6% to 3.0 cents per ASM in the quarter ended March 31, 2009 from 6.0 cents per ASM in the quarter ended March 31, 2008. Average fuel cost per gallon decreased $1.41, to an average of $1.55 per gallon for the quarter ended March 31, 2009 from an average of $2.96 per gallon for the quarter ended March 31, 2008. The cost per gallon decrease resulted in a $45.8 million favorable price variance, of which $2.0 million was related to go!. The reduction in gallons of fuel purchased in the quarter ended March 31, 2009 resulted in a $22.6 million favorable volume variance. The volume decrease is primarily due to a direct supply agreement with United Airlines that now includes fifteen (including 10 new stations since April 1, 2008) stations. In the quarter ended March 31, 2009, approximately 94.9% of our fuel costs were reimbursed by our code-share partners.
In the quarter ended March 31, 2009, maintenance expense decreased $10.1 million, or 15.1%, to $56.8 million from $66.9 million for the quarter ended March 31, 2008. On an ASM basis, maintenance expense decreased 1.0% to 3.3 cents per ASM in the quarter ended March 31, 2009 from 3.4 cents per ASM in the quarter ended March 31, 2008. The decrease in maintenance is primarily due to an $11.8 million decrease in engine repair cost associated with the termination of power by the hour programs. Additionally wages and wage related expenses decreased $0.7 million due to a decrease in headcount, reserve for expendable parts decreased $0.6 million, and usage of expendable parts decreased $0.4 million. Penalties and fines decreased $0.2 million, software licenses and fees decreased $0.1 million, and supplies decreased $0.1 million. These decreases were partially offset by an inventory write-off of $1.8 million, an engine rent increase of $0.7 million, airframe heavy maintenance expense increase of $0.4 million, component repair increase of $0.4 million, and equipment lease increase $0.3 million which represents non-recurring China maintenance reimbursement received in fiscal year 2008.
In the quarter ended March 31, 2009, general and administrative expense decreased $6.3 million, or 29.8%, to $14.7 million from $21.0 million for the quarter ended March 31, 2008. The decrease is primarily due to a $5.2 million decrease in property and sales taxes. Administrative expenses decreased $1.2 million from the quarter ended in March 31, 2008 driven by decreases in bad debt and software licenses. Employee related expenses decreased $0.8 million. Rent decreased $0.2 million and was mainly attributed to lower office rents. These decreases were partially offset by increased insurance expenses of $0.7 million due to increased hull liability and workers compensation expenses, freight increased $0.2 million, and legal expenses increased $0.1 million.
On October 30, 2007, the United States Bankruptcy Court for the District of Hawaii found that the Company had violated the terms of a confidentiality agreement with Hawaiian Airlines and awarded Hawaiian $80.0 million in damages and ordered the Company to pay Hawaiian's cost of litigation, reasonable attorneys' fees and interest. The Company filed a notice of appeal to this ruling in November 2007 and posted a $90.0 million bond pending the outcome of this litigation. As a result, the Company recorded $86.9 million as a charge to the statement of operations in the fourth quarter of fiscal 2007. On April 29, 2008 the Company reached a settlement with Hawaiian Airlines. While admitting no fault, the Company agreed to pay $52.5 million to Hawaiian Airlines. As a result of the settlement, the Company recorded a $34.1 million credit to the statement of operations in the second quarter of fiscal 2008. The $34.1 million credit is net of $0.3 million in fees incurred related to the bond.
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Mesa Air Group operates as America West Express in the Southwest as US Airways Express throughout the East and Midwest and independently as Mesa Airlines in New Mexico Texas and Colorado. Mesa is a member of Regional Aviation Partners. Mesa Air Group Inc. has a market cap of $17.7 million; its shares were traded at around $0.167 with a P/E ratio of 0.8.
