Q4 2020 Mesa Air Group Inc Earnings Call
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Good afternoon, and thank you for standing by and welcome to the fourth quarter fiscal year 2020 earnings call. Today's conference is being recorded if you have any objections. Please disconnect at this time through lines are in a listen only mode until the question and answer session of today's conference at that time, you May Press star followed by the new.
Over one to ask a question. Please on mute your phones and state your first and last name and prompted it is now my pleasure to turn the conference over to Jonathan Ornstein, Chairman and Chief Executive Officer, Sir you may begin.
And you might want to drop or your size and the delay guys were all a working remotely and you can imagine so.
Typically trying to get everyone on the same page, but we appreciate your patience and this is John at the North Sea and I'm, The Chairman and Chief Executive Officer, and makes airlines on the call with me today is Mike lots, our president and Chief Financial Officer, Brian Gilman, Our executive VP, and General Counsel and Brad Rich, our Chief operating officer I liked.
Moving up with our forward looking statements.
For the presentation and the comments begin makes would like to remind you that some of the segments in response to your questions and this conference call May include forward looking statements as such they are subject to future events and uncertainties that could also affect our results to differ materially from those segments.
So please note the company undertakes no obligation to update or revise these forward looking statements any.
Any forward looking statements should be considered in conjunction with the cautionary statements and our press release and the risk factors, including the alluded and art filings with the S. and see which makes encourages you to read and addition, please refer to our press release and the Investor section of makes his website to find additional disclosures and reconciliations of non-GAAP financial measures that will be you.
And on today's call.
Okay, I really want to start the call with a big thanks to all of our people and the field who despite the obvious from this and continue to exhibit and credible braeburn dedication.
And their service to our passengers and that.
Dedication is in the face of and then make I believe is nothing short of outstanding I like to take each of our pilots flight attendants mechanics operations control personnel and all the other front line employees.
While this may well be an example of the darkest hour.
Before dawn, we remain optimistic that our country and our industry will recover and 2021. Thank you everybody.
Despite the challenges in the industry and they says focus on our core business and is secure and some important opportunities going forward.
Like to walk you through some of our key accomplishments for the year.
We started off 2020, expanding our United.
She P.J., which we signed in November 2019 per 20 incremental and barrel 175 aircraft as while extending our 42 existing number 170 fives for five years.
And to lease 20 of our older Crj seven hundreds to another United Express operators for seven years.
And of those number 170 fives already flying for United with six additional aircraft scheduled for delivery this month and the remaining four and the first half of the calendar year 2021.
And April 2020, we applied for the P.S.P. program and received 95.2 million, allowing us to retain all of our employees, who would likely have been furloughed otherwise due to the significant reduction in our level of operations.
<unk> expenses and normally paid by our partners through the CPM.
And our June quarter, we're the only publicly traded U.S.K. to report a profit and this MACI positive cash flow to date.
In July we announced a five year contract with DHL to operate 2737 400 cargo aircraft I'm very pleased to tell you. The bulk of those aircraft are currently and service today.
In October we dealt and although the P.S.P. program and and did not for a low any employees from the end of the calendar year.
Accomplish this through a combination of a pilot agreement for reduced hours a significant number of voluntary crew leaves and a reduction of hours for administrative personnel and then I'd like to thank all of our people for supporting each other and the company and this endeavor.
In November we entered into an agreement with United to pre pay US 85 million to be used to pay down debt on existing aircraft, which enabled us to maximize our treasury alone.
Also in November, we finalized and closed $895 million loan under the carriers and with the U.S. Treasury Department.
And lastly, and November we amended our American.
Capacity purchase agreement to extend 40 Crj nine aircraft for five years surely in my mind, a remarkable accomplishment given the environment.
We remain focused on our primary business with our existing partners and opportunities to grow our business with them we.
We are also pursuing and number of new opportunities and we believe could provide the company additional long term growth diversification and.
Enhanced earnings.
I liked and turn it over to Brad Rich to give you an update on our level of operations as well as on our American United and DHL operations.
Okay. Thank you Jonathan.
