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Mesa Air Group Reports Third Quarter 2007 Revenues and Earnings

Posted on: Wednesday, 1 August 2007, 09:06 CDT

PHOENIX, Aug. 1 /PRNewswire-FirstCall/ -- Mesa Air Group, Inc. announced today third quarter earnings of $2.6 million on gross operating revenues of $355.9 million. Total operating revenues increased $16.9 million year-over-year, or 5.0%, primarily as a result of the year-over- year increases in our regional jet fleet. Net income and earnings per share for the third quarter were $2.6 million and 8 cents per share on a diluted basis (all amounts reported herein are after tax and all per share amounts reported hereafter are on a diluted basis), respectively, as compared to net income of $10.9 million and 25 cents per share for the same period of fiscal 2006 which included income of $5.9 million related the Company's US Airways bankruptcy claim. Pro forma net income for the quarter was $5.1 million, or 15 cents per share. Pro forma net income excluded net non-cash investment gains of $0.7 million, costs associated with the early return of certain Dash- 8 aircraft of $1.4 million, a $1.7 million cost associated with a contract settlement with a vendor and $0.1 million in certain start up costs associated with our Chinese joint venture. This compares to pro forma net income of $11.5 million, or 26 cents per share for the comparable period of fiscal 2006.

(Logo: http://www.newscom.com/cgi-bin/prnh/19990210/LAW065)

Total Available Seat Miles (ASMs) for the third quarter of 2007 increased 1.7% from the third quarter of 2006, primarily as a result of an increase in the number of regional jets flown from 146 jets as of June 30, 2006 to 152 as of June 30, 2007. At June 30, 2007, Mesa's fleet of regional jets was comprised of 94 50-seat regional jets, 20 70-seat regional jets and 38 86-seat regional jets (53 at US Airways, 58 at United, 33 at Delta, 5 at go! and 3 preparing for sublease to our Chinese joint venture). In addition to its regional jet fleet, Mesa operated 47 turboprops, including 16 37-seat DH8-200s (six at US Airways and ten at United), 11 37-seat DH8-100s (all 11 at Delta) and 20 B1900s (six at Mesa independent and 14 at US Airways).

As of June 30, 2007, the Company's cash, marketable securities and debt investments were approximately $209.9 million, which includes $12.2 million of restricted cash.

Events during the third quarter: * The Company took delivery of 2 CRJ-700's and placed them into service for United Airlines in June, swapping them for 2 50-seat RJs. In addition, the Company removed 2 additional 50-seat RJs, further reducing the Company's exposure to less profitable 50-seat RJ flying at United. * The Company announced an order for ten incremental Bombardier NextGen CRJ-700 aircraft (with an option for an 11th), for delivery late fiscal 2008 / early fiscal 2009. These aircraft will replace ten Mesa 50-seat RJs currently flying at United Airlines. Mesa is the launch customer for Bombardier's NextGen aircraft. * Working with United, the Company has made significant progress in improving Mesa's United Express flight schedules. The restructuring of Mesa's July United Express flight schedule has already led to measurable operating improvements, with a controllable completion factor and on-time performance of 99.3% and 76.1%, respectively, for the month of July as compared to 97.5% and 58.0%, respectively, for the July 2006 period. * The Company and Delta have begun implementing their joint plan to eliminate the JFK Dash 8 operations. Three Dash-8's were removed from line service in the third quarter. The remaining nine aircraft will be removed from service during August 2007. * The Company has begun realizing the benefit of its new power-by-the- hour GE engine agreement with Delta. The Company experienced lower engine repair costs in the quarter as a result of the agreement. * The Company negotiated a lower rate for maintenance for its Embraer regional jets' auxiliary power units. * The Company revised its spare parts maintenance agreement with AAR to settle a prior billing dispute and cap certain previously uncapped costs. * The Company celebrated its one year anniversary of its inter-island Hawaii operation go!. go!'s load factor in June was 72%, up from 63% in May and June also saw go!'s highest average fare for 2007. In addition, during the third quarter, go!'s frequent flyer membership almost doubled. * Work commenced for adding the first of 14 76-seat CRJ-900 regional jets on Mesa's Freedom certificate to be operated for Delta as Delta Connection. The first of the CRJ-900s is expected to be in operation by November 2007. * The Company continued to prepare for the launch of its Chinese joint venture, KunPeng Airlines. In June 2007, three CRJ-200 aircraft began the conformity process for sublease to the joint venture. Operations are expected to commence in mid to late September 2007. * As previously disclosed, effective January 1, 2007 United Airlines assumed responsibility for a portion of Mesa's United Express fuel purchases and as a result, Mesa's revenues, as well as its fuel expenses, were reduced by approximately 4.6 million gallons of fuel in the third quarter which represented approximately $10.6 million. Due to the pass-through feature of our contracts, this did not impact Mesa's earnings.

