Q1 2022 Mesa Air Group Inc Earnings Call
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Speaker 1: Thank you for standing by and welcome to the Mesa Airlines Q1 fiscal 2022 earnings conference call. All participants are in a listen only mode until the question and answer.
Thank you for standing by and welcome to the Mesa Airlines Q1 fiscal 2022 earnings Conference call.
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 pump.
Speaker 1: At that time, please press star 1, unmute your phone, and record your name.
Speaker 1: This call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Susan D'Onofrio, head of Investor Relations. Mr. D'Onofrio, you may begin.
This call is being recorded if you have any objections. Please disconnect at this time I would now like to turn the call over to Susan Donofrio head of Investor Relations. Mr. <unk> you may begin.
Speaker 2: Thank you, operator, and welcome everyone to Mesa's earnings call for its first fiscal quarter ended December 31st.
Thank you operator, and welcome everyone to make those earnings call for its first fiscal quarter ended December 31. 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, Chairman and CEO , Mike Lotz President Brad.
Speaker 2: This call is being recorded and simultaneously webcast. A replay of this call can be found on our website.
Speaker 2: On the call with me today are Jonathan Ornstein, MACE's Chairman and CEO , Michael Lotz, President, Brad Rich, EVP and COO, and Torque Zubeck, CFO , as well as other members of the management team. Following our prepared remarks, there will be a question and answer session for the cell side analysts.
Rich EVP and COO and torque xebec CFO as well as other members of the management team. Following our prepared remarks, there will be a question and answer session for the sell side analysts.
Speaker 2: We also wanted to remind everyone on the call today 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 report on file with the FCC.
We also wanted to remind everyone on the call today 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 result 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.
Speaker 2: We undertake no duty to update any forward-looking statements.
Speaker 2: In comparing results today, we will be adjusting all periods to exclude special items.
Speaker 2: Please refer to our first fiscal quarter earnings release, which 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.
Please refer to our first fiscal quarter earnings release, which 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 and thanks, everyone for joining us today.
Speaker 3: Thank you, Susan, and thanks everyone for joining us.
Speaker 3: Obviously, this has been a very tough quarter for Mesa, and the one piece of good news I can report is that demand for our products has never been stronger. Our primary challenge will be meeting...
Obviously this has been a very tough quarter for Mesa.
And the one piece of good news I can report is that demand for our products has never been stronger.
Our primary challenge will be meeting that demand.
Speaker 3: While COVID now appears to be received and in some quarters referred to as a controllable embodiment.
While COVID-19 now appears to be received and in some quarters referred to as a control.
Speaker 3: impact to our operation and financials is still evident however and its effect on this quarter was significant and unlike anything we have seen in 20...
Its impact to our operations and financials is still evident however.
This quarter was significant and unlike anything we have seen in 20 years.
Speaker 3: Well, COVID hit by far the greatest impact. We had other items that negatively impacted the quarter as well.
While COVID-19 hit by far the greatest impact we had other items that negatively impacted the quarter as well.
Speaker 3: continue to have a catch up and heavy maintenance expense that we defer at the start of COVID, which will discuss the last quarter.
Can you kind of a catch up in heavy maintenance expense that we deferred at the start of Covid, which was discussed last quarter.
Speaker 3: We experience unprecedented volatility in sick calls, which we believe are COVID-19-pronged related. In November , December , we had...
We experienced unprecedented volatility and sick calls, which we believe are COVID-19 pulmicort unrelated.
If I remember in December we had.
Speaker 3: days with 6 rates of 5 to 23% compared to our historical average of 5%. This continues for the first-
As with fixed rates as high as 23% compared to our historical average of 5%.
This continued for the first three weeks in January .
Speaker 3: Fortunately, that January 23rd, we have seen a measurable reduction in sick core rate, which we obviously monitoring close.
Ali That's January 23rd we have seen a measurable reduction in CCAR rates, which we are obviously monitoring closely.
Speaker 3: While COVID effects are less than, we are also containing with a significant increase in power nutrition, as main line tears begin hiring to refill depleted pirate ranks caused by early and statutory retirements.
While COVID-19 effects are less thing. We are also contending with a significant increase in pilot attrition is mainline carriers to begin hiring to rebuild depleted pirate range caused by early and statutory retirement.
Speaker 3: Additionally, the National and Cargill Carries continued to have a strong demand for piles.
Additionally, the national and cargo carriers continue to have a strong demand profile.
Speaker 3: That being said, by far the biggest impact on the current pilot.
That being said by far the biggest impact on the current pilot shortage would be ill advised 500 hour requirement for commercial pilots.
Speaker 3: ill-advised 1,500-hour requirement for commercial pilot. A rule adopted by no other...
<unk> adopted by no other country.
Speaker 3: Unfortunately, our financial performance this year will be highly correlated to our ability to deal with this pile of the Triton success.
Unfortunately, our financial performance this year will be highly correlated to our ability to deal with this pilot attrition successful.
Speaker 3: On a personal note, I could not be more proud of our people who bravely continue to work through the pandemic, providing fake transportation to our past.
On a personal note I could not be more proud of our people who bravely continue to work through the pandemic, providing safe transportation to our passengers managing through the challenges of our four regional operations remains our team's top priority Grad will go into more details with some of these initiatives.
Speaker 3: Managing through the challenges of our four regional operations remains our team's top priority. Brad will go into more detail with some of the initial...
Speaker 3: As far as some of the areas you have invested in partnered in outside of our four regional operations, they continue to make progress and reach.
As far as some of the areas, where we've invested and partnered and outside of our core regional operations that continue to make progress and reach company milestones. These partnerships will help made to diversify its revenue to add to our future growth opportunities as an update.
Speaker 3: These partnerships will help make it diversify its revenue and add to our future growth outcomes.
Speaker 3: as an update. Turning to our DHL cargo operation.
Turning to our DHL cargo operation has continued to perform well with our two dedicated 737 400 aircraft we.
Speaker 3: Can you support well with our two dedicated 737-400-Head Air?
Speaker 3: We have consistently met or exceeded DHL's operational performance too far.
We have consistently met or exceeded dhl's operational performance requirements. We recently leased a third 737 400 aircraft. They expect to take delivery. This month going forward, we think that cargo can be an increasingly important part of our business.
Speaker 3: We recently released a third 737-400 aircraft. They expect to take delivery this month. Going forward, we think that cargo can be an increasingly important part of our-
Speaker 3: Our partnership with Grammar C Associates Limited is on track to have certification completed in the first half of 2020.
Our partnership with Gramercy Associates Ltd is on track to have certification completed in the first half of 2022.
Speaker 3: We own 49% of this multibase regal jet operation. And we're looking forward to introducing the regional, our regional business model to Europe .
149% of this multi based regional jet operation and we're looking forward to introducing the regional our regional business model to Europe .
Speaker 3: In spite of the difficult environment, we have selectively continued to invest in partner and newer environmentally friendly technology.
In spite of the difficult environment, we have selectively continue to invest in partner and newer environmentally friendly technology.
Speaker 3: partnerships of design decision-makers to be the first regional airline to fly electric aircraft and being the forefront of decarbonizing air travel and reducing our relies on thought.
These partnerships are designed to decision makers could be the first regional airlines to fly electric aircrafts and being in the forefront of Decarbonising air travel and reducing our reliance on fossil fuels.
Speaker 3: our electric aviation partners partnerships with Archer and Park that we entered alongside United are reaching product development miles.
Our electric aviation partners partnerships with Archer in part that we entered alongside United are reaching product development milestones.
Speaker 3: At Archer, the company has received a special airworthiness certificate from the AFA covering its maker demonstrated aircraft in early December . This was followed by completing its first successful test flight in December 2021.
At Archer the company has received a special airworthiness certificate from the FAA covering its maker demonstrated aircrafts in early December .
This was followed by completing its first successful test flights in December 2021.
Speaker 3: This moment is a significant step forward for Archer's overall certification timeline and serves as the key naveler for the company's mission to launch its first commercial EV Tilt flight in 2024.
This moment is a significant step forward for archers overall certification timelines and serves as a key enabler for the Companys mission to launch its first commercial EV tall flight in 2024.
Speaker 3: Heart Aerospace, our other Electric Aircraft Partnership, is also reporting progress in development of its 19 passenger electric aircraft.
Aerospace or other electric aircraft partnership is also reporting progress and development of its 19 passenger electric aircraft for the firm.
Speaker 3: first time the scale model of the plane took flight at the heart aerospace headquarters out located in Sweden this past December
First time, a scale model of the plane to fly at the heart Aerospace headquarters located in Sweden. This past December .
Speaker 3: Going forward, our strategy to selectively look at other opportunities and aviation-related green technology to ensure a leadership role in this area.
Going forward our strategy to selectively look at other opportunities in aviation related Green technologies.
To ensure a leadership role in this area.
Speaker 3: During the quarter, we signed a letter of intent and entered into a partnership agreement with region to support the development of their electric power transportation, utilizing wing and ground effect technology.
During the quarter, we signed a letter of intent and entered into an agreement.
Agreement with region to support the development of their electric power transportation utilizing winging ground effect technology, which is designed to significantly expand the range of over other electric designs.
Speaker 3: to significantly span the range of over other electric designs.
Speaker 3: With that, I will hand it over to Brad Rich to go over more of the details of an update on an update on our operational performance this morning.
With that I will hand, it over to Brad rich to go over more of the detailed update.
Update and an update on our operational performance this quarter.
Okay.
Speaker 4: Thank you, John , for sending good afternoon to everyone. Thank you for joining us today.
Thank you Jonathan and good afternoon to everyone. Thank you for joining us today.
Speaker 4: Our main focus remains on authorizing our core regional business in the safest and most operationally reliable way with the health and safety of our people and our customers, always the top priority.
Our main focus remains on operating our core regional business in the safest and most operationally reliable way with the health and safety of our people and our customers always the top priority.
Speaker 4: We are focused on remaining flexible and respond to the flying needs of our partners, American and United MDHL.
We are focused on remaining flexible and responsive to the flye needs of our partners American and United and DHL.
Speaker 4: In the December quarter, we flew 86,079 block hours, which is a 24.3% increase from last year, and 9.3% below last quarter.
In the December quarter, we flew 86079 block hours, which is a 24, 3% increase from last year.
And nine 3% below last quarter.
Speaker 4: Our combined controllable completion factor was 97.8% compared to 99.9% a year ago.
Our combined controllable completion factor was 97, 8% compared to 99, 9% a year ago.
Speaker 4: Our current production is the lower 2019 levels, primarily driven by a reduction in flying for American as a result of our smaller fleet under contract, as well as capacity reductions due to the spread of the Omicron variant of COVID-19 and elevated attrition to mainline carrier.
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 as well as capacity reductions due to the spread of the omicron variant of COVID-19, and elevated attrition to mainline carriers.
Speaker 4: Looking ahead to 2022, we are focused on preparing to operate the airline productively and reliably in a post pandemic environment.
Looking ahead to 2022, we are focused on preparing to operate the airline productively and reliably in a post pandemic environment.
Speaker 4: While United and American are requesting additional flying, it is in an industry environment of increased pilot attrition to the major airlines compounded by COVID-related absence rates.
While United and American are requesting additional flying.
It is in an industry environment of increased pilot attrition to the major airlines compounded by Covid related absence rates.
Speaker 4: In previous calls, we discussed the increase in volume of additional heavy check requirements and the timing of such checks that compromised our aircraft availability.
In previous calls we discussed the increase in volume of additional heavy check requirements and the timing of such checks that compromise our aircraft availability.
Speaker 4: We feel like we are seeing some tailwinds on this issue. And after this quarter, we expect to be back to a more normal run rate of heavy maintenance.
We feel like we are seeing some tailwind on this issue and after this quarter, we expect to be back to a more normal run rates of heavy maintenance.
Speaker 4: and our Aircrafted Furbishment Program is also just about completed.
Our aircraft refurbishment program is also just about completed.
Speaker 4: Regarding our United Operations, our controllable completion factor or CCF was 98.3% due to pilot staffing challenges caused by piloted to the mainline carriers and elevated absences due to the spread of COVID-19.
Regarding our United operations are controllable completion factor or Ccs was 98, 3% due to pilot staffing challenges caused by pilot attrition to the mainline carriers and elevated absences due to the spread of COVID-19.
Speaker 4: As far as our United SLEEP, we had previously removed all 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.
As far as our United Fleet, We had previously 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.
Speaker 4: 17 of the aircraft have been delivered as of December 31st, 2021. The three remaining aircraft are planned to be delivered by the end of March 2022.
17 of the aircraft have been delivered as of December 31, 2021.
Three remaining aircrafts are planned to be delivered by the end of March 2022.
Speaker 4: Our United E-175 fleet remains at 80 aircraft.
Our United <unk> Hundred 75 fleet remains at 80 aircraft.
Speaker 4: We feel like our relationship with United remains strong and productive and we are working collaboratively with them as we navigate through the recovery.
We feel like our relationship with United remained strong and productive and we are working collaboratively.
Collaboratively with them as we navigate through the recovery.
Speaker 4: I'd like to now provide an update on our American operation. Our CCF for American was 97.2% for the quarter, and driven primarily from the same issues that impacted our United performance, specifically COVID-related absence rates among our pilots, compounded by pilot of Christians.
I'd like to now provide an update on our American operation Our CCF for American was 97, 2% for the quarter and driven primarily from the same issues that impacted our United performance, specifically COVID-19 related absence rates among our pilots compounded by pilot attrition.
Speaker 4: Working cooperatively through the pandemic, American recognized difficult operating environment impacted our performance and waived our performance related requirements.
Cooperatively through the pandemic American recognized difficult operating environment impacted our performance and waved our performance related requirements.
Speaker 4: As mentioned in previous quarters, the increased volume and timing of heavy maintenance impacted our ability to schedule aircraft and related spare.
As mentioned in previous quarters, the increased volume and timing of heavy maintenance impacted our ability to schedule aircraft and related spares.
Speaker 4: Maintenance and refurbishment costs should begin to return to more normalized levels after this quarter.
Maintenance and refurbishment costs should begin to return to more normalized levels. After this quarter.
Speaker 4: I would like to provide a little more color to our operating performance.
I would like to provide little more color to our operating performance.
Speaker 4: Unlike other regional carriers that were pulling down scheduled flying earlier due to elevated pited accretion, the situation at Mesa was unique and that our accretion spike happened much later than others and occurred at the same time in which we experienced elevated absences due to the Omicron arm temperature.
Unlike other regional carriers that were pulling down scheduled flying earlier due to elevated pilot attrition the situation at Mesa was unique in that our attrition spike happened much later than others and occurred at the same time in which we experienced elevated absences due to the omicron Serge.
Speaker 4: This sequence of events is the driver for reduced performance in November , December and January .
This sequence of events is the driver for reduced performance in November December and January .
Speaker 4: And cooperation with our partners, we have kept our forward scheduled block hours down to a more conservative level in order to account for COVID-related absences and piloted patients.
In cooperation with our partners we have.
Kept our forward scheduled block hours down to a more conservative level in order to account for Covid related absences and pilot attrition.
Speaker 4: Given the fact that we have outlined the industry-wide challenges, the relevant question is, what are we doing about it, and how are we navigating through the recovery?
Given the fact that we have outlined the industry wide challenges. The relevant question is what are we doing about it and how are we navigating through the recovery.
Speaker 4: Our focus is on staffing, specifically employee hiring, training and retention.
Our focus is on staffing specifically employee hiring training and retention.
Speaker 4: This focus will be on pilot and all critical positions that support our daily operations.
This focus will be on pilots and all critical positions that support our daily operations.
Speaker 4: Our pilot training pipeline is full, and we have implemented programs to not only continue to attract new pilots to Mesa, but also increase our instructor range.
Our pilot training pipeline is full and we have implemented programs to not only continue to attract new pilots to Mesa, but also increase our instructor rates. We have secured additional simulator time and have the strategically positioned in key locations to decrease our training timelines.
Speaker 4: We have secured additional simulator time and have this strategically positioned in key locations to decrease our training time length.
Speaker 4: Furthermore, we are well positioned to be an attractive option for pilots through opportunities such as...
More we are well positioned to be an attractive option for pilots through opportunities such as that.
Speaker 4: A fleet of entirely large regional jets and narrow bodies, 737 aircraft.
Fleet are entirely large regional jets and narrow bodies 737 aircraft.
United 88 program, where we're one of few independent regional airlines to be able to offer a direct pathway for our pilots to become a career pilot for United Airlines.
Speaker 4: United Aviate Program where we're one of few independent regional airlines to be able to offer a direct passway for our pilots to become a career pilot for United Airlines.
737 aircraft, we are the only regional airline offering the opportunity to fly larger aircraft and earn the highest pay in the regional industry.
Speaker 4: 737 aircraft, where the only regional airline offering the opportunity to fly larger aircraft and earn the highest pay in the regional industry.
Speaker 4: We have attractive domiciles which make it easy to commute.
We have attractive domiciled, which make it easy to commute.
Speaker 4: We're currently offering rapid-capped and upgrade opportunities.
Currently offering rapid captain upgrade opportunities.
Speaker 4: We have an active targeted recruiting program, including a cadet program, and on-site visits at aviation schools across the country.
We have an active targeted recruiting program, including a cadet program and onsite visits at aviation schools across the country.
Speaker 4: We have competitive new higher pay with enhanced bonus opportunity.
We have competitive new higher pay with enhanced bonus opportunities.
Speaker 4: And additionally, we are pursuing other creative initiatives to attract and retain new pilot candidates.
And Additionally, we are pursuing other creative initiatives to attract and retain new pilot candidates.
Turning to DHL, we continue to see strong performance numbers as we complete our first full year of operations. We had a controllable completion factor of 99, 8% for the quarter, which exceeded dhl's performance goals we.
Speaker 4: Turning to DHL, we continue to see strong performance numbers as we complete our first full year of operation.
Speaker 4: We had a controllable completion factor of 99.8% for the quarter, which exceeded DHL's performance goals.
Speaker 4: We are expecting delivery of our third 737-400F aircraft this month. This aircraft is expected to provide additional lift as well as provide additional operational support.
We are expecting delivery of our third 737 Dash 400 F aircrafts this month.
This aircraft is expected to provide additional lift as well as provide additional operational support.
Speaker 4: With that, I now like to turn the time over to Torx to watch through our financial performance.
With that I'd now like to turn the time over to <unk> to walk through our financial performance.
Speaker 3: Thank you Brad. Now I'll review our financial performance, capital out, look and balance sheet, and then I'll provide some more detail on our business out.
