Why Mesa Air Group Stock Is Soaring

Mesa Air Group, Inc. MESA shares are trading higher Friday after the company announced agreements with United Airlines Holdings, Inc. UAL to amend its capacity purchase agreement and certain credit agreements between the companies.

The Details:

Mesa stated that the company entered into an agreement with United that increases the block-hour rate under its CPA, covering the period from Oct. 1, 2023 to Dec. 31, 2024. Mesa expects this increase will provide approximately $63.5 million in incremental revenue over the next twelve months and bolster liquidity.

The company also announced that United agreed to reduce the outstanding balance on the revolving credit facility by $2.1 million and relieve the full $10.5 million principal amount of the bridge loan it previously issued to Mesa, in exchange for Mesa’s investment in privately-held Heart Aerospace. As a result of the bridge loan elimination, Mesa’s equity investment in Archer Aviation, Inc. ACHR is released as collateral.

Mesa also said that since September 2023, the company has sold or entered into agreements to sell excess CRJ-900 aircraft and related engines for combined gross proceeds of $198 million, which has been and will be used to pay down $174.3 million in debt.

“Following exhaustive negotiations over the past year, we reached several agreements with United that will increase rates per block-hour to long-sought market levels and provide additional liquidity. We believe these new agreements, combined with our CRJ-related asset sales, will enable Mesa to generate substantial incremental contract revenue and improve margins,” said Jonathan Ornstein, CEO of Mesa Air.

Mesa Air shares are soaring on heavy trading volume following the company’s announcements. According to data from Benzinga Pro, more than 30.7 million shares have already been traded in the session, far exceeding the stock’s 100-day average volume of less than 559,000 shares.

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MESA Price Action: According to Benzinga Pro, Mesa Air shares are up 78% at $1.14 at the time of publication.

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