Mesa Air Group, Inc.

Thank you for standing by and welcome to Mesa Airlines Q4 and full year fiscal year 2022 conference call. All participants are in a listen-only mode until the question and answer session of today's call. At that time, to ask a question, please press star 1 on your touchtone phone. This call is being recorded. If you have any objections, please disconnect this time. I would now like to turn the call over to Doug Cooper, Head of Investor Relations. Mr. Cooper, you may now begin.

Thank you, Ted, and welcome. everyone to Mesa's earnings conference call for its fiscal fourth quarter and fiscal year ended September 30th, 2022. On the call with me today are Jonathan Orsine, Mesa's Chairman and Chief Executive Officer, Brad Rich, Executive Vice President and Chief Operating Officer, Michael Lotz, President, and Tor Zubek, Chief Financial Officer, and other members of the management team. Following our prepared remarks, there will be a question and answer session for the sell-side analysts. We also want to remind everyone on the call 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 factor discussed in our report 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 fiscal fourth quarter earnings release which is available on our Web site for the reconciliation of our non-GAAP measures. With that, I will turn it over to Jonathan for his opening remarks. Jonathan?

Thank you, Doug, and thank you everyone for being with us today. Since we spoke on last quarter's results, several significant transactions have occurred at MESA. Collectively, these new agreements transition our business from American Airlines to United, address the industry-wide pilot shortage and its financial and operational impacts, and create a much stronger liquidity position and balance sheet. Combined, these initiatives have transformed our business. Let's walk through what has been accomplished. As we announced on December 19, as a result of ongoing unprofitable operations due in part to utilization penalties and uncovered increases in our pilot wage structure, we initiated and finalized an agreement to wind down our contract with American Airlines by April 3rd, 2023. Unfortunately, while American initiated dramatic wage increases at their own subsidiaries, they were unwilling to reimburse MESA for similar pay increases at our American Eagle operation, leaving us vulnerable to unprecedented pilot attrition. This led to an untenable situation and required us to take action. Fortunately, based on our strong relationship with United Airlines, combined with our consistent operational performance over many years, United took a different view and quickly stepped in to take over the American CRJ900 flying. Given the industry-wide shortfall in regional jet block hours, United supported higher wages in both our E175 and CRJ900 operations, and intends to increase service to many of the smaller and rural cities that have lost flying due to the pilot shortage. As a result, on December 27th, we finalized a new five-year capacity purchase agreement with United that covers up to 38 of our CHA 900s, depending on the number of 175s we are operating. While there is a very clear business case for United's decision, this deal was made possible as a result of a strong relationship that has developed between United and MESA over the past 30 years. To ensure a smooth transition, our CRJ900 crew and maintenance bases in Phoenix, Dallas, El Paso, and Louisville will remain in place, with an additional CRJ900 crew base to be added in Houston, along with a new pilot base in Denver to expand services to western states. Other incremental crew bases will be potentially added. MESA will continue to utilize all of its pilots and crews in the existing locations through the transition and beyond. In addition to these actions, our new pilot pay scale has had an immediate and significant impact on attrition as well as our ability to attract qualified candidates. We currently have approximately 400 pilots in our training pipeline. Concurrently, United is providing financial support to MESA under two additional agreements that we also finalized on December 27. One, to provide MESA a new 41.2 million liquidity facility, of which 25.5 million will be additional liquidity. And another, to purchase 30 spare engines from MESA for $80 million, generating over 50 million of net cash proceeds. As part of the transaction, United will also receive a 10% equity position in MESA and a seat on the Mesa board. We thank United for their support and we look forward to capitalizing on the substantial demand for regional jet flying together. This is an important reversal momentum for the regional airline industry as Mesa and I will work to restore service to neglected smaller and rural markets, three quarters of which have seen service reductions in the past three years by adding over 100 daily regional jet flights to the United network. We look forward to leveraging our previously announced co-investments with United on new technology and electric aircraft to further address the needs of smaller and congested communities. Moreover, after the transition, Mesa will be the only exclusive regional carrier for United operating large regional jets. We believe our strong relationship with the United will provide significant opportunities in the future as a preferred carrier. In particular, we believe Mesa's participation in the AVA program combined with United's industry-leading growth plan, will provide the most reliable, fastest path for aviators to transition to a major commercial care. Once our operations are fully integrated with United, Mesa will be the most attractive career path in regional aviation for pilots, as well as all of our other employee groups. In the quarter, we also signed a new two-year agreement with our flight attendants. I would also like to note that our operation with DHL was unaffected by the American and UNI agreements, and we continue to maintain a strong relationship with DHL. Additionally, we have completed a number of transactions to strengthen our capital structure. In mid-December, we renegotiated improved terms and conditions with EDC, Export Development Bank Canada, on debt associated with seven next-gen CRJ900 aircraft reducing debt service by approximately $14 million from January 2023 to December 2024. The junior note holder, Mitsubishi, has also agreed to forgive 50% of the outstanding note balance, or approximately $4.2 million, if the notes are fully repaid prior to December 31, 2023. Additionally, we negotiated an agreement with Raspro, a Canadian special purpose finance company, on our leases of 15 CRJ900 aircraft which reduces the effect of purchase prices at or prior to March 2024 lease termination by approximately $25 million. Concurrently, MESA plans on closing on the sales of the remaining eight CRJ550s denited in January 2023 and 11 surplus CRJ900s to a third party, resulting in net cash proceeds of $16.2 million. These sales are expected to reduce Mesa's US Treasury debt by approximately $65 million and reduce annual interest expense by approximately 4.5 million at current rates. With that, I will hand over to Brad Rich to go over more of the details of an update on our operational performance this quarter.