US regional carrier Mesa Airlines has turned a profit in the first quarter of its fiscal year of 2021. Clocking in at just over $14 million, Mesa’s business structure and diversified portfolio of operations led the airline’s first-quarter results to be a decent start to the year. In fact, the airline improved its net income compared to the same quarter in 2019.
Mesa Airlines turns a profit
For the three months ended on December 31st, Mesa Airlines turned a $14.1 million profit in the quarter. This was the airline’s first quarter, as its fiscal year runs from October 1st through September 30th instead of the traditional calendar year. Mesa’s also recorded a profit in its fiscal year 2020.
The $14.1 million profit was higher than the $10.8 million profit it recorded in the same period of 2019. Some highlights included a reduction in operating expenses, driven primarily from a reduction in flight operations and $11.3 million in payroll support.
Mesa’s business agreements
As a regional carrier, Mesa flies on behalf of major US carriers. The airline currently has capacity purchase agreements with American Airlines and United Airlines.
Under the American Airlines agreement, the carrier flew 54 CRJ900s in the December quarter. However, a revised service agreement with American will see the airline fly 45 CRJ900s in the March quarter and beyond.
Under United Airlines, Mesa is restructuring its operations. After flying 20 CRJ700s through the June and September quarter in 2020 for United, the airline brought that number down to eight CRJ700s flying under the United Express regional banner in the December quarter and down to zero this quarter.
However, the airline is doing more Embraer E175 flying for United. After flying 60 E175s in the June and September quarter in 2020, the airline flew 72 of the jets in the December quarter for United, and, by the end of this fiscal year, the airline will fly a total of 80 E175s for United Airlines.
The final agreement with cargo carrier DHL sees Mesa fly two Boeing 737-400Fs. The airline started flying the first two for DHL in the December quarter.
The airline operated 136 aircraft in the December quarter. This number will decrease to 123 planes this quarter, before increasing to 127 planes by the end of this fiscal year. The decrease comes from less CRJ700 and CRJ900 flying for United and American, respectively. However, the later increase comes as Mesa adds more E175 flying for United Airlines.
Mesa’s business model positions it to do well
Unlike United and American, Mesa does not get paid based on the number of bookings and customer enplanements. Rather, the airline gets paid for the amount of flying it does on behalf of major airlines.
In the December quarter, the airline recorded 69,247 block hours of flying. This was up from the 57,622 block hours in the quarter before, and then 31,622 block hours it flew in the abysmal June quarter.
In its second quarter, the airline is currently forecasting 76,000 block hours. The carrier expects it to grow to 85,000 block hours in the June quarter of 2021 and 89,000 in the September quarter of 2021.
Mesa does not necessarily dictate the routes it flies. Rather, American or United work with the carrier to provide, mainly, regional feed. For example, Mesa flies between American’s hub in Dallas/Fort Worth, Texas, to Sioux Falls, South Dakota. Passengers can connect to or from the Sioux Falls flight to a host of domestic and international routes out of Dallas.
Since American wants Mesa to fly the routes, Mesa does. Regardless of whether every single flight goes out full or not, the carrier gets paid for the block hours since Mesa does not market or sell the flights. It operates them under the American Eagle banner.
A similar example plays out on a route like Washington-Dulles to Charleston under the United Express banner.
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