Mesa Air Group has reported pre-tax income of $7.6 million for the second quarter of its 2021 financial year compared to $3.2 million for Q2 2020. The Group’s net income was $5.7 million or $0.14 per diluted share compared to net income of $1.9 million, or $0.05 per diluted share for Q2 2020.
The Group’s adjusted pre-tax income was $12.1 million, with adjusted net income of $9.1 million or $0.23 per diluted share.
Mesa’s results include a one-time non-cash $4.5 million lease termination expense resulting from the purchase of a previously leased CRJ-900 aircraft.
Mesa’s Q2 2021 results include, per GAAP, the deferral of $4.9 million of revenue, all of which was billed and paid by American and United during the quarter and will be recognized over the remaining terms of the contracts. The primary reason for the $8.9 million increase in adjusted pre-tax income from Q2 2020 to Q2 2021 was $56.0 million of benefit from the Payroll Support Program (PSP2) under the CARES Act largely offset by temporarily reduced rates offered to our partners related to the PSP2 program.
Jonathan Ornstein, Chairman and CEO, said, “The last year has emphasized the importance of innovation in the face of significant challenges. Given change is the one constant of our industry, we have focused on positioning the company for the future and taken the regional industry’s initial steps toward sustainability and de-carbonization of air travel. Our first strategic initiative this fiscal year was an investment with United Airlines in Archer Aviation, a leader in the development of electric air-mobility vehicles. Since our founding, Mesa has been an innovator and we continue to evaluate other opportunities in green technology. Additionally, we began to diversify our business model by starting a cargo operation and are flying two 737-400F with DHL. We have signed a letter of intent this quarter, partnering with Gramercy Partners for European flying and are planning to use existing CRJ-900 aircraft.”
Brad Rich, Mesa’s Chief Operating Officer, added, “During the past quarter, we continued to improve our operational performance and believe we are well-positioned with both American and United to assist in the pandemic recovery. Our operational performance improved, especially on our American flying, where block hours increased 6.8% from last quarter despite flying fewer aircraft.”
Total operating revenue decreased by $82.6 million, or 45.9%, to $97.3 million for our three months ended March 31, 2021 as compared to the three months ended March 31, 2020. Contract Revenue decreased by $84.1 million, or 50.7%, to $81.7 million due to the impact of COVID-19, fewer aircraft at American, lower temporary contract rates, and the winter storm and subsequent power outages in Texas. Mesa Air’s pass-through and other revenue increased during the three months ended March 31, 2021 by $1.5 million, or 10.6%, to $15.6 million primarily due to pass-through maintenance revenue related to the E-175 fleet.
Total operating expense decreased by $85.5 million, or 51.5%, to $80.5 million. The reduction is primarily due to $56.0 million of PSP2 funds that are recorded as an offset to wages.
Mesa ended the quarter at $147.9 million in unrestricted cash and equivalents. During the quarter, Mesa fully repaid the $48.0 million United prepayment. As of March 31, 2021, the company had $725.4 million in total debt secured primarily with aircraft and engines.
The Company was granted $56.0 million in financial assistance by the U.S. Treasury under the Payroll Support Program Extension (PSP2), of which $48.7 million was received during the quarter with the remaining $7.3 million received in April.
The Company is not required to issue any warrants or to repay any of the amount received under the PSP2 program but is required to refrain from conducting involuntary employee layoffs or furloughs through March 31, 2021 as well as prohibitions on share repurchases and dividends through March 31, 2022 and certain limitations on executive compensation.
The Company was also granted $52.2 million in financial assistance by the U.S. Treasury under the Payroll Support Program Extension (“PSP3”) as part of the American Recovery Plan Act of 2021.
On April 23, 2021, the Company received $26.1 million of the PSP3 grant with the remaining $26.1 million anticipated to be paid in May 2021. The Company is not required to issue any warrants or to repay any of the amount received under the PSP3 program. The PSP3 payments are conditioned on the Company’s agreement to refrain from conducting involuntary employee layoffs or furloughs through September 30, 2021, prohibitions on share repurchases and dividends through September 30th, 2022, and certain limitations on executive compensation.