Mesa Air Group Q3 2026 Earnings Results & Report

Mesa Air Group EPS Results

• Actual EPS: $0.85
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A
• EPS Beat Rate: 1 of last 4 quarters

Mesa Air Group Revenue Results

• Actual Revenue: $553.50 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Mesa Air Group (NASDAQ:RJET) is a regional airline holding company whose principal operating subsidiary is Mesa Airlines, Inc. Mesa Airlines provides scheduled passenger air service for major airline partners under capacity-purchase and code-sharing agreements. Its operations have primarily been conducted under the United Express brand, with the company also having operated flights for partners including American Airlines, US Airways and Delta Air Lines at various points in its history.

Based in Phoenix, Arizona, Mesa Airlines serves destinations across the United States and has historically operated regional jet aircraft, including Bombardier CRJ and Embraer E-Jet models. The company’s business focuses on connecting smaller and mid-sized communities with larger airline hubs, while its major airline partners generally handle branding, ticket sales and network planning.

Mesa Air Group was founded in 1980 and expanded through a combination of organic growth and acquisitions before concentrating on regional airline operations. Jonathan G. Ornstein has been a prominent long-term executive and has served as the company’s chairman and chief executive officer for much of its modern history. The ticker provided, NASDAQ:RJET, was historically associated with Republic Airways Holdings; Mesa Air Group’s public stock has traded under the ticker MESA.

Mesa Air Group Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Full-year 2026 guidance was raised to adjusted EBITDAR of $410 million-$420 million, up from $395 million-$405 million, with adjusted earnings expected to exceed $3.30 per diluted share.
• Positive Sentiment: Republic reached a six-year agreement with American Airlines to place five additional E170 aircraft into service beginning in December, while partner demand remains strong and 26 Embraer delivery positions provide future growth flexibility.
• Positive Sentiment: The Mesa integration continued to advance, including consolidation of operations and maintenance functions, FAA acceptance of the second revision cycle, and approximately 40% improvement in heavy-check turnaround times year over year.
• Positive Sentiment: The company strengthened its balance sheet, ending the quarter with $290 million of unrestricted cash, $863 million of net debt, and net leverage of 2.2 times versus 2.8 times a year earlier.
• Negative Sentiment: Third-quarter completion factor fell to 94.6% from 98.2% in the prior quarter due largely to severe Northeast weather and air traffic control disruptions, while supply-chain constraints and ongoing Mesa integration costs are expected to persist into early 2028.

Presentation

[Operator]

Hello, everyone. Thank you for joining us and welcome to the Republic Airways third quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Keely Mitchell, Corporate Controller. Keely, please go ahead.

[Keely Mitchell, Corporate Controller at Republic Airways]

Thank you, Kenneth, and thank you everyone for joining our earnings call. On with me today are Matt Koscal, President and Chief Executive Officer, and Joe Allman, Executive Vice President and Chief Financial Officer. In the investor relations section of our website, you will find the earnings press release and slide presentation to accompany today's discussion. This call is being recorded and will be available for replay in our investor relations website. Today's discussion will include forward-looking statements regarding Republic Airways future performance, strategic initiatives and market outlook. These statements reflect our current expectations and beliefs based on information available to us today, but they are subject to various risks and uncertainties that could cause actual results to differ materially from our projections.

[Keely Mitchell, Corporate Controller at Republic Airways]

The aviation industry operates in a dynamic environment with inherent risks, including regulatory changes, economic fluctuations, weather-related disruptions, and evolving market conditions that can significantly impact our operations and financial performance. Additionally, our business is subject to the operational and financial health of our major airline partners, labor market conditions, aircraft availability, and other factors beyond Republic's direct control. For a comprehensive understanding of the specific risks and uncertainties that may affect our business and financial results, I encourage all participants to review our detailed disclosures in our filings with the Securities and Exchange Commission, including our Form 10-K on file with the SEC and subsequent periodic reports. These documents provide important context and detailed information that supplement today's discussion and are, or will be, available on both the SEC's website and in the investor relations section of our company website at rjet.com.

