Q4 2021 Mesa Air Group Inc Earnings Call
Sure.
Yeah.
[music].
And to the Mesa Airlines Q4, Investor Conference call. All participants are in a listen only mode until the question and answer session at that time. Please press star one on mute your phone and record your name at the problem.
This call is being recorded if you have any objections you may disconnect at this time.
I'd now like to turn the call over to Susan Donofrio head of Investor Relations. Mr. Raphael you may begin.
Thank you operator, and welcome everyone to Nathan earnings call.
Good quarter.
Yes.
This call is being recorded.
Opinions webcast.
This call can be found on our website.
On the call with me today Jonathan.
As the chairman and CEO.
<unk> EVP and COO Michael lot.
And towards your deck, it, though as well as other members of the management team. Following our prepared remarks, there will be a question and answer session for sell side analyst.
Also one.
One 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 a significant risk and uncertainties that cause actual results to differ materially from those reflected by the forward looking statements, including the risk factor.
As discussed in our reports on file with the SEC.
Undertakes no duty to update any forward looking statement 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 with a reconciliation of our non-GAAP measures with that I will turn it over to Jonathan.
His opening remarks.
Thank you Susan.
Obviously this was a difficult quarter for Mesa.
Who would have anticipated that coming out of COVID-19 will be more difficult than going into it.
As Brad into our COO will cover in more detail, our significantly higher seed costs and spend time with the primary driver.
Larry originally 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.
Aviation operating environment has been dominated by the pandemic, resulting in massive fluctuations in demand.
Attrition inflationary pressures and supply chain disruption.
This is presented a set of circumstances. Unlike what we've seen before that will remain require innovation.
Cooperations 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 our American to operate 40 of our CRE J nine hundreds for the next five years.
We leased 20 <unk> seven hundreds to go jet another you'd I 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 aerospace.
We believe this will lead to significant long term growth opportunities and make us the industry leaders in Green Aviation technology.
<unk> electric vertical takeoff aircrafts.
Is designed for convenient economical and low carbon transportation to United's hubs airports in congested urban environments, like New York, Los Angeles and Chicago.
As part of the transaction makes a main equity investment in the company and received warrants as the closed on Tuesday, the value of our investments is approximately $15 million on a cost basis of $5 million.
We also entered into a purchase agreement for another 40 aircrafts and 20 options with deliveries expected 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.
And another Green initiative, we made an investment in our 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 options with deliveries scheduled to begin in 2026 <unk>.
<unk> Aerospace is located in <unk>, Sweden plants to be the first provider of all electric 19 seat commercial regional aircraft.
It has been had previously been the largest operator of 19 seat aircrafts and it is our hope that these highly efficient environmentally friendly aircraft will allow us to reintroduce service to dozens of cities that loss 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 of 45000 people of Farmington.
Effectively cut off from the National Air Transportation system.
Es 19, aircrafts will reintroduce rural aviation to cities like this with clean efficient safe and reliable transportation.
Our investment in these two companies are.
Are designed to position makes it to be the first regional airlines to fly electric aircraft and be in the forefront of Decarbonising air travel and reducing our reliance on fossil fuels.
This will allow makes it 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 <unk> market to grow to nine trillion dollars. When it is fully developed and we intend on being at the forefront of this development.
We have also entered into an agreement with Sky dropped formerly known as Liberty to operate for drones with an option to acquire up to 500 in total.
We believe sky drop as one of the most technically advanced precision drone delivery systems in the world.
Actual focus on food delivery.
We are excited about introducing drone delivery and think about I think there is a huge potential market.
We'll carefully newly 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 Ltd based in London.
A European based joint venture Regional Airlines makes.
<unk> 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 <unk> will be explaining more detailed but while we are navigating through the uncertain demand environment caused by Covid in 2000 2021.
The shortages of pilots driven by the federally mandated 500 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.
FAA and the federal government as well as our employees in response.
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 our strengthening our airline partnerships and positioning 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 are 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 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 often rapidly changing industry conditions.
We are pleased to see demand for air travel recovery.
In the September quarter, we flew 94868 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 a 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 variance 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 <unk>.
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 C checks, which are at historical highs.
