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Item 8. Financial Statements and Supplementary Data

2025-05-14 compared with 2024-01-26 · 469 added, 608 removed, 657 unchanged (62% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Mesa Air Group, Inc.

(the Company) as of September 30, 2022, the related consolidated statements of operations and comprehensive (loss) income, stockholders’

equity and cash flows for each of the two years in the period ended September 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2022 and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2022, in conformity with U.S.

We have audited the accompanying consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the year ended September 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company's operations and its cash flows for the year ended September 30, 2022, in conformity with U.S.

generally accepted accounting principles.

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These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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/s/ Ernst & Young LLP

We served as the Company’s auditor from 2019 to 2023.

Phoenix, Arizona

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We have audited the accompanying consolidated balance sheet of Mesa Air Group, Inc.

(the Company) as of September 30, 2023, the related consolidated statements of operations and comprehensive (loss) income, stockholders' equity and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

(the Company) as of September 30, 2023, the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity and cash flows, for the year then ended and the related notes (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control —

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Our report dated January 26, 2024 expressed an opinion that the Company had not maintained effective internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control —

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Emphasis of Matter related to Concentration of Revenue and Liquidity

As discussed in Notes 1, 2, 3 and 5 to the financial statements, the Company generates substantially all its revenues and liquidity from United Airlines, Inc.

under terms of a capacity purchase agreement and other agreements.

The termination or modification of these agreements may have significant adverse effects on the Company’s continuing operations and liquidity.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

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Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provide a reasonable basis for our opinion.

We served as the Company’s auditor from 2023 to 2024.

Phoenix, Arizona

January 26, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Mesa Air Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Mesa Air Group, Inc.

(the “Company”) as of September 30, 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the year ended September 30, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024, and the results of its operations and its cash flows the year ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Forecasted Cash Flows Utilized in Assessment of Going Concern and Impairment of Long-lived Assets

As described in Notes 1 and 2 of the consolidated financial statements, the Company believes that cash on hand, ongoing cashflows from operations, in addition to obtaining equity financing, issuing debt, entering into other financing arrangements, restructuring of operations to grow revenues and decrease expenses, selling the aircraft held for sale and equity investments, is adequate to meet its cash obligations for the next twelve months following the issuance of its financial statements.

Accordingly, management has disclosed the factors that give rise to initial concerns regarding the ability of the Company to continue as a going concern, as well as management’s plan and management’s conclusion as to whether the plan is probable of being both implemented and effective in alleviating the conditions giving rise to substantial doubt.

The process involves the forecast of cash flows to determine whether the Company will have sufficient cash to continue operations and repay debt as it becomes due.

In addition, to determine whether impairments exist for long-lived assets, including aircraft and other related assets used in operations, among other things, the Company identified the asset groups at the capacity purchase agreement or flight services agreement level (i.e., the lowest level for which there are identifiable cash flows).

As disclosed in Note 1 of the consolidated financial statements, the Company believes that cash on hand, ongoing cashflows from operations, restructuring debt covenants and agreements, forgiveness of debt based on operational metrics outlined in the United Capacity Purchase Agreement, borrowing capacity under the United Revolving Credit Facility, reimbursement of expenses up to $14.0 million related to the transition to an entirely E-175 fleet, restructuring of operations to defer major expenses, and selling the

aircraft and engines held for sale, is adequate to fund operations and meet debt obligations for the next twelve months following the issuance of these financial statements.

Accordingly, management has disclosed the factors that give rise to concerns regarding the ability of the Company to continue as a going concern, as well as management’s implemented plan which alleviates the conditions giving rise to substantial doubt.

The plan involves the forecast of cash flows to determine whether the Company will have sufficient cash to fund operations and satisfy debt obligations as it becomes due.

As disclosed in Note 2 of the consolidated financial statements the Company reviews long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired.

To determine whether impairments exist for aircraft and other related assets used in operations, the Company groups assets at the lowest level for which identifiable cash flows exist.

The Company assesses whether indicators of impairment are present for an asset group and, when applicable, the Company evaluates recoverability of the asset group by comparing the undiscounted future cash flows to the carrying amount of the asset group.

The Company estimates future cash flows based on the projections of the capacity purchase agreement or flight services agreement.

In the event the asset group is not recoverable, an impairment charge is recorded and the asset group’s carrying amount is reduced to its estimated fair value.

The forecast of undiscounted cashflows prepared to assess going concern and impairment of long-lived assets was prepared with significant judgment and estimates of future cashflows based on projections of capacity purchase agreement block hours, maintenance events, labor costs, and other relevant factors.

We identified management’s evaluation of undiscounted cash flows related to the assessment of going concern and impairment of long-lived assets for the United capacity purchase agreement asset group as a critical audit matter.

The undiscounted cash flows represent an estimate that is subject to significant estimation uncertainty regarding the Company’s future cash flows and the risk of bias in management’s judgments in estimating these cash flows.

Auditing the undiscounted cash flows related to going concern and the impairment of long-lived assets involves a high degree of auditor judgment and an increase in audit effort.

Our audit procedures related to testing management’s evaluation of undiscounted cash flows included the following, among others:

Evaluated the reasonableness of forecasted revenues and operating expenses, as well as management’s assumptions related to sources and uses of cash.

This testing included:

Developing an understanding of management’s plans for financing operations through discussions with management.

Evaluating probability of future asset sales to generate cash inflows through tracing expected future asset sales to binding purchase agreements.

Developing an understanding of management’s expectations for future changes in revenue and expenses through discussions with management, review of budgets, comparison of historical and projected block hours to be provided under capacity purchase agreement, including information obtained from the customer, consideration of pilot attrition and number of current and projected pilots, and consideration of the number of aircraft to provide services under the capacity purchase agreement.

Evaluating the reasonableness of forecasted revenues and expenses to historical results through comparison of historical block hours provided under capacity purchase agreement, and direct and indirect expenses.

Evaluating the completeness of the disclosures related to management’s plans.

Evaluated the reasonableness of management’s estimate to remain in compliance with debt covenants, as of the balance sheet date and through a year from issuance.

Evaluating the impact of the Company’s debt amendments subsequent to the balance sheet date and the amendments impact on cash flows through a year from issuance.

/s/ RSM US LLP

The Company estimates future cash flows based on projections of capacity purchase block hours, maintenance events, labor costs and other relevant factors.

If the asset group is not recoverable, an impairment charge is recorded and the asset group’s carrying amount is reduced to its estimated fair value.

Management engaged experts to calculate the fair value of long-lived assets.

The forecasts of undiscounted cashflows prepared to assess going concern and impairment of long-lived assets were prepared with significant judgment and estimates of future cashflows based on projections of capacity purchase agreement block hours, maintenance events, labor costs, and other relevant factors.

The principal considerations for our determination that performing procedures relating to the forecasts of undiscounted cashflows prepared to assess going concern and impairment of long-lived assets as critical audit matters are (i) the significant judgment by management in estimating capacity purchase block hours, maintenance events, labor costs and other relevant factors, (ii) the significant judgment by management in estimating future compliance with debt covenants, (iii) the significant judgement by management used by experts to calculate the fair value of long-lived assets, and (iv) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the forecasts of undiscounted cashflows and the determination of the fair value of the long-lived assets.

Addressing the critical audit matters involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included (i) testing management’s process for developing the estimates (ii) testing the completeness and accuracy of underlying data used in the estimates (iii) testing future asset sales to generate cash through binding purchase agreements, (iv) testing future compliance with debt covenants based on amended debt agreements, (v) testing changes in revenues and expenses through audit procedures on projected block hours, scheduled future flight plans, pilot attrition, and number of aircraft in service, (vi) testing the valuation of long-lived assets, including the work performed by management’s specialists, and (vii) testing the completeness of the disclosures related to management’s plans.

/s/ Marcum llp

We have served as the Company’s auditor since 2024

Phoenix, Arizona

January 26, 2024

MESA AIR GROUP, INC.

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Property and equipment, net

Intangible assets, net

Lease and equipment deposits

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Assets held for sale

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Accrued compensation

Customer deposits

Other accrued expenses

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Noncurrent operating lease liabilities

Deferred credits ($ 4,617 and $ 2,193 from related party)

Deferred credits from related party

Deferred income taxes

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(2023) warrants issued and outstanding

(Accumulated deficit)/Retained Earnings

Accumulated deficit

Total stockholders' equity

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MESA AIR GROUP, INC.

Consolidated Statements of Operations and Comprehensive (Loss) Income

(in thousands)

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

Year Ended September 30,

Operating revenues:

Contract revenue (2023—$ 294,129 , 2022—$ 207,003 , and 2021—$ 198,212 from related party)

Contract revenue (2024—$ 394,206 , 2023—$ 294,129 , and 2022—$ 207,003 from related party)

Pass-through and other revenue

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Depreciation and amortization

Lease termination

Asset impairment

(Gain) on sale of assets

Loss/(Gain) on sale of assets

Other operating expenses

Government grant recognition

Total operating expenses

Operating (loss)/income

Operating loss

Other income (expense), net:

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Interest income

Unrealized gain/(loss) on investments, net

Other (expense)/income, net

Gain on investments, net

Unrealized (loss)/gain on investments, net

Gain on extinguishment of debt

Gain on debt forgiveness

Other expense, net

Total other expense, net

(Loss)/income before taxes

Income tax (benefit)/expense

Net (loss)/income and comprehensive (loss)/income

Loss before taxes

Income tax expense/(benefit)

Net loss and comprehensive loss

Net loss per share attributable to

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Payment of tax withholding for

Issuance of warrants, net of issuance costs

Restricted shares issued

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Restricted shares issued

United Stock Issuance

Employee share purchases

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Restricted shares issued

United Stock Issuance

Employee share purchases

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Stock compensation expense

Unrealized (gain)/loss on investments, net

Unrealized loss/(gain) on investments, net

Realized gain on investments, net

Deferred income taxes

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Loss/(Gain) on extinguishment of debt

Gain on debt forgiveness

Changes in assets and liabilities:

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Operating lease right-of-use assets and liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Capital expenditures

Investments in equity securities

Proceeds from sale of aircraft and engines

Refund (payment) of equipment and other deposits

Net cash provided by (used in) investing activities

Proceeds from (purchases of) investments in equity securities, net

Proceeds from sale of aircraft and engines, net of transaction costs

Investment transaction costs

Receipt (payment) of equipment and other deposits

Net cash provided by investing activities

Cash flows from financing activities:

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Proceeds from issuance of common stock under ESPP

Debt prepayment costs

Payment of tax withholding for RSUs

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Finance lease obtained in exchange for lease liability

Principal payments in exchange for transfer of equity investment

Principal forgiven

Acquisition of finance leases

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Accrued capital expenditures

Debt issuance cost related to loan agreement with U.S.

Department of the Treasury

See accompanying notes to these consolidated financial statements.

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Headquartered in Phoenix, Arizona, Mesa Air Group, Inc.

("Mesa", the "Company", "we", "our", or "us") is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 86 cities in 36 states, the District of Columbia, Canada, Cuba, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport.

Under the United CPA and DHL FSA, Mesa operated or maintained as operational spares a fleet of 120 aircraft with approximately 296 daily departures and 2,303 employees as of September 30, 2023.

Mesa’s fleet were conducted under the Company’s Capacity Purchase Agreements (“CPAs”) and Flight Services Agreement (“FSA”), leased to a third party, held for sale or maintained as operational spares.

Mesa operates all of its flights as either United Express or DHL Express flights pursuant to the terms of the CPA entered into United Airlines, Inc.

(“United”) and FSA with DHL Network Operations (USA), Inc.

(“DHL”) (each, our “major partner”).

Prior to the wind-down and termination of the Company's CPA with American Airlines, Inc.

("American") on April 3, 2023, Mesa also operated flights as American Eagle.

All of the Company’s consolidated contract revenues for the twelve months ended September 30, 2023 and September 30, 2022 were derived from operations associated with the American CPA prior to April 3, 2023, the United CPA, FSA, and leases of aircraft to a third party.

("Mesa," the "Company," "we," "our," or "us") is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 67 cities in 34 states, Cuba, and Mexico.

As of September 30, 2024, Mesa operated a fleet of 67 regional aircraft consisting of 55 E-175 aircraft and 12 CRJ-900 aircraft with approximately 265 daily departures.

Mesa’s fleet were conducted under our CPA and FSA, leased to a third party, held for sale or maintained as operational spares during the fiscal year ended September 30, 2024.

Mesa operates all of its flights as United Express flights pursuant to the terms of the CPA entered into with United.

Prior to the voluntary wind-down of the FSA with DHL on March 1, 2024, Mesa also operated flights as DHL Express flights pursuant to the terms of the FSA.

All of the Company’s consolidated contract revenues for the fiscal years ended September 30, 2024 and 2023 were derived from operations associated with the United CPA, DHL FSA, leases of aircraft to a third party, and Mesa Pilot Development ("MPD").

The Company also generated contract revenues for the fiscal year ended September 30, 2023 from the Company's CPA with American prior to the wind-down and termination of the American CPA on April 3, 2023.

The United CPA involves a revenue-guarantee arrangement whereby United pays fixed-fees for each aircraft under contract, departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time), and reimbursement of certain direct operating expenses in exchange for providing flight services.

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Under the terms of the CPA, United controls route selection, pricing, and seat inventories, reducing our exposure to fluctuations in passenger traffic, fare levels, and fuel prices.

Under our FSA with DHL, we receive a fee per block hour with a minimum block hour guarantee in exchange for providing cargo flight services.

Ground support expenses including fueling and airport fees are paid directly by DHL.

Impact of Pilot Shortage and Attrition

During our fiscal year ended September 30, 2023 , the severity of the pilot shortage and attrition and increasing costs associated with pilot wages adversely impacted our financial results, cash flows, financial position, and other key financial ratios.

These conditions and events raised substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

One of the primary factors contributing to the pilot shortage and attrition is the demand for pilots at major carriers, which are hiring at an accelerated rate to backfill the thousands of pilots whom they offered early retirements to at the beginning of the pandemic.

These airlines now seek to increase their capacity to meet the growing demand for air travel as the global pandemic has moderated.

A primary source of pilots for the major US passenger and cargo carriers are the US regional airlines.

As a result of the pilot shortage and attrition, the Company has increased overall hourly pay of nearly 118 % for captains and 172 % for new-hire first officers.

As a result of pilot shortage and attrition, we produced less block hours to generate revenues and incurred penalties for operational shortfalls under our CPAs.

During the twelve months ended September 30, 2023, these challenges resulted in a negative impact on the Company’s financial results highlighted by cash flows used in operations of $ 24.1 million and net loss of $ 120.1 million including a non-cash impairment charge of $ 54.3 million related to the Company designating 14 CRJ-900 aircraft as held for sale and our customer relationship intangible asset.

These conditions and events raised substantial doubt about our ability to continue to fund our operations and meet our debt obligations over the next twelve months.

To address such concerns, management developed and implemented several material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt

obligations over the next twelve months.

The Company implemented the following measures during the year ended September 30, 2023, and through the date of the issuance of the financial statements.

We have 15 aircraft under the RASPRO finance lease with a buyout obligation of $ 50.3 million at the end of March 2024.

We entered into purchase agreements with two separate parties to purchase the RASPRO aircraft and related engines.

One agreement is for 30 engines for a total of $ 19.5 million.

The second agreement is for 15 airframes (without engines) for a total of $ 18.8 million.

Both of these transactions are expected to be completed by the end of March 2024, with net cash from these transactions expected to be approximately $( 12.1 ) million.

We entered into an agreement to sell 11 CRJ-900 aircraft to a third party.

The Company has closed the sale of seven of the aircraft which generated $ 21.0 million in gross proceeds and approximately $ 1.5 million in net proceeds after partial debt reduction on the UST Loan.

Subsequent to September 30, 2023, we closed the sale of the remaining four CRJ-900 aircraft to the third party for gross proceeds of $ 12.0 million.

Net proceeds from the sale of all four aircraft was $ 6.5 million after partial debt reduction of our UST Loan.

We entered into an agreement with Export Development Bank of Canada (EDC), reducing debt and interest payments on seven CRJ-900 aircraft which began January 2023 through December 2024, providing approximately $ 14.0 million of liquidity.

Additionally, the junior noteholder, MHIRJ, agreed to forgive approximately $ 5.0 million in principal contingent upon the repayment of $ 4.2 million in principal by December 31, 2023.

We entered into an agreement to sell seven surplus CRJ-900 aircraft to American.

The Company has closed the sale of three of the aircraft which generated approximately $ 29.7 million in gross proceeds and approximately $ 2.4 million in net proceeds after partial debt reduction.

