Q3 2023 Mesa Air Group Inc Earnings Call
Okay.
[music].
Thank you for standing by and welcome to the Mesa Airlines Q3 fiscal year 2023 conference call. All participants are in a listen only mode until the question and answer session of today's call at that time to ask a question. Please press star.
One on your Touchtone phone. 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 Sean Lange, Mr. Wang you may begin.
Thank you operator, and welcome everyone to make this earnings conference call for its fiscal third quarter 2023 and at June 30.
On the call with me today are Jonathan Ornstein, Chairman and Chief Executive Officer, Mike Lotz, President and talked to you back Chief Financial Officer. Following our prepared remarks, there will be a question and answer session for sell side analyst.
We also want to remind everyone that called 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.
It could be significant risks and uncertainties may 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 take no duty to update any forward looking statements.
Today's results, we will be adjusting all periods exclude special items. Please refer to the fiscal third quarter earnings release, which is available on our website for the reconciliation of non-GAAP measures with that I'll turn it over to Jonathan for his opening remarks Jonathan.
Thank you Sean and thank you to everyone for joining us today as we have stated fiscal 2023 remains a transition year for Macy's.
We continue to focus on maximizing block hours and reducing surplus C. R. J 900 assets and infrastructure.
Although the adjusted pre tax loss for the quarter was $29 1 million. This included approximately $15 million of surplus C. R. J 900 related costs, an additional 5 million related to the transition our third quarter blackout performance roughly track with our forecast of approximately 46000 block hours.
Regarding our CR J 900 transition the work is largely complete.
And we currently have a total of 24 C. R. J spine. In addition to 56 eight jets.
The transition from American to United was not always easy, but our people did an amazing job during the quarter, we carried an additional half a million passengers for United on this incremental flying.
While regional Air service continues to see strong demand the industry at large has faced significant challenge in recent months with widespread operational disruptions driven by inclement weather and exacerbated by air traffic control staffing shortages, while we understand unites mandate to minimize cancellations for our passenger will we believe there is.
Significant opportunity to further optimize scheduling, allowing us to increase our block hour capacity overall.
Our top priority. It makes it continues to increase pilot production to ensure our planed to operate at maximum utilization.
The aviation industry continue to see significant labor constraints with an overall shortage of pilots exacerbated by an increasingly pervasive imbalance of captains at first officers driven by hyper attrition and impacting all carriers from majors to regionals.
Mesa is addressing our captain first officer and balanced with our direct entry Captain program in cooperation with United. This effort has been supported by a new requirement and unites Aviate program that pilots must have two years of captain experience before transitioning to United.
In addition, unlike some carriers may says the ability to acquire qualified first officers to upgrade to captain.
We also can you develop our in house recruiting and training initiatives in particular that makes a pile development program has worked very well. We now have 10 aircrafts at our first location in Venice, Florida currently.
Currently we have approximately 2000 applicants with commercial pilot license will need to build additional hours to reach their 500 hour requirement. We have already graduated and initial cadre, who have performed very well in training at Mesa.
Given the benefits of an MPD in combination with our industry, leading pay scale at the top of the regional industry. We now have approximately 1900, new hire applicants.
While our pilot attrition over the last six months has been at pre pandemic levels. The pacing item has now become the availability Upgradable first officers.
Stable pilot base and healthy pipeline remain essential to the turnaround of our business. The pilot shortage created by counterproductive regulation continues to cripple. The industry is not immune to give you an idea of the impact here are a few important facts and.
In spite of consistently adding pilots from January to present, we're still only flying at approximately 70% of our full utilization capacity, which we believe is consistent with other regional carriers in the United portfolio.
To me its target utilization, we will need approximately 150 more pilots primarily captains.
Once we reach United as target utilization, which we consistently achieved prior to the pilot charge, we will generate pre tax margins between seven and 10% in our base business.
Given our current pilot outlook as well as cooperation and support from United Airlines, We believe we will reach United as target utilization by the end of fiscal year 2024.
While it makes it ongoing transformation has not been easy we believe United will continue to work closely with makes it to ensure our future success.