And aircraft interior refurbishment upgrades.
This also lengthen the time span of our heavy checks.
Impeding our ability to return our aircraft into service and do 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 is important to note that these issues are primarily impacting our <unk> 900 fleet.
Regarding our United Operation.
Our E 175 fleet remains at 80 aircraft are controllable completion factor remained 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 <unk> seven hundreds from our operations and we continue the transition process of leasing. These 20 <unk> 700 aircraft to go jet Airlines as part of the previously announced agreement ending in 2030.
14 of the aircraft have been delivered as of September 30, 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 <unk> 900 <unk>.
Last quarter, we mentioned the issues, we faced with our <unk> 900 fleet.
These aircrafts were particularly impacted by part shortages and the timing of heavy maintenance events. Additionally.
Additionally, at the request of American <unk>, we added an additional five lines of flying through the summer schedule.
This increased capacity extended through mid August and combined with the additional C checks reduced the number of spare aircraft available to the company.
As previously mentioned our seat check volume is at a historical high and more than double the company's normalized scheduled C check right.
Our DHL operation continues to perform very well operationally, we've completed our first full year of operations.
We for DHL are controllable completion factor was 99, 6% for the year.
Our on time performance rate was 90 765.
<unk> have exceeded dhl's performance goals and.
And our performance.
The third 730 <unk>.
737 aircraft deliveries 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 and all of our operational divisions.
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 aircrafts that have 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 up 8% from the September 2021 quarters.
Furthermore, we feel like we're very well positioned to be an attractive option for regional pilots through opportunities such as.
Our fleet consists entirely of 76 passenger or narrow bodies 737, aircrafts and does not have a 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 slide larger aircraft and earn the highest pay in the regional industry.
We are well positioned we have well positioned crude on the sales 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 are actively recruiting from hundreds of aviation schools across the country.
We have competitive new higher pay with enhanced bonuses.
<unk>.
And we are pursuing other creative initiatives to attract and retain new pilot candidates.
With respect to mechanics, while we're 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.
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 walk through our financial performance.
Great. Thank you Brad so.
So let me do a review of our financial performance and then provide some more detail on our business outlook after that I'll discuss our capital outlook and balance sheet for the fourth quarter of fiscal year 2021, We reported a net loss of $7 5 million or <unk> 21 per diluted share and an adjusted net loss of $2 1 million or <unk> <unk> per diluted share.
Excluding the $6 8 million mark to market noncash losses on our investments in equity securities and related impact on our income tax expense.
For the full year 2021, we reported net income of $16 6 million or <unk> 43 per diluted share and an adjusted net income of $24 6 million or <unk> 64 per diluted share.
These adjustments include the aforementioned mark to market noncash losses on investments in equity securities as well as a loss on a lease termination at a gain on extinguishment of debt.
As Brad mentioned, we've been investing in our fleet getting them through heavy maintenance that has been deferred during COVID-19, overall maintenance expense was up $14 million versus prior year fee check volumes were double the normal run rate in the quarter. The associated cost was roughly $9 million higher than Q4 2020.
Similarly, our rotable, an expandable expenses were elevated due to a catch up on parts removed in fiscal year 2020 that were not needed at lower flying levels, but are now being repaired and put back into service to support the higher flying activity. This add another $3 million of expense net of one time true ups with one of our maintenance vendors let.
Let me review, where we are on cash and liquidity.
Cash for the quarter, excluding restricted cash decreased by $59 9 million to $125 million. This amount of slightly above where we forecasted it to be last quarter. The reduction from Q3 to Q4 is primarily due to planned scheduled debt payments of 45 billion, which included a onetime deferred debt payment of $19 million pardon.
True ups of roughly $23 million, a $5 million investment in Archer aviation, a $5 million investment at heart aerospace during the quarter and the purchase of a new spare engine.
Total debt at the end of the quarter was $670 3 million, which was down $43 4 million from the prior quarter.
Assuming no additional debt the balance will be reduced by roughly 100 million on average in each of fiscal year 2022, and 2023. This brings the total debt balance down to roughly $470 million at fiscal year end 2023.