I will begin with an update of our block hour production. After the September quarter, we generated 57622 block hours, which is about 50%.
The pre total but levels.
Based on current guidance with our partners, we expect the December quarter to be at about 60% of pre called and levels and roughly 70 per said for the March quarter.
Based on high level projections from one of our partners. We believe block hour utilization will continue to increase increase and reached pretty cold and levels by the end of the calendar year.
I might not want to provide an update on our American operation relationship.
We recently amended our CPGA to operate 40 of our Crj 900 aircraft for a term of five years.
Our current fleet as many of you know is 64 crj nine hundreds.
And that will reduce the 63 and June 2021 of.
63 aircraft, we own 48, and 41 of those are financed under our recently announced U.S. Treasury loan.
We also have 15 aircraft lease through 2024.
We'll be using the majority of these aircraft to support the American operations. However.
However, we are reviewing several new opportunities that would productively utilized some of these aircrafts.
Given the attractive financing and low debt balance on a majority of the fleet. We believe these aircraft are valuable assets and.
Well remain productive.
Additionally, American has requested that we picked up additional flying over the first half of calendar year 2021 over and above the new cpk levels.
Although weve not formalized and agreement we believe this could result in three to five additional lines of line.
Obviously this new agreement with American was extremely important to Mesa.
Getting it done and it's difficult and challenging environment was not easy and we are excited and pleased to continue our relationship with American that began over 30 years ago.
Well I would like to thank American Eagle leadership.
Including Devon May Mark Moessner and George.
George Sol Staley.
For their hard work and support.
We did offer rates that we believe are competitive and appropriate considering the reduced aircraft ownership previously discussed.
This agreement also demonstrates our ability to provide rates that we believe our industry leading.
Now moving to an update of our United operations.
And as Jonathan pointed out we've already added 10, new every other 175 L. <unk> aircraft that are scheduled and are scheduled to add six more of this month the.
The last four will be delivered in the first half of calendar year 2021.
As we add these aircraft to the United Fleet.
We are removing our crj seven hundreds on a one for one basis.
These aircraft will be leased to another United operator on a seven year term.
We are retraining most of the current Crj 700 pilots and Dole us on the Embraer 175, and most of that training expense will be covered by the training and credits that are part of the purchase agreement.
And then the next six months, we will be operating a single fleet of 80, Embraer, one seven fives, with United which will enhance operational performance and improve cost efficiencies.
In regards to our cargo operations, we have two 737 400 cargo aircraft in service for DHL.
Both aircraft are based in Cincinnati, where we have a pilot and on style and the maintenance base. So far we have been pleased with the operations and believe we are well positioned to grow this line of business.
And with that I'd now like to turn it over to Mike lots to walk through our financial performance.
Great. Thanks, Brad Let me give a quick recap on the earnings and that's in the fourth quarter fiscal 2020 reported net income of 11.4 million or 32 cents per share.
This compares and net income of 12.2 million for the same quarter last year or 35 cents per diluted share.
As noted in our press release, the Q4 2020 results and we are GAAP, the deferral and 7.8 million of EPA revenue all of which was billed and paid by American and United during the quarter and will be recognized over the remaining term and that she needs.
During the quarter. We also recognized 48 40.8 million as an offset to wages related to the previous announce VSP program.
We did report 3.2 million net income tax expense for the quarter. However.
Happening any cash taxes, as we have over 500 million and valuable and it won't carry forward.
For the full year.
20 reported net income of 27.5 million and 78 cents per diluted share compared to 47.6 million or $1.36 cents per diluted share last year.
As noted in our press release also 2020 results include again for GAAP, the deferral of 43.8 million and SCPA revenue.
Which was deferred and will be recognized over the remaining term and this you'd be a.
During the quarter. We also recognized 83.8 million as an offset to wages and related to that EPS the program.
Of note of the total PSP grant of $95.2 million, which initially was 92.5 million and then reallocated up through the 95.2, nothing like 83.8 million in fiscal 2020, and expect to recognize and remain balanced and the first quarter fiscal 2021.