It has assured us that they understand the strategic importance of our relationship and we are incredibly thankful for their ongoing support.
With that I'll turn the call over to Mike.
Thank you Jonathan and good afternoon, everyone first off I'd like to note that we recently added two key operational leaders at Mesa Laurie to Marco our new Vice President of maintenance and engineering brings over 33 years of aviation experience and maintenance oversight expertise in Asia.
We also hired Andrew Lauder as our new Vice President of flight operations, Andrew has over 25 years' experience in the airline industry and has significant background in pilot training Andrew.
Andrew and Lawry's talent will be key to a hearing makes it can maintain can maximize our peak capacity and utilization going forward and continue to improve our operational performance.
Operationally, we now fly the <unk> 900, primarily out of Houston, and Denver, which was newly opened this spring.
Initially this had an impact on the CRD 900, reliability reliability, which has historically been supported by our Dallas and Phoenix maintenance basis. This realignment of resources has been completed and we ran 99% completion factor for July and are currently 100% in August .
Next I'd like to review our block hour capabilities in the June quarter, We flew 45301 block hours roughly in line with our estimate of approximately 46000 that we had provided.
Looking forward, we expect that our September quarter block hours to be roughly the same or slightly higher than the June quarter.
Our initial projections for fiscal 2024, or an increase of roughly 4% to 6% per quarter. Our block hour production is highly dependent on our ability to upgrade first offices attract direct entry captains and is based on our most recent attrition rates.
With regards to our regional fleet the United CPA provides for 80 large regional jets for the third quarter. The fleet mix consisted of 56 E Jets and 24 <unk> nine hundreds. However, we continue to focus on increasing the utilization of our Embraer 175 fleet.
For our cargo operations, we continue to operate four 730 sevens at DHL $3 737, four hundreds and $1 737 eight hundreds.
With that I'd like now turn it over to tour will walk through some of the financial debt.
Thank you Mike.
Take this opportunity to review, our financial performance and our balance sheet for.
For the third quarter of fiscal year, 2023 revenue was $114 7 million.
$14, 7% lower compared to $134 4 million in Q3 of 2022.
While contract revenue fell by $24 1 million year over year. These decreases were driven by lower CRD 900 block hours and fewer aircraft under contract, partially offset by higher United block hour rates for new pilot pay scale.
The decrease in contract revenue was partially offset by an increase in pass through revenue of $4 8 million driven by pass through maintenance expense with a net zero P&L impact basis Q3, 2023 results include per GAAP. The recognition of $2 million of previously deferred revenue versus the recognition of $6 8 million of previously deferred revenue.
In Q3 2022, the remaining deferred revenue balance of $22 7 million will be recognized as flights are completed over the remaining term of the United contract on the expense side Nathan overall GAAP operating expenses for Q3, 2023 were $154 9 million up $20 7 million versus Q3.
2022, this increase was primarily due to <unk>.
$35 million impairment of assets held for sale.
However, adjusting operating expenses were $131 2 million or two 3% lower versus Q3 2022. This decrease was driven by an $8 $4 million year over year decrease in aircraft rent attributed attributable to the reclassification from operating lease to finance lease for certain CR J nine hundreds.
As well as depreciation and amortization expense.
Falling by $4 8 million, primarily driven by lower depreciable base from the <unk> hundred asset impairment charge in Q4 of 2022.
The decrease was also partially offset by higher flight operations expense of $51 6 million $8 3 million higher year over year, primarily reflecting higher pilot pay scales.
Additionally, maintenance expense in this quarter was $51 1 million $1 4 million higher versus Q3 2022. This was due to an increase in pass through maintenance, partially offset by lower C check and engine expense.
We expect maintenance and <unk> expense to be roughly consistent at this level for the next quarter.
On the bottom line, we reported a net loss of $47 6 million or a loss of $1 17 per diluted share compared to a net loss of $10 million or a loss of 28 per diluted share for Q3 2022.
On an adjusted basis basis, we reported a loss of $27 2 million or a loss of <unk> 67 per diluted share compared to a net loss of $7 1 million or a loss of <unk> 20 per diluted share a year ago.
