Mesa Air Group Q2 2026 Earnings Call Transcript

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July 30, 2026

Key Takeaways

  • Positive Sentiment: Republic raised its 2026 outlook, now expecting approximately 880,000 block hours, more than $2.1 billion in revenue, and adjusted EBITDAR of $395 million–$405 million, despite severe July weather disruptions.
  • Positive Sentiment: Second-quarter adjusted net income was $41.3 million, or $0.89 per diluted share, while revenue increased 8% to approximately $571 million as stronger partner demand and improved weather drove block-hour production up nearly 7% sequentially.
  • Positive Sentiment: The Republic-Mesa integration remains ahead of schedule, with FAA approval received for the first of five revision cycles and Mesa’s operations center expected to move to Republic’s Indiana campus in the third quarter.
  • Positive Sentiment: Management expects Mesa’s fleet maintenance improvements to increase fleet utilization by more than 10% once fully implemented in late 2027 or 2028, potentially adding aircraft availability and improving both revenue and margins.
  • Neutral Sentiment: Republic ended the quarter with $278 million in unrestricted cash and $1.2 billion of debt and lease liabilities, while labor discussions with pilots remain ongoing and mechanics have recently elected the IBT as their bargaining representative.
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Earnings Conference Call
Mesa Air Group Q2 2026
00:00 / 00:00

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Operator

Hello, everyone. Thank you for joining us, and welcome to the Republic Airways second 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 on 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, 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 US 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. Now I will turn the call over to Matt.

Matt Koscal
President and CEO at Republic Airways

Thank you, Keely, and good morning, everyone. Before I turn to results, let me briefly acknowledge where we are as a leadership team. As you know, I stepped into the CEO role last month when David Grizzle returned to his role as non-executive chairman. I'm grateful for David's continued partnership on the board and for the confidence the board and our associates have placed in this team. My focus and this team's focus is exactly where it has been, investing in our people to maintain a culture of excellence focused on safe, reliable flying and the disciplined execution of our integration and growth strategy. Earlier this morning, we reported second quarter adjusted net income of $41 million, or $0.89 per diluted share. Demand from our partners remained strong throughout the quarter.

Matt Koscal
President and CEO at Republic Airways

We saw increase in scheduled block hour utilization of approximately 2% and much better weather for most of the quarter, resulting in an increased completion factor of 98%, up from just under 94% in the first quarter. Together, those factors drove block hour production up nearly 7% sequentially over Q1. These results are the hard work and dedication of our frontline crew and technicians who ensure we deliver safe, reliable flying every single day. The teams working around the clock behind the scenes. Our crew schedulers, dispatchers, and maintenance controllers and many others support our operation 24/7. None of what we accomplish on the line happens without them. Together, our Republic and Mesa associates delivered 85 days of perfect controllable completion factor and an overall 99.99% controllable completion factor on nearly 120,000 completed flights during the quarter.

Matt Koscal
President and CEO at Republic Airways

That is a standard of excellence that sets us apart in this industry. It's by design. To all 8,500 of our Republic and Mesa associates, thank you for an outstanding quarter and for delivering on our mission. Let me turn to the integration of Mesa and Republic. I'm pleased to report that we remain ahead of schedule and this quarter delivered a significant milestone. We received FAA acceptance and approval on the first of five revision cycles, the step that harmonizes our safety management systems across both airlines. That progress runs across all four of our core work streams, back-office consolidation, IT systems integration, maintenance and fleet harmonization, and our path toward a single operating certificate. Each led by our integration office, touching every department in the company. We anticipate filing revision cycle 2, which covers the pre-flight procedures and activities, during the third quarter.