With your reported 9.5 million and income tax expense and as we noted we've not made any cash taxes.
Quarter over quarter revenues down 79.8 million, and 42% Madrid, and 78.7 million per $108 million and through the year revenue was down 178 million and 25% and 723.4 million 545.1 day.
Cash for the quarter increased by 34.5 million 99.4.
During the quarter, we had cap ex expenses 1.5 million, we also paid 34.6 million and scheduled principal payments and.
We had deferred principal payments and $14 million and the quarter and total we have deferred the 28.1 million and principal payments since March.
I'd also like to now walk you through the very important U.S. Treasury loan, which we recently closed on which means that using a lot and effort and a lot of people within the company.
At a high level, our total loan is 195 million.
Force Troms funding was $43 million and was collateralized with existing unencumbered assets.
Right through the second try and we extinguished 164 million of debt.
The unencumber 44 aircraft using a combination of 83 million and cash on hand, and 81 million of prepaid GP and revenue from United.
And second tranche funding was 152 million collateralized with the 44 aircrafts and total of 195.
Net cash generated was 31 million, which is $195 million, that's $164 million and that was that was in debt that was extinguished.
The U.S. treasury debt and set at LIBOR plus 350, its interest only while the debt that we extinguish was fully amortizing debt.
As a result as a result scheduled principal payments going forward are significantly lower we choose not to repay and treasury long and he has an option to do.
Put this into context prior to the treasury.
For example in fiscal year, 2021, and 189 million and scheduled principal payments, which will be reduced and 96 million reduction of 93 million.
And for fiscal 2022 scheduled principal payments are reduced from 152 million.
The 91 million reduction and six and to make when the next two fiscal years scheduled principal payments being reduced by $154 million.
Also as part of a loan agreement, we did issue 4.9 million warrants the U.S. treasury that was struck at $3.98 and.
And just touch on it and few other items.
Moving to $164 million of debt that we extinguish was 21 million and the $28 million of total principal deferrals that we had through the end of the fiscal year.
The remaining 7 million of deferrals, plus an additional 12 million, which we are deferring between October and July well be repaid and August.
We also negotiated and so total prepayment discounts.
Roughly three and a half million dollars.
At this through year end, we had $22.9 million outstanding under our revolving which you are considering repaying now that weve closed on our treasury anymore.
The $81 million United prepaid revenue received in November.
And to be reduced to zero by approximately February.
Capex for 2021 will primarily be our purchase and 20 engines from GE roughly $110 million.
And he kind of those engines are scheduled for delivery and 2021 and 10 to 2022. We are currently in discussions with various parties on financing and lease options as well those discussions with GE and modify the delivery schedule.
Other cash items related to fiscal 2021 scheduled aircraft lease cash payments will exceed book expense line up $9 million.
We continue to manage our vendor payments and and moved the significant number of vendors and net 60 up from net 15 and net there.
For fiscal year 2021, you will be performing heavy maintenance that was previously deferred due to lower aircraft utilization levels and fiscal 20 Twond.
Lastly, as we look at the New American CPGA turns from the 40 aircraft.
And the new you and 75 and through the 20, new aircraft, we expect our pre tax margins consistent with past few years. Obviously in this environment. There are a lot and areas that could impact numbers will positively and negatively and due to this uncertainty or we're not we're not offering any guidance at this point.
I'd like to now turn it back over to John.
Thank you, Mike and we appreciate the snatched recap at this point, operator, I'd be happy to field any questions that come from any of the listeners.
Thank you Sir at this time, if you do have any questions or comments you May press star one place I meet your phones and state your first and last name and prompted to withdraw. Your question you May Press Star two again start one for any question one moment. Please for the first question.
Savi Syth from Raymond James You May go ahead.
Okay.
Hey, good afternoon, everyone and thank you and help us with some of the deferred cost showing up and and some of the deferred revenue happen and could you give us an idea of maybe the progression I know that you know the timing of everything's not exact but any.
Hello, and the progression and that's kind of the revenue build and the cost out and in in fiscal year and 21.
Mike you want to do that.