During the third quarter of 2007 the Company purchased approximately 2.3 million shares of common stock under Board-authorized stock repurchase programs. An additional 13.5 million common shares remain authorized for purchase under these programs.

OPERATING DATA Three Months Ended Nine Months Ended June 30, June 30, June 30, June 30, 2007 2006 2007 2006 Passengers 4,397,338 3,901,480 12,325,092 10,832,397 Available seat miles (000's) 2,327,235 2,288,200 6,945,781 6,781,886 Revenue passenger miles (000's) 1,844,807 1,820,001 5,232,603 5,074,883 Load factor 79.3% 79.5% 75.3% 74.8% Yield per revenue passenger mile (cents) 19.2 18.6 19.4 19.2 Revenue per available seat mile (cents) 15.3 14.8 14.6 14.4 Operating cost per available seat mile (cents)* 14.6 13.6 14.5 13.1 Operating cost per available seat mile, excluding fuel (cents)* 9.4 8.3 9.5 8.3 Block hours flown (000s) 156 142 470 419 Average stage length(miles) 359 403 363 404 * Excluding one time items MESA AIR GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) Three Months Ended June 30, 2007 2006 Operating revenues: Passenger $346,494 $331,967 Freight and other 9,362 7,070 Gross operating revenues 355,856 339,037 Impairment of contract incentives -- -- Total net operating revenues 355,856 339,037 Operating expenses: Flight operations 96,127 92,927 Fuel 120,935 121,990 Maintenance 71,820 60,849 Aircraft and traffic servicing 22,929 20,883 Promotion and sales 2,303 1,335 General and administrative 16,534 14,335 Depreciation and amortization 10,185 8,998 Vendor settlement 2,860 -- Bankruptcy settlement (333) (9,742) Total operating expenses 343,360 311,575 Operating income 12,496 27,462 Other expense: Interest expense (11,246) (9,415) Interest income 2,996 3,609 Other income (expense) 192 (3,668) Total other expense (8,058) (9,474) Income before taxes 4,438 17,988 Income taxes 1,834 7,059 Net income $2,604 $10,929 Income per common share: Basic $0.09 $0.30 Diluted $0.08 $0.25 Weighted average shares - basic 30,063 36,020 Weighted average shares - diluted 37,468 47,461 Dilutive interest on convertible debentures included in interest expense (after tax) $548 $900 Three Months Ended June 30, 2007 2006 PRO FORMA (After tax): Net income $2,604 $10,929 Net (gain) loss on securities (712) 603 Costs associated with the early return of certain Dash-8 aircraft 1,357 -- Vendor settlement 1,730 -- Start up costs associated with China joint venture 109 -- Pro forma net income $5,088 $11,532 Pro forma income per common share: Basic $0.17 $0.32 Diluted $0.15 $0.26 Weighted average shares - basic 30,063 36,020 Weighted average shares - diluted 41,251 47,461 Dilutive interest on convertible debentures included in interest expense (after tax) $906 $900 MESA AIR GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) Nine Months Ended June 30, 2007 2006 Operating revenues: Passenger $1,011,608 $953,034 Freight and other 28,291 21,685 Gross operating revenues 1,039,899 974,719 Impairment of contract incentives (25,324) -- Total net operating revenues 1,014,575 974,719 Operating expenses: Flight operations 287,956 273,625 Fuel 343,836 329,996 Maintenance 207,907 163,993 Aircraft and traffic servicing 68,218 55,403 Promotion and sales 5,683 2,989 General and administrative 50,204 47,240 Depreciation and amortization 31,149 27,005 Vendor settlement 2,860 -- Bankruptcy settlement (2,426) (9,742) Impairment of long-lived assets 12,367 -- Total operating expenses 1,007,754 890,509 Operating income 6,821 84,210 Other expense: Interest expense (31,407) (27,710) Interest income 11,443 9,206 Other expense (7,780) (17,995) Total other expense (27,744) (36,499) (Loss) income before taxes (20,923) 47,711 Income tax (benefit) provision (7,554) 18,502 Net (loss) income $(13,369) $29,209 Net (loss) income per common share: Basic $(0.42) $0.89 Diluted $(0.42) $0.73 Weighted average shares - basic 31,857 32,980 Weighted average shares - diluted 31,857 44,710 Dilutive interest on convertible debentures included in interest expense (after tax) $-- $3,428 Nine Months Ended June 30, 2007 2006 PRO FORMA (After tax): Net (loss) income $(13,369) $29,209 Net loss on securities 4,261 1,188 Debt conversion costs -- 8,034 Gain on sale of aircraft -- (267) Costs associated with the early return of certain Dash-8 aircraft 1,357 -- Vendor settlement 1,730 -- Start up costs associated with China joint venture 109 -- Impairment charges 23,445 -- Pro forma net income $17,533 $38,164 Pro forma income per common share: Basic $0.55 $1.16 Diluted $0.47 $0.93 Weighted average shares - basic 31,857 32,980 Weighted average shares - diluted 43,121 44,710 Dilutive interest on convertible debentures included in interest expense (after tax) $2,738 $3,428