Matt Koscal
President and CEO at Republic Airways

The remaining revision cycles are scheduled for completion throughout 2027 and into early 2028. We continue to make substantial progress on Mesa's fleet health and maintenance harmonization. We continue to see reduced heavy check footprint and improved turnaround times, which will support better aircraft availability in the back half of 2027 and beyond. Finally, during the third quarter, we anticipate moving Mesa's network and operations center to our aviation campus here in Carmel, Indiana. This represents an important milestone in further aligning the cultures of our two airlines. I know change can be difficult. I want to thank our integration office and the broader team for their leadership and commitment through this transition. Let me turn for a moment to labor. We've reached some meaningful milestones. We are actively implementing the Flight Attendant Joint Collective Bargaining Agreement, or JCBA, that was ratified earlier this year.

Matt Koscal
President and CEO at Republic Airways

I'm pleased to say several important provisions are now live for our flight attendants, including the introduction of boarding pay earlier this month. These are real, tangible improvements for our flight attendants, who care for our passengers every day. With respect to our pilots, we continue to actively negotiate with the IBT and ALPA teams. I want to thank both unions for their continued engagement, and we will provide further updates as meaningful progress is achieved. In May, Republic's mechanic associates elected IBT as their bargaining representative. We are still early in the stages here and look forward to engaging constructively with our mechanics and their representatives as that process moves forward. Let me turn the call over to Joe to review the financial highlights for the quarter, and then I'll come back to provide an update on guidance. Joe?

Joe Allman
EVP and CFO at Republic Airways

Thanks, Matt, and good morning, everyone. As Matt noted, strong partner demand and improved operating performance drove block hour production up 7% sequentially and revenues up 8% to approximately $571 million for the quarter. Second quarter GAAP net income was $31.2 million or $0.68 per diluted share. Pre-tax income was $43.4 million. Excluding executive separation and merger-related items and the mark to market on our Eve investment and adjustments to our equity investment in Cape Air, both of which are included in the non-operating income expense line, adjusted net income was $41.3 million or $0.89 per diluted share. Adjusted pre-tax income was $57.4 million, and adjusted EBITDA was $109.6 million for the quarter. The adjustments primarily consist of costs associated with the CEO transition, other severance related to the Mesa integration, and professional fees tied to the ongoing integration work and certain duplicative overheads at Mesa.

Joe Allman
EVP and CFO at Republic Airways

These items are expected to subside as the integration milestones are achieved and when we reach the end of the revision cycle process in early 2028. Turning to the balance sheet, we ended the quarter with $278 million in unrestricted cash, up slightly from $273 million at the end of March. Capital expenditures during the quarter were approximately $21 million, and we repaid $43 million of debt. During the quarter, we received refunds of tariffs paid of approximately $20 million, and the offset went to reduce the basis in the aircraft and does not have a material impact on our financial results or guidance. Total debt and lease liabilities stood at $1.2 billion at quarter end. We continue to make solid progress on our de-leveraging initiatives. Our fleet ended the quarter at 314 aircraft, unchanged from March.

Joe Allman
EVP and CFO at Republic Airways

Just a reminder, 275 aircraft are operating under capacity purchase agreements, 31 aircraft are on lease to a partner, and eight aircraft remain unallocated. We remain focused on finding solutions to meet our partners' growth needs and continue to work on redeployment opportunities of the unallocated aircraft. Lastly, I noted on our last call, we have 26 delivery positions with Embraer, and our next scheduled delivery position is in April of 2028. We retain significant fleet flexibility to meet our partners' needs and fund future growth of our business. With that, I'll turn the call back over to Matt to provide us an update on 2026 guidance. Matt?

Matt Koscal
President and CEO at Republic Airways

Thank you, Joe. Turning to guidance, the improved operating environment we experienced in Q2 has not translated to the start of Q3. July weather across the East Coast and in the Mid-Atlantic, the heart of our Northeast operations, has been severe. Through July 28th, our completion factor for the month stood at 91%. To put that in perspective, that is below where we ended in either January or February, the months hit by major winter storms. Here's what I want you and our team to hear clearly. Our people have met the moment. Through some of the most demanding conditions we've seen, our associates delivered post-irregular operations recovery efforts that reflect the culture of excellence that we've built, maintaining a 99.99% controllable completion factor in this environment. This gives me real confidence in what our team is capable of delivering for the back half of the year.

