1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 Commission File Number 0-15495 MESA AIR GROUP, INC. ---------------------------------------------------------- (Exact name of registrant as specified in its charter) <TABLE> <CAPTION> <S> <C> Nevada 85-0302351 - -------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3753 Howard Hughes Parkway, Suite 200, Las Vegas 89109 - --------------------------------------------------------------- -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (702) 892-3773 -------------------- </TABLE> Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- On July 31, 1998 the Registrant had outstanding 28,362,866 shares of Common Stock.
2 PART 1. FINANCIAL INFORMATION Item 1. MESA AIR GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (in thousands, except per share amounts) <TABLE> <CAPTION> Three Months Ended Nine Months Ended June 30 June 30 1998 1997 1998 1997 -------- --------- --------- --------- <S> <C> <C> <C> <C> Operating revenues: Passenger $ 96,621 $ 126,823 $ 334,456 $ 368,735 Freight and other 2,902 2,620 9,259 7,529 -------- --------- --------- --------- Total operating revenues 99,523 129,443 343,715 376,264 -------- --------- --------- --------- Operating expenses: Flight operations 38,283 48,421 134,012 136,104 Maintenance 20,512 23,626 67,043 66,401 Aircraft and traffic servicing 14,041 21,305 57,493 63,111 Promotion and sales 14,214 20,066 49,451 55,642 General and administrative 6,306 5,682 21,832 18,418 Depreciation and amortization 6,205 8,571 20,753 25,596 Other operating items -- -- 40,443 -- -------- --------- --------- --------- Total operating expenses 99,561 127,671 391,027 365,272 -------- --------- --------- --------- Operating income (loss) (38) 1,772 (47,312) 10,992 -------- --------- --------- --------- Non-operating income (expense): Interest expense (5,190) (7,025) (18,233) (20,618) Interest income 369 418 1,232 1,463 Other 498 742 5,091 1,019 -------- --------- --------- --------- Total non-operating income (expense) (4,323) (5,865) (11,910) (18,136) -------- --------- --------- --------- Loss before income taxes (4,361) (4,093) (59,222) (7,144) Income tax benefit -- (1,590) (2,511) (2,776) -------- --------- --------- --------- Net loss $ (4,361) $ (2,503) $ (56,711) $ (4,368) ======== ========= ========= ========= Average common and common equivalent shares outstanding 28,350 28,295 28,316 28,269 ======== ========= ========= ========= Net loss per common and common equivalent share $ (0.15) $ (0.09) $ (2.00) $ (0.15) ======== ========= ========= ========= </TABLE> 2
3 MESA AIR GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) <TABLE> <CAPTION> June 30 September 30 1998 1997 -------- ------------ <S> <C> <C> ASSETS Current Assets: Cash and cash equivalents $ 50,416 $ 57,232 Marketable securities -- 8,690 Receivables, primarily traffic 30,226 53,852 Income tax refund receivable 7,523 6,999 Expendable parts and supplies, net 34,463 31,377 Prepaid expenses and other current assets 11,383 8,553 -------- -------- Total current assets 134,011 166,703 Property and equipment, net 334,962 440,890 Lease and equipment deposits 11,784 10,354 Intangibles, net 20,998 22,071 Other assets 5,467 9,848 -------- -------- Total assets $507,222 $649,866 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Current portion of long-term debt and capital leases $ 13,563 $ 31,786 Accounts payable 27,477 21,884 Air traffic liability 10,595 6,785 Accrued compensation 2,473 7,025 Other accrued expenses 29,599 30,662 -------- -------- Total current liabilities 83,707 98,142 Long-term debt and capital leases, excluding current portion 245,857 338,199 Deferred credits and other liabilities 59,847 34,837 Deferred income taxes -- 1,600 Stockholder's equity: Preferred stock of no par value, 2,000,000 shares -- -- authorized; no shares issued and outstanding Common stock of no par value, 75,000,000 shares authorized; 101,836 101,361 28,362,249 and 28,294,584 shares issued and outstanding Retained earnings 15,975 72,686 Unrealized gain on marketable securities, net -- 3,041 -------- -------- Total stockholder's equity 117,811 177,088 -------- -------- Total liabilities and stockholder's equity $507,222 $649,866 ======== ======== </TABLE> 3
4 MESA AIR GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended June 30 <TABLE> <CAPTION> 1998 1997 -------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(56,711) $ (4,368) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation and amortization 20,753 25,596 Provision for other operating items 40,443 -- Amortization and write-off of deferred credits (15,433) (1,296) Stock bonus plan -- 349 Provision for doubtful accounts 1,027 -- Gain on sale of securities (4,544) -- Other 2,759 -- Changes in assets and liabilities: Receivables 22,599 (10,018) Expendable parts and supplies (3,086) (2,369) Prepaid expenses and other current assets (2,830) (4,059) Accounts payable 5,594 5,408 Other accrued liabilities (5,615) (7,537) -------- -------- NET CASH FLOWS FROM OPERATING ACTIVITIES: 4,956 1,706 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital retirements (6,443) (5,498) Proceeds from sale of property and equipment 17,624 1,803 Proceeds from sale of marketable securities 11,102 1,000 Other assets (1,292) 4,811 Lease and equipment deposits (1,430) (888) -------- -------- NET CASH FLOWS FROM INVESTING ACTIVITIES: 19,561 1,228 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt and obligations under capital leases (31,808) (13,050) Proceeds from issuance of common stock 475 122 Proceeds from deferred credits -- 230 -------- -------- NET CASH FLOWS FROM FINANCING ACTIVITIES: (31,333) (12,698) -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS: (6,816) (9,764) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 57,232 54,720 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 50,416 $ 44,956 ======== ======== </TABLE> 4
5 <TABLE> <CAPTION> 1998 1997 ------------------- -------------------- <S> <C> <C> Cash paid during the period for: Interest $ 18,233 $ 20,618 Income taxes ___ 1,286 </TABLE> Mesa did not purchase any property or equipment upon which debt was assumed during the nine-month period ended June 30, 1998. Mesa purchased property and equipment totaling approximately $37.0 million upon which debt of approximately $35.9 million was assumed in the nine-month period ended June 30, 1997. During the three month period ended June 30, 1998, Mesa sold 22 aircraft for $78.7 million which was debt assumed by the acquirer. 5
6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending September 30, 1998. These condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and footnotes included in the annual report for the year ended September 30, 1997. 2. The condensed consolidated financial statements include the accounts of Mesa Air Group, Inc. and its wholly owned subsidiaries Mesa Airlines, Inc., WestAir Holding, Inc., Air Midwest, Inc., Mesa Leasing, Inc., MAGI Insurance, Ltd., MPD, Inc., and FCA, Inc. All significant intercompany balances and transactions have been eliminated in consolidation. See discussion of WestAir Holding, Inc. in the "Liquidity and Capital Resources" section of this report. 3. Income tax benefit in the nine-month period ended June 30, 1998 has been recognized only to the extent of previously recorded deferred tax liability. 4. Legal Proceedings: See, "Part II., Item 1." 6