Subsequent to September 30, 2023, the Company closed the sale of the remaining four CRJ-900 aircraft to American for gross proceeds of $ 41.5 million.

Net proceeds from the sale of all four aircraft was $ 5.7 million after the retirement of the EDC Loan and MHIRJ junior note.

$ 0.6 million in proceeds from the sale of each aircraft was repaid to MHIRJ for a total of $ 4.2 million, and we achieved approximately $ 5.0 million of forgiveness on the MHIRJ junior note.

We established and drew upon a new line of credit with United totaling $ 25.5 million.

The United line of credit contains an additional deemed prepayment of $ 15 million with potential forgiveness upon the achievement of a certain number of block hours flown as well as maintaining a 99.3 % controllable completion factor ("CCF") over any rolling four-month period from April 2023 through December 2024.

As of November 2023, the foregoing milestones have been achieved for such rolling four-month period.

As a result, $ 9 million of the $ 15 million will be deemed prepaid one business day following the repayment of the Effective Date Bridge Loan discussed elsewhere herein.

We consider it likely that we will achieve additional forgiveness in fiscal year 2024.

Subsequently, this facility was amended to permit the Company to re-draw approximately $ 7.9 million of the Effective Date Bridge Loan previously repaid and increased the amount of Revolving Commitments from $ 30.7 million to $ 50.7 million.

See Note 10 for a discussion of the line of credit and amount drawn as well as discussion on the deemed prepayment.

On January 11, 2024 and January 19, 2024, we entered into the First Amendment to our Third Amended and Restated United CPA and the Second Amendment to our Third Amended and Restated United CPA (the "January 2024 United CPA Amendments"), respectively.

The January 2024 United CPA Amendments provide additional liquidity and certain other amendments described below

o Increased CPA rates, retroactive to October 1, 2023 through December 31, 2024, which are projected to generate approximately $ 63.5 million in incremental revenue over the next twelve months.

o Amended certain notice requirements for removal by United of up to eight CRJ-900 Covered Aircraft (as defined in the United CPA) from the United CPA.

o Extended United's existing utilization waiver for the Company's operation of E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA) to June 30, 2024.

On January 11, 2024 and January 19, 2024, we entered into Amendment No.

4 to our Second Amended and Restated Credit and Guaranty Agreement, Amendment No.

1 to Stock Pledge Agreement and Limited Waiver of Conditions to Credit Extension United and Waiver and Amendment No.

5 to our Second Amended and Restated Credit and Guaranty Agreement (collectively, the "January 2024 Credit Agreement Amendments"), respectively.

The January 2024 Credit Agreement Amendments provide for the following:

o The repayment in full of the Company's $ 10.5 million Effective Date Bridge Loan obligations, and the prepayment (and corresponding reduction) of approximately $ 2.1 million in Revolving Loans (as defined therein), with the proceeds from the sale, assignment, or transfer of the Company's vested investment in Heart Aerospace Incorporated.

o As a result of the repayment of the Effective Date Bridge Loan and pay down of the Revolving Loans, the shares of capital stock of Archer Aviation, Inc.

held by the Company are being released as collateral for the United credit facility, subject to certain conditions.

o The waiver of certain financial covenant defaults with respect to the fiscal quarters ended June 30, 2023, September 30, 2023, and December 31, 2023 and the waiver of projected financial covenant defaults with respect to the fiscal quarter ending March 31, 2024.

o An increase in the Applicable Margin (as defined in the United credit facility) during a specified period of time for borrowings under the Credit Agreement.

o Loan prepayment requirements in connection with the sale of four specified aircraft engines and the addition of such engines as collateral for the United credit facility for a specified period of time.

On December 1, 2023, we entered into an agreement with a third party to sell 12 surplus GE model CF34-8C aircraft engines and related parts.

The gross proceeds of $ 56.0 million will be used to retire approximately $ 40.0 million in associated debt and provide additional liquidity to fund operations and current debt obligations as they come due.

The transaction is expected to close by the end of March 2024.

Subsequent to September 30, 2023, we entered into a purchase agreement with a third party which provides for the sale of 23 engines for gross proceeds of $ 11.5 million which will be used to pay down our UST Loan.

The transaction is expected to close by the end of December 2024.

Liquidity and Going Concern

During our fiscal year ended September 30, 2024, the decrease in scheduled flying activity associated with the transition of our operations with American to United, increased costs associated with pilot wages, together with increasing interest rates adversely impacted our financial results, cash flows, financial position, and other key financial ratios.

Additionally, United has asked us to accelerate the removal of our CRJ-900 aircraft and transition the pilots to our E-175 fleet.

These events will lead to increased costs and impact our block hour capabilities while these pilots are in training.

As a result of the decrease in scheduled flying activity for United, we produced less block hours to generate revenues.

During the fiscal year ended September 30, 2024, these challenges resulted in a negative impact on the Company’s financial results highlighted by net loss of $ 91.0 million, primarily due to impairment expense of $ 73.7 million related to held for sale assets during the year.

These conditions and events raised concerns about our ability to continue to fund our operations and meet our debt obligations over the next twelve months from the filing of this Form 10-K.

To address such concerns, management developed and implemented certain material changes to our business designed to ensure the Company could continue to fund its operations and meet its debt obligations over the next twelve months.

The following measures were implemented during the year ended September 30, 2024, and through the date of issuance of the financial statements.

• On April 4, 2025, the Company entered into the Three Party Agreement between United, Republic, and the Company, which provides for, among other things, the following, each subject to the completion of the Merger Agreement:

o Termination of the United CPA.

o The Company to sell or dispose of all remaining Eligible Assets (as defined in the Three Party Agreement).

o The Company to extinguish all remaining debt with cash and sale of assets.

Any remaining debt will be assumed by the surviving corporation or forgiven by United.

o A three percent ( 3 %) increase in CPA block hour rates, retroactive to January 1, 2025.

o The transfer of all of the Company's rights and obligations under its agreements with Archer (as discussed in Note 17).

• On April 4, 2025, we entered into the Sixth Amendment to the Third Amended and Restated Capacity Purchase Agreement with United which provides for the following:

o The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments, retroactive to January 1, 2025, through March 31, 2026.

o The extension of incentives for achieving certain performance metrics, retroactive to July 1, 2024, through March 31, 2026.

• On April 4, 2025, we entered into the Sixth Amendment to Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of an existing financial covenant default with respect to the period ended March 31, 2025, and a projected financial covenant default with respect to the periods ending June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026, each relating to a minimum liquidity requirement under our United Revolving Credit Facility.

• On April 3, 2025, we entered into a purchase agreement with a third party which provides for the sale of 23 GE model CF34-8C engines to the third party for expected gross proceeds of $ 16.3 million, which will be used to pay down our UST Loan.

• On December 31, 2024, we entered into an Aircraft Purchase Agreement with United which provides for the sale of 18 E-175 aircraft to United for gross proceeds of $ 227.7 million and net proceeds of $ 84.7 million after the retirement of debt.

Subsequently, we closed the sale of all 18 aircraft to United.

• On December 30, 2024, we received notice from United that $ 4.5 million of our Effective Date Revolving Loan balance under our United Revolving Credit Facility has been forgiven for achieving certain operational performance metrics outlined in the United CPA.

• On December 24, 2024, we entered into a purchase agreement with a third party which provides for the sale of 15 CRJ-900 airframes to the third party for expected gross proceeds of $ 19.0 million, which will be used to pay down our UST Loan.

On April 3, 2025, the purchase agreement was amended to include an additional 14 CRJ-900 airframes to be sold to the third party for expected gross proceeds of $ 9.1 million.

The total expected gross proceeds of $ 28.1 million will be used to pay down our UST Loan.

• On December 23, 2024, we entered into an agreement with the UST to lower the minimum CCR covenant to .99 to 1.0 effective as of November 22, 2024 through February 28, 2025.

After such date, the CCR will revert to 1.55 to 1.0.

The agreement also requires the Company to use its reasonable best efforts to cause counterparties to all Receivables (as defined in the Treasury Loan) (whether or not constituting “Eligible Receivables” (as defined in the Treasury Loan)) of the Company to be paid to the Eligible Receivables Account (as defined in the Treasury Loan).

Receivables generated from the sale of assets that are not Collateral (as defined in the Treasury Loan) are excluded from the scope of the foregoing requirement.

As a result of the lower CCR covenant, we are in compliance with this covenant as of September 30, 2024.

Additionally, on March 18, 2025, we entered into a new CCR Modification Agreement with the UST to lower the minimum CCR covenant to .91 to 1.0 effective as of February 28, 2025 through the maturity date of the loan.

• On December 23, 2024, we entered into a Waiver to Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of an existing financial covenant default with respect to the period July 1, 2024 to December 23, 2024 and a projected financial covenant default with respect to the period December 24, 2024 to December 31, 2024, each relating to a minimum liquidity requirement under our United Revolving Credit Facility.

• On December 23, 2024, we entered into the Fourth Amendment to our Third Amended and Restated United CPA which provides for the following:

o Amended certain scheduled exit dates for our E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA).

o Added provisions relating to the reimbursement by United of up to $ 14.0 million of pilot training costs incurred by the Company with respect to its E-175 aircraft.

• On September 25, 2024, we reached an agreement with United which provides for, among other things, the commitment to buy our two CRJ-700 aircraft out of their lease with GoJet and to purchase such aircraft for total proceeds of $ 11.0 million, $ 4.5 million of which will pay down the outstanding obligations.

Subsequent to September 30, 2024, we closed the sale of the two CRJ-700 aircraft to United.

• Based on the most recent appraisal value of our spare parts, we have $ 12.4 million of borrowing capacity under our United Revolving Credit Facility.

• In addition to already executed agreements to sell aircraft, the Company is actively seeking arrangements to sell other surplus assets primarily related to the CRJ fleet including aircraft, engines, and spare parts to reduce debt and optimize operations.

• We have delayed and/or deferred major spending on aircraft and engine maintenance to match the current and projected level of flight activity.

The Company believes the plans and initiatives outlined above have effectively alleviated the substantial doubt and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements.

The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA and FSA block hours, maintenance events, labor costs, and other relevant factors.

The Company believes the plans and initiatives outlined above have effectively alleviated the financial concerns and will allow the Company to meet its cash obligations for the next twelve months following the issuance of its financial statements.

The forecast of undiscounted cash flows prepared to determine if the Company has the ability to meet its cash obligations over the next twelve months was prepared with significant judgment and estimates of future cash flows based on projections of CPA block hours, maintenance events, labor costs, and other relevant factors.

Assumptions used in the forecast may change or not occur as expected.

As of September 30, 2023 , the Company has $ 163.6 million of principal maturity payments on long-term debt due within the next twelve months.

We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations, as well as the liquidity created from the additional measures identified above.

As of July 16, 2024, the Company was not in compliance with a financial covenant related to a minimum liquidity requirement of $ 15.0 million of cash and cash equivalents associated with its Second Amended and Restated Credit and Guaranty Agreement with United.

On December 23, 2024, the Company entered into a Waiver to Second Amended and Restated Credit and Guaranty Agreement providing for the waiver for the financial covenant default with respect to the period July 1, 2024 to December 23, 2024 and a projected financial covenant default with respect to the period December 24, 2024 to December 31, 2024.

Further, on April 4, 2025, the Company entered into the Sixth Amendment to Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of an existing financial covenant default with respect to the period ended March 31, 2025, and a projected financial covenant default with respect to the periods ending June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026.

As of the issuance of this Form 10-K, we are in compliance with all financial covenants.

As of September 30, 2024, the Company had $ 50.5 million of principal maturity payments on long-term debt due within the next twelve months.

Additionally, all outstanding principal amounts of $ 113.7 million as of September 30, 2024, under our UST Loan are due and payable in a single installment on October 30, 2025.

We plan to meet these obligations with our cash on hand, ongoing cashflows from our operations, and the liquidity created from the additional measures identified above.

If our plans are not realized, we intend to explore additional opportunities to create liquidity by refinancing and deferring repayment of our principal maturity payments that are due within the next twelve months.

The Company continues to monitor covenant compliance with its lenders as any

noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations.

Correction of Immaterial Misstatement

Subsequent to the issuance of the Company's 2022 consolidated financial statements, management determined that there was an error regarding the classification of a $ 4.7 million gain on sale of assets for the year ended September 30, 2022.

The gain on sale of assets was previously reported as a non-operating gain when it should have been reported as part of operations.

We have now reported the prior year gain on sale of assets as part of operations, consistent with the current period classification.

The error had no effect on the Company's previously reported net income, earnings per share, or net cash flows from operating, investing, or financing activities for the year ended September 30, 2022.

Management evaluated the error considering both quantitative and qualitative factors and concluded it was immaterial to previously issued financial statements.

Correction of Error (Unaudited)

Subsequent to the filing of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, and in connection with the preparation of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, the Company identified an approximately $ 30.6 million balance sheet error associated with the classification of debt on the condensed consolidated balance sheet as of June 30, 2023.

The error was due to certain covenant requirements that were not met under our Second Amended and Restated Credit and Guaranty Agreement dated as of June 30, 2022, with United.

The debt covenants consisted of the 12-month rolling consolidated interest and rental coverage ratio covenants for the quarter ended June 30, 2023.

As a result, approximately $ 30.6 million should have been classified as current portion of long-term debt and finance leases on the condensed consolidated balance sheet as opposed to long-term debt and finance leases, excluding current portion.

In addition, the Company incorrectly stated in the going concern disclosures within the footnotes to our financial statements included in the 3 rd Quarter 10-Q that, as of June 30, 2023, the Company was in compliance with all of its debt covenants.

Except as discussed above, the error had no impact on the Company's condensed consolidated balance sheet as of June 30, 2023.

The error also had no impact on the Company's condensed consolidated statements of operations, stockholders' equity, and cash flows for the three-month and nine-month periods ended June 30, 2023.

The following table shows the original reported balances and restated balances reflecting the correction.

June 30, 2023 (Unaudited)

Current liabilities:

Current portion of long-term debt and finance leases

Total current liabilities

Noncurrent liabilities:

Long-term debt and finance leases, excluding current portion

Total noncurrent liabilities

Total liabilities

American Capacity Purchase Agreement

In December 2022, we entered into Amendment No.

11 (the “American Amendment”) to the American CPA.

The American Amendment provided for the termination and wind-down of the American CPA by April 3, 2023 (the “Wind-down Period”), at which time all Covered Aircraft (as defined in the American CPA) were removed from the American CPA.

In March 2023, we began to transition aircraft operated under the American CPA to the United CPA.

The American CPA was previously set to expire by its terms on December 31, 2025.

Under the terms of the American Amendment, during the Wind-down Period (i) we continued to receive a fixed minimum monthly amount per aircraft covered by the American CPA, plus additional amounts based on the number of flights and block hours flown during each month, subject to adjustment based on the Company’s controllable completion rate and certain other factors, and (ii) American agreed not to exercise certain termination or withdrawal rights under the American CPA if we failed to meet certain operational performance targets for the three consecutive month period ending January 31, 2023.

No Material Breach (as defined in the American CPA) occurred that would have required the payment of liquidated damages.

Pursuant to the American Amendment, as no material breaches occurred during the wind-down period, American agreed to waive Mesa’s failure to meet certain past operational performance targets and other requirements, which triggered termination and withdrawal rights for American pursuant to the terms of American CPA.

All CCF targets were met during the Wind-down Period, and there were no penalties associated with that performance metric.

The parties executed a written mutual release of all claims and acknowledgment that no Material Breaches occurred.

continues to monitor covenant compliance with its lenders as any noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations.

As of September 30, 2024, the Company is in compliance with all financial covenants.

See Sources and Uses of Cash in “Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional disclosure.

United Capacity Purchase Agreement

Under the United CPA, we have the ability to fly up to 80 aircraft for United.

The aircraft can be a mix of any number of E-175 or CRJ-900 aircraft so long as the number of aircraft operating at any given time does not exceed 80 .

As of September 30, 2023 we operated 54 E-175 and 26 CRJ-900 aircraft under our Third Amended and Restated CPA with United dated December 27, 2022, which amended and restated the Second Amended and Restated CPA dated November 4, 2020 (as amended, the “United CPA”

or the "Amended and Restated United CPA").

Under the United CPA, we currently have the ability to fly up to 67 aircraft for United.

During the fiscal year ended September 30, 2024, United began exercising its right under Section 2.4(a) of the United CPA to remove CRJ-900 Covered Aircraft (as defined in the United CPA).

