Republic Airways executives used the company’s fiscal first-quarter 2026 earnings call to highlight strong profitability, progress integrating Mesa Air Group NASDAQ: RJET following last November’s merger, and a leadership transition set for mid-June.
Leadership succession and first quarter as a combined company
At the outset of the call, the operator provided an update on leadership changes: the board promoted President and Chief Commercial Officer Matthew Koscal to chief executive officer, effective June 15. At the same time, CFO Joseph Allman and COO Paul Kinstedt will become executive vice presidents, while David Grizzle will remain chairman.
Grizzle said the quarter marked the first fiscal quarterly reporting period following the merger with Mesa. He also emphasized that the company’s Q1 2025 results did not include Mesa.
Financial results: revenue growth, integration costs, and leverage goals
Allman reported total revenue of $527 million, up 34% year over year, driven by a 30% increase in block hour production and the inclusion of Mesa’s operations for a full quarter. The company posted adjusted pre-tax income of $47 million, up 15% versus Q1 2025, representing an 8.9% pre-tax margin, while Grizzle said adjusted net income per diluted share was $0.73. Allman added that adjusted EBITDAR was $100 million, up 14% from the prior-year period.
The company recorded $9.5 million of merger and integration-related costs during the quarter. Allman said these costs are tied to the integration and harmonization initiatives and will continue to be reported separately, with the expectation they will decline as activities subside.
On cash flow and financing, Allman said the company generated $58 million in cash from operations. Cash outlays for investments in aircraft, property, and equipment—including pre-delivery deposits—rose to $95 million, driven by the acquisition of three E175 aircraft. The company received $64 million of new debt proceeds and made $49 million of scheduled principal repayments.
Adjusted net leverage ended the quarter flat versus year-end 2025 at 2.7 times. Allman said the company expects leverage to improve through 2026, reiterating a goal to reduce net leverage below 2.2 times by year-end 2026 and a longer-term target below 1.5 times.
In response to a question about refinancing, Allman said the company’s focus is currently on strengthening the balance sheet, noting it has “a lot of unencumbered assets” and that “70% of the fleet today is…free of financing,” including a number of debt-free E175s and E170s.
Operations: winter weather disruption and fleet transition at United
Management said first-quarter operations were affected by severe winter weather, which typically makes the quarter seasonally the lowest for block hour production. Grizzle said winter storms Fern and Hernando disrupted operations in the Northeast and Mid-Atlantic, citing one day during Fern when the airline “was unable to operate 87% of the airline because of weather,” which created crew positioning disruptions.
Grizzle said the company’s “full up completion factor” was 94%, three points lower than the prior-year quarter’s 97%, though he said controllable completion remained “exceptional.” He added the airline delivered 80 days of “perfect” 100% controllable completion factor performance during the quarter.
Grizzle also announced completion of the company’s fleet transition at United, saying Republic took delivery of its last three new E175 aircraft to complete the swap of 38 new E175s for 38 E170s at United, a program that began in November 2022. He said 31 of the removed E170s have been redeployed to other partners, either in revenue service or under long-term leases, while the remaining seven are unallocated and will be used for ad hoc charters and other support.
Grizzle reiterated that substantially all revenue is generated under capacity purchase agreements with American, Delta, and United, and said the model limits exposure to fuel costs because partners are responsible for fuel, ground handling, and passenger pricing and demand management, while Republic provides “safe, reliable and cost-efficient operations.”
Merger integration: four work streams and a multi-year FAA harmonization timeline
Koscal said demand signals from airline partners were “cautiously optimistic” and focused on “smart capacity deployments,” adding that demand for “large multi-class regional aircraft remains strong” in the hubs the company serves. He also addressed an FAA order capping daily flights at Chicago O’Hare at 2,700 beginning in June, saying Republic expects some June schedule adjustments but does not anticipate “material long-term impacts,” as block hours can be redeployed elsewhere in partner networks.
Koscal said the Mesa merger added geographic diversity, specifically citing Houston as helping offset lost flying days in the Northeast during winter storms, and said the company expects to “increase utilization at Mesa over the next couple of years.”
On integration, Koscal outlined four work streams:
- Consolidation of back office functions
- IT systems integration
- Fleet harmonization
- Regulatory operating certificate harmonization
He said back office integration is “slightly ahead of plan” and expected to be substantially complete by Q4 of this year. On IT, he said the company continues to invest in legacy Mesa hardware and software, describing the work as a multi-year process that will not fully conclude until operating certificate harmonization is completed in 2028.
Koscal said the company received FAA approval to recognize its Carmel training campus as an approved Mesa training facility, which he said is a step toward training all crews at the Carmel, Indiana campus. On fleet harmonization, he said Republic is in the early stages of moving the Mesa fleet onto its standard maintenance cycle and harmonizing E175 programs, with the goal of improving utilization and consistency across maintenance and inventory management. He added that the company reached an initial milestone in Q1 on reduced heavy maintenance turnaround times and is targeting completion of fleet harmonization in late 2027.
For FAA operating certificate harmonization, Koscal said the process is expected to continue into 2028 and will involve five FAA revision cycles. He said the first cycle, aligning safety systems and processes, is anticipated to be submitted in early May.
On labor, Koscal said the company reached a joint collective bargaining agreement in December with the two flight attendant unions and spent the first quarter preparing for implementation. For pilots, he said the company continues “productive dialogue and negotiations” with the IBT at Republic and ALPA at Mesa.
Guidance reaffirmed; Embraer delivery timing pushed to 2028
Allman reaffirmed the company’s previously issued full-year 2026 outlook, saying Republic expects:
- Revenue in excess of $2 billion
- Adjusted EBITDAR in excess of $380 million
- Block hour production of at least 865,000 hours
- CapEx of approximately $170 million
- Principal repayments of $165 million and new debt proceeds of about $75 million
Allman said CapEx should decline after what he described as the year’s heaviest quarter in Q1, which included aircraft deliveries, with remaining spending tied to the Carmel campus construction, general maintenance, and continued investment at Mesa.
The company also updated its aircraft delivery timeline with Embraer. Allman said Republic reached an agreement to reschedule delivery positions, moving the next expected delivery from February 2027 to April 2028. He said the revised timing allows the company to better match deliveries to expected demand from airline partners.
During Q&A, Koscal said that absent macro uncertainty, the company would have been inclined to raise guidance given the quarter’s performance and demand trends heading into Q2 and Q3, but he said management viewed it as “prudent to get a little bit further into the year.”
Asked about pilot attrition and the LIFT Academy pipeline, Koscal said LIFT is positioned to cover about 20% to 25% of hiring needs in a normal year, with no change to planned throughput in 2026. He said attrition remained at normalized, pre-COVID levels during the quarter and that the company was seeing the start of a seasonal slowdown heading into summer months, with hiring and attrition “right on plan.”
In closing remarks, Grizzle said the company maintained strong operating and financial performance despite winter weather disruptions and said demand signals from partners for the rest of the year “remain quite strong,” adding that management expects headwinds to subside and anticipated “positive momentum and significant growth throughout the rest of 2026.”
About Mesa Air Group NASDAQ: RJET
Mesa Air Group, Inc is a regional airline holding company headquartered in Phoenix, Arizona. The company provides feeder air transportation services under capacity purchase agreements with major carriers in the United States, operating as an affiliate of American Airlines and United Airlines. Mesa Air Group’s operations are conducted through two wholly owned subsidiaries, Mesa Airlines and Mokulele Airlines, which serve domestic markets on a scheduled basis.
Mesa Airlines is the company’s primary regional carrier.
Further Reading
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