7 Item 2. MESA AIR GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Mesa Air Group, Inc. and its subsidiaries (collectively referred to herein as "Mesa" or the "Company") is a regional airline operating as America West Express, Mesa Airlines, US Airways Express and, through May 31, 1998, United Express (see, "Other Events--United Airlines") serving 113 cities in 29 states, Canada and the District of Columbia. At June 30, 1998, Mesa utilized a fleet of 107 aircraft with approximately 1,000 daily departures. Mesa's long-term strategy is to profitably service routes not directly served by major air carriers and to supplement service of major carrier code partners on certain routes. The Company evaluates market demand and utilizes its fleet of aircraft to meet that demand. Code-sharing agreements with certain of the major air carriers provide benefits from the name recognition, reservation systems, marketing and promotional efforts of those carriers. Mesa operates a fleet of new and efficient aircraft and performs much of its own maintenance and overhaul work. Historically, the Company has relied on generating much of its revenues by use of a "through fare" arrangement with its major code-sharing partners. A "through fare" is a combined fare offered to passengers who connect to Mesa from a major code-sharing partner and vice versa. Mesa is paid a pro rata portion of the "through fare." As an alternative to the pro rate arrangements, the Company, in certain markets, has utilized fee per departure arrangements. A fee per departure arrangement allows the Company to obtain a fee based on a proprietary formula for each flight operated. The Company seeks to obtain fee per departure arrangements in those markets where it deems the arrangement more favorable than a pro rate agreement. The following tables set forth year-to-year comparisons for the periods indicated below: OPERATING DATA -------------- <TABLE> <CAPTION> Three Months Ended Nine Months Ended June 30 June 30 1998 1997 1998 1997 ------------------ ------------------ ------------------ ------------------ <S> <C> <C> <C> <C> Passengers 1,199,004 1,748,216 4,242,013 4,866,198 Available seat miles (000) 530,652 642,527 1,793,078 1,832,185 Revenue passenger miles (000) 303,238 359,644 984,364 1,015,334 Load factor 57.1% 56.0% 54.9% 55.4% Yield per revenue passenger mile 31.9(cent) 35.3(cent) 34.0(cent) 36.3(cent) Revenue per available seat mile 18.8(cent) 20.1(cent) 19.2(cent) 20.5(cent) Operating cost per available seat mile 18.8(cent) 19.9(cent) 21.8(cent) 19.9(cent) Average stage length (miles) 194 170 184 170 Number of aircraft in fleet 132 186 132 186 </TABLE> 7
8 <TABLE> <CAPTION> Three Months Ended Nine Months Ended June 30 June 30 1998 1997 1998 1997 ------------------ ------------------ ------------------ ------------------ <S> <C> <C> <C> <C> Gallons of fuel consumed (000) 15,539 19,299 53,135 55,956 Block hours flown 104,369 147,747 376,799 424,370 Departures 104,739 156,473 378,006 450,940 </TABLE> FINANCIAL DATA -------------- Three Months Ended June 30, 1998 Versus Three Months Ended June 30, 1997 - ------------------------------------------------------------------------ <TABLE> <CAPTION> Three Months Ended June 30 -------------------------- 1998 1997 ---------------------------------- ---------------------------------- Cost per Percent of total Cost per Percent of total ASM operating revenues ASM operating revenues ----------- ------------------ ----------- ------------------ <S> <C> <C> <C> <C> Flight operations 7.2(cent) 38.5% 7.6(cent) 37.4% Maintenance 3.9(cent) 20.6% 3.7(cent) 18.2% Aircraft and traffic servicing 2.6(cent) 14.2% 3.3(cent) 16.5% Promotion and sales 2.7(cent) 14.3% 3.1(cent) 15.5% General and administrative 1.2(cent) 6.4% 0.9(cent) 4.4% Depreciation and amortization 1.2(cent) 6.2% 1.3(cent) 6.6% Other operating items 0.0(cent) 0.0% 0.0(cent) 0.0% --------- --------- --------- --------- Total operating expenses 18.8(cent) 100.0% 19.9(cent) 98.8% Interest expense 1.0(cent) 5.2% 1.1(cent) 5.4% </TABLE> Nine Months Ended June 30, 1998 Versus Nine Months Ended June 30, 1997 - ---------------------------------------------------------------------- <TABLE> <CAPTION> Nine Months Ended June 30 ------------------------- 1998 1997 --------------------------------- --------------------------------- Cost per Percent of total Cost per Percent of total ASM operating revenues ASM operating revenues ----------- ------------------ ---------- ------------------ <S> <C> <C> <C> <C> Flight operations 7.5(cent) 39.0% 7.4(cent) 36.2% Maintenance 3.7(cent) 19.5% 3.6(cent) 17.6% Aircraft and traffic servicing 3.2(cent) 16.7% 3.5(cent) 16.8% Promotion and sales 2.7(cent) 14.4% 3.0(cent) 14.8% General and administrative 1.2(cent) 6.4% 1.0(cent) 4.9% Depreciation and amortization 1.2(cent) 6.0% 1.4(cent) 6.8% Other operating items 2.3(cent) 11.7% 0.0(cent) 0.0% --------- --------- ------------ --------- Total operating expenses 21.8(cent) 113.8% 19.9(cent) 97.1% Interest expense 1.0(cent) 5.2% 1.1(cent) 5.5% </TABLE> 8
9 OPERATIONS Operating Revenues: Operating revenues decreased by $29.9 million to $99.5 million in the quarter ended June 30, 1998 from $129.4 million in the quarter ended June 30, 1997. The revenue decrease was primarily due to a 31.4 % decrease in passengers carried. Available seat miles ("ASMs") decreased by 17.4 %, and the load factor increased from 56.0% during the June 30, 1997 quarter to 57.1% for the current quarter. The primary reason for the decrease in ASM's was the discontinuation of the Company's United Airlines Express ("United") operations. (See Other Events- United Operations.) Operating revenues decreased by $32.5 million to $343.7 million for the nine-month period ended June 30, 1998 from $376.3 million for the nine-month period ended June 30, 1997. This decrease was primarily due to the decrease in the number of passengers carried in this period as compared to the nine months ended June 30, 1997 as explained above, including the cessation of the United Express operations and independent jet operations in Ft. Worth, Texas. The independent jet operation was discontinued in February 1998 (See "Other Events--Independent Jet Operation"). Operating Expenses: Flight Operations: - ----------------- Flight operations costs decreased by $10.1million to $38.3 million for the quarter ended June 30, 1998 from the quarter ended June 30, 1997 and decreased by $2.1 million to $134.0 million for the nine-month period ended June 30, 1998 from the nine-month period ended June 30, 1997. The primary cause of the decrease for the quarter ended June 30, 1998 from the prior year's comparable quarter was the reduction in ASM's previously noted. Flight operations expense on a cost per ASM basis decreased to 7.2(cent) per seat mile for the quarter ended June 30, 1998 from 7.6(cent) for the quarter ended June 30, 1997 due to lower fuel costs. For the nine months ended June 30, 1998, the increase in cost per ASM over the nine-month period ended June 30, 1997 were caused by a $3.4 million increase in pilot salaries, a $5.7 million increase in lease costs for deployment of the CRJ aircraft into the Company's fleet, and a $2.9 million increase in pilot training and lodging, all of which was partially offset by a decrease in fuel costs of $2.8 million. Maintenance Expense: - ------------------- Maintenance expense decreased by $3.1million in the quarter ended June 30, 1998 to $20.5 million from $23.6 million in the same quarter of the previous fiscal year and increased by $.6 million in the nine-month period ended June 30, 1998 to $67.0 million from $66.4 million for the nine-month period ended June 30, 1997. The decrease for the quarter ended June 30, 1998 was due to the reduction in ASM's partially offset by maintenance of a greater number of CRJ aircraft for the period from the prior year and higher costs of operating under increased regulatory oversight as a Part 121 carrier. The increase for the nine-month period ended June 30, 1998 was primarily due to a provision of $1.1 million in uncollectible warranty and insurance claims, a $0.5 million increase as a result of the higher cost of operating under greater regulatory oversight, and maintenance of a greater number of CRJ aircraft. Aircraft and Traffic Service Expense: - ------------------------------------ Aircraft and traffic service expense decreased by $7.3 million to $14.0 million during the quarter ended June 30, 1998 from $21.3 million in the comparable quarter of the previous fiscal year. Aircraft and traffic service expense decreased by $5.6 million to $57.5 million for the nine-month period ended June 30, 1998 from $63.1 million for the nine-month period ended June 30, 1997. The decrease for the 9