14 CRJ-900 aircraft were removed from the CPA, and the remaining 12 will be removed from the CPA by the end of February 2025.

As of September 30, 2024 we operated 55 E-175 and 12 CRJ-900 aircraft under our United CPA.

Under the United CPA, United owns 42 of our 60 E-175 aircraft.

The E-175 aircraft owned by United and leased to us have terms expiring between 2024 and 2028 , and the 18 E-175 aircraft owned by us have terms expiring in 2028 .

Additionally, United leased 20 E-175LL aircraft to us at nominal amounts during the year ended September 30, 2023.

The E-175LL aircraft were removed from the CPA beginning in February 2023, with the last E-175LL aircraft being removed in April 2023.

In exchange for providing flight services under our United CPA, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown and the results of passenger satisfaction surveys.

United also reimburses us for certain costs on an actual basis, including property tax per aircraft and passenger liability insurance.

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In addition, if United removes any of our 18 owned E-175 aircraft from service at its direction, United would remain obligated, at our option, to assume the aircraft ownership and associated debt with respect to such aircraft through the end of the term of the United CPA.

On December 27, 2022, we entered into the Amended and Restated United CPA, which provides, among other things, for the following amended terms:

The addition of up to 38 CRJ-900 aircraft to be operated by the Company on behalf of United under the Amended and Restated United CPA, dependent on the number of E-175 aircraft the Company is operating.

As of September 30, 2023, we operated 24 CRJ-900 aircraft under our Amended and Restated United CPA;

An increase in rates to cover the Company’s pilot pay increases instituted in September 2022, effective through September 2025;

United to be responsible for all costs associated with converting the CRJ-900 aircraft for operation in United’s network;

Terms providing that United may remove the CRJ-900 aircraft from the scope of the United CPA, subject to certain notice and other requirements;

United’s existing utilization waiver for the Company’s operation of E-175LL Covered Aircraft (as defined in the United CPA) to be extended to December 31, 2023;

The extension of existing monthly operational performance incentives;

An agreement by the Company to not enter into new regional air carrier service agreements, excluding the Company’s existing agreement with DHL, and provided that this restriction shall not apply from and after the earlier to occur of (i) January 1, 2026 and (ii) the Company's satisfaction of certain Performance Milestones (as defined in the Amended and Restated United CPA).

Additionally, in January 2023, in consideration for entering in the Amended and Restated United CPA and providing the revolving line of credit, discussed in Note 10, the Company (i) granted United the right to designate one individual to the Company's board of directors (the "United Designee"), which occurred effective May 2, 2023 with the appointment of Jonathan Ireland and (ii) issued to United 4,042,061 shares of the Company’s common stock equal to approximately 10 % of the Company’s issued and outstanding capital stock on such date (the "United Shares").

United's board designee rights will terminate at such time as United's equity ownership in the Company falls below five percent (5%) of the Company's issued and outstanding stock.

United was also granted pre-emptive rights relating to the issuance of any equity securities by the Company and certain registration rights, set forth in a definitive registration rights agreement with United, granting United customary demand registration rights in respect of publicly registered offerings of the Company, subject to usual and customary exceptions and limitations.

See also Note 18 for a discussion regarding the amendment to the Company's bylaws as it relates to the Amended and Restated United CPA.

Pursuant to the United CPA, we agreed to lease our CRJ-700 aircraft to another United Express service provider for a term of nine years .

We ceased operating our CRJ-700 fleet in February 2021 in connection with the transfer of those aircraft into a lease agreement.

During August of 2022, we committed to a formal plan to sell 18 of our CRJ-700 aircraft and terminated the leases on the 18 CRJ-700 aircraft, which have all subsequently been sold.

Subsequent to September 30, 2024, we amended our United CPA, providing for the following:

• The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments through March 31, 2026.

• The extension of incentives for achieving certain performance metrics through March 2026.

• The commitment of a combined fleet of 60 CRJ-900 and E-175 aircraft through February 2025, and an entirely E-175 fleet by March 2025.

• Reimbursement of up to $ 14.0 million of expenses related to the transition to an entirely E-175 fleet.

• Amendment of certain scheduled exit dates for our E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA).

On January 11, 2024 and January 19, 2024, we entered into the January 2024 United CPA Amendments which provide for the following:

• Increased CPA rates, retroactive to October 1, 2023 through December 31, 2024.

• Amended certain notice requirements for removal by United of up to eight CRJ-900 Covered Aircraft (as defined in the United CPA) from the United CPA.

• Extended United's existing utilization waiver for the Company's operation of E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA) to June 30, 2024.

Our United CPA is subject to early termination prior to its expiration in various circumstances including:

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DHL Flight Services Agreement

On December 20, 2019, we entered into a FSA with DHL (the “DHL FSA”).

Under the terms of the DHL FSA, we operate four Boeing 737 aircraft to provide cargo air transportation services as of September 30, 2023.

In exchange for providing cargo flight services, we receive a fee per block hour with a minimum block hour guarantee.

We are eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance.

Ground support expenses including fueling and airport fees are paid directly by DHL.

Under our DHL FSA, DHL leases two Boeing 737-400F aircraft and one 737-800F and subleases them to us at nominal amounts.

DHL reimburses us on a pass-through basis for all costs related to heavy maintenance including C-checks, off-wing engine maintenance and overhauls including life limited parts (“LLPs”), landing gear overhauls and LLPs, thrust reverser overhauls, and APU overhauls and LLPs.

Certain items such as fuel, de-icing fluids, landing fees, aircraft ground handling fees, en-route navigation fees, and custom fees are paid directly to suppliers by DHL or otherwise reimbursed if incurred by us.

A third Boeing 737-400F aircraft is leased to us under an operating lease by a third party.

The DHL FSA expires five years from the commencement date of the first aircraft placed into service, which was in October 2020.

DHL has the option to extend the agreement with respect to one or more aircraft for a period of one year with 90 days’

advance written notice.

Our DHL FSA is subject to the following termination rights prior to its expiration:

If either party fails to comply with the obligations, warranties, representations, or undertakings under the DHL FSA, subject to certain notice and cure rights;

If either party is declared bankrupt or insolvent;

If we are unable to legally operate the aircraft under the DHL FSA for a specified number of days;

At any time after the first anniversary of the commencement date of the first aircraft placed in service with 90 days' written notice.

If we fail to comply with performance standards for three consecutive measurement periods.

If we are subject to a labor incident that materially and adversely affects our ability to perform services under the DHL FSA for a specified number of days;

Upon a change in control or ownership of the Company;

DHL may terminate the agreement for a specific aircraft if it is subject to a total loss and the Company does not provide alternate services at our expense, or if the aircraft becomes unavailable for more than 30 days due to unscheduled maintenance.

On December 20, 2019, we entered into a FSA with DHL (the “DHL FSA”).

Under the terms of the DHL FSA, we operated four Boeing 737 aircraft to provide cargo air transportation services.

In exchange for providing cargo flight services, we received a fee per block hour with a minimum block hour guarantee.

We were eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance.

Ground support expenses including fueling and airport fees were paid directly by DHL.

On March 15, 2024, we entered into Amendment No.

3 to our DHL FSA which provided for the wind-down and termination of our flight operations on behalf of DHL.

As part of this Amendment, we received $ 1.0 million for wind-down and associated costs.

Summary of Significant Accounting Policies

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The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company generated a net loss of $ 120.1 million and cash flow used in operations of $ 24.1 million for the year ended September 30, 2023.

As of September 30, 2023 ,

the Company had a working capital deficit of $ 129.3 million, an accumulated deficit of $ 71.1 million, and cash and cash equivalents of $ 32.9 million.

The Company generated a net loss of $ 91.0 million and had cash flow provided by operations of $ 34.2 million for the year ended September 30, 2024.

As of September 30, 2024 , the Company had a working capital deficit of $ 113.2 million, an accumulated deficit of $ 162.1 million, and cash and cash equivalents of $ 15.6 million.

The Company is evaluating strategies to obtain the required additional funding for future operations.

These strategies may include, but are not limited to, obtaining equity financing, issuing debt, entering into other financing arrangements, restructuring of operations to grow revenues and decrease expenses, or selling the aircraft held for sale and our equity investments.

These strategies may include, but are not limited to, issuing debt, entering into other financing arrangements, restructuring of operations to grow revenues and decrease expenses, or the sale of assets.

Use of Estimates

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In consideration of ASC 280, " Segment Reporting, " we are not organized around specific services or geographic regions.

We currently operate in one service line providing scheduled flying services in accordance with our CPAs and FSAs.

While we operate under a CPA and a FSA, we do not manage our business based on any performance measure at the individual contract level.

We currently operate in one service line providing scheduled flying services in accordance with our CPA.

While we operate under our CPA, we do not manage our business based on any performance measure at the individual contract level.

As of September 30, 2024 , our chief operating decision maker ("CODM") was the Chief Executive Officer.

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Pursuant to such agreement, $ 3.0 million and $ 3.1 million of outstanding letters of credit are required to be collateralized by amounts on deposit as of September 30, 2024 and 2023, respectively, which are classified as restricted cash.

Cash, cash equivalents and restricted cash consist of the following:

September 30,

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

Expendable Parts and Supplies

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The Company provides an allowance for obsolescence for such parts and supplies over the useful life of its aircraft after considering the useful life of each aircraft fleet, the estimated cost of expendable parts expected to be on hand at the end of the useful life, and the estimated salvage value of the parts.

This allowance for

expendable parts account was $ 4.1 million and $ 3.8 million as of September 30, 2023 and 2022, respectively.

This allowance for expendable parts account was $ 4.7 million and $ 4.1 million as of September 30, 2024 and 2023 , respectively.

Property and Equipment

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If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its estimated fair value.

To determine whether impairments exist for aircraft and other related assets used in operations, we group assets at the CPA and FSA level (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity purchase or FSA, block hours, maintenance events, labor costs and other relevant factors.

To determine whether impairments exist for aircraft and other related assets used in operations, we group assets at the CPA level (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity purchase block hours, maintenance events, labor costs and other relevant factors.

If an asset group is impaired, the impairment loss recognized is the amount by which the asset group's carrying amount exceeds its estimated fair value.

We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available.

Due to operating losses and the transition of operations from American to United, we evaluated our United fleet as of September 30, 2023 , and determined that future cash flows from the operation of our fleet through the respective remaining useful life exceeded the carrying value of the fleet.

As such, no impairment charges were recorded to our fleet.

The Company recognized impairment charges of zero , 109.7 million, and zero on property and equipment and other long-lived assets for the years ended September 30, 2023 , 2022, and 2021 respectively.

Due to operating losses and the removal of CRJ-900 aircraft from the United CPA, we evaluated our United fleet as of September 30, 2024 , and determined that future cash flows from the operation of our fleet through the remaining useful life exceeded the carrying value of the fleet.

As such, no impairment expenses were recorded to our fleet.

The Company did no t recognize impairment expenses to our fleet during the fiscal years ended September 30, 2024 and 2023 , and recognized $ 109.7 million in impairment on property and equipment and other long-lived assets for the fiscal year ended September 30, 2022 .

Assets Held for Sale

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If the market value, less costs to sell, is lower than the current carrying value, an impairment loss is recorded on the asset designated as held for sale.

The Company recognized impairment charges of $ 50.6 million, $ 62.1 million, and zero on assets designated as held for sale for the years ended September 30, 2023, 2022, and 2021, respectively.

See Note 7 –

“Assets Held for Sale”

for further discussion of our assets classified as held for sale as of September 30, 2023

The Company recognized impairment expenses of $ 73.7 million, $ 50.6 million, and $ 62.1 million on assets designated as held for sale for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

See Note 6 – “Assets Held for Sale” for further discussion of our assets classified as held for sale as of September 30, 2024

Fair Value Measurements

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Each fair value measurement is reported in one of three levels:

Level 1 –

Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 –

Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;

Level 3 –

Unobservable inputs in which there is little or no market data, requiring an entity to develop its own assumptions.

• Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities;

• Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;

• Level 3 – Unobservable inputs in which there is little or no market data, requiring an entity to develop its own assumptions.

Debt Financing Costs

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Debt financing costs related to a recognized debt liability are presented as a direct deduction from the carrying amount of the related long-term debt on the consolidated balance sheet.

Debt financing costs with no related recognized debt liability are presented as assets, with the current portion included in prepaid expenses and other current assets and the noncurrent portion included in other assets on the consolidated balance sheet.

Intangible Assets

Customer relationships are amortized over their estimated useful lives.

In accordance with ASC 360, Property, Plant, and Equipment, an intangible asset with a finite life that is being amortized is reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired.

The Company records an impairment loss if the undiscounted future cash flows are found to be less than the carrying amount of the asset and if the carrying amount of the asset exceeds fair value.

If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its

estimated fair value.

The Company recognized an impairment loss of $ 3.7 million, $ 1.9 million, and zero on intangible assets for the year ended September 30, 2023 , 2022, and 2021 respectively.

Other noncurrent assets primarily consist of the non-current portion of lease incentives related to aircraft which Mesa leases to third parties and investments in equity securities.

Other noncurrent assets primarily consist of a contract asset related to the issuance of equity to United as part of the United CPA.

Upon entering into the United CPA and issuing equity to United, the Company recorded the contract asset at fair value of the shares issued to United.

The contract asset is amortized as a reduction of revenue over the term of the CPA.

Lease incentives represent amounts paid or payable by Mesa to the lessee and are amortized as a reduction of lease revenue over the term of the lease.

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Revenue Recognition

The Company recognizes revenue when the service is provided under its CPAs and FSAs.

Under these agreements, the Company’s major partners generally pay a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of departures and block hours or flight hours flown.

The agreements also include reimbursement of certain direct costs incurred by the Company in performing flight services.

These costs, known as " pass-through costs, " may include passenger liability and hull insurance as well as aircraft property taxes.

Additionally, for the E-175 aircraft owned by United, United reimburses the Company for heavy airframe and engine maintenance, landing gear maintenance, APU maintenance, and component maintenance.

The Company also receives compensation under its agreements for heavy maintenance expenses at a fixed hourly rate or per aircraft rate for all aircraft in scheduled service other than the E-175 aircraft owned by United.

The contracts also include incentives and penalties based on certain operational benchmarks.

The Company is eligible to receive incentive compensation upon the achievement of certain performance criteria defined in the agreements.

At the end of each period during the term of an agreement, the Company calculates the incentives or penalties

achieved during that period and recognizes revenue attributable to the agreement during the period accordingly, subject to the variable constraint guidance in accordance ASC 606.

All revenue recognized under these contracts is presented as the gross amount billed to the major partners.

See Note 3 - “Contract Revenue and Pass-through and Other Revenue”

for further information.

The Company has committed to perform various activities that can be generally classified into in-flight services and maintenance services.

The Company recognizes revenue when the service is provided under its CPA.

Under the CPA, United generally pays a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown.

The contract also includes reimbursement of certain costs incurred by the Company in performing flight services.

These costs, known as "pass-through costs," may include passenger liability insurance as well as aircraft property taxes and other flight service expenditures defined in our agreement.

Additionally, for the E-175 aircraft owned by United, the CPA provides that United will reimburse the Company for heavy airframe and engine maintenance, landing gear, APUs and component maintenance.

The Company also receives compensation under its CPA for heavy maintenance expenses at a fixed hourly rate or per aircraft rate for all aircraft in scheduled service other than the E-175 aircraft owned by United.

The Company is eligible to receive incentive compensation upon the achievement of certain performance criteria defined in the agreement.

At the end of each period during the term of an agreement, the Company calculates the incentives achieved during that period and recognizes revenue attributable to the agreement during the period accordingly, subject to the variable constraint guidance under ASC 606.

All revenue recognized under the CPA is presented as the gross amount billed to United.

Due to United's ownership in the Company ( 9.8 % as of September 30, 2024), revenue recognized under the United CPA is considered related party revenue.

Under the United CPA, the Company has committed to perform various activities that can be generally classified into in-flight services and maintenance services.

When evaluating these services, the Company determined that the nature of its promise is to provide a single integrated service, flight services, because its contracts require integration and assumption of risk associated with both services to effectively deliver and provide the flights as scheduled over the contract term.

Therefore, the in-flight services and maintenance services are inputs to that combined integrated flight service.

Both the services occur over the term of the agreement and the performance of maintenance services significantly effects the utility of the in-flight services.

The Company's individual flights flown under the CPAs and FSAs are deemed to be distinct and the flight service promised in the agreements represents a series of services that should be accounted for as a single performance obligation.

Therefore, the in-flight services and

maintenance services are inputs to that combined integrated flight service.