[Keely Mitchell, Corporate Controller at Republic Airways]

Additionally, throughout this webcast, we will also present and discuss non-GAAP financial measures. Reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measure, to the extent they are available without unreasonable effort, appear in today's earnings press release and accompanying presentation, which are available on our investor relations website. I will now turn the call over to Matt.

[Matt Koscal, President and CEO at Republic Airways]

Thank you, Keely, and good morning, everyone. Before turning to our third quarter results, I want to build on a theme I shared on our last quarterly earnings call. This has been a transformational year for Republic, but this year is part of a much larger story, a transformational decade in which we have helped redefine what a regional airline can be. Our three partners have been focused on building stronger brands through premium products, exceptional reliability, and a customer experience that earns lasting loyalty. That promise must extend across the entire journey, including the flights we operate. We recognized this early that regional service needed to evolve to match that ambition, and over the past decade, we have invested deliberately to be ready. It starts with our people.

[Matt Koscal, President and CEO at Republic Airways]

Creating an industry-leading work environment, world-class training infrastructure, and a relentless commitment to culture give our associates the foundation to deliver for our partners and their passengers. We paired those investments with a premium regional product led by the E175, a passenger experience across all classes of service that complements our partners' brands. Together, these investments in people, product and technology have built a Republic that has been ready to answer our partners' calls. Reliability is where those investments come together. We serve our partners' most complex, congested, and important hubs, particularly in the Northeast. Weather and air traffic control disruptions are a reality of that operating environment. Our ability to anticipate disruption and recover effectively is a key competitive advantage and a critical part of protecting the customer experience when it matters most. None of this happened by chance.

[Matt Koscal, President and CEO at Republic Airways]

We made deliberate choices to invest early in our people and culture, innovative technology solutions for our crews and operations center, and our fleet. We sustained that commitment through disruptive periods, including the pandemic, when we broke ground on our state-of-the-art aviation campus. Bringing training and operations together on one campus reflects our long-term approach to excellence. These are capabilities built over years, not in response to a single quarter. We cannot control macroeconomic or geopolitical uncertainty, weather or air traffic control, but we can stay focused on where we have an impact with our people, our product, our reliability and the successful integration of Mesa and Republic. That discipline has underpinned our results throughout this year and positions us to grow as the solution provider of choice for our partners' most complex and important opportunities.

[Matt Koscal, President and CEO at Republic Airways]

With that context, I want to thank our more than 8,500 Republic and Mesa associates for supporting the integration and delivering this quarter's operational and financial results in a challenging environment. As we approach the first anniversary of the Mesa merger, we have made meaningful progress toward a fully integrated airline. Let me now turn to the quarter's results and the work ahead. Earlier this morning, we reported third quarter adjusted net income of $40 million, or $0.85 per diluted share. July was a historically challenging month for our operation, with an overall completion factor of just 92% due to weather and ATC disruptions. Conditions improved considerably through the remainder of the quarter, and demand from our partners remained strong. By September, our completion factor had recovered to 97.6%.

[Matt Koscal, President and CEO at Republic Airways]

For the third quarter, completion factor was 94.6%, slightly above the challenging first quarter, but 360 basis points below the second quarter's 98.2%. Severe weather in the Northeast's highly congested airspace can significantly disrupt our operations, creating irregular operations, or IROPs. Our focus is on recovering efficiently when those disruptions occur, and we continue to make investments in our people and technology to further improve those recovery efforts, ultimately serving our crews and passengers better. These investments will continue to show up in our controllable completion factor, which was 99.96% and allowed us to complete nearly 115,000 flights, despite the high number of IROP days and a challenging ATC environment. We achieved perfect controllable completion on 81 days during the quarter. That performance reflects our associates' commitment to getting our partners' passengers to their destinations safely.