10 quarter ended June 30, 1998 was primarily due to reduced ASM's and additional rent and landing fee reductions due to the closure of the Company's United Express operations in Denver, which has some of the highest rents and landing fees in the Company's system. The decrease for the nine-month period ended June 30, 1998 was due to reduced ASM's, partially offset by increased charges for reaccommodation and lost baggage costs from flight cancellations caused by crew scheduling difficulties and training delays. Promotion and Sales: - ------------------- Promotion and sales expense decreased $6.0 million to $14.2 million for the quarter ended June 30, 1998 and decreased by $6.2 million to $49.5 million for the nine-month period ended June 30, 1998 over the three-month and nine-month periods ended June 30, 1997, respectively. The primary reason for these decreases was a significant decline in the number of passengers carried and a reduction in commissions paid to travel agents, as a result of fewer passengers and a lower commission rate. General and Administrative Expense: - --------------------------------- General and administrative expense increased by $.6 million for the three-month period ended June 30, 1998 to $6.3 million as compared to the quarter ended June 30, 1997 and increased by $3.4 million to $21.8 million for the nine-month period ended June 30, 1998 as compared to the nine-month period ended June 30, 1997. The primary causes of the increase for the quarter ended June 30, 1998 were $0.4 million increase in health insurance claims, and $0.2 million increase in property and casualty insurance. The primary causes of the increase for the nine-month period ended June 30, 1998 was a $0.6 million increase in amounts paid to employees as part of the employee performance bonus plan, a $1.3 million increase in the amount of health insurance claims paid during the period, a $0.6 million increase in property taxes, and a $0.3 million increase in property and casualty insurance. Depreciation, Amortization and Interest Expense: - ----------------------------------------------- Depreciation and amortization decreased by $2.4 million to $6.2 million for the quarter ended June 30, 1998 as compared to the quarter ended June 30, 1997 and by $4.8 million to $20.8 million for the nine-month period ended June 30, 1998 from the comparable periods in the prior year. The primary reason for these decreases in depreciation and amortization was the writedown of the Denver system intangible assets as of September 30, 1997. Interest expense declined by $1.8 million to $5.2 million during the quarter ended June 30, 1998 from $7.0 million during the similar period in the prior fiscal year and by $2.4 million to $18.2 million for the nine-month period ended June 30, 1998 from the comparable period in the prior year. The decrease was due to lower outstanding principal loan balances as a result of the retirement of aircraft. Other Operating Items: - --------------------- During the nine-months ended June 30, 1998, the Company recognized a $4.0 million loss provision related to the discontinuation of its independent jet operations in Ft. Worth, Texas. The Company also recognized a $2.5 million loss provision related to anticipated settlement costs of a shareholder class action lawsuit. See, Part II, Item 1. "Legal Proceedings." The Company also recognized a $33.9 million loss provision related to the discontinuation of service under the Mesa Airlines, Inc. ("MAI") code-sharing agreement with United Airlines, Inc. ("UAL"). See, "Other Events--United Airlines." Other Non-Operating Income: - -------------------------- 10
11 In January 1998, Mesa sold its remaining investment in America West Airlines, Inc. ("AWA") comprised of 100,000 Class A shares, 200,000 Class B shares and warrants to purchase approximately 800,000 Class B shares. Mesa received cash of approximately $11.1 million and recognized non-operating income of approximately $4.5 million on the sale of these securities. LIQUIDITY AND CAPITAL RESOURCES The Company's cash balance of $50.4 million at June 30, 1998 included $2.4 million of cash restricted for the issuance of letters of credit, and $11.5 million held by WestAir Commuter Airlines, Inc. ("WestAir"). Mesa had receivables of $30.2 million at June 30, 1998 which consisted primarily of amounts due from code-sharing partner US Airways, Inc. ("US Airways"). Under the terms of the US Airways code-sharing agreement, Mesa receives a substantial portion of its revenues through the Airline Clearing House. Historically, the Company has enjoyed cash flow sufficient to meet its needs. However, UAL has terminated all of its code-sharing agreements with the Company. Such action could have a material negative impact on the financial position and cash flow of the Company, particularly if the Company cannot re-deploy its United Express aircraft on other operating routes, or alternatively, sell the aircraft or return them to the lessors. Management's belief that the Company will have adequate cash flow to meet its operating needs is a forward-looking statement. The Company may have less cash flow than anticipated in the event of a substantial decrease in the number of routes allocated to MAI under its code-sharing agreements with US Airways and America West Airlines, failure to sell, dispose of, or redeploy its assets associated with United Express operations in a timely manner, reduced levels of passenger revenue, additional taxes or costs of compliance with governmental regulations, fuel cost increases, increase in competition, increase in interest rates, general economic conditions and unfavorable settlement of existing or potential litigation. On March 1, 1998, the Company's $20 million secured line of credit expired under its terms and the bank declined to renew it. The Company has been approved by another financial institutions to provide a secured $20 million line of credit. There is presently no balance outstanding under this line of credit. As of June 30, 1998, Mesa was not in compliance with some of the secured debt covenants required by a bank credit agreement; however, the bank has waived compliance with such covenants. The Company believes it will either maintain compliance or obtain waivers of compliance with its present debt covenants through September 30, 1998. Management's belief that it will maintain compliance with its present debt covenants is a forward-looking statement. Compliance may be adversely impacted in the event of the termination or renegotiation of one or more code-sharing agreements, a substantial decrease in the number of routes allocated to MAI under its code-sharing agreements with US Airways, failure to dispose of or redeploy assets associated with its United Express operations, reduced levels of passenger revenue, additional taxes or costs of compliance with governmental regulations, fuel cost increases, increase in competition, increase in interest rates, general economic conditions and settlement of existing or potential litigation. At June 30, 1998, the Company had aggregate indebtedness of approximately $259.4 million payable to various parties under promissory notes issued in connection with the purchase of aircraft. The notes have interest rates ranging from 6.66% to 7.87% with maturities through December 2011. In addition, the Company has significant lease obligations on other operating and non-operating aircraft. These leases are classified as operating leases and therefore are not reflected as liabilities in the accompanying balance sheet. At June 30, 1998, 67 aircraft were leased by the Company with terms extending through 11