Both services occur over the term of the agreement and the performance of maintenance services significantly affects the utility of the in-flight services.

The Company's individual flights flown under the CPA are deemed to be distinct and the flight service promised in the CPA represents a series of services that is accounted for as a single performance obligation.

This single performance obligation is satisfied over time as the flights are completed.

Therefore, revenue is recognized when each flight is completed.

In allocating the transaction price, variable payments (i.e., billings based on departures and block hours or flight hours flown, pass-through costs, etc.) that relate specifically to the Company's efforts in performing flight services are recognized in the period in which the individual flight is completed.

In allocating the transaction price, variable payments (i.e., billings based on flights and block hours flown, pass-through costs, etc.) that relate specifically to the Company's efforts in performing flight services are recognized in the period in which the individual flight is completed.

The Company has concluded that allocating the variability directly to the individual flights results in an overall allocation meeting the objectives in ASC 606.

This results in a pattern of revenue recognition that follows the variable amounts billed from the Company to its customers.

A portion of the Company's compensation under its CPAs with American and United is designed to reimburse the Company for certain aircraft ownership costs.

Such costs include aircraft principal and interest debt service costs, aircraft depreciation, and interest expense or aircraft lease expense costs while the aircraft is under contract.

This results in a pattern of revenue recognition that follows the variable amounts billed from the Company to their customers.

A portion of the Company's compensation under its CPAs with United and previously American is designed to reimburse the Company for certain aircraft ownership costs.

The Company has concluded that a component of its revenue under these agreements is deemed to be lease revenue, as such agreements identify the "right of use" of a specific type and number of aircraft over a stated period-of-time.

The lease revenue associated with the Company's CPAs is accounted for as an operating lease and is reflected as contract revenue on the Company's consolidated statements of operations and comprehensive (loss) income.

The Company recognized $ 144.7 million, $ 158.4 million, and $ 170.2 million of lease revenue for the year ended September 30, 2023, 2022, and 2021, respectively.

The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statements of operations and comprehensive (loss) income because the use of the aircraft is not a separate activity of the total service provided under our CPAs.

The Company's CPAs and FSAs are renewable periodically and contain provisions pursuant to which the parties could terminate their respective agreements, or withdraw aircraft under their respective agreements, subject to certain conditions as described in Note 1.

The agreements also contain terms with respect to covered aircraft, services provided, and compensation as described in Note 1.

The agreements are amended from time to time to change, add, or delete terms of the agreements.

The Company's revenues could be impacted by a number of factors, including amendment or termination of its agreements with its major partners, contract modifications resulting from contract renegotiations, its ability to earn incentive payments contemplated under applicable agreements, and settlement of reimbursement disputes with the Company's major partners.

In the event contracted rates are not finalized at a quarterly or annual financial statement date, the Company evaluates the enforceability of its contractual terms and when it has an enforceable right, it estimates the amount the Company expects to be entitled to that is subject to the variable constraint guidance within ASC 606.

The Company's agreements contain an option that allows its major partners to assume the contractual responsibility for procuring and providing the fuel necessary to operate the flights that it operates for them.

All of the Company's major partners have exercised this option.

Accordingly, the Company does not record

an expense or revenue for fuel and related fueling costs for flying under its CPAs or FSA.

In addition, the Company's major partners also provide, at no cost to the Company, certain ground handling and customer service functions, as well as airport-related facilities and gates at their hubs and other cities.

Services and facilities provided by the Company's major partners at no cost are presented net in its consolidated financial statements;

hence, no amounts are recorded as revenue or operating expense for these items.

The lease revenue associated with the Company's CPA is accounted for as an operating lease and is reflected as contract revenue on the Company's consolidated statements of operations and comprehensive loss.

The Company recognized $ 123.0 million, $ 144.7 million, and $ 158.4 million of lease revenue for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statements of operations and comprehensive loss because the use of the aircraft is not a separate activity of the total service provided.

The Company's CPA is renewable periodically and contain provisions pursuant to which the parties could terminate their respective agreements, subject to certain conditions, as described in Note 1.

The CPA also contains terms with respect to covered aircraft, services provided, and compensation as described in Note 1.

The CPA is amended from time to time to change, add, or delete terms of the agreements.

The Company's revenues could be impacted by a number of factors, including amendment or termination of its CPA, contract modifications resulting from contract renegotiations, its ability to earn incentive payments contemplated under applicable agreements, and settlement of reimbursement disputes with United.

In the event contracted rates are not finalized at a quarterly or annual financial statement date, the Company evaluates the enforceability of its contractual terms and when it has an enforceable right, it estimates the amount the Company expects to be entitled subject to the variable constraint guidance under ASC 606.

The Company records deferred revenue when cash payments are received or are due from United in advance of the Company’s performance.

The deferred revenue balance as of September 30, 2024 of $ 9.6 million (current and non-current portion) represents our aggregate remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied (as flights are completed over the remaining contract term).

Deferrals of revenue and recognition of previously deferred revenue during fiscal year 2024 are shown below:

Revenue Deferred/(Recognized)

Deferred revenue as of September 30, 2023

Fixed revenue deferrals

Pass-through revenue deferrals

Previously deferred fixed revenue recognized

Previously deferred pass-through revenue recognized

Deferred revenue as of September 30, 2024

Contract Liabilities

Contract liabilities consist of deferred credits representing upfront payments received from major partners related to aircraft modifications associated with CPAs and pilot training.

The deferred credits are recognized over time depicting the pattern of transfer of the related services over the term of the CPAs.

Contract liabilities consist of deferred credits representing upfront payments received from United related to aircraft modifications associated with the CPA and pilot training.

The deferred credits are recognized over time depicting the pattern of transfer of the related services over the term of the CPA.

Current and non-current deferred credits are recorded to other accrued expenses and non-current deferred credits in the consolidated balance sheets, respectively.

The Company's total current and non-current deferred credit balances at September 30, 2024 and September 30, 2023 were $ 4.1 million and $ 5.1 million, respectively.

The Company recognized $ 1.7 million, $ 0.9 million, and $ 2.4 million of the deferred credits within contract revenue in the consolidated statements of operations and comprehensive (loss) income during the year ended September 30, 2023 , 2022, and 2021, respectively .

The Company recognized $ 1.8 million, $ 1.7 million, and $ 0.9 million of the deferred credits within contract revenue in the consolidated statements of operations and comprehensive loss during the fiscal years ended September 30, 2024, 2023, and 2022 , respectively .

Contract Assets

The Company recognizes assets from the incremental costs incurred to obtain contracts with major partners including aircraft painting, aircraft reconfiguration, and flight service personnel training costs.

The Company recognizes assets from the incremental costs incurred to obtain contracts with major partners including aircraft painting, aircraft reconfiguration, flight service personnel training costs, and the issuance of stock.

These costs are amortized based on the pattern of transfer of the services in relation to flight hours over the term of the contract.

Contract assets are recorded as other assets in the consolidated balance sheets.

The Company's contract assets balance at September 30, 2023 and September 30, 2022 was approximately $ 8.8 million and zero , respectively.

Contract cost amortization was approximately $ 1.0 million, zero , and $ 2.0 million for the year ended September 30, 2023 , 2022, and 2021, respectively.

The Company's contract assets balance at September 30, 2024 and September 30, 2023 was approximately $ 6.1 million and $ 8.8 million, respectively.

Contract cost amortization was approximately $ 2.7 million, $ 1.0 million, and zero for the fiscal years ended September 30, 2024, 2023, and 2022 , respectively.

Maintenance Expense

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The Company accounts for heavy maintenance and major overhaul costs on its owned E-175 fleet under the deferral method whereby the cost of heavy maintenance and major overhaul is deferred and amortized until the earlier of the end of the useful life of the related asset or the next scheduled heavy maintenance event.

Amortization of heavy maintenance and major overhaul costs charged to depreciation and amortization expense was approximately $ 3.1 million, $ 1.9 million, and $ 0.4 million for the fiscal year ended September 30, 2023, 2022, and 2021, respectively.

At September 30, 2023 and September 30, 2022 , the Company had a deferred heavy maintenance balance, net of accumulated amortization, of approximately $ 8.0 and $ 9.7 million, respectively.

Amortization of heavy maintenance and major overhaul costs charged to depreciation and amortization expense was approximately $ 3.2 million, $ 3.1 million, and $ 1.9 million for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

At September 30, 2024 and September 30, 2023 , the Company had a deferred heavy maintenance balance, net of accumulated amortization, of approximately $ 6.4 million and $ 8.0 million, respectively.

The Company accounts for heavy maintenance and major overhaul costs for all other fleets under the direct expense method whereby costs are expensed to maintenance expense as incurred, except for certain maintenance contracts where labor and materials price risks have been transferred to the service provider and require payment on a utilization basis, such as flight hours.

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Under the Company's aircraft operating lease agreements and FAA operating regulations, it is obligated to perform all required maintenance activities on its fleet, including component repairs, scheduled airframe checks and major engine restoration events.

The Company estimates the timing of the next major maintenance event based on assumptions including estimated usage, FAA-mandated maintenance

intervals, and average removal times as recommended by the manufacturer.

The Company estimates the timing of the next major maintenance event based on assumptions including estimated usage, FAA-mandated maintenance intervals, and average removal times as recommended by the manufacturer.

The timing and the cost of maintenance are based on estimates, which can be impacted by changes in utilization of its aircraft, changes in government regulations and suggested manufacturer maintenance intervals.

Major maintenance events consist of overhauls to major components.

Engine overhaul expense totaled approximately $ 32.4 million, $ 23.6 million, and $ 31.4 million for the years ended September 30, 2023 , 2022, and 2021, respectively, of which approximately $ 31.9 million, $ 21.7 million, and $ 16.8 million, respectively, was pass-through expense.

Airframe check expense totaled approximately $ 23.4 million, $ 22.1 million, and $ 51.1 million for the years ended September 30, 2023 , 2022, and 2021, respectively, of which approximately $ 16.9 million, $ 3.2 million, and $ 20.5 million, respectively, was pass-through expense.

Engine overhaul expense totaled approximately $ 23.0 million, $ 32.4 million, and $ 23.6 million for the fiscal years ended September 30, 2024, 2023, and 2022 , respectively, of which approximately $ 23.5 million, $ 31.9 million, and $ 21.7 million, respectively, was pass-through expense.

The Company received approximately $ 0.5 million from an insurance claim reimbursement during fiscal year 2024 which was net against engine overhaul expense.

Airframe C-check expense totaled approximately $ 22.9 million, $ 23.4 million, and $ 22.1 million for the fiscal years ended September 30, 2024, 2023, and 2022 , respectively, of which approximately $ 16.3 million, $ 16.9 million, and $ 3.2 million, respectively, was pass-through expense.

Pursuant to the United CPA, United reimburses the Company for heavy maintenance on certain E-175 aircraft.

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Operating lease costs are recognized on a straight-line basis over the lease term, while finance leases result in a front-loaded expense pattern.

To determine whether impairments exist for aircraft and other related assets used in operations, we group assets, including ROU assets, at the CPA or FSA level (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of CPA or FSA, block hours, maintenance events, labor costs and other relevant factors.

As all of our aircraft leases besides one with an insignificant value on our books are leased to us from United or DHL at nominal amounts and not recorded on our books, we did no t assess leased aircraft for impairment.

The Company recorded impairment losses of zero , $ 10.5 million, and zero for the years ended September 30, 2023, 2022, and 2021, respectively.

To determine whether impairments exist for aircraft and other related assets used in operations, we group assets, including ROU assets, at the CPA level (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity purchase block hours, maintenance events, labor costs and other relevant factors.

As all of our aircraft leases besides short-term aircraft leases are leased to us from United at nominal amounts and not recorded on our books, we did no t assess leased aircraft for impairment.

The Company did no t record impairment losses for the fiscal years ended September 30, 2024 and 2023, and recorded a $ 10.5 million impairment loss for the fiscal year ended September 30, 2022.

As a lessee, we have elected a short-term lease practical expedient on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to leases with terms of 12 months or less.

Our CPAs identify the "right of use" of a specific type and number of aircraft over a stated period-of-time.

A portion of the compensation under our CPAs are designed to reimburse the Company, as lessor, for certain aircraft ownership costs of these aircraft.

Our CPA identifies the "right of use" of a specific type and number of aircraft over a stated period-of-time.

A portion of the compensation under our CPA is designed to reimburse the Company, as lessor, for certain aircraft ownership costs of these aircraft.

We account for the non-lease component under ASC 606 and account for the lease component under ASC 842.

We allocate the consideration in the contract

between the lease and non-lease components based on their stated contract prices, which is based on a cost basis approach representing our estimate of the stand-alone selling prices.

As discussed in Note 1, we lease, at nominal rates, certain aircraft from United and DHL under our United CPA and DHL FSA, which are excluded from operating lease assets and liabilities as they do not represent embedded leases under ASC 842.

Other than nominal leases with our major partners, approximately 1 % of our aircraft are leased from third parties.

We allocate the consideration in the contract between the lease and non-lease components based on their stated contract prices, which is based on a cost basis approach representing our estimate of the stand-alone selling prices.

As discussed in Note 1, we lease, at nominal rates, certain aircraft from United under our United CPA, which are excluded from operating lease assets and liabilities as they do not represent embedded leases

under ASC 842.

Other than nominal leases with United, approximately 7 % of our aircraft are leased from third parties, all of which are short-term leases.

Our aircraft classified as operating leases results in rental payments being charged to expense over the term of the related leases.

In the event that we or one of our major partners decide to exit an activity involving leased aircraft, losses may be incurred.

In the event that we or United decide to exit an activity involving leased aircraft, losses may be incurred.

In the event that we exit an activity that results in exit losses, these losses are accrued as each aircraft is removed from operations for early termination penalties, lease settle up and other charges.

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Contract Revenue and Pass-through and Other Revenue

The Company recognizes contract revenue when the service is provided under its CPA and FSA.

Under the CPA and FSA, our major partners generally pay for each departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time) incurred, and an amount per aircraft in service each month with additional incentives based on flight completion, on-time performance, and other operating metrics.

The Company’s performance obligation is met when each flight is completed, and revenue is recognized and reflected in contract revenue.

The Company recognizes pass-through revenue when the service is provided under its CPA and FSA.

Pass-through revenue represents reimbursements for certain direct expenses incurred including passenger liability and hull insurance, property taxes, other direct costs defined within the agreements, and major maintenance on aircraft leased at nominal rates.

The Company’s performance obligation is met when each flight is completed or as the maintenance services are performed, and revenue is recognized and reflected in pass-through and other revenue.

The Company records deferred revenue when cash payments are received or are due from our major partners in advance of the Company’s performance, including amounts that are refundable.

The Company recognized approximately $ 3.0 million of previously deferred revenue, and deferred $ 10.4 million of revenue during the years ended September 30, 2023 and 2022, respectively, which was billed to and paid by our major partners.

The Company recognizes contract revenue when the service is provided under its CPA.

Under the CPA, United generally pays for each departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time) incurred, and an amount per aircraft in service each month with additional incentives based on flight completion, on-time performance, and other operating metrics.

The Company’s performance obligation is met when each flight is completed, and revenue is recognized and reflected in contract revenue.

The Company recognizes pass-through revenue when the service is provided under its CPA.

Pass-through revenue represents reimbursements for certain direct expenses incurred including passenger liability insurance, property taxes, other direct costs defined within the CPA, and major maintenance on aircraft leased at nominal rates.

The Company’s performance obligation is met when each flight is completed or as the maintenance services are performed, and revenue is recognized and reflected in pass-through and other revenue.

The Company records deferred revenue when cash payments are received or are due from United in advance of the Company’s performance, including amounts that are refundable.

The Company recognized approximately $ 11.4 million and $ 3.0 million of previously deferred revenue during the fiscal years ended September 30, 2024 and 2023, respectively, which was billed to and paid by United as well as American prior to the wind-down of the American CPA during fiscal year 2023.

Deferred revenue is recognized as flights are completed over the remaining contract term.

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Total Revenue

A portion of the Company's compensation under its CPA with United and formerly American is designed to reimburse the Company for certain aircraft ownership costs.

A portion of the Company's compensation under its CPA with United is designed to reimburse the Company for certain aircraft ownership costs.

Such costs include aircraft principal and interest debt service costs, aircraft depreciation, and interest expense or aircraft lease expense costs while the aircraft is under contract.

The Company has concluded that a component of its revenue under this agreement is deemed to be lease revenue, as the agreement identifies the "right of use" of a specific type and number of aircraft over a stated period-of-time.