The adjusted loss for Q3, 2023 exclude that $35 million asset impairment loss of $6 $7 million gain on an asset sale and a $2 $9 million gain on investments in equity and at 300.
Dollar loss on deferred financing costs related to debt retirement.
Adjusted results from Q3, 2022, primarily excluded a $3 $9 million loss on investments in equity securities.
We're looking at Q3 financial performance there are several key items impacting the bottom line. The Companys fleet still had 60 C. R. J nine hundreds of which 24 are in the United CPA, leaving 36 that surplus.
C. R. J 900, aircrafts and an additional 20 <unk> spare engines continue to be a drag on earnings estimated at roughly $15 million for the quarter. This costs primarily include the expenses for depreciation interest crew wages and excess infrastructure as we transition from the <unk> 907 E Jets, one of our key focus area.
Going forward will be to continue to sell surplus Dr. Dana head of aircraft engines and inventory and shared infrastructure now let me walk you through some of these items.
At 36 surplus the RJ 900 aircraft, we have purchase agreements on 2014, the disposal of which will result in cost savings of approximately $3 million per quarter.
We're also in negotiations to dispose of an additional 15, CRH as which will deliver cost savings of approximately $2 million per quarter. The.
The remaining seven surplus Dr. Jain at hunters have not been disposed Dev and hold carrying costs of approximately $2 million per quarter.
We also have 12 olefin engines that we are marketing for the <unk>.
All of which will result in cost savings of approximately $2 million per quarter.
While the disposition of 14 engines to United This past quarter will result in cost savings of approximately $1 million moving forward.
It's important to note that all of these aircraft and engines asphalt.
<unk> about their existing debt balances.
We're also in discussions with United regarding their support eliminated the cost of our surplus the RJ nine hundreds as we transition the fleet.
Now, let me turn to the balance sheet for the June quarter as of the quarter end cash excluding restricted cash decreased by $3 1 million from the March quarter to $48 $3 million total debt was $566 3 million down from $608 $7 million at the end of the prior quarter.
During the quarter Macys made debt payments of $40 6 million in the finance lease payments of $4 2 million.
During the quarter. We also closed on the sale of the remaining 20 out of the 30 spare engines that we agreed to sell to United in Q1 2023. This transaction generated net cash of $26 9 million, while paying down approximately $19 1 million in debt during the quarter. In addition, we retired approximately $8 million of the $10 million under the bridge loan provided by <unk>.
Got it.
We had $26 3 million of scheduled principal and finance lease payments remaining in 2023 and after the repayment of debt associated with asset sales. We expect fiscal year 2023 at year end debt of approximately $490 million, notably we expect our current transactions involving.
<unk> <unk> thousand 14 surplus Dr. Jayson. We are currently have agreements on will reduce our debt levels by $74 3 million and provide another approximately $18 million in cash.
Given the ongoing uncertainties in the business, we will not provide any more specific fiscal year guidance at this time with that I'd like to now turn it back over to Jonathan for closing remarks.
Thank you torque.
In sum we knew this process would not be easy when we took dramatic steps at the beginning of the year to improve our operational and financial performance, we have rolled up our sleeves and made significant progress with our CRE J transition and balance sheet actions.
That being said this is not the financial outcome that either mesa or United anticipated and as such we've agreed to take actions together to correct that.
With that I'd like to thank you again for taking your time to hear us today, and we look forward to answering any questions you may have.
Thank you and I will now time for the question and answer session of today's call. At this time, if you would like to ask a question. Please press star one on your Touchtone phone.
We wish to withdraw your question you can press star two please make sure that your phone is on mute and record your name and your company name and prompt debt. Thank you.
Our first question comes from Savi <unk> with Raymond James Your line is open.
Hey, good afternoon, everyone.
I was just curious.
The fourth quarter block.
<unk> is a little bit lighter than you had thought before.
And just curious where your utilization is today and what you know.
Pilot trends are kind of giving you confidence on the kind of the current outlet because as you get into that in too.
Fiscal 2024, I've seen that level of quarter over quarter improvement in block hours.
Hi, This is Jonathan savvy, Thank you and I'll, let Mike chime in also at the end if he wants to.
