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Item 7. Management’s Discussion and Analysis

2026-03-19 compared with 2025-05-14 · 519 added, 676 removed, 25 unchanged (98% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements, the accompanying notes, and the other financial information included elsewhere in this Annual Report on Form 10-K.

The following discussion contains forward‑looking statements that involve risks and uncertainties such as our plans, estimates, and beliefs.

Our actual results could differ materially from those discussed in the forward-looking statements below.

Factors that could cause or contribute to those differences in our actual results include, but are not limited to, those discussed below and those discussed elsewhere in this Annual Report on Form 10-K, particularly in the sections " Cautionary Notes Regarding Forward-Looking Statements " and Part I, Item 1A.

" Risk Factors" above.

Mesa Airlines is a regional air carrier providing scheduled passenger service to 67 cities in 34 states, Cuba, and Mexico.

All of our flights are operated as United Express flights pursuant to the terms of our Amended and Restated CPA with United.

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

Under the United CPA, we operated a fleet of 67 aircraft with approximately 265 daily departures as of September 30, 2024.

We also leased two CRJ-700 aircraft to a third party during fiscal year 2024 and operated MPD, our pilot development program.

As of September 30, 2024, all of our aircraft in scheduled service were operated for United.

All of our operating revenue in our 2024, 2023, and 2022 fiscal years were derived from operations associated with our United CPA, DHL FSA, leases of aircraft to a third party, and MPD.

Operating revenue in fiscal years 2023 and 2022 were also derived from operations associated with our American CPA prior to the wind-down and termination of such CPA on April 3, 2023.

Our long-term agreement with United provides us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour and flight actually flown, and reimbursement of certain direct operating expenses in exchange for providing regional flying services on behalf of United.

Our CPA also shelters us from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of passengers.

In providing regional flying under our CPA, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of United.

United controls route selection, pricing, seat inventories, marketing, and scheduling, and provides us with ground support services, airport landing slots and gate access.

Glossary of Airline Terms

Set forth below is a glossary of industry terms used in this Annual Report on Form 10-K:

" Available seat miles " or " ASMs " means the number of seats available for passengers multiplied by the number of miles the seats are flown.

" Average stage length " means the average number of statute miles flown per flight segment.

" Block hours " means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination.

" CRASM " means contract revenue divided by ASMs.

" DOT " means the United States Department of Transportation.

" FAA " means the United States Federal Aviation Administration.

" FTE " means full-time equivalent employee.

" Load factor " means the percentage of aircraft seat miles actually occupied on a flight (RPMs divided by ASMs).

" NMB " means the National Mediation Board.

" Pass-through and other revenue " means costs from our major partners under our agreements that we equally recognize as both a revenue and an expense, including passenger and hull insurance, aircraft property taxes, landing fees, catering and certain maintenance costs related to our E-175 aircraft.

" Revenue Passenger Miles " or " RPMs " means the number of miles traveled by paying passengers.

" TSA " means the United States Transportation Security Administration.

" Utilization " means the percentage derived from dividing (i) the number of block hours actually flown during a given month under a particular CPA by (ii) the maximum number of block hours that could be flown during such month under the particular CPA.

2024 Financial Highlights

For our fiscal year ended September 30, 2024, we had total operating revenues of $476.4 million, a 4.3% decrease, compared to $498.1 million for our fiscal year ended September 30, 2023.

Net loss for our fiscal year ended September 30, 2024 was $91.0 million, or $2.21 per diluted share, compared to net loss of $120.1 million, or $3.04 per diluted share, for our fiscal year ended September 30, 2023.

During our fiscal year ended September 30, 2024, our completed block hours decreased by 12,711, or 6.7%, compared to our fiscal year ended September 30, 2023.

Industry Trends

We believe our operating and business performance is driven by various factors that typically affect regional airlines and their markets, including trends which affect the broader airline and travel industries, though the terms of our United CPA reduces our exposure to fluctuations in certain trends.

The following key factors may materially affect our future performance.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, the accompanying notes, and the other financial information included elsewhere in this Report.

The following discussion contains forward-looking statements that involve risks, uncertainties,

and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements below.

Factors that could cause such differences include, but are not limited to, those discussed in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Report.

We are the second largest independent regional airline in the United States based on total fleet and daily departures.

As of December 31, 2025 and 2024, we had an operational fleet of 275 and 208 regional jet aircraft that regularly provides scheduled passenger service on approximately 1,300 and 1,000 daily flights, to approximately 130 and 90 cities, respectively, in the United States, Canada, Mexico, and the Caribbean.

On November 25, 2025, the Company and Mesa Air Group, Inc.

(“Mesa Parent”), former parent company of Mesa Airlines, completed the Merger of Republic Airways Holdings Inc.

and Mesa Air Group, Inc., whereby the Company merged with and into Mesa Air Group, Inc.

(the “Merger”).

The legal entity Mesa Air Group, Inc.

continued as the surviving corporation;

however, upon completion of the Merger, the legal entity was renamed Republic Airways Holdings Inc .

The Company, on a pre-Merger basis, is referred to as “Legacy Republic.” The Company includes the operations of Legacy Republic and, beginning on November 25, 2025, also includes the operations, financial position, and cash flows of the former entity Mesa Air Group, Inc.

and its wholly-owned subsidiaries.

S ee Note 3, Merger with Mesa Air Group, Inc.

, in the notes to the audited consolidated financial statements included in this Report.

Substantially all of our flights are operated under multi-year CPAs with our Partner Airlines.

We exclusively operate the dual class Embraer E170/175 family of aircraft and are one of the world’s largest operators of that popular aircraft type.

Under the CPAs, we provide substantially all of our flight capacity to our Partner Airlines.

Our compensation is not materially or directly affected by variations in fares or passenger load factors, nor by variations in the price of fuel, the cost of which is paid directly by our Partner Airlines, effectively providing us with contractual monthly revenues, while reducing our exposure to fluctuations in fuel prices, fare competition, and passenger loads.

In 2025 and 2024 , we carried passengers on more than 371,000 and 323,000 flights, generating revenue s of $1,676.5 million and $1,474.0 million and pre- tax income of $113.4 million and $86.9 million , respectively.

We operate under our Partner Airlines’ two-letter flight designation codes, paint our aircraft in the style of our Partner Airlines’ brand requirements, and use our Partner Airlines’ service marks to market ourselves as a carrier for our Partner Airlines.

Our Partner Airlines control route selection, pricing, seat inventories, marketing, and scheduling, and provide us with ground support services, airport take-off and landing slots, and gate access, allowing us to focus on operational excellence, positioning ourselves as the regional airline of choice for our Partner Airlines and passengers through the delivery of safe, clean, reliable, and efficient regional service.

For the year ended December 31, 2025 , American Airlines, Delta Air Lines, and United Airlines accounted for 43%, 28%, and 29% of our departures, respectively.

During the year ended December 31, 2025, Bryan K.

Bedford, our former Chief Executive Officer, was nominated and subsequently confirmed for service as Administrator of the Federal Aviation Administration.

In connection with such nomination, Mr.

Bedford retired effective July 1, 2025 .

We paid a cash payment of $16.0 million related to his employment contract.

Upon effectiveness of his retirement, 652,475 shares were considered earned and vested immediately, resulting in additional compensation expense of $9.8 million .

We recorded total expense of approximately $20.8 million during the year ended December 31, 2025 related to Mr.

Bedford’s separation and retirement, which includes $2.0 million related to subsequent remeasurements of Mr.

Bedford’s awards.

Matthew Koscal, Executive Vice President and Chief Administrative Officer, was promoted to President and Chief Commercial Officer, and David Grizzle, Chairman of the Board of Directors, began serving as Chief Executive Officer upon Mr.

Bedford’s retirement on July 1, 2025 .

During the year ended December 31, 2025, we announced that the Board of Directors expects that Mr.

Koscal will succeed Mr.

Grizzle in the position of CEO during the year ending December 31, 2026, at which time David Grizzle will return to the position of non-executive Chairman of the Board of Directors.

Any final succession decision will be determined at a future undetermined date, in the sole discretion of the Board of Directors and publicly announced, as legally required.

Factors, Trends, and Uncertainties Affecting Republic’s Business

We believe our operating and business performance is driven by various factors that typically affect regional airlines and their markets, including factors and trends which affect the broader airline and travel industries.

The following key factors, trends, and uncertainties have affected our historical results of operations and may materially affect our future performance:

Availability and Training of Qualified Pilots .

On July 8, 2013, as directed by the U.S.

Congress, the FAA issued more stringent pilot qualification and crew member flight training standards, which, among other things, increased the required training time for new airline pilots from 250 hours to 1,500 hours of flight time.

With these changes, the supply of qualified pilot candidates eligible for hiring by the airline industry was dramatically reduced.

To address the diminished supply of qualified pilot candidates, regional airlines implemented significant pilot wage and bonus increases.

We launched the MPD Program to address the diminished supply of qualified pilots, provide a more affordable path for pilots to reach the 1,500 flight hours required to earn their Airline Transport Pilot certificate, and provide a pipeline of potential pilots at Mesa Airlines.

As part of this program, we operate a fleet of 28 Pipistrel Alpha Trainer 2 aircraft.

Currently, pilots pay out-of-pocket for the first 250 flight hours at a rate of $60 per hour.

Subsequent flight costs of $75 per hour are financed by the Company at zero interest and, generally, require repayment of such financing over two years.

Although pilot attrition has returned to normal levels no assurance can be given that the measures we have taken or may take in the future will enable us to attract, hire and train pilots at a rate necessary to support our operations.

Pilot and Mechanic Attrition.

In recent years, we have experienced significant volatility in our attrition as a result of pilot wage and bonus increases at other regional air carriers, the growth of cargo, low-cost and ultra-low-cost carriers, and the number of pilots at major airlines reaching the statutory mandatory retirement age of 65 years.

If our actual pilot attrition rates are materially different than our projections, our operations and financial results could be materially and adversely affected.

Although we target maintenance staffing levels above our projected needs in order to account for attrition, which is widespread in the industry, from time to time we have experienced attrition with our maintenance technicians, who have the option to seek employment at mainline airlines, which generally offer higher salaries and more extensive

benefit programs than regional airlines are financially able to offer.

Attrition of maintenance technicians has sometimes required us to supplement our staff with qualified temporary employees.

As discussed generally above, we implemented a new pay structure whereby as of September 15, 2022, we offer starting wages of $100 an hour for entry-level first officers, and $150 an hour for first-year captains while captains with 20 years of experience will be paid $215 an hour to remain competitive and attract and retain experienced, qualified pilots.

Economic Conditions, Challenges and Risks

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 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 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.

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

Market Volatility.

The airline industry is volatile and affected by economic cycles and trends.

Consumer confidence and discretionary spending, spread of a virus, fear of terrorism or war, weakening economic conditions, fare initiatives, fluctuations in fuel prices, labor actions, changes in governmental regulations on taxes and fees, weather and other factors have contributed to a number of reorganizations, bankruptcies, liquidations, and business combinations among major and regional airlines.

The effect of economic cycles and trends may be somewhat mitigated by our reliance on our CPA.

If, however, United experiences a prolonged decline in the number of passengers or is negatively affected by low ticket prices or high fuel prices, it may seek rate reductions in future CPAs, or materially reduce our scheduled flights in order to reduce its costs.

Our financial performance could be negatively impacted by any adverse changes to the rates, number of aircraft or utilization under our CPA.

Effective July 15, 2013 , as directed by U.S.

Congress, the FAA issued more stringent pilot qualification and crew member flight training standards, which, among other things, increased the required training time for new commercial airline pilots from 250 hours to 1,500 hours of flight time.

With these changes, the supply of qualified pilot candidates eligible for hiring by the airline industry has been dramatically reduced in recent years.

In addition, the FAA’s mandatory retirement age of 65 is expected to cause a significant number of pilots to retire over the next decade.

To address the expected increasingly diminished supply of qualified pilot candidates, we developed and launched a proprietary flight training school called LIFT Academy in 2018 and continue to develop relationships with flight schools across the country to help fulfill our need for pilots.

Since its founding in 2018 in Indianapolis, IN , LIFT Academy expanded its operations with additional flight school locations in Columbia, SC, Myrtle Beach, SC, Galveston, TX, Columbus, IN and at Moton Field in partnership with Tuskegee University in Tuskegee, AL.

We also entered into a partnership with Hyannis Air Service Inc.

d/b/a Cape Air and Nantucket Airlines (“Cape Air”) in order to create a pipeline of talent from LIFT Academy to Cape Air and then to Republic to provide additional structured pathways for accumulation of the FAA 1,500 flight hour requirement.

This strategic partnership will help us retain talented pilots as they transition from LIFT Academy students to pilots at Republic in less time and with more experience.

We also built a state-of-the-art aviation campus that opened in early 2023 .

