Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of March 31, ~~2020,~~2021, the registrant had ~~35,194,902~~35,700,161 shares of common stock, no par value per share, issued and outstanding.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (http://investor.mesa-air.com/), SEC filings, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with our members and public about our company, our products, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

~~In some cases, you~~Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can ~~identify forward-looking statements~~also be identified by ~~terms~~words such as ~~"may"~~"future," "anticipates," "believes," "estimates," "expects", ~~"should"~~"intends, ~~"expects", "might", "plans", "anticipates", "could", "intends", "target", "projects", "contemplates", "believes", "estimates", "predicts", "potential", "seek", "would", "continue", or~~" "plans," "predicts," "will," "would," "could," "can," "may," and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the ~~negative~~results discussed in the forward-looking statements. Factors that might cause such differences include but are not limited to, those discussed in Part I, Item 1A of ~~these terms or other similar expressions. The forward-looking statements in~~ this ~~Quarterly~~Annual Report on Form ~~10-Q are only predictions. We have based these forward-looking statements largely on~~10-K under the heading "Risk Factors." Unless otherwise stated, references to particular years, quarters, months or periods refer to our ~~current expectations~~fiscal years ended September 30 and ~~projections about future events~~the associated quarters, months, and ~~financial trends that we believe may affect our business, financial condition and results~~periods of operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. These forward-looking statements speak only asthose fiscal years. Each of the ~~date of this Quarterly Report on Form 10-Q~~terms the "Company," "Mesa Airlines," "we," "us" and ~~are subject~~"our" as used herein refers collectively to ~~a number of risks, uncertainties~~Mesa Air Group, Inc. and ~~assumptions described in the "Risk Factors" section and elsewhere in this Quarterly Report on Form 10-Q. Because~~its wholly owned subsidiaries, unless otherwise stated. We do not assume any obligation to revise or update any forward-looking ~~statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events.~~ statements.

The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports we have filed with the SEC may be further amplified by the global impact of the COVID-19 pandemic. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

	March 31,		September 30,		March 31,		September 30,
	2020		2019		2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	52,399	$	68,855	$	147,867	$	99,395
Restricted cash		3,441		3,646		3,351		3,446
Receivables, net		14,182		23,080		13,867		13,712
Expendable parts and supplies, net		22,378		21,337		23,044		22,971
Prepaid expenses and other current assets		5,911		40,923		8,956		16,067
Total current assets		98,311		157,841		197,085		155,591

Property and equipment, net		1,242,797		1,273,585		1,180,684		1,212,415
Intangibles, net		8,782		9,532		7,412		8,032
Lease and equipment deposits		13,973		2,167		8,242		1,899
Operating lease right-of-use assets		140,753		—		105,521		123,251
Other assets		7,124		8,792		20,647		742
Total assets	$	1,511,740	$	1,451,917	$	1,519,591	$	1,501,930

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and financing leases	$	168,171	$	165,900	$	103,980	$	189,268
Current portion of deferred revenue						4,356		9,389
Current maturities of operating leases		43,648		—		44,016		43,932
Accounts payable		49,246		49,930		70,012		53,229
Accrued compensation		12,406		11,988		10,449		12,030
Other accrued expenses		27,138		28,888		28,610		45,478
Total current liabilities		300,609		256,706		261,423		353,326
Noncurrent liabilities:
Long-term debt and financing leases, excluding current portion		619,793		677,423		600,058		542,456
Noncurrent operating lease liabilities		78,698		—		38,405		62,531
Deferred credits		10,242		12,134		7,442		5,705
Deferred income taxes		59,791		55,303		70,929		64,275
Deferred revenue, net of current portion						29,502		14,369
Other noncurrent liabilities		1,255		24,483		20,988		1,409
Total noncurrent liabilities		769,779		769,343		767,324		690,745
Total liabilities		1,070,388		1,026,049		1,028,747		1,044,071
Commitments and contingencies (Note 14 and Note 15)
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock of no par value, 5,000,000 shares authorized; no shares issued and outstanding		—		—
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 35,194,902 (2020) and 31,413,287 (2019) shares issued and outstanding, 0 (2020) and 3,600,953 (2019) warrants issued and outstanding		241,059		238,504
Preferred stock of no par value, 5,000,000 shares authorized; 0 shares issued and outstanding						—		—
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 35,700,161 (2021) and 35,526,918 (2020) shares issued and outstanding, 4,899,497 (2021) and 0 (2020) warrants issued and outstanding						255,950		242,772
Retained earnings		200,293		187,364		234,894		215,087
Total stockholders' equity		441,352		425,868		490,844		457,859
Total liabilities and stockholders' equity	$	1,511,740	$	1,451,917	$	1,519,591	$	1,501,930

	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Operating revenues:
Contract revenue	$	165,781		$	169,771		$	337,580		$	340,220		$	81,712		$	165,781		$	208,870		$	337,580
Pass-through and other		14,115			7,376			26,351			15,083			15,568			14,115			38,781			26,351
Total operating revenues		179,896			177,147			363,931			355,303			97,280			179,896			247,651			363,931