We account for the non-lease component under ASC 606 and account for the lease component under ASC 842.

We allocate the

consideration in the contract between the lease and non-lease components based on their stated contract prices, which is based on a cost basis approach representing our estimate of the stand-alone selling prices.

The Company recognized approximately $ 144.7 million, $ 158.4 million, and $ 170.2 million of lease revenue for the years ended September 30, 2023, 2022, and 2021, respectively.

Historically, the Company entered into lease agreements with GoJet Airlines LLC (“GoJet”) to lease CRJ-700 aircraft.

The lease agreements were accounted for as operating leases and had a term of nine years beginning on the delivery date of each aircraft.

Under the lease agreements, GoJet paid fixed monthly rent per aircraft and variable lease payments for supplemental rent based on monthly aircraft utilization at fixed rates.

Supplemental rent payments were subject to reimbursement following GoJet’s completion of qualifying maintenance events defined in the agreements.

Lease revenue for fixed monthly rent payments were recognized on a straight-line basis within contract revenue.

Lease revenue for supplemental rent was deferred and recognized within contract revenue when it was probable that amounts received will not be reimbursed for future qualifying maintenance events over the lease term.

The lease revenue associated with the Company's CPA is accounted for as an operating lease and is reflected as contract revenue on the Company's consolidated statements of operations and

comprehensive loss.

The Company recognized approximately $ 123.0 million, $ 144.7 million, and $ 158.4 million of lease revenue for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

The Company entered into lease agreements with GoJet Airlines LLC (“GoJet”) to lease CRJ-700 aircraft as of September 30, 2021.

The lease agreements are accounted for as operating leases and had a term of nine years beginning on the delivery date of each aircraft.

Under the lease agreements, GoJet pays fixed monthly rent per aircraft and variable lease payments for supplemental rent based on monthly aircraft utilization at fixed rates.

Supplemental rent payments are subject to reimbursement following GoJet’s completion of qualifying maintenance events defined in the lease agreements.

Lease revenue for fixed monthly rent payments is recognized on a straight-line basis within contract revenue.

Lease revenue for supplemental rent is deferred and recognized within contract revenue when it is probable that amounts received will not be reimbursed for future qualifying maintenance events over the lease term.

Subsequent to September 30, 2024, we entered into an agreement with United to buy the remaining aircraft out of their lease with GoJet.

The Company mitigated the residual asset risks through supplemental rent payments and by leasing aircraft and engine types that can be operated by the Company in the event of a default.

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Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”).

This ASU provides optional expedients and exceptions for a limited period of time for accounting for contracts, hedging relationships, and other transactions affected by the London Interbank Offered Rate (LIBOR), or another reference rate expected to be discontinued.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, has determined that the U.S.

dollar LIBOR will be replaced by the Secured Overnight Financing Rate (SOFR) after June 30, 2023.

Optional expedients can be applied through December 31, 2024.

Under the expedient, the Company will account for amendments to agreements as if the modification was not substantial.

The new carrying amounts of debts will consist of the carrying amount of the original debt and any additional fees associated with the modified debt instrument.

A new effective yield will be established based on the new carrying amount and revised cash flows.

In June 2022, the FASB issued new guidance to clarify the fair value measurement guidance for equity securities subject to contractual restrictions that prohibit the sale of an equity security.

Further, the guidance introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value.

The standard will be effective for annual reporting periods beginning after December 15, 2023, including interim reporting periods within those fiscal years.

We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

We continue to evaluate recent accounting pronouncements and the effect that new standards and guidance has on our consolidated financial statements.

There are no recent accounting pronouncements that apply to the Company.

Concentrations of Credit Risk

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Pursuant to the terms of this agreement, $ 3.0 million and $ 3.1 million of outstanding letters of credit are required to be collateralized by amounts on deposit as of September 30, 2024 and 2023, respectively, which are classified as restricted cash.

Significant customers are those which represent more than 10% of the Company’s total revenue or net accounts receivable balance at each respective balance sheet date.

At September 30, 2023, the Company had a CPA with United and a FSA with DHL.

Substantially all of the Company's consolidated revenue for the years ended September 30, 2023, 2022, and 2021 and accounts receivable at the end of September 30, 2023 and 2022 was derived from these agreements as well as the CPA with American which was terminated on April 3, 2023.

In certain cases, the terms of these agreements are not aligned with the lease obligations on the aircraft performing services under such agreements.

Amounts billed by the Company under these agreements are subject to the Company's interpretation of the applicable agreement and are subject to audit by the Company's major partners.

Periodically, the Company's major partners dispute amounts billed and pay amounts less than the amount billed.

Ultimate collection of the remaining amounts not only depends upon the Company prevailing under the applicable audit, but also upon the financial well-being of the major partner.

As such, the Company reviews amounts due based on historical collection trends, the financial condition of major partners and current external market factors and records a reserve for amounts estimated to be uncollectible.

Significant customers are those which represent more than 10% of the Company’s total revenue or net accounts receivable balance at each respective balance sheet date.

Substantially all of the Company's consolidated revenue for the fiscal year ended September 30, 2024 was derived from the United CPA.

Fiscal years ended September 30, 2023 and 2022 also generated substantial revenue from the American CPA.

A large portion of the Company's receivables at the end of September 30, 2024 and 2023 was also derived from the United CPA.

Amounts billed by the Company under the United CPA are subject to the Company's interpretation of the applicable agreement and are subject to audit by United.

Periodically, United disputes amounts billed and pay amounts less than the amount billed.

Ultimate collection of the remaining amounts not only depends upon the Company prevailing under the applicable audit, but also upon the financial well-being of

As such, the Company reviews amounts due based on historical collection trends, the financial condition of United, and current external market factors and records a reserve for amounts estimated to be uncollectible.

The allowance for doubtful accounts was no t material at September 30, 2024 and 2023, respectively.

If the Company's ability to collect these receivables and the financial viability of our major partners is materially different than estimated, the Company's estimate of the allowance could be materially impacted.

American accounted for approximately 23 %, 45 %, and 45 % of the Company's total revenue for the years ended September 30, 2023 , 2022, and 2021, respectively.

United accounted for approximately 73 %, 48 %, and 52 % of the Company's total revenue for the years ended September 30, 2023 , 2022, and 2021, respectively.

American accounted for zero , 23 %, and 45 % of the Company's total revenue for the fiscal years ended September 30, 2024, 2023, and 2022 , respectively.

United accounted for approximately 97 %, 73 %, and 48 % of the Company's total revenue for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

A termination of the United CPA would have a material adverse effect on the Company's business prospects, financial condition, results of operations, and cash flows.

Intangible Assets

The Company includes its intangible assets of customer relationship in the asset group associated with the CRJ-900 fleet operating under the American CPA and monitors for any indicators of impairment of the asset group.

When certain conditions or changes in the economic situation exist, the asset group may be impaired if the carrying amount of the assets is not recoverable and that carrying amount exceeds the asset group’s fair value.

Due to the impacts of the pilot shortage and the pilot wage increase, we evaluated all asset groups during the year ended September 30, 2023 and determined that the asset group for the CRJ-900 fleet operating under the American CPA was impaired.

As a result, the Company recognized an impairment loss of $ 3.7 million and $ 1.9 million on the customer relationship related to the CRJ-900 fleet operating under the American CPA during the year ended September 30, 2023 and 2022, respectively, which was recorded in asset impairment on our consolidated statements of operations and comprehensive (loss) income.

The Company did no t record any impairment losses related to its intangible assets during the year ended September 30, 2021.

Information about the intangible assets of the Company at September 30, 2023 and 2022, is as follows (in thousands):

September 30,

Customer relationship

Accumulated amortization

Net carrying value

Total amortization expense recognized was approximately $ 0.1 million, $ 1.0 million, and $ 1.2 million, for the fiscal years ended September 30, 2023, 2022, and 2021, respectively.

The Company recognized an impairment loss of $ 3.7 million on the customer relationship related to the American CPA during the year ended September 30, 2023 , which was recorded in asset impairment on our condensed consolidated statements of operations and comprehensive loss.

Accordingly, we expect to record amortization expense of zero for fiscal year 2024 and thereafter.

Significant vendors are those which represent more than 10% of the Company's total purchases during the year.

The Company had two vendors, AAR and Standard Aero Holdings, Inc.

("Standard Aero") which individually represented more than 10% of the Company's purchases during the fiscal year ended September 30, 2024.

AAR and Standard Aero accounted for approximately 18 % and 11 % of the Company's purchases during the year, respectively.

A change to the operations of the Company's significant vendors could have a material adverse effect on the Company's financial condition, results of operations, and cash flows.

Assets Held for Sale

During the year ended September 30, 2023, management disposed of our remaining CRJ-200 aircraft and our remaining CRJ-700 aircraft besides two which are leased to a third party.

Additionally, management continued our plan to sell certain of our CRJ-900 aircraft, and determined that 14 CRJ-900 aircraft met the criteria to be classified as assets held for sale during the year ended September 30, 2023.

We have a total of 15 aircraft held for sale as of September 30, 2023, all of which are CRJ-900 aircraft.

These aircraft are presented separately in our condensed consolidated balance sheet at the lower of their current carrying value or their fair market value less costs to sell.

During the fiscal year ended September 30, 2024, management continued our plan to sell certain of our CRJ-900 aircraft and related parts.

The Company completed the sale of 15 CRJ-900 aircraft that were held for sale as of September 30, 2023.

Management determined that eight additional CRJ-900 aircraft, 26 CRJ-900 airframes (without engines), 77 GE Model CF34-8C engines, two CRJ-700 aircraft, and certain spare parts met the criteria to be classified as assets held for sale during the fiscal year ended September 30, 2024.

We have a total of 26 airframes, 55 engines, two CRJ-700 aircraft, and certain spare parts classified as held for sale as of September 30, 2024.

These assets are presented separately in our condensed consolidated balance sheet at the lower of their current carrying value or their fair market value less costs to sell.

The fair values are based upon observable and unobservable inputs, including recent purchase offers and market trends and conditions.

The assumptions used to determine the fair value of our assets held for sale, excluding agreed upon purchase offers, are subject to inherent uncertainty and could produce a wide range of outcomes which we will continue to monitor in future periods as new information becomes available.

Prior to the ultimate sale of the assets, subsequent changes in our estimate of the fair value of our assets held for sale will be recorded as a gain or loss with a corresponding adjustment to the assets’

carrying value.

As of September 30, 2022, the Company had eight CRJ-700 classified as held for sale.

During the year ended September 30, 2023 , the Company closed the sale of all eight CRJ-700 aircraft for gross proceeds of $ 40.0 million.

Net proceeds from the sale after retirement of debt was $ 8.0 million.

As of September 30, 2022, the Company had 11 CRJ-900 aircraft and one CRJ-200 aircraft classified as held for sale.

During the year ended September 30, 2023, the Company closed the sale of seven of the CRJ-900 aircraft to a third party for gross proceeds of $ 21.0 million.

Net proceeds from the sale after partial debt reduction was $ 1.5 million.

The sale of the remaining four CRJ-900 aircraft is expected to close in January 2023 and generate another $ 12.0 million in gross proceeds.

Additionally, our CRJ-200 aircraft classified as held for sale as of September 30, 2022 was included in this deal.

As the aircraft was fully depreciated, there was no loss recorded on the disposal.

During the year ended September 30, 2023, t he Company entered into an agreement to sell seven surplus CRJ-900 aircraft to American.

As of September 30, 2023, the Company has closed the sale of three of the aircraft which generated approximately $ 29.7 million in gross proceeds and approximately $ 2.4 million in net proceeds after partial debt reduction.

Subsequent to September 30, 2023, the Company closed the sale of the remaining four CRJ-900 aircraft to American for gross proceeds of $ 41.5 million.

Net proceeds from the sale of all four aircraft was $ 5.7 million after the retirement of the EDC Loan and MHIRJ junior note.

During the year ended September 30, 2023 , the Company closed the sale of seven CRJ-900 aircraft to a third party.

The proceeds of $ 21 million from the sale of the CRJ-900 aircraft were used to pay down the Company's obligations under its UST Loan.

During the year ended September 30, 2023 , the Company designated seven of our CRJ-900 aircraft under the agreement with RASPRO Trust as held for sale.

Subsequent to September 30, 2023 , we entered into an agreement with a third party to sell 12 surplus engines.

The transaction is expected to close by the end of March 2024.

As of September 30, 2023 , the Company has 15 CRJ-900 aircraft that are classified as assets held for sale with a net book value of $ 69.7 million, $ 57.7 million of which is classified as current assets on our condensed consolidated balance sheet and $ 12.0 million of which is classified as noncurrent assets on our condensed consolidated balance sheet.

The Company recorded a total of $ 73.7 million of impairment associated with held for sale assets during the fiscal year ended September 30, 2024.

As of September 30, 2023, the Company had 15 CRJ-900 aircraft classified as held for sale.

During the fiscal year ended September 30, 2024 , the Company closed the sale of all 15 aircraft ( seven of the aircraft were split up as seven airframes and 14 engines and sold to separate third parties) for gross proceeds of $ 71.5 million.

During the fiscal year ended September 30, 2024, the Company entered into the following agreements:

• 15 airframes (including the seven noted above) to a third party for gross proceeds of $ 18.8 million which were used to pay off our RASPRO finance lease obligations.

The transaction is complete as of September 30, 2024.

• 30 engines (including the 14 noted above) to a third party for expected gross proceeds of $ 19.5 million.

We have closed the sale of 29 of the engines as of September 30, 2024 for gross proceeds of $ 18.9 million, which were used to pay off our RASPRO finance lease obligations.

We expect to close the sale of the remaining engine by the end of February 2025 for gross proceeds of $ 0.7 million.

• 23 engines to a third party for expected gross proceeds of $ 11.5 million.

We have closed the sale of three of the engines as of September 30, 2024 for gross proceeds of $ 1.5 million, which were used to pay down our UST Loan.

• 12 engines to a third party for gross proceeds of $ 54.2 million.

This transaction is complete as of September 30, 2024.

• Nine engines to a third party for expected gross proceeds of $ 8.8 million.

This transaction is expected to be completed by September 30, 2024.

• 14 engines to a third party for expected gross proceeds of $ 24.7 million.

We have closed the sale of eight of the engines as of September 30, 2024 for gross proceeds of approximately $ 12.9 million and net proceeds of approximately $ 4.4 million after the paydown of debt.

• Two CRJ-700 aircraft to United for expected gross proceeds of $ 11.0 million.

This transaction is expected to be completed by December 31, 2024.

Additionally it was determined that 26 airframes, 19 engines, and certain spare parts without an active purchase agreement met the criteria to be classified as held for sale.

The Company expects to complete a sale of each of these assets within the next 12 months.

As of September 30, 2024 , the Company had 26 CRJ-900 airframes, 55 engines, two CRJ-700 aircraft, and certain spare parts that were classified as assets held for sale with a net book value of $ 92.3 million, $ 5.7 million of which is classified as current assets on our condensed consolidated balance sheet and $ 86.6 million of which is classified as noncurrent assets on our condensed consolidated balance sheet.

Balance Sheet Information

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Accrued maintenance

Accrued liability on government payroll

Accrued simulator costs

Accrued employee benefits

Accrued fleet operating expense

Short term lease incentive liability

Other noncurrent liabilities:

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Long-term employee benefits

Impairment of long-lived assets

The Company monitors for any indicators of impairment of the long-lived fixed assets.

When certain conditions or changes in the economic situation exist, the assets may be impaired and the carrying amount of the assets exceed its fair value.

The assets are then tested for recoverability of carrying amount.

The Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired, the undiscounted net cash flows estimated to be generated by those assets are less than the carrying amount of those assets, and the net book value of the assets exceeds their estimated fair value.

We group assets at the CPA and FSA level (i.e., the lowest level for which there are identifiable cash flows).

If impairment indicators exist with respect to any of the asset groups, we estimate future cash flows based on projections of capacity purchase or FSA, block hours, maintenance events, labor costs and other relevant factors.

Due to operating losses and the transition of operations from American to United, the Company assessed whether any impairment of its long-lived assets existed for our United fleet as of September 30, 2023 .

As future cash flows from the operation of our United fleet through the respective remaining useful life exceeded the carrying value of the fleet, the Company determined that no impairment charges were necessary for the United fleet.

The asset group associated with the CRJ-900 fleet includes owned aircraft, leased aircraft, intangible assets of customer relationship, and other relevant long-lived assets.

The Company recorded impairment losses of zero , $ 116.6 million, and zero related to its long-lived assets for the years ended September 30, 2023, 2022, and 2021, respectively.