Thank you Brad I'll review, our financial performance capital outlook and balance sheet, and then I'll provide some more detail on our business outlook for.
Speaker 3: In the first quarter of fiscal year 2022, we reported a net loss of 14.3 million or 40 cents per deluded share. And an adjusted net loss of 9.3 million or 26 cents per deluded share.
For the first quarter of fiscal year 2022, we reported a net loss of $14 3 million or <unk> 40 per diluted share and an adjusted net loss of $9 3 million or 26 per diluted share.
Speaker 3: The adjusted net loss excludes a 6.5 million mark to market non-cash losses on our investments in equity securities and related impact on our income tax expense.
The adjusted net loss excludes the $6 5 million Mark to market noncash losses on our investments in equity securities and related impact on our income tax expense.
Speaker 3: Brevenue in Q1 2022 with a 147.8 million, a decrease of 2.6 million or 1.7 percent from a 150.4 million for Q1 2021.
Revenue in Q1, 2022, with $147 8 million, a decrease of $2 6 million or one 7% from $150 4 million for Q1 2021.
Speaker 3: But contract revenue increased 9.7 million due to more flying on all fleets relative to the prior period. This increases offset by a decrease in the number of aircraft flown for America.
Contract revenue increased $9 7 million due to more flying on all fleets relative to the prior period. This increase was offset by a decrease in the number of aircrafts loan for American.
Speaker 3: There was also a decrease in pastor and other revenue of 12.4 million, primarily due to a decrease in pastor maintenance expense. And as a reminder, the pastor expense...
There's also a decrease in pass through and other revenue of $12 $4 million, primarily due to a decrease in pass through maintenance expense.
As a reminder, the pass through expense has no P&L impact Macy's.
Speaker 3: Mace of Q1 2022 results include per gap, the recognition of 4.2 million, a previously deferred revenue, versus the deferral of 5.2 million of revenue in Q1 2021. The remaining deferred revenue balance will be recognized as flights are completed over the remaining terms of the contract.
<unk> Q1 2022 results include per GAAP, the recognition of $4 2 million of previously deferred revenue versus the deferral of $5 2 million of revenue in Q1 2021.
The remaining deferred revenue balance will be recognized as flights are completed over the remaining terms of the contract.
Speaker 3: On the expense side, Macy's overall operating expenses for Q1 2022 were $151.7 million, up $26 million over Q4 2021, and $28.3 million versus Q1 2021. The single biggest cost variance compared to Q1 2021 is a $11.3 million PSP-related grant that did not exist in Q1 2022.
On the expense side Macy's overall operating expenses for Q1, 2020 to $151 7 million up $26 million over Q4, 2021, and $28 $3 million versus Q1 2021 the.
The single biggest cost variance compared to Q1 2021 is at $11 3 million PSP related grant that did not exist in Q1 2022.
Speaker 3: Nases operations, flight operations expense was up 10.6 million versus last year. Over 60% of the increase is related to increased block hour flying for both pilots and flighting.
Macy's operations by flight operations expense was up $10 6 million versus last year over 60% of the increase was related to increased block hour flying for both pilots and flight attendants. Additionally, pilot training and recruiting bonuses accounted for $3 3 million.
Speaker 3: Additionally, pilot training and recruiting bonuses accounted for 3.3 million.
Speaker 3: Maintenance expense for Q1 2022 was $69 million, up $6.1 million, versus 2021, but down $2.1 million versus Q4 2020.
Maintenance expense for Q1, 2022 was $59 million up $6 1 million versus 2021, but down $2 1 million versus Q4 2021.
Speaker 3: Labor costs were up 7.3 million versus Q1 2021, reflecting increased flying activity and pay scale increases for the maintenance technician.
<unk> costs were up $7 $3 million versus Q1, 2021, reflecting increased buying activity in payscale increases for the maintenance technician.
Speaker 3: Compared to Q4 2021, labor costs and other expenses were up only 1.1 million.
Compared to Q4, 2021 labor costs and other expenses were up only $1 1 million.
Speaker 3: See check expenses, excluding pass through amounts were 9.1 million in Q1 2022, up 6.1 million versus Q1 2021. But down 1.5 million compared to Q420.
<unk> expenses, excluding pass through amounts were $9 1 million in Q1, 2022 up $6 1 million versus Q1, 2021, but down $1 5 million compared to Q4 2021 <unk>.
Speaker 3: Rotables and expendables and component contracts were up 3.4 million versus last year, but down 1.4 million from Q4 2021. Now let me review where we are.
<unk> is an expandable and component contracts were up $3 4 million versus last year, but down $1 4 million from Q4 2021.
Now, let me review, where we are on cash and liquidity cash for the quarter, excluding restricted cash decreased by $18 2 million to $102 3 million. This amount is right, where we expected it would be last quarter <unk>.
Speaker 3: Cash for the quarter, excluding restricted cash, decreased by 18.2 million to 102.3 million. This amount is right where we expected it to be last quarter.
Speaker 3: The reduction from Q4 to Q1 was primarily due to plan schedule debt payments and and financing costs of 26.8 million.
The reduction from Q4 to Q1 was primarily due to planned scheduled debt payments and financing costs of $26 8 million 19.
Speaker 3: 19.8 million in spare engines and other equipment, and 7 million in deposits paid toward the future spare engine purchase.
<unk> $19 8 million in spare engines, and other equipment and $7 million in deposits paid towards the future spare engine purchases. These expenditures were partially offset by $38 million and gross debt proceeds.
Speaker 3: These expenditures were partially offset by 30.8 million in gross debt proceeds.
Speaker 3: Total debt at the end of the quarter was 678.6 million, which is up 8.3 million from the prior court.
Total debt at the end of the quarter was $678 6 million, which is up $8 3 million from the prior quarter.
Speaker 3: Assuming no additional debt, the balance will be reduced by roughly 93 million during the remainder of fiscal year 2022 and 95 million during fiscal year 2023.
Assuming no additional debt the balance will be reduced by roughly $93 million during the remainder of fiscal year 2022, and $95 million during fiscal year 2023.
Speaker 3: This brings the total debt balance down to roughly 490 million in fiscal year end 2023.
This brings the total debt balance down to roughly $490 million at fiscal year end 2023.
Speaker 3: Now let me touch on guidance, although there's still a lot of uncertainty, we did want to provide guidance in a few years.
Now, let me touch on guidance, although there's still a lot of uncertainty we did want to provide guidance in a few areas as Brad pointed out we're going to see a quite a bit of pressure on block hours with the rest of the fiscal year.
Speaker 3: As Brad pointed out, we are going to see it quite a bit of pressure on block hours for the rest of the fiscal year. Based on prior COVID trends, we believe this quarter will be the most impacted at 15 to 20% below Q1, 2010 to 2022, as we have been conservative with our partners on block our production.
Based on prior Covid trends, we believe this quarter will be the most impacted at 15% to 20% below Q1 2010 to 2022 as we have been conservative with our partners on block hour production.
Speaker 3: By calendar year and we anticipate that our block our production levels will be 5 to 10% below Q1 2022.
By calendar year end, we anticipate that our block hour production levels will be 5% to 10% below Q1 2022.
Speaker 3: The heavy maintenance that we defer it, sort of COVID will be winding down at the end of this quarter. Pilot training will remain at elevated levels as we continue to hire and train new pilots without a thin capacity for the EJETs in February , an additional CRJ-SIM capacity coming up in the next quarter.
The heavy maintenance that we deferred the start of Covid will be winding down at the end of this quarter pilot training will remain at elevated levels as we continue to hire and train new pilots with added some capacity for the <unk> in February and additional <unk> capacity coming up in the next quarter.
Speaker 3: We're also looking for cost savings opportunities such as parking access aircraft, evaluating under use facilities, leases and equipment to eliminate unneeded costs in our business.
Also looking for cost savings opportunities such as parking excess aircrafts evaluating underneath facilities leases in equipment to eliminate unneeded costs in our business clearly Q2 will be a challenge will be a challenge, but we are focused on our plan to get to breakeven by Q4, our September quarter.
Speaker 3: Clearly Q2 will be a challenge, will be a challenge, but we are focused on our plan to get to break even by Q4, our September quarter.
Speaker 3: Getting our pilot attrition into control and increasing our pilot training output will be the most critical focus areas for increasing our block our production. We'll also be working with our partners to address the contractual performance requirements in an industry environment that has dramatically changed. Help.
Getting our pilot attrition under control and increasing our pilot training output will be the most critical focus areas for increasing our block hour production. We will also be working with our partners to address the contractual performance requirements in an industry environment that it's dramatically changed I'd like to now turn it over to Jonathan.
Speaker 5: Thank you, Chor. We appreciate the financial report. Given.
Thank you sure we appreciate the financial.
Report.
Given.
The operational initiatives.
Speaker 5: outlines we expect to see an improvement in block output reduction by the end of
Outlines we expect to see an improvement in block hour production by the end of year.
Speaker 5: We were also aggressively focused on the cost savings initiative at Torch Powell.
We're also aggressively focused on the cost savings initiatives.
Outlines.
In conclusion, while we faced some significant near term issues, we believe that the fundamentals of the industry remain unchanged over the long term.
Speaker 5: In conclusion, while we face some significant near-term issues, we believe that the fundamentals of the industry remain unchanged over the long.
Speaker 5: This last quarter demonstrated the extreme volatility of the industry and has required us to redouble our efforts to operate at pre-COVID performance and utilization level.
This last quarter demonstrates the extreme volatility of the industry and has required us to redouble our efforts to operate our pre COVID-19 performance and utilization levels.
Speaker 5: It clearly will not be easy, but we will get there and be stronger as a result.
They clearly will not be easy, but we will get there and be stronger as a result.
Speaker 5: At this point operator, please open up the call. I'd be happy to field any questions that analysts face.
At this point operator, please open up the call I'd be happy to field any questions that analysts may have.
Okay.
Speaker 1: Absolutely, thank you. And if you would like to ask a question at this time, please press star one on your phone on Neat Your Line. And record your name so you may be introduced. Again, to ask a question, please press star one.
Absolutely. Thank you and if you would like to ask a question at this time. Please press star one on your phone on mute your line and record. Your name you may be introduced again to ask a question. Please press star one.
Speaker 1: Our first question comes from Saudi Fights. Go ahead, please. You'll learn it open.
Our first question comes from Saudi sites go ahead. Please your line is open.
Speaker 6: Hey, good afternoon, everyone. Just if I'm on the 22 and a half million COVID related impact that you called out for the December quarter, could you break out or at least provide a little bit of goal post on how much of it was sick calls and how much heavy maintenance? And as you point out, I think both of those.
Hey, good afternoon, everyone.
If I might on the $22 5 million Covid related impact that you called out for the December quarter could you break out alright at least provide a little bit of goalposts on how much of it let's take calls with and how much heavy maintenance and.
As you pointed out it in both of those should be less of an issue as you look into the second half of the fiscal year I'm just trying to understand maybe.
Speaker 6: should be less of an issue as you look into second half of the fiscal year. So I'm trying to understand maybe the items that linger on into the end of the year.
The items that linger on into the end of the year.
Hey, Savi this is to work on so.
Speaker 3: Hey, David, this is Tork. So the heavy maintenance component of that, we will have most of that completed in this current quarter and we'll really have that behind us. The other elements that we refer to was really related to the increased training costs that go along with, you know, we'll be, we'll be, we have increased training the rest of the year as we try to fill back to our pilots. So I don't know if that helps you, but, you know, we'll be doing a lot more training and recruiting as part of the program.
The heavy maintenance component of that.
We will have most of that completed in this current quarter and we really have that behind us. The other elements that we referred to was really related to the increased.
Training costs that go along with it will be have increased screening the rest of the year as we try to go back to our pilot.
Does that helps you, but we'll be doing a lot more training and recruiting as part of the program, which includes bonuses that will be paying as well.
Speaker 6: And maybe if I can, maybe she can provide, is there any color that you can provide just either on a per block or a basis or on a kind of annual basis, just how much higher in terms of training cost you, you're expected training in the hiring cost you expect to see in the fiscal year?
And maybe sorry, and maybe if I could maybe if you can provide is there any color that you can provide just either on a per block hour basis or on a kind of annual basis, just how much higher in terms of training cost you expect to training and hiring costs you expect to see in this fiscal year.
Speaker 3: Yeah, well, when I think about when I think in my prepared remarks, I talked about about 3.3 million in a quarter for additional.
Yes, when I think about I think in my prepared remarks, we talked about about $3 3 million in the quarter for additional.
Speaker 3: pilot training and recruiting cost. That's probably a reasonable
Pilot training and recruiting costs, that's probably a reasonable estimate.
Speaker 6: Sorry, perfect. I missed that. Thank you. And then.
Alright, perfect I missed that thank you and then.
Yes.
Speaker 6: You mentioned that the attrition rates kind of increased here November , December , January . I know one of your competitors called out another thing is that they're seeing this a lot more on the captain's side. You know, just try to understand your comfort about kind of getting to that ever kind of decreasing level of declines in block hours. Just, you know, what are you seeing on the attrition front and your comfort to be able to reach those kind of block over rates by the September quarter?
The you mentioned that the attrition rate can I increased here November December January .
I know one of your competitor guys called out and the other thing is that they are seeing this a lot more on the captain side.
I'm just trying to understand your comfort about kind of getting to that.
Ever decreasing level of declines and block hour is just what are you seeing on the attrition front and your comfort to be able to reach those kind of block hour rates by the September quarter.
Speaker 5: Yeah, Sammy, this is Jonathan. Yes. Clearly the attrition issue has been significant. You know, a big part of it is in fact the backfill and being able to get the training done. We're fortunate in that we actually have adequate sometime. We secured a bunch of sometime right as this problem began to show their rub back in 2021.
Hey, Savi this is Jonathan.
Clearly the attrition issue has been cigna.
Significant.
A big part of it is in fact, the backfill and being able to get the training done.
We're fortunate in that we actually have adequate same time.
We secured a bunch of same time right as this problem began to show their rough back in 2021.
So we just put another Egypt simulator online.
Speaker 5: eJet simulator online. Matter of fact, three days ago, we have another CRJ send coming. And we actually have another send coming in, you know, 10 months. So we think from that standpoint, just a structural piece we can do it. We have to continue to fill classes.
A matter of fact, three days ago, we have another CR, Jason coming and we actually have another same coming in.
10 months. So we think from that standpoint, just the structural piece, we can do it we have to continue to fill classes.
Speaker 5: which given the 1,500 hour rule has made it obviously more difficult with what we feel to be actually less qualified people than this.
Which given the 500 hour rule is made it obviously more difficult with what we feel to be actually less qualified people than the students that we were getting from the programs that we train people AB initio.
Speaker 5: students that we were getting from the programs that we train people have an issue.
Speaker 5: But clearly the attrition piece is the wild card. You know, Mesa was fortunate and part of the problem that we've had is our attrition was actually, you know, on the low side of the industry for, you know, first three or four months.
But clearly the attrition piece is the wildcard.
Nathan was fortunate as part of the problem that we've had our attrition was actually on the low side of the industry for the first three or four months of the year and didn't pick up until really November December where we had a significant spike but believe it or not our spike was actually an <unk>.
Speaker 5: of the year and didn't pick up until really November , December , where we had a significant spike, but believe it or not, our spike was actually in FOs.
Speaker 5: And you know, it just caused us to, you know, for example, in one of our operations, literally all of our cancellations were due to a lack of that pose. So.
And.
It just caused us to.
For example in one of our operations.
Literally all of our cancellations were due to a lack of that pose.
<unk>.
Speaker 5: obviously the the the issue is going to be going forward uh... you know what the majors do i mean it's fortunate that we've had very open conversations with united american about this uh... you know united
Obviously, the issue is going to be going forward.
What the majors do I mean, its fortunate that we've had very open conversations with United American about this.
United has been extremely helpful. In understanding we put together the Eva program with them. We're the only large jet independent regional carrier with a flow through.
Speaker 5: has been extremely helpful and understanding. We put together the AVA program with them where the only large jet independent regial carrier was a flow through that we have with United. And at American, given that they operate their own regials, they are very much aware of the problem. And our sympathetic because they're dealing with the same thing.
Like we have with United and at American given that they operate their own regionals. They are very much aware of the problem.
<unk> are sympathetic because they're dealing with the same thing.
Speaker 5: So, you know, I think that while this is an industry problem, I'd like to think that MACE is reasonably well positioned given our relationships with American and United.
So.
Think that while this is an industry problem I'd like to think that Mesa is reasonably well positioned given our relationships with American and United.
Speaker 5: I do think that there's some things that we are doing that are a little bit different.
I do think that there's some things that we are doing that are a little bit different.
That should help us I think primarily the piece about the same time, so I don't think people should underestimate.
The ability to get enough Sim training to qualified people is going to become challenging and I think we're reasonably well positioned in that so I mean, if if attrition is.
Speaker 5: So, I mean, if attrition is, you know, stabilizes, I think we can pull our way through this. It's not gonna be easy, but I think that, you know,
<unk> I think we can pull our way through this.
Not going to be easy, but I think that.
No.
Speaker 5: you know it's really needed to pat the outlook is in the base on the trition i think one more thing just to mention quickly is while the trition impact of us is last quarter please do not understand the impact
It's really you need to allocate it based on attrition I think one more thing just to mention quickly as while attrition impacted us. This last quarter. Please do not underestimate the impact of Covid, because when youre dealing with 'twenty three 'twenty four 'twenty, 5% absence rates.
Speaker 5: because when you're dealing with 23, 24, 25% absence rates, I mean, I don't care what the attrition is. If you had no attrition, you would not be able to cover that on a day-to-day basis where we were canceling, there were days we canceled more flights in a day than we had canceled in the previous 12 months.
I don't care, what the attrition as we had no attrition you would not be able to cover that on a day to day basis, where we were canceling.
There were days, we canceled more flights in a day that we had canceled the previous 12 months.
Speaker 5: and that really had to do with the tradition and you know i'd like to point out on that but i think it's important because people of that you know what's there an issue with the pilots is there some kind of you know problem there and i'm like well you know we've had COVID-19 for the last you know almost two years we've had no problems with attendance
And that really had to do with attrition.
I'd like to point out on that because I think it is important because people of that.
Is there an issue with the pilots is there some kind of problem, there and I'm like well we've had COVID-19 for the last.
Almost two years and we've had no problems with attendance, we really only had a problem. When you had the omicron in Delta, which really.
Speaker 5: We really only had a problem when you had Omicron and Delta, which really had a big impact on the group. And to give you an idea of how big the impact...
