Mesa Air Group, Inc.

Welcome, everyone, to Mace's earnings call for its fourth fiscal quarter ended September 30th. This call is being recorded and simultaneously webcast. A replay of this call can be found on our website. On the call with me today are Jonathan Ornstein, Mace's chairman and CEO, Ed Rich, EVP and CEO, Michael Lott, president, and Tarek Zubek, CFO, as well as other members of the management team. Following our prepared remarks, there will be a question and answer session for the self-side analysts. I also want to assure everyone on the call that today's discussion contains forward-looking statements that are based on the company's current expectations and are not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially from those reflected by the forward-looking statements. including the risk factors discussed in our reports on file with the SEC. We undertake no duty to update any forward-looking statements. In comparing results today, we will be adjusting all periods to exclude special items. Please refer to our fourth fiscal quarter earnings release. It is available on our website for the reconciliation of our non-GAAP measures. With that, I will turn it over to Jonathan for his opening remarks.

Thank you, Susan. Obviously, this was a difficult quarter for Mesa. Who would have anticipated that coming out of COVID would be more difficult than going into it? As Brad and Tork will cover in more detail, our significantly higher seat cost and span times for the primary driver. Larry Risley, founder of Mesa and my mentor, once told me, in the airline business, something happens every year that happens every 10 years. And beginning in 2020, something happened that happens once a century. The aviation operating environment has been dominated by the pandemic, resulting in massive fluctuations in demand, higher attrition, inflationary pressures, and supply chain disruption. This has presented a set of circumstances unlike what we have seen before that will require innovation and cooperation to address successfully. While we believe industry fundamentals remain intact for the long term, Our expectation is that 2022 is likely to be a pandemic transition year. I'd like to thank all of our employees for their dedication throughout the pandemic as we work through this tough environment and the federal government for the PSP program that allowed us to keep all of our people fully employed. Since it is the end of the fiscal year, I would like to go over some of this year's highlights. First, we added 20 Embraer 175 aircraft to our United Express operation. We put in place a new contract for American to operate 40 of our CRJ 900s for the next five years. We leased 20 CRJ 700s to GoJet, another United Express operator, for a nine-year term. We successfully launched our 737 cargo operation with DHL, and in partnership with United, we entered into agreements with electric aircraft manufacturers Archer Aviation and Art Aerospace. We believe this will lead to significant long-term growth opportunities and make us the industry leaders in green aviation technology. Archer's electric vertical takeoff aircraft is designed for convenient, economical, and low-carbon transportation to United's hubs of airports in congested urban environments like New York, Los Angeles, and Chicago. As part of the transaction, Mesa made an equity investment in the company and received warrants. As of the close on Tuesday, the value of our investment is approximately $15 million on a cost basis of $5 million. We also entered into a purchase agreement for another 40 aircraft and 20 options with deliveries expecting to begin in 2025. Another significant benefit we see is that these small aircraft provide a pathway for our new pilots entering the industry to fly our larger regional jets. In another green initiative, we made an investment in Hart Aerospace alongside United Airlines and Breakthrough Energy Ventures led by Bill Gates. In addition to our investment, we received warrants and entered into a purchase agreement for 100 aircraft and 50 on option with deliveries scheduled to begin in 2026. Part Aerospace is located in Gothenburg, Sweden, plans to be the first provider of all-electric 19-seat commercial regional aircraft. Mesa has previously been the largest operator of 19-seat aircraft, and it is our hope that these highly efficient, environmentally friendly aircraft will allow us to reintroduce service to dozens of cities that lost commercial service over the last 20 years. For example, Farmington, New Mexico, our former headquarters, at one time at over 40 flights a day to five destinations, and currently has no commercial air service. As a result, the 45,000 people of Farmington have been effectively cut off from the national air transportation system. ARTS ES-19 aircraft will reintroduce rural aviation to cities like this with clean, efficient, safe, and reliable transportation. Our investment in these two companies are designed to position Mesa to be the first regional airline to fly electric aircraft and be in the forefront of decarbonizing air travel and reducing our reliance on fossil fuels. This will allow Mesa to have significant growth opportunities and continue to be a leader in introducing new technology to regional aviation. To put this in perspective, Morgan Stanley has estimated that the eVTOL market could grow to $9 trillion when it is fully developed, and we intend on being at the forefront of this development. We have also entered into an agreement with Skydrop, formerly known as Flirty, to operate four drones with an option to acquire up to 500 in total. We believe Skydrop is one of the most technically advanced precision drone delivery systems in the world with its initial focus on food delivery. We are excited about introducing drone delivery and think there is a huge potential market. While carefully limiting our risk, We believe we are pioneering an exciting and potentially high-growth industry of the future. Subsequent to year end, we finalized our agreement with Gramercy Associates Limited, based in London, to develop a European-based joint venture regional airline. Mesa owns 49% of the new venture. The joint venture will be based in Malta, and the certification is expected to be completed in the first half of 2022. We are excited at the potential to bring our regional business model overseas. I'd like to touch on the overall labor situation and the impact of potential shortages going forward. Brad and Tork will be explaining in more detail, but while we are navigating through an uncertain demand environment caused by COVID in 2020-21, the shortages of pilots driven by the federally mandated 1500-hour rule and now exacerbated by early retirements of the major carriers will require our largest focus over the near term. This is an industry-wide problem that needs to be addressed cooperatively with our partners, the FAA, and the federal government, as well as our employees. In response, we increased our recruiting and training efforts back in April and are looking at other strategic initiatives to respond to this potential pilot labor shortage. We believe We are laying the foundation for a strong future by strengthening our airline partnerships and position ourselves at the forefront of environmentally friendly electric aviation. Throughout our history, we have always worked together to come up with creative solutions when we were faced with near-term hurdles and believe this time will be no exception. With that, I'd like to turn the call over to Brad to provide an update on our operational performance this quarter.