12 June 2016. Total lease expense for the nine-month period ended June 30, 1998 amounted to $31.8 million. Mesa has ordered 32 CRJ aircraft for use in its AmericaWest Express operation in Phoenix, Arizona, as USAirways Express on the East Coast and in other markets that management believes have the potential for profitable operations. As of June 30, 1998, the Company had received sixteen of the 32 CRJ aircraft on order and expects to take delivery of the remaining 16 aircraft by the end of 1999. The Company has options for an additional 16 CRJ aircraft with a delivery schedule of one per month beginning June 2000. The value of these 32 CRJ aircraft is approximately $640 million. The expected delivery schedule of aircraft is a forward-looking statement which could significantly differ based on manufacturer's delivery delays, among other factors. The Company's wholly owned subsidiary, WestAir Holding, Inc. ("WHI"), owns WestAir Commuter Airlines, Inc. ("WestAir"), a certificated air carrier and Regional Aircraft Services, Inc. ("RAS"), an aircraft equipment repair service company. WestAir had a total of 22 Embraer Brasilia aircraft leased from various lessors along with the 21 Jetstreams which are currently parked and not being utilized in WestAir's operations. WestAir made lease payments for all 43 aircraft only through May 31, 1998, the expiration date of WestAir's code-sharing agreement with UAL. Failure to make lease payments constituted a default under the lease agreements. The aircraft lessors have the right to exercise liens each lessor has on particular aircraft. If the aircraft provide insufficient collateral for the remaining lease payments, it is the belief of management that while the various lessors may seek recovery of any deficiency from WestAir (or WHI, as the various lease contracts permit) that they will have no right to seek any recovery of deficiencies from Mesa Air Group, Inc. Management's belief that the various aircraft lessors will have no right of recovery against Mesa Air Group, Inc. itself is a forward-looking statement which could materially differ based on the interpretation of lease agreements and other documents entered into between WestAir and/or WHI and the lessors by a court or an arbitrator, as the case may be. WestAir's operations are being liquidated due to the expiration of the UAL code-sharing agreement. The remaining assets and liabilities of WHI and its subsidiaries are included in the consolidated financial statements of Mesa Air Group, Inc. as of June 30, 1998. It is unlikely that any assets of WestAir will remain for distribution to WHI and, ultimately, Mesa Air Group, Inc. Management of the Company recognizes the need to ensure its operations will not be adversely impacted by Year 2000 software failure and that the Company's computer systems and applications must function properly beyond 1999. The Company is conducting the analysis necessary to determine the potential Year 2000 risk and until completion of such analysis will not know the cost to the Company of potential Year 2000 software failure. Although the Company cannot presently estimate the costs associated with Year 2000 software failure, such costs will be expensed as incurred. The Company recognizes that its business is reliant upon the systems and applications of third parties and will conduct an assessment of the potential risks. However, there can be no assurance that the systems and applications of other parties upon which the Company's business relies will be converted on a timely basis. The Company's business, financial condition, or results of operations could be materially adversely affected by the failure of its systems and applications or the failure of those systems operated by other parties to properly operate or manage dates beyond 1999. 12
13 OTHER EVENTS United Airlines, Inc. As a result of termination by UAL of the West Air and MAI Code-Sharing Agreements on April 22 and May 31, 1998 respectively, the Company incurred a loss provision totaling $106 million to provide for costs to dispose of certain aircraft, equipment, and other costs to shut down the entire United Express system. Should the Company fail to locate purchasers for its excess Beechcraft 1900D aircraft or redeploy its Dash 8-200 aircraft utilized in the MAI United Express system in a timely manner, the $106 million loss provision may be inadequate and subject to a material increase. The Company anticipates flying the Dash 8-200 aircraft under an agreement with AWA (see America West Airlines, Inc. discussion). Management of the Company believes that it will incur approximately $15 to $20 million of net cash expenditures during the 12-month period subsequent to May 31, 1998 as a result of the termination of its MAI and WestAir code-sharing agreements. WestAir spent approximately $1.7 million in the period from June 1, 1998 through July 31, 1998 on wind down activities. The estimated net cash expenditure is a forward-looking statement which could materially change as a result of the ultimate cost to park the WestAir fleet, or the failure to sell or dispose of excess aircraft in a timely manner. US Airways, Inc. Mesa has entered into a marketing agreement with US Airways in which it will initially operate 12 CRJ aircraft in its USAirways Express operation. The Company began USAirways Express CRJ service on January 19, 1998, with flights between Philadelphia, Pennsylvania and Birmingham, Alabama; St. Louis, Missouri; Cincinnati, Ohio; and Newburgh, New York. Other cities to be served include Charlotte, North Carolina; Washington, D.C.; Toronto, Canada; Little Rock, Arkansas; Charleston, West Virginia; Raleigh Durham, North Carolina; Boston, Massachusetts; Milwaukee, Wisconsin; White Plains, New York; and Tallahassee, Florida. All of this service is to be provided pursuant to a fee per departure arrangement. There are 12 CRJ aircraft operating in the US Airways Express system as of August 1, 1998. America West Airlines, Inc. The terms of the Company's code-sharing agreement with AWA provide for a minimum controllable flight completion factor for any consecutive two-month period. Primarily as a result of flight crew shortages in December 1997 and January 1998, MAI's controllable flight completion factor fell below the minimum and AWA issued the Company a notice of termination. In early February 1998, MAI resolved its crew shortages with AWA and its controllable completion factor exceeded the minimum requirement in February 1998 through April 1998. Subsequent to the termination by AWA of the code-sharing agreement, AWA and Mesa entered into an interim agreement to continue Mesa operations as America West Express through September 10, 1998. The Company entered into a new six-year agreement with AWA to provide expanded regional airline service as America West Express. The new agreement calls for the addition of eleven 37-passenger turboprop aircraft and ten regional jets by the end of 1999, with options to continue to expand both fleets in the year 2000 and 2001. This will more than double the size of the America West operation over the next twelve months. The Company will be compensated for these markets under a modified fee per departure arrangement. 13