Matt Koscal
President and CEO at Republic Airways

On our Q1 call, I said absent the macro uncertainty, guidance would have been increased at that time. Despite the recent headwinds we just discussed, with an additional quarter completed, we are now able to increase our guidance for the year. We now expect the following. 2026 block hour production of approximately 880,000 hours, up roughly 2% from our previous guidance of at least 865,000 hours. Revenue is expected to be greater than $2.1 billion, up from the greater than $2 billion target, and adjusted EBITDAR in the range of $395 million-$405 million, up from the greater than $380 million target we previously provided. We have no changes to our previously issued guidance for capital expenditures or debt reduction.

Matt Koscal
President and CEO at Republic Airways

To recap, despite a more volatile market and the extraordinary weather challenges of the third quarter so far, we continue to see solid demand for our product. We are raising our full year outlook. We remain focused on cost discipline and executing on our strategic initiative, the successful integration of Mesa and Republic. We are ahead of schedule on each of our integration work streams. We've consolidated back office responsibilities. We received FAA approval on our first revision cycle. Next month we take the important step of relocating Mesa's network and operations center to our Carmel campus in Indiana. Each of these steps brings us closer to greater efficiencies, stronger financial performance, and enhanced long-term shareholder value. We said 2026 would be a transformational year for Republic. It is proving to be exactly that.

Matt Koscal
President and CEO at Republic Airways

None of this progress would be possible without the dedication of our associates and the continued support of our partners and shareholders. As we move through the second half of the year, we remain focused on executing our integration priorities and continuing to deliver safe and reliable air service. 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'd 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, and 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 Savi Syth with Raymond James. Savi, your line is open. Please go ahead.

Savi Syth
Savi Syth
Analyst at Raymond James

Thanks. Good morning, everyone. Just on the guidance, Matt, last call you said that just given the uncertainty, you weren't taking it up, and I was just curious, is this confidence to take your guidance up just based on what you've completed already, or are you getting greater confidence from your partners as they schedule their block hours?

Matt Koscal
President and CEO at Republic Airways

Hey, Savi. This is Matt. Thanks for the question. Thanks for joining the call. It's a bit of both. As we talked in the first quarter, we had seen a demand signal that was greater than where we entered the year and what our plan of forecast was, we continue to see that demand signal as we go through Q3 and Q4. Q3, we do have some noise and a lot of it is this weather disruption. As I said, we're at 91% through earlier this week. Our worst month during winter storms was just over 92%, so that gives you an idea of the magnitude of that impact. Despite that noise, the organic demand signal remains strong. Demand for the product is strong, we feel confident that we can take that number up through the back half of the year here.

Savi Syth
Savi Syth
Analyst at Raymond James

That's helpful. Just on the Mesa alignment side, I know you were working on aligning the maintenance on the aircraft. I was wondering where you were in aligning that and getting that fleet closer to the legacy Republic fleet.

Matt Koscal
President and CEO at Republic Airways

Yeah. Great question, and let me break it up as answering it in two parts. First, we have our internal metrics of are we meeting our turn time reductions that we had planned for and the improvement that we thought we could bring to the Mesa maintenance program? And we are. We're actually seeing all of those improvements on an aircraft-by-aircraft turn time. We still need to get through the entire fleet, though, right? It changes the amount of duration that it takes for us to get through the entire fleet. It accelerates that. You still don't start to see that real improvement or that impact till the back half of 2027.

Matt Koscal
President and CEO at Republic Airways

It just means, though, that the ability for us to actually meet those improved turn times ensures that that work gets done by the end of 2027 as opposed to going through 2028, if we were on the previous turn times at Mesa.

Savi Syth
Savi Syth
Analyst at Raymond James

That makes sense. All right, great. Congratulations. Thank you.