Hello.
Yes, I got it thank you.
And the savages and Mike So most of our AR.
And you build is going to be baseball and I'd walk our production. We did you did give guidance through the first two quarters and the third and fourth quarters is it's a little hard for us to predict you know we.
Gotten some indication from a partners that and it's.
It's going to be increase but.
We're we're just not not in a position right now to give you those from block hour projections through Q3, and Q4, but that from a revenue build that will that will primarily just because and by by orbach block hours and on the cost side are obviously going to be fairly consistent and we did have this this deferral of some of.
Heavy maintenance on the air claims that we differing from from 2020, and you're seeing a lot of that and 2021.
Do those deferrals show up in the off and should we assume kind of the off peak quarters, Mike and so they can a heavy on those and those time periods or and and also do you have an update on any kind of Ah those pass through costs, there and they are quite is gonna be somebody other agreements.
No <unk> spending and pass.
Through but most of them are through the the Mesa major responsibility and as far as timing and I think it will be more more likely in the front half of the year than detailed.
Makes sense and then just one last clarification the seat and request from the American that you're still working on for additional block hours line that is that in the guidance or that would be above and beyond what's in the guidance.
I believe that's in the guidance.
Thank you.
Thank you. Our next question comes from from Stephens with people you May go ahead Sir.
Hey, this is up or simple with Stifel and thanks for the time and good afternoon over the last couple of years.
Quarters, and you know you highlighted very strong controllable completion factor as you know almost pretty much as close as you can get through a 100%.
What gives you confidence you can run this strong and operations and block hours start to come back and maybe you don't have the same degree of sparingly you have now.
Well I'll take a shot at it and Brad I'm happy to have you add into that per suddenly American side. We will have you know significantly more skirts and we've ever had so I I think you know we will probably be okay. There will just really depend on what ultimately happens with those aircraft.
We certainly will make sure that we have the adequate spares or to operate at the levels that are above and beyond and I think that having no spare aircraft will allow us to do that.
And the United side, you know we have continued to operate.
We have always operated for United you know above.
And you know contract requirements you know we've done a really good job we have a lot of new aircraft, there and we have adequate sparing plus I think a big part of what goes on with United is you know we have two big maintenance bases that allow us to see a lot of aircraft and we don't see any real changes there. So I think we feel very confident.
And particularly with the you know the age of the fleet at United Right and you want to add anything to that.
I think no Jonathan I think the two main things are look we're excited to move to a one consistent fleet of Embraer once up and fives on the United side, which will really enhance operational reliability, we believe.
And then as Jonathan already said on the American side, we will be adequately spared.
Yeah, No I appreciate that I guess I, just wondering you know and some of the spares come down he said, there's potentially some productive use and some of those aircraft.
You expect that to have an impact or not really.
I I don't think we would we wouldn't jeopardize anything at American by pulling more aircraft out and and we feel comfortable with.
You know as a result of the financing that is made available to us under the true three alone and these aircraft become you know.
Financially much less of a burden.
And having the additional spare aircraft is something we want to do to continue to build.
You know even after 30 years, we continued to build the confidence of our partner. So I just don't think we'd let it get to that point, where we felt that we were not adequately spurt.
Great. Thanks, that's that's helpful color just just one more follow up a shock and last last quarter. You. You said you think the there's greater opportunity on the regional side than the cargo side.
And we still think that's the case, but just wondered if you had any commentary around that.
Well no I think that you know my view on that is.
And the regional businesses clearly our core business and we do think that there continues to be some.
Some very good opportunities and the regional side and terms of the cargo business I mean, I think that no and I imagine the strength that we've seen in.
And the cargo side and and the opportunities that exist. The difference there is our partners at American United and other main line carriers you.
And we'll do deals 10, 20 aircraft at a time, whereas on the cargo side. They have a tendency just to be a lot more incremental and so I think for that reason and you know the cargo business will build but potentially not at the same rate was and could potentially move the regional business.
