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Mesa Air Group, Inc. (MESA)

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Mesa Air Group, Inc. (MESA)

Q4 2008 Earnings Call

January 13, 2009 12:00 pm ET

Executives

Jonathan Ornstein - CEO

Analysts

Helane Becker – Jesup & Lamont

Bob Macadoo – Avondale Partners

Presentation

Operator

Welcome to the Mesa Air Group’s fourth quarter earnings conference call. (Operator Instructions) I would now like to turn the meeting over to your host for today’s conference, Jonathan Ornstein, Mesa Air Group Chairman and Chief Executive Officer; sir you may begin.

Jonathan Ornstein

Welcome to our call. I would like to thank everyone for taking time out of your schedule to listen. We appreciate your interest in our company. We’d also like to take a moment just to apologize for the delay in getting these numbers out to you. This resulted from a tax issue regarding NOLs that took about a month to resolve.

Our numbers were done on time and then we had to deal with this tax issue.

This conference call will contain 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 made in this call prior to its next filing with the Securities and Exchange Commission.

Let’s go straight to the numbers, for the fourth quarter 2008 on a consolidated basis we posted a net loss of $22.3 million or $0.83 per share from continuing operations on operating revenues of $325.3 million.

On a pro forma basis however net profit was $3.1 million or $0.11 per share. This compares to a net profit of $2.2 million or $0.08 per share in the fourth quarter of 2007. Pro forma net income for the quarter includes adjustments for the following items on an after-tax basis; $10 million of vendor settlements, this revolves around an engine deal we completed with GE, $4.9 million related to lease return costs, $3.7 million for loss from equity method and investments, $2 million expense from Aloha Airline settlement, $1.8 million for the adjustment to income tax valuation allowance, $1.5 million loss on disposal of assets; $0.9 million loss associated with our Chinese start-up joint venture; $0.4 million of legal expenses for our go! operations, and a net $0.2 million of additional pro form items.

As of September 30 we had cash, cash equivalents, and marketable securities including restricted cash of $64.9 million compared to $208 million at the end of September 30, 2007, also compared to the third quarter 2008 of $60.1 million for an increase of $4.8 million quarter-over-quarter.

[Near] ending September 30, 2008 net operating revenue increased $28 million or 2.2% to $1.33 billion from $1.3 billion for the year ending September 30, 2007. Contract revenue decreased $17.1 million or 1.3% primarily driven by reduced aircraft in service including the elimination of our Dash 8 fleet at JFK operating its Delta connection which had contributed $32 million of revenue for the year ending September 30, 2007.

Operating revenues for go! increased $18.1 million as a result of both fare increases and an increase in number of passengers. Going forward at current fuel prices, go! is currently cash positive and we continue to see opportunities in Hawaii which we’ll go into later in the call.

In year ended September 30, 2008 we reduced our operating fleet by three aircraft within our continuing operations. This accounted for a 15.6% reduction of block hours, 17.8% reduction in departures and available seat miles declined 10.8%.

Our fleet count at the end of the fourth quarter was 159 aircraft comprised of 143 regional jets, 16 turboprops. In the regional jet category we operated 45 CRJ-900’s, 44 CRJ-200’s, 20 CRJ-700’s, 34 Embrarer 145’s.

In addition to our 143 aircraft regional jet fleet, Mesa operated 16 37C Dash 8 turboprops. Of those we operated 55 for US Airways, 56 for United, 37 for Delta, six under Mesa Air Group, and five CRJ-200’s operated as go!

On November 28, 2008 Mesa announced entering into a settlement with the former controlling shareholder of Aloha Airlines concerning the Aloha Airlines lawsuit over Mesa’s Hawaiian inter-island flight services operated under the go! brand name. Under the terms of the settlement and without admitting any wrongdoing, Mesa agreed to make a $2 million cash payment, issue shares of common stock equal to 10% of the outstanding shares, and provide inter-island travel benefits to certain former Aloha Airline employees.

Under the terms of the settlement if the shareholder is able to purchase the Aloha name in the upcoming bankruptcy court auction it will license the Aloha name to Mesa. We have recently announced that we are adding an additional aircraft into go! for the busy spring and summer season. Advance bookings continue to be very strong. In March its approximately double where we were last year and we continue to see positive trends in traffic in Hawaii.

Read the rest of this transcript for free on seekingalpha.com