<unk> had a big impact on the group and to give you an idea of how big the impact was again there were a period of time, where our infection rate was actually up 30 fold over the previous months.
Speaker 5: Again, there were a period of time where our infection rate was actually up 30 fold over the previous month.
Speaker 5: So, I mean, there was a confluence of issues here that clearly impacted us on the pilot fight, which, you know, we're gonna do everything we can to fix. The one piece of good news is that, you know, for the last five days, we've had one infection, which is, you know, really a drop off that we did not expect even, we did not expect or even hope could happen so fast. So, hopefully at least that piece of us is behind us right now.
I mean, there was a <unk>.
Influence of issues here that clearly impacted us on the pilot side, which we can do everything we tend to fix the one piece of good news is that for the last five days, we've had one infection, which is really a drop off that we did not expect even we do not expect or even hoped could happen. So fast so hopefully at least that piece of it.
<unk> is behind Us right now.
Helpful. Thank you.
Speaker 7: Our next question comes from Haleen Becker. Go ahead, please. Your line is open. Thanks very much, operator. Hi, everybody. And thank you for the time. So, Savi asked me if I missed the question.
Our next question comes from Helane Becker go ahead. Please your line is open.
Oh, thanks, very much operator, hi, everybody and thank you for the time.
Ravi asked most of the questions I would have asked you but.
Just trying to.
I think through the differences between did you said city areas.
Not so much American and United.
The passenger and cargo did you have similar issues with cargo pilots.
Or was it kind of more confined to the passenger side of the business and B do you have trouble finding pilots for the 730 sevens and finding some time for them.
Speaker 5: You know, interestingly, I will say on the 737, we did not have the same impact. Although I think it would be remiss for me not to mention that we did actually lose one of our 737 pilots who was a dear friend of mine.
Interestingly.
I will say on the on the 737, we did not have the same impact although I think it would be remiss for me not to.
Mentioned that we did actually lose one of our 737 pilots who was it.
Dear friend of mine, who.
Speaker 5: who actually passed away as a result of COVID.
Who actually passed away as a result of COVID-19 and other than that.
Speaker 5: and other than that, we did not have the same impact. We did not, I think the number of cancel during the quarter where like maybe one or two or actually Mike is shaking that I think maybe no cancel on the cover side, but it was a small group of people and they were able to cover for each other if there was an issue.
We did not have the same impact we did not I think the number of canceled during the quarter were.
Maybe one or two or are actually Mike is shaking his head I think may have been no no cancels on the on the on the cargo side, but it was a small group of people and they were able to cover for each other if there was an issue. So we just didn't have the same problem on the cargo side.
Speaker 5: So we just didn't have the same problem on the cargo side.
Speaker 5: On the passenger side obviously we just had much bigger groups
On the passenger side, obviously, we just had much bigger groups and unfortunately, what happened to was that it was in waves. It wasn't even distributed I mean, we'd have one week it would be everybody in Dallas in one week could be everybody in Houston, and we just would literally find ourselves in a position where we'd come in and have a 2025% call.
Speaker 5: and you know unfortunately what happened to was that it was in ways it wasn't even distributed i mean we have one week it would be everybody in doubt and one week of the everybody in he's in and you know we just would literally find ourselves in a position where you know we'd come in and have a twenty twenty five percent call out rate
Right and this was.
Speaker 5: And this was compared to a month earlier where we had a 5% callout rate. While there was still COVID going on. So I think that...
Two a month earlier, where we had a 5% call out rates, while there was still COVID-19 going on so.
I think that.
Speaker 5: you know that really just we I think it'd be fair to say we got
That really just we I think it would be fair to say we've got I.
Speaker 5: I would say lucky on the cargo side with the exception of a fatality. We don't have problem recruiting the pilots on the cargo side because they come through the basis in yard list. And we have always lots of volunteers because I mean to be frank, the pay is very good. And you know, we're very proud about that. We have the highest paying the regional industry. I mean, we have some pilots making over $200 an hour.
I would say lucky on the cargo side with the exception of a fatality.
We don't have a problem recruiting the pilots on the cargo side because they come through the Mesa seniority list.
We have always lots of volunteers, because I mean to be Frank the pay is very good and we're very proud about that we have the highest paying the regional industry.
We have some pilots making over $200 an hour.
Speaker 5: become a good tool for us in terms of recruiting as well. So the cargo side is probably, you know, right now, you know, probably are our
Become a good tool for us in terms of recruiting as well.
The cargo side is probably <unk>.
Now.
Probably R R.
Speaker 5: uh... you know the best news that we have for today uh... we are adding a third aircraft in the very near future it's just coming on uh... out of the c check it on its way
Best News that we have for today, but we are adding a third aircraft and the <unk>.
Very near future its just coming on out of the C. Check it's on its way this month and it will go into service and.
Speaker 5: this month and it will go into service. And, you know, we're looking to continue to expand the cargo business, you know, and best we can.
We're looking to continue to expand the cargo business.
As best we can.
Speaker 7: Thanks, Jonathan. I'm sorry for your loss. The other question I have is an unpenalty. So normally...
Thanks, Jonathan I'm, sorry for your loss.
Other question I have is on.
On penalties. So normally you would have to pay penalties to your partners.
If you Couldnt meet that.
The contract.
On the contractual obligations, but in this case, it's partly their fault.
Speaker 7: In this case, it's partly their fault that you can't meet the obligation.
You can't meet the obligations so.
Speaker 7: because they're hiring them away from you. So how are you dealing with that? Are they cutting you?
Because theyre hiring them away from you. So how are you dealing with that are they.
Cutting is some slack there is like what's going on with that and I know you can't necessarily disclose the amounts that.
Speaker 5: Oh no, we're happy too. I mean, I think that, you know, when we're looking at for this quarter, we just closed it. We had booked $4 million of penalty. I think that is under the conversation with our partners.
We're happy to I mean.
I think that when we when we're looking at for this quarter, we disclosed that we had booked $4 million of.
Of penalty.
I think that is under the conversation with our partners.
Speaker 5: And we feel strongly that for the reasons that you mentioned, that there is a very good argument. And it's not so much their fault, I mean, as much as I said, a big chunk of it is COVID.
And we feel strongly that for the reasons that you mentioned that there is a very good argument and it's not so much their fault I mean as much as that as I said, a big chunk of it is COVID-19 .
Speaker 5: The hiring is obviously part of the issue, no doubt, but I think that, but I think our partners are also, both of our partners, like I said, for different reasons maybe, but understand the situation. And I feel pretty strongly that we will have productive conversations with them around this.
The hiring.
Obviously part of the issue no doubt.
But I think that but I think our partners are also.
Both of our partners like I said for different reasons, maybe but understand the situation and I feel pretty strongly that we will have productive conversations with them around this because I don't think anybody.
Speaker 5: because I don't think anybody, anyone wants to take advantage of another company as a result of COVID-related illnesses. And I think that given the attrition situation,
Anyone want to take advantage of another company as a result of Covid related illnesses and I think that given the attrition situation.
Speaker 5: I think that everyone's just trying to come up with the best solution.
I think that everyone's just trying to come up with the best solution and <unk>.
Speaker 5: and you know just to penalize us for a situation like this just as deep productive when i think they'd much rather see us putting our money into you know additional recruiting and training and bringing up more pilots
Just to penalize us for a situation like this just doesn't seem to be productive, but I think they'd much rather see us putting our money into additional recruiting and training and bringing more pilots. It seems like a much better use of that money than to pay it.
Speaker 5: seems like a much better use of that money than to pay it, you know.
Speaker 5: you know, what are millions of dollars for them that may not be as helpful as what it would be to us in terms of...
While there are millions of dollars for them that may not be as helpful. As what it would be to us in terms of.
Speaker 5: uh... you know bringing in you know bringing in more pilots you know they have the same issues i mean every every airline in the country is talked about pilot shortages and training problems
Bringing in.
Bringing in more pilots and again they have the same issues I mean every every airline in the country has talked about pilot shortages and training problems.
Speaker 5: You know, and I said particularly with American having their own regional
As I said, particularly with American having their own regionals.
Speaker 5: uh... you know we had a conversation just recently and you know they they fully understand the challenges and i think that uh... i i'm hopeful that they will be it and i i feel confident frankly they're gonna at least conversations will be productive and you know uh... some of the penalty that that we've anticipated or even booked uh... i think there could be some discussions about those
A conversation, we just recently and.
They fully understand the challenges and I think that.
I'm hopeful that they will be.
I feel confident and frankly that theyre going to have these conversations will be productive and.
Some of the penalties that we've anticipated or even book.
There could be some discussions about those.
That's really helpful. Thank you.
Just a reminder.
I'm sorry go ahead.
Speaker 1: I apologize, it's a reminder if you would still like to ask a question, you may press star one and record your name.
I apologize just a reminder, if you would still like to ask a question you May press Star one and record your name at this time. Our next question comes from Mike Lindenberg Go ahead. Please your line is open.
Speaker 1: Our next question comes from Mike Lennonberg. Go ahead, please. You'll wanna do it.
Speaker 8: Oh yeah, hey, good afternoon everyone. Hey, I have a few here if I could just start off with a torque, you know, you identified a whole bunch of areas for cost saves, various initiatives. Did you actually, did you say what the target was maybe on an annual run rate, what you hoped to achieve and maybe the timing of achieving those cost savings?
Oh, Yeah, Hey, good afternoon, everyone.
I have a few here if I could just start off with the torque.
<unk> identified a.
So a bunch of areas for cost saves various initiatives could you actually could you say what the target was maybe on an annual run rate.
Hope to achieve and maybe the timing of achieving those cost savings.
Thanks.
We haven't we're not ready to share the exact details on that Michael right now, but what we are looking at it.
I think Youre aware, we're flying we worked 154 aircraft for American we're now down to 40 and so we're looking at is how do we.
Speaker 3: Look at our current footprint with maintenance spaces that we have for Americans. Now we can pull those together, limit, leave costs, and get better utilization out of our mechanic group. And so that's one of the opportunities that we're considering. There's also, we've already been going through opportunities for cost savings and finding.
Looking at our current.
Our footprint with.
Maintenance bases that we have for America, and how we can pull those together eliminate lease costs.
Better utilization of our mechanic group and so that that's one of the opportunities that were considering.
There's also we've already been going through opportunities for cost savings and finding all of our contractors to go back and say what are we doing and how much more can we.
Speaker 3: All of our contractors go back and say, what are we doing? How much more can we find more money in those areas? So I'm not ready to share the details yet because we haven't announced.
Find more money in those areas, so I'm not ready to share the details yet because we haven't announced any specific plans but.
Speaker 3: but I think it'd be easy to say that we think we could pick up several hundred thousand a month potentially in there. But I don't...
I think it would be easy to say that we think we could pick up several hundred thousand a month potentially in there, but not ready to share the exact numbers. Okay. Okay. That's helpful and then.
Speaker 8: Okay, okay now that's helpful and then Brad, you know, on the operational side, in the queue, you know, you guys provided a little bit.
Brad on the operational side in the queue.
You guys provided a little bit more.
Speaker 8: you know sort of detail around kind of the american situation uh... and the question i guess i have for you is i guess in return for the waivers that they granted you uh... for the late you know sort of you know November December in January in return did did with any modifications to your american american contract as a result of that it just it wasn't clear
Sort of detail around kind of the American situation.
And the question I guess I have for you is I guess in return for the waivers that they granted you.
For.
Sort of November December and January and return.
Were there any modification to your American American contract as a result of that it just it wasn't clear.
Speaker 4: Mike, that's a good question. I think the simple and quick answer to that is no. Okay.
Mike Good.
Good question I think.
I mean, that's simple and quick answer to that is it.
No.
This is what Jonathan alluded to earlier is.
Speaker 4: what Jonathan alluded to earlier is, is, you know, we just expect to continue some, what we think will be productive dialogues surrounding the economic penalties, but, no, there are no other modifications.
As we just expect to continue.
What we think will be productive dialog surrounding the economic penalties.
No there are no other modifications to the agreement.
Speaker 8: Okay, okay, that's super helpful. And then just lastly, Jonathan, maybe this is kind of a two part question. One, where is your attrition now and where has it been historically sort of part A? Part B is when I look at the number of cities that are losing service, that are losing all air service.
Okay. Okay. That's super helpful. And then just lastly, Jonathan maybe this is kind of a two part question one.
Or is your attrition now and where has it been historically sort of part a part b is when I look at the number of cities that are losing service that are losing all air service.
Speaker 8: there in states very powerful members of the house and the senate and at the end of the day you think about where the rubber meets the road you know in states like i saw united pulling out of louis bird west virginia you know west virginia doesn't have a lot of airports and their people you know in that state who care about air service and at some point you gotta get enough senators and members of the house to start looking at this fifteen
They're in states with very powerful members of the house and the Senate and at the end of the day when you think about where the rubber meets the road.
When states like I saw United's pulling out of Lewisburg West Virginia.
West Virginia doesn't have a lot of airports and there are people in that state who care about air service and at some point you got to get enough Senators and members of the house.
Looking at this 500 hour rule because rural America is going to lose all of it service I mean your comments about <unk> 200.
Speaker 8: because world america's gonna lose all the service i mean i you know your comments about fifty you know all the cr g two hundred
Speaker 8: being you know you know none existed in a year to that's gonna have a big impact for the america's national airway system
<unk>.
Nonexistent in a year or two that's going to have a big impact for the Americas National airway system.
Speaker 8: So I mean, I, you know, I see, you know, we're going to get, you know, something's going to give here. So I'm going to say, you're probably the first one here who can help out of that message.
Yes.
We're going to get worse.
Something's got to give here.
Okay.
The first one here can help over that message, yes, Mike Let me tell you I mean, as you know way back in 19, 95% or so they went to one level of safety and I spoke out about the fact that it would destroy the 135 business and 2500 $1 35 aircrafts that had flown into rural America are now part.
Speaker 5: Yeah, Mike, let me tell you, I mean, as you know, way back in 1995 or so, they went to one level of safety and I spoke out about the fact that it would destroy the 135 business.
Speaker 5: 2535 aircraft that had flown into rural America are now parked.
Speaker 5: There's not a single 19 or 30 seat aircraft currently in operation flying into those cities
There is not a single 19 or 36 aircraft currently in operation flying into those cities.
Speaker 5: I said on the 1500 hour rule that it would only be a matter of time before the demographics of the retirements at the majors would have this kind of impact.
I said on the 500 hour rule that it would only be a matter of time before the demographics of the retirements at the majors would have this kind of impact when you couple that with Covid it as the perfect storm.
Speaker 5: When you couple that with COVID, it is the perfect storm. Yeah. There were some issues, we can all talk about the early retirement that probably were not the best idea, but at the time knowing quite new where COVID was going to go. The fact of matter is, now, the industry needs to pull together. And for the first time, you are hearing other CEOs talk about the 1,500 hour rule, and hopefully more people will, because in the end,
There were some issues we can all talk about the early retirement that probably were not the best idea, but at the time, knowing quite knew where COVID-19 was going to go.
The matter is now the industry needs to pull together and for the first time you are hearing other Ceos talk about the 500 hour rule and hopefully more people will because in the end who's going to pay for it all the small communities that will lose service entirely but the other folks that will pay for will be reduced service reduced supply.
Speaker 5: who's going to pay for all the small community that will lose service entirely. But the other folks that will pay for will be reduced service, reduced supply, and that will only do what thing is raised price.
And that will only do one thing has raised prices.
Speaker 5: And I think that everybody realizes too, and I think it's very important to hit on this. This is not...
I think that everybody realizes too and I just think it's very important to hit on this.
This is not a safety issue.
Speaker 5: I mean, there is not a shred of evidence that says that a 1,500-hour pilot is safer than a 300-hour pilot within 10's training.
There is not a shred of evidence that says that a 1500 hour pilot is safer than a 300, our pilot with intense training.
Speaker 5: Our failure rate is probably 10 times higher with 1,500 hour pilots as it was for the 300 hour pilots coming out of our own programs that we had at Infarmington or at ASU. So this is not a safety issue.
Our failure rate is probably 10 times higher with 1500 hour pilot as it was for the 300 per hour pilot coming out of our own programs that we had in Farmington or at ASU. So this is not a safety issue.
Speaker 5: and and micwad to make a point that you know this is a law that was adopted and no other country in the world is adopted this lot not a single one
And I think it's important that some of the politicians start to I can take this up because if they don't they are putting the industry in jeopardy, and that doesn't matter, if you're mesa or any other regional airlines, everyone is going to face the same outcome and it's just not sustainable if they don't do something to fix this.
Got it.
Mike wanted to make a point that.
This is a law that was adopted and no other country in the World has adopted this was not a single one.
Speaker 5: right i mean it seems crazy that a three hundred hour f.o. can land a luft
I mean, it seems crazy that a 300, our CFO can land that Luc answer.
<unk> hundred 50 into JFK flying over Queens.
Our U S pilot can't do the same thing.
Speaker 5: So attrition levels, I will say that attrition has clearly been elevated. You have one month at high, one month at low. I mean, it's really been all over the board. I think to fair to say that it's running anywhere from, we look at like 3% to maybe 5% per month. And we are...
So <unk>.
Attrition levels.
I'll tell you that attrition has clearly been elevated.
We have one month, it's high one month, it's low I mean, it's.
Really been all over the board.
I think fair to say that it is running anywhere from you know.
We looked at like 3% to maybe 5% per month.
And we are doing our best to keep up on the trading side. The only problem that you have with training and which has caught us a little bit behind is that normally pilots give us two weeks notice maybe 30 days notice.
Speaker 5: doing our best to keep up on the training side. You know, the only problem that you have with training in which is caught us a little bit behind, is that normally pilots give us two weeks notice, maybe 30 days notice, takes three months to train a pilot. So, you know, we've got a pipeline as Brad mentioned, that is full. We now have in fact additional SIM time that will double our output, but we absolutely have some catching up to do right now. There is no doubt about it, and it's gonna take some time. And, you know, one of the big question marks is, you know, right now we...
Three months to train the pilots so we've got a pipeline.
<unk> mentioned that is full we now have in fact additional same time that will double our output, but we absolutely have some catching up to do right. Now there is no doubt about it and it's going to take some time and one of the Big question marks is right now we fill up our classes I am concerned that as we go down the road dependent.
Speaker 5: I am concerned that as we go down the road, depend upon how future attrition looks.
Upon how future attrition looks does that reservoir, how dry does that reservoir get before Congress take some action and allows us to refill with high qualified.