Finally, we have undertaken substantial efforts to generate renewed interest in the industry, including developing partnerships with secondary education institutions to promote the availability of careers in aviation.

Our ability to grow and continue to provide safe, clean, and reliable regional airline services to our Partner Airlines will depend on our ability to successfully attract, train, and develop pilots.

Furthermore, pilot training and development is constrained by the availability of full motion flight simulation equipment in the marketplace.

In order to ensure access to this equipment, we have acquired one flight simulator and have long-term lease agreements in place that guarantee a minimum level of flight simulator availability and provide for potential access to additional flight simulators.

Pilot Attrition and Staffing Base.

We experience significant volatility in our attrition as a result of the demand for pilots at mainline, low-cost, and cargo carriers who obtain pilot hires, in part, from regional airlines.

Pilot attrition could be a factor impacting our results and ability to acquire new market share in future periods.

In addition, the lead-time in acquiring and training new pilots requires that we grow our pilot staffing base in excess of our then-current need when we accept new business and expand our fleet.

Workforce Development.

Over the past few years we have expanded our investment in LIFT Academy to address workforce development needs to include a DOL approved maintenance technician apprenticeship program and CFR Part 145 repair station to expand the level of experience and learning opportunities afforded to technicians and other aspiring aviation operations personnel.

In addition, we secured a partnership with Cape Air to create a flow program of talented aviators from LIFT Academy to Cape Air to supplement their workforce in exchange for flight hours and valuable experience.

We also built a state-of-the-art aviation campus that houses simulators, a cabin trainer, and classrooms to train our pilots, flight attendants, maintenance technicians, dispatchers, and other employees.

Our inability to source qualified aviation personnel, whether from LIFT Academy or externally, may adversely impact our ability to operate in a cost-effective manner, expand our fleet, and carry out reliable operations.

The Company also operates Bridge Air with a dedication to helping aviation professionals achieve their dream of becoming a commercial airline pilot as quickly, safely, and inexpensively as possible.

The airline industry is heavily unionized.

The wages, benefits and work rules of unionized airline industry employees are determined by collective bargaining agreements.

As of September 30, 2024, approximately 62.8% of our workforce was represented by the ALPA and AFA.

In August 2022, we entered into a three-year Letter of Agreement with ALPA, which provided for increased overall hourly pay increases of nearly 118% for captains and 172% for new-hire first officers.

These pay increases have positively impacted our ability to attract, hire, and retain pilots in fiscal years 2023 and 2024, and attrition levels have dropped to a pre-COVID level.

In September 2022, we entered into a Letter of Agreement with AFA to extend the term of our agreement by two years.

Our extension with AFA provided, among other things, an

increase in compensation for our flight attendants.

The terms and conditions of our future collective bargaining agreements may be affected by the results of collective bargaining negotiations at other airlines that may have a greater ability, due to larger scale, greater efficiency or other factors, to bear higher costs than we can.

The wages, benefits, and work rules of unionized airline industry employees are determined by our CBAs.

As of December 31, 2025 , approximately 71% of our workforce was represented under CBAs.

The terms and conditions of our future CBAs may be affected by the results of collective bargaining negotiations at other airlines, regional or otherwise, that may have a greater ability, due to larger scale, greater efficiency, or other factors, to bear higher wage costs than we can.

In addition, conflicts between airlines and their unions can lead to work slowdowns or stoppages.

3 unchanged sentences

Major airlines typically award CPAs to regional airlines based on the following criteria:

ability to fly contracted schedules, availability of labor resources including pilots, low operating cost, financial resources, geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages, and the overall image of the regional airline.

Our ability to renew our existing agreement and earn additional flying opportunities in the future will depend, in significant part, on our ability to maintain a low-cost structure competitive with other regional air carriers.

(i) ability to fly contracted schedules;

(ii) availability of labor resources (including pilots);

(iii) low operating cost;

(iv) financial resources;

(v) geographical infrastructure;

(vi) overall customer service and reliability levels such as on-time arrival and flight completion percentages;

and (vii) the overall image of the regional airline.

Our ability to earn additional flying opportunities in the future will depend, in significant part, on our ability to consistently operate as a safe, clean, reliable, cost-effective, and high-quality regional airline.

Market Volatility.

The airline industry is volatile and sensitive to economic cycles and trends.

Declining consumer confidence and discretionary spending, fear of terrorism or war, fear of a global pandemic, weakening economic conditions, fare initiatives, fluctuations in fuel prices, labor actions and wage escalation, changes in governmental regulations on taxes, fees and tariffs, weather, and other factors have contributed to a number of reorganizations, bankruptcies, liquidations, and business combinations among major and regional air carriers.

The effect of economic cycles and trends may be somewhat mitigated by our reliance on long-term CPAs.

If, however, any of our Partner Airlines experience a prolonged decline in the number of passengers served or is negatively affected by low ticket prices or high fuel prices, it may seek rate reductions in future CPAs or materially reduce its scheduled flights in order to reduce its costs.

Our financial performance could be negatively impacted by any adverse changes to contracted revenue rates, number of aircraft in the fleet, or utilization under our CPAs.

Maintenance Contracts, Costs, and Timing.

Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at their respective maintenance facilities.

We also use third-party vendors, such as AAR, Aviall, MHI, GE, and StandardAero, for certain heavy airframe and engine maintenance work, along with parts procurement and component overhaul services for our aircraft fleet.

As of September 30, 2024, $52.3 million of parts inventory was consigned to us by AAR and Aviall under long-term contracts that is not reflected in our consolidated balance sheet.

The average age of our E-175, CRJ-900, and CRJ-700 type aircraft is approximately 8.7, 18.2, and 17.4 years, respectively.

Due to the relatively young age of our E-175 aircraft, they require less maintenance now than they will in the future.

In prior periods, we incurred relatively low maintenance expenses on our E-175 aircraft because most of the parts are under multi-year warranties and a limited number of heavy airframe checks and engine overhauls have occurred.

As our E-175 aircraft age and these warranties expire, we expect that maintenance costs will increase in absolute terms and as a percentage of revenue.

In addition, because our current aircraft were acquired over a relatively short period of time, significant maintenance events scheduled for these aircraft will occur at roughly the same intervals, meaning we will incur our most expensive scheduled maintenance obligations across our present fleet at approximately the same time.

These more significant maintenance activities result in out-of-service periods during which aircraft are dedicated to maintenance activities and unavailable for flying under our CPA.

We use the direct expense method of accounting for our maintenance of regional jet engine overhauls, airframe, auxiliary power units and landing gear for the majority of our fleets, with the exception of Mesa-owned E-175 aircraft.

Heavy maintenance and major overhaul costs on our owned E-175 fleet are deferred and amortized until the earlier of the end of the useful life of the related asset or the next scheduled heavy maintenance event.

Normal recurring maintenance is expensed when the maintenance work is completed, or over the repair period, if materially different.

Our maintenance policy is determined by fleet when major maintenance is incurred.

While we keep a record of expected maintenance events, the actual timing and costs of major engine maintenance expense are subject to variables such as estimated usage, government regulations and the level of unscheduled maintenance events and their actual costs.

Accordingly, we cannot reliably quantify the costs or timing of future maintenance-related expenses for any significant period of time.

Our associates perform routine airframe and engine maintenance along with periodic inspections of equipment at our maintenance facilities.

We also use third-party vendors for certain heavy airframe, engine, and other maintenance work, along with parts procurement and component overhaul services for our aircraft fleet.

The average age of our aircraft is approximately 13.0 years.

Due to the age of certain aircraft, our aircraft require less overall maintenance now than they will in the future.

As our aircraft fleet ages and warranties expire, we expect that our maintenance costs will increase in absolute terms and as a percentage of revenues.

We use the direct expense method of accounting for our maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance whereby we recognize expense as maintenance work is completed or over the repair period, if materially different.

While we keep a record of expected maintenance events, the actual timing and costs of major engine maintenance expense are subject to variables such as estimated usage, government regulations (including tariffs), the extent of the occurrence of unscheduled maintenance events, and their actual costs.

Accordingly, we cannot reliably quantify the cost or timing of future maintenance-related expenses for any significant period of time.

In addition, we have entered into long-term maintenance “power-by-the-hour” service contracts with third-party maintenance providers under which we are charged fixed rates for each flight hour or other measure accumulated by the majority of our engines and some of the major airframe components.

The effect of such contracts is to reduce the volatility of aircraft maintenance expense over the term of the maintenance agreement.

Aircraft Leasing and Finance Determinations.

We have generally funded aircraft acquisitions through a combination of operating leases and debt financing.

Our determination to lease or finance the acquisition of aircraft may be influenced by a variety of factors, including the preferences of our major partners, the strength of our balance sheet and credit profile and those of our major partners, the length and terms of the available lease or financing alternatives, the applicable interest rates, and any lease return conditions.

When possible, we prefer to finance aircraft through debt rather than operating leases, due to lower operating costs, extended depreciation period, opportunity for aircraft equity, absence of lease return conditions and greater flexibility in renewing the aircraft under our CPA with our major partner after paying off the principal balance.

Subsequent to the initial acquisition of an aircraft, we may also refinance the aircraft or convert one form of financing to another (e.g., replacing an aircraft lease with debt financing).

The purchase of leased aircraft allows us to lower our operating costs and avoid lease-related use restrictions and return conditions.

As of September 30, 2024, we had 47 aircraft in our fleet under lease, including 42 E-175 aircraft owned by United and leased to us at nominal amounts and five CRJ-900 aircraft on short-term leases owned by a third party.

We also have two CRJ-700 aircraft that are leased to us by a third party.

In order to determine the proper classification of our leased aircraft as either operating leases or finance leases, we must make certain estimates at the inception of the lease relating to the economic useful life and the fair value of an asset as well as select an appropriate discount rate to be used in discounting future lease payments.

These estimates are utilized by management in making computations as required by existing accounting standards that determine whether the lease is classified as an operating lease or a finance lease.

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

We are also subject to lease return provisions that require a minimum portion of eligible flight time for certain components remain when the aircraft is returned at the lease expiration.

We estimate the cost of maintenance lease return obligations and accrue such costs over the remaining lease term when the expense is probable and can be reasonably estimated.

See "Risk Factors" for a discussion of these factors and other risks.

Our results of operations for any interim period are not necessarily indicative of those for the entire year since the airline industry is subject to seasonal fluctuations and general economic conditions.

Our operations are somewhat favorably affected by increased utilization of our aircraft in the summer months and are unfavorably affected by increased fleet maintenance and by inclement weather during the winter months.

Components of Our Results of Operations

The following discussion summarizes the key components of our consolidated statements of operations and comprehensive loss.

Operating Revenues

Our consolidated operating revenues consist of contract revenue as well as pass-through and other revenue.

Contract Revenue.

Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our United CPA, along with the additional amounts received based on the number of flights and block hours flown, rental revenue for aircraft leased to a third party, and revenue received from pilots in the MPD program.

Contract revenues we receive from United are paid on a weekly basis and recognized over time consistent with the delivery of service under our CPA.

Pass-Through and Other Revenue.

Pass-through and other revenue consists of passenger insurance, aircraft property taxes, landing fees, and other aircraft and traffic servicing costs received pursuant to our United CPA, as well as certain maintenance costs related to the United owned E-175 aircraft.

We have generally funded aircraft acquisitions through a combination of debt financing, finance leases, and operating leases.

Our decision to finance the acquisition of aircraft through leases or secured debt may be influenced by a variety of factors, including the preferences of our Partner Airlines, the strength of our balance sheet and credit profile (and those of our Partner Airlines), the length and terms of the available financing alternatives, prevailing market interest rates, and any lease return condition requirements.

Generally, under our

CPAs, the monthly ownership costs of the aircraft we operate are reimbursed, in whole or in part, by our Partner Airlines.

When practical, we prefer to finance aircraft through secured debt rather than with leasing products, due to the accelerated tax depreciation benefits, opportunity to acquire equity in our aircraft, absence of lease return conditions, and greater flexibility in renewing the aircraft under our CPAs with our Partner Airlines at end of term.

We currently own or have finance leases on 66% of our existing aircraft and expect to own, rather than lease, a majority of any new fleet acquired.

The remaining 34% of our fleet is owned directly by certain of our Partner Airlines, which we refer to as “Partner Controlled Aircraft.” Subsequent to the initial acquisition of an aircraft, we may also refinance the aircraft or convert one form of financing to another (e.g.

replacing an aircraft operating lease with debt financing or vice versa) to meet our capital needs at a given time.

As of December 31, 2025 , we ha ve 11 aircraft subject to finance leases.

At lease inception, we make certain estimates in order to determine the proper classification of our leased aircraft as either operating leases or finance leases, economic useful lives of subject assets, fair value of the asset under lease, as well as selection of an appropriate discount rate to be used in discounting future lease payments.