Highlight of Business Operations:
In the quarter ended March 31, 2009 the Company recognized gains on the extinguishment of debt of $37.2 million. During the quarter ended March 31, 2009, the Company restructured certain senior convertible notes due in June 2023 and February 2024 at a substantial discount and recorded a gain of approximately $37.2 million. On April 16, 2009, Mesa Air Group completed transactions with Shenzhen Airlines relating to Kunpeng Airlines regional airline based in the People's Republic of China. Under the agreement Mesa divested its 49% indirect interest in Kunpeng Airlines. Also pursuant to the agreement, outstanding aircraft lease payments owed by Kunpeng Airlines to the Company were settled for $4.4 million and the Company's lease of five CRJ-200 aircraft to Kunpeng Airlines terminated. In total, the Company received $4.5 million, which included $100,000 for the Company's interests in Ping Shan SRL and Shan Yue SRL. $900,000 of the total consideration was offset by the Company's return of security deposits. As a result, the Company recorded a loss on equity method investment of $4.4 million in the second quarter of 2009. The five aircraft were returned to the Company during the third quarter of 2009. In the second quarter of fiscal 2009 Mesa continued to expand its Hawaiian inter-island operation, go!. Available seat miles increased 16.0% in comparison to the same period in the prior fiscal year. Departures increased 13.7% and passengers carried increased 20.1% over the second quarter of 2008. go! also celebrated its 2,000,000th passenger on March 18, 2009. During the second quarter of fiscal 2009 Mesa terminated its code share agreement with Mokulele Airlines, with respect to its go! Express operation in Hawaii, and entered into a new code share agreement with Hawaii Island Air. Effective March 25, 2009, go! began marketing services to be flown by Island Air. 23 Recent DevelopmentsThe Company recorded consolidated net loss from continuing operations of $37.3 million and $21.8 million for the three and six months ending March 31, 2009, respectively. This represented basic ($0.43 and $0.38) and diluted ($0.43 and $0.38) loss per share from continuing operations, respectively. This compares to consolidated net income from continuing operations of $17.5 million and $14.7 million for the three and six months ending March 31, 2008 or per basic ($0.65 and $0.53) and diluted ($0.51 and $0.45) share in the three and six months ended March 31, 2008.
In the quarter ended March 31, 2009, fuel expense decreased by $68.4 million, or 57.6%, to $50.3 million from $118.8 million for the quarter ended March 31, 2008. On an ASM basis, fuel expense decreased 50.6% to 3.0 cents per ASM in the quarter ended March 31, 2009 from 6.0 cents per ASM in the quarter ended March 31, 2008. Average fuel cost per gallon decreased $1.41, to an average of $1.55 per gallon for the quarter ended March 31, 2009 from an average of $2.96 per gallon for the quarter ended March 31, 2008. The cost per gallon decrease resulted in a $45.8 million favorable price variance, of which $2.0 million was related to go!. The reduction in gallons of fuel purchased in the quarter ended March 31, 2009 resulted in a $22.6 million favorable volume variance. The volume decrease is primarily due to a direct supply agreement with United Airlines that now includes fifteen (including 10 new stations since April 1, 2008) stations. In the quarter ended March 31, 2009, approximately 94.9% of our fuel costs were reimbursed by our code-share partners.
In the quarter ended March 31, 2009, maintenance expense decreased $10.1 million, or 15.1%, to $56.8 million from $66.9 million for the quarter ended March 31, 2008. On an ASM basis, maintenance expense decreased 1.0% to 3.3 cents per ASM in the quarter ended March 31, 2009 from 3.4 cents per ASM in the quarter ended March 31, 2008. The decrease in maintenance is primarily due to an $11.8 million decrease in engine repair cost associated with the termination of power by the hour programs. Additionally wages and wage related expenses decreased $0.7 million due to a decrease in headcount, reserve for expendable parts decreased $0.6 million, and usage of expendable parts decreased $0.4 million. Penalties and fines decreased $0.2 million, software licenses and fees decreased $0.1 million, and supplies decreased $0.1 million. These decreases were partially offset by an inventory write-off of $1.8 million, an engine rent increase of $0.7 million, airframe heavy maintenance expense increase of $0.4 million, component repair increase of $0.4 million, and equipment lease increase $0.3 million which represents non-recurring China maintenance reimbursement received in fiscal year 2008.
In the quarter ended March 31, 2009, general and administrative expense decreased $6.3 million, or 29.8%, to $14.7 million from $21.0 million for the quarter ended March 31, 2008. The decrease is primarily due to a $5.2 million decrease in property and sales taxes. Administrative expenses decreased $1.2 million from the quarter ended in March 31, 2008 driven by decreases in bad debt and software licenses. Employee related expenses decreased $0.8 million. Rent decreased $0.2 million and was mainly attributed to lower office rents. These decreases were partially offset by increased insurance expenses of $0.7 million due to increased hull liability and workers compensation expenses, freight increased $0.2 million, and legal expenses increased $0.1 million.
On October 30, 2007, the United States Bankruptcy Court for the District of Hawaii found that the Company had violated the terms of a confidentiality agreement with Hawaiian Airlines and awarded Hawaiian $80.0 million in damages and ordered the Company to pay Hawaiian's cost of litigation, reasonable attorneys' fees and interest. The Company filed a notice of appeal to this ruling in November 2007 and posted a $90.0 million bond pending the outcome of this litigation. As a result, the Company recorded $86.9 million as a charge to the statement of operations in the fourth quarter of fiscal 2007. On April 29, 2008 the Company reached a settlement with Hawaiian Airlines. While admitting no fault, the Company agreed to pay $52.5 million to Hawaiian Airlines. As a result of the settlement, the Company recorded a $34.1 million credit to the statement of operations in the second quarter of fiscal 2008. The $34.1 million credit is net of $0.3 million in fees incurred related to the bond.
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