There was $9 million of Capex in the quarter, which primarily consisted of the purchase of a new spare engine and rotable spare parts for fiscal year 2022, we still have four additional new spare engine deliveries and no other major planned capital expenditures.
Effective October 21.
All temporary partner rate reductions related to PSP are no longer in effect as the PSP program ended at the end of September.
Let me now touch on guidance, although the environment is still recovering we did want to provide guidance in a few areas as Brad outlined our Q1 2022 block hours are anticipated to be 8% lower than the previous quarter.
We also anticipate increased pilot training costs as we have our training center at full capacity for new hire training and captain upgrades.
And like most regionals, we have enhanced new higher pilot compensation to attract a sufficient number of qualified trainings.
Our heavy maintenance expense levels will continue to be elevated for the first two quarters of fiscal year 2022. This includes both an interior refresh program at the American as well as our regularly scheduled heavy maintenance visits.
For a pass through maintenance expense as you know this is zero P&L impact and it is not related to our level of operations. This is more related to the timing of events. So we've provided our best estimates and our press release.
We see 2022 is a transitional year, primarily in the first two quarters, we are coming to the end of the elevated C check activity, we've seen in the past year.
We see travel demand increasing given that pilot hiring major carriers is expected to be at elevated levels. We are focused on making sure. We keep our pilot hiring and recruiting activity at full throttle. Our success in this area will have a direct impact upon our financial performance now.
Now I'd like to turn it back over to Jonathan.
Thank you very much torque.
We appreciate the financial recap.
To sum up we strengthened our partnership with United through the addition of 20 aircrafts in our partnership and electric aviation.
We were also able to successfully enter into a new contract with American in the midst of the pandemic.
We believe we have a plan to attract and retain qualified employees.
We also feel our DHL cargo flying in our European growth plans or just start as we continue to look for and pursue new growth opportunities.
Finally, we remain the low cost regional airline and intend on being the regional airline leader and de Carbonization and electric aircraft.
While we certainly face some significant near term issues, we believe that the fundamentals of our industry remain unchanged over the long term at this point operator, please open up the call up I'd be happy to answer any questions at the analysts may have.
Thank you so much if you would like to ask a question at this time, Please press star one.
Yes.
Amit your line and record your name and that will be needed to introduce you again to ask a question. Please press star one.
And our first question comes from Savi sites go ahead. Please your line is open.
Hey, good afternoon everybody.
And just a bit confused if I look at your <unk>.
Results relative to your guidance here.
For this quarter your black card production came in higher ear.
Recognition of deferred revenue is higher and.
Some of the non pass through engine empty check maintenance costs estimates were actually lower what seems to be different maybe is the five American aircrafts, leading a little sooner than maybe smaller.
Aircraft. Please go ahead.
And I'm just kind of curious what are you expecting a loss a non-GAAP loss in the September quarter previously or something.
Else happened during the quarter that drove that and also.
Along those lines. If you expect some of these costs to continue for another couple of quarters do you should we be expecting non-GAAP losses for a couple more quarters as well.
Savi. This is Jonathan I'm going to just give you a high level view from my perspective in terms of what drove this quarter and I'll, let <unk> talk and Mike maybe at chime in but clearly what drove things here was just the elevated level of heavy maintenance primarily in C check.
The cost the duration the number.
It is important to point out that we have 64 aircrafts on property. We're always fly 42, we had five additional aircrafts, but in the meantime, we were actually maintaining all of them.
And I don't imagine that just that will not continue we had a lot of aircraft that were in also.
Part of our new agreement with American we put them through various types of mods, whether it be electric <unk> interior Mod paint bought so we were funding.
Additional I believe it was five lines of aircrafts that otherwise would either been available for spares are.
Been part and the expense of maintaining those aircraft would not be there.
A lot of this is related to that transition into the new American contract and again in the higher costs associated with primarily heavy check that that came through and again on those C checks.
Were there were more they took longer due to supply chain issues and they were more expensive as a result.
Yes, Jonathan maybe I could just add.
Not only the <unk>, but there was a an.
An increase in the quarter related to parts support which is.
Some of it's tied to the C check when C checks are in for that expanded period of time, there are significant parts expenses that we had.