These estimates also affect the value recorded for the finance lease asset and the corresponding finance lease liability, which is classified as current and long-term debt.

Amortization of the finance lease asset is recorded to depreciation and amortization expense.

The interest component of a finance lease payment is recorded to interest expense.

Our results of operations for any interim period are not necessarily indicative of those for the entire year, in part because the airline industry is subject to seasonal fluctuations and changes in general economic conditions.

A significant portion of our CPAs is based on completing flights as scheduled, and we typically have more scheduled flights during the summer months and concurrently generally experience significant weather cancellations during the summer months, which negatively impacts our revenues during such months.

Key Components of Republic’s Results of Operations

We operate under the American Eagle, Delta Connection, and United Express brands through our CPAs with American Airlines, Inc.

(“American Airlines”), Delta Air Lines, Inc.

(“Delta Air Lines”), and United Airlines, Inc.

(“United Airlines”), respectively.

Under these arrangements, we receive fixed fees, as well as reimbursement of specified costs with additional possible incentives from our Partner Airlines for superior performance.

Substantially all of our revenues are earned under our CPAs with our Partner Airlines.

The number of aircraft we operate, aircraft utilization, and the rates we charge are the most significant drivers of our revenues.

The number of passengers carried and the fares which revenue-generating passengers pay do not affect our revenues.

We earn revenues based on aircraft utilization levels under the applicable CPAs with each of our Partner Airlines, subject to minimum utilization guarantees.

Revenues associated with regional jet services are generally derived from (i) a fixed fee per departure, flight hour, and/or block hour of time incurred and a fixed rate for available-to-schedule aircraft, payable on a monthly basis;

and (ii) a premium amount, which is earned monthly or quarterly by maintaining minimum aircraft utilization levels and exemplary operating results.

To the extent that minimum targets are not achieved, we could be subject to financial penalties.

These fixed-fee rates are contractually subject to periodic economic adjustment.

We also receive reimbursement from our Partner Airlines for direct expenses incurred such as qualifying maintenance activities, property taxes, and miscellaneous operating expenses.

The Company refers to Partner reimbursements as “pass-through charges.” Certain charges such as fuel, landing fees, and certain ownership costs are generally paid directly by the Partner Airlines, although the charges were incurred by the Company in ongoing operations.

The Company refers to these charges as “Partner direct charges.” Pass-through charges are primarily recorded to revenues and the corresponding operating expense on a gross basis.

Pass-through charges recorded on a net basis are not material.

Amounts recognized as regional jet services revenues are measured at the contractual amount we expect we will be entitled to in exchange for the promised services.

We allocate the transaction price as flights are completed with variable consideration that relates specifically to our efforts in delivering each flight recognized in the period in which the individual flight is completed and measured on a monthly basis.

We record an estimate for incentive revenue based on our

expected performance at the end of each period.

These estimates are derived under accounting guidance related to variable consideration constraints and based on amounts expected to be collected.

We have concluded that allocating the variability directly to the individual flights results in an overall allocation meeting the objectives in Financial Accounting Standards Board (“FASB”) ASC 606, Revenue Recognition .

This results in a pattern of revenue recognition that generally follows the variable amounts billed from us to our Partner Airlines.

Operating Expenses

Our operating expenses consist of the following items:

Flight Operations.

Flight operations expense includes costs related to salaries, bonuses and benefits earned by our pilots, flight attendants, and dispatch personnel, as well as costs related to technical publications, lodging of our flight crews, and pilot training expenses.

Fuel expense includes fuel and related fueling costs for flying we undertake outside of our CPA, including aircraft repositioning and maintenance.

All aircraft fuel and related fueling costs for flying under our CPA were directly paid and supplied by United.

The fuel and related cost for flying under our DHL FSA were directly paid and supplied by DHL.

Accordingly, we do not record an expense or the related revenue for fuel supplied United for flying under our CPA or DHL under our FSA except fuel costs incurred for controllable ferry flights for United.

Fuel expenses relating to MPD are paid by the Company.

Maintenance expense includes costs related to engine overhauls, airframe, landing gear and normal recurring maintenance, which includes pass-through maintenance costs related to our E-175 aircraft.

All other maintenance costs are expensed 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.

Costs incurred for maintenance and repair for utilization maintenance contracts where labor and materials price risks have been transferred to the service provider are charged to maintenance expense based on contractual payment terms.

As a result of using the direct expense method for heavy maintenance on the majority of our fleets, the timing of maintenance expense reflected in the financial statements may vary significantly from period to period.

Aircraft Rent.

Aircraft rent expense includes costs related to leased engines and aircraft.

Aircraft and Traffic Servicing.

Aircraft and traffic servicing expense includes expenses related to our CPA and FSA, including aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by our major partners.

General and Administrative.

General and administrative expense includes insurance and taxes, the majority of which are pass-through costs, non-operational administrative employee wages and related expenses, building rents, real property leases, utilities, legal, audit and other administrative expenses.

Depreciation.

Depreciation expense is a periodic non-cash charge primarily related to aircraft, engine, aircraft improvement, and equipment depreciation.

Impairment expense is a non-recurring, non-cash charge related to the reduction in value of aircraft and related parts, primarily upon reclassification to held for sale.

Other Income (Expense), Net

Interest Expense.

Interest expense is interest on our debt to finance purchases of aircraft, engines, and equipment, including amortization of debt financing costs and discounts.

Interest Income.

Interest income includes interest income on our cash and cash equivalent balances.

Gain on Investments, Net.

Gain on investments, net consists of gains on the sale or transfer of our investments in equity securities to another party.

Unrealized (Loss)/Gain, Net.

Unrealized (loss)/gain on investments, net consists of losses or gains due to changes in the value of our investments in equity securities.

Gain on extinguishment of debt.

Gain on extinguishment of debt relates to the settlement of a loan for an amount less than the outstanding principal balance.

Gain on debt forgiveness.

Gain on debt forgiveness consists of gains resulting from the forgiveness earned on our deemed prepayment associated with our United Revolving Credit Facility for the achievement of certain performance metrics.

Other Expense.

Other expense includes expense derived from activities not classified in any other area of the consolidated statements of income.

Segment Reporting

Operating segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing operating performance.

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 flight services in accordance with our CPA.

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

Additionally, our CODM uses consolidated financial information to evaluate our performance, which is the same basis on which he communicates our results and performance to our Board of Directors.

The CODM bases all significant decisions regarding the allocation of our resources on a consolidated basis.

Based on the information described above and in accordance with the applicable literature, management has concluded that we are organized and operated as one operating and reportable segment.

A brief description of the items included in our operating expenses line items are as follows:

Wages and Benefits

This expense includes salaries and wages earned by our pilots, flight attendants, dispatchers, and other employees, as well as expenses associated with various employee benefit plans, stock-based compensation, employee incentives, and payroll taxes.

These expenses fluctuate primarily based on our level of operations, changes in wage rates for contract and non-contract employees, and changes in costs of our benefit plans.

Aircraft and Engine Rent

This expense consists of the costs of aircraft and spare engines under operating leases.

Leased aircraft (including wing-mounted engines) and spare engines are operated under long-term operating leases and subject to adjustment as costs associated with minimum lease return conditions become probable and able to be estimated, generally coinciding with the last heavy maintenance visit.

Maintenance and Repair

Maintenance and repair expenses include all materials and external labor required to maintain our aircraft and engines.

We have entered into long-term maintenance “power-by-the-hour” service contracts with certain third-party maintenance providers under which we are charged fixed rates for each flight hour or departure accumulated by the majority of our engines and certain major airframe components.

The effect of such contracts is to reduce the volatility of aircraft maintenance expense over the term of our maintenance agreements.

All other maintenance charges are expensed as incurred under the direct expense method of accounting.

Certain maintenance and repair activities, such as engine overhauls and heavy maintenance, qualify for reimbursement from our Partner Airlines under the pass-through provisions of our CPAs.

Depreciation and Amortization

This expense includes depreciation expense of all owned aircraft, property, and equipment which includes aircraft under debt obligations and finance leases, spare engines, flight equipment, general aviation aircraft, and ground equipment as well as amortization expense on leasehold improvements.

Effective January 1, 2024, we revised the estimated useful lives of regional jet aircraft, spare engines, and flight equipment from 22.0 to 26.0 years in an effort to more closely align with market data impacting our fleet usage pattern.

Executive Separation and Merger-related Items

We classify certain operating expenses as executive separation and Merger-related items due to their nonrecurring or infrequently occurring nature.

Executive separation and Merger-related items are principally composed of transaction-related expenses incurred for the ongoing integration of Mesa Airlines into the legacy operations of the Company, post-employment benefit costs, and costs incurred for the consolidation of the airline operating certificates (“AOCs”) of Mesa Airlines, Inc.

and Republic Airways, Inc., among others.

The Company does not expect to incur costs of this nature following completion of Merger-related integration activities.

Other Operating Expense

Costs of crew training, crew travel, facilities and administrative lease expenses, professional fees, software, and all other administrative and operational overhead expenses are recorded to other operating expense.

Additionally, to the extent that these charges are incurred, we record expenses related to gains and losses on asset disposals, impairment charges, and bad debt expense to other operating expense.

Other Expense, net

Other expense, net is comprised of interest expense on secured and unsecured debt obligations, realized and unrealized gains and losses on fair value adjustments to marketable securities and non-current investments, warrants, and put options held with EVE Holdings, Inc.

(“EVE”), and our minority interest in Cape Air and our proportionate share of income or losses of Cape Air.

Additionally, we have a strategic partnership with EVE for the development of electric vertical takeoff and landing (“eVTOL”) aircraft.

Results of Operations

Comparison of our Fiscal Years Ended September 30, 2024 and 2023

We had an operating loss of $65.8 million in our year ended September 30, 2024, compared to an operating loss of $84.3 million in our year ended September 30, 2023.

In our year ended September 30, 2024, we had a net loss of $91.0 million compared to a net loss of $120.1 million in our year ended September 30, 2023.

Our operating results for the fiscal year ended September 30, 2024 improved as a result of decreases in operating expenses due to (i) decreases in flight operations expense as a result of decreased pilot training and lower pilot wages;

(ii) decreases in maintenance expense, primarily due to a decrease in pass-through engine overhaul on our E-175 fleet;

(iii) decreases in general and administrative expenses, primarily due to a decrease in pass-through property tax;

and (iv) decreases in depreciation expense, primarily due to the retirement and sale of several aircraft.

These decreases were partially offset by (i) impairment expense of $73.7 in our fiscal year ended September 30, 2024 compared to impairment expense of $54.3 million in our fiscal year ended September 30, 2023;

and (ii) a decrease in contract revenue due to reduced block hours flown, fewer aircraft under contract, and the wind-down of the DHL FSA, partially offset by an increased United block hour compensation rate.

Operating Revenues/Statistics

Year Ended September 30,

Operating revenues ($ in thousands):

Pass-through and other

Total operating revenues

Operating data:

Available seat miles—ASMs (thousands)

Revenue passenger miles—RPMs

Average stage length (miles)

Contract revenue per available seat

mile—CRASM (in cents)

(1) The definitions of certain terms related to the airline industry used in the table can be found under "Glossary of Airline Terms" above.

Total operating revenue decreased by $21.7 million, or 4.4%, to $476.4 million during our fiscal year ended September 30, 2024 as compared to our fiscal year ended September 30, 2023.

Contract revenue decreased by $17.0 million, or 4.0%, to $404.3 million during our fiscal year September 30, 2024, primarily driven by reduced block hours flown, fewer aircraft under contract, and the wind-down of the DHL FSA compared to our fiscal year ended September 30, 2023, partially offset by an increased United block hour compensation rate.

Our block hours flown during our fiscal year ended September 30, 2024 decreased 6.7% as compared to our fiscal year ended September 30, 2023 due to a decrease in scheduled flying on our CRJ fleet.

Our pass-through and other revenue decreased by $4.7 million, or 6.1%, to $72.1 million compared to our fiscal year ended September 30, 2023 due to a decrease in pass-through maintenance related to our E-175 fleet.

Year ended December 31, 2025 compared to the year ended December 31, 2024

The following table sets forth information rega rding our operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024 :

(in millions) 2025 2024 $ Variance % Variance

Revenues $ 1,676.5 $ 1,474.0 $ 202.5 13.7 %

Operating expenses:

Year Ended September 30,

Operating expenses ($ in thousands):

Flight operations

Aircraft rent

General and administrative

Wages and benefits 762.6 677.2 85.4 12.6

Aircraft and engine rent 0.7 3.6 (2.9) (80.6)

Maintenance and repair 320.9 311.2 9.7 3.1

Depreciation and amortization 126.3 117.0 9.3 7.9

Asset impairment

Loss/(Gain) on sale of assets

Other operating expenses

Executive separation and Merger-related items 47.1 3.2 43.9 NM

Other operating expense 250.6 224.8 25.8 11.5

Total operating expenses 1,508.2 1,337.0 171.2 12.8

Operating data:

Available seat miles—ASMs

Average stage length (miles)

Flight Operations.

