Mesa Air Group stumbles to loss

Friday May 11, 2007
A second fiscal quarter rife with operational difficulties resulted in a $24 million net loss for Mesa Air Group compared to a $5.3 million profit in the first three months of 2006.

The company blamed weather, air traffic control problems and operations on behalf of United Airlines that were cancelled or significantly delayed. It also cited low yields and lower-than-expected revenue at its Hawaiian subsidiary go!. "We are clearly not happy with this report," Chairman and CEO Jonathan Ornstein said. "We know we are below Street expectations."

Gross operating revenue rose 7.8% to $336.4 million although the company reported a $25.3 million impairment charge related to an incentive payment to UA that impacted its operating result, which swung to a $24.9 million loss from a $27.9 million profit. Expenses climbed 18.2% to $336 million. "We know what we have to do and we have a plan in place going forward," Ornstein said, adding that MAG is working closely with United to "reduce the impact of irregular operations."

Its agreement to operate Dash 8s on behalf of Delta Air Lines ends in August and Mesa will look for other options for the aircraft. Also, it announced a stock repurchase program for up to 10 million shares of common stock. Ornstein said its joint venture with Shenzhen Airlines is on schedule with first flight expected in September.

MAG flew 1.68 billion RPMs in the quarter, up 4.7% from the year-ago period, against a 3.8% increase in capacity to 2.27 billion ASMs. Load factor rose 0.7 point to 73.9%. Yield increased 3.6% to 20.2 cents on a 4.2 lift in unit revenue to 14.9 cents. Unit cost was up 10% to 14.3 cents, or 16.9% to 9.7 cents excluding fuel.

For the six months ended March 31, the company reported a net loss of $16 million, a reversal from an $18.3 million profit in the year-ago period. Operating result fell to a $5.7 million loss from a $56.7 million profit.

by Sandra Arnoult