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Mesa Air shares take off on reworked United deal, asset sales

Mesa Air Group’s shares jumped close to 70% in Friday premarket trade after it announced a revised deal with United Airlines Holdings Inc (NASDAQ:UAL) that will boost revenue and improve liquidity at the struggling company.

The Phoenix, Arizona-based holding company for regional carrier Mesa Airlines also issued an update on its efforts to sell excess CRJ-900 aircraft and engines to reduce its debt and bolster liquidity.

It risks being delisted by Nasdaq after failing to release its fourth-quarter and full-year 2023 results by the December 29 deadline.

Under the new agreements, Mesa said United agreed to increase its block-hour rate retroactively to October 1, 2023, through to the end of 2024, which it said would generate roughly $63.5 million in incremental revenue over the next 12 months.

United also wrote off $12.6 million of an outstanding bridge loan and revolving credit facility debt in exchange for Mesa’s vested equity investment in privately held Heart Aerospace, which it originally purchased for $5 million.

In addition, Mesa released its equity investment in Archer Aviation, an air taxi service, as collateral.

Since September 2023, Mesa said it had sold or entered into agreements to sell excess CRJ-900 aircraft and related engines for combined gross proceeds of $198 million, which has been targeted at paying down debt of $174.3 million.

“We believe these new agreements, combined with our CRJ-related asset sales, will enable Mesa to generate substantial incremental contract revenue and improve margins,” Mesa chairman and CEO Jonathan Ornstein commented in a statement.

“While the situation remains challenging, this stability is critical as we continue to restore our pilot capabilities, drive increased fleet utilization, and step up block-hour production.”

Ahead of the opening bell, Mesa's shares were up 67% at $1.07.