The quarters.
Versus our.
Our projection is a little bit like we did get impacted somewhat by some of the operational issues that everybody was impacted by we.
We did lose a few more people to aviate than we had anticipated.
Obviously, you are facing the same captain crunch.
Arden.
But.
That we all sort of short a little bit in terms of upgrading people. We do have the ability to upgrade people and we have.
But I think that.
Those are probably most of the issue the other point of it is.
We mentioned that we thought that there was maybe some more efficient scheduling I think we have more block hours available to us in the CR J flying United took a particularly.
Conservative approach in the transition, while we think that as we've now gotten people and equipment and spare parts, where they need to be I think theres some more confidence in terms of that.
That was not an insignificant reduction.
Over what our crew Mack said, we could fly so I think that.
That's one of the areas that we've talked about is we probably can fly more CR Jay hours and what's interesting is that when you do look at us compared to the other regional carriers from at least what we can tell from the data we see our actual utilization across the fleet in other words total number of hours divided by the total number of aircraft in.
The CPA is almost identical to the other operators.
So it's not as if we're doing flying less and not holding our own.
Doing a pretty good job on pilots vis vis the other carriers, but it was just a question of the transition and building up those hours and now.
We have to continue to focus primarily on pushing up hours and the E Jets, which as you can imagine.
The aircraft of choice going forward to a large degree.
Do you want add anything Mike on that.
No I think we just had we did have fewer upgrades than we had planned we are.
Scheduling our <unk> upgrade as they qualify.
With ours, but we.
At fewer than we anticipated.
But our projections going forward that number starts to increase.
As we do more and more of these upgrade classes of our first officers. We also are going to have a pretty major emphasis on this direction.
<unk> entry Captain program.
In cooperation with the United has been extended a couple of times.
We're going to come out with them to try to capitalize on that program as well.
Thank you and our next question comes from Helane Becker with TD Cowen Your line is open.
Thanks very much.
For the time guys.
Question about the current portion of debt I think and I have a clarification question talk I think you said you had $26 million in debt.
Repayments scheduled for is that I wasn't sure is that calendar 'twenty three remaining or is that just the fourth quarter and then how are you thinking about refinancing that debt. That's due over the next year or are you intending to pay it as it's due.
Thanks, Helane, that's a great question so.
This remaining in 2023.
In the fiscal year, not the calendar year, so that comment on there, but if that makes sense.
And obviously, we're looking to we're working on selling assets and retiring debt that way, but if we if we do need to.
Look at refinancing something that's certainly something we would consider.
Okay. That's helpful. And then the other question I have just one clarification on the.
The purchase agreement.
Potential for 15 more.
Just $3 million, that's in the $2 million per quarter in the $1 million that's not all.
Her aircraft, that's just in the aggregate the total amount right.
A dumb question, but I just wanted to make sure I got that yes, yes.
It's in the aggregate the aggregate yes.
Yeah, Okay, that's perfect and then Jonathan.
So assuming the current FAA bill.
It's clear that the FAA is gonna, let pilots fly a couple of or I guess, the negotiations telecom slide two more years.
<unk> changed the 500 hour rule ship. So it looks like that's going to be with us and continue to be with us for a while.
Do you guys think about hiring retired captains from the other airlines that might still want to fly, but that were kind of forced out during the pandemic and are maybe only 58 or 60, or 61 and and mapping them for another few years or does that not make financial.
<unk>.
No I think look we're looking at all the different possibilities.
People are direct entry captains people qualified I mean, I think we're paying a 100 plus thousand dollars bonus to people, who were bringing that and we are going to announce shortly some new programs to further enhance that in order to get the direct entry captains or what they call high tide first officers.
Right now we have almost I think 2000 applicants who have qualifications to be pilots the.
The problem with that of course is that everybody is.
It's basically struggling to find captains and the reason why the captains are gone is because the more qualified at both through this hyper attrition that we're facing.
Due to the shortage have all moved up.
I think that.
What we've done is said look let's just create a pipeline, which we do through NPD. We have the aviate program, which then guarantees of jobs to the United.
88, Thankfully was restructured that now requires those folks to become captains. They can no longer sit in the right seats.