14 The following table lists the aircraft owned and leased by Mesa for scheduled operations as of June 30, 1998: <TABLE> <CAPTION> NUMBER OF AIRCRAFT Passenger --------------------------------------------------------- Type of Aircraft Owned Leased Total Operating Capacity On June 30, 1998 ------------- -------------- --------------- -------------- --------------- <S> <C> <C> <C> <C> <C> Beechcraft 1900 86 10 96 80 19 Embraer Brasilia -- 8 8 4 30 Dash 8-200 -- 12 12 7 37 CRJ -- 16 16 16 50 ------------- -------------- --------------- -------------- Total 86 46 132 107 ------------- -------------- --------------- -------------- </TABLE> PART II. OTHER INFORMATION Item 1. Legal Proceedings During 1994, seven shareholder class action complaints were filed in the United States District Court for the District of New Mexico against Mesa, certain of its present and former corporate officers and directors, its independent auditor, and certain underwriters who participated in Mesa's June 1993 public offering of Common Stock. During October 1995, the court certified a class consisting of persons who purchased Mesa stock between January 28, 1993 and August 5, 1994. These complaints were consolidated by court order, and, after the court granted in part a motion to dismiss in May 1996, a third amended consolidated complaint was filed alleging that during the class period the defendants caused or permitted Mesa to issue publicly misleading financial statements and other misleading statements in the registration statement for the June 1993 public offering, annual and quarterly reports to shareholders, press releases and interviews with securities analysts. In May 1998, the Company entered into a memorandum of understanding with the plaintiffs to settle the litigation. While the Company and its corporate officers and directors believe they have substantial and meritorious defenses against the plaintiff's allegations and have defended their position vigorously, they have agreed to a settlement to avoid ongoing litigation. The memorandum of understanding provides for a total of $8 million to be paid to the class plaintiffs on behalf of the defendants. The Company will pay a substantial portion of this settlement. The settlement still must be approved by the Court following notification of the Class. The Company intends to utilize funds reserved for the defense of the case as its contribution towards the settlement. In June 1997, UAL filed a complaint in the United States District Court for the Northern District of Illinois against two subsidiaries of the Company, Mesa Airlines, Inc. ("MAI") and WestAir, seeking a judicial declaration of the parties' rights and obligations under two separate written agreements, pursuant to which MAI and WestAir allegedly agreed to provide certain airline transportation services to UAL including the provision of scheduled air transportation services in certain areas of the United States under the service mark "United Express." UAL contends that, under these agreements, UAL has the right to 14
15 "increase, decrease, or in any other way adjust the flight frequencies, or markets, or both" in certain airports currently serviced by WestAir and/or MAI. In January 1998, UAL amended its complaint to include damages related to MAI's purported breach of contract to provide specified levels of service in certain cities. MAI and WestAir dispute the principal contentions in UAL's complaint, and unless a satisfactory negotiated resolution is achieved, intend to defend their position vigorously. Furthermore, MAI and WestAir believe that UAL has breached its code-sharing agreements with the respective entities and have filed a counterclaim seeking to recover the substantial damages to the business of MAI and WestAir which have been incurred. In addition, Mesa and WestAir have counter claimed against UAL and SkyWest Airlines. SkyWest was contracted to be Mesa's successor on the West Coast. The complaint alleges that SkyWest unlawfully interfered with Mesa's and WestAir's contracts with UAL. It further alleges improper conduct on the part of UAL and SkyWest in terminating markets under the Mesa agreement and in leading to the non-renewal of the WestAir agreement. The Company is seeking substantial damages against each defendant. In July 1998, Jet Acceptance Corporation ("Jet Acceptance") filed suit against Mesa and WestAir in the United States District Court for the Northern District of California. The suit seeks damages from WestAir for non-payment of leases for Jetstream 31 aircraft leased by WestAir and also claims damages against Mesa for alleged fraudulent conveyances and the receipt of illegal dividends. Jet Acceptance claims damages in the amount of approximately $16.5 million. Jet Acceptance seeks to hold Mesa liable for the WestAir leases on an "alter ego" or "piercing the corporate veil" theory. Mesa denies the allegations. Jet Acceptance has applied for and received a court-ordered attachment of WestAir's assets. The Company intends to vigorously defend this suit. Mesa is also a party to legal proceedings and claims which arise during the ordinary course of business. In the belief of management, based upon information at this time, the ultimate outcome of all the proceedings and claims pending against Mesa other than those with UAL and Jet Acceptance referred to above is not expected to have a material adverse effect on Mesa's consolidated financial position. It is too early to determine the impact on Mesa's financial position of the litigation with UAL and Jet Acceptance. The belief that UAL has breached its code-sharing agreements with MAI and WestAir and the belief that the ultimate outcome of certain of the proceedings and claims pending against Mesa will favorably be resolved are forward-looking statements which could materially differ as a result of the determination of a judge or jury. Item 5. The Company expects to hold its next annual meeting in March 1999. Shareholder proposals to be included in the Company's proxy materials and form of proxy must be received by the Company no later than September 30, 1998. To be included, proposals must be proper under law and comply with the rules and regulations of the U.S. Securities and Exchange Commission. Shareholders desiring to present proposals at the 1999 annual meeting that are 15
16 not to be included in the Company's proxy materials and form of proxy must provide the Company with notice no later than December 1, 1998. Item 6. Exhibits and Reports on Form 8-K (A) Documents filed as part of this report: 1. Reference is made to consolidated financial statement schedules in item 8 hereof. 2. Reports on Form 8-K None 3. Exhibits Please see the attached Exhibit Index for a list of the exhibits that are either filed as part of this report or are incorporated herein by reference from documents previously filed with the Securities and Exchange Commission.