[Matt Koscal, President and CEO at Republic Airways]

During the quarter, we also reached an agreement to place five additional E170 aircraft into service for American Airlines, which represents the continued demand for premium regional connectivity, even in a high fuel cost environment. Now let me turn to the integration of Mesa and Republic. We continue to make great progress on the integration across three key areas: operations, regulatory milestones, and fleet harmonization. We continue to advance toward a fully harmonized operation and a single operating certificate. In August, Mesa's operations center moved from Phoenix to our aviation campus in Carmel, Indiana, and we welcome the Mesa associates who relocated to the greater Indianapolis area. We also received FAA acceptance of the second of five revision cycles, aligning our pre-flight procedures and activities. We remain on track to file, implement, and complete revision cycles three, four, and five during 2027 and early 2028.

[Matt Koscal, President and CEO at Republic Airways]

In maintenance, we completed the transition of all Mesa maintenance and material control specialists to Republic and migrated their system of record into Republic's maintenance and material control system. Substantially all of Mesa's corporate functions have now transitioned to our aviation campus. Each of these milestones moves us closer to completing the integration. Regarding fleet harmonization, our goal is to complete that process by the end of 2027. During the quarter, we continued to improve fleet health and maintenance harmonization, meeting our targeted improvements in heavy check turnaround times. Total turnaround times are approximately 40% lower today than they were just a year ago. Supply chain challenges remain an industry headwind, as you've heard throughout this earnings season, and we have made this harmonization progress despite these constraints.

[Matt Koscal, President and CEO at Republic Airways]

Our supply chain and engineering teams remain fully engaged with the manufacturers and OEMs that supply spare parts and components for our E-Jets. Once these challenges are fully mitigated, we will be positioned to increase aircraft availability and utilization across the entire fleet. Turning to labor, we experienced reduced attrition of pilots throughout the first half of 2026, mostly driven by the availability of Spirit pilots post their liquidation. In the third quarter, pilot attrition normalized to what we had expected it to be for 2026, and we are positioned well to support the expected demand from our partners in 2027. There continues to be a strong pipeline of pilot supply and Republic's world-class aviation campus and training center and culture differentiates us as an employer of choice.

[Matt Koscal, President and CEO at Republic Airways]

Regarding our flight attendants, implementation of our joint collective bargaining agreement, or JCBA, with IBT and AFA continued throughout the quarter, including the introduction of boarding pay in July. I want to thank everyone who has been working on this implementation effort throughout the year. We remain in active pilot negotiations with the joint negotiating committees of IBT and ALPA. If we are unable to reach an agreement, interest arbitration is expected to begin in mid-December and continue into 2027. We expect to finalize labor integration in 2027. Let me turn the call over to Joe to review the financial highlights for the quarter.

[Joe Allman, EVP and CFO at Republic Airways]

Thanks, Matt, and good morning, everyone. Third quarter GAAP net income was $35 million, or $0.75 per diluted share, and pre-tax income was $49 million. Adjusting for executive separation and merger-related costs, as well as mark to market and other adjustments associated with our Eve and Cape Air investments, adjusted net income was $40 million, or $0.85 per diluted share. Adjusted pre-tax income was $56 million, and adjusted EBITDAR was $107 million for the quarter. The adjustments primarily reflect professional fees from the ongoing integration work, severance related to the Mesa integration, and the duplicative overheads at Mesa. These items are expected to subside as the integration process concludes into early 2028. We continued to execute on our strategy to fortify the balance sheet by reducing leverage. At the end of September, unrestricted cash increased to $290 million, up from $278 million at the end of June's quarter.

[Joe Allman, EVP and CFO at Republic Airways]

Third quarter CapEx was approximately $30 million, which included one engine, and we repaid $38 million of debt. Total debt, including our lease liabilities, was $1.2 billion at quarter end. Net debt declined to $863 million, a reduction of $66 million since December 2025. At the end of the third quarter, net leverage was 2.2 times, down from 2.8 times one year ago. Strong cash generation and lower leverage with a fortified balance sheet better position Republic to deliver long-term sustainable value. Turning to our fleet, as Matt mentioned earlier, we finalized an agreement with American Airlines to place five previously unassigned aircraft into operation. These aircraft will begin operations in early December. The agreement is for a six-year term and will provide incremental revenue opportunity into the future. The economics on these aircraft will be similar to other E170 aircraft operating at American.