Flight operations expense decreased by $32.3 million, or 14.9%, to $184.5 million for our fiscal year ended September 30, 2024, compared to our fiscal year ended September 30, 2023.

The decrease was primarily driven by decreased pilot training expense and lower pilot wages as a result of fewer block hours flown and decreases in headcount.

Aircraft maintenance expense decreased $14.9 million, or 7.5%, to $184.7 million for our fiscal year ended September 30, 2024, compared to our fiscal year ended September 30, 2023.

This decrease was primarily driven by a decrease in pass-through engine overhaul and rotable and expendable parts, partially offset by an increase in other pass-through costs and C-check maintenance expenses.

Total pass-through maintenance expenses reimbursed by our major partners decreased by $3.1 million during our fiscal year ended September 30, 2024 compared to our fiscal year ended September 30, 2023.

The following table presents information regarding our aircraft maintenance costs during our fiscal years ended September 30, 2024 and 2023:

Year Ended September 30,

Engine overhaul

Pass-through engine overhaul

Pass-through C-check

Component contracts

Rotable and expendable parts

Other pass-through

Labor and other

Aircraft Rent.

Aircraft rent expense increased by $1.6 million, or 25.8%, to $7.8 million for our fiscal year ended September 30, 2024, compared to our fiscal year ended September 30, 2023.

This increase was due to several short-term CRJ-900 airframe and engine leases during the fiscal year ended September 30, 2024.

General and Administrative.

General and administrative expense decreased by 4.5 million, or 9.3%, to $44.2 million for our fiscal year ended September 30, 2024, compared to our fiscal year ended September 30, 2023.

This decrease was primarily driven by decreases in pass-through property taxes and pass-through insurance costs.

Depreciation and Amortization.

Depreciation and amortization expense decreased by $20.3 million, or 33.7%, to $40.0 million for our fiscal year ended September 30, 2024, compared to our fiscal year ended September 30, 2023.

The decrease is primarily due to aircraft in our fleet being sold or classified as non-depreciable assets held for sale.

Asset Impairment.

Asset impairment of $73.7 million was recorded for our fiscal year ended September 30, 2024 primarily related to eight CRJ-900 aircraft, 26 CRJ-900 airframes (without engines), and 77 model CF34-8C engines being designated as held for sale.

There was $54.3 million of asset impairment recorded for our fiscal year ended September 30, 2023 related to the write-off of our customer relationship intangible asset and 14 CRJ-900 aircraft being designated as held for sale.

Loss/(Gain) on sale of assets.

Loss on sale of assets of $0.7 million was recorded for our fiscal year ended September 30, 2024 related to the sale of certain engines.

A gain on the sale of assets of $7.2 million was recorded for our fiscal year ended September 30, 2023 related to a 30-engine sale agreement.

Other Operating Expenses.

Other operating expenses increased by $3.0 million, or 86.8%, to $6.6 million for our fiscal year ended September 30, 2024 compared to our fiscal year ended September 30, 2023.

The increase is primarily attributable to interrupted trip costs during the fiscal year ended September 30, 2024.

Other Expense

Other expense decreased by $19.8 million, or 44.6%, to $24.7 million for our fiscal year ended September 30, 2024, compared to our fiscal year ended September 30, 2023.

The decrease is primarily attributable to realized gains on investments in equity securities of $8.0 million, gain on extinguishment of debt of $3.0 million, gain on debt forgiveness of $10.5 million, and decreases on interest expense.

The decrease is partially offset by $6.1 million in unrealized losses on investments in equity securities for our fiscal year ended September 30, 2024 compared to $5.4 million in unrealized gains on investments in equity securities for our fiscal year ended September 30, 2023.

In our fiscal year ended September 30, 2024, our effective tax rate was (0.6)% compared to 6.9% in our fiscal year ended September 30, 2023.

Our tax rate can vary depending on changes in tax laws, adoption of accounting standards, the amount of income we earn in each state and the state tax rate applicable to such income, as well as any valuation allowance required on our state net operating losses.

We recorded an income tax provision of $0.5 million and an income tax benefit of $8.7 million for the fiscal years ended September 30, 2024 and 2023, respectively.

The income tax provision for our fiscal year ended September 30, 2024 resulted in an effective tax rate of (0.6)%, which differed from the U.S.

federal statutory rate of 21%, primarily due to the impact of state taxes and permanent differences between financial statement and taxable income.

In addition to the state effective tax rate impact, other state impacts include changes in the valuation allowance against federal and state net operating losses, expired state attributes, disallowed unrealized losses, and changes in state apportionment and statutory rates.

The income tax provision for our fiscal year ended September 30, 2023 resulted in an effective tax rate of 6.9%, which differed from the U.S.

federal statutory rate of 21%, primarily due to the impact of state taxes and permanent differences between financial statement and taxable income.

We continue to maintain a valuation allowance on a portion of our state net operating losses in jurisdictions with shortened carryforward periods or in jurisdictions where our operations have significantly decreased as compared to prior years in which the net operating losses were generated.

As of September 30, 2024, we had aggregate federal and state net operating loss carryforwards of approximately $511.7 million and $226.9 million, which expire in 2027-2038 and 2024-2044, respectively, with approximately $4.0 million of state net operating loss carryforwards that expired in 2024.

See Note 12 - "Income Taxes" in the notes to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Cautionary Statement Regarding Non-GAAP Measures

We present Adjusted EBITDA and Adjusted EBITDAR in this Annual Report on Form 10-K, which are not recognized financial measures under accounting principles generally accepted in the United States of America ("GAAP"), as supplemental disclosures because our senior management believes that they are well-recognized valuation metrics in the airline industry that are frequently used by companies, investors, securities analysts, and other interested parties in comparing companies in our industry.

Operating income 168.3 137.0 31.3 22.8

Total other expense (54.9) (50.1) (4.8) 9.6

Income before income taxes 113.4 86.9 26.5 30.5

Income tax expense 37.2 22.3 14.9 66.8

Net income $ 76.2 $ 64.6 $ 11.6 18.0 %

Net income % (1)

4.5 % 4.4 % NM 0.1 pts

Adjusted EBITDA (2)

We define Adjusted EBITDA as net income or loss before interest, income taxes, depreciation and amortization, adjusted for gains and losses on investments, lease termination costs, loss on extinguishment of debt, and write-off of associated financing fees.

$ 341.7 $ 257.2 84.5 32.9 %

Adjusted EBITDA % (2)

20.4 % 17.4 % NM 3.0 pts

Adjusted EBITDAR (2)

We define Adjusted EBITDAR as net income or loss before interest, income taxes, depreciation and amortization, and aircraft rent, adjusted for gains and losses on investments, lease termination costs, loss on extinguishment of debt, and write-off of associated financing fees.

You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis.

In evaluating Adjusted EBITDA and Adjusted EBITDAR, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in our presentation of Adjusted EBITDA and Adjusted EBITDAR.

Gains and losses on investments, which are presented as adjustments to EBITDA and EBITDAR because they are non-cash gains and losses driven by changes in stock prices and other valuation techniques and are not reflective of our core operations, will occur in periods where the Company has investments in equity securities with readily determinable fair values.

Our presentation of Adjusted EBITDA and Adjusted EBITDAR should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

There can be no assurance that we will not modify the presentation of Adjusted EBITDA or Adjusted EBITDAR and any such modification may be material.

$ 342.4 $ 260.8 81.6 31.3 %

Adjusted EBITDAR % (2)

20.4 % 17.7 % NM 2.7 pts

(1) Net income % is net income expressed as a percentage of revenues.

(2) Adjusted EBITDA represents net income before executive separation and Merger-related items, interest expense, investment income, and other, net, income taxes, and depreciation and amortization expense.

Adjusted EBITDAR represents net income before executive separation and Merger-related items, interest expense, investment income, and other, net, income taxes, depreciation and amortization expense, and aircraft and engine rent.

Adjusted EBITDA % and EBITDAR % are non-GAAP measures that represent Adjusted EBITDA and Adjusted EBITDAR, respectively, expressed as a percentage of revenues.

Republic’s management uses these metrics, and it believes these metrics are also useful to investors to understand Republic’s financial performance.

frequently used by companies, investors, securities analysts, and other interested parties in comparing companies in Republic’s industry.

Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools.

Some of the limitations applicable to these measures include:

(i) Adjusted EBITDA and Adjusted EBITDAR do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations;

(ii) Adjusted EBITDA and Adjusted EBITDAR do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

(iii) Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, our working capital needs;

(iv) Adjusted EBITDA and Adjusted EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;

(v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future;

(vi) Adjusted EBITDA and Adjusted EBITDAR do not reflect gains and losses on investments, which are non-cash gains and losses but will occur in periods when there are changes in the value of the Company’s investments in equity securities;

and (vii) Adjusted EBITDA and Adjusted EBITDAR do not reflect any cash requirements for such replacements and other companies in our industry may calculate Adjusted EBITDA and Adjusted EBITDAR differently than we do, limiting its usefulness as a comparative measure.

Some of the limitations applicable to these measures include:(i) Adjusted EBITDA and Adjusted EBITDAR do not reflect the impact of certain cash charges resulting from matters Republic considers not to be indicative of its ongoing operations;

(ii) Adjusted EBITDA and Adjusted EBITDAR do not reflect Republic’s cash expenditures for capital expenditures or contractual commitments;

(iii) Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, Republic’s working capital needs;

(iv) Adjusted EBITDA and Adjusted EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on its debts;

(v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA and Adjusted EBITDAR do not reflect any cash requirements for such replacements;

and (vi) other companies in Republic’s industry may calculate Adjusted EBITDA and Adjusted EBITDAR differently than Republic does, limiting their usefulness as comparative measures.

Because of these limitations, Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

In addition, Adjusted EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business.

For the foregoing reasons, each of Adjusted EBITDA and Adjusted EBITDAR has significant limitations which affect its use as an indicator of our profitability.

Accordingly, you are cautioned not to place undue reliance on this information.

Adjusted EBITDA and Adjusted EBITDAR

The following table presents a reconciliation of net (loss) income to Adjusted EBITDA and Adjusted EBITDAR for the period presented:

Year Ended September 30,

Reconciliation:

Income tax benefit

Loss before taxes

Gain on investments, net

Unrealized loss/(gain) on investments, net

Adjustments (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)

Adjusted loss before taxes

In addition, Adjusted EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft and engine rent, which is a normal, recurring cash operating expense that is necessary to operate Republic’s business.

For the foregoing reasons, each of Adjusted EBITDA, Adjusted EBITDA %, Adjusted EBITDAR, and Adjusted EBITDAR % has significant limitations which affect its use as an indicator of Republic’s profitability.

Accordingly, readers are cautioned not to place undue reliance on this information.

The following table presents the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDAR for the periods presented below:

(in millions) 2025 2024

Net income $ 76.2 $ 64.6

Depreciation and amortization 126.3 117.0

Executive separation and Merger-related items 47.1 3.2

Interest expense 60.6 57.7

Interest income

Investment income and other, net (5.7) (7.6)

Income tax expense 37.2 22.3

Adjusted EBITDA 341.7 257.2

Aircraft and engine rent 0.7 3.6

Adjusted EBITDAR $ 342.4 $ 260.8

The following table summarizes certain operating data that we believe are useful indicators of our operating performance for the years ended December 31, 2025 and 2024 .

We believe block hours, departures, and average daily utilization of each aircraft are our primary measures in evaluating aircraft production, incurrences of revenues and operating expenses, and efficiency of the Airline.

Operating Highlights

2025 2024 % Variance

Aircraft under operation for the Partner Airlines at period end (1)(2)

275 208 32.2 %

Block hours (3)

699,313 591,677 18.2 %

371,205 323,807 14.6 %

Average daily utilization of each aircraft (hours) (4)

9.7 8.5 14.1 %

Average length of aircraft haul (miles)

493 489 0.8 %

(1) Excludes five spare aircraft as of December 31, 2025.

(2) Excludes 31 aircraft that have been leased to another airline as of December 31, 2025 and 2024.

(3) Reflects hours of aircraft movement from gate to gate (including taxi time before takeoff and after landing) until the aircraft comes to rest at the next point of landing.

(4) Reflects average daily utilization in block hours (aircraft movement from gate to gate, including taxi time) for the greater of actual in-service aircraft or minimum contracted scheduled aircraft, if applicable.

Revenues increased $202.5 million, or 13.7%, to $1,676.5 million for the year ended December 31, 2025 compared to $1,474.0 million for the year ended December 31, 2024, primarily related to a $188.3 million increase in variable revenue year-over-year due in part to the increase in flying compared to the prior year.

