Mesa Provides Update on RASPRO Surplus CRJ Asset Transactions

Rhea-AI Summary

Mesa Air Group (NASDAQ: MESA) announced the completion of the sale of six CRJ-900 airframes and ten CRJ engines from its surplus inventory. This is part of its Regional Aircraft Securitization Program (RASPRO) finance lease. Originally, Mesa faced a $50.4 million obligation to purchase these assets by March 2024. Through a series of transactions from May to September 2024, Mesa has reduced this obligation to $27.3 million as of May 31, 2024. Mesa plans to eliminate the remaining obligation by completing further sales in the near future. Mesa’s CEO Jonathan Ornstein emphasized the importance of addressing the RASPRO lease and highlighted the company’s focus on returning to profitability and executing strategic actions.

Positive

• Completed sales of six CRJ-900 airframes and ten CRJ engines.
• Reduced outstanding purchase obligation from $50.4 million to $27.3 million.
• Planned elimination of remaining obligation through continued asset sales.
• CEO emphasized prioritizing future profitability and strategic actions.

Negative

• Initial $50.4 million obligation due to RASPRO finance lease.
• Purchase obligation remains at $27.3 million despite completed sales.
• Company's financial focus still on resolving this significant obligation.

Insights

Financial Analyst

The recent update from Mesa Air Group regarding the sale of surplus CRJ-900 airframes and CRJ engines is noteworthy for several reasons. Firstly, the reduction in the RASPRO lease obligation from $50.4 million to $27.3 million is a significant financial milestone. This reduction alleviates a substantial liability, thereby improving the company's balance sheet and liquidity position. For investors, this move can signal Mesa's proactive stance in managing its debt and optimizing asset utilization.

In the short term, this reduction in obligations can free up cash flow, potentially allowing Mesa to reinvest in other revenue-generating activities or reduce other debts. In the long term, eliminating this significant financial burden can enhance Mesa's financial stability and investor confidence, making the company more attractive for both equity and debt investors.

However, it's important to consider the broader market context. The aviation industry is highly competitive and capital-intensive, so any financial maneuver that strengthens balance sheets is beneficial. But this does not immediately translate to profitability; investors should also keep an eye on Mesa's operational performance and market conditions.

Overall, Mesa's actions here are prudent and reflect good financial management, but this is just one piece of the larger puzzle in evaluating the company's overall financial health and long-term prospects.

Market Research Analyst

The announcement provides a clear indication that Mesa is actively addressing its surplus asset issue, which can be seen as a response to changing market demands and fleet optimization strategies. The sale of these airframes and engines likely comes after a thorough market analysis, ensuring that the company is not holding onto non-essential assets that do not contribute to its core operations.

For retail investors, understanding Mesa's market strategy is crucial. The sale of surplus assets aligns with the company's broader goal of focusing on profitable operations. By divesting non-core assets, Mesa can concentrate on optimizing its fleet, reducing operating costs and potentially improving margins. This strategic focus can enhance Mesa's competitive positioning in the regional aviation market.

Moreover, the company's intention to finalize these transactions and eliminate the remaining obligations in the coming months signals a positive forward momentum. Investors should, however, monitor the execution of these plans closely and assess any market impact or shifts in operational efficiency that result from these asset sales.

In conclusion, Mesa’s strategic asset management moves are aligned with industry practices and suggest a focused approach to improving financial health and operational efficiency.

PHOENIX, June 06, 2024 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) (“Mesa” or the “Company”) today provided an update that the Company has completed the sales of six of the 15 surplus CRJ-900 airframes, and ten of the 30 surplus CRJ engines, associated with its Regional Aircraft Securitization Program (“RASPRO”) finance lease. Mesa previously entered into agreements to sell the 15 airframes and 30 engines, respectively, to two separate third parties.

Previously, the RASPRO finance lease carried a $50.4 million obligation for Mesa to purchase the assets at the end of the lease in March 2024. As disclosed with its first quarter fiscal 2024 earnings release, Mesa reached an agreement to fulfill the purchase obligation over the course of May 2024 to September 2024. Based on the aforementioned sale closings and resulting payments to RASPRO, Mesa's purchase obligation has been reduced to $27.3 million as of May 31, 2024. The Company anticipates fully eliminating this obligation in the coming months as it purchases the remaining assets from RASPRO and in turn executes their sales to the respective third parties under agreement.

“Addressing the RASPRO lease has been one of the top priorities for our surplus asset sale efforts over the past year-and-a-half,” said Jonathan Ornstein, Mesa Chairman and CEO. “This is a significant financial obligation that we are putting behind us, and we are increasingly able to prioritize the future of the company for our investors and people. We look forward to enhancing our focus on returning to profitable performance and executing other strategic actions while closing the remaining transactions related to the RASPRO assets in the coming months.”

About Mesa Air Group, Inc.

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 79 cities in 36 states, the District of Columbia, Canada, Cuba, and Mexico. As of March 31, 2024, Mesa operated a fleet of 80 aircraft, with approximately 263 daily departures. The Company had approximately 2,110 employees. Mesa operates all its flights as United Express pursuant to the terms of a capacity purchase agreement entered into with United Airlines, Inc.

Forward-Looking Statements

This press release includes information that constitutes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and similar expressions are used to identify forward-looking statements. These forward-looking statements are based on the Company’s current beliefs, assumptions, and expectations regarding future events, which in turn are based on information currently available to the Company. By their nature, forward-looking statements address matters that are subject to risks and uncertainties. A variety of factors could cause actual events and results to differ materially from those expressed in or contemplated by the forward-looking statements. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to the Company’s filings with the SEC, including the risk factors contained in its most recent Annual Report on Form 10-K and the Company’s other subsequent filings with the SEC. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by applicable laws.

Contact:
Mesa Air Group, Inc.
Media
media@mesa-air.com

Investor Relations
investor.relations@mesa-air.com

FAQ

What did Mesa announce about its CRJ-900 airframes on June 6, 2024?

Mesa announced the completion of the sale of six surplus CRJ-900 airframes.

How much did Mesa reduce its RASPRO purchase obligation by May 31, 2024?

Mesa reduced its RASPRO purchase obligation to $27.3 million by May 31, 2024.

What was Mesa's original purchase obligation under the RASPRO lease?

Mesa's original purchase obligation under the RASPRO lease was $50.4 million.

What are Mesa's plans for the remaining RASPRO purchase obligation?

Mesa plans to eliminate the remaining obligation through continued sales of assets.

Why is Mesa's CEO emphasizing the importance of addressing the RASPRO lease?

Mesa's CEO emphasized addressing the RASPRO lease to focus on future profitability and strategic actions.