[Joe Allman, EVP and CFO at Republic Airways]

Looking further ahead, we have 26 Embraer delivery positions scheduled from early 2028 through mid-2030. These delivery positions provide meaningful flexibility to support our partners' long-term fleet needs and fund Republic's future growth. With that, I will turn the call back over to Matt.

[Matt Koscal, President and CEO at Republic Airways]

Thank you, Joe. As we prepare to close out the year, we remain focused on supporting our people and delivering exceptional operational performance, as well as progressing on the revision cycle process and the Mesa integration efforts. While the macro environment remains extremely volatile, the demand from our partners remains strong, as evidenced by the placement of the five E170s at American and the expected scheduled demand through the end of the year. We outperformed our internal forecast for the third quarter, primarily due to the improved operating environment and completion factor in August and September and efficient disruption recovery. Given that performance and the strong demand signals, we are revising our full year 2026 earning guidance. We now expect full-year adjusted EBITDAR in the range of $410 million-$420 million, above the $395 million-$405 million guidance provided in July.

[Matt Koscal, President and CEO at Republic Airways]

The updated guidance for adjusted EBITDAR translates to an expected adjusted earnings in excess of $3.30 per diluted share for the full year of 2026. With that, Kenneth, we are ready to open the line for questions.

[Operator]

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Savanthi Syth with Raymond James. Please go ahead.

[Carter Eades, Analyst at Raymond James]

Hi, guys. This is Carter on for Savanthi. I was just curious when you guys are going to start having conversations with Delta about extending the 57 aircraft on contract, given that your average expirations are in 2028?

[Matt Koscal, President and CEO at Republic Airways]

Yeah, thanks, Carter. As you know, we've got expirations staggered throughout our entire fleet, so we're in a constant conversation and negotiation on extension. So, we're in that process today. We'll provide meaningful updates as we get to conclusions on any of our negotiations, just as we've done on this quarterly call with the five new aircraft going into American.

[Carter Eades, Analyst at Raymond James]

Got it. Makes sense. Then I guess for my follow-up, just as you continue to improve utilization, could you help us frame the incremental earnings contribution that you're going to get from additional block hours and the operating leverage opportunity?

[Joe Allman, EVP and CFO at Republic Airways]

Yeah, Carter, this is Joe. As we think about it, the additional five aircraft coming in, plus some of the utilization uptick that we've harvested out of the Mesa fleet later in the process this year and as we roll into next year. We see block hour production in the low single-digit numbers, 3%-5% range. Then incrementally on that, I think the margin contribution from that operation comes not on a linear basis, because as we roll into 2027, we're not prepared to talk about 2027 just yet. But as we roll into the year, there's always puts and takes in the planning process. But we feel pretty confident about the plan going into next year as we finalize that and wrap that up with our board in early December. We'll try to update the market as soon as we're ready.

[Carter Eades, Analyst at Raymond James]

Perfect. Thank you.

[Matt Koscal, President and CEO at Republic Airways]

Thank you.

[Operator]

There are no further questions at this time. I will now turn the call back to Matt Koscal, President and Chief Executive Officer, for closing remarks.

[Matt Koscal, President and CEO at Republic Airways]

Thank you, Kenneth, and thank you everyone for joining us today. We continue to be proud of the work that our team has completed and our priorities as we exit the year remain clear, to continue to execute on the integration and deliver safe and reliable services for our partners. The investments we've made in our people, product, and technology remain the foundation of that work, and we look forward to providing you an update as we get into 2027. Thank you.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Analysts

• Keely Mitchell, Corporate Controller at Republic Airways
• Matt Koscal, President and CEO at Republic Airways
• Joe Allman, EVP and CFO at Republic Airways
• Carter Eades, Analyst at Raymond James