This included a 18.2% increase in block hour production and a 14.6% increase in departures due to increased daily utilization and contribution of additional flying under the new CPA with United Airlines resulting from the Merger, beginning November 25, 2025.

Operating expenses

Wages and benefits expense increased $85.4 million, or 12.6%, to $762.6 million for the year ended December 31, 2025 from $677.2 million for the year ended December 31, 2024.

The increase was primarily attributable to a $67.3 million increase in salaries and wages due largely to the 18.2% increase in block hour production.

Maintenance and repair expense increased $9.7 million, or 3.1%, to $320.9 million for the year ended December 31, 2025 from $311.2 million for the year ended December 31, 2024.

The increase was due to a $28.2 million increase primarily in engine, rotable, landing gear, and auxiliary power unit repairs driven by a 18.2% increase in block hours, partially offset by a decrease in heavy check maintenance events and LLP contract expenses of $18.3 million during the year ended December 31, 2025.

Depreciation and amortization expense increased $9.3 million, or 7.9%, to $126.3 million for the year ended December 31, 2025 from $117.0 million for the year ended December 31, 2024.

The increase was due to the addition of new E175 aircraft delivered throughout 2024 and 2025, offset by the sale of six E175 aircraft during the year ended December 31, 2024.

Executive separation and Merger-related items expense increased $43.9 million to $47.1 million for the year ended December 31, 2025 from $3.2 million for the year ended December 31, 2024.

The increase was due primarily to cash and share based compensation expenses related to the modification and acceleration of restricted stock awards upon Mr.

Bedford’s retirement of $20.8 million, coupled with an increase in professional fees of $16.5 million year-over-year from the increased work scope and expenses related to the Merger, as well as an increase of $6.5 million in Merger-related compensation.

Other operating expense increased $25.8 million, or 11.5%, to $250.6 million for the year ended December 31, 2025 from $224.8 million for the year ended December 31, 2024, primarily due to a $12.3 million increase in crew hotel and other travel expense caused by increased flying.

Additionally, professional fees, software costs, and freight increased by $10.2 million, combined with a reduction of $3.6 million in gain from asset disposals, primarily related to the sale of aircraft year-over-year.

Other expense, net

Other expense, net increased $4.8 million, or 9.6%, to $54.9 million for the year ended December 31, 2025 from $50.1 million for the year ended December 31, 2024.

The table below shows the (increase) decrease related to the changes in other expense, net:

(in millions)

Unrealized gains from marketable securities

Interest expense

Income tax expense

We recorded income tax expense of $37.2 million for the year ended December 31, 2025, compared to income tax expense of $22.3 million for the year ended December 31, 2024 at an effective tax rate of 32.8% and 25.7%, respectively.

Our effective tax rates differ from the federal statutory rate of 21.0% primarily due to state income taxes and valuation allowances on net operating losses.

During the year ended December 31, 2025, we recorded additional income tax expense of $8.1 million related to non-deductible items.

We expect an effective tax rate of 29% in 2026.

Year ended December 31, 2024 compared to the year ended December 31, 2023

The following table sets forth information regarding our operating results for the year ended December 31, 2024 compared to the year ended December 31, 2023:

(in millions) 2024 2023 $ Variance % Variance

Revenues $ 1,474.0 $ 1,429.1 $ 44.9 3.1 %

Operating expenses:

Wages and benefits 677.2 654.8 22.4 3.4

Aircraft and engine rent 3.6 6.1 (2.5) (41.0)

Maintenance and repair 311.2 285.3 25.9 9.1

Depreciation and amortization 117.0 159.4 (42.4) (26.6)

Executive separation and Merger-related items

3.2 0.3 2.9 NM

Other operating expense 224.8 187.9 36.9 19.6

Total operating expenses 1,337.0 1,293.8 43.2 3.3

Operating income 137.0 135.3 1.7 1.3

Total other expense (50.1) (47.3) (2.8) 5.9

Income before income taxes 86.9 88.0 (1.1) (1.3)

Income tax expense 22.3 33.2 (10.9) (32.8)

Net income $ 64.6 $ 54.8 $ 9.8 17.9 %

Net income % (1)

4.4 % 3.8 % NM 0.6 pts

Adjusted EBITDA (2)

Aircraft rent

$ 257.2 $ 295.0 (37.8) (12.8) %

Adjusted EBITDA % (2)

17.4 % 20.6 % NM (3.2) pts

Adjusted EBITDAR (2)

(1) $0.2 million of lease termination expense during the fiscal year ended September 30, 2022.

(2) $3.2 million loss from the write off of lease incentive assets during the fiscal year ended September 30, 2022.

(3) $109.7 million impairment loss related to our long-lived asset group for our CRJ-900 fleet during the fiscal year ended September 30, 2022.

(4) $1.6 million, $1.2 million and $0.4 million loss on deferred financing costs related to the retirement of debts during the during the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

(5) $0.7 million loss, $7.2 million gain, and $4.7 million gain on the sale of aircraft, engines, and other assets during the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

(6) $77.4 million, $46.9 million and $58.6 million impairment loss on held for sale accounting treatment during the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

(7) $3.7 million gain, $3.7 million loss, and $3.5 million loss on impairment fair value adjustments during the fiscal years ended September 30, 2024, 2023, and 2022, respectively.

(8) $3.7 million impairment loss on intangible assets during the fiscal year ended September 30, 2023.

(9) $6.0 million in third party costs associated with non-recurring transactions during the fiscal year ended September 30, 2024.

(10) $10.5 million gain on debt forgiveness during the fiscal year ended September 30, 2024.

(11) $3.0 million gain on extinguishment of debt during the fiscal year ended September 30, 2024.

(12) $0.9 million loss for early payment fees on the retirement of debt during the fiscal year ended September 30, 2024.

$ 260.8 $ 301.1 (40.3) (13.4) %

Adjusted EBITDAR % (2)

17.7 % 21.1 % NM (3.4) pts

(1) Net income % is net income expressed as a percentage of revenues.

Adjusted EBITDA % and EBITDAR % are non-GAAP measures that represent Adjusted EBITDA and Adjusted EBITDAR, respectively, expressed as a percentage of revenues.

Republic’s management uses these metrics, and it believes these metrics are also useful to investors to understand Republic’s financial performance.

Adjusted EBITDA, Adjusted EBITDA %, Adjusted EBITDAR, and Adjusted EBITDAR % are included as supplemental disclosure because Republic’s management believes that they are well recognized valuation metrics in the airline industry that are frequently used by companies, investors, securities analysts, and other interested parties in comparing companies in Republic’s industry.

Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools.

(ii) Adjusted EBITDA and Adjusted EBITDAR do not reflect Republic’s cash expenditures for capital expenditures or contractual commitments;

(iii) Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, Republic’s working capital needs;

(iv) Adjusted EBITDA and Adjusted EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on its debts;

and (vi) other companies in Republic’s industry may calculate Adjusted EBITDA and Adjusted EBITDAR differently than Republic

does, limiting their usefulness as comparative measures.

Because of these limitations, Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

Accordingly, readers are cautioned not to place undue reliance on this information.

The following table presents the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDAR for the periods presented below:

(in millions) 2024 2023

Net income $ 64.6 $ 54.8

Depreciation and amortization 117.0 159.4

Executive separation and Merger-related items 3.2 0.3

Interest expense 57.7 49.1

Investment income and other, net (7.6) (1.8)

Income tax expense 22.3 33.2

Adjusted EBITDA 257.2 295.0

Aircraft and engine rent 3.6 6.1

Adjusted EBITDAR $ 260.8 $ 301.1

The following table summarizes certain operating data that we believe are useful indicators of our operating performance for the years ended December 31, 2024 and 2023 .

Operating Highlights

2024 2023 % Variance

Aircraft under operation for the Partner Airlines at period end (1)(2)

208 213 (2.3 %)

Block hours (3)

591,677 561,905 5.3 %

323,807 308,314 5.0 %

Average daily utilization of each aircraft (hours) (4)

8.5 7.6 11.8 %

Average length of aircraft haul (miles)

489 484 1.0 %

(1) Excludes one spare aircraft as of December 31, 2023.

(2) Excludes 31 and 25 aircraft that have been leased to another airline as of December 31, 2024 and 2023, respectively.

(3) Reflects hours of aircraft movement from gate to gate (including taxi time before takeoff and after landing) until the aircraft comes to rest at the next point of landing.

Revenues increased $44.9 million, or 3.1%, to $1,474.0 million for the year ended December 31, 2024 compared to $1,429.1 million for the year ended December 31, 2023, primarily related to a $83.8 million or 9.0% increase in Carrier-Controlled Revenue year-over-year due in part to the increase in flying compared to the prior year.

This included a 5.3% increase in block hours, a 5.4% increase in flight hours, and a 5.0% increase in departures.

This was offset by a $40.0

million, or 13.1% decrease in aircraft ownership revenue due to fleet changes that occurred throughout the year ended December 31, 2024.

Operating expenses

Wages and benefits expense increased $22.4 million, or 3.4%, to $677.2 million for the year ended December 31, 2024 compared to $654.8 million for the year ended December 31, 2023.

The increase in wages and benefits expense was primarily due to the 5.3% increase in block hour production.

Maintenance and repair expense increased $25.9 million, or 9.1%, to $311.2 million for the year ended December 31, 2024 compared to $285.3 million for the year ended December 31, 2023.

The increase in maintenance and repair expense was primarily due to the 5.3% increase in block hour production.

Depreciation and amortization expense decreased $42.4 million, or 26.6%, to $117.0 million for the year ended December 31, 2024 compared to $159.4 million for the year ended December 31, 2023.

Effective January 1, 2024, we revised the estimated useful lives of regional jet aircraft, spare engines, and flight equipment from 22.0 years to 26.0 years in an effort to closely align with our expectation of utilization of the aircraft, including engine life limited parts replacement (“LLP”).

The change in accounting estimate on the then-current fleet assets decreased depreciation and amortization expense by $50.5 million for the year ended December 31, 2024.

This was offset by an increase in depreciation and amortization expense of $7.4 million due to the delivery of six and 13 new aircraft during the years ended December 31, 2024 and 2023, respectively, and further offset by additional depreciation for building assets put into service in the year ended December 31, 2024.

Executive separation and Merger-related items expense increased $2.9 million to $3.2 million for the year ended December 31, 2024 from $0.3 million for the year ended December 31, 2023.

The increase was primarily due to an increase in professional fees of $2.9 million year-over-year caused by increased work scope related to the Merger due diligence.

Other operating expense increased $36.9 million, or 19.6%, to $224.8 million for the year ended December 31, 2024 compared to $187.9 million during the year ended December 31, 2023.

During the year ended December 31, 2024, we recognized a $2.5 million gain on the sale of six E175 aircraft compared to a $11.4 million gain on the sale of six E175 aircraft during the year ended December 31, 2023.

This was coupled with a $7.0 million increase in professional fees and software costs, and a $5.2 million increase in travel expenses caused by a 5.3% increase in block hour production when compared to the year ended December 31, 2023.

Other expense, net

Other expense, net increased $2.8 million, or 5.9%, to $50.1 million for the year ended December 31, 2024 from $47.3 million for the year ended December 31, 2023.

The table below shows the (increase) decrease related to the changes in other expense, net:

(in millions)

Unrealized gains from marketable securities

Interest expense

Income tax expense

We recorded income tax expense of $22.3 million for the year ended December 31, 2024, compared to income tax expense of $33.2 million for the year ended December 31, 2023 at an effective tax rate of 25.7% and 37.7%, respectively.

Our effective tax rates differ from the federal statutory rate of 21% primarily due to state income taxes, valuation allowances on state net operating losses, and certain non-deductible expenses.

During the years ended December 31, 2024

and 2023, our effective state income tax rate increased due to increased operations in higher income tax jurisdictions, resulting in $1.2 million and $12.2 million of additional income tax expense, respectively.

Liquidity and Capital Resources

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

Additionally, all outstanding principal amounts, $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.

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.

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

The loan agreement provides for a secured term loan facility of up to $200.0 million (the “Treasury Loan” or "UST Loan").

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

No additional sums are available for borrowing under the Treasury Loan.

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

All principal amounts outstanding under the Treasury Loan are due and payable in a single installment on October 30, 2025 (the "Maturity Date") and all accrued interest is payable in arrears on the first business day following the 14th day of March, June, September, and December (beginning with December 15, 2020), and on the Maturity Date.

For the first 12 months, interest was paid in-kind by increasing the principal amount of the loan by the amount of such interest due on an interest payment date.

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

Voluntary prepayments of loans under the Treasury Loan may

be made, in whole or in part, without premium or penalty, at any time.

Amounts prepaid may not be reborrowed.

Mandatory prepayments of amounts outstanding 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.

The Treasury Loan requires the Company, under certain circumstances, including within one business day 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.