Thank you, Jonathan, and good afternoon to everyone. Thank you for joining us today. We remain focused on the health and safety of our people and our customers, and as you would expect, we continue to follow the CDC's latest guidance and are working cooperatively with our major partners to ensure consistency across our network. Our partnerships with United and American remain the cornerstone of our business, and we are committed to not only meeting their performance and capacity objectives, but remain flexible and responsive to often rapidly changing industry conditions. We are pleased to see demand for air travel recovering. In the September quarter, we flew 94,868 block hours, which is a 64.6% increase from last year and an 11.4% above last quarter. Our combined controllable completion factor was 99.7% compared to 100% a year ago. Our current production is below our 2019 levels, primarily driven by our reduction in flying for American as a result of our smaller fleet under contract. Looking ahead to 2022, while demand has been recovering, there continues to be uncertainty as new variants of COVID-19 arise, Our ability to meet our airline partners' demand will likely be dependent upon the severity of the pandemic. Additionally, our industry continues to face significant obstacles, often magnified by the impact of COVID. This includes the rapid changes in demand, employee retention and hiring, increases in the cost of heavy maintenance, often due to supply chain issues and increasing labor costs, and a more expensive overall operating environment due to inflationary pressures. That being said, while we remain focused on solving these difficulties, we are not immune to these industry-wide issues. Let me discuss a few of the issues. In spite of issues obtaining parts and materials, the primary factor driving increased scheduled heavy maintenance expenses is the volume of scheduled fee checks, which are at historical highs and aircraft interior refurbishment upgrades. This also lengthened the time span of our heavy checks, thus impeding our ability to return our aircraft into service and to add additional aircraft into heavy maintenance. The result has been a reduction in the number of spare aircraft to support daily operations. We anticipate elevated costs and seat check times will remain in place into the next fiscal year as the supply chain recovers. It's important to note that these issues are primarily impacting our CRJ 900 fleet. Regarding our United operation, our E-175 fleet remains at 80 aircraft. Our controllable completion factor remains strong throughout the quarter at 99.8%. Our United performance has consistently placed us in the top tier ranking versus our peers, and this quarter was no exception. We have removed all of the CRJ 700s from our operations, and we continue the transition process of leasing these 20 CRJ 700 aircraft to GoJet Airlines as part of the previously announced agreement ending in 2030. 14 of the aircraft have been delivered as of September 30th, 21 with four additional aircraft transitioning in the December quarter. and the two remaining aircraft will be delivered by the end of March of 2022. I'd like to provide a quick update on our American operation, which consists entirely of CRJ900s. Last quarter, we mentioned the issues we faced with our CRJ900 fleet. These aircraft were particularly impacted by part shortages and the timing of heavy maintenance events. Additionally, at the request of American, We added an additional five lines of flying through the summer schedule. This increased capacity extended through mid-August and combined with the additional sea checks, reduced the number of spare aircraft available to the company. As previously mentioned, our sea check volume is at a historical high and more than double the company's normalized scheduled sea check rates. Our DHL operation continues to perform very well operationally. We've completed our first full year of operations. For DHL, our controllable completion factor was 99.26% for the year and our on-time performance rate was 97.65%. Both have exceeded DHL's performance goals and our performance. The third 737 aircraft delivery has been postponed by the lessor due to deliveries and conversion, maintenance, and certification. I'd now like to make some additional comments about our outlook on labor. We remain focused on hiring and training to meet increasing staffing requirements in all of our operational divisions. For pilots, this was exacerbated by an increase in early retirements at the majors and has resulted in higher attrition. While we put our training back into full capacity in May, we have seen further elevated attrition levels over the past 60 days. While we have been able to successfully recruit a sufficient number of new hire pilots and currently have over 200 pilots in training, there is a gap between the resignations and when the new hire training is completed. In addition, we removed five aircraft that had been added for the summer peak from our American operation, and as a result, for the December quarter, We are currently anticipating a block hour reduction in flying of 8% from the September 2021 quarter. Furthermore, we feel like we are very well positioned to be an attractive option for regional pilots through opportunities such as our fleet consists entirely of 76 passenger or narrow body 737 aircraft and does not have turboprop or 50 passenger aircraft. We offer the United Aviate program. We're one of few regional airlines able to offer a direct pathway for our pilots to become a career pilot for United Airlines. Our 737 aircraft. We are the only regional airline offering the opportunity to fly larger aircraft and earn the highest pay in the regional industry. We are well positioned. We have well positioned crew domiciles across the country. that allow our pilots the opportunity to live where they desire and commute easily to work. We're currently offering captain upgrade opportunities. We're actively recruiting from hundreds of aviation schools across the country. We have competitive new hire pay with enhanced bonus opportunities, and we are pursuing other creative initiatives to attract and retain new pilot candidates. With respect to mechanics, while we are continuing to deal with attrition, we have been able to hire a sufficient number to keep pace with attrition thus far. That being said, we continue to remain highly focused in this critical area. As an example, we implemented a new pay scale effective in October of 2021 and implemented other incentive and retention programs. With that, I'd now like to turn the time over to Tork to walk through our financial performance.