Speaker 5: does that reservoir, how dry does that reservoir get before Congress takes some action and allows us to refill with high qualified, you know, really, really, you know, well-trained students who don't have 1500 hours, but have high quality training and simulators and advanced aircraft types.
Really really well trained students, who don't have 500 hours, but have high quality training and simulators and advanced aircraft types.
Yes.
Speaker 8: Well, great. Thanks for that, Jonathan. Thanks everyone else for the answers. Appreciate it. Thank you, Mike.
Great. Thanks for that Jonathan and thanks, everyone else for the answers I appreciate it thank.
Thank you Mike.
Speaker 1: Our next question comes from Andrew D'Dora. Go ahead, please, your line is open.
Our next question comes from Andrew <unk> Go ahead. Please your line is open.
Yeah.
Speaker 5: Hey everyone. So Jonathan actually my question was on kind of your the last point that you made. I guess at what point do you start worrying about filling up your classes? I know you're training pipeline. It's full, but what does your pool of applications stand for for pilots today? What was it pre pandemic and kind of what do you see your pilot hiring needs of the course of 2022?
Hey, everyone. So Jonathan actually my question was on kind of your.
The last point that you made I guess at.
What point do you start worrying about filling up your classes right. I know you are training pipeline, but what does your pool of applications stand for pilots today.
What was it pre pandemic and kind of where do you see your pilot hiring needs over the course of 2022.
Speaker 5: Okay, now that's a good question. You know.
Okay. So that's a good question.
Speaker 5: Again, dependent upon attrition and I just hesitate to say which direction it's heading. I mean, you know, we saw, for example, a significant drop in January , which we thought we'd give an attrend and then, you know, it went back up to previous level in February . We are currently, as I said,
Again dependent upon attrition I, just hesitate to say, which direction. It's heading I mean, we saw for example, a significant drop in January which we thought he had been a trend and then it went back up to previous level in February .
We are currently as I said have multiple hundreds of people in training right now and now is the biggest problem. We had was just getting adequate sometime which we've now secured.
Speaker 5: Multiple hundreds of people in training right now and now and the biggest problem we had was just getting adequate Symptoms which we've now secured
Speaker 5: Our pilot applicants and numbers are probably a little bit less than they were pre-pandemic, you know, in terms of applications, not drastically less, but a little bit less.
Our pilot applicants the numbers are probably a little bit less than they were pre pandemic in terms of applications not drastically less but a little bit less.
Speaker 5: And we still are finding that we can fill the class. But, you know, I mean, we've got an entire department that's not recruiting right now. I mean, there was a time when in fact, people used to pay us to apply for jobs.
And we still are finding that we can fill the class, but I mean, we've got an entire department that's out recruiting right now I mean, there was a time when in fact people used to pay us.
To apply for jobs, so I mean things have changed dramatically and it's just a question of how we see things going forward and if we can get any relief whatsoever. I mean, there have been some long term fixed is being put into place things that frankly, we've been advocating for a long time.
Speaker 5: So I mean things have changed dramatically and it's just a question of how we see things going forward and if we can get any relief whatsoever. I mean there have been some long-term fixes being put into play.
Speaker 5: you know things that you know frankly we've been advocating for a long time uh... and had started to do and then the pandemic hit but you know i think that some of these schools
And had started to do and then the pandemic hit but I think that some of the schools.
Speaker 5: uh... you know fortunately are you know out there uh... you know with united for example beginning avia and you know there are other academies out there that will help but the problem is
Fortunately are out there with United for example, beginning aviate and there are other academies out there that will help but the problem is.
Speaker 5: um... you know you can get some of up to the point where they have to three hundred three hundred fifty hours having gone through a couple year program and then they have to sort of scrambled to get to the next twelve hundred uh... it's very expensive it takes a long time and you know you're also asking people to stay out of the workforce for two years and you know to be frank in today's environment i mean you know i i feel even even more passionate against it because frankly it is you know basically discriminate against anyone who doesn't have a ton of money
You can get somewhat up to the point, where they have the 300 350 hours having gone through a couple of your program and then they have to scramble to get to the next 1200, it's very expensive. It takes a long time and you know Youre also asking people to stay out of the workforce for two years and to be Frank in todays environment, I mean, I feel even.
Even more passionate against it because frankly it is basically discriminates against anyone who doesn't have a ton of money I mean, unless you are a very wealthy person you are not going to become a pilot without basically tried to hock your entire future. If you can make that happen. So I mean, it's clearly.
Speaker 5: I mean, unless you are a very wealthy person, you are not gonna become a pilot without basically trying to hawk your entire future if you can make that happen. So, I mean, it's clearly problematic. I think for Mesa, we're in a reasonably good position because we do fly large jets. We have very good, very desirous domiciles. And...
<unk> I think for Mesa.
We're at a reasonably good position because we do fly large jets, we have very good very desirous.
Domiciled in Dallas, and Houston, Phoenix, and Washington, D C and we have a program with United which has been obviously helpful. In terms of attracting people, but on the other hand with aviate. We also lose people to United So, it's a little bit of a double edged sword, but net net I think it's still.
Speaker 5: Dallas and Houston Phoenix and Washington DC and we have the ABA program with United which has been obviously helpful in terms of attracting people but on the other hand you know with ABA we also lose people to United so it's a little bit of a double-edged sword but net net I think it still you know is advantageous for us.
As advantageous for us.
Speaker 5: And I think I should know this, but just in a normal year pre-COVID, how many pilots would you typically hire?
And maybe I should know this but just in a normal year pre pre COVID-19 , how many pilots would you typically higher every year.
Yes.
$2 53.
Speaker 5: Maybe I think when we look back, I mean, if there is ever considered to be a normal year in this industry, but I think our normal training classes we'd probably run between 20 and 30 a month. I think is that a fair statement, Mike? You know, just depending upon what our needs are. 50, 300 a year. Yeah, 250 to 300 a year. Okay.
Maybe I think.
I think when we look back I mean, if there is ever consider to be a normal year in this industry, but.
I think our normal training classes, we'd probably run between 20 and 30 a month I think is that a fair statement Mike just.
Just dependent upon what our needs are 5300, yes, 250 to 300 a year.
Okay.
Obviously, it has gone up from there.
Speaker 5: I mean, in COVID, we are literally losing two people a month.
I mean in Covid, we are literally losing two people a month.
Speaker 5: understood. Lastly, from me, maybe toward the $4 million of penalties in the December quarter, where does that hit the P&L in that the playoffs cost or is that a country revenue just curious for a modeling perspective? Yeah, I'm not gonna, I really can't speak to that. Sorry, not something we share publicly previously in country revenue. But it would be, it would be in country revenue.
Yes understood.
Lastly for me maybe towards the.
$4 million.
Penalties in the December quarter, where does that hit the P&L is that the complaint ops line.
Flight ops cost or is that a country revenue just just curious from a modeling perspective, I'm not going to I really can't speak to that.
Alright, not something we've shared publicly previously the contra revenue, but that it would be.
It would be in contra revenue.
Okay.
Thank you.
Speaker 5: yeah i i mean to savvy's question and you know i i talk about the penalties i i don't know i'm i'm maybe i maybe i should have but the fact is that we did have it uh... out in earlier draft so i want i'm happy we did because i'd like to be transparent uh... you know we we we looked at the four million penalties and then we looked at you know what would have happened if we did not have cobit and had the absence rates and it just flown the same amount of flying as we did in October
Sure.
Yeah, I mean to Savi question and.
Talked about the penalties I don't know maybe.
Maybe I shouldn't but the fact is is that we did have it out in earlier drafts. So I wanted I'm happy we did because I would like to be transparent.
We looked at the $4 million in penalties and then we'd looked at what would have happened. If we did not have COVID-19 and heavy absence rate and adjust flow in the same amount of flying as we did in October .
Speaker 5: you know, for October , November , December , and without the absence rate, that probably was an additional $5 million.
For October November December and even without the absence rates that probably was an additional $5 million. So it's very easy for us to say without any of the other COVID-19 related problems for like the delay in our Sams and all the other things that happened, we could easily identified $9 million of COVID-19 related expenses or excuse.
Speaker 5: So it's very easy for us to say without any of the other COVID related problems for, you know, like the delay in our Sims and all the other things that happened, we could easily identify $9 million of COVID related.
Speaker 5: or excuse me, lots of revenue in this quarter that we feel pretty easily, we can identify.
I mean lots of revenue in this quarter that we feel pretty pretty pretty easily we can we can identify.
Yeah.
Yeah.
Okay.
Speaker 1: Just a reminder that you may still press star one and record your name to ask a question. Our next question comes from Savi Fies. Go ahead, please, you'll have to do.
Just a reminder, that you may still press star one and record your name to ask a question. Our next question comes from Savi. <unk> go ahead. Please your line is open.
Speaker 6: Hey, thanks for the follow-up. Just a follow-up on Hallyanne's question, with cargo not seeing as much pilot nutrition, is there an opportunity to expand the cargo given how strong that market is, even if you're having pilot issues on the CPA side or because of that, is that does that kind of constrain of any kind of cargo ambition?
Hey, thanks for the follow up.
Just.
Follow up on <unk> question.
With cargo not seeing as much pilot attrition is there an opportunity to expand the cargo given how strong that market is even if you are having pilot issues on the <unk>.
And then the CPA side or because of that is that does that kind of constrain any kind of cargo ambition.
Speaker 5: No, I think, that the cargo business is clearly for us, a very important growth area, because not only as the business continue to grow and be strong in terms of just the macro aspect, the more cargo aircraft we add, I think it becomes that much more attractive place and makes it easier to recruit pilots.
No.
I think savi that the cargo business is clearly for us a very important growth area because not only.
As the business continued to grow and be strong in terms of just the macro aspects. The more cargo aircraft. We add I think it becomes that much more attractive place that makes it easier to recruit pilots because clearly.
Speaker 5: because clearly, as I said, it gives pilots that makes it the opportunity to make, you know, narrow-body rates without ever having to leave. So I think the opposite, and I think even our partners realize, I mean, I actually had a conversation with one partner who said, why didn't you grow cargo? It's a great way to attract more pilots.
As I said it gives pilots that makes it the opportunity to make.
Narrow body rates without ever having to leave so I think the opposite and I think even our partners realize I mean, I actually had a conversation with one partner who said why didn't you broke cargo it's a great way to attract more pilots and so this is coming from our own major airline partners. So I think that that that we are focusing on that growth.
Speaker 5: And so, you know, this is even, you know, coming from our own, you know, major airline partners. So I think that that we are focusing on that growth. We've done an excellent job operation. I have to say hats off to our people there without a spare aircraft. We went months without a cancellation. And, you know, we are, you know, it's an area that we think there could be some real opportunity for us, you know, in the narrow body area. So, no, I, it's very important growth avenue for us going forward.
We've done a excellent job operationally I have to say hats off to our people there without a spare aircraft we went months without a cancellation.
And we are.
It's an area that we think there could be some real opportunity for us.
In the narrow body.
Area so.
It's very important growth Avenue for us going forward.
Speaker 5: I think it's like I can also add, look, you know, for our DHL, we've only done it just about a year and, you know,
And that's the way to do it it's Mike I can also add look.
For for our DHL, we've only done it just about a year and.
Speaker 5: use that to prove ourselves and now we got another aircraft and you know that's just a good indication of of you know our potential that we can grow that as well as any other car
We use that to prove ourselves and now we've got another aircraft in.
That's just a good a good indication of.
Our potential that we can grow that as well as any other cargo business.
Speaker 6: It's a more degrading factor in growing that. It's a, it sounded like you had this proving now that you proved it. Is it just maybe an aircraft a year and you just kind of have to show, okay, you have another one and give a year of good performance there?
So Mike it's a wash.
What's the gating factor in and growing that it sounded like you had this proving now that you've proved that is it just maybe up.
Aircraft, a year and you just kind of have to shelf. Okay. You have another one in Europe performance there.
Speaker 5: What's the grading factor there? I think the gaining factor really is just the man on the side of the cargo operators. I think that Mesa has proven itself to be, you know.
What's the gating factor there.
Look.
I think the gating factor really is just demand on the side of the cargo operators I.
I think that makes has proven itself to be.
Speaker 5: maybe the most reliable of the 737 operators right now and i think as a result i think if there's growth out there i think we stand a really good chance getting our fair share but i think the real issue is just no what do the cargo operators see as the demand for narrow body aircraft in there
Maybe the most reliable of the 737 operators right now and I think as a result, I think if there is growth out there I think we stand a really good chance of getting our fair share, but I think the real issue is just what do the cargo operators see as the demand for.
For narrow body aircraft in their system.
Speaker 6: And then if I might just quickly ask a question on the European JV, it seems like the timing is looking a bit, I think the one Q was the expectation, one Q, a calendar one Q, and maybe now it's first half. Could you remind us again, you know, what comes after the certification and when that back can start contributing?
And then if I might just add.
Quickly ask a question on the European JV. It seems like the timing is slipping a bit and I think <unk> was the expectation <unk> calendar <unk> and maybe now its first half could you remind us again what comes after this indication and when that that can start contributing.
Speaker 5: Yeah, so we're, this is Mike. So there is no 1500 hour rule in Europe . So I could start with that. So there's the private, the pilot situation there is much different.
Yes, so where this.
This is Mike. So there is no 500 out where we were in Europe . So that's I could start with that but there is the private the pilot situation. There is much different than what we would see here, but our plan is still to get the operating certificate.
Speaker 5: than what we would see here. But our plan is still to get the operating certificate, you know, by mid-year. And then, you know, we've already talked to some customers and add customers throughout the year and kind of mimic the model in the US, which is much different than what they do in Europe right now where they have, you know, a couple of aircraft here and a couple of aircraft there and not a lot of structure to it. But we think the model in the US will work well.
By mid year, and then we.
We've already talked to some customers and add customers throughout the year and kind of mimic the model in the U S, which is much different than what they do in Europe , right now where they have.
Couple of aircrafts here in a couple of aircrafts, there and not not a lot of structure to it but we think the model in the U S will work well in Europe .
Speaker 5: And is that something that's more seasonal to Mike? Is it that, you know, the opportunity really in the summertime when the demand is strong and then maybe not as much in the winter? No, we're really not trying to do the, you know, traditional European ACMI will pick up the summer peaks. This is more establishing partnerships with major carriers in Europe , like we do with the US for long term relationships for, you know, larger fleets of aircraft.
And is that something thats more seasonal like you said that the opportunity really in the summertime when the demand is strong and then maybe not as much in the winter.
We're really not trying to do the.
Traditional European ACM I will we will pick up the summer peaks. This is more establishing partnerships with major carriers in Europe like we do with the U S for a long term relationships for <unk>.
Larger fleets of aircraft.
Got it thank you.
Speaker 1: And stickers I have shown you know are there no questions at this time you may proceed.
And speakers I'm showing no additional questions at this time you May proceed.
Speaker 5: All right, well, look folks, you know, clearly this has been a difficult quarter.
Alright, well look folks.
Clearly this has been a difficult quarter.
Speaker 5: You know, the effects of COVID combined with the attrition have obviously been difficult. And to be frank, I think probably the single biggest issue was how rapidly things change.
The effects of Covid combined with the attrition.
Have obviously been been difficult and to be Frank I think probably the single biggest issue was how rapidly things changed.
Speaker 5: We responded, we thought as quickly as we could. We brought back and started classes back in April to try to get ahead of this. You know, there was some constraints in regard to being able to put people through training in Simtime, particularly in the EJF fleet, which we just solved this week.
We responded we thought as quickly as we could.
We brought back and started classes back in April to try to.
Get ahead of this.
There were some constraints in regard to being able to put people through training and sometimes particularly in the E jet fleet, which we just saw this week.
Speaker 5: It's going to take us some time to dig our way out, but I think it's fair to say that besides the structural problem that exists within the industry.
It's going to take us some time to dig our way out, but I think it's fair to say that besides the structural problem that exists within the industry in terms of pilots that we are hopeful that Washington will address before it's too late I mean, I think there is I think it's very fair to say that in terms of what's happening at Mesa and our partners.
Speaker 5: in terms of pilots that, you know, we are hopeful that Washington will address before it's too late. I mean, I think there's, I think it's very fair to say that in terms of...
Speaker 5: what's happening at Mesa and our partners at United American DHL, there is no structural issue there that would cause...
At United American DHL, there's no structural issue there that would cause at least from my perspective any concern it's much more dealing with some of these industry issues and then it's a question of how fast we can address them and I can assure you that everyone. Here is working at full speed. We're all back in the office I think that we are.
Speaker 5: At least from my perspective, any concern, it's much more dealing with some of these industry issues. And then it's a question of how fast we can address them. And I can assure you that everyone here is working at full speed. We're all back in the office. I think that we're very much focused on getting this turned around. And the biggest aspect there is just getting our folks to training and getting people back out on the line flying air.
We're very much focused on getting this turned around and the biggest aspect. There is just getting our folks to training and getting people back out on the line flying airplanes. So I want to thank in particular again all of our people, but I also think it's really important for us to thank our partners all of whom which have been incredibly supportive.
Speaker 5: So I want to thank, in particular, again, all of our people. But I also think it's really important for us to thank our partners, all of whom, which have been incredibly supportive throughout this whole period. And I think that that's probably one of my single biggest reasons for confidence is the fact that our partners have really stepped up and have been very helpful throughout this whole.
Throughout this whole period.
And I think that Thats, probably one of my single biggest.
Reasons for confidence is the fact that our partners have really stepped up and have been very helpful. Throughout this whole period.
Speaker 5: So with that, I want to thank everybody for taking the time and we'll hopefully talk to you next quarter. Thank you very much.
So with that I want to thank everybody for taking the time and we'll hopefully talk to you next quarter. Thank you very much.
Speaker 1: That will conclude today's conference and we thank you for participating. We just connected this time. Have a wonderful day. Figures please stand by for your books.
That will conclude today's conference and we thank you for participating you may disconnect. At this time have a wonderful day speakers. Please standby for your post conference.
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Speaker 1: Thank you for standing by and welcome to the Mesa Airlines Q1 fiscal 2022 earnings conference call. All participants are in a listen only mode until the question remains.
Thank you for standing by and welcome to the Mesa Airlines Q1 fiscal 2022 earnings 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 pump. This.
Speaker 1: At that time, please press star 1, unmute your phone and record your name in the...
Speaker 1: The call is being recorded if you have any objections please disconnect at this time. I would now like to turn the call over to Susan D'Ouffrial at of Investor Relations. Mr. N'Ouffrial, you may begin.