Related to the C checks and the parts related to the interior is like.
Jonathan alluded to we're flying more aircraft.
Then in.
In the CPA some of them to support for spares are enough to support.
Sure.
Programs that we're doing with the American fleet. So those but those are the two major items, the heavy maintenance and the parts support related to them.
That makes sense.
On that.
The non-GAAP.
Should we be expecting losses for another couple of quarters here or is that something that changes here in the next couple of quarters.
Well, we're not giving any guidance on earnings, but we as <unk> alluded to and I think Jonathan is the the heavy maintenance you know a lot of it was.
For for work.
That took longer than expected and that that is going to be tailing off and it will go through Q1.
Part of Q2, but then certainly by Q3 and Q4 will be through that whole cycle, and we will probably be under run rate at that point, rather kind of flipped to a.
A lower point.
Got it and if I might just ask.
On the pilot front and could.
Could you talk about any color on levels and if this is what youre seeing a little bit of a transitional issue as you mentioned were.
Takes time for the pilots that are in training to catch up or do you see this kind of.
Add a treadmill youre on a lasting.
Quite a bit longer.
I'll make my comment again, I'll ask Brad to give you more color.
No.
During COVID-19.
Good.
The attrition literally went to zero.
I'm talking zero.
810, 12 pilots a month, which for us obviously and given the fact that we were flying so much reduced.
The fact is.
We also felt that this was not a long term.
This was not going to be long term that there was when it turned it would turn and as.
As we mentioned in the call. We really began back in April while we did highlight Eric we still had pilots on voluntary leave.
We fired up the training center and started to move forward.
The attrition levels incur.
Increase and then increase again.
Yes at this point.
We're not counting on them coming down I do think that they could moderate somewhat but to moderate to what would still be considered elevated levels were.
We're also talking to our partners about it and how we might work together as I mentioned too that we have to work. This problem together and just coming up with a solution on how to best handle this due to the fact that we there.
There is in fact that lag that Brad talked about and we need to be able to operate within this new paradigm, where the demand for pilots is it appears to be on.
Very powerful and again.
Absolutely exacerbated by the.
<unk>.
Early retirements that were offered during the pandemic, which effectively accelerated the impact of the pilot shortage, which.
I think we all know has been artificially created by.
Government regulation regarding the 500 hour rule or Brad you want to add something Jonathan I think you covered it.
Don't have really anything meaningful that.
The issue.
Alright, Thank you guys.
And our next question comes from Helane Becker go ahead. Please your line is open.
Thanks, very much operator, right at the second mile Taco sauce.
Everybody. Thank you for the time, just a couple of questions here on the to clarify on the five aircrafts that were spares that arent being flow now does that did that free up pilots or did they immediately go into.
<unk>.
Or did they immediately leave and go to other airlines.
I don't know.
The five aircrafts were just transitioned out of service.
We have had attrition levels that from best we can tell and again. This is anecdotal at best but talking to our partners and talking to other people around the industry. This is not something unique to make it by any stretch.
Sure.
At American for example, our utilization levels, because we did fully aircraft out were higher.
And then other carriers, but again.
Just a question of how fast can we train versus how many people.
It took us a little bit of time to spool up trading because it's Lisa.
Roughly 90 day footprint at best.
And so it just takes time.
To catch up with that lag, but as Brad mentioned, we have over 200 pilots in training and.
We think that we're going to be able to continue to fulfill.
Pilot requirements going forward as best we can tell I mean, the environment is very volatile and that that's for sure.
Gotcha, and then are there issues with people other than pilots.
That exists.
I need you Amtrust, Mr year maintenance and you already talked about that but.
Are there other talk about maintenance, but let me just give you. An example, when we say that there is labor shortages coming out of we just are.
It's amazing.
Have generally fairly high level of attrition within flight attendants.
To give you an example.
It does not.
That eagle remotely close to the kind of numbers that we've seen a trip out and flight attendants, which thankfully we can train quickly and that we have.
Thousands of applicants, but just to give you. An example, one of our partners hired 22 of our flight attendants and eight days.
So their demand levels of exploded. So it's just like I said, it's a new regime and we just have to come to grips with it and we are in fact acting as fast as we can but you would never think for a second that you'd be dealing with flight.