To supplement our consolidated financial statements presented in accordance with GAAP, the Company uses non-GAAP measures of pro forma net income and pro forma earnings per share, which are adjusted from our GAAP results as shown above. These non-GAAP adjustments are provided to enhance the user's overall understanding of our current financial performance. We believe the non-GAAP results provide useful information to both management and investors by excluding certain charges and other amounts that we believe are not indicative of our core operating results. These non-GAAP measures are included to provide investors and management with an alternative method for assessing the Company's operating results in a manner that is focused on the performance of the Company's ongoing operations and to provide a more consistent basis for comparison between quarters. In addition, since we have historically reported pro forma results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting. These measures are not in accordance with or an alternative for, GAAP and may be different from pro forma measures used by other companies.

Mesa's third quarter results will be discussed in more detail via teleconference on August 1, 2007 at 9:00 AM Pacific Time, 12:00 PM Eastern Time. The live audio Webcast of the call will be available on Mesa's Web site at http://www.mesa-air.com/. There will also be a replay of the call available beginning approximately one hour after its conclusion at the same Web address.

Mesa currently operates 199 aircraft with over 1,300 daily system departures to 181 cities, 46 states, the District of Columbia, Canada, the Bahamas and Mexico. Mesa operates as Delta Connection, US Airways Express and United Express under contractual agreements with Delta Air Lines, US Airways and United Airlines, respectively, and independently as Mesa Airlines and go!. In June 2006 Mesa launched inter-island Hawaiian service as go!. This operation links Honolulu to the neighbor island airports of Hilo, Kahului, Kona and Lihue. The Company, founded by Larry and Janie Risley in New Mexico in 1982, has approximately 5,000 employees. Mesa is a member of the Regional Airline Association and Regional Aviation Partners.

This press release contains various forward-looking statements that are based on management's beliefs, as well as assumptions made by and information currently available to management. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable; it can give no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or expected. The Company does not intend to update these forward-looking statements prior to its next filing with the Securities and Exchange Commission.

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/19990210/LAW065AP Archive: http://photoarchive.ap.org/PRN Photo Desk, photodesk@prnewswire.com

Mesa Air Group, Inc.

CONTACT: Peter Murnane of Mesa Air Group, Inc., +1-602-685-4010

Web site: http://www.mesa-air.com/

Source: PRNewswire-FirstCall

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