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Mesa Air Group Reports Record Fiscal 2005 Revenues and Earnings

Mesa Air Group Reports Record Fiscal 2005 Revenues and Earnings

PHOENIX, Nov. 17 /PRNewswire-FirstCall/ -- Mesa Air Group, Inc. today announced 4th quarter after tax earnings of $15.0 million on operating revenues of $309.1 million. Total operating revenues for the fourth quarter of 2005 increased $49.1 million, or 18.9%, primarily the result of year-over-year increases in our regional jet fleet. Net income and earnings per share for the 4th quarter were $15.0 million and 36 cents per share on a diluted basis (all amounts reported herein are after tax and all per share amounts reported hereafter are on a diluted basis), respectively, as compared to net income of $10.7 million and 25 cents per share for the same period of fiscal 2004. Pro forma net income for the quarter was $14.7 million, or 35 cents per share. Pro forma net income excluded net investment gains of $0.3 million. This compares to pro forma earnings of $11.5 million, or 27 cents per share for the comparable period of fiscal 2004.

(Logo: http://www.newscom.com/cgi-bin/prnh/19990210/LAW065 )

Total Available Seat Miles (ASMs) for the fourth quarter of 2005 increased 10.8% from the fourth quarter of 2004, primarily a result of an increase in the number of regional jets flown from 129 jets as of September 30, 2004 to 144 as of September 30, 2005. During the quarter, the Company took delivery of two 86-seat CRJ-900s for its America West Express operations. At September 30, 2005, Mesa's fleet of regional jets was comprised of 92 50-seat regional jets, 15 70-seat regional jets and 37 86-seat regional jets (55 at America West, 36 at United, 49 at US Airways and 4 transitioning to Delta). The Company delivered one additional 86-seat regional jet to America West in the first quarter of fiscal 2006. In addition to its regional jet fleet, Mesa operates 38 turboprops, including 16 37-seat DH8-200s (6 at America West and 10 at United) and 22 B1900s (8 at Mesa independent and 14 at US Airways).

Year-to-date net income was $56.9 million on operating revenues of $1.1 billion. Total operating revenues for 2005 increased $239.5 million, or 26.7%, primarily the result of year-over-year increases in our regional jet fleet. Net income and earnings per share for the year were $56.9 million and $1.35 per share, respectively, as compared to net income of $26.3 million and 63 cents per share for 2004. Pro forma net income for the year was $55.1 million, or $1.31 per share. Pro forma net income excluded $1.1 million in net costs to return four non-operating Embraer 120 aircraft to the lessor, a $0.8 million gain on the early return of two Shorts 360 aircraft to the lessor, $0.6 million from a settlement of a dispute with a vendor and net investment gains of $1.4 million. This compares to pro forma earnings of $39.1 million, or 89 cents per share for the comparable period of fiscal 2004.

As of September 30, 2005, the Company's cash, marketable securities and debt investments were approximately $280.4 million, which includes $8.8 million of restricted cash.

Events during the quarter:

The Company finalized an agreement with AAR Corp. for the sale, management, and repair of certain of its regional jet rotable spare parts. Under the agreement, AAR will purchase approximately $50 million in existing spare parts inventory to support Mesa's current and future fleet of regional jets. AAR will provide asset management planning and support for Mesa's spare part operational requirements and will manage the component repairs. The repair portion of this agreement is valued at an estimated $200 million over the life of the 10 year contract.

The Company completed the permanent financing of 15 CRJ-900 regional jets through a sale/leaseback transaction. As a result of this transaction, which is structured as an off-balance sheet operating lease, approximately $400 million in both the asset and related debt were removed from the Company's balance sheet.

The Company announced its intention to establish an independent inter-island Hawaiian airline with service expected to begin in the 1st quarter of 2006. The airline will be conducted using state-of-the-art new generation regional jets in a high quality, high frequency service, connecting the islands of Hawaii with service to the Hilo, Honolulu, Kona, Lihue and Maui (Kahului) markets. The aircraft will be incremental to Mesa's current fleet.

Also during the quarter, the Company began the transition of 59 regional jets out of its US Airways operations into operation with United and Delta. The Company began flying in revenue service for Delta on October 1st and currently has eight aircraft with Delta.