But that being said I do think that the cargo business does provide us with some pretty significant opportunity, but it's just it's just maybe taking a little takes a little bit longer to develop and United. We we went from you know literally 20 airplanes to 80 airplanes and no matter, where a few years I just think it's going to do that.
Kind of growth and the cargo business will take some time.
Thanks for the time.
Thank you. Our next question comes from Mike Linenberg from Deutsche Bank, Sir You May go ahead.
Hey, Hey, everyone, Hey, Jonathan just two on the cargo piece to kind of follow up on that like you know when we think about how big that could be and two or three years are we talking what six 810 airplanes do you get to a dozen airplanes. Just if you can sort of frame the expectations for us and then I have a second sure well you know we think the 7374 and.
<unk> continues to have a long term attraction to the other different cargo operations and goals.
Very good niche, we're all looking at other aircraft types as well and I think they'll probably be mid to seven through seven eight hundreds at some point <unk>. We're also looking at smaller aircraft there seems to be a great need to get you know more product out to more places faster.
And with the advent of overnight delivery literally to everywhere and the country, which has been exacerbated by the pandemic and I don't think its going to go away anytime soon.
And I think that as a result, we're going to continue to pursue what we think our number of attractive cargo opportunities.
You know how fast they develop and how quick you know I think is because it's speculation, but I would be very surprised if we weren't you know significantly larger than we are today with only two aircraft and you're too and again that's just.
You know based on our existing business with.
Our business with DHL.
So you know.
I I think that that.
Like I said, the cargo operators take things a little bit more incrementally but.
But that being said I think overtime, we continue to build that operations nicely over the next couple of years and you know I would like to think that a you know we could add I mean, I simply could add and airplane every other month or somewhere in that kind of range. I think we were you know a 10 or 12 airplanes and two years I think we'd be pretty happy.
Okay, Great and then just a question and Mike you gave us a lot and numbers on you know.
Where are you where your <unk>, yeah fiscal year and from a liquidity perspective, and you know now you've closed the other part and allow and you talked about you know maybe paying down the C. I T line of credit how much and can you just tell us how much capacity you have available on that C. I T line, and maybe give us a ballpark.
Calendar year and liquidity level and like what we what we should be kind of honing in on thanks.
Yeah. So.
Let's see I see that we have out.
I think it's roughly 23 24 million and that's.
That's about the amount that we have.
Collateral to support them through that facility I think the seat.
Actual facility, maybe 35, but no.
No.
From the collateral I think were probably cap and like 25 of which we have no most of it drawn down okay.
Based on you know the treasury loan and and we see liquidity, where we're evaluating just paying that paying that down keeping it in place and of course, but he is and is paying it down and your and liquidities, a little a little true right now because we're not sure how much of the United prepayment.
We'll be burned off so and I'd prefer to hold off and kind of predicting pass through year end right now.
Okay very good thanks, Thanks, Mike Thanks, Jonathan.
Sure. Thanks.
And our next question comes from Helane Becker with Cowen You May go ahead.
Thanks, very much operator, hi, everybody and thank you very much for the time, so one kind of and net question your liabilities and the current liability line and the non current liability line don't add up.
On the balance sheet you provided today.
And its first line to our off by a little bit of money and she might want to look at that or try to figure out why.
[laughter] moving Okay, and then my second question and.
The fact that you guys are running you know have a really good on time performance and and a good operation right now just that.
How are you getting more more and downs for people wanting from other airlines wanting to sign you up.
Since you have the capacity and and you're one of the few airlines assets profitable.
First let me address the first question Helane since you and I have known each other a long time is not the first time that you pointed out and ever and have been correct.
Certainly and look at that and make sure that we have the numbers right. So thank you Oh, My God I'm, sorry, [laughter] and I feel really [laughter] me, though I was I was just commenting today that when you run a big operations anytime a you know occasionally something slips through the cracks and let us take a look at it and make sure that we have it right.
On the second question, Yeah, I think that we have really.
They'll establish ourselves as one of the leading regional carriers and hopefully you know one of the leading cargo carriers.
There is certainly opportunity within the regional business and other cpis have aircraft that.
Our expiring.