This call is being recorded if you have any objections. Please disconnect at this time I would now like to turn the call over to Susan Donofrio head of Investor Relations. Mr. <unk> you may begin.
Speaker 2: Thank you operator and welcome everyone to make his earnings call for its first fiscal quarter and to December 31st.
Thank you operator, and welcome everyone to make this earnings call for its first fiscal quarter ended December 31. 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, Chairman and CEO , Michael lot President Brad.
Speaker 2: This call is being recorded and simultaneously webcast. A replay of this call can be found on our website.
Speaker 2: On the call with me today, Arjanis and Ornstein, bases chairman and CEO , Michael Lott, president, Brad Rich, EVP, and COO, and torque Zubak CFO , as well as other members of the management team.
Rich EVP and CFO and torque <unk> CFO as well as other members of the management team. Following our prepared remarks, there will be a question and answer session for sell side analysts.
Speaker 2: Following our prepared remarks, there will be a question and answer session for the self-side analyst.
Speaker 2: We will also wanted to remind everyone on the call today 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 report on file with the SEC.
We also wanted to remind everyone on the call today 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 statement in comparing results today, we will be adjusting all periods to exclude special items.
Speaker 2: We undertake no duty to update any forward-looking statement.
Speaker 2: In comparing results today, we will be adjusting all periods to exclude special items.
Speaker 2: Please refer to our first fiscal quarter earnings release, which is available on our website for the reconciliation of our non- GAAP measures . But that, I will turn it over to Jonathan for his opening remarks.
Please refer to our first fiscal quarter earnings release, which 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.
Speaker 5: Thank you Susan and thank everyone for joining us.
Thank you Susan and thanks, everyone for joining us today.
Speaker 5: Obviously, this has been a very tough quarter for Mesa. And the one piece of good news I can report is that demand for our product has never been stronger. Our primary challenge will be needing...
Obviously this has been a very tough quarter for Mesa.
And the one piece of good news I can report is that demand for our products has never been stronger.
Our primary challenge will be meeting that demand.
Speaker 5: While COVID now appears to be received, and in some quarters referred to as a control, what a dentist.
While COVID-19 now appears to be received and in some quarters referred to as a controllable and Dennis <unk>.
Speaker 5: impact to our operation and financials is still evidence, however. And it's effect on this quarter was significant and unlike anything we have seen in 20.
The impact to our operations and financials is still evident. However, this effect this quarter was significant and unlike anything we have seen in 20 years.
Speaker 5: Well, COVID hit by far the greatest impact. We had other items that negatively impacted the quarter as well.
While copeland and by far the greatest impact we had other items that negatively impacted the quarter as well.
Speaker 5: continue to have a catch up and heavy maintenance expense that we defer at the start of COVID which will discuss the last quarter.
We continue to have a catch up in heavy maintenance expense that we deferred at the start of Covid, which was discussed last quarter.
Speaker 5: We experience unprecedented volatility in sick calls, which we believe are COVID-19-R-R-related. In November , December , we had...
We experienced unprecedented volatility and sick calls, which we believe are COVID-19 pulmicort unrelated in November December we had.
Speaker 5: days with sick rates is 23% compared to our historical average of 5%. This continues for the first-
Days with fixed rates as high as 23% compared to our historical average of 5%.
This continued for the first three weeks in January .
Speaker 5: Fortunately, that January 23rd, we have seen a measurable reduction in sick core rate, which we obviously monitor in close.
Fortunately that's January 23rd we have seen a measurable reduction in CCAR right.
We are obviously monitoring closely.
Speaker 5: While COVID effects are less than, we are also contending with a significant increase in pilot nutrition as main line carriers begin hiring to refill the fleet of pirate ranks caused by early and statutory retirements.
While COVID-19 effects are less thing. We are also contending with a significant increase in pilot attrition is mainline carriers to begin hiring to rebuild depleted pirate range caused by early and statutory retirement.
Speaker 5: Additionally, the National and Cargill Carries continued to have a strong demand for piles.
Additionally, the national and cargo carriers continue to have a strong demand for filings.
Speaker 5: That being said, by far the biggest impact on the current pilot.
That being said by far the biggest impact on the current pilot shortage is the <unk>.
Speaker 5: ill-invised 1,500-hour requirement for commercial pilot. A rule adopted by no other...
Ill advised 500 hour requirement for commercial pilots a rule adopted by no other country.
Speaker 5: Unfortunately, our financial performance this year will be highly correlated to our ability to deal with this pile of the traditions itself.
Unfortunately, our financial performance this year will be highly correlated to our ability to deal with this pilot attrition successful.
Speaker 5: On a personal note, I could not be more proud of our people who bravely continue to work through the pandemic, providing fake transportation to our cats.
On a personal note I could not be more proud of our people who bravely continued to work through the pandemic, providing safe transportation to our passengers managing through the challenges of our four regional operations remains our team's top priority Grad will go into more details with some of these initiatives.
Speaker 5: Managing through the challenges of our four regional operation remains our team's top priority. Grad will go into more detail with some of these initiatives.
Speaker 5: As far as some of the areas you have invested in parking and outside of our four regional operations, they continue to make progress and reach.
As far as some of the areas.
And partners is outside of our core regional operation.
Continue to make progress and reached company milestones. These partnerships will help me to diversify its revenue and add to our future growth opportunities as an update.
Speaker 5: These partnerships will help make the diversified revenues and add to our future growth up.
Speaker 5: as an update. Turning to our DHL cargo operation.
Turning to our DHL cargo operation just continues to perform well with our two dedicated 737 400 aircraft.
Speaker 5: I'm gonna continue to perform well with our two dedicated 737-400-HEP air.
Speaker 5: We have consistently met or exceeded DHL's operational performance so far.
We have consistently met or exceeded dhl's operational performance requirements. We recently leased a 3700 37 400 aircraft. They expect to take delivery of this model going forward. We think the cargo can be an increasingly important part of our business.
Speaker 5: We recently released a third 737-400 aircraft. They expect to take delivery this month. Going forward, we think that cargo can be an increasingly important part of our...
Speaker 5: Our partnership with Grammar C Associates Limited is on track to have certification leaded in the first half of 2020.
Our partnership with Gramercy Associates Ltd is on track to have certification completed in the first half of 2022.
Speaker 5: We own 49% of this multibase regial jet operation. And we're looking forward to introducing the regional, our regional business model to Europe .
149% of this multi based regional jet operation and we're looking forward to introducing the regional our regional business model to Europe .
Speaker 5: In spite of the difficult environment, we have selectively continued to invest in partner and newer environmentally friendly technology.
In spite of the difficult environment, we have selectively continue to invest in partner and newer environmentally friendly technology.
Speaker 5: partnerships of design decision-making to be the first regional airline to fly electric aircraft and mean the forefront of decarbonizing air travel and reducing our relies on thought.
These partnerships are designed for decision makers could be the first regional airline to fly electric aircraft and being in the forefront of Decarbonising air travel and reducing our reliance on fossil fuels.
Speaker 5: our electric aviation partners partnerships with our turn part that we enter the long side united are reaching product development
Our electric aviation partners partnerships with Archer in part we entered alongside United are reaching product development milestones.
Speaker 5: At Archer, the company has received a special airworthiness certificate from the AFA covering its maker demonstrated aircraft in early December . This was followed by completing its first successful test flight in December 2021.
At Archer the company has received a special airworthiness certificate from the FAA covering its maker demonstrated aircrafts in early December .
This was followed by completing its first successful test flight in December 2021.
Speaker 5: This moment is a significant step forward for Archer's overall certification timeline and serves as the key naveler for the company's mission to launch its first commercial e-b-tall flight in 2024.
This moment is a significant step forward for archers overall certification timeline and serves as a key enabler for the Companys mission to launch its first commercial flight.
Like in 2024.
Speaker 5: Heart Aerospace, our other electric aircraft partnership, is also reporting progress and development of its 19 passenger electric aircraft.
Heart aerospace or other electric aircraft partnership is also reporting progress and development of its 19 passenger electric aircraft.
Speaker 5: The first time the T.L. model was a plane to flight at the heart arrow space, head course out, located in Sweden, this cat, this cat.
First time, the scale model of the plane to fly at the heart Aerospace headquarters located in Sweden. This past December .
Speaker 5: Going forward, our strategy is to selectively look at other opportunities and aviation-related green technologies to ensure a leadership role in this area.
Going forward our strategy to selectively look at other opportunities in aviation related Green technologies.
To ensure a leadership role in this area.
Speaker 5: During the quarter, we signed a letter of intent and entered into a partnership agreement with region to support the development of their electric power transportation, utilizing wing and ground effect technology.
During the quarter, we signed a letter of intent and entered into an agreement.
Agreement with region to support the development of their electric power transportation utilizing wing in ground effect technology, which is designed to significantly expand the range of over other electric designs.
Speaker 5: design to significantly span the range of over other electric designs.
Speaker 5: With that, I will hand it over to Brad Rich to go over more of the details of an update on an update on our operational performance support.
With that I will hand, it over to Brad rich to go over more of the detail of it update and an update on our operational performance this quarter.
Okay.
Speaker 4: Thank you, John , for sending good afternoon to everyone. Thank you for joining us today.
Thank you Jonathan and good afternoon to everyone. Thank you for joining us today.
Speaker 4: Our main focus remains on operating our core regional business in the safest and most operationally reliable way with the health and safety of our people and our customers, always the top priority.
Our main focus remains on operating our core regional business in the safest and most operationally reliable way with the health and safety of our people and our customers always the top priority.
Speaker 4: We are focused on remaining flexible and respond to the flying needs of our partners, American and United MDHL.
Our focus on remaining flexible and responsive to the flye needs of our partners American and United and DHL.
Speaker 4: In the December quarter, we flew 86,079 block hours, which is a 24.3% increase from last year, and 9.3% below last quarter.
In the December quarter, we flew 86079 block hours, which is a 24, 3% increase from last year.
And nine 3% below last quarter.
Speaker 4: Our combined controllable completion factor was 97.8% compared to 99.9% a year ago.
Our combined controllable completion factor was 97, 8% compared to 99, 9% a year ago.
Speaker 4: Our current production is the lower 2019 levels, primarily driven by a reduction in flying for American as a result of our smaller fleet and our contract, as well as capacity reductions due to the spread of the Omicron variant of COVID-19 and elevated attrition to mainline carrier.
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 as well as capacity reductions due to the spread of the omicron variant of COVID-19, and elevated attrition to mainline carriers.
Speaker 4: Looking ahead to 2022, we are focused on preparing to operate the airline productively and reliably in a post-pandemic environment.
Looking ahead to 2022, we are focused on preparing to operate the airline productively and reliably in a post pandemic environment.
Speaker 4: While United and American are requesting additional flying, it is in an industry environment of increased pilot attrition to the major airlines compounded by COVID-related absence rates.
While United and American are requesting additional flying.
It is in an industry environment of increased pilot attrition to the major airlines compounded by Covid related absence rates.
Speaker 4: In previous calls, we discussed the increase in volume of additional heavy check requirements and the timing of such checks that compromised our aircraft availability.
In previous calls we discussed the increase in volume of additional heavy check requirements and the timing of such checks that compromise our aircraft availability.
Speaker 4: We feel like we are seeing some tailwinds on this issue. And after this quarter, we expect to be back to a more normal run rate of heavy maintenance.
We feel like we are seeing some <unk> on this issue and after this quarter, we expect to be back to a more normal run rates of heavy maintenance.
Speaker 4: and our Aircrafted Servishment Program is also just about completed.
Our aircraft refurbishment program is also just about completed.
Speaker 4: Regarding our United Operations, our controllable completion factor or CCF was 98.3% due to pilot staffing challenges caused by piloted attrition to the mainline carriers and elevated absences due to the spread of COVID-19.
Regarding our United operations are controllable completion factor or Ccs was 98, 3% due to pilot staffing challenges caused by pilot attrition to the mainline carriers.
And elevated absences due to the spread of COVID-19.
Speaker 4: As far as our United Fleet, we had previously removed all 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.
As far as our United Fleet, We had previously 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.
Speaker 4: 17 of the aircraft have been delivered as of December 31st, 2021. The three remaining aircraft are planned to be delivered by the end of March 2022.
17 of the aircraft have been delivered as of December 31, 2021.
Three remaining aircrafts are planned to be delivered by the end of March 2022.
Speaker 4: Our United E-175 fleet remains at 80 aircraft.
Our United <unk> Hundred 75 fleet remains at 80 aircraft.
Speaker 4: We feel like our relationship with United remains strong and productive and we are working collaboratively with them as we navigate through the recovery.
We feel like our relationship with United remained strong and productive and we are working collaboratively collaboratively with them as we navigate through the recovery.
Speaker 4: I'd like to now provide an update on our American operation. Our CCF for American was 97.2% for the quarter, and driven primarily from the same issues that impacted our United performance, specifically COVID-related absence rates among our pilots, compounded by pilot of Christians.
I'd like to now provide an update on our American operation Our CCF for American was 97, 2% for the quarter and driven primarily from the same issues that impacted our United performance, specifically COVID-19 related absence rates among our pilots compounded by pilot attrition.
Speaker 4: Working cooperatively through the pandemic, American recognized difficult operating environment impacted our performance and waived our performance related requirements.
Working cooperatively through the pandemic American recognized difficult operating environment impacted our performance.
Our performance related requirements.
Speaker 4: As mentioned in previous quarters, the increased volume and timing of heavy maintenance impacted our ability to schedule aircraft and related spare.
As mentioned in previous quarters, the increased volume and timing of heavy maintenance impacted our ability to schedule aircraft and related spares.
Speaker 4: Maintenance and refurbishment costs should begin to return to more normalized levels after this quarter.
Maintenance and refurbishment costs should begin to return to more normalized levels. After this quarter.
Speaker 4: I would like to provide a little more color to our operating performance.
I would like to provide little more color to our operating performance.
Speaker 4: Unlike other regional carriers that were pulling down scheduled flying earlier due to elevated pilot attrition, the situation at Mesa was unique and that our attrition spike happened much later than others and occurred at the same time in which we experienced elevated absences due to the Omicron surge.
Unlike other regional carriers that were pulling down scheduled flying earlier due to elevated pilot attrition the situation at Mesa was unique in that our attrition spike happened much later than others and occurred at the same time in which we experienced elevated absences due to the omicron Serge.
Speaker 4: This sequence of events is the driver for reduced performance in November , December and January .
This sequence of events is the driver for reduced performance in <unk>.
November December and January .
Speaker 4: And cooperation with our partners, we have kept our forward scheduled block hours down to a more conservative level in order to account for COVID-related absences and piloted patients.
In cooperation with our partners we have.
Kept our forward scheduled block hours down to a more conservative level in order to account for Covid related absences and pilot attrition.
Speaker 4: Given the fact that we have outlined the industry-wide challenges, the relevant question is, what are we doing about it, and how are we navigating through the recovery?
Given the fact that we have outlined the industry wide challenges. The relevant question is what are we doing about it and how are we navigating through the recovery.
Speaker 4: Our focus is on staffing, specifically employee hiring, training and retention.
Our focus is on staffing specifically employee hiring training and retention.
Speaker 4: This focus will be on pilot and all critical positions that support our daily operation.
This focus will be on pilots and all critical positions that support our daily operations.
Speaker 4: Our pilot training pipeline is full, and we have implemented programs to not only continue to attract new pilots to Mesa, but also increase our instructor range.
Our pilot training pipeline is full and we have implemented programs to not only continue to attract new pilots to Mesa, but also increase our instructor rates. We have secured additional simulator time and have the strategically positioned in key locations to decrease our training timelines.
Speaker 4: We have secured additional simulator time and have this strategically positioned in key locations to decrease our training timeline.
Speaker 4: Furthermore, we are well positioned to be an attractive option for pilots through opportunities such as...
There are more we are well positioned to be an attractive option for pilots through opportunities such as.
Speaker 4: A fleet of entirely large regional jets and narrow bodies, 737 aircraft.
<unk> fleet of entirely large regional jets and narrow bodies 737 aircraft.
Speaker 4: United Aviate Program where we're one of few independent regional airlines to be able to offer a direct passway for our pilots to become a career pilot for United Airlines.
United 88 program, where we're one of few independent regional airlines to be able to offer a direct pathway for our pilots to become a career pilot for United Airlines.
Speaker 4: 737 aircraft, where the only regional airline offering the opportunity to fly larger aircraft and earn the highest pay in the regional industry.
737 aircraft, we are the only regional airline offering the opportunity to fly larger aircraft and earn the highest pay in the regional industry.
Speaker 4: We have attractive domiciles which make it easy to commute.
We have attractive domiciled, which make it easy to commute.
Speaker 4: We're currently offering rapid captain upgrade opportunity.
We're currently offering rapid captain upgrade opportunities.
Speaker 4: We have an active targeted recruiting program, including a cadet program, and on-site visits at aviation schools across the country.
We have an active targeted recruiting program, including a cadet program and onsite visits at aviation schools across the country.
Speaker 4: We have competitive new higher pay with enhanced bonus opportunity.
We have competitive new higher pay with enhanced bonus opportunities.
Speaker 4: And additionally, we're pursuing other creative initiatives to attract and retain new pilot candidates.
And Additionally, we are pursuing other creative initiatives to attract and retain new pilot candidates.
Speaker 4: Turning to DHL, we continue to see strong performance numbers as we complete our first full year of operation.
Turning to DHL, we continue to see strong performance numbers as we complete our first full year of operations. We had a controllable completion factor of 99, 8% for the quarter, which exceeded dhl's performance goals.
Speaker 4: We had a controllable completion factor of 99.8% for the quarter, which exceeded DHL's performance goals.
<unk> delivery of our third 737 Dash 400 aircrafts this month.
Aircraft is expected to provide additional lift as well as provide additional operational support.
Speaker 4: With that, I'd now like to turn the time over to Torque to watch through our financial performance.
With that I'd now like to turn the time over to <unk> to walk through our financial performance.
Speaker 3: Thank you, Brad. Now I'll review our financial performance, capital out, look and balance sheet, and then I'll provide some more details. Thank you.
Thank you Brad.
Now I'll review, our financial performance capital outlook and balance sheet, and then I'll provide some more detail on our business outlook.
Speaker 3: The first quarter of fiscal year 2022, we reported a net loss of 14.3 million or 40 cents per diluted share and an adjusted net loss of 9.3 million or 26 cents per diluted share.