Flight attendant attrition and the way it is and.
Effectively a shortage and widespread.
So yes, it affects everybody and I'll, let Brad talk about the next obviously critical as.
Highly trained mechanics.
If you want to make a comment yes.
Look Helane I don't think it's any surprise there is there is pressure on all labor groups.
The thing Thats and mechanics are no exception.
The actual numbers, though we've been able to hire a sufficient number of mechanics to keep pace with attrition.
And with mechanics.
Although you are getting an inexperienced mechanics, the training footprint is not nearly as long as it is with a pilot so great.
This pressure, we've been keeping up on hiring with the other groups.
Pilots upwards, obviously get more focus and attention because of the demand issues or the supply issues and the length of the training footprint.
Got you that's very helpful. Thanks, Brad and just if I can follow up this is the management change.
American change anything for you with the American contract.
No nothing certainly nothing contractually, but.
No.
But Doug and I have been friends since the America West bankruptcy and certainly we're sorry to see him go.
To retire because he has always been.
We view them as a friend and ally, but we've also known Robert Isom for a long time, Brad has worked very closely with their operational people Devon may.
So for the folks that we deal with.
I don't see any significant change so we like Doug a lot both professionally and personally and wish him the best I mean, but.
Okay.
Yes.
I don't think we will be hurt by it.
That's the impact because it'll be the same and then contractually. There is there is no there's no change.
Got it.
Thank you thanks guys.
Just a reminder, that you may still press star one and record your name to ask a question. Our next question comes from Michael Lindenberg Go ahead. Please your line is open.
Oh, Hey, good afternoon, everyone Hey, Jonathan.
Jonathan.
The European operations of <unk>, 49%, So I guess youre going to account for that under the equity method and when does that.
When does that start showing up in the P&L like what's the ramp up their I guess their startup costs, maybe I don't know if theres. Some initial capex can you just can you talk about that because that sounds like that that was going to be a fiscal year 2022 development.
Bob I'm going to ask Mike to answer that because he has been responsible and taking the lead on the European operations. So I'm going to ask Mike to answer those questions great.
Hi, Mike. So yes. This is Mike Lotz were expected were working.
With the mall piece regulatory authorities, where we're going to have this certificate be incorporated.
Going through the process of getting a certificate, we expect to get that certificate certainly.
In Q2, and the first the first half of calendar 'twenty two.
The startup costs will will be minimum.
I'm talking not billions of dollars, probably more like hundreds of thousands of dollars to startup.
And we will be looking for for customers.
In the coming months and go from there.
Is.
Are you with respect to staffing.
Bringing in pilots and the like is it are you going to run into some of the same as this operation going to run into some of the same issues that we're seeing in the U S. I know this pilot and mechanic.
It seems to be global like anything on that front that you're seeing or that you can highlight for us. Thanks.
Yes.
First of all I want to mention that when Mike said, we're looking for customers I think that's important because we intend our thought there and our partner sources that we're going to bring over to Europe much more of a kind of U S model capacity purchase agreement, we've already begun conversations with.
Large carriers to provide that level of service as you know the regional business has been truly decimated in Europe.
In terms of personnel.
No.
Probably one of the few people in here to keep harping on the 500 hour rule because someone else feels it's a loss caused by COVID-19.
We see the same issues internationally that you do in the United States because no other country in the World has adopted these rules.
We've looked at some situations in other parts of the world as well and when we talk about pilot shortage. They look at us.
Whats shortage.
So I think that we feel comfortable that.
The type of aircraft that we operate there is likely to be a regional jet.
We don't think that that will be a problem and we feel that we can hire people and retain and attract people.
<unk> anywhere near the level of difficulty that we have here.
And it's kind of crazy to think of Europe being less regulated in some respects for the United States, but at least when it comes to pilots SDK.
Okay, Jonathan or Mike or Gregg can I just sneak in one last one you talked about.
<unk>.
The attrition rate being high did you did you throw out a number.
What percent what Youre seeing right now whether its pilot tariff for flight attendants anything on that front would be would be great. Thanks.
Thanks for taking my question.