And wait to become hired by United They have to have what basically equates out to.
At least two years of time as a captain.
Once that kicks in and they did give us a grandfathered on the existing people in but once that kicks in I think the industry will start to write itself because folks will be out there say, we hired youre going to have to accept an upgrade when you are capable of doing it and particularly at basis as a result of our participation in aviation.
And I think 85% of our pilots are signed up for aviation.
We will in fact get upgraded rather than being you know lifetime first officers.
Back in the old days.
That expression was well known as upper out and you didn't have a choice.
I think that youre going to see that more and more frequently in these programs where the pilots will in fact.
Put in a position to upgrade and I think that will ultimately solve that.
The issue regarding upgradeable for saucers, but it will take time to wash through the system and clearly.
That's the thing that we're preparing by having this stream of pilots coming in all of whom lived reach upgrade and are in the 88 program. So it will take time and that's why you know in Mike's projections, we think that we can get there by the end of 'twenty for fiscal 'twenty four we can be at our targeted block hours, which will generate the kind of.
Margins at neat because clearly the situation has changed there is no doubt about that and thankfully, we have United that agrees with us and knows that things need to be done right now to see us through to that point and I feel very confident that they will do that.
That's that's really helpful. Thanks, Jonathan Thanks.
Thanks.
Thanks Lynn.
Thank you. Our next question comes from Andrew <unk> with Bank of America. Your line is open.
Hey, good afternoon, everyone talk just a question on the cost savings from the sale of all these potential incremental CR, Jason engines, just trying to understand what the cash flow impact of that would be so from a cost savings perspective does that mostly DNA or is that a combination of DNA as an interest expense are there some other.
Cash operating costs that you have on these aircraft right now just trying to get a sense for the cash flow benefit.
We're primarily looking at elimination of the interest and depreciation that's the biggest piece, but also when you have aircraft.
Unless theyre in storage you have to maintain them and there's a certain amount of.
Expenses associated with keeping them active and so the sooner we can get these sold the biggest piece certainly the interest and depreciation, but but there is also some other cost savings that we price the on the maintenance side, just because we have fewer aircraft to work on and maintained.
And I also think too Andrew one of the things that that torque mentioned and I think it really is important to restate again is that we have not sold anything that we havent generated cash from the sale.
So I think that it took a little while of us convinced United that convince other parties, but all of our sales even the aircraft that we sold that had.
100% run out engines were sold at or above our debt balance and so you know when you look at all of these sales not only do they take expense of our income statement and improve our cash flow, but they also will generate cash.
And tore can walk through that but it's not in a significant amount of cash we've actually built up a fair amount of equity.
And all of this while these aircrafts and in particular in the engines.
Got it Okay. That's helpful and then Jonathan.
You mentioned all the 150 more pilots you need to reach kind of the.
It's targeted utilization rate next year, I guess like what are the milestones needed or like what are what are some of the things we should be on the look out for or goals that you have from a pilot perspective, just to give us more confidence as we move through fiscal 'twenty four that you're on track for for meeting this for meeting this goal.
Yeah Andrew.
Look it is.
Can't even begin to tell you how frustrating.
Fact that basis numbers are where they are.
And you know we are in fact flying utilization at the same levels as other carriers.
The operators of large regional jets. So that in itself is frustrating, but we have we need 150 pilots, which again just seems.
That 150 pilots, which is 150 people that we need to find now obviously, we have the issue of retention.
We do lose captains, obviously as we go we actually lost a little bit more than we had anticipated.
Earlier, but that was just due to an issue with aviate, which has since been resolved.
And I think that we're going to have to rely on bringing in some of the direct entry captains. Although you know that you can count the number on one hand, how many we need per month to make these numbers.
And then you know we absolutely need to ensure that our first officers who are coming up for upgrade are capable and able to upgrade which we're putting a lot of energy into that as well. So that we have qualified people because you know the fact the matter is.
We're not going to upgrade to anyone who is not capable.
<unk>.
I think that that's probably the biggest area is just once we get the Anda program kicking in.
Our pilots will be required to upgrade I think all of that helps which is why we feel confident that we can get to that number.