Matt Koscal
President and CEO at Republic Airways

Thanks so much.

Operator

Your next question comes from the line of Michael Linenberg with Deutsche Bank. Michael, your line is open.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Oh, yeah. Hey. Good morning, everyone. It's always nice to hear an airline characterize a year as a transformational year and still post double-digit operating and pre-tax margins. My question is just, in the release you talk about the integration taking 18-24 months, and then you get to a point where you expect to realize true operational synergies. How can we express that in margin improvement? We're at 10% on a pre-tax, 12% operating. Are we talking a couple hundred basis points of margin improvement once the full integration is complete? How should we think about that?

Matt Koscal
President and CEO at Republic Airways

Yeah. Michael, I don't know if we're ready to unpack what it looks like at the end of the road here yet. We're going to be able to unpack 2027 for you as we get towards our end of year forecast here, and we'll give you a bit of a peek-

Matt Koscal
President and CEO at Republic Airways

into that. We really don't start to appreciate the full effects of this until we get through that back half of 2027 and fully into 2028, right? As we get into 2028, you'll start to see a lot of the noise, the redundancy, and the fleet improvements, right? That increase in utilization that will unlock at Mesa and in the fleet there, begin to contribute-

Matt Koscal
President and CEO at Republic Airways

both to the top line and to the bottom line. I think the 2027 forecast that we're working through now will help unpack a bit of that and start to shape up what 2028 can look like as well.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Matt, when you talk about the fleet utilization, maybe to put some numbers around that, where are you today on a daily utilization, and where do you think that could go?

Matt Koscal
President and CEO at Republic Airways

Let me unpack where I really think the improvement on the Mesa side is. In the fleet utilization concept there, we believe we could actually add about 10%-15% when we get to full health on the maintenance program at Mesa.

Matt Koscal
President and CEO at Republic Airways

The difference between the maintenance program at Mesa and the maintenance program at Republic, how we've historically operated those fleets, we think there's a greater than 10% improvement in the overall Mesa fleet, once we get to the end of that 2027, 2028 timeframe. The daily utilization for aircraft will fluctuate a little bit up and down from where we're at today seasonally, but it's really getting more of those aircraft put to work.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Yeah.

Joe Allman
EVP and CFO at Republic Airways

Michael, this is Joe speaking. Matt's exactly right. It's really a increase in scheduled lines available to fly as the maintenance aircrafts come back online. You get that, what I'll call, normal pickup, to what we're seeing today on that fleet. On a scheduled available aircraft line of flying, we're somewhere in that above 9.5, probably closer to-

Joe Allman
EVP and CFO at Republic Airways

9.8. Our partners want to continue to try to squeeze as much utilization as they can out of fleet. We're ready to respond-

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

We're positioning the fleet to be in a position to capture that utilization when available.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Thanks, Joe. My second actually is to you, Joe. Can you just remind us, this is a quick one, just your percentages of what you own of Eve and Cape Air?

Joe Allman
EVP and CFO at Republic Airways

Yeah. We're about a 40% owner in the Cape Air equity. On the Eve investment, that's really a mark to market on the warrants that we hold-

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Okay.

Matt Koscal
President and CEO at Republic Airways

related to Eve, that flows through the non-operating line.

Michael Linenberg
Michael Linenberg
Analyst at Deutsche Bank

Okay. All right. 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. Thank you all for joining us this morning. We've accomplished a great deal in the first half of the year, that would not have been possible without the dedication of our over 8,500 aviation professionals and the trust and support of our long-term partners. Have a great rest of your day, I look forward to providing a further update next quarter.

Operator

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

Analysts
    • Keely Mitchell
      Corporate Controller at Republic Airways
    • Matt Koscal
      President and CEO at Republic Airways
    • Joe Allman
      EVP and CFO at Republic Airways
    • Savi Syth
      Analyst at Raymond James
    • Michael Linenberg
      Analyst at Deutsche Bank
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