For the first quarter of fiscal year 2022, we reported a net loss of $14 3 million or <unk> 40 per diluted share and an adjusted net loss of $9 3 million or 26 per diluted share.
Speaker 3: The adjusted net loss excludes a 6.5 million mark to market non-cash losses on our investments in equity securities and related impact on our income tax expense.
The adjusted net loss excludes a $6 5 million mark to market noncash losses on our investments in equity securities and related impact on our income tax expense.
Speaker 3: Brevenue in Q1 2022 was 147.8 million, a decrease of 2.6 million or 1.7% from 150.4 million for Q1 2021.
Revenue in Q1, 2022, with $147 8 million, a decrease of $2 6 million or one 7% from $150 4 million for Q1 2021.
Speaker 3: But contract revenue increased 9.7 million due to more flying on all fleets relative to the prior period. This increases offset by a decrease in the number of aircraft flown for Americans.
While contract revenue increased $9 7 million due to more flying on all fleets relative to the prior period. This increase was offset by a decrease in the number of aircraft flown for American.
Speaker 3: There was also a decrease in pastor and other revenue of 12.4 million, primarily due to a decrease in pastor maintenance expense. And as a reminder, the pastor expense...
There was also a decrease in pass through and other revenue of $12 4 million, primarily due to a decrease in pass through maintenance expense.
And as a reminder, the pass through expense has no P&L impact.
Speaker 3: Mace of Q1 2022 results include per gap, the recognition of 4.2 million of previously deferred revenue, versus the deferral of 5.2 million of revenue in Q1 2021. The remaining deferred revenue balance will be recognized as flights are completed over the remaining terms of the contract.
Q1, 2022 results include per GAAP, the recognition of $4 2 million of previously deferred revenue versus the deferral of $5 2 million of revenue in Q1 2021 the.
The remaining deferred revenue balance will be recognized that flights are completed over the remaining terms of the contract.
Speaker 3: On the expense side, Macy's overall operating expenses for Q1 2022 were $151.7 million, up $26 million over Q4 2021, and $28.3 million versus Q1 2021. The single biggest cost variance compared to Q1 2021 is a $11.3 million PSP-related grant that did not exist in Q1 2022.
On the expense side makes us overall operating expenses for Q1, 2020 to $151 7 million up $26 million over Q4, 2021, and $28 $3 million versus Q1 2021. The single biggest cost variance compared to Q1 2021 is the $11 3 million PSP.
A related grant that did not exist in Q1 2022.
Speaker 3: Nases' flight operations expense was up 10.6 million versus last year. Over 60% of the increase is related to increased block hour flying for both pilots and flighting.
It makes us operations flight operations expense was up $10 6 million versus last year over 60% of the increase is related to increased block hour flying for both pilots and flight attendants. Additionally.
Speaker 3: Additionally, pilot training and recruiting bonuses accounted for 3.3 million.
Additionally, pilot training and recruiting bonuses accounted for $3 3 million.
Speaker 3: Maintenance expense for Q1 2022 was $69 million, up $6.1 million versus 2021, but down $2.1 million versus Q4 2021.
Maintenance expense for Q1, 2022, with $59 million up $6 1 million versus 2021, but down $2 1 million versus Q4 2021 labor.
Speaker 3: Labor costs were up 7.3 million versus Q1 2021, reflecting increased flying activity and pay scale increases for the maintenance technician.
Labor costs were up $7 3 million versus Q1, 2021, reflecting increased buying activity and pay scale increases for the maintenance technician.
Speaker 3: Compared to Q4 2021, labor costs and other expenses were up only 1.1 million.
Compared to Q4, 2021 labor costs and other expenses were up only $1 1 million.
Speaker 3: See check expenses, excluding pass through amounts were 9.1 million in Q1 2022, up 6.1 million versus Q1 2021. But down 1.5 million compared to Q4 2020.
<unk> expenses, excluding pass through amounts were $9 1 million in Q1, 2022 up $6 $1 million versus Q1, 2021, but down $1 5 million compared to Q4 2021 <unk>.
Speaker 3: Rotables and expendables and component contracts were up 3.4 million versus last year, but down 1.4 million from Q4 2021. Now let me review where we...
<unk> is an expandable and component contracts were up $3 4 million versus last year, but down $1 4 million from Q4 2021.
Now, let me review, where we are on cash and liquidity cash for the quarter, excluding restricted cash decreased by $18 2 million to $102 3 million. This amount is right, where we expected it would be last quarter.
Speaker 3: Cash for the quarter, excluding restricted cash, decreased by 18.2 million to 102.3 million. This amount is right where we expected it to be last quarter.
Speaker 3: The reduction from Q4 to Q1 was primarily due to plan schedule debt payments and financing costs of 26.8 million.
The reduction from Q4 to Q1 was primarily due to planned scheduled debt payments and financing costs of $26 8 million 19.
Speaker 3: 19.8 million in spare engines and other equipment, and 7 million in deposits paid toward the future spare engine purchase.
<unk> $19 8 million in spare engines, and other equipment and $7 million in deposits paid towards the future spare engine purchases. These expenditures were partially offset by $38 million and gross debt proceeds.
Speaker 3: These expenditures were partially offset by 30.8 million in gross debt growth.
Speaker 3: Total debt at the end of the quarter was 678.6 million, which is up 8.3 million from the prior court.
Total debt at the end of the quarter was $678 6 million, which is up $8 3 million from the prior quarter.
Speaker 3: Assuming no additional debt, the balance will be reduced by roughly 93 million during the remainder of fiscal year 2022 and 95 million during fiscal year 2023.
Assuming no additional debt the balance will be reduced by roughly $93 million during the remainder of fiscal year 2022, and $95 million during fiscal year 2023.
Speaker 3: This brings the total debt balance down to roughly 490 million in fiscal year end 2023.
This brings the total debt balance down to roughly $490 million at fiscal year end 2023.
Speaker 3: Now let me touch on guidance, although there's still a lot of uncertainty we did want to provide guidance in a few years.
Now, let me touch on guidance, although there's still a lot of uncertainty we did want to provide guidance in a few areas as Brad pointed out we're going to see quite a bit of pressure on block hours with the rest of the fiscal year.
Speaker 3: As Brad pointed out, we are going to see quite a bit of pressure on block hours for the rest of the fiscal year. Based on prior COVID trends, we believe this quarter will be the most impacted at 15 to 20% below Q1, 2010 to 2022. As we have been conservative with our partners on block hour production.
Based on prior Covid trends, we believe this quarter will be the most impacted at 15% to 20% below Q1 2010 to 2022 as we have been conservative with our partners on block hour production.
Speaker 3: By calendar year and we anticipate that our block our production levels will be 5 to 10% below Q1 2022.
By calendar year end, we anticipate that our block hour production levels will be 5% to 10% below Q1 2022.
Speaker 3: The heavy maintenance that we defer it, sort of, COVID will be winding down at the end of this quarter. Pilot training will remain at elevated levels as we continue to hire and train new pilots with added sim capacity for the EJETs in February . And additional CRJ sim capacity coming up in the next quarter.
The heavy maintenance that we deferred the start of Covid will be winding down at the end of this quarter pilot training will remain at elevated levels as we continue to hire and train new pilots with added some capacity for the Egypt in February and additional <unk> capacity coming up in the next quarter.
Speaker 3: We're also looking for cost savings opportunities such as parking access, aircraft, evaluating under use facilities, leases and equipment to eliminate unmuted costs in our business.
Also looking for cost savings opportunities such as parking excess aircraft evaluating underneath facilities leases in equipment to eliminate unneeded costs in our business clearly Q2 will be a challenge will be a challenge, but we are focused on our plan to get to breakeven by Q4, our September quarter.
Speaker 3: Clearly Q2 will be a challenge, will be a challenge, but we are focused on our plan to get to break even by Q4, our September quarter.
Speaker 3: Getting our pilot attrition into control and increasing our pilot training output will be the most critical focus areas for increasing our block our production. We'll also be working with our partners to address the contractual performance requirements in an industry environment that has dramatically changed. Hello.
Getting our pilot attrition under control and increasing our pilot training output will be the most critical focus areas for increasing our block hour production. We will also be working with our partners to address the contractual performance requirements in an industry environment that it's dramatically changed.
I'd like to now turn it over to Jonathan.
Speaker 5: Thank you, Chor. We appreciate the financial report. Given.
Thank you sure we appreciate the financial.
Report.
Given.
The operational initiatives.
Speaker 5: outline, we expect to see an improvement in block output reduction by the end of
Outlined we expect to see an improvement in block hour production by the end of year.
Speaker 5: We were also aggressively focused on the cost savings initiative at Torch Powell.
We're also aggressively focused on the cost savings initiatives.
Outlines.
Speaker 5: In conclusion, while we face some significant near-term issues, we believe that the fundamentals of the industry remain unchanged over the long.
In conclusion, while we faced some significant near term issues, we believe that the fundamentals of the industry remain unchanged over the long term.
Speaker 5: This last quarter demonstrates the extreme volatility of the industry and has required us to redouble our efforts to operate at pre-COVID performance and utilization level.
This last quarter demonstrates the extreme volatility of the industry and has required us to redouble our efforts to operate our pre COVID-19 performance and utilization levels.
Speaker 5: that clearly will not be easy, but we will get there and be stronger as a result.
They clearly will not be easy, but we will get there and be stronger as a result.
Speaker 5: At this point operator, please open up the call. I'd be happy to field any questions that panelists face.
At this point operator, please open up the call I'd be happy to field any questions that analysts may have.
Okay.
Speaker 1: Absolutely, thank you. And if you would like to ask a question at this time, please press star one on your phone, on mute your line. And record your name so you may be introduced. Again, to ask a question, please press star one.
Absolutely. Thank you and if you would like to ask a question at this time. Please press star one on your phone on mute your line and record. Your name can you may be introduced again to ask a question. Please press star one.
Speaker 1: Our first question comes from Saudi Fights. Go ahead, please. You'll let it open.
Our first question comes from Saudi sites go ahead. Please your line is open.
Speaker 6: Hey, good afternoon, everyone. Just if I might, on the 22 and a half million COVID related impact that you called out for the December quarter, could you break out, or at least provide a little bit of goal post on how much of it was sick calls and how much heavy maintenance? And as you point out, it can both of those.
Hey, good afternoon, everyone.
If I might on the $22 5 million Covid related impact that you called out for the December quarter could you break out alright at least provide a little bit of goalposts on how.
How much of that let's take some calls with and how much heavy maintenance and.
As you pointed out it in both of those should be less of an issue as you look into second half of the fiscal year. So I'm just trying to understand maybe.
Speaker 6: should be less of an issue as you're looking to second half of the fiscal year. So I'm trying to understand maybe the items that linger on into the end of the year.
The items that linger on into the end of the year.
Speaker 3: Hey, David, this is torque. So the heavy maintenance component of that, we will have most of that completed in this current quarter and we'll really have that behind us. The other elements that we refer to is really related to the increased training costs that go along with, you know, we'll be, we have increased training in the rest of the year as we try to fill back to our pilots. So I don't know if that helps you, but, you know, we'll be doing a lot more training and recruiting as part of the program, which includes...
Hey, Savi this is to work so.
The heavy maintenance component of that.
We will have most of that completed in this current quarter and we really have that behind us. The other elements that we referred to was really related to the increase.
Ah.
Training costs that go along with it will be <unk>.
Screening the rest of the year as we try to go back to our pilot.
Does that helps you, but we'll be doing a lot more training and recruiting as part of the program, which includes bonuses that will be paying as well.
Speaker 6: And maybe sorry, maybe if I can, maybe she can provide, is there any color that you can provide just on a per block our basis or on a kind of annual basis, just how much higher in terms of training costs you're expected, training in the hiring cost you expect to see in the fiscal year?
And maybe sorry, and maybe if I could maybe if you can provide is there any color that you can provide just either on a per block hour basis or on a kind of annual basis, just how much higher in terms of training cost you expect to training and hiring costs, we expect to see in this fiscal year.
Speaker 3: Yeah, well, when I think about when I think in my prepared remarks, I talked about about 3.3 million in a quarter for additional.
Yeah, well when I think about I think in my prepared remarks, we talked about at about $3 3 million in the quarter for additional.
Speaker 3: pilot training and recruiting cost. That's probably a reasonable
Pilot training and recruiting cost, that's probably a reasonable estimate.
Speaker 6: Sorry, perfect. I miss that. Thank you. And then.
Alright, perfect I missed that thank you and then.
Yes.
Speaker 6: You mentioned that the attrition rates kind of increased here November , December , January . I know one of your competitors called out another thing is that they're seeing this a lot more on the captain's side. You know, just try to understand your comfort about kind of getting to that ever kind of decreasing level of declines in block hours. Just, you know, what are you seeing on the attrition front and your comfort to be able to reach those kind of block over rates by the September quarter?
The you mentioned that the attrition rate can I increased here November December January .
I know one of your competitors called out and the other thing is that they're seeing just a lot more on the captain side.
Just trying to understand your comfort about kind of getting to that.
Ever decreasing level of declines and block hour is just what are you seeing on the attrition front and your comfort to be able to reach those kind of block hour rates.
In the quarter.
Speaker 5: Yeah, you said this is Jonathan. Yes. Clearly the attrition issue has been significant. You know, a big part of it is in fact the backfill and being able to get the training done. We're fortunate in that we actually have adequate sometime. We secured a bunch of sometime right as this problem began to sort of erupt back in 2021.
Yeah Savi this is Jonathan.
Clearly the attrition issue has been.
Significant.
A big part of it is in fact, the backfill and being able to get the training done.
We're fortunate in that we actually have adequate same time.
We secured a bunch of same time right as this problem began to show their rough back in 2021.
So we just put another Egypt simulator online.
Speaker 5: eJet simulator online. Matter of fact, three days ago, we have another CRJ sim coming and we actually have another sim coming in, you know, 10 months. So we think from that standpoint, just a structural piece we can do it. We have to continue to fill classes.
Matter of fact, three days ago, we have another CR, Jason coming and we actually have another <unk> coming in.
10 months. So we think from that standpoint, just the structural piece, we can do it we have to continue to fill classes.
Speaker 5: which given the 1500 hour rule has made it obviously more difficult with what we feel to be actually less qualified people than that.
Which given.
Given the 500 hour rule is made it obviously more difficult with what we feel to be actually less qualified people then.
Speaker 5: students that we were getting from the programs that we trained people have initial
Since that we were getting from the programs that we train people AB initio.
Speaker 5: But clearly the attrition piece is the wild card. You know, Mesa was fortunate and part of the problem that we've had is our attrition was actually, you know, on the low side of the industry for, you know, first three or four months.
But clearly the attrition piece is the wildcard.
Mesa was fortunate as part of the problem that we've had our attrition was actually.
On the low side of the industry for.
Speaker 5: of the year and didn't pick up until really November , December where we had a significant spike, but believe it or not, our spike was actually in FOs.
First three or four months.
The year and didn't pick up until really November December where we had a significant spike but believe it or not our spike was actually in <unk> and.
Speaker 5: and you know it just caused us to you know for example in one of our operations literally all of our cancellations were due to a lack of that pose.
It just caused us to.
For example in one of our operations.
All of our cancellations were due to a lack of that Bose. So.
Speaker 5: obviously the the the issue is going to be going forward uh... you know what the majors do i mean it's fortunate that we've had very open conversations with united american about this um... you know united
Obviously, the issue is going to be going forward.
What the majors do I mean, its fortunate that we've had very open conversations with United American about this.
Speaker 5: has been extremely helpful and understanding. We put together the AVA program with them where the only large jet independent regional carrier was a flow through that we have with United. And at American, given that they operate their own regials, they are very much aware of the problem. And our sympathetic because they're dealing with the same thing.
United has been extremely helpful. In understanding we've put together the Eva program with them. We're the only large jet independent regional carrier with a flow through.
Like we have with United and at American given that they operate their own regionals. They are very much aware of the problem.
<unk> are sympathetic because they're dealing with the same thing.
Speaker 5: So, you know, I think that while this is an industry problem, I'd like to think that MACE is reasonably well positioned, given our relationships with American and United.
So.
Think that while this is an industry problem I'd like to think that Mesa is reasonably well positioned given our relationships with American and United.
Speaker 5: I do think that there's some things that we are doing that are a little bit different.
I do think that there's some things that we are doing that are a little bit different.
Speaker 5: uh... that should help us primarily the peace about the same times i don't think people should underestimate just the ability to get enough sim training to qualify people is going to become challenging and i think we're reasonably well positioned that
That should help us I think primarily the piece about the same times I don't think people should underestimate just the ability to get enough Sim training to qualified people is going to become challenging and I think we're reasonably well positioned in that.
Speaker 5: So, I mean, if attrition is, you know, stabilizes, I think we can pull our way through this. It's not going to be easy, but I think that, you know,
So I mean, if if attrition is.
Stabilizes I think we can pull our way through this it's not going to be easy, but I think that.
No.
Speaker 5: you know it's really needed to path that will give me based on a trition i think one more thing just to mention quickly is while a trition impact of us is last quarter please do not understand the impact
<unk>.
It's really needed the outlook is based on attrition I think one more thing just to mention quickly as while attrition impacted us this last quarter.
Do not underestimate the impact of Covid, because when youre dealing with 'twenty three 'twenty four 'twenty, 5% absence rates I mean, I don't care what the attrition is if you had no attrition you would not be able to cover that on a day to day basis, where we were canceling.
Speaker 5: because when you're dealing with 23, 24, 25% absence rates, I mean, I don't care what the attrition is. If you have no attrition, you would not be able to cover that on a day-to-day basis where we were canceling, there were days we canceled more flights in a day than we had canceled in the previous 12 months.
Days, we canceled more flights in a day that we had cancelled in the previous 12 months.
Speaker 5: And that really had to do with attrition and you know the other thing I'd like to point out on that Because I think it's important because people of that you know What's is there an issue with the pilots is there some kind of you know problem there? And I'm like well, you know we've had COVID for the last you know almost two years And we've had no problems with attendance
That really had to do with attrition and the other thing I'd like to point out on that because I think it's important because people of that.
Is there an issue with the pilots is there some kind of problem, there and I'm like well we've had COVID-19 for the last.
Two years, and we've had no problems with attendance, we really only had a problem. When you had the omicron in Delta, which really.
Speaker 5: We really only had a problem when you had Omicron and Delta, which really had a big impact on the group. And to give you an idea of how big the impact...
<unk> had a big impact on the group and to give you an idea of how big the impact was again.
Speaker 5: again, you know, there were a period of time where our infection rate was actually up 30 fold over the previous month.