Once we have the benefit of that as well so between those three just the natural upgrade of people who would be coming along the Eva program kicking in requiring people to upgrade and the direct entry captains positions should give us enough.
Assuming attrition levels stay where they are that we should be okay. As I mentioned, we've actually reduced the number of <unk> that we hire.
Pretty significantly as everyone else has.
And now we're focusing strictly on direct entry captains are high time at both in terms of our new hires.
Got it thank you.
Hey, Mike.
No I think as far as Andrew just as far as engaging where we are we'll know each quarter based on how many block hours were fine because R. R.
Our partners arent holding us back.
On pilot logos, yes, I mean initially we.
It would have probably hope to get a little more aggressive on the CR Jason.
But you.
You know, obviously with everything going on in the industry. The majors are a little reticent.
The delays and cancellations get a lot of attention.
From the government and from the press. So I think they were a little conservative which is understandable, but I think now that we've proven that these aircraft can fly reliably I think theres more room in the C. R. J schedule for example, which would help significantly the one thing that I will tell you that both United and Mesa underestimated was the sensitivity.
Two our numbers based on just a few aircraft are flying so I think that you know.
Once we get as we get that resolved in future scheduled changes are already addressing that I think will be in far better shape, just with our existing the existing crew staff that we have and that's without increasing any numbers.
Thank you. Our next question comes from Michael Lindenberg with Deutsche Bank. Your line is open.
Oh, Hey, Hey, good morning, or good afternoon, everyone.
Jonathan just getting back to that target block hour.
Number for United by the end of next year, I think you mentioned, 4% to 6% per quarter, you're now is that a year over year number or is that sequential.
Where we are today on a block hour production basis.
Sequential.
Okay.
And then with respect to.
With your first officers and I wanted to go back and just kind of touch on the point that you may do you have the ability to upgrade pilots to captains I think unlike your competitors and you talked about to get to.
And then they're scheduled for an upgrade I think that a lot of carriers. It's on a voluntary basis do you see.
A falloff or high attrition in first officers when they get to that point, where they're supposed to upgrade to captain where they elect to not.
Become a junior captain and decide at that point in time to break from the company and maybe go elsewhere is that is that a potential breakpoint or is that an issue that you've been saying.
No we havent really seen the numbers are not that big so it would be hard to really put a finger on it but I don't think we have people, saying, Oh, Gee I'm going to be forced to upgrade I need to go somewhere else because most of those folks remember 85% of our pilots are in aviation. They did not want to leave aviate, Eric just because they may have to upgrade and we.
Work with people, but I think the fact of matter is.
No it hasn't been a problem and again once the aviate requirement kicks in entirely we clearly that I firmly believe this issue will go away.
You know the problem also to be Frank we created ourselves because the first officer pay went up so much.
That flows coming up to the airport, saying Gee Whiz I've never even dreamed of making this much money and you know the fact of matter is being at F. O is itself not a bad job I mean are paid for starting it poses a $100 an hour. So I think we created a little bit of ourselves maybe the differential should've been greater between F. Owing captains button.
It is what it is and we'll deal with it.
I do think that.
United making that change and Eva will be what we're really make things work as well as the fact that.
All the new people coming in are well aware of what's going on and I think that will help us down the road.
These folks are putting position to upgrade okay. And then just the last one just on completion factor.
Clearly I mean, if you look at the difference between your controllable completion factor your tone and your total completion factor and I. Just you know you look at the daily data and the fact is you can see that your partners are in this case your partner in many cases are telling you that you have to cancel rate theyre going to dispatch I don't know if a flight to London, rather than the flight to Presque Isle Maine.
What sort of financial impact, though is that having on Neil youre doing well on a completion basis at least the controllable completion basis, but it's got to put airplanes and crews out of sync and it's got to have some sort of cost.
Is that a margin point or two where you're getting hit every quarter, because you're being told to stand down and not <unk>.
The flight by your partner.
Yeah, I think the bigger issue is not the day to day cancels that we have and look I mean, we all had operational issues the transition.
