Mesa Air Group and United Airlines have amended their capacity purchase agreement (CPA) and certain credit agreements to significantly improve Mesa's operating income and liquidity over the next year.
Under the new agreement, the block-hour rate in United CPA, retroactive to October 1, 2023 through December 31, 2024, is projected to generate approximately $63.5 million in incremental revenue over the next 12 months. Also, the $12.6 million outstanding United bridge loan and revolving credit facility debt will be extinguished in exchange for Mesa's vested equity investment in privately held Heart Aerospace, originally purchased for $5 million. Mesa will retain 222,222 unvested 'penny' warrants in Heart.
The agreement will also see Mesa's equity investment in Archer Aviation common stock, which comprises of 2.27 million vested shared and 1.17 million unvested 'penny' warrants to be released as collateral.
"We believe these new agreements, combined with our CRJ-related asset sales, will enable Mesa to generate substantial incremental contract revenue and improve margins," said Mesa CEO Jonathan Ornstein. "While the situation remains challenging, this stability is critical as we continue to restore our pilot capabilities, drive increased fleet utilisation, and step up block-hour production."
Mesa and United also agreed to amend certain notice requirements related to eight CRJ-900 aircraft covered under the CPA and to extend United's waiver of utilisation requirements for aircraft under contract until June 30, 2024. Since September 2023, Mesa sold or entered into agreements to sell excess CRJ-900 aircraft and related engines for combined gross proceeds of $198.0 million, which has been and will be used to pay down $174.3 million in debt. Specifically, Mesa has sold seven CRJ-900 NextGen aircraft for $71.2 million, seven of its remaining 11 CRJ-900s previously contracted for sale for $21 million, and entered into agreements with various third parties to sell its 15 CRJ-900 airframes and 65 CF32-8C5 engines for total gross proceeds of $105.8 million.