"In spite of a difficult operating environment which led us to make significant changes to our operating plan, the Company posted record revenues and earnings for the year," said Jonathan Ornstein, Mesa Air Group's Chairman and Chief Executive Officer. "We believe these results reflect our ability to adapt to a changing environment and would not have been possible without operational flexibility, maintaining our focus on a high quality low cost product and the dedication of our motivated workforce. These attributes will allow us to successfully compete for future growth opportunities as the major airlines continue to restructure. As the fiscal year draws to a close, we would like to thank our airline partners, America West, Delta, Midwest Airlines, United and US Airways; our passengers; our suppliers, vendors and financial partners; our Board of Directors; and, most importantly, all of our people. Working together, we believe the future will continue to provide opportunity and job security to our employees and meaningful financial returns to our shareholders."

Mesa's operating statistics for the three months ended September 30, 2005 2004 Change Passengers 3,521,246 3,142,052 12.1% Available Seat Miles (000s) 2,352,687 2,123,444 10.8% Revenue Passenger Miles (000s) 1,694,256 1,564,340 8.3% Load Factor % 72.0 73.7 -1.7 pts. Yield (cents) 18.0 16.6 8.4% Revenue per ASM (cents) 12.8 12.2 4.9% Operating Cost per ASM (cents) * 11.6 11.0 5.5% Operating Cost per ASM, excluding fuel expense (cents) * 7.8 8.0 -0.3% Block Hours (000s) 147 114 28.9% Average Stage Length (miles) 399 396 0.8% * Excluding one-time items Mesa's operating statistics for the year ended September 30, 2005 2004 Change Passengers 13,088,872 10,239,915 27.8% Available Seat Miles (000s) 8,715,749 7,107,684 22.6% Revenue Passenger Miles (000s) 6,185,864 5,035,165 22.9% Load Factor % 71.0 70.8 0.2 pts. Yield (cents) 18.2 17.8 2.2% Revenue per ASM (cents) 13.0 12.6 3.2% Operating Cost per ASM (cents) * 11.6 11.9 -2.5% Operating Cost per ASM, excluding fuel expense (cents) * 8.1 9.2 -12.0% Block Hours (000s) 571 514 11.1% Average Stage Length (miles) 389 390 -0.3% * Excluding one-time items MESA AIR GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended September 30, September 30, 2005 2004 Operating revenues: Passenger $300,851 $252,025 Freight and other 8,219 7,984 Total operating revenues 309,070 260,009 Operating expenses: Flight operations 82,637 81,403 Fuel 90,522 62,691 Maintenance 50,860 46,116 Aircraft and traffic servicing 16,886 18,472 Promotion and sales 785 1,260 General and administrative 18,218 14,989 Depreciation and amortization 13,357 9,292 Impairment and restructuring charges (credits) -- (483) Total operating expenses 273,265 233,740 Operating income 35,805 26,269 Other income (expense): Interest expense (13,977) (7,416) Interest income 1,059 256 Other income (expense) 1,438 (396) Total other income (expense) (11,480) (7,556) Income before income taxes 24,325 18,713 Income taxes 9,316 7,992 Net income $15,009 $10,721 Income per common share: Basic $0.52 $0.35 Diluted $0.36 $0.25 Weighted average shares - basic 28,646 30,884 Weighted average shares - diluted 46,113 48,724 Dilutive interest on convertible debentures included in interest expense (after tax) $1,524 $1,437 Three Months Ended September 30, September 30, 2005 2004 PRO FORMA (After tax): Net income $15,009 $10,721 Reversal of failed merger related costs -- (232) Reversal of restructuring costs -- (238) Tax effects related to executive compensation -- 852 Investment (income) loss (265) 380 Pro forma net income $14,744 $11,483 Pro forma income per common share Basic $0.51 $0.37 Diluted $0.35 $0.27 Weighted average shares - basic 28,646 30,884 Weighted average shares - diluted 46,113 48,724 Dilutive interest on convertible debentures included in interest expense (after tax) $1,524 $1,437 To supplement our consolidated financial statements presented in accordance with GAAP, the Company uses non-GAAP measures of pro forma net income and pro forma earnings per share, which are adjusted from our GAAP results as shown above. These non-GAAP adjustments are provided to enhance the user's overall understanding of our current financial performance. We believe the non-GAAP results provide useful information to both management and investors by excluding certain charges and other amounts that we believe are not indicative of our core operating results. These non-GAAP measures are included to provide investors and management with an alternative method for assessing the Company's operating results in a manner that is focused on the performance of the Company's ongoing operations and to provide a more consistent basis for comparison between quarters. In addition, since we have historically reported pro forma results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting. These measures are not in accordance with or an alternative for, GAAP and may be different from pro forma measures used by other companies. Amounts reported above