Seneca Pilot

Your math is off and this is not consistent with what JO said in one of the quarterly earnings calls this summer. Mesa owns those 700s so the lease payments that GJ would pay would go to Mesa as part of the 500K. 300K per month per plane (your numbers) profit.

tonsterboy5

he was using fake numbers just to show how leasing is easier money than operating. He was correct, it is only 100k in profit. 500k revenue -200k lease payment(pure profit to Mesa)- 200k in operating cost=100k you are really bad at math

pangolin

Maybe not. With this formula since mesa isn’t making a 200,000 lease payment the profit would be 300k for Mesa operating them.

tonsterboy5

true, Mesa would make more money operating them, but then they have all the headaches of operation. 300k with tons of headaches or 200k with none.

Hedley

Lease payments also provide a diversified income stream. Someone else will still be on the hook for the rent even if demand goes down and utilization decreases.

Seneca Pilot

You have no clue what you are talking about.

Tankerds

Really it seems like you’re the only one here not knowing what they’re talking about.

Seneca Pilot

Mesa does not lease planes. Leasing planes to other airlines that are subject to the same market forces that you are is not diversification. GE is diversified as they are in aviation, health care, and washing machines. See the difference?

Mesa's 700s are paid for therefore no costs to offset. In a conference call that I listened to, JO specifically said he approached United about operating the jets as 550s and would prefer that to leasing. Mesa already has maintenance, training, operations, scheduling, spares, and pilots that are trained on the airframe. Every plane Mesa can operate at this point is cost reduction per acft due to the existing operation. There is more profit in operating the planes than leasing them to another competitor to operate at a profit.

Tell me how any of that is wrong.

DarkSideMoon

Depends on how the agreements are structured. Operating the aircraft you’re paid fee for departure, which means you’re exposed to a lot of risk if there’s say, a global pandemic, and your block hours are greatly reduced. I would guess leases are probably a monthly fee plus a premium based on block flown. You could be in a situation where you’re making money on leases while the lessee is underwater because they’re not flying enough. I’d call that diversification.

Seneca Pilot

Fair enough, but that diversification only goes as far as the health of the lessee. I doubt JO would even lease the acft. to GJ except that United is guaranteeing the payments. OO already cut them off because they couldn't pay. I don't know the history of OO leasing airframes but I would guess they do it because they got stuck with acft. they owned but couldn't place just like Mesa. I doubt it was a deliberate business decision but will stand corrected if they went out and bought aircraft for the purpose of leasing them out.

Remember Mesa is the only passenger airline in the US that made a full year profit in 2020. All quarters. Why would JO want to take on the counter party risk of a lease when he has shown that he can operate those airframes at a profit? I repeat, he specifically said in a conference call that he wanted to operate those airframes as 550s for United but that if that didn't work out he would lease or park them. That doesn't sound like a man wanting to get into the leasing business. Would he turn down the money? Of course not, but that doesn't mean it is plan A.