The Company’s assumptions about future conditions important to its assessment of potential impairment of its long-lived assets are subject to uncertainty, and the Company will continue to monitor these conditions in future periods as new information becomes available, and will update its analyses accordingly.

Depreciation Expense on Property and Equipment

Depreciation expense on property and equipment totaled $ 60.2 million, $ 80.5 million, and $ 81.2 million for the years ended September 30, 2023, 2022, and 2021, respectively.

In connection with a negotiated forward purchase contract for electrically-powered vertical takeoff and landing aircraft (“eVTOL aircraft”) executed in February 2021, we obtained equity warrant assets giving us the right to acquire a number shares of common stock in Archer Aviation, Inc.

(“Archer”), which at the time of our initial investment was a private, venture-backed company.

As the initial investment in Archer did not have a readily determinable fair value, we accounted for this investment using the measurement alternative under ASC 321 and measured the investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments from the same issuer.

Depreciation expense on property and equipment totaled $ 40.0 million, $ 60.2 million, and $ 80.5 million for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

(“Archer”), which at the time of our initial investment was a private, venture-backed company.

As the initial investment in Archer did not have a readily determinable fair value, we accounted for this investment using the measurement alternative under ASC 321, Investments – Equity Securities, and measured the investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments from the same issuer.

We estimated the initial equity warrant asset value to be $ 16.4 million based on publicly available information as of the grant date.

In September 2021, the merger between Archer and a special purpose acquisition company (“SPAC”) was completed, resulting in a readily determinable fair value of our investments in Archer.

Accordingly, gains and losses associated with changes in the fair value of our investments in Archer are measured in earnings, in accordance with ASC 321.

In September 2021, the merger between Archer and a special purpose acquisition company (“SPAC”) was completed, resulting in a readily determinable fair value of our investments in Archer.

Accordingly, gains and losses associated with changes in the fair value of our investments in Archer are reported in earnings, in accordance with ASC 321.

The initial grant date value of the warrants, $ 16.4 million, was recognized as a vendor credit liability within other noncurrent liabilities.

The liability related to the warrant assets will be settled in the future, as a reduction of the acquisition date value of the eVTOL aircraft contemplated in the related aircraft purchase agreement.

In connection with closing of the merger between Archer and the SPAC described above, in September 2021, we purchased 500,000 Class A common shares in Archer for $ 5.0 million, and obtained

an additional warrant to purchase shares of Archer with a total grant date value of $ 5.6 million.

In connection with closing of the merger between Archer and the SPAC described above, in September 2021, we purchased 500,000 Class A common shares in Archer for $ 5.0 million and obtained an additional warrant to purchase shares of Archer with a total grant date value of $ 5.6 million.

The initial value of the warrants was recognized as a vendor credit liability within other noncurrent liabilities, and will be settled in the future, as a reduction of the acquisition date value of the eVTOL aircraft contemplated in the related aircraft purchase agreement.

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All of our vested warrants have been exercised into shares of Archer common stock.

Gains/(losses) on our investments in Archer totaled $ 5.6 million and ($ 13.7 ) million during the fiscal years ended September 30, 2023 and 2022, respectively and are reflected in gain/(loss) on investments, net in our consolidated statement of operations.

The fair values of the Company’s investments in Archer are Level 1 within the fair value hierarchy as the values are determined using quoted prices for the equity securities.

The value of the Company's investment in Archer is $ 11.5 million as of September 30, 2023.

In connection with a negotiated forward purchase contract for fully electric aircraft executed in July 2021, we obtained $ 5.0 million of preferred stock in Heart Aerospace Incorporated (“Heart”), a privately held company.

The fair values of the Company’s investments in Archer are Level 1 within the fair value hierarchy as the values are determined using quoted prices for the equity securities.

The Company recorded a $ 2.7 million unrealized loss and a $ 5.6 million unrealized gain on the investment in Archer during the fiscal years ended September 30, 2024 and 2023 , respectively.

During the fiscal year ended September 30, 2024, the Company sold substantially all of its shares of Archer for approximately $ 9.6 million in proceeds and recorded a $ 0.8 million gain on the sale.

Our investment in Heart does not have a readily determinable fair value, so we account for the investment using the measurement alternative under ASC 321 and measure the investment at initial cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments from the same issuer.

We consider a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, financing transactions subsequent to the acquisition of the investment, or other features that indicate a change to fair value is warranted.

Any changes in fair value from the initial cost of the investment in preferred stock are recognized as increases or decreases on our balance sheet and as net gains or losses on investments in equity securities, in other income (expense), net.

The initial investment in preferred stock was measured at cost of $ 5.0 million.

There were no identical or similar transactions during the fiscal year ended September 30, 2023, and as such, no adjustments to the initial cost of the equity investment resulting from observable price changes have been recorded at September 30, 2023.

The fair values of the Company’s investments in Heart are Level 3 within the fair value hierarchy as the values are determined using unobservable inputs in which there is little or no market data, requiring the Company to develop our own assumptions.

The value of the Company's investment in Heart is $ 5.0 million as of September 30, 2023.

In connection with a negotiated forward purchase contract for hybrid-electric vertical takeoff and landing (“VTOL”) aircraft executed in February 2022, we obtained a warrant giving us the right to acquire a number of shares of common stock in the privately-held manufacturer of the VTOL aircraft.

These investments do not have a readily determinable fair value, so we account for them using the measurement alternative under ASC 321 and measure the investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments from the same issuer.

We consider a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, financing transactions subsequent to the acquisition of the investment or other features that indicate a discount to fair value is warranted.

Any changes in fair value from the grant date value of the warrant assets will be recognized as increases or decreases to the investment on our balance sheet and as net gains or losses on investments equity securities.

During the fiscal year ended September 30, 2024 , the Company transferred its vested investment in Heart to United in exchange for $ 12.6 million in debt reduction, and realized a gain on the investment of $ 7.2 million, net of transaction costs.

These investments did not have a readily determinable fair value, so we originally accounted for them using the measurement alternative under ASC 321, plus or minus changes resulting from observable price changes

in orderly transactions for identical or similar investments from the same issuer.

We estimated the initial warrant asset value to be $ 3.2 million based on prices of similar investments in the same issuer.

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The liability related to the warrant assets will be settled in the future, as a reduction of the acquisition date value of the VTOL aircraft contemplated in the related forward purchase agreement.

The fair values of the Company’s investments in the privately-held manufacturer noted above are Level 3 within the fair value hierarchy as the values are determined using unobservable inputs in which there is little or no market data, requiring the Company to develop our own assumptions.

The value of the Company's investment is $ 3.5 million as of September 30, 2023.

Total net gains/(losses) on our investments in equity securities totaled $ 5.4 million and ($ 13.7 ) million during the year ended September 30, 2023 and 2022, respectively, and are reflected in gain/(loss) on investments, net in our consolidated statements of operations and comprehensive (loss) income.

As of September 30, 2023, the aggregate carrying amount of our investments in equity securities was $ 20.3 million, and the carrying amount of our investments without readily determinable fair values was $ 8.8 million.

On March 12, 2024, the privately-held manufacturer of the VTOL aircraft, XTI Aerospace, Inc.

("XTIA"), and its merger subsidiary completed their merger agreement, and began trading as XTIA on the Nasdaq Composite on March 13, 2024, resulting in a readily determinable fair value on our investment in XTIA.

The fair values of the Company's investments in XTIA are now Level 1 within the fair value hierarchy as the values are determined using quoted prices for the equity securities.

The Company recorded a $ 3.5 million unrealized loss on the investment in XTIA during the fiscal year ended September 30, 2024 .

The total value of the investment in XTIA is $ 0.1 million as of September 30, 2024.

Total net unrealized (loss)/gain on our investments in equity securities totaled $( 6.1 ) million and $ 5.4 million for the fiscal years ended September 30, 2024 and 2023 , respectively, and are reflected in unrealized (loss)/gain on investments, net in our condensed consolidated statements of operations and comprehensive loss.

Total realized gain on our investments in equity securities totaled $ 8.0 million, net of transaction costs, for the fiscal year ended September 30, 2024 , and are reflected in gain on investments in our condensed consolidated statements of operation and comprehensive loss.

There was no realized gain or loss on investments in equity securities during the fiscal year ended September 30, 2023.

As of September 30, 2024 and September 30, 2023, the aggregate carrying amount of our investments in equity securities was $ 0.3 million and $ 20.3 million, respectively, and the carrying amount of our investments without readily determinable fair values was $ 0.3 million and $ 8.8 million, respectively.

Fair Value Measurements

Other than our assets held for sale, asset group associated with the CRJ-900 fleet, and investments in equity securities described in Notes 7 and 8, respectively, we did not measure any of our assets or liabilities at fair value on a recurring or nonrecurring basis as of September 30, 2023 and 2022.

Other than our assets held for sale and investments in equity securities described in Notes 6 and 7, respectively, we did not measure any of our assets or liabilities at fair value on a recurring or nonrecurring basis as of September 30, 2024 and 2023.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable included on the consolidated balance sheets approximated fair value at September 30, 2024 and 2023 because of the immediate or short-term maturity of these financial instruments.

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Notes payable to secured parties, due in semi-annual installments,

interest based on SOFR plus interest spread at 4.75 % to 6.25 %

interest based on fixed interest of 4.75 % to 6.25 %

through 2028 , collateralized by the underlying aircraft

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collateralized by the underlying aircraft

Revolving credit facility, quarterly interest based on SOFR plus

interest spread at 4.50 % through 2028 , with incentives for up

to $ 15 million based on achieving certain performance metrics

United Revolving credit facility, quarterly interest based on SOFR plus

interest spread at 4.50 % through 2028

United Bridge Loan - due in quarterly installments based on SOFR

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2024 , collateralized by the underlying equipment

Notes payable to financial institution, due in monthly installments, plus

interest spread at 5.00 % through 2023 , secured by flight equipment

Notes payable to financial institution, due in monthly installments,

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collateralized by the underlying equipment

Notes payable to financial institution, quarterly interest based

Notes payable to the UST, quarterly interest based

on SOFR plus interest spread at 3.50 % through 2025

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Principal maturities of long-term debt as of September 30, 2024, and for each of the next five years are as follows (in thousands):

Periods Ending June 30,

Periods Ending September 30,

Total Principal

The net book value of collateralized aircraft and equipment as of September 30, 2024 was $ 438.4 million.

EDC Loan and MHIRJ Junior Note

In June 2015, we entered into seven separate credit agreements with EDC and junior noteholder, MHIRJ, to finance seven CRJ-900 aircraft with a maturity date of June 30, 2027 .

In November 2022, we entered into a letter amendment with EDC which provided for the deferral of a portion of scheduled principal payments on our existing loan, beginning in January 2023 through December 2024.

The total amount originally scheduled to be deferred during the deferral period was approximately $ 14.0 million.

The deferral of the scheduled principal payments was originally scheduled to be repaid on the maturity date of June 30, 2027 .

Additionally, the junior noteholder, MHIRJ, agreed to forgive approximately $ 5.0 million in principal contingent upon the repayment of $ 4.2 million in by December 31, 2023.

On May 31, 2023, we entered into an agreement with American (the "American Purchase Agreement") to sell all seven aircraft under the EDC Loan and MHIRJ Junior note to American and eliminate the remaining associated debt.

As of September 30, 2023, the sale of three of the EDC aircraft has closed, and approximately $ 27.2 million of principal was eliminated with proceeds from the sale.

A total of $ 34.6 million of principal between the senior and junior notes was paid off during fiscal year 2023.

As of September 30, 2023, we have $ 39.0 million outstanding on the EDC Loan and MHIRJ Junior note.

Subsequent to September 30, 2023, we closed the sale of the remaining four CRJ-900 aircraft as part of the American Purchase Agreement, and used a portion of the proceeds to retire the EDC Loan and MHIRJ junior note.

$ 0.6 million in proceeds from the sale of each aircraft was repaid to MHIRJ for a total of $ 4.2 million, and we achieved approximately $ 5.0 million of forgiveness on the MHIRJ junior note.

Enhanced Equipment Trust Certificate ("EETC")

In December 2015, an Enhanced Equipment Trust Certificate ("EETC") pass-through trust was created to issue pass-through certificates to obtain financing for new E-175 aircraft.

$ 22.2 million in principal payments were made during the year, and as of September 30, 2023, Mesa has $ 108.8 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the consolidated balance sheets.

$ 23.3 million in principal payments were made during the year, and as of September 30, 2024, Mesa had $ 85.5 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the consolidated balance sheets.

The structure of the EETC financing consists of a pass-through trust created by Mesa to issue pass-through certificates, which represent fractional undivided interests in the pass-through trust and are not obligations of Mesa.

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United Revolving Credit Facility

On December 27, 2022, in connection with entering into the Amended and Restated United CPA, (i) United agreed to purchase and assume all of First Citizens’

rights and obligations as a lender under the Existing Facility pursuant to an Assignment and Assumption Agreement, (ii) United and CIT Bank agreed to amend the Existing Facility pursuant to an Amendment No.

1, dated December 27, 2022 (“Amendment No.

1”), and an Amendment No.

2, dated January 27, 2023 (“Amendment No.

On December 27, 2022, in connection with entering into the Amended and Restated United CPA, (i) United agreed to purchase and assume all of First Citizens’ rights and obligations as a lender under the Existing Facility pursuant to an Assignment and Assumption Agreement, (ii) United and CIT Bank agreed to amend the Existing Facility pursuant to an Amendment No.

1, dated December 27, 2022 ("Amendment No.

1"), and an Amendment No.

2, dated January 27, 2023 (“Amendment No.

the Existing Facility as amended by Amendment No.

1 and Amendment No.

2, the "Amended Facility"), and (iii) Wilmington Trust,

National Association agreed to assume all of CIT Bank’s rights and obligations as Administrative Agent pursuant to an Agency Resignation, Appointment and Assumption Agreement, dated as of January 27, 2023.

2, the "Amended Facility"), and (iii) Wilmington Trust, National Association agreed to assume all of CIT Bank’s rights and obligations as Administrative Agent pursuant to an Agency Resignation, Appointment and Assumption Agreement, dated as of January 27, 2023.

Amendment No.

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2, among other things, amends the definition of Controlled Account (as defined in the Amended Facility).

Amounts borrowed under this Amended Facility are secured by a collateral pool consisting of a combination of expendable parts, rotable parts and engines and a pledge of the Company’s stock in certain aviation companies.

United funded $ 25.5 million as of the closing date of Amendment No.

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In order to earn forgiveness on the deemed prepayment, we must also have repaid the bridge loan in full.

As of September 30, 2023, we have achieved $ 9.0 million in forgiveness.

However, as the bridge loan is still outstanding as of September 30, 2023, the forgiveness is not currently recognizable.

During the fiscal year ended September 30, 2024, the bridge loan was repaid in full, and $ 10.5 million of the potential $ 15.0 million achieved was recognized as a deemed prepayment and recorded as a gain on debt forgiveness.

$ 4.5 million of the deemed prepayment remained outstanding as of September 30, 2024.

On September 6, 2023, the Company amended the existing United Credit Facility to (i) permit the Company to re-draw approximately $ 7.9 million of the Effective Date Bridge Loan (as defined in the United Credit Facility) previously repaid;

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Amounts borrowed under this facility bear interest at 3.50 % for Base Rate Loans and 4.50 % per annum for Term SOFR Loans.

Amounts borrowed under the Amended Credit Facility are secured by a collateral pool consisting of a combination of expendable parts, rotable parts and engines, a pledge of certain of the Company’s bank accounts and a pledge of the Company’s stock in certain aviation companies.

On January 11, 2024 and January 19, 2024, we entered into Amendment No.

4 to our Second Amended and Restated Credit and Guaranty Agreement, Amendment No.

1 to Stock Pledge Agreement and Limited Waiver of Conditions to Credit Extension ("Amendment No.

4") and Waiver and Amendment No.

5 to our Second Amended and Restated Credit and Guaranty Agreement (collectively, the "January 2024 Credit Agreement Amendments"), respectively.

The January 2024 Credit Agreement Amendments provide for the following:

The repayment in full of the Company's $ 10.5 million Effective Date Bridge Loan obligations, and the prepayment (and corresponding reduction) of approximately $ 2.1 million in Revolving Loans (as defined therein), with the proceeds from the sale, assignment, or transfer of the Company's vested investment in Heart Aerospace Incorporated.

As a result of the repayment of the Effective Date Bridge Loan and pay down of the Revolving Loans, the shares of capital stock of Archer Aviation, Inc.

held by the Company are being released as collateral for the United credit facility, subject to certain conditions.