17 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the duly authorized undersigned. MESA AIR GROUP, INC. Registrant Date: August 14, 1998 /s/ Blaine M. Jones ----------------------- Blaine M. Jones Chief Financial Officer (Principal Accounting Officer) 22
18 INDEX TO EXHIBITS <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION REFERENCE ------ ----------- --------- <S> <C> <C> 2.1 Plan and Agreement of Merger of Mesa Air Filed as Exhibit 2.1 to Registrant's Form 10-K Group, Inc. into Mesa Holding, Inc. dated for the fiscal year ended September 30, 1996, September 16, 1996 incorporated herein by reference 3.1 Articles of Incorporation of Mesa Air Filed as Exhibit 3.1 to Inc. dated May 28, 1996 Registrant's Form 10-K Holdings, for the fiscal year ended September 30, 1996, incorporated herein by reference 3.2 Bylaws of Mesa Air Group, Inc., as amended Filed as Exhibit 3.2 to Registrant's Form 10-K for the fiscal year ended September 30, 1996, incorporated herein by reference 4.1 Form of Common Stock certificate Filed as Exhibit 4.5 to Amendment No. 1 to Registrant's Form S-18, Registration No. 33-11765 filed March 6, 1987, incorporated herein by reference 4.2 Form of Common Stock certificate (issued Filed as Exhibit 4.8 to Form S-1, Registration after November 12, 1990) No. 33-35556 effective December 6, 1990, incorporated herein by reference 4.8 Form of Employee Non-Incentive Stock Option Filed as Exhibit 4.12 to Registrant's Form 10-K Plan, dated as of June 2, 1992 for the fiscal year ended September 30, 1992, Commission File No. 33-15495, incorporated herein by reference 4.9 Form of Non-Incentive Stock Option issued Filed as Exhibit 4.13 to Registrant's Form 10-K for under Mesa Airlines, Inc. Employee Non- the fiscal year ended September 30, 1992, Incentive Stock Option Plan, dated Commission File No. 33-15495, incorporated herein as of June 2, 1992 by reference 4.10 Form of Mesa Airlines, Inc. Outside Filed as Exhibits 4.1, 4.2 and 4.3 to Directors Stock Option Plan, dated as of Registration No. 33-09395 effective August 1, March 9, 1993 1996 </TABLE>
19 <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION REFERENCE ------ ----------- --------- <S> <C> <C> 4.11 Form of Stock Option issued under Mesa Filed as Exhibit 4.4 to Registration No. Airlines, Inc. Outside Director's Stock 33-09395 effective August 1, 1996 Option Plan, dated as of March 9, 1993 4.12 Form of Mesa Airlines, Inc. Additional Filed as Exhibit 4.5 to Registration No. Outside Directors Stock Option Plan dated as 33-09395 effective August 1, 1996 of December 9, 1994 4.13 Form of Non-Qualified Stock Option Issued Filed as Exhibit 4.6 to Registration No. Under Mesa Airlines, Inc. Additional Outside 33-09395 effective August 1, 1996 Directors' Stock Option Plan 4.14 Form of Mesa Air Group, Inc. Restated and Filed as Exhibit 4.1 to Registration No. Amended Employee Stock Option Plan dated 33-02791 effective April 24, 1996 April 23, 1996 4.15 Form of Non-Qualified Stock Option issued Filed as Exhibit 4.2 to Registration No. under Mesa Air Group, Inc. Restated and 33-02791 effective April 24, 1996 Amended Employee Stock Option Plan dated April 23, 1996 4.16 Form of Qualified Stock Option issued under Filed as Exhibit 4.3 to Registration No. Mesa Air Group, Inc. Restated and Amended 33-02791 effective April 24, 1996 Employee Stock Option Plan dated April 23, 1996 10.17 Agreement between Beech Aircraft Corporation Filed as Exhibit 10.30 to Form S-1, and Mesa Airlines, Inc., dated April 30, 1990 Registration No. 33-35556 effective December 6, 1990, incorporated herein by reference 10.18 Sublease Agreement between Air Midwest, Inc. Filed as Exhibit 10.32.1 to Form S-1, and Mesa Airlines, Inc., dated April 27, Registration No. 33-35556 effective December 6, 1990 for Embraer Brasilia aircraft 120.180 1990, incorporated herein by reference 10.20 Agreement between Air Midwest, Inc. and Mesa Filed as Exhibit 10.32.3 to Form S-1, Airlines, Inc., dated February 27, 1990, for Registration No. 33-35556 effective December 6, purchase of four Embraer Brasilia aircraft 1990, incorporated herein by reference 10.21 Letter Agreement between McDonnell Douglas Filed as Exhibit 10.32.4 to Form S-1, Finance Corporation, Air Midwest, Inc. and Registration No. 33-35556 effective December 6, Mesa Airlines, Inc., dated March 19, 1990, 1990, incorporated herein by reference as amended, regarding lease and sublease of four Embraer Brasilia aircraft 10.22 Sublease Agreement between Air Midwest Inc. Filed as Exhibit 10.32.5 to Form S-1, and Mesa Airlines, Inc., dated July 26, Registration No. 33-35556 effective December 6, 1990, for Embraer Brasilia aircraft 120.193 1990, incorporated herein by reference 10.23 Lease Agreement between McDonnell Douglas Filed as Exhibit 10.32.6 to Form S-1, Finance Corporation and Mesa Airlines, Inc., Registration No. 33-35556 effective December 6, dated July 26, 1990, for Embraer Brasilia 1990, incorporated herein by reference aircraft 120.193 10.24 Sublease Agreement between Air Midwest Inc. Filed as Exhibit 10.32.7 to Form S-1, and Mesa Airlines, Inc., dated September 26, Registration No. 33-35556 effective December 6, 1990, for Embraer Brasilia aircraft 120.203 1990, incorporated herein by reference </TABLE>