<unk> a period of time, where our infection rates was actually up 30 fold over the previous months. So I mean, there was a <unk>.
Speaker 5: So, I mean, there was a conclusive issue here that clearly impacted us on the pilot side, which, you know, we're gonna do everything we can to fix. The one piece of good news is that, you know, for the last five days, we've had one infection, which is, you know, really a drop off that we did not expect even, we did not expect or even hope could happen so fast. So, hopefully at least that piece of us is behind us right now.
Influence of issues here that clearly impacted us on the pilot side, which we can do everything we can to fix the one piece of good news is that for the last five days, we've had one infection, which is really a drop off that we did not expect even we do not expect or even hope could happen. So fast so hopefully at least that piece of it.
It is behind Us right now.
Helpful. Thank you.
Speaker 7: Our next question comes from Haleen Becker. Go ahead, please. Your line is open. Thanks very much, operator. Hi, everybody. And thank you for the time. Susabi asked me to the question.
Our next question comes from Helane Becker go ahead. Please your line is open.
Oh, thanks, very much operator, hi, everybody and thank you for the time.
Savi asked most of the questions I would have asked you but.
Just trying to.
Think through the differences between the two said city areas.
Not so much American and United.
Passenger and cargo.
Did you have similar issues with cargo pilots.
Or was it kind of more confined to the.
And your side of the business and B do you have trouble finding pilots for the 730 sevens and finding some time for them.
Speaker 5: You know, interestingly, I will say on the 737, we did not have the same impact, although I think it would be remiss for me not to mention that we did actually lose one of our 737 pilots who was a dear friend of mine.
Interestingly.
I will say on the on the 737, we did not have the same impact although.
It would be remiss for me not to.
Mentioned that we did actually lose one of our 737 pilots who was a dear friend of mine who.
Speaker 5: who actually pass away as a result of COVID.
Who actually passed away as a result of COVID-19 and other than that.
Speaker 5: and other than that, we did not have the same impact. We did not, I think the number of cancel during the quarter where like maybe one or two or actually Micah's shaking said, I think maybe no cancel on the cover side, but it was a small group of people and they were able to cover for each other. There was an issue.
We did not have the same impact we did not I think the number of canceled during the quarter were like.
Maybe one or two or are actually Mike is shaking his head I think may have been no no cancels on the on the on the cargo side, but it was a small group of people and they were able to cover for each other if there was an issue. So we just didn't have the same problem on the cargo side.
Speaker 5: So we just didn't have the same problem on the cargo side.
Speaker 5: On the passenger side, obviously, we just had much bigger groups. And unfortunately, what happened too was that it was in waves. It wasn't even distributed. I mean, we'd have one week. It would be everybody in Dallas. And one week it would be everybody in Houston. And we just would literally find ourselves in a position where we'd come in and have a 20, 25% callout rate. And this was compared to a month earlier where we had a 5% callout rate. While there was still COVID going on. So, you know, I think that...
On the passenger side, obviously, we just had much bigger groups and unfortunately, what happened to was that it was in waves. It wasn't even distributed I mean, we'd have one week it would be everybody in Dallas in one week could be everybody in Houston, and we just would literally find ourselves in a position where we'd come in and have a 2025% call out.
Right.
And this was.
<unk> two a month earlier, where we had a 5% call out rates, while there was still COVID-19 going on so.
I think that.
Speaker 5: You know, that really just, I think it'd be fair to say we got...
That really just we I think it would be fair to say we got.
Speaker 5: I would say lucky on the cargo side with the exception of a fatality. We don't have problem recruiting the pilots on the cargo side because they come through the basis in yard list. And we have always lots of volunteers because I mean to be frank, the pay is very good. And you know, we're very proud about that. We have the highest paying the regional industry. I mean, we have some pilots making over $200 an hour.
I would say lucky on the cargo side with the exception of a fatality.
We don't have a problem recruiting the pilots on the cargo side because they come through the Mesa seniority list and we have always lots of volunteers because I mean to be Frank the pay is very good and we're very proud about that we have the highest paying the regional industry.
We have some pilots making over $200 an hour.
Speaker 5: become a good tool for us in terms of recruiting as well. So the cargo side is probably, you know, right now, you know, probably are our
Become a good tool for us in terms of recruiting as well.
The cargo side is probably.
Right now.
Probably R R.
Speaker 5: You know, the best news that we have for today, we are adding a third aircraft in the very near future. It's just coming on out of the Sea Jacket on its way.
Best News that we have for today, we're adding a third aircraft.
Very near future its just coming on out of the C check it's on its way.
Speaker 5: this month and it will go into service. And, you know, we're looking to continue to expand the cargo business, you know, as best we can.
This month and then it will go into service and we're looking to continue to expand the cargo business.
As best we can.
Speaker 7: Thanks, Jonathan. I'm sorry for your loss. The other question I have is an unpenalty. So normally you...
Thanks, Jonathan I'm, sorry for your loss.
The other question I have.
<unk> is.
On penalty. So normally you would have to pay penalties to your partners.
If you Couldnt meet that.
The contract.
The contractual obligations, but in this case, it's partly their fault.
Speaker 7: In this case, it's partly their fault that you can't read the obligatory.
You can't.
Obligations so.
Speaker 7: Um, because they're hiring them away from you. So how are you dealing with that? Are they like are they cutting you?
Because they are hiring them away from you. So how are you dealing with that are they are they cutting you. Some slack there is and what's going on with that and I know you can't necessarily disclose the amounts that although we're happy too.
Speaker 5: Oh no, we're happy too. I mean, I think that, you know, when we're looking at, for this quarter, we disclose that we had booked $4 million of penalty. I think that is under a conversation with our partners.
I think that when we when we're looking at for this quarter, we disclosed that we had booked $4 million of penalty.
I think that is under the conversation with our partners.
Speaker 5: And, you know, we feel strongly that for the reasons that you mentioned that there is a very good argument, and it's not so much their fault. I mean, as much as, you know, as I said, a big chunk of it is COVID.
We feel strongly that for the reasons that you mentioned that there is a very good argument and.
And it's not so much their fault I mean as much as that as I said, a big chunk of it is COVID-19 .
Speaker 5: The hiring is obviously part of the issue, no doubt, but I think that, but I think our partners are also, both of our partners, like I said, for different reasons maybe, but understand the situation. And I feel pretty strongly that we will have productive conversations with them around this.
The hiring.
Obviously part of the issue no doubt.
I think that but I think our partners are also.
Both of our partners like I said for different reasons, maybe but understand the situation and I feel pretty strongly that we will have productive conversations with them around this because I don't think anybody.
Speaker 5: because I don't think anybody, anyone, wants to take advantage of another company as a result of COVID-related illnesses. And I think that given the attrition situation,
Anyone want to take advantage of another company as a result of Covid related illnesses and I think that given the attrition situation.
Speaker 5: I think that everyone's just trying to come up with the best solution.
I think that everyone's just trying to come up with the best solution and.
Speaker 5: and you know just to penalize us for a situation like this just as a deep productive when i think they'd much rather see us putting our money into you know additional recruiting and training and bringing on more pilot
Just to penalize us for a situation like this just doesn't seem to be productive, but I think they'd much rather see us putting our money into additional recruiting and training and bringing more pilots. It seems like a much better use of that money than to pay it.
Speaker 5: seems like a much better use of that money than to pay it. You know, you know, what are millions of dollars for them that may not be as helpful as what it would be to us in terms of...
What are millions of dollars for them that may not be as helpful. As what it would be to us in terms of.
Speaker 5: uh... you know bringing in you know bringing in more pilots you know they have the same issues i mean every every airline in the country is talked about pilot shortages and training problems
Bring in.
Bringing in more pilots so again they are.
The same issues I mean every every airline in the country has talked about pilot shortages and training problems.
Speaker 5: You know, and I said particularly with American having their own regional
As I said, particularly with American having their own regionals.
Speaker 5: um... you know we had a conversation just recently and you know they they fully understand the challenges and i think that uh... i i'm hopeful that they will be it and i i feel confident frankly that they're gonna at least conversations will be productive and you know uh... some of the penalty that that we've anticipated or even booked uh... i think there could be some discussions about those
We had a conversation with just recently and they fully understand the challenges and I think that.
Im hopeful that they will be.
I feel confident frankly that theyre going to these conversations will be productive and.
Some of the penalties that we've anticipated or even book.
There could be some discussions about those.
That's really helpful. Thank you.
Just a reminder.
I'm sorry go ahead.
Speaker 1: I apologize, just a reminder if you would still like to ask a question. You may press star one and record your name.
I apologize just a reminder, if you would still like to ask a question you May press Star one and record your name at this time. Our next question comes from Mike Lindenberg Go ahead. Please your line is open.
Speaker 1: Our next question comes from Mike Lennonberg. Go ahead, please. You're mine, it's up.
Speaker 8: Oh yeah, hey, good afternoon everyone. Hey, I have a few here if I could just start off with a torque, you know, you identified a whole bunch of areas for cost saves, various initiatives. Did you actually, did you say what the target was maybe on an annual run rate, what you hoped to achieve and maybe the timing of achieving those cost savings?
Yeah, Hey, good afternoon, everyone.
I have a few here if I could just start off with the torque.
<unk> identified a.
On a whole bunch of areas for cost saves various initiatives could you actually could you say what.
What the target was maybe on an annual run rate, what you hope to achieve and maybe the timing of achieving those cost savings.
Speaker 3: Thanks. We haven't, we're not ready to share the exact details on that Michael right now, but what we are looking at is I think you're where, you know, we're flying, we were flying 54 aircraft for American. We're now down to 40 and so we're looking at is
Thanks.
We haven't we're not ready to share the exact details on that Michael right now, but we are looking at it I think you are aware we're flying we were flying 54 aircraft for American we're now down to 40 and so we're looking at is how do we.
Speaker 3: Look at our current footprint with maintenance spaces that we have for Americans. Now we can pull those together, eliminate, leave costs and get better utilization out of our mechanic group. And so that's one of the opportunities that we're considering. There's also, we've already been going through opportunities for cost savings and finding.
Looking at our current.
Our footprint with.
I think the places that we have for America, and how we can pull those together eliminate lease cost and get better utilization out Hunter mechanic group.
That's one of the opportunities that were considering.
There's also we've already been going through opportunities for cost savings and finding all of our contractors to go back and say what are we doing how much more can we can we are.
Speaker 3: All of our contractors go back and say, what are we doing? How much more can we find more money in those areas? So I'm not ready to share the details yet because we haven't announced.
Find more money in those areas, so I'm not ready to share the details yet because we haven't announced any specific plans but.
Speaker 3: plans, but I think it'd be easy to say that we think we could pick up several hundred thousand a month potentially in there.
I think it would be easy to say that.
We think we could pick up several hundred thousand a month potentially in there, but but not ready to share the exact numbers. Okay. Okay. That's helpful and then.
Speaker 8: Okay, okay, now that's helpful. And then Brad, you know, on the operational side, I, in the queue, you know, you guys provided a little bit.
Brad I don't want the operational Friday in the queue.
You guys provided a little bit more.
Speaker 8: you know sort of detail around kind of the american situation uh... and the question i guess i have for you is i guess in return for the waivers that they granted you uh... for the late you know sort of you know November December in January in return did did with any modifications to your american american contract as a result of that it just it wasn't clear
Sort of detail around kind of the American situation.
And the question I guess I have for you is I guess in return for the waivers that they granted you.
For.
Sort of November December and January and return.
Were there any modifications to your American American contract as a result of that it just it wasn't clear.
Speaker 4: Mike, that's a good question. I think the simple and quick answer to that is no. Okay.
Yes, Mike.
Good question I think.
I mean, that's simple and quick answer to that.
No okay.
Speaker 4: what Jonathan alluded to earlier is, is, you know, we just expect to continue some, what we think will be productive dialogues surrounding the economic penalties, but, no, there are no other modifications.
What Jonathan alluded to earlier is.
We just expect to continue.
What we think will be productive dialog surrounding the economic penalties, but no. There are no other modifications to the agreement.
Speaker 8: okay okay that's super helpful and then just lastly uh... god if in maybe this is kind of a two-part question one where where is your attrition now and and where has it been historically sort of part a part b is when i look at the number of cities that are losing losing all air service
Okay. Okay. That's super helpful. And then just lastly, Jonathan maybe this is kind of a two part question one.
Or is your attrition now and where has it been historically sort of part a part b is when I look at the number of cities that are losing service that are losing all air service.
Speaker 8: there in states very powerful members of the house and the senate and at the end of the day you think about where the rubber meets the road you know in states like i saw united's pulling out of louis bird west regina you know west regina doesn't have a lot of airports and their people you know in that state who care about air service and at some point you gotta get enough senators and members of the house
They're in states with very powerful members of the house and the Senate and at the end of the day when you think about where the rubber meets the road.
When states like I saw United's pulling out of Lewisburg West Virginia.
West Virginia doesn't have a lot of airports and there are people in that state who care about air service and at some point you got to get enough Senators and members of the house.
Speaker 8: to start looking at this fifteen hundred hour rule because world america's gonna lose all the service i mean i you know your comments about fifty you know all the crj two hundred
Looking at the 2500 hour rule because rural America is going to lose all of it service I mean your comments about 50 <unk> two hundreds.
Speaker 8: being you know you know none existed in the year to that's gonna have a big impact for the america's national airway system
<unk>.
Nonexistent in a year or two that's going to have a big impact for the Americas National Air we assess them.
Speaker 8: So I mean, I, you know, I see, you know, we're gonna get, we're gonna, you know, something's gonna give here. So I'm gonna, you're probably the first one here who can help cover that message.
Okay.
We're going to get.
Something's got to give here so.
So you are probably the first one here can help over that message, yes, Mike Let me tell you I mean, as you know way back in 19, 95% or so they went to what level of safety and I spoke out about the fact that it would destroy the $1 35 business and 2500 $1 35 aircrafts that had flown into rural America are now part.
Speaker 5: Yeah, Mike, let me tell you, I mean, as you know, way back in 1995 or so, they went to one level of safety and I spoke out about the fact that it would destroy the 135 business.
Speaker 5: 2535 aircraft that had flown into rural America are now apart.
Speaker 5: There's not a single 19 or 30 seat aircraft currently in operation, flying into those cities.
There is not a single 19 or 36 aircraft currently in operation flying into those cities.
Speaker 5: I said on the 1500 hour rule that it would only be a matter of time before the demographics of the retirements at the majors would have this kind of impact.
I said on the 500 hour rule that it would only be a matter of time before the demographics of the retirements at the majors would have this kind of impact when you couple that with Covid it as the perfect storm.
Speaker 5: When you couple that with COVID, it is the perfect storm. Yeah. There were some issues, we can all talk about the early retirement that probably were not the best idea, but at the time knowing quite new where COVID was gonna go. The fact of matter is, now, the industry needs to pull together and for the first time, you are hearing other CEOs talk about the 1500 hour rule and hopefully more people will because in the end,
There were some issues we can all talk about the early retirement that probably were not the best idea, but at the time, knowing quite knew where COVID-19 was going to go.
The matter is now the industry needs to pull together and for the first time you are hearing other Ceos talk about the 500 hour rule and hopefully more people will because in the end who's going to pay for it all the small communities that will lose service entirely but the other folks that will pay for it will be reduced service reduced supply.
Speaker 5: who's going to pay for it? All the small community that will lose service entirely. But the other folks that will pay for will be reduced service, reduced supply, and that will only do what thing is raised price.
And that will only do one thing has raised prices.
Speaker 5: And I think that everybody realizes, too. And I think it's very important to hit on this. This is not...
I think that everybody realizes too and I think it's very important to hit on this.
This is not a safety issue.
Speaker 5: I mean, there is not a shred of evidence that says that a 1,500 hour pilot is safer than a 300-hour pilot within 10 training.
There is not a shred of evidence that says that a 500 hour pilot is safer than a 300, our pilot with intense training.
Speaker 5: Our failure rate is probably 10 times higher with 1,500 hour pilots as it was for the 300 hour pilots coming out of our own programs that we had it in Farmington or at ASU. So this is not a safety issue.
Our failure rate is probably 10 times higher with 1500 hour pilot as it was for the 300 per hour pilot coming out of our own programs that we had in Farmington or at ASU. So this is not a safety issue and.
Speaker 5: And I think it's important that some of the politicians start to act and take this up because if they don't, they're putting the industry in jeopardy and that doesn't matter if you're METHA or any other regional airline, everyone is going to face the same outcome and it's just not sustainable if they don't do something to fix.
I think it's important that some of the politicians start to act can take this up because if they don't they are putting the industry in jeopardy, and that doesn't matter, if you're mesa or any other regional airlines, everyone is going to face the same outcome and it's just not sustainable if they don't do something to fix this.
Speaker 5: and and micwanda make a point that you know this is a law that was adopted and no other country in the world is adopted this one not a single one
Jonathan.
Mike wanted to make a point that.
This is a law that was adopted and no other country in the World has adopted this was not a single one.
Speaker 5: right i mean it seems crazy that a three hundred hour f.o. can land a luftonza you know eight three fifty into gfk flying over queens and a u.s. pilot can't do the same thing
And it seems crazy that a 300 hour <unk> can land that loop sponsor <unk> hundred 50 into JFK flying over Queens.
Our U S pilot can't do the same thing.
Speaker 5: Atrition levels, I will tell you that attrition has clearly been elevated. You have one month at high, one month at low. I mean, it's really been all over the board. I think to fair to say that it's running anywhere from, we look at like 3% to maybe 5% per month. And we are...
So attrition levels.
I will tell you that attrition has clearly been elevated.
We have one month, it's high one month, it's low I mean, it's really been all over the board.
I think fair to say that it is running anywhere from.
We look at like 3% to maybe 5% per month.
And we are doing our best to keep up on the trading side. The only problem that you have with training and which has caught us a little bit behind is that normally pilots give us two weeks notice maybe 30 days notice.
Speaker 5: doing our best to keep up on the training side you know the only problem that you have with training in which is quite a little bit uh... behind is that normally pilots give us two weeks notice maybe thirty days notice uh... takes three months to train a pilot so you know we've got a pipeline as as as Brad mentioned that is full uh... we now have in fact additional sometime that will double our output but we absolutely have some catching up to do right now there is no doubt about it and it's going to take some time and you know one of the big you'll be saw this way you've got secure is it necessary ?
Takes three months to train a pilot so we've got a pipeline.