On January 11, 2024 and January 19, 2024, we entered into the January 2024 United CPA Amendments providing for the following:

• The repayment in full of the Company's $ 10.5 million Effective Date Bridge Loan obligations, and the prepayment (and corresponding reduction) of approximately $ 2.1 million in Revolving Loans (as defined therein), with the proceeds from the sale, assignment, or transfer of the Company's vested investment in Heart.

• As a result of the repayment of the Effective Date Bridge Loan and pay down of the Revolving Loans, the shares of capital stock of Archer held by the Company were released as collateral for the United credit facility.

• The waiver of certain financial covenant defaults with respect to the fiscal quarters ended June 30, 2023, September 30, 2023, and December 31, 2023 and the waiver of projected financial covenant defaults with respect to the fiscal quarter ending March 31, 2024.

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• Loan prepayment requirements in connection with the sale of four specified aircraft engines and the addition of such engines as collateral for the United credit facility for a specified period of time.

On May 8, 2024, we entered into a Waiver Agreement to our Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of a certain projected financial covenant default with respect to the fiscal quarter ending June 30, 2024.

As of the issuance of this Form 10-K, we are in compliance with all financial covenants.

Loan Agreement with the United States Department of the Treasury

On October 30, 2020, the Company entered into a Loan and Guarantee Agreement with U.S.

Department of the Treasury (the “U.S.

Treasury”) for a secured loan facility of up to $ 200.0 million that matures in October 2025 (“the Treasury Loan”).

Department of the Treasury (the “U.S.

Treasury”) for a secured loan facility of up to $ 200.0 million that matures in October 2025 (“the Treasury Loan”).

On October 30, 2020, the Company borrowed $ 43.0 million and on November 13, 2020, the Company borrowed an additional $ 152.0 million.

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The Company also issued warrants to purchase shares of common stock to the U.S.

The Treasury Loan bears interest at a variable rate equal to (a)(i) the LIBOR rate divided by (ii) one minus the Eurodollar Reserve Percentage plus (b) 3.50 %.

Accrued interest on the loans is payable in arrears on the first business day following the 14th day of each March, June, September, and December, beginning with December 15, 2020.

All principal amounts outstanding under the Treasury Loan are due and payable in a single installment on October 30, 2025 (the “Maturity Date”).

The Treasury Loan bears interest at a variable rate equal to (a)(i) the SOFR rate divided by (ii) one minus the Eurodollar Reserve Percentage plus (b) 3.50 %.

Accrued interest on the loans is payable in

arrears on the first business day following the 14th day of each March, June, September, and December, beginning with December 15, 2020.

All principal amounts outstanding under the Treasury Loan are due and payable in a single installment on October 30, 2025 (the “Maturity Date”).

Interest is paid in kind by increasing the principal amount of the loan by the amount of such interest due on an interest payment date for the first 12 months of the loan.

Mesa's obligations under the Treasury Loan are secured by certain aircraft, aircraft engines, accounts receivable, ground service equipment, and tooling (collectively, the “Collateral”).

The obligations under the Treasury Loan are guaranteed by the Company and Mesa Air Group Inventory Management.

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Mandatory prepayments of loans under the Treasury Loan are required, without premium or penalty, to the extent necessary to comply with the covenants discussed below, certain dispositions of the Collateral, certain debt issuances secured by liens on the Collateral and certain insurance payments related to the Collateral.

In addition, if a “change of control”

(as defined in the Treasury Loan) occurs with respect to Mesa Airlines, Mesa Airlines will be required to repay the loans outstanding under the Treasury Loan.

In addition, if a “change of control” (as defined in the Treasury Loan) occurs with respect to Mesa Airlines, Mesa Airlines will be required to repay the loans outstanding under the Treasury Loan.

The Treasury Loan requires the Company, under certain circumstances, including within 10 business days prior to the last business day of March and September of each year beginning March 2021, to appraise the value of the Collateral and recalculate the collateral coverage ratio.

If the calculated collateral coverage ratio is less than 1.55 to 1.0, Mesa Airlines will be required either to provide additional Collateral (which may include cash collateral) to secure its obligations under the Treasury Loan or repay the term loans under the Treasury Loan, in such amounts that the recalculated collateral coverage ratio, after giving effect to any such additional Collateral or repayment, is at least 1.55 to 1.0.

On September 23, 2024, we entered into the CCR Modification Agreement to reduce our required minimum CCR to 1.44 to 1.0 through November 22, 2024, after which, the required minimum CCR will revert back to 1.55 to 1.0.

The Treasury Loan contains two financial covenants, a minimum collateral coverage ratio and a minimum liquidity level.

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Treasury for the provision of financial assistance under the Treasury Loan, the Company issued to the U.S.

Treasury warrants to purchase an aggregate of 4,899,497 shares of the Company’s common stock at an exercise price of $ 3.98 per share, which was the closing price of the Common Stock on The Nasdaq Stock Market on April 9, 2020.

The exercise price and number of shares of common stock issuable under the Warrants are subject to adjustment as a result of anti-dilution provisions contained in the Warrants for certain stock issuances, dividends, and other corporate actions.

The warrants expire on the fifth anniversary of the date of issuance and are exercisable either through net share settlement or net cash settlement, at the Company’s option.

For accounting purposes, the fair value for the Warrant was estimated using a Black-Scholes option pricing model and recorded in stockholders' equity with an offsetting debt discount to the Treasury Loan in the consolidated balance sheet.

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At funding on November 13, 2020, the remaining $ 152.0 million was recorded net of $ 2.3 million in capitalized debt issuance costs.

The remaining $ 0.1 million in debt issuance costs was allocated to the warrants as a reduction to the warrant value within additional paid-in capital.

The remaining $ 0.1 million in debt issuance costs was allocated to the warrants as a reduction to the warrant value within additional

paid-in capital.

Debt issuance costs allocated to the debt are amortized into interest expense using the effective interest method over the term of the related loan.

Prior to the November 13, 2020 funding of the $ 152.0 million portion of the Treasury Loan, the Company repaid $ 167.7 million in existing aircraft debt covering 44 aircraft, including indebtedness under its (a) Senior Loan Agreements, dated June 27, 2018, (b) Junior Loan Agreements, also dated June 27, 2018, (c) Credit Agreements, dated January 31, 2007, April 16, 2014, and May 23, 2014, (d) Senior Loan Agreements, dated December 27, 2017, and (e) Junior Loan Agreements, also dated December 27, 2017 (collectively, “the EDC Loans”).

The Company made payments totaling $ 164.2 million to repay the EDC Loans, consisting of principal of $ 167.7 million, and a $ 3.5 million discount on the balance owed.

Additionally, in connection with the repayment, $ 2.5 million of unamortized original issue discount and deferred financing costs were recorded as a loss on debt extinguishment, resulting in a net gain on extinguishment of $ 1.0 million recorded within other income.

As of September 30, 2024 , Mesa has $ 113.7 million outstanding under the Treasury Loan.

$ 25.4 million in principal payments were made during the year.

Spare Engine Financing

In December 2021, we entered into a loan agreement with a financing institution to finance certain purchases of spare engines via a newly formed limited liability company (“LLC”).

The loan agreement provides for aggregate borrowings of up to $ 54.0 million through November 2022.

In December 2021, we borrowed an aggregate of $ 35.3 million under the loan agreement, which matures in December 2027 .

The borrowed amounts are collateralized by the underlying engines and require monthly principal and interest payments until maturity.

Borrowings under the loan agreement bear interest at the monthly LIBOR plus 4.25 % .

The borrowings are the obligation of the newly formed LLC and are guaranteed by Mesa Airlines, Inc.

Subsequent to September 30, 2023 , we entered into an agreement with a third party to purchase the 12 spare engines under the loan agreement.

The transaction is expected to close by the end of March 2024, and will eliminate all remaining debt under the loan agreement.

The newly formed LLC, which is wholly owned by Mesa, was determined to be a VIE for which we are the primary beneficiary because we have the power to direct the activities of the LLC that most significantly impact the LLC’s economic performance and the obligation to absorb losses and right to receive benefits from the LLC in our capacity as sole member of the LLC and guarantor of the borrowings.

Therefore, the LLC is consolidated in our financial statements and the borrowings are reflected as long-term debt in our consolidated balance sheets.

The loan agreement contains a loan-to-value (“LTV”) financial covenant pursuant to which we are required to prepay certain amounts of the loan if the aggregate outstanding principal balance of the loan exceeds a specified percentage of the appraised value of the engines beginning in the 12 th full month after closing and each June 1 and December 1 thereafter.

Earnings Per Share

Calculations of net (loss) income per common share were as follows (in thousands, except per share data):

Loss Per Share

Calculations of net loss per common share were as follows (in thousands, except per share data):

Year Ended September 30,

Net (loss)/income

Basic weighted average common

shares outstanding

Incremental shares for:

Dilutive effect of warrants

Dilutive effect of restricted stock

Diluted weighted average common

shares outstanding

Net (loss)/income per common share

Net loss per common share

attributable to Mesa Air Group:

Basic (loss) income per common share is computed by dividing net (loss) income attributable to Mesa Air Group by the weighted average number of common shares outstanding during the period.

Basic loss per common share is computed by dividing net loss attributable to Mesa Air Group by the weighted average number of common shares outstanding during the period.

The number of incremental shares from the assumed issuance of shares relating to restricted stock and exercise of warrants (excluding warrants with a nominal conversion price) is calculated by applying the treasury stock method.

Share-based awards and warrants whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net (loss) income per share calculation.

Share-based awards and warrants whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net loss per share calculation.

In loss periods, these incremental shares are excluded from the calculation of diluted loss per share, as the inclusion of unvested restricted stock and warrants would have an anti-dilutive effect.

The following number of weighted-average potentially dilutive shares (in thousands) were excluded from the calculation of diluted net (loss) income per share because the effect of including such potentially dilutive shares would have been anti-dilutive:

The following number of weighted-average potentially dilutive shares (in thousands) were excluded from the calculation of diluted net loss per share because the effect of including such potentially dilutive shares would have been anti-dilutive:

Year Ended September 30,

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Treasury for the provision of financial assistance under the Treasury Loan, the Company issued warrants to the U.S.

Treasury to purchase shares of the Company’s common stock, no par value, at an exercise price of $ 3.98 per share (the “Exercise Price”), which was the closing price of the common stock on The Nasdaq Stock Market on April 9, 2020.

The warrants were issued pursuant to the terms of a Treasury Warrant Agreement entered into by the Company and the U.S.

The exercise price and number of warrant shares issuable under the warrants are subject to adjustment as a result of anti-dilution provisions contained in the warrants for certain stock issuances, dividends, and other corporate actions.

The warrants expire on the

fifth anniversary of the date of issuance and are exercisable either through net share settlement or net cash settlement, at the Company’s option.

The warrants are accounted for within equity at a grant date fair value determined under the Black-Scholes Option Pricing Model.

The warrants expire on the fifth anniversary of the date of issuance and are exercisable either through net share settlement or net cash settlement, at the Company’s option.

The warrants are accounted for within equity at a grant date fair value

determined under the Black-Scholes Option Pricing Model.

As of September 30, 2024 , 4,899,497 warrants were issued and outstanding.

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The Company has not historically paid dividends on shares of its common stock.

Additionally, the Treasury Loan and the Company's aircraft lease facility (the " RASPRO " Lease Facility) with RASPRO Trust 2005, a pass-through trust contains restrictions that limit the Company's ability to or prohibit it from paying dividends to holders of its common stock.

Additionally, the UST Loan contains restrictions that limit the Company's ability to or prohibit it from paying dividends to holders of its common stock.

The provision for income taxes consists of the following:

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(in thousands)

(Benefit) provision for income taxes

Provision/(Benefit) for income taxes

The reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows:

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Expired tax attributes

Income tax (benefit) provision

Income tax provision (benefit)

The components of the Company's deferred taxes as of September 30, 2024 and 2023 are as follows:

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Warrant liabilities

State alternative minimum tax

Other reserves and estimated losses

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Total net deferred tax assets

Intangible assets

Operating lease right-of-use assets

Property and equipment

Unrealized gain on equity investments

Unrealized loss/(gain) on equity investments

Total deferred tax liabilities

Net deferred tax liabilities

The Company has federal and state income tax net operating losses (“NOL”) carryforwards of $ 562.6 million and $ 233.5 million, which expire in fiscal years 2027 - 2038 and 2023 - 2043 , respectively.

The Company has federal and state income tax net operating losses (“NOL”) carryforwards of $ 511.7 million and $ 226.9 million, which expire in fiscal years 2027 - 2038 and 2024 - 2044 , respectively.

Approximately $ 194.2 million of our federal NOL carryforwards are not subject to expiration.

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The Company cannot conclude that it is more likely than not that the benefit from certain federal and state NOL carryforwards will not be realized.

In recognition of this uncertainty, the Company has provided a valuation allowance of $ 21.1 million as of September 30, 2023 and $ 2.9 million as of September 30, 2022 on the deferred tax assets related to these state NOL carryforwards.

In recognition of this uncertainty, the Company has provided a valuation allowance of $ 41.6 million as of September 30, 2024 and $ 21.1 million as of September 30, 2023 on the deferred tax assets related to these NOL carryforwards.

If or when recognized, the tax benefits related to any reversal of the valuation allowance on deferred tax assets will be recognized as a reduction of income tax expense.

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Based on the study conducted at that time, a portion of the federal NOLs were determined to be limited by IRC Section 382, resulting in the Company writing off a portion of its NOLs at that time.

Additionally, the Company’s initial public offering in August of 2018 resulted in a change in ownership under Section 382 of the Internal Revenue Code.

The Company completed an update to the analysis of any potential limitation on the use of its net operating losses under Section 382 for the fiscal year ended September 30, 2024.

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(in thousands)

Unrecognized tax benefits —

Gross decreases —

tax positions in prior period

Gross increases —

tax positions in prior period

Unrecognized tax benefits —

The Company’s unrecognized tax benefits of $ 4.9 million, $ 4.9 million and $ 4.9 million as of September 30, 2023, 2022, and 2021, respectively, is included as an offset to the net deferred tax asset balance.

Unrecognized tax benefits — October 1

Gross decreases — tax positions in prior period

Gross increases — tax positions in prior period

Unrecognized tax benefits — September 30

The Company’s unrecognized tax benefits of $ 4.9 million and $ 4.9 million as of September 30, 2024 and 2023, respectively, is included as an offset to the net deferred tax asset balance.

If recognized, the balance of the uncertain tax benefits would impact the effective tax rate.

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Share-based compensation expense for the years ended September 30, 2024, 2023, and 2022 was approximately $ 1.3 million, $ 2.3 million, and $ 2.8 million, respectively.

Share-based compensation expense is recorded in general and administrative expenses in the consolidated statements of operations and comprehensive (loss) income.

Share-based compensation expense is recorded in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

The Company repurchased 112,698 shares of its common stock for approximately $ 0.1 million to cover the income tax obligation on vested employee equity awards during the fiscal year ended September 30, 2024 .

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ordinary shares under the 2019 ESPP, 55,372 of which were purchased and issued during the current fiscal year.

During the fiscal year ended September 30, 2024, the maximum amount of shares was reached and the 2019 ESPP was discontinued.

At September 30, 2024 , the Company leased 32 aircraft, airport facilities, office space, and other property and equipment under non-cancelable operating leases.

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The Company expects that, in the normal course of business, such operating leases that expire will be renewed or replaced by other leases, or the property may be purchased rather than leased.

Aggregate rental expense under all operating aircraft, equipment and facility leases totaled approximately $ 12.2 million, $ 43.4 million, and $ 44.6 million for the year ended September 30, 2023, 2022, and 2021, respectively.

At September 30, 2023 , the Company leased 15 aircraft and three spare engines under non-cancelable finance leases.

Aggregate rental expense under all operating aircraft, equipment and facility leases totaled approximately $ 13.9 million, $ 12.2 million, and $ 43.4 million for the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

At September 30, 2024 , the Company leased two aircraft under non-cancelable finance leases.

Basic rent on finance leases is paid monthly and at the end of the lease term.

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Total lease costs

As of September 30, 2023 , the Company’s operating lease right-of-use assets were $ 9.7 million, the Company’s current maturities of operating lease liabilities were $ 3.5 million, and the Company’s noncurrent operating lease liabilities were $ 8.1 million.

As of September 30, 2023, the Company’s current portion of finance lease liabilities were $ 57.7 million, and the Company’s noncurrent finance lease liabilities were $ 9.9 million.