20 <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION REFERENCE ------ ----------- --------- <S> <C> <C> 10.25 Lease Agreement between McDonnell Douglas Filed as Exhibit 10.32.8 to Form S-1, Finance Corporation and Mesa Airlines, Inc., Registration No. 33-35556 effective December 6, dated September 26, 1990, for Embraer 1990, incorporated herein by reference Brasilia aircraft 120.203 10.27 Expanded Partner Agreement between United Filed as Exhibit 19.3 to Registrant's Form 10-Q Air Lines, Inc., and Mesa Airlines, Inc., for the quarterly period ended June 30, 1990, dated February 15, 1990 Commission File No. 0-15495, incorporated herein by reference 10.29 Form of Directors' and Officers' Filed as Exhibit 10.41 to Form S-1, Indemnification Agreement Registration No. 33-35556 effective December 6, 1990, incorporated herein by reference 10.31 Agreement Relating to the Settlement of Filed as Exhibit 10.45 to Form S-1, Interline Accounts through Airlines Clearing Registration No. 33-35556 effective December 6, House, Inc., between Airlines Clearing 1990, incorporated herein by reference House, Inc. and Mesa Airlines, Inc., dated September 2, 1981 10.32 Agreement between Beech Aircraft Corporation Filed as Exhibit 10.42 to Form 10-K for fiscal and Mesa Airlines, Inc., dated September 18, year ended September 30, 1991, Commission File 1991 No. 0-15495, incorporated herein by reference 10.33 Agreement between US Airways, Inc. and Air Filed as Exhibit 10.43 to Form 10-K for fiscal Midwest, Inc. year ended September 30, 1991, Commission File No. 0-15495, incorporated herein by reference 10.34 Agreement between US Airways, Inc. and Filed as Exhibit 10.44 to Form 10-K for fiscal FloridaGulf Airlines, Inc. year ended September 30, 1991, Commission File No. 0-15495, incorporated herein by reference 10.35 Sublease agreement between Trans States Filed as Exhibit 10.45 to Form 10-K for fiscal Airlines, Inc. and Air Midwest, Inc. year ended September 30, 1992, Commission File No. 0-15495, incorporated herein by reference 10.37 Agreement between Beech Aircraft Filed as Exhibit 10.47 to Form 10-K for fiscal Corporation, Beech Acceptance Corporation, year ended September 30, 1992, Commission File Inc. and Mesa Airlines, Inc., dated August No. 0-15495, incorporated herein by reference 21, 1992 10.38 Agreement between America West Airlines, Filed as Exhibit 10.48 to Form 10-K for fiscal Inc. and Mesa Airlines, Inc. year ended September 30, 1992, Commission File No. 0-15495, incorporated herein by reference 10.39 Agreement between United Air Lines, Inc. and Filed as Exhibit 10.49 to Form 10-K for fiscal WestAir Commuter Airlines, Inc. (WestAir) year ended September 30, 1992, Commission File No. 0-15495, incorporated herein by reference 10.40 Plan and Agreement to Merge between Mesa Filed as Exhibit A to Form S-4 Registration No. Airlines, Inc., Mesa Acquisition Corporation 33-45638, effective April 17, 1992, and WestAir Holding, Inc., dated February 7, incorporated herein by reference 1992 10.41 Certificate of Public Convenience and Filed as Exhibit 10.1(a) to WestAir Holding, Necessity for WestAir Commuter Airlines, Inc. Inc.'s Registration Statement on Form S-1, Commission File No. 33-24316, incorporated herein by reference 10.42 Air Carrier Operating Certificate for WestAir Filed as Exhibit 10. to WestAir Holding, Inc.'s Registration Statement on Form S-1, Commission File No. 33-24316, incorporated herein by reference </TABLE>
21 <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION REFERENCE ------ ----------- --------- <S> <C> <C> 10.46 Original Agreement to Lease dated as of Filed as Exhibit 10.44 to WestAir Holding, April 27, 1987 between NPA, Inc. ("NPA") and Inc.'s Registration Statement on Form S-1, British Aerospace, Inc. ("BAe") with a Commission File No. 33-24316, incorporated Letter to FG Holdings, Inc. ("FGH") dated herein by reference March 11, 1988 and Amendment No. 1 to Agreement to Lease dated as of March 3, 1988 between BAe and FGH 10.47 Side Letter Agreement to NPA from JACO dated Filed as Exhibit 10.48 to WestAir Holding, June 4, 1987 Inc.'s Registration Statement on Form S-1, Commission File No. 33-24316, incorporated herein by reference 10.49 Employment Agreement dated as of Filed as Exhibit 10.51(b) to WestAir Holding, September 1, 1988 between WestAir and Inc.'s Registration Statement on Form S-1, Maurice J. Gallagher Jr. Commission File No. 33-24316, incorporated herein by reference 10.50 Aviation Land and Building Lease and Filed as Exhibit 10.164 to the Pre-effective Agreement between City of Fresno, California Amendment No. 1, filed October 19, 1988, to and WestAir dated January 7, 1986 WestAir Holding, Inc.'s Registration Statement on Form S-1, Commission File No. 33-24316, incorporated herein by reference 10.51 Airport Operating Permit between Airport Filed as Exhibit 10.67 to WestAir Holding, Commission of City and County of San Inc.'s Registration Statement on Form S-1, Francisco and WestAir Commission File No. 33-24316, incorporated herein by reference 10.58 Promissory Note to Textron for spare parts Filed as Exhibit 10.80 to WestAir Holding, as executed by WestAir, dated December 30, Inc.'s Form 10-K dated December 31, 1988, 1988 Commission File No. 33-24316, incorporated herein by reference 10.59 Agreement to lease Jetstream model 3101 Filed as Exhibit 2.1 to WestAir Holding, Inc.'s aircraft and Jetstream model 3201 Form 8-K filed June 8, 1989, Commission File aircraft between BAe and WestAir, dated No. 33-24316, incorporated herein by reference May 11, 1989 10.60 Amendment to Agreement to Lease dated May Filed as Exhibit 10.38 to WestAir Holding, 11, 1989 between WestAir and BAe, dated Inc.'s Form 10-K for the year ended February 15, 1990 December 31, 1989, Commission File No. 33-24316, incorporated herein by reference 10.61 Amended and Restated Stock Purchase Filed as Exhibit 10.42(a) to WestAir Holding, Agreement, dated September 30, 1991 among Inc.'s Form 10-K for the year ended December WestAir Holding, Inc., WestAir Commuter 31, 1991, Commission File No. 33-24316, Airlines, Inc. and Atlantic Coast Airlines, incorporated herein by reference Inc., relating to the sale of the Atlantic Coast division of WestAir Commuter Airlines, Inc. 10.65 Agreement of Purchase and Sales of Assets by Filed as Exhibit 10.90 to Mesa Airlines, Inc. and among Crown Airways, Inc., Phillip R. Form 10-K for the year ended September 30, Burnaman, A. J. Beiga and Mesa Airlines, 1994, Commission File No. 0-15495 Inc., dated as of December 16, 1993 10.66 Supplemental Agreement No. 9/03/94 Filed as Exhibit 10.66 to Mesa Airlines, Inc. Beechcraft 1900 D Airliner Acquisition Form 10-K for the year ended September 30, Master Agreement between Mesa Airlines, 1994, Commission File No. 0-15495 Inc., Beech Aircraft Corporation and Beech Acceptance Corporation, Inc., dated as of September 23, 1994 </TABLE>