The Treasury Loan also contains customary negative and affirmative covenants for credit facilities of this type, including, among others:

(a) limitations on dividends and distributions;

(b) limitations on the creation of certain liens;

(d) limitations on transactions with affiliates;

(e) restrictions on fundamental changes to the business, and (f) restrictions on lobbying activities.

Additionally, the Company is required to comply with the relevant provisions of the CARES Act, including limits on employment level reductions after September 30, 2020, restrictions on dividends and stock buybacks, limitations on executive compensation, and requirements to maintain certain levels of scheduled service.

Sources and Uses of Cash

We require cash to fund our operating expenses and working capital requirements, including outlays for capital expenditures, aircraft and engine pre-delivery payments, maintenance, aircraft rent and debt service obligations, including principal and interest payments.

Our cash needs vary from period to period primarily based on the timing and costs of significant maintenance events.

Our principal sources of liquidity are cash on hand, cash generated from operations, proceeds from the sale of assets, and funds from external borrowings.

In the near term, we expect to fund our primary cash requirements through cash generated from operations, cash and cash equivalents on hand, and proceeds from the sale of assets.

As discussed above, we entered into the Treasury Loan on October 30, 2020 pursuant to which we borrowed an aggregate of $195.0 million.

We believe that the key factors that could affect our internal and external sources of cash include:

▪ Factors that affect our results of operations and cash flows, including the impact on our business and operations as a result of changes in demand for our services, competitive pricing pressures, and our ability to achieve further reductions in operating expenses;

▪ Factors that affect our access to bank financing and the debt and equity capital markets that could impair our ability to obtain needed financing on acceptable terms or to respond to business opportunities and developments as they arise, including interest rate fluctuations, macroeconomic conditions, sudden reductions in the general availability of lending from banks or the related increase in cost to obtain bank financing, and our ability to maintain compliance with covenants under our debt agreements in effect from time to time.

Our ability to service our long-term debt obligations, including our equipment notes, to remain in compliance with the various covenants contained in our debt agreements and to fund our working capital, capital expenditures and business development efforts will depend on our ability to generate cash from

operating activities, which is subject to, among other things, our future operating performance, as well as to other factors, some of which may be beyond our control.

If we fail to generate sufficient cash from operations, we may need to raise additional equity or borrow additional funds to achieve our longer-term objectives.

There can be no assurance that such equity or borrowings will be available or, if available, will be at rates or prices acceptable to us.

We believe that cash flow from operating activities coupled with existing cash and cash equivalents, existing credit facilities, financing arrangements, and anticipated asset sales, will be adequate to fund our operating and capital needs, as well as enable us to maintain compliance with our various debt agreements, through at least the next 12 months.

To the extent that results or events differ from our financial projections or business plans, our liquidity may be adversely impacted.

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect the current market conditions and our projected demand.

Our capital expenditures, which includes purchases of spare engines, aircraft, inventory, tools, vehicles, equipment and miscellaneous projects for the year ended September 30, 2024 were approximately 4.3% of annual revenues.

We expect to continue to incur capital expenditures to support our business activities.

Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents of $15.6 million.

In addition, we had restricted cash of $3.0 million as of September 30, 2024.

Restricted cash includes certificates of deposit that secure letters of credit issued for particular airport authorities as required in certain lease agreements.

Furthermore, as of September 30, 2024, we also had $310.5 million in secured indebtedness incurred primarily in connection with our financing of aircraft.

Our primary uses of liquidity are capital expenditures, operating lease payments, and debt repayments.

As of September 30, 2024, we had $48.7 million of short-term debt, excluding finance leases, and $259.4 million of long-term debt excluding finance leases.

Sources of cash for our fiscal year ended September 30, 2024 were primarily cash flows provided by operations of $34.2 million and proceeds from the sale of assets of $169.3 million.

Debt and Other Obligations

As of September 30, 2024, we had $363.6 million of long-term debt (including principal and projected interest obligations) and finance lease obligations (including current maturities).

This amount consists of $247.7 million in notes payable principal payments related to owned aircraft used in continuing operations, $25.3 million in notes payable principal payments related to spare engines and engine kits, $4.7 million in finance lease obligations, $37.5 million in principal outstanding under our working capital line of credit, and an aggregate of $48.4 million in projected interest costs through our fiscal 2027.

As of September 30, 2024, we had variable rate debt representing 69.0% of our total long-term debt.

Actual interest commitments will change based on the actual variable interest.

Operating Leases

We have significant long-term operating lease obligations primarily relating to our aircraft fleet, as well as leases of office and hangar space.

As of September 30, 2024, we had five airframes and 21 engines on operating leases (excluding aircraft leased at nominal amounts from United).

The five airframes are short-term operating leases that will be returned when the airframes are removed from the United CPA by the end of February 2025.

The engines have remaining lease terms of up to 2.2 years.

Future minimum lease payments due under all long-term operating leases were approximately $10.5 million as of September 30, 2024.

Finance Leases

On June 1, 2022, Mesa Airlines, as lessee, entered into two agreements for the lease of two CRJ-700 aircraft (the “Aircraft Leases”).

Basic rent on this lease is paid monthly and at the end of the lease term.

The Company has the option to purchase both aircraft for a total of $1.5 million at the end of the lease term.

On May 30, 2024, we amended the finance lease agreements providing for the revision of the lease term from June 22, 2031 to May 29, 2027.

We paid initial payments totaling approximately $1.8 million.

Subsequent to September 30, 2024, we entered into an agreement with United to buy the aircraft out of their lease with the third party and to purchase them for $11.0 million, $4.5 million of which will pay down the outstanding obligations under the associated finance leases.

The Company had previously leased 15 aircraft from RASPRO Trust as an operating lease.

In December 2022, the Company entered into an agreement with RASPRO Trust, reducing the buyout pricing 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.

During the fiscal year ended September 30, 2024, the Company purchased all 15 aircraft and completely paid off the RASPRO obligation.

As of September 30, 2024, we had two aircraft on finance leases with remaining lease terms of up to 2.7 years.

Future minimum lease payments due under all long-term finance leases were approximately $4.7 million as of September 30, 2024.

Working Capital Line of Credit

In August 2016, we, as guarantor, our wholly owned subsidiaries, Mesa Airlines and MAG-AIM, as borrowers, CIT, as administrative agent, and the lenders party thereto (the “CIT Lenders”), entered into the CIT Revolving Credit Facility, pursuant to which the CIT Lenders committed to lend to Mesa Airlines and MAG-AIM revolving loans in the aggregate principal amount of up to $35.0 million.

The borrowers' and guarantor's obligations under the CIT Revolving Credit Facility are secured primarily by a first priority lien on certain engines, spare parts, and related collateral, including engine warranties and proceeds of the foregoing.

The CIT Revolving Credit Facility contains affirmative, negative, and financial covenants that are typical in the industry for similar financings, including, but not limited to, covenants that, subject to exceptions described in the CIT Revolving Credit Facility, restrict our ability and the ability of Mesa Airlines and MAG-AIM and their subsidiaries to:

(i) enter into, create, incur, assume or suffer to exist any liens;

(ii) merge, dissolve, liquidate, consolidate or sell or transfer substantially all of its assets;

(iii) sell assets;

(iv) enter into transactions with affiliates;

(v) amend certain material agreements and organizational documents;

(vi) make consolidated unfinanced capital expenditures;

or (viii) maintain a consolidated interest and rental coverage ratio above the amount specified in the CIT Revolving Credit Facility.

The CIT Revolving Credit Facility also includes customary events of defaults, including but not limited to:

(i) payment defaults;

(ii) breach of covenants;

(iii) breach of representations and warranties;

(iv) cross-defaults;

(v) certain bankruptcy-related defaults;

(vi) change of control;

and (vii) revocation of instructions with respect to certain controlled accounts.

On September 25, 2019, the Company extended the term on its $35.0 million working capital draw loan by three years, which now terminates in December 2022.

Interest is assessed on drawn amounts at one-month SOFR plus 3.75%.

In June 2020, $23.0 million was drawn to cover operational needs.

As of September 30, 2022, $15.6 million remained outstanding under the working capital draw loan.

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.

Amendment No.

1, among other things, extends the Maturity Date from the earlier to occur of November 30, 2028, or the date of the termination of the Amended and Restated United CPA;

provides for a revolving loan of $10.0 million plus fees and expenses, which was due January 31, 2024, subject to certain mandatory prepayment requirements;

provides for Revolving Commitments equal to $30.7 million plus the original principal amount of the $10 million revolving loan;

amortization of the obligations

outstanding under the existing CIT Agreement commencing quarterly until March 31, 2025;

and a covenant capping Restricted Payments (as defined in the Amended Facility) at $5.0 million per fiscal year, a consolidated interest and rental coverage ratio of 1.00 to 1.00 covenant, and a Liquidity (as defined in the Amended Facility) requirement of not less than $15.0 million at the close of any business day.

Interest assessed under the Amended Facility is 3.50% for Base Rate Loans and 4.50% for Term SOFR Loans (as such terms are defined in the Amended Facility).

Amendment No.

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.

1, to be used for general corporate purposes.

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;

(ii) increased the amount of Revolving Commitments (as defined in the United Credit Facility) from $30.7 million to $50.7 million, in each case, plus the original principal amount of the Effective Date Bridge Loan and subject to the Borrowing Base (as defined in the United Credit Facility);

and (iii) amended the calculation of the Borrowing Base.

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 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.

• 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.

Electric Aircraft Forward Purchase Commitments

As described in Note 7, in February 2021, the Company entered into a forward purchase contract with Archer Aviation, Inc.

(“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 Aerospace Incorporated (“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.

Maintenance Commitments

In August 2005, we entered into a ten-year agreement with AAR for the maintenance and repair of certain of our CRJ-200, CRJ-700, and CRJ-900 aircraft.

The agreement has since been amended to include a term extending through 2025, and to provide certain E-175 aircraft rotable spare parts with a term through December 2027.

Under the agreements, we pay AAR a monthly access fee per aircraft for certain consigned inventory as well as a fixed "cost per flight hour" fee on a monthly basis for repairs on certain repairable parts during the term of the agreement, which fees are subject to annual adjustment based on increases in the cost of labor and component parts.

In July 2013, we entered into an engine maintenance contract with GE to perform heavy maintenance on certain CRJ-700, CRJ-900, and E-175 engines based on a fixed pricing schedule.

The pricing may escalate annually in accordance with GE's spare parts catalog for engines.

The engine maintenance contract extends through 2024.

In 2014, we entered into a ten-year contract with Aviall to provide maintenance and repair services on the wheels, brakes and tires of our CRJ-700 and CRJ-900 aircraft.

Under the agreement, we pay Aviall a fixed "cost per landing" fee for all landings of our aircraft during the term of the agreement, which fee is subject to annual adjustment based on increases in the cost of labor and component parts.

We entered into an engine maintenance contract with StandardAero, which became effective on June 1, 2015, to perform heavy maintenance on certain CRJ-700 and CRJ-900 engines based on a fixed pricing schedule.

The pricing may escalate annually in accordance with the GE's spare parts catalog for engines.

Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at their respective maintenance facilities.

We also use third-party vendors, such as AAR, Ascent, Embraer, Aviall, and GE, for certain heavy airframe and engine maintenance work, along with parts procurement and component overhaul services for our aircraft fleet.

As of September 30, 2024, $52.3 million of parts inventory was consigned to us by AAR and Aviall under long-term contracts that is not reflected on our balance sheet.

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.

For all other fleets, we use the direct expense method of accounting for our maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance wherein we recognize the expense when the maintenance work is completed, or over the repair period, if materially different, 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.

Our maintenance policy is determined by fleet when major maintenance is incurred.

Accordingly, we cannot reliably quantify the costs or timing of future maintenance-related expenses for any significant period of time.

Restricted Cash

As of September 30, 2024, we had $3.0 million in restricted cash.

We have an agreement with a financial institution for a $6.0 million letter of credit facility and to issue letters of credit for landing fees, worker's compensation insurance and other business needs.

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.

The following table presents information regarding our cash flows for each of our fiscal years ended September 30, 2024, 2023, and 2022:

Year Ended September 30,

Net cash provided by (used in) operating activities

Net cash provided by investing activities

Net cash used in financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Net Cash Flow Provided by Operating Activities

Our primary source of cash from operating activities is cash collections from United pursuant to our CPA.

Our primary uses of cash used in operating activities are for maintenance costs, personnel costs, operating lease payments, and interest payments.

During our fiscal year ended September 30, 2024, we had cash flow provided by operating activities of $34.2 million.

We had net loss of $91.0 million adjusted for the following significant non-cash items:

asset impairment of $73.7 million, depreciation of $40.0 million, stock-based compensation expense of $1.3 million, net unrealized losses on investments in equity securities of $6.1 million, net gains on investments of $(8.0) million, amortization of deferred credits of $(1.1) million, amortization of debt discount and issuance costs and accretion of interest of $8.3 million, gain on extinguishment of debt of $(3.0) million, gain on debt forgiveness of $(10.5) million, and $4.7 million in net other operating cash flow adjustments.