for prior year pro forma earnings per share amounts have been restated to reflect the Company's adoption of Emerging Issues Task Force Issue Number 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings Per Share." MESA AIR GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Year Ended September 30, September 30, 2005 2004 Operating revenues: Passenger $1,102,550 $868,415 Freight and other 33,718 28,397 Total operating revenues 1,136,268 896,812 Operating expenses: Flight operations 319,271 297,521 Fuel 304,256 194,510 Maintenance 198,695 163,463 Aircraft and traffic servicing 68,475 66,223 Promotion and sales 3,906 5,806 General and administrative 69,429 62,035 Depreciation and amortization 44,231 28,001 Impairment and restructuring charges (credits) (1,257) 11,895 Total operating expenses 1,007,006 829,454 Operating income 129,262 67,358 Other income (expense): Interest expense (44,466) (25,063) Interest income 2,901 1,163 Other income 4,469 1,723 Total other income (expense) (37,096) (22,177) Income before income taxes 92,166 45,181 Income taxes 35,299 18,899 Net income $56,867 $26,282 Income per common share: Basic $1.95 $0.83 Diluted $1.35 $0.63 Weighted average shares - basic 29,215 31,490 Weighted average shares - diluted 46,559 49,774 Dilutive interest on convertible debentures included in interest expense (after tax) $6,097 $5,027 Year Ended September 30, September 30, 2005 2004 PRO FORMA (After tax): Net income $56,867 $26,282 Embraer 120 lease return costs 1,052 -- Reversal of restructuring costs (775) (238) Beech 1900 return costs -- 7,200 Merger related costs -- 1,973 Executive compensation payments, net of change in effective tax rate -- 4,210 Insurance proceeds (617) -- Investment (income) loss (1,443) (341) Pro forma net income $55,084 $39,086 Pro forma income per common share Basic $1.89 $1.24 Diluted $1.31 $0.89 Weighted average shares - basic 29,215 31,490 Weighted average shares - diluted 46,559 49,774 Dilutive interest on convertible debentures included in interest expense (after tax) $6,097 $5,027 * To supplement our consolidated financial statements presented in accordance with GAAP, the Company uses non-GAAP measures of pro forma net income and pro forma earnings per share, which are adjusted from our GAAP results as shown above. These non-GAAP adjustments are provided to enhance the user's overall understanding of our current financial performance. We believe the non-GAAP results provide useful information to both management and investors by excluding certain charges and other amounts that we believe are not indicative of our core operating results. These non-GAAP measures are included to provide investors and management with an alternative method for assessing the Company's operating results in a manner that is focused on the performance of the Company's ongoing operations and to provide a more consistent basis for comparison between quarters. In addition, since we have historically reported pro forma results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting. These measures are not in accordance with or an alternative for, GAAP and may be different from pro forma measures used by other companies. Amounts reported above for prior year pro forma earnings per share amounts have been restated to reflect the Company's adoption of Emerging Issues Task Force Issue Number 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings Per Share."

Mesa's fourth quarter results will be discussed in more detail on November 17, 2005 at 11:00 AM MST (Mountain Standard Time) via teleconference. The live audio Webcast of the call will be available on Mesa's Web site at http://www.mesa-air.com/. There will also be a replay of the call available beginning approximately one hour after its conclusion at the same Web address.

Mesa currently operates 182 aircraft with over 1,100 daily system departures to 176 cities, 43 states, the District of Columbia, Canada and Mexico. Mesa operates as America West Express, Delta Connection, US Airways Express and United Express under contractual agreements with America West, Delta Air Lines, US Airways and United Airlines, respectively, and independently as Mesa Airlines. The Company, founded by Larry and Janie Risley in New Mexico in 1982, has approximately 5,000 employees. Mesa is a member of Regional Aviation Partners and the Regional Aviation Association.

This press release contains various forward-looking statements that are based on management's beliefs, as well as assumptions made by and information currently available to management. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable; it can give no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or expected. The Company does not intend to update these forward-looking statements prior to its next filing with the Securities and Exchange Commission.

Mesa Air Group, Inc.

CONTACT: Peter Murnane of Mesa Air Group, Inc., +1-602-685-4010,
[email protected]

Web site: http://www.mesa-air.com/

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