And our cost structure, we feel is significantly below our major competitors, and we think that and all probability the likelihood and be able to catch our cost structure is very low because so much of our cost structure is based on the fact that you know I think a lot from it looks half of our employees have less than two years seniority. So we have a young.
<unk> Junior work force that gives us some benefits there so yeah and I think that you know both in the regional side and and the cargo side when their RFP is out there I think Mesa will in fact be included going forward. So I do feel that we can win business both on our costs and also on the level of service.
We can provide.
Believe me, we know that were being tested right now by DHL and we're doing everything can we tend to provide the highest quality business because we believe that there could be some growth coming in that regard, but we know that performance is critical so okay. I do think that it's been helpful to us and obviously, we have to build on this coming out of the pandemic to demonstrate.
But what we've done here is is building the base for us to continue to grow the business.
Okay that Jonathan and that's really helpful. Thank you so much sorry about that and.
My addition, there, but the other way and everything I wanted to ask is what other things I'm starting to see a lot and in the trade press is biometrics and.
Do you sense that at airports and with the airlines and stuff and I'm wondering if either of your two partners have talked to you about making sure. All if you're you know eats and and your boarding process and are consistent with their since they moved to that over the next few years.
Well, Brad do you want to answer that you were you were at United and probably have a better feel for that and I do and he thought.
I apologize.
<unk>.
The question I'm, sorry, Oh, Yeah, no worries, it's just I'm seeing a lot of stuff on biometrics and and the use of biometrics you know to board people and I guess, we're going to that because you don't we're going to it looks to me like we're going to a touch less environment at airports and and so on from Uh Huh.
[noise] perspective, even after the pandemic goes away and I'm just kind of wondering if your partners have approached you about making sure all of you our airports are consistent with that.
So.
So.
The part of that obviously that we control is I mean, we obviously stay in very close contact and follow the guidance about partners as I as you well know and your question is half day approached us not with anything to the level that you've described.
Are we making advances and progressions more toward the type of environment you.
Kind of described Oh certainly.
But how quickly things continue to develop at least to the extent you have described you know I.
Obviously, not very well qualified to address other than we just keep in touch with them closely follow what the guidance. They ask and then as it relates to our old operations. Our old people of course, we're doing everything you know I think humanly possible to keep.
You know people safe and this environment, but.
That goes from only thoughtfully gotcha, that's really helpful. Okay. Thanks, gentlemen, thanks for the thanks for now.
Thank you and once again that is star one if you would like to ask a question. Our next question comes from George Steam with core partners. Sir you May go ahead.
Hi, guys and thanks for taking my question and congrats on a great quarter and.
My first question just wanted to I wanted to restate, maybe something that Mike was asking is you know maybe if you could just give us a lens into the cash balance as of today are roughly around today [noise].
You know where the U L three payment it stands and gross debt.
[noise] I mean, yeah look where we are.
We're fairly close here through the through.
Through the end of the calendar year. So we we look at year end cash and <unk>.
Probably somewhere around 170.
Million dollars.
Of which you know probably at least half.
40 to 50 of that is still.
And prepaid cash that they have to burn off.
And.
Got you and can you remind me of the so that the carry back loan you know where the LTV stands on that one per the covenant.
Well, you guys went and the maintenance for the collateral or the.
Yes, so the loan and the space on and LTV was different from different types of equipment, but it was 50%.
On aircraft with which the majority of our loan was baseline.
And the the tests going forward and 66.2% and LTV. So there is some some amount of cushion as we as we test the collateralized and twice a year.
<unk>.
Outside of kind of round numbers today are getting close to a year and have somewhere around 100 and.
130 million to 120 million of cash net of the net of the whale plus I guess conceivably and doubly collateralized Cares Act, one and 195.
I guess course net that against the market cap of $150 million.
And those rough numbers and so.
That's correct.
Okay and that's.
That's it from me thanks.
You bet.
And the next question comes from Savi fights from Raymond James.
Hey, guys and thanks for the follow up and could.
Could you talk a little bit about you know and mid day Mac and contract you know, what's the threshold that American head and neck.