I mean, the pilot numbers are sort of all over the board, although I will tell you they have been increasing.
We.
I can't say.
Unfair to say exited COVID-19, but as Covid had begun to sort of wind down the numbers went up and it's all been driven by hiring at the major level.
And I think that that's really what's driven it but.
We have in the past under high high levels of attrition.
We are.
We've seen numbers in the 25 to 30 range and occasionally it's popped up a little bit higher than that in terms of total pilots.
Again, it's just a question of where things level off and what happens but.
It's run higher in a couple of months, it's rod lower but.
It's really hard to say right now because it's going to be dependent upon where things shake out and the other thing to it.
I do believe that our partners realize that this is a problem for all of us.
There is attrition going on throughout the industry no one is immune.
No one is immune a lot of regionals like ourselves have had to fly lower hours.
Actually I'm not aware of any regional that fly at the levels that we were back in 2019, according to our partners.
Maybe the closest at American but.
I think the fact, the matter and Thats.
And to be fair, that's only because we pulled those aircraft out.
So I mean, we're not there's nothing magical there.
It's really a question of how effective we are at not just <unk>.
No.
Retaining pilots, but also attracting people and.
One of the drugs that we have been beating with our partners is we really need to focus on ways not just to keep people within the United ecosystem or the American ecosystem, but actually to bring people and sort of refill the reservoir pilot.
And in fact has been drained.
With expansion of fly as well as the all.
All the retirement better occurred.
Thanks, Thanks, Jonathan Thanks, everyone.
Okay.
And we have another question from Savi sites go ahead. Please your line is open.
Hey, thanks.
And then just kind of curious on the cargo front.
It sounds like Youre executing well there.
Getting another it looks on the fleet plan Youre getting that third aircraft as well just any update on <unk>.
How you can expand that are what we can expect in the next year I can't.
Sure.
No.
Clearly, we did not enter the cargo business for three aircraft.
It's just not an efficient operation.
No.
There's lots of reasons why it needs to be bigger.
In fact, one of the reasons why we got the third aircraft, but just because we were nervous about only having two aircrafts and not having a spare.
Operationally.
We found that we did operate with only two airplanes and we exceeded I can tell you without a doubt that we exceeded dhl's expectations over the over the year.
I think that we are very well positioned for growth.
DHL is of the world Amazon They don't add growth.
Willy Nilly, they're very thoughtful, but I think in our conversations with DHL they are well aware that.
Are supportive of the fact that for us to be successful long term and they have clearly indicated that they want us in the portfolio.
That they've made clear without a doubt that we have to be larger and can we go to six airplanes eight airplanes airplanes. So I would say that it's probably a fair statement that if we're below that airplanes, it's hard for us to really spread our costs around and I think that those are targets for us would be to.
To be at least at that number over the next few years.
What happened in fact, we've made a big investment so far which clearly is impacted our numbers as well, but they have made it very clear that they would like to see us remain in the portfolio and theyre going to help us do that.
Perfect. Thank you.
Speakers I'm showing no further questions at this time.
Alright.
In conclusion I just wanted to say finally.
It has been a tough quarter for us.
First statement about who would've thought it would be harder to exit Covid then to enter COVID-19.
The repeatedly at which demand levels at least domestically increase and the fact, the majors were anxious to put so much additional capacity, it's not as if it caught us by surprise, it's just that even starting training back in April while we still had pilot on <unk>.
It's just taken.
<unk> is to get.
Backup to the speed that we want we would like to be at.
The situation has been difficult.
We've frankly said that.
Patricia levels has still not come down they are still high and we are going to continue to work as best we can to make sure that we can.
As many block hours as possible.
Bob.
I think that.
We feel that we've got these issues to deal with over the near term, but as I mentioned also we do feel that not only the fundamentals of the industry are intact long term, but we think we've laid a good base here at Mesa, and we'll see that benefit over the long term as well.
So with that we appreciate your time.
We will continue to work hard to do the best we can and if you have any additional questions as always feel free to call any of us. So after the caller or this week whenever you need to add any additional information. Thank you very much.
That will conclude today's conference and we thank you for participating you may disconnect at this time.
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