Brad mentioned that is full we now have in fact additional same time that will double our output, but we absolutely have some catching up to do right. Now there is no doubt about it and it's going to take some time and one of the Big question marks is right now we fill up our classes I am concerned that as we go down the road dependent.
Speaker 5: is right now we fill up our classes. I am concerned that as we go down the road, depend upon how future attrition looks.
Upon how future attrition looks does that reservoir, how dry does that reservoir get before Congress take some action and allows us to refill with high qualified.
Speaker 5: does that reservoir, how dry does that reservoir get before Congress takes some action and allows us to refill with high qualified, you know, really, really, you know, well trained students who don't have 1500 hours, but have high quality training and simulators and advanced aircraft types.
Really really well trained students, who don't have 500 hours, but have high quality training and simulators and advanced aircraft types.
Speaker 8: Well, great. Thanks for that, Jonathan. Thanks everyone else for the answers. Appreciate it. Thank you, bye.
Yes.
Thanks for that Jonathan Thanks, everyone else for the answers I appreciate it thank.
Thank you Mike.
Speaker 1: Our next question comes from Andrew D'Dora. Go ahead, please, your line is open.
Our next question comes from Andrew Datura Go ahead. Please your line is open.
Speaker 5: Hey everyone. So Jonathan, I actually, my question was on kind of your, the last point that you made. I guess, at what point do you start worrying about filling up your classes, right? I know you're training pipeline, it's full, but what does your pool of applications stand for for pilots today? What was it pre-pandemic? And kind of, where do you see your pilot hiring needs of the course of 2022?
Yeah.
Hey, everyone. So Jonathan I actually my question was on kind of your.
The last point that you made I guess at.
What point do you start worrying about filling up your classes right I know you are training pipeline.
But what does your pool of applications stand for for pilots today.
What was it pre pandemic and kind of where do you see your pilot hiring needs over the course of 2022.
Speaker 5: Okay, that's a good question.
Okay. So that's a good question.
Speaker 5: Again, dependent upon attrition, and I just hesitate to say which direction it's heading. I mean, you know, we saw, for example, a significant drop in January , which we thought it would have been a trend, and then, you know, it went back up to previous level in February . We are currently, as I said,
Again dependent upon nutrition, I, just hesitate to say, which direction. It's heading I mean, we saw for example, a significant drop in January which we thought he had been a trend and then it went back up to previous level in February .
We are currently as I said have multiple hundreds of people in training right now and now is the biggest problem. We had was just getting adequate sometime which we've now secured.
Speaker 5: multiple hundreds of people in training right now and now in the biggest problem we had was just getting adequate Symptoms which we've now secured
Speaker 5: Our pilot applicants, the numbers are probably a little bit less than they were pre-pandemic, you know, in terms of applications. Not drastically less, but a little bit less.
Our pilot applicant the numbers are probably a little bit less than they were pre pandemic in terms of applications not drastically less but a little bit less.
Speaker 5: And we still are finding that we can fill the class, but we've got an entire department that's out recruiting right now. I mean, there was a time when in fact, people used to pay us to apply for jobs.
And we still are finding that we can fill the class but.
We've got an entire department that's out recruiting right now I mean, there was a time when in fact people used to pay us.
Two to apply for jobs. So I mean things have changed dramatically and it's just a question of how we see things going forward and if we can get any relief whatsoever. I mean, there have been some long term fixed is being put into place things that frankly, we've been advocating for a long time.
Speaker 5: so i mean things have changed dramatically and it's just a question of how we see things going forward and if we can get any relief whatsoever i mean there have been some long-term fixes being put into place you know things that you know frankly we've been advocating for a long time uh... and had started to do and then the pandemic hit but you know i think that some of these schools
<unk> started to do and then the pandemic hit, but I think that some of the schools.
Speaker 5: uh... you know fortunately are you know out there uh... you know with united for example beginning avia and you know there are other academies out there that will help but the problem is
Fortunately are out there with United for example, beginning aviate.
There are other academies out there that will help but the problem is.
Speaker 5: um... you know you can get someone up to the point where they have to three hundred three hundred fifty hours having gone through a couple of your program and then they have to sort of scrambled to get to the next twelve hundred uh... it's very expensive uh... it takes a long time and you know you're also asking people to stay out of the workforce for two years and you know to be frank in today's environment i mean you know i i feel even even more passionate against it because frankly it is you know basically discriminate against anyone who doesn't have a ton of money
Can get somewhat up to the point, where they have their 300 350 hours, having gone through a couple of your program and then they have to scramble to get to the next 1200, it's very expensive. It takes a long time and you know Youre also asking people to stay out of the workforce for two years and to be Frank in todays environment, I mean, I feel even.
Even more passionate against it because frankly it is basically discriminates against anyone who doesn't have a ton of money I mean, unless you are a very wealthy person you are not going to become a pilot without basically tried to hock your entire future. If you can make that happen. So I mean, it's clearly.
Speaker 5: I mean, unless you are a very wealthy person, you are not gonna become a pilot without basically trying to hawk your entire future if you can make that happen. So, I mean, it's clearly problematic. I think for Mesa, we're in a reasonably good position because we do fly large jets. We have very good, very desirous domiciles and...
<unk> I think for Mesa.
We're at a reasonably good position because we do fly large jets, we have very good very desirous.
Speaker 5: Dallas and Houston, Phoenix and Washington DC and we have the AVA program with United, which has been obviously helpful in terms of attracting people. But on the other hand, with AVA, we also lose people to United. So it's a little bit of a double ed sword, but Net, Net, I think it still is advantageous for us.
Domiciled in Dallas, and Houston, Phoenix, and Washington, D C and we have the Eva program with United which has been obviously helpful. In terms of attracting people, but on the other hand with aviate. We also lose people to United So, it's a little bit of a double edged sword, but net net I think it's still.
Advantageous for us.
Speaker 5: And maybe I should know this, but just in a normal year pre-COVID, how many pilots would you typically hire?
Okay.
And maybe I should know this but just in a normal year pre pre COVID-19 , how many pilots would you typically higher every year.
$2 53.
Speaker 5: Maybe I think when we look back, I mean, if there is ever considered to be a normal year in this industry, but I think our normal training classes we'd probably run between 20 and 30 a month. I think is that a fair statement, Mike? You know, just depending upon what our needs are. 50, 300 a year. Yeah, 250 to 300 a year. OK.
Maybe I think.
When we look back I mean, if there is ever consider to be a normal year in this industry, but.
Our normal training classes, we'd probably run between 20 and 30 a month I think is that a fair statement Mike.
Just dependent upon what our needs are 5300, yes, 250 to 300 a year.
Okay.
Obviously, it has gone up from there.
Speaker 5: I mean, in COVID, we are literally losing two people a month.
I mean in Covid, we are literally losing two people a month.
Speaker 5: understood. Lastly, from me, maybe torque those, the $4 million of penalties in the December quarter, where does that hit the P&L? Is that the playoffs cost or is that a country revenue just curious for a modeling perspective? Yeah, I'm not going to, I really can't speak to that. Sorry, not something we've shared publicly previously in contrarovance. But it would be, it would be, it would be in contrarovance.
Yes understood.
Lastly for me maybe towards the four.
$4 million.
Penalties in the December quarter.
Does that hit the P&L is that.
<unk>.
Flight ops cost or is that a country revenue just curious from a modeling perspective, I'm not going to I really can't speak to that.
Alright, not something we've shared publicly previously the contra revenue, but that it would be it would be.
It would be in contra revenue.
Okay.
Thank you.
Speaker 5: yeah i i mean to savvy's question and you know i i talk about the penalties i i don't know i'm i'm maybe i maybe i should have but the fact is that we did have it uh... out in earlier draft so i want i'm happy we did because i'd like to be transparent uh... you know we we we looked at the four million penalties and then we looked at you know what would have happened if we did not have coven and had the absence rates and it just flown the same amount of flying as we did in October
Sure.
Yeah, I mean to Savi question and.
<unk> talked about the penalties I don't know maybe.
Maybe I shouldn't but the fact is is that we did have it out in earlier drafts. So I wanted I'm happy we did because I would like to be transparent.
We looked at the $4 million in penalties and then we'd looked at what would have happened. If we did not have COVID-19 and heavy absence rate and adjust flow in the same amount of flying as we did in October .
Speaker 5: you know, for October , November , December , and without the absence rate, that probably was an additional $5 million.
For October November December and even without the absence rates that probably was an additional $5 million. So it's very easy for us to say without any of the other COVID-19 related problems for like the delay in our Sams and all the other things that happened, we could easily identified $9 million of COVID-19 related expenses or <unk>.
Speaker 5: So it's very easy for us to say without any of the other COVID related problems, for, you know, like the delay in our Sims and all the other things that happened, we could easily identify $9 million of COVID related.
Speaker 5: or, excuse me, lots of revenue in this quarter that we feel pretty easily, we can identify.
Lots of revenue in this quarter that we feel pretty pretty pretty easily we can we can identify.
Yeah.
Yeah.
Speaker 1: Just a reminder that you may still press star one and record your name to ask a question. Our next question comes from Savi Fies. Go ahead, please, you might as well.
Okay.
Just a reminder, that you may still press star one and record your name to ask a question. Our next question comes from Savi. <unk> go ahead. Please your line is open.
Speaker 6: Hey, thanks for the follow-up. Just a follow-up on Holi and Squresha, you know, with cargo not seeing as much pilot nutrition, is there an opportunity to expand the cargo given how strong that market is even if you're having pilot issues on the CPA side or because of that, is that does that come a constraint of any kind of cargo ambition?
Hey, thanks for the follow up.
Just.
A follow up on <unk> question.
With cargo not seeing as much pilot attrition is there an opportunity to expand the cargo given how strong that market is even if you are having pilot issues.
Good.
On the CPA side or.
Cause of that is that does that kind of constrain any kind of cargo ambition.
Speaker 5: No, I think, that the cargo business is clearly for us, a very important growth area, because not only as the business continue to grow and be strong in terms of the macro aspect, the more cargo aircraft we add, I think it becomes that much more attractive place and makes it easier to recruit pilots.
No.
I think savi that the cargo business is clearly for us a very important growth area because not only.
As the business continued to grow and be strong in terms of the.
Macro aspect.
Cargo aircraft, we add I think it becomes that much more attractive place that makes it easier to recruit pilots because clearly.
Speaker 5: because clearly, as I said, it gives pilots that makes it the opportunity to make, you know, narrow-body rates without ever having to leave. So I think the opposite, and I think even our partners realize, I mean, I actually had a conversation with one partner who said, why didn't you grow cargo? It's a great way to attract more pilots.
As I said it gives pilots that makes it the opportunity to make narrowed.
Narrow body rates without ever having to leave so.
I think the opposite and I think even our partners realize I mean, I actually had a conversation with one partner who said why didn't you broke cargo it's a great way to attract more pilots and so this is coming from our own major airline partners. So I think that that that we are focusing on that growth.
Speaker 5: And so, you know, this is even, you know, coming from our own, you know, major airline partners. So I think that that we are focusing on that growth. We've done an excellent job operation. I have to say hats popped to our people there without a spare aircraft. We went months without a cancellation. And, you know, we are, you know, it's an area that we think there could be some real opportunity for us, you know, in the narrow body area. So, no, I, it's very important growth avenue for us going forward.
Done a excellent job operationally I have to say hats off to our people there without a spare aircraft we went months without a cancellation.
And we are.
It's an area that we think there could be some real opportunity for us.
In the narrow body.
Area so.
It's very important growth Avenue for us going forward.
Speaker 5: And that's what I could also add. Look, for our DHL, we've only done it just about a year. And we've only done it just about a year. And we've only done it just about a year.
And that's the way to do it if.
Mike I can also add look.
For for our DHL now, we've only done it just about a year and.
Speaker 5: use that to prove ourselves and now we got another aircraft and you know that's just a good indication of of you know our potential that we can grow that as well as any other cargo
We use that to prove ourselves and now we've got another aircraft and.
That's just a good a good indication of.
Our potential that we can grow that as well as any other cargo business.
Speaker 6: It's a water gating factor in growing that. It sounded like you had this proving now that you proved it. Is it just maybe aircraft a year and you just kind of have to show, okay, you have another one and give a year of good performance there?
So Mike it's a wash.
What's the gating factor in and growing that it sounded like you had this proving now that you've proved that is it just maybe up.
Aircraft, a year and you just kind of have to shelf. Okay. You have another one in Europe performance there.
Speaker 5: What's the grading factor there? I, it looked, you know, I think the gaining factor really is just the man on the side of the cargo operators. I think that, you know, Mesa has proven itself to be, you know,
What's the gating factor there.
Look.
I think the gating factor really is just demand on the side of the cargo operators I.
I think that makes has proven itself to be.
Speaker 5: maybe the most reliable of the 737 operators right now and i think as a result i think if there's growth out there i think we stand a really good chance of getting our fair share but i think the real issue is just no what do the cargo operators see as the demand uh... for narrow body aircraft in there
Maybe the most reliable of the 737 operators right now and I think as a result, I think if there is growth out there I think we stand a really good chance of getting our fair share, but I think the real issue is just what do the cargo operators see as the demand for.
For narrow body aircraft in their system.
Speaker 6: And then if I might just quickly ask a question on the European JV, it seems like the timing is looking a bit, I think one Q was the expectation, one Q, a calendar one Q, and maybe now it's first half. Could you remind us again, what comes after the certification and when that back can start contributing?
And then if I might just add.
Quickly ask a question on the European JV. It seems like the timing is slipping a bit and I think <unk> was the X.
Expectation <unk> Cowen and <unk> and maybe now its first half could you remind us again what comes after the certification and when that that can start contributing.
Speaker 5: Yeah, so where this is Mike, so there is no 1,500 hour rule in Europe . So I could start with that. But there's the private, the pilot situation there is much different.
Yes, so we are.
This is Mike. So there is no 500 out where we were over in Europe . So that's I could start with that but there is the private the pilot situation. There is much different than what we would see here, but our plan is still to get the operating certificates.
Speaker 5: than what we would see here. But our plan is still to get the operating certificate, you know, by mid-year. And then, you know, we've already talked to some customers and add customers throughout the year and kind of mimic the model in the US, which is much different than what they do in Europe right now where they have, you know, a couple of aircraft here and a couple of aircraft there and not a lot of structure to it. But we think the model in the US will work well.
By mid year and then.
We've already talked to some customers and add customers throughout the year and kind of mimic the model in the U S, which is much different than what they do in Europe , right now where they have.
A couple of aircraft here in a couple of aircrafts. They are not not a lot of structure to it but we think the model in the U S will work well in Europe .
Speaker 5: And is that something that's more seasonal to Mike? Is it that, you know, the opportunity really in the summertime when the demand is strong and then maybe not as much in the winter? No, we're really not trying to do the, you know, traditional European ACMI we'll pick up the summer peaks. This is more establishing partnerships with major carriers in Europe , like we do in the U.S. for long-term relationships for, you know, larger fleets of aircraft.
And is that something thats more seasonal like you said that the opportunity really in the summertime when the demand is strong and then maybe not as much in the winter.
No, we're really not trying to do the.
Traditional European ACM I will we will pick up the summer peaks. This is more establishing partnerships with major carriers in Europe like we do with the U S for a long term relationships for.
Larger fleets of aircraft.
Got it thank you.
Speaker 1: And speakers, I am showing no additional questions at this time. You may proceed.
Speakers I'm showing no additional questions at this time you May proceed.
Speaker 5: All right, well, look folks, you know, clearly this has been a difficult quarter.
Alright, well look folks.
Clearly this has been a difficult quarter.
Speaker 5: You know, the effects of COVID combined with the attrition have obviously been difficult. And to be frank, I think probably the single biggest issue was how rapidly things change.
The effects of Covid combined with the attrition.
Obviously been been difficult.
To be Frank I think probably the single biggest issue was how rapidly things changed.
Speaker 5: We responded, we thought as quickly as we could. We brought back and started classes back in April to try to, you know, get ahead of this.
We responded we thought as quickly as we could.
We brought back and started classes back in April to try to.
Speaker 5: You know, there was some constraints in regard to, you know, being able to put people through training in Simtime, particularly in the EJF leap, which we just saw this week.
Get ahead of this.
There was some constraints in regard to being able to put people through training and some time, particularly in the EGF fleet, which we just saw this week.
Speaker 5: It's going to take us some time to dig our way out. But I think it's fair to say that besides the structural problem that exists within the industry.
It's going to take us some time to dig our way out, but I think it's fair to say that besides the structural problem that exists within the industry in terms of pilots that we are hopeful that Washington will address before it's too late I mean, I think there is I think it's very fair to say that in terms of what's happening at Mesa and our partners.
Speaker 5: in terms of pilots that, no, we are hopeful that Washington will address before it's too late. I mean, I think there's, I think it's very fair to say that in terms of...
Speaker 5: What's happening at Mesa and our partners at United American DHL, there is no structural issue there that would cause...
At United American DHL, there's no structural issue there that would cause at least from my perspective any concern it's much more dealing with some of these industry issues and then it's a question of how fast we can address them and I can assure you that everyone here is working at full speed.
Speaker 5: At least from my perspective, any concern, it's much more dealing with some of these industry issues. And then it's a question of how fast we can address them. And I can assure you that everyone here is working at full speed. We're all back in the office. I think that we're very much focused on getting this turned around. And the biggest aspect there is just getting our folks to training and getting people back out on the line flying air.
I'll back in the office I think that we're very much focused on getting this turned around and the biggest aspect. There is just getting our folks to training and getting people back out on the line flying airplanes. So I want to thank in particular again all of our people, but I also think it's really important for us to thank our partners.
Speaker 5: So I want to thank, in particular, again, all of our people, but I also think it's really important for us to thank our partners, all of whom, which have been incredibly supportive throughout this whole period. And I think that that's probably one of my single biggest reasons for confidence is the fact that our partners have really stepped up and have been very helpful throughout this whole period.
<unk>, all of whom which have been incredibly supportive throughout this whole period.
And I think that that's probably one of my single biggest.
Reasons for confidence is the fact that our partners have really stepped up and have been very helpful. Throughout this whole period.
Speaker 5: So with that, I want to thank everybody for taking the time and we'll hopefully talk to you next quarter. Thank you very much.
So with that I want to thank everybody for taking the time and we'll hopefully talk to you next quarter. Thank you very much.
Speaker 1: That will conclude today's conference and we thank you for participating. You may disconnect at this time. Have a wonderful day. Speakers, please stand by for your books.
That will conclude today's conference and we thank you for participating you may disconnect. At this time have a wonderful day speakers. Please standby for your post conference.