We had net change of $13.5 million within other net operating assets and liabilities largely driven by accrued liabilities, accounts payable, and prepaid expenses, partially offset by deferred revenue during our fiscal year ended September 30, 2024.

During our fiscal year ended September 30, 2023, we had cash flow used in operating activities of $24.1 million.

We had net loss of $120.1 million adjusted for the following significant non-cash items:

asset impairment of $54.3 million, depreciation and amortization of $60.4 million, stock-based compensation expense of $2.3 million, deferred income taxes of $(9.3) million, net unrealized gains on investments in equity securities of $(5.4) million, amortization of deferred credits of $1.5 million, amortization of debt discount and issuance costs and accretion of interest of $6.3 million, loss on extinguishment of debt of $1.5 million, net gain on disposal of assets of $(7.2) million, and $2.2 million in net other operating cash flow adjustments.

We had net change of $(10.7) million within other net operating assets and liabilities largely driven by accrued liabilities, accounts payable, deferred revenue, receivables, and operating leases during our fiscal year ended September 30, 2023.

During our fiscal year ended September 30, 2022, we had cash flow provided by operating activities of $13.4 million.

We had net loss of $182.7 million adjusted for the following significant non-cash items:

asset impairment of $171.8 million, depreciation and amortization of $81.5 million, stock-based compensation expense of $2.8 million, deferred income taxes of $(52.0) million, losses on investments in equity securities of $13.7 million, amortization of deferred credits of $(0.9) million, amortization of debt discount and issuance costs and accretion of interest of $9.7 million, loss on extinguishment of debt of $0.4 million, gain on disposal of assets of $(4.7) million, provision for obsolete expendable parts and supplies of $0.6 million, and loss on lease termination of $0.2 million.

We had net change of $(26.8) million within other net operating assets and liabilities largely driven by accrued liabilities, accounts payable, deferred revenue, receivables, and operating leases during our fiscal year ended September 30, 2022.

Net Cash Flows Provided by (Used in) Investing Activities

Our investing activities generally consist of the sale of assets, capital expenditures for aircraft and related flight equipment, deposits paid or returned for equipment and other purchases, and strategic investments.

During our fiscal year ended September 30, 2024, our net cash flow provided by investing activities was $148.8 million.

We received a total of $158.3 million from the sale of aircraft and engines, net of transaction costs, $9.2 million from the sale of investments in equity securities, net of transaction costs, and $1.5 million in customer deposits.

Additionally, we invested $1.2 million in aircraft, $6.1 million in depreciable inventory, $3.7 million in costs associated with transitioning CRJ-900 aircraft to United operations, $3.4 million in capitalized maintenance, and $5.8 million in tools, vehicles, equipment and other miscellaneous projects.

During our fiscal year ended September 30, 2023, our net cash flow provided by investing activities was $142.3 million.

We invested $15.8 million in spare engines, $2.2 million in aircraft, $13.4 million in inventory, $2.6 million in costs associated with transitioning CRJ-900 aircraft to United operations, and $2.6 million in tools, vehicles, equipment and other miscellaneous projects.

Additionally, we received a total of $178.6 million from the sale of aircraft and engines and received a $0.3 million in refunds on equipment and other deposits.

During our fiscal year ended September 30, 2022, our net cash flow provided by investing activities was $1.4 million.

We invested $16.7 million in spare engines, $2.2 million in aircraft, $18.4 million in inventory, $4.4 million in tools, vehicles, equipment and other miscellaneous projects, and $7.6 million in net payments on equipment and other deposits.

Additionally, we invested a total of $0.2 million in equity securities and received a total of $50.0 million from sale of 10 CRJ-700 aircraft.

Net Cash Flows Used in Financing Activities

Our financing activities generally consist of debt borrowings, principal repayments of debt, payment of debt financing costs, stock repurchases, and proceeds received from issuing common stock under our ESPP.

During our fiscal year ended September 30, 2024, our net cash flow used in financing activities was $200.5 million.

We received $86.9 million of proceeds from long-term debt.

We made $286.3 million of principal repayments on long-term debt during the period.

We incurred $0.9 million in prepayment fees and made $0.1 million of payments of tax withholding for restricted stock units.

During our fiscal year ended September 30, 2023, our net cash flow used in financing activities was $143.1 million.

We received $60.9 million of proceeds from long-term debt.

We made $203.0 million of principal repayments on long-term debt during the period.

We incurred $0.9 million of costs related to debt financing and $0.4 million of payments of tax withholding for restricted stock units.

We received $0.3 million in proceeds from the issuance of common stock under our ESPP.

During our fiscal year ended September 30, 2022, our net cash flow used in financing activities was $77.6 million.

We received $39.8 million of proceeds from borrowings under the Treasury Loan.

We made $114.9 million of principal repayments on long-term debt during the period.

We incurred $2.4 million of costs related to debt financing and $0.5 million of payments of tax withholding for restricted stock units.

We received $0.4 million in proceeds from the issuance of common stock under our ESPP.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with GAAP.

In doing so, we must make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosure of contingent assets and liabilities.

To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected.

We base our estimates on past experience and other assumptions that we

believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

We refer to accounting estimates of this type as critical accounting estimates, which we discuss below.

The discussion below is not intended to be a comprehensive list of our accounting policies.

Our significant accounting policies are more fully described in Note 2 - "Summary of Significant Accounting Policies" to the consolidated financial statements.

Effective October 1, 2019, we adopted ASU No.

2016-02, Leases (Topic 842) ("ASU 2016-02" or “ASC 842”) which provides guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases with terms of less than 12 months.

From a lessee perspective, our leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income.

We determine if an arrangement is a lease at inception.

Our operating lease activities are recorded in operating lease right-of-use (“ROU”) assets, current maturities of operating leases, and noncurrent operating lease liabilities in the consolidated balance sheets.

Finance leases are included in property and equipment, net, current portion of long-term debt and finance leases, and long-term debt and finance leases, excluding current portion.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

Variable lease payments are not included in the calculation of the right-of-use assets and lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred.

As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

We use the implicit rate when readily determinable.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

In addition to the aircraft we lease from United under our United CPA, approximately 7% of our aircraft are leased from third parties.

Our aircraft operating leases are all short-term leases and result in rental payments being charged to rent expense immediately.

As a lessee, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e., leases with terms of 12 months or less).

From a lessor perspective, 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 in the CPA is designed to reimburse the Company for certain aircraft ownership costs of these aircraft.

We account for the non-lease component of our CPA 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 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 pursuant to which United agreed to buy the two aircraft out of their lease with GoJet and purchase the aircraft.

Revenue Recognition

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 agreement 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 contract also includes 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 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.

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 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 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 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 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's CPA contains an option that allows United to assume the contractual responsibility for procuring and providing the fuel necessary to operate the flights that it operates for them.

United has exercised this option.

Accordingly, the Company does not record an expense or revenue for fuel and related fueling costs for flying under its CPA.

In addition, United also provides, 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 United at no cost are presented net in its consolidated financial statements;

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

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).

Property and Equipment

The Company’s property and equipment, which primarily consists of aircraft and related flight equipment, had a net book value of $426.4 million as of September 30, 2024.

The Company monitors for any indicators of impairment of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate that the related carrying amount may be impaired.

Factors which could be indicators of impairment include, but are not limited to:

(i) significant adverse changes in the extent or manner in which an asset is being used, including permanently removing a long-lived asset or assets from operations;

(ii) significant changes in the estimated useful life of an asset;

(iii) significant changes in estimated future cash flows or a history of operating or cash flow losses;

(iv) permanent and significant declines in market prices of an asset;

and (v) changes to the regulatory environment or business climate.

The Company records an impairment loss if (i) the undiscounted future cash flows are found to be less than the carrying amount of the asset or asset group, and (ii) the carrying amount of the asset or asset group exceeds its 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.

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

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

The Company’s assumptions about future conditions are important to its assessment of potential impairment of its long-lived assets.

The Company will continue to monitor these conditions in future periods as new information becomes available and will update its analyses accordingly.

If an asset group is

impaired, the impairment loss recognized is the amount by which the asset group’s carrying amount exceeds its fair value.

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

As a result of operating losses and the removal of CRJ-900 aircraft from the United CPA, we evaluated our fleet for impairment 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.

Income taxes are accounted for using the asset and liability method.

Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is provided for those deferred tax assets for which we cannot conclude that it is more likely than not that such deferred tax assets will be realized.

In determining the amount of the valuation allowance, estimated future taxable income as well as feasible tax planning strategies for each taxing jurisdiction are considered.

If we determine it is more likely than not that all or a portion of the remaining deferred tax assets will not be realized, the valuation allowance will be increased with a charge to income tax expense.

Conversely, if we determine we are more likely than not to be able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been provided, the related portion of the valuation allowance will be recorded as a reduction to income tax expense.

We recognize and measure benefits for uncertain tax positions using a two-step approach.

The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that is it more likely than not that the tax positions will be sustained upon audit, including resolution of any related appeals or litigation processes.

For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

Significant judgment is required to evaluate uncertain tax positions.

Evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of tax audits and effective settlement of audit issues.

Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in income tax expense in the period in which the change is made, which could have a material impact to our effective tax rate.

See Note 12 - "Income Taxes" in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

See also "Management's Discussion and Analysis—Results of Operations—Income Taxes" for additional information.

We require cash to fund our operating expenses and working capital requirements, including outlays to fund capital expenditures, aircraft pre-delivery deposit payments, maintenance expenses, aircraft rent, and debt service obligations, including principal and interest payments.

Our cash needs vary from period to period, primarily based on the timing and costs of significant maintenance events and capital expenditures.

Our principal sources of liquidity are cash on hand and liquid investments, including investments in marketable securities, cash generated from operations, and funds raised from external borrowings or offerings.

In the near term, we expect to fund our primary cash requirements through cash generated from operations, cash, and cash equivalents on hand (including our investments in marketable securities), and funds from new borrowings on aircraft deliveries and our aviation campus.

There is no assurance that we will be successful in securing any additional liquidity from third-party creditors.

We believe that cash flow from operating activities coupled with existing cash, cash equivalents, and marketable securities will be adequate to fund our operating and capital needs through at least the next 12 months.

As of December 31, 2025 , we had a working capital deficit of $33.6 million .

The airline industry is highly capital intensive due to the nature and financing methods for its fleet assets used to generate operating cash flows.

If we fail to generate sufficient funds from operations to repay such obligations, we may need to raise capital through the issuance of equity or obtain or refinance borrowings to meet our existing obligations.

There can be no assurance that such equity transactions or borrowings will be available or, if available, will be at terms, rates, or prices acceptable to us.

The following table summarizes our total cash and marketable securities as of December 31, 2025 and December 31, 2024 as well as our operating, investing, and financing cash flow activities for the years ended December 31, 2025 and 2024 :

(in millions) 2025 2024 $ Variance % Variance

Cash, cash equivalents, and restricted cash

$ 157.7 $ 131.9 $ 25.8 19.6 %

Marketable securities

162.2 191.5 (29.3) (15.3)

$ 319.9 $ 323.4 $ (3.5) (1.1) %

(in millions) 2025 2024 $ Variance % Variance

Net cash provided by operating activities

$ 322.0 $ 226.1 $ 95.9 42.4 %

Net cash used in investing activities

(350.9) (105.5) (245.4) NM

Net cash provided by (used in) financing activities

54.7 (102.2) 156.9 NM

During the year ended December 31, 2025 , total cash, cash equivalents, restricted cash, and marketable security positions decreased $3.5 million, or 1.1%, to $319.9 million as of December 31, 2025 from $323.4 million as of December 31, 2024.

Net cash provided by operating activities increased $95.9 million, or 42.4%, to $322.0 million during the year ended December 31, 2025 from $226.1 million during the year ended December 31, 2024.

The increase was attributable to the increase in earnings excluding non-cash expenses, coupled with changes in working capital accounts from the timing of collection of receivables and settlement of liabilities when compared to the year ended December 31, 2024.

Net cash used in investing activities increased $245.4 million to $350.9 million net cash used during the year ended December 31, 2025 from $105.5 million net cash used during the year ended December 31, 2024.

We purchased $176.2 million and redeemed $212.5 million in marketable securities and investments during the year ended December 31, 2025, compared to purchases of $187.3 million and redemptions of $255.3 million in marketable securities and investments during the year ended December 31, 2024.

Additionally, we acquired 12 E175 regional aircraft and sold no E175 regional

aircraft resulting in proceeds during the year ended December 31, 2025, compared to the acquisition of six E175 regional aircraft and the sale of six E175 regional aircraft resulting in proceeds during the year ended December 31, 2024.

We also received $22.8 million during the year ended December 31, 2025 in connection with the Merger.