To come down on them in line fleet, if for them to be able to take and take aircraft out in that first half of the air and and also just could you provide an update on the white tail risk, especially if American kind of close out aircraft from that contract as they they're able to.
Brad you ought to do that.
Well sure.
Look we I want to be a little careful here are becoming a spokesman for American and all other discussions we've had and Bobby I think your question as you know it is and it's related to the first half of 2021 is that correct and that's correct.
Yes, so look we we we yes, we and all the discussions we've had with American.
And the we think there is a that's threshold here and about another 40 aircraft that reduction.
What then trigger some type of and issue with their scope.
But look I want to be careful that because you know its americans to describe not ask but that's what we believe.
And so and if you think of a 40 additional narrow body reduction in excess of the current reduction.
Yeah, that's a that's quite a few airplanes, which we think.
Be pretty minimal risk for us, especially in an environment, where you know as we mentioned, we're having more discussion and about potentially additional flying above and beyond.
40, aircrafts, so we having said all of that we really.
You know, we don't know exactly what's going to happen of course, but we think theres relative.
A relatively small risk.
And those for six months.
Sense, and just kind of curious what the white update and whitetail races, and even more so because it's now the crj 900, and I think have been pledged as well just kind of curious what.
What deacon and updated by tail risk and.
Mike I'm happy to make some comments, but you want to take the tail risk art.
Yeah. So what what's what are you talking about the lease exposure.
Exactly lease and and that payment that might go beyond.
Yeah, I mean, I'll art art tail risk hedge always you know, we it's really related to the leach aircrafts and there's 15 of them and I think we've we've always said its somewhere around 20 $25 million to $30 million and it and.
It's a it's a it's a tale that occurs not out and not until.
I think that the first and second calendar quarter of 2024.
Well that that net.
Number really hasn't changed and of course the aircraft are fungible, but you know those those 15 aircraft or are in the <unk>.
Hi, Thank you.
And at this time Im showing no further questions, Sir I'll turn the call back over to you for any closing comments.
Sure. Thank you very much.
Thank you everyone for your support base over the years and certainly through the pandemic, it's been a hobby.
Obviously challenging.
But on the same at the same time you know we've worked very hard.
Keep all of our people moving in the same direction they've been incredibly supportive I have to tell you I'm ever.
Every day amazed that the the work effort that people are putting and whether it's out on line, you know and the maintenance hangers and dispatch or that's it and some people who are working from home diligently to keep the company moving forward.
We think that the accomplishments this quarter.
Certainly and will bode well for the future I think when we look at our two main partnerships with United and their support your willingness to load up to a pre pay US 80 plus million dollars to help us or could actually strengthen our balance sheet I think is something.
And particularly given the environment, a remarkable and itself and we are really pleased with American and their support and the work that Brad and putting that deal together that allowed us to continue to operate those 40 aircraft with them and the American system.
Those two things I think will hopefully be indicative of what we're capable of doing going forward with those partners. Additionally, other U.S. Treasury Department law and has been giving us incredible flexibility with the aircraft.
Our cash cost on the aircraft that were financed by the Treasury alone is about $11000 and dog.
And I think that's what's important nuts, you know, while we have depreciation expense and obviously engine expenses that flexibility is what allowed us to put the American deal together.
I'm hopeful on the cargo side that we can continue to see opportunities. There I can tell you that we have had numerous inbound calls.
Regarding our cargo capability over the last few months we.
We would like we are looking forward to acting and those calls also going forward.
All in all a you know we feel much better with.
With what's happening now and the other world scene.
And the beginning of the distribution of the vaccine, which in itself may be a business opportunity for us and I think that our partners are continuing to show their confidence.
And one of our partners has indicated to us at a high level that they expect us to be running at almost 100% utilization by the end of the calendar year. So hopefully.
You know as they say and child and all the indications are and the green and we're continuing to make progress going forward.
Thank you again, I always feel free to give us a call. If you have any additional questions. Thank.
Thank you everybody.
And thank you. This concludes today's conference call. You May go ahead and disconnect at this time.