Could have gone a little bit smoother there was a little bit there was at a point in time when I think some aircraft will probably move too quickly out of Dallas to Houston, I think those kinds of things.
We're more of it the bigger issue that we have is just being able to fly to chromebooks were doing the flight crew Max on the E Jets right now, but I think we could fly to crew Max on the CR Jays and I think if we scheduled this E jets more efficiently we could create spare aircraft just by putting.
More hours per shell and I think that on each aircraft and that would ultimately then create more spares. So.
I think that there are solutions to this that working with United We're able to do I don't think the problem is the day to day cancellations. Its just the planned block hours those numbers have to go up and you know as you can imagine United has been fairly conservative given all the attention that completion rate and on time performance has been given.
Bye.
Government officials as well as the press right now.
Okay, great. Thank you.
Yes.
Thank you. Our next question comes from Savi Smith with Raymond James Your line is open.
Hey, Thanks for the follow up just two quick ones are based on the questions. So far just.
Do you have a kind of a target that you can give us for cash or something like that when maybe cash and debt. When all of this is Don I. Appreciate the kind of the fiscal year end debt level that you gave but given that a lot of the sales are happening by kind of calendar year and I was wondering if you can give a little bit of color of where this all ends.
You get get through some of those sales and if I might just also what was the revenue makes up kind of cargo and lease in this quarter now that most of its focused on United flying.
Well on the on the revenue piece I think the and I did.
She is going to be like 97% in.
And the cargo will be 3%, 2% to 3%.
On that on that distribution as far as cash we don't have any we're not putting out any projections, it's really going to be high.
Really dependent on not only the sales of most of these surplus assets, but the timing of that.
Obviously, the quicker we can.
Get rid of some of this these 900 asset.
The more benefit to us.
It's not putting any long term projections on cash right now and it will be highly dependent on.
When we sell these surplus 900 assets that we have aircraft engines March one and even when we close on the aircraft that are already contracted for I mean that is not an insignificant insignificant number in itself.
Is there a certain target you want to kind of keep cash at that you don't want to get into kind of go below.
I'd say, our target is as much as possible, but I try to think what Mike do you have any idea where we.
I think let me answer that obviously we are in.
Lots of discussions with United United is well aware of the situation.
We had board participation for the first time with the United This last board meeting, which I thought was incredibly productive.
I think that we all understand that the problem needs to get solved and that it's going to take our cooperation from United to do that which they have made it incredibly clear that they intend to do that makes it an important part of the family. We are certainly part of the battle.
Balancing of all the equipment I mean, if you look at it.
Two other operators of large regional jets operate about the same number of aircraft that we do we actually operate a little more than one of them. So I think that United understands that and knows what needs to be done to help get this fixed and we will do what it takes to ensure that our cash balances are at adequate level that we can operate the business without.
What I would call cash strapped, we do operate a little bit differently than the other operators in terms of cash we've historically done that but nonetheless, I think we all feel that we need a healthy balance in order to operate the business on a day to day basis.
At the level that United requires us to do.
Makes sense appreciate the color.
Yes.
Thank you I'm showing no other questions at this time.
Okay, well, let me just wrap up in conclusion again.
We're not particularly pleased with these numbers, we know that things have to change I mean, the good news is that we feel we have a very strong partner to help make that happen with us they've been very supportive will continue to be supportive.
We didnt mention much about the cargo business, but the cargo businesses actually.
Been a consistent steady.
This quarter I think there could be opportunities down the road in terms of cargo.
But nonetheless, our focus has been primarily just on continues to be on the whole pilot situation and I you know I.
I think it goes without saying that if.
Things were different in terms of regulation, none of this would be happening right now and I think at this point all we're doing is focusing on getting through this bubble.
To the point, where we could get back up to the target utilization, which by the way I think it's fair to add that target utilization is actually below where we had been operating in the past and that our financial results will reflect numbers that in the past we were able to achieve even at lower utilization rates than we were so I think.
The targets are doable I think we have the means in place and most importantly, I think we have the support that we need from United to make all this happen. So thank you very much.
We will talk to you next quarter. We appreciate your time.
Thank you that does conclude today's conference you may disconnect at this time and thank you for joining.