Net cash provided by (used in) financing activities changed $156.9 million to $54.7 million net cash provided for the year ended December 31, 2025 compared to $102.2 million net cash used for the year ended December 31, 2024.

During the year ended December 31, 2025, we obtained secured borrowings resulting in cash inflows of $299.4 million, compared to obtaining secured borrowings resulting in cash inflows of $177.3 million during the year ended December 31, 2024.

Additionally, there were no accelerated payments and early debt extinguishments for aircraft-related notes during the year ended December 31, 2025, compared to the accelerated payment and early debt extinguishment for aircraft-related notes of $37.4 million during the year ended December 31, 2024.

Our credit agreements require that we comply with customary affirmative and negative covenants.

We believe we are in compliance with all of our financial covenants as of December 31, 2025 and 2024.

Letters of Credit

As we enter new markets, increase the amount of maintenance space we lease, or add leased aircraft, we are often required to provide airport authorities and lessors with letters of credit.

We also provide letters of credit for our workers’ compensation insurance, construction activities, and student loans.

As of December 31, 2025 and 2024 , we had cash collateralized letters of credit totaling $22.8 million and $21.4 million, respectively .

Cash collateralized against our letters of credit is recorded in restricted cash on our consolidated balance sheets.

Aircraft and Other Leases

Our lease obligations consist of aircraft, spare engines, flight training equipment, terminal space, operating facilities, and office space, which expire through 2038 .

All of our leases are classified as operating leases and finance leases with contractual terms extending up to 13 years .

For operating leases with terms greater than 12 months, we record an operating lease liability and the related right-of-use asset at the present value of remaining lease payments at the measurement date, taking into consideration rental escalation provisions, when applicable.

Lease obligations expected to be paid within 12 months represent current maturities and are classified within the current portion of operating lease liabilities to our consolidated balance sheets.

Lease obligations with expected repayment extending beyond 12 months are recorded to operating lease liabilities—less current portion to our consolidated balance sheets in our accompanying consolidated financial statements.

We record our finance lease assets, current liability, and noncurrent liability to property and equipment, net, current portion of long-term debt and finance leases, and long-term debt and finance leases—less current portion, respectively.

Amortization of the finance lease asset is recorded to depreciation and amortization expense.

The interest component of the lease payment is recorded to interest expense.

With the exception of our CPAs and some operating facilities, we do not separate lease and non-lease contractual components.

Provisions for residual value guarantees are not material.

See Note 7 , Leases , in the notes to the audited consolidated financial statements included in this Report.

Components of operating and finance lease costs for the years ended December 31, 2025, 2024, and 2023, are as follows:

(in millions)

Operating lease cost

Finance lease cost (1)

Variable and short-term lease cost

Total lease cost

(1) Finance lease costs include depreciation and amortization costs and interest costs.

Off-Balance Sheet Arrangements

We have guaranteed certain obligations of LIFT Academy and certain third parties related to LIFT Academy.

Expected losses from guaranteed obligations are derived from total commitments outstanding to third parties coupled with the probability of repayment.

Total guaranteed obligations as of December 31, 2025 were $21.1 million .

Losses expected to be incurred from guaranteed obligations were $7.3 million as of December 31, 2025 .

Commitments and Obligations

From time to time, we enter into purchase commitments for future aircraft and engine deliveries.

We regularly make pre-delivery deposit payments (“PDP”) to support aircraft and engines on order.

PDPs are retained until scheduled aircraft or engine delivery occurs or when deposit amounts are no longer expected to be returned by the manufacturer.

Interest costs associated with PDPs are capitalized as a portion of the overall historical cost of the related aircraft or engine and are depreciated over the estimated useful life of the asset.

During the years ended December 31, 2025, 2024, and 2023, we recorded $2.1 million, $1.6 million, and $1.1 million, respectively, in capitalized interest costs to property and equipment, net, in our consolidated balance sheets.

The following table sets forth our future contractual obligations as of December 31, 2025 :

(in millions)

Current and long-term debt obligations

$ 1,025.4 $ 196.0 $ 292.5 $ 186.4 $ 350.5

Interest on debt obligations (1)

261.9 57.9 90.8 55.2 58.0

Operating lease obligations

176.0 24.5 48.2 43.9 59.4

Finance lease obligations

72.6 9.5 19.0 39.5 4.6

Aircraft and spare engines under purchase obligations

837.1 83.5 630.3 123.3 —

Aviation Campus purchase commitment

28.3 28.3 — — —

$ 2,401.3 $ 399.7 $ 1,080.8 $ 448.3 $ 472.5

(1) Interest calculated for fixed rate debt and estimated for variable rate debt based on current interest rates as of December 31, 2025.

84.2% of Republic’s debt is fixed rate debt.

We have an order for 29 Embraer regional jets (E175), and expect three aircraft to be delivered during the three months ended March 31, 2026, with the remaining deliveries beginning in 2027 through 2029.

During the year ended December 31, 2025, we executed an amendment to an existing financing arrangement to finance contractually scheduled aircraft deliveries during the year ending December 31, 2026, which provides funding for a portion of the total aircraft cost, is secured by the related aircraft, and is funded upon each delivery.

Additionally, we entered into a new credit facility secured by spare engines.

As of December 31, 2025, the remaining maximum borrowings allowable under the agreements is $115.6 million.

During the years ended December 31, 2024 and 2023, we completed the initial phase of three phases of a new flight aviation campus and corporate headquarters in Carmel, Indiana (the “Aviation Campus”).

The Aviation Campus includes a training center that will be used to perform substantially all of our training activities for pilots, flight attendants, maintenance technicians, and dispatchers and houses eight full motion simulators along with flat panel simulators, cabin trainers, and classrooms.

Additionally, the Aviation Campus includes overnight accommodations that will be used exclusively by associates in training and a parking garage.

In January 2026, the second phase of the Aviation Campus was completed, including a new corporate headquarters.

As of December 31, 2025 and 2024 , we recorded $2.9 million and $1.3 million, respectively, in capitalized interest costs to property and equipment, net, in the consolidated balance sheets associated with the construction of the Aviation Campus.

We have long-term agreements relating to our maintenance costs associated with engines, auxiliary power units (“APUs”), avionics, and other aircraft equipment.

The following agreements comprise our long-term maintenance agreements for various airframe and engine components as of December 31, 2025 :

Maintenance Agreement

December 2034

December 2029

December 2037

Wheels and Brakes

September 2030

Certain fixed agreements include a guaranteed minimum payment amount based on flight hours, departures, or other measures.

Aggregate payments under long-term maintenance agreements were $154.0 million, $149.4 million, and $150.8 million for the years ended December 31, 2025, 2024, and 2023 , respectively.

We recorded income tax expense o f $37.2 million, $22.3 million, and $33.2 million, during the years ended December 31, 2025, 2024, and 2023, respectively, at an effective tax rate of 32.8%, 25.7%, and 37.7%, respectively.

We utilize Federal NOLs against our current period taxable income.

Our Federal NOL deferred tax assets are largely generated from the accelerated tax depreciation on aircraft and other significant asset acquisitions.

Based on our expected utilization and expiration of our NOL deferred tax assets as well as anticipated aircraft deliveries, we do not expect to become a cash tax-paying entity until at least 2028.

See Note 11, Income Taxes , in the notes to the audited consolidated financial statements included in this Report.

The One Big Beautiful Bill Act , enacted on July 4, 2025, has introduced changes to the United States Federal tax laws.

We do not expect that this legislation will have a material impact to our income tax expense and deferred tax balances.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements.

Actual results may materially differ from these estimates under different assumptions and conditions.

Some of those estimates and judgments can be subjective and complex.

Consequently, actual results could differ from those estimates.

We consider an accounting estimate to be critical if:

(i) the accounting estimate requires us to make assumptions about matters that are highly uncertain at the time the accounting estimate is made;

and (ii) we reasonably could have used different estimates in the current period , or changes in these estimates are reasonably likely to occur from period to period as new information becomes available, and a change in these estimates would have a material impact on our financial condition, results of operations, the price of our common stock, or cash flows.

We continually evaluate the estimates and judgments used to prepare our consolidated financial statements.

Our estimates are based on historical experience, information from third-party professionals, and various other assumptions that we believe are reasonable.

There are other items within our financial statements that require estimation but are not deemed critical based on the criteria above.

Changes in estimates used in these and other items could have a material impact on our financial statements in any one period.

Significant estimates include but are not limited to (i) estimated useful lives and residual values of aircraft and equipment, (ii) provision for income taxes, and (iii) accounting for business combinations.

Actual results could materially differ from our initial estimates.

Estimated useful lives and residual values of aircraft and equipment — We record property and equipment at historical cost, less accumulated depreciation, which is charged to expense on a straight-line basis over the estimated useful life of the related asset.

Effective January 1, 2024, we adjusted the estimated useful life of certain aircraft, rotable spare parts, and engines from 22.0 to 26.0 years to more closely align with market data impacting our fleet usage pattern, including LLP.

Estimated useful lives and residual values for each asset class are as follows:

Current Useful

Life Effective

January 1, 2024

Previous Useful Life Effective December 31, 2023 and Prior (Years) Residual Value

Regional jet aircraft

26.0 22.0 0.0% – 10.0%

General aviation aircraft, engines, and flight equipment

10.0 – 22.0 0.0% – 50.0%

Office equipment and leasehold improvements

Income taxes — We have generated significant NOLs for U.S.

federal income tax purposes primarily from accelerated depreciation on owned aircraft.

As of December 31, 2025, we had estimated NOLs of approximately $300 million for U.S.

federal income tax purposes, which begin to expire in 2036.

The future use of NOLs is limited to the extent that the utilization of deferred tax assets and other carry forwards becomes uncertain in future years.

If such conditions exist, we will be required to record a valuation allowance for deferred tax assets not expected to be utilized at the time that it becomes more likely than not that we will not generate sufficient taxable income to reali ze our NOL deferred tax assets and establish or adjust our valuation allowance if such conditions exist.

In evaluating the likelihood of utilizing our net deferred income tax assets, significant judgments include limitations on utilization, our recent history of profitability, forecasts of our taxable income trends, and future impacts of taxable temporary differences.

The Company cannot conclude that it is more likely than not that the benefit from certain Federal and state NOL carryforwards will be realized.

In recognition of this uncertainty, the Company has provided a valuation allowance of $82.7 million and $36.4 million as of December 31, 2025 and 2024, respectively, on the deferred tax assets related to these NOL carryforwards.

During the year ended December 31, 2025, there was an adjustment of $58.7 million to the valuation allowance as a result of IRC Sec 382 limitation due to the ownership change caused by the Merger, and the unlikelihood of fully utilizing the deferred tax assets.

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.

Accounting for the Merger with Mesa Air Group, Inc — The Merger is accounted for as a reverse acquisition under provisions of FASB ASC 805, Business Combinations , using the acquisition method of accounting.

Legacy Republic is designated the accounting acquirer and legal acquiree for financial reporting purposes on the basis that, immediately following consummation of the Merger, (i) shareholders of Legacy Republic hold a substantial majority of the voting interest in the Company, (ii) Legacy Republic designated six of seven director positions on the Company’s Board, and (iii) senior management of Legacy Republic retained all named executive officer positions within the Company following the Merger.

The accounting for the Merger as a reverse acquisition resulted in the issuance and relinquishment of 11.9% of the pre-Merger voting interest in Legacy Republic as consideration in exchange for certain net assets of Mesa, which is measured at the acquisition date fair value of the consideration exchanged.

To record the assets acquired and liabilities assumed as a result of the Merger with Mesa Parent, we performed a purchase price allocation utilizing the best information available to management.

We recognized the identifiable assets acquired and the liabilities assumed at their estimated fair values on the acquisition date.

Any excess Merger consideration exchanged over the fair value of net assets acquired was recorded to goodwill.

Determining the fair value of these items requires management’s judgment, and more often than not the utilization of independent valuation specialists.

Additionally, the determination of what is a part of and separate from the business combination requires management’s judgment in the application of FASB ASC 805, Business Combinations .

The valuation of these tangible and identifiable intangible assets and liabilities is subject to further review from management and may change between the preliminary allocation and end of the purchase price allocation period.

Management will continue to evaluate these estimates and assumptions should new information become available, and

adjustments may be recorded to the fair value of the assets acquired and liabilities assumed as soon as practicable, but no later than November 25, 2026.

For more information on our acquisitions and application of the acquisition method, see Note 3, Merger with Mesa Air Group, Inc.

in the notes to the consolidated financial statements.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 4 - "Recent Accounting Pronouncements" in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

For a listing and discussion of our accounting policies, see Note 2 - "Summary of Significant Accounting Policies" in the notes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

S ee Note 2, Summary of Significant Accounting Policies , included in the notes to the consolidated financial statements included in this Report.

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 7. Management’s Discussion and Analysis