22 <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION REFERENCE ------ ----------- --------- <S> <C> <C> 10.67 Form of Lease Agreement between Beech Filed as Exhibit 10.67 to Mesa Airlines, Inc. Acceptance Corporation, Inc. and Mesa Form 10-K for the year ended September 30, Airlines, Inc., negotiated September 30, 1994, Commission File No. 0-15495 1994 for all prospective 1900 D Airliner leases. 10.68 Asset Purchase Agreement dated July 29, 1994 Filed as Exhibit 10.68 to Mesa Airlines, Inc. among Pennsylvania Commuter Airlines, Inc., Form 10-K for the year ended September 30, dba Allegheny Commuter Airlines, US Airways 1994, Commission File No. 0-15495 Leasing and Services, Inc., and Mesa Airlines, Inc. 10.69 Letter Agreement in Principle dated as of Filed as Exhibit 10.69 to Mesa Airlines, Inc. October 16, 1994 among Air Wisconsin, Inc., Form 10-K for the year ended September 30, United Air Lines Inc. and Mesa Airlines, 1994, Commission File No. 0-15495 Inc. (Certain portions deleted pursuant to request for confidential treatment) (Referred to erroneously as Exhibit 10.94 in letter asking for confidential treatment to Securities and Exchange Commission dated 12-23-94 from Chapman & Culture) 10.70 Subscription Agreement between AmWest Filed as Exhibit 10.70 to Mesa Airlines, Inc. Partners, L.P. and Mesa Airlines, Inc. dated Form 10-K for the year ended September 30, as of June 28, 1994 1994, Commission File No. 0-15495 10.71 Omnibus Agreement Filed as Exhibit 10.71 to Mesa Air Group, Inc. Form 10-Q for the quarter ended December 31, 1994, Commission File No. 0-15495 10.72 Aircraft Purchase and Sale Agreement Filed as Exhibit 10.72 to Mesa Air Group, Inc. Form 10-Q for the quarter ended December 31, 1994, Commission File No. 0-15495 10.73 Expendable and Rotable Spare Parts and Sale Filed as Exhibit 10.73 to Mesa Air Group, Inc. Agreement Form 10-Q for the quarter ended December 31, 1994, Commission File No. 0-15495 10.74 United Express Agreement Amendment Filed as Exhibit 10.74 to Mesa Air Group, Inc. Form 10-Q for the quarter ended December 31, 1994, Commission File No. 0-15495 10.75 Side Letter Agreement Filed as Exhibit 10.75 to Mesa Air Group, Inc. Form 10-Q for the quarter ended December 31, 1994, Commission File No. 0-15495 10.76 First Amendment to Omnibus Agreement Filed as Exhibit 10.76 to Mesa Air Group, Inc. Form 10-Q for the quarter ended December 31, 1994, Commission File No. 0-15495 10.77 Operating Lease Agreement Filed as Exhibit 10.77 to Mesa Air Group, Inc. Form 10-Q for the quarter ended December 31, 1994, Commission File No. 0-15495 10.78 Item 3. Legal Proceedings - Form 10-K dated Filed as Exhibit 10.78 to Mesa Air Group, Inc. September 30, 1994 Form 10-Q for the quarter ended December 31, 1994, Commission File No. 0-15495 </TABLE>
23 <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION REFERENCE ------ ----------- --------- <S> <C> <C> 10.79 Purchase Agreement B95-7701-PA-200 between Filed as Exhibit 10.79 to Mesa Air Group, Inc. Bombardier Inc. and Mesa Airlines, Inc. Form 10-Q for the quarter ended March 31, 1995, Commission File No. 0-15495 10.81 Letter of Understanding between Mesa Air Filed as Exhibit 10.81 to Mesa Air Group, Inc. Group, Inc. and Raytheon Aircraft Company Form 10-Q for the quarter ended March 31, 1996, (RAC) dated April 12, 1996. Commission File No. 0-15495 10.82 Supplemental Agreement No. 05/22/96, Filed as Exhibit 10.82 to Mesa Air Group, Inc. Beechcraft 1900D Airliner Acquisition Master Form 10-Q for the quarter ended March 31, 1997, Agreement between Mesa Air Group, Inc., Commission File No. 0-15495 Raytheon Aircraft Company and Raytheon Aircraft Credit Corporation 10.83 Bombardier Regional Aircraft Division Filed as Exhibit 10.83 to Mesa Air Group, Inc. Purchase Agreement CRJ-0351 between Form 10-Q for the quarter ended December 31, Bombardier Inc. and Mesa Air Group, Inc. 1996, Commission File No. 0-15495 10.84 Aircraft Option Exercise B97-7701-RJTL-3492L Filed as Exhibit 10.84 to Mesa Air Group, Inc. dated as of August 15, 1997 between Mesa Air Form 10-K for the fiscal year ended Group, Inc. and Bombardier Inc. (Request September 30, 1997, Commission File No. 0-15495. for confidential treatment submitted to SEC.) 10.85 Bombardier Regional Aircraft Division Filed as Exhibit 10.85 to Mesa Air Group, Inc. Settlement Agreement B97-7701-RJTL-3493L Form 10-K for the fiscal year ended dated as of August 15, 1997 between Mesa Air September 30, 1997, Commission File No. 0-15495. Group, Inc. and Bombardier Inc. (Request for confidential treatment submitted to SEC.) 10.86 Service Agreement dated as of November 11, Filed as Exhibit 10.86 to Mesa Air Group, Inc. 1997 between Mesa Airlines, Inc. and US Form 10-K for the fiscal year ended Airways, Inc. (Request for confidential September 30, 1997, Commission File No. 0-15495. treatment submitted to SEC.) 10.87 Letter Agreement dated as of March 26, 1998 Filed as Exhibit 10.87 to Mesa Air Group, Inc. between Mesa Airlines, Inc. and America West Form 10-Q for the quarter ended March 31, Airlines, Inc. (Request for confidential 1998, Commission File No. 0-15495. treatment submitted to SEC.) 10.88 Employment Agreement dated as of March 13, Filed as Exhibit 10.88 to Mesa Air Group, Inc. 1998, between Mesa Air Group, Inc. and Form 10-Q for the quarter ended March 31, Jonathan G. Ornstein 1998, Commission File No. 0-15495. 10.89 Form of Employment Agreement dated as of Filed as Exhibit 10.89 to Mesa Air Group, Inc. January 5, 1998 entered into by and between Form 10-Q for the quarter ended March 31, Mesa Air Group, Inc. and Gary E. Risley, W. 1998, Commission File No. 0-15495. Stephen Jackson, J. Clark Stevens and various other officers of the Company and its subsidiaries 10.90 Letter Agreement dated as of February 4, Filed as Exhibit 10.90 to Mesa Air Group, Inc. 1998 between Mesa Air Group, Inc. and Larry Form 10-Q for the quarter ended March 31, L. Risley 1998, Commission File No. 0-15495. 10.91 Code Share and Revenue Sharing Agreement Filed herewith between Mesa Airlines, Inc. and America West Airlines, Inc. (Request for confidential treatment submitted to SEC.) 27 Financial Data System Filed herewith </TABLE>