The Company’s operating lease payments included in operating cash flows for the year ended September 30, 2023 and 2022 were approximately $ 9.5 million and $ 36.3 million, respectively.

The Company’s finance lease interest payments included in operating cash flows for the year ended September 30, 2023 and 2022 were $ 1.2 million and $ 0.3 million, respectively.

The Company’s finance lease principal payments included in financing cash flows for the year ended September 30, 2023 and 2022 were $ 15.1 million and $ 2.5 million, respectively.

The Company recorded impairment losses of zero , $ 10.5 million, and zero for the years ended September 30, 2023, 2022, and 2021, respectively.

As of September 30, 2024 , the Company’s operating lease right-of-use assets were $ 7.2 million, the Company’s current maturities of operating lease liabilities were $ 1.7 million, and the Company’s noncurrent operating lease liabilities were $ 6.9 million.

As of September 30, 2024, the Company’s current portion of finance lease liabilities were $ 1.8 million, and the Company’s noncurrent finance lease liabilities were $ 2.9 million.

The Company’s operating lease payments included in operating cash flows for the fiscal years ended September 30, 2024 and 2023 were approximately $ 4.6 million and $ 9.5 million, respectively.

The Company’s finance lease interest payments included in operating cash flows for the fiscal years ended September 30, 2024 and 2023 were $ 2.0 million and $ 1.2 million, respectively.

The Company’s finance lease principal payments included in financing cash flows for the fiscal years ended September 30, 2024 and 2023 were $ 65.3 million and $ 15.1 million, respectively.

The table below presents the weighted average remaining terms and discount rates for our operating and finance leases as of September 30, 2024:

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Weighted average discount rate

The following table summarizes future minimum rental payments, primarily related to leased aircraft, required under operating and finance leases that had initial or remaining non-cancelable lease terms as of September 30, 2023 (in thousands):

The following table summarizes future minimum rental payments, primarily related to facilities and leased aircraft, required under operating and finance leases that had initial or remaining non-cancelable lease terms as of September 30, 2024 (in thousands):

Periods Ending

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Amounts recorded in the consolidated balance sheet

RASPRO Lease Facility.

On September 23, 2005, Mesa Airlines, as lessee, entered into the RASPRO Lease Facility, with RASPRO as lessor, for 15 of our CRJ-900 aircraft.

The obligations under the RASPRO Lease Facility are guaranteed by us, and basic rent is paid quarterly on each aircraft.

On each of March 10, 2014, June 5, 2014, and December 8, 2017, the RASPRO Lease Facility was amended to defer certain payments of basic rent (the "Deferred Amounts").

Until the principal of and accrued interest on the Deferred Amounts are paid in full:

(i) we and Mesa Airlines are prohibited from paying any dividends to holders of our common stock, (ii) we are prohibited from repurchasing any of our warrants or other equity interests, (iii) Mesa Airlines must maintain a minimum of $ 35.0 million of cash, cash equivalents and availability under lines of credit, (iv) Mesa Airlines must provide RASPRO with periodic monthly, quarterly and annual reports containing certain financial information and forecasted engine repair costs and (v) we must maintain a minimum debt-to-assets ratio.

In June 2020, the Company amended its RASPRO aircraft lease agreement to defer a $ 4.0 million lease payment otherwise due in June 2020.

Per the amended agreement dated June 5, 2020, the Company is required to pay this amount over the period of September 2021 through March 2024.

The Company made the accounting election available for COVID-19 related concessions provided by a lessor and accordingly, this was not a lease modification and required no changes to current accounting treatment.

In December 2022, the Company entered into an agreement with RASPRO Trust, reducing the buyout price on all 15 aircraft at lease termination by a total of $ 25 million.

Under the terms of the new agreement, the Company reclassified these leases as finance leases.

Commitments and Contingencies

We are involved in various legal proceedings (including, but not limited to, insured claims) and FAA civil action proceedings which we consider routine to our business activities on an ongoing basis.

If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the

estimated liability in our consolidated financial statements.

If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated liability in our consolidated financial statements.

If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome;

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As of September 30, 2024, we believed that the ultimate outcomes of routine legal matters are not likely to have a material adverse effect on our financial position, liquidity, or results of operations.

Engine Purchase Commitments

On February 26, 2021, the Company and General Electric Company (“GE”), acting through its GE-Aviation business unit, entered into an Amended and Restated Letter Agreement No.

The Company agreed to purchase and take delivery of 10 new CF34-8C5 or CF34-8E5 engines with delivery dates starting from July 1, 2021 through November 1, 2022.

During the quarter ended March 31, 2021, a $ 7.0 million non-refundable purchase deposit was made for the first five engines to be delivered in calendar year 2021.

The Company has options to purchase an additional 10 similar engines beyond 2022.

The total purchase commitment related to these 10 engines is approximately $ 52.2 million.

As of September 30, 2023, we have purchased all of the engines pursuant to the Amended and Restated Letter Agreement No.

If the Company fails to accept delivery of the spare engines when duly tendered, the Company may be assessed a minimum cancellation charge based on the engine price determined as of the date of scheduled engine delivery to the Company.

Electric Aircraft Forward Purchase Commitments

As described in Note 8, in February 2021, the Company entered into a forward purchase contract with Archer for a number of electrically-powered vertical takeoff and landing aircraft (“eVTOL aircraft”).

As described in Note 7, in February 2021, the Company entered into a forward purchase contract with Archer for a number of electrically-powered vertical takeoff and landing aircraft (“eVTOL aircraft”).

The aggregate base commitment for the eVTOL aircraft is $ 200.0 million, with an option to purchase additional aircraft.

The Company’s obligation to purchase the eVTOL aircraft is subject to the Company and Archer first agreeing in the future to a number of terms and conditions, which may or may not be met.

As described in Note 7, in July 2021, the Company entered into a forward purchase contract with Heart for a number of fully electric aircraft.

The maximum aggregate base commitment for the aircraft is $ 1,200.0 million, with an option to purchase additional aircraft.

The Company’s obligation to purchase the aircraft is subject to the Company and Heart first agreeing in the future to a number of terms and conditions, which may or may not be met.

Other Commitments

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Subsequent Events

United Agreements

The January 2024 United CPA Amendments provide additional liquidity and certain other amendments described below

Increased CPA rates, retroactive to October 1, 2023 through December 31, 2024, which are projected to generate approximately $ 63.5 million in incremental revenue over the next twelve months.

Amended certain notice requirements for removal by United of up to eight CRJ-900 Covered Aircraft (as defined in the United CPA) from the United CPA.

Extended United's existing utilization waiver for the Company's operation of E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA) to June 30, 2024.

On January 11, 2024 and January 19, 2024, we entered into Amendment No.

4 to our Second Amended and Restated Credit and Guaranty Agreement, Amendment No.

1 to Stock Pledge Agreement and Limited Waiver of Conditions to Credit Extension ("Amendment No.

4") and Waiver and Amendment No.

5 to our Second Amended and Restated Credit and Guaranty Agreement (collectively, the "January 2024 Credit Agreement Amendments"), respectively.

The January 2024 Credit Agreement Amendments provide for the following:

As a result of the repayment of the Effective Date Bridge Loan and pay down of the Revolving Loans, the shares of capital stock of Archer Aviation, Inc.

held by the Company are being released as collateral for the United credit facility, subject to certain conditions.

The waiver of certain financial covenant defaults with respect to the fiscal quarters ended June 30, 2023, September 30, 2023, and December 31, 2023 and the waiver of projected financial covenant defaults with respect to the fiscal quarter ending March 31, 2024.

An increase in the Applicable Margin (as defined in the United credit facility) during a specified period of time for borrowings under the Credit Agreement.

Loan prepayment requirements in connection with the sale of four specified aircraft engines and the addition of such engines as collateral for the United credit facility for a specified period of time.

American Purchase Agreement

Subsequent to September 30, 2023, we closed the sale of the four remaining CRJ-900 aircraft to American for gross proceeds of $ 41.5 million.

Net proceeds from the sale of all four aircraft was $ 5.7 million after the retirement of the EDC Loan and the MHIRJ junior noteholder debt.

As part of our letter amendment entered into with MHIRJ in November 2022, approximately $ 5.0 million in principal was forgiven upon the repayment of $ 4.2 million in principal before December 31, 2023.

Aircraft Purchase Agreement

Subsequent to September 30, 2023, we closed the sale of the remaining four CRJ-900 aircraft as part of an aircraft purchase agreement to a third party for gross proceeds of $ 12.0 million.

Net proceeds from the sale of all four aircraft was $ 6.5 million after partial debt reduction of our UST Loan.

Engine Purchase Agreement

On December 1, 2023, we entered into an agreement with a third party to sell 12 surplus GE model CF34-8C aircraft engines and related parts.

The transaction is expected to close by the end of March 2024.

Engine Purchase Commitment

The transaction is expected to close by the end of December 2024.

Airframe and Engine Purchase Commitments

We have 15 aircraft under the RASPRO finance lease with a buyout obligation of $ 50.3 million at the end of March 2024.

Subsequent to September 30, 2023, we entered into purchase agreements with two separate parties to purchase the RASPRO aircraft and related engines.

One agreement is for 30 engines for a total of $ 19.5 million.

The second agreement is for 15 airframes (without engines) for a total of $ 18.8 million.

Both of these transactions are expected to be completed by the end of March 2024, with net cash from these transactions expected to be approximately $( 12.1 ) million.

Merger Agreement

On April 4, 2025, the Company entered into the Merger Agreement with Republic.

Subject to the terms and conditions of the Merger Agreement, Republic will merge with and into the Company, with the Company continuing as the surviving corporation following the Merger.

In connection with the Merger, immediately prior to the Effective Time, the Company will convert from a Nevada corporation to a Delaware corporation pursuant to the Conversion.

Three Party Agreement

Concurrently with the execution of the Merger Agreement, the Company entered into the Three Party Agreement between United, Republic, and the Company, which provides for, among other things, the following, each subject to the completion of the Merger Agreement:

• Termination of the United CPA.

• The Company to sell or dispose of all remaining Eligible Assets (as defined in the Three Party Agreement).

• The Company to extinguish all remaining debt with cash and sale of assets.

Any remaining debt will be assumed by the surviving corporation or forgiven by United.

• A three percent ( 3 %) increase in CPA block hour rates, retroactive to January 1, 2025.

• The transfer of all of the Company's rights and obligations under its agreements with Archer (as discussed below).

• The issuance by the Company (referred to in the Three Party Agreement as the "Primary Issuance") of shares of Company common stock equal to six percent ( 6 %) of the issued and outstanding shares of Company common stock after giving effect to the issuance of Company common stock in the Merger, which shares will (a) first become available to United to the extent of certain financial contributions made by United to the Company at or prior to the effective time of the Merger, (b) second, to the extent of any remainder, become available to the surviving corporation to satisfy certain liabilities, and (c) third, to the extent of any remainder, become available on a pro rata basis to the persons who, as of immediately prior to the effective time of the Merger, held shares of Company common stock.

The foregoing description of the Merger Agreement and the Three Party Agreement is only a summary, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement and the Three Party Agreement, which are attached as Exhibit 2.1 and 10.1, respectively, to the Current Report on Form 8-K filed by the Company with the SEC on April 8, 2025.

Amendments to our Third Amended and Restated United CPA

On April 4, 2025, we entered into the Sixth Amendment to our Third Amended and Restated United CPA which provides for the following:

• The extension of the CPA rate increases agreed upon in the January 2024 United CPA Amendments, retroactive to January 1, 2025, through March 31, 2026.

• The extension of incentives for achieving certain performance metrics, retroactive to July 1, 2024, through March 31, 2026.

On December 23, 2024, we entered into the Fourth Amendment to our Third Amended and Restated United CPA which provides for the following:

• Amended certain scheduled exit dates for our E-175 and CRJ-900 Covered Aircraft (as defined in the United CPA).

• Added provisions relating to the reimbursement by United of certain pilot training costs incurred by the Company with respect to its E-175 aircraft.

Transfer of Archer Obligations

In connection with the Three Party Agreement, the Company has agreed to transfer all rights and obligations associated with its Archer warrants and aircraft purchase agreement obligations.

If the Company is unable to transfer such rights and obligations, the Company will work with United to either cancel or transfer any remaining obligations to United.

The Company will be released from its liability associated with Archer obligations due to the transfer due United

Sale of Engines

On April 3, 2025, we entered into an agreement with a third party which provides for the sale of 23 GE model CF34-8C engines to the third party for expected gross proceeds of $ 16.3 million, which will be used to pay down our UST Loan.

• The Company expects to record an impairment loss of approximately $ 14.7 million associated with held for sale accounting treatment of the 23 engines, which will be reflected in our financial statements for fiscal year 2025.

Held for Sale Inventory

Subsequent to September 30, 2024, the Company reclassified certain spare parts related to its CRJ asset fleet to held for sale.

• The Company expects to record an impairment loss of approximately $ 25.4 million associated with held for sale accounting treatment of the spare parts, which will be reflected in our financial statements for fiscal year 2025.

Assets Held for Sale

Subsequent to September 30, 2024, the Company closed the sale of four CRJ-900 airframes, 18 GE model CF34-8C engines, and certain spare parts that were classified as held for sale as of September 30, 2024.

The Company received $ 22.4 million in gross proceeds from the sale of such assets, $ 21.0 million of which was used to pay down our UST Loan.

Aircraft Sale to United and Assumption of EETC Note by United

On December 31, 2024, we entered into an Aircraft Purchase Agreement with United which provides for the sale of 18 E-175 aircraft to United.

• Subsequent to September 30, 2024, the Company closed the sale of all 18 aircraft to United for gross proceeds of $ 227.7 million and net proceeds of $ 84.7 million after the retirement of debt.

The Company recorded a loss of approximately $ 120.6 million on the sale of the 18 aircraft, which will be reflected in our financial statements for the first and second fiscal quarters of 2025.

• As part of the sale of the 18 aircraft, United assumed our EETC note with a remaining balance of $ 73.4 million at the time of assumption.

Forgiveness on Revolving Loan

On December 30, 2024, we received notice from United that $ 4.5 million of our Effective Date Revolving Loan balance under our United Revolving Credit Facility has been forgiven for achieving certain operational performance metrics outlined in Amendment No.

1 to Second Amended and Restated Credit and Guaranty Agreement.

Sale of Airframes

On December 24, 2024, we entered into a purchase agreement with a third party which provides for the sale of 15 CRJ-900 airframes to the third party for expected gross proceeds of $ 19.0 million, which will be used to pay down our UST Loan.

On April 3, 2025, the purchase agreement was amended to include an additional 14 CRJ-900 airframes to be sold to the third party for expected gross proceeds of $ 9.1 million.

The total expected gross proceeds of $ 28.1 million will be used to pay down our UST Loan.

• The Company expects to record an impairment loss of approximately $ 6.7 million associated with the reclassification of 29 airframes to held for sale, which will be reflected in our financial statements for fiscal year 2025.

Minimum CCR Covenant

On December 23, 2024, we entered into an agreement with the UST to lower the minimum collateral coverage ratio ("CCR") covenant to .99 to 1.0 effective as of November 22, 2024 through February 28, 2025.

After such date, the CCR will revert to 1.55 to 1.0.

Receivables generated from the sale of assets that are not Collateral (as defined in the Treasury Loan) are excluded from the scope of the foregoing requirement.

As a result of the lower CCR covenant, we are in compliance with this covenant as of September 30, 2024.

Additionally, on March 18, 2025, we entered into a new CCR Modification Agreement with the UST to lower the minimum CCR covenant to .91 to 1.0 effective as of February 28, 2025, through the maturity date of the loan.

Waiver to Second Amended and Restated Credit and Guaranty Agreement

On December 23, 2024, we entered into a Waiver to Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of an existing financial covenant default with respect to the period July 1, 2024 to December 23, 2024 and a projected financial covenant default with respect to the period December 24, 2024 to December 31, 2024, each relating to a minimum liquidity requirement under our United Revolving Credit Facility.

Additionally, on April 4, 2025, we entered into the Sixth Amendment to Second Amended and Restated Credit and Guaranty Agreement providing for the waiver of an existing financial covenant default with respect to the period ended March 31, 2025, and a projected financial covenant default with respect to the periods ending June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026, each relating to a minimum liquidity requirement under our United Revolving Credit Facility.

Sale of CRJ-700 Aircraft

Subsequent to September 30, 2024, we completed the sale of two CRJ-700 aircraft to United for gross proceeds of $ 11.0 million and net proceeds of approximately $ 6.8 million after the retirement of debt.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data