Operating expenses:
Flight operations		52,891			49,366			105,535			102,611			37,403			52,891			74,367			105,535
Fuel		188			101			358			222			198			188			588			358
Maintenance		64,335			45,380			122,430			85,182			51,773			64,335			104,637			122,430
Aircraft rent		12,285			14,110			23,614			28,229			9,992			12,285			20,040			23,614
Aircraft and traffic servicing		1,336			1,065			2,400			1,999			743			1,336			1,644			2,400
General and administrative		14,500			13,472			27,496			25,686			11,164			14,500			24,237			27,496
Depreciation and amortization		20,469			19,276			41,021			37,767			20,705			20,469			41,175			41,021
Lease termination														4,508			—			4,508			—
Government grant recognition														(55,967	)		—			(67,278	)		—
Total operating expenses		166,004			142,770			322,854			281,696			80,519			166,004			203,918			322,854
Operating income		13,892			34,377			41,077			73,607			16,761			13,892			43,733			41,077
Other (expenses) income, net:
Interest expense		(11,673	)		(13,772	)		(24,300	)		(28,614	)		(8,755	)		(11,673	)		(17,837	)		(24,300	)
Interest income		36			299			94			455			79			36			205			94
Loss on extinguishment of debt		-			(3,616	)		-			(3,616	)
Other (expense) income, net		937			47			641			533			(506	)		937			417			641
Total other (expense), net		(10,700	)		(17,042	)		(23,565	)		(31,242	)		(9,182	)		(10,700	)		(17,215	)		(23,565	)
Income before taxes		3,192			17,335			17,512			42,365			7,579			3,192			26,518			17,512
Income tax expense		1,307			4,086			4,842			10,035			1,890			1,307			6,711			4,842
Net income	$	1,885		$	13,249		$	12,670		$	32,330
Net income and comprehensive income													$	5,689		$	1,885		$	19,807		$	12,670
Net income per share attributable to
common shareholders
Basic	$	0.05		$	0.38		$	0.36		$	0.93		$	0.16		$	0.05		$	0.56		$	0.36
Diluted	$	0.05		$	0.38		$	0.36		$	0.92		$	0.14		$	0.05		$	0.52		$	0.36
Weighted-average common shares outstanding
Basic		35,141			34,699			35,082			34,607			35,628			35,141			35,579			35,082
Diluted		35,265			34,962			35,220			35,041			39,432			35,265			38,382			35,220

Six Months Ended March 31, 2019

Common

Stock and

Additional

Number of

Number of

Paid-In

Retained

Shares

Warrants

Capital

Earnings

Total

Balance at September 30, 2018

23,902,903

10,614,990

$
234,683

$
139,784

$
374,467

Stock compensation expense

—

—

1,454

—

1,454

Stock issuance costs

—

—

157

—

157

Net income

—

—

—

19,081

19,081

Balance at December 31, 2018

23,902,903

10,614,990

$
236,294

$
158,865

$
395,159

Stock compensation expense

—

—

$
1,298

—

$
1,298

Repurchased shares

(52,967
)

—

(449
)

—

(449
)
Stock issuance costs

—

—

28

—

28

Warrants converted to common stock

3,834,693

(3,834,693
)

—

—

—

Restricted shares issued

284,846

—

—

—

—

Net Income

—

—

—

13,249

13,249

Balance at March 31, 2019

27,969,475

6,780,297

$
237,171

$
172,114

$
409,285

	Six Months Ended March 31, 2020
							Common
							Stock and
							Additional
	Number of			Number of			Paid-In			Retained
	Shares			Warrants			Capital			Earnings		Total
Balance at September 30, 2019		31,413,287			3,600,953		$	238,504		$	187,364	$	425,868

Adoption ASU 2018-09 Stock compensation- income taxes		—			—			—			259		259
Stock compensation expense		—			—			1,320			—		1,320
Repurchased shares and warrants		(5,558	)		—			(41	)		—		(41	)
Warrants converted to common stock		1,612,481			(1,612,481	)		—			—		—
Restricted shares issued		18,916			—			—			—		—
Net income		—			—			—			10,785		10,785
Balance at December 31, 2019		33,039,126			1,988,472		$	239,783		$	198,408	$	438,191

Stock compensation expense		—			—			1,193			—		1,193
Repurchased shares and warrants		(18,244	)		—			(160	)		—		(160	)
Warrants converted to common stock		1,988,472			(1,988,472	)		—			—		—
Restricted shares issued		141,614			—			—			—		—
Employee share purchases		43,934			—			243			—		243
Net income		—			—			—			1,885		1,885
Balance at March 31, 2020		35,194,902			—		$	241,059		$	200,293	$	441,352

	Six Months Ended March 31, 2021
						Common
						Stock and
						Additional
	Number of			Number of		Paid-In			Retained
	Shares			Warrants		Capital			Earnings		Total
Balance at September 30, 2020		35,526,918			—	$	242,772		$	215,087	$	457,859

Stock compensation expense		—			—		850			—		850
Repurchased shares		(2,256	)		—		(19	)		—		(19	)
Restricted shares issued		7,500			—		—			—		—
Issuance of warrants, net of issuance costs		—			4,899,497		11,489			—		11,489
Net income		—			—		—			14,118		14,118
Balance at December 31, 2020		35,532,162			4,899,497	$	255,092		$	229,205	$	484,297


Stock compensation expense		—			—		808			—		808
Repurchased shares and warrants		(14,680	)		—		(157	)		—		(157	)
Warrants converted to common stock		—			—		—			—		—
Restricted shares issued		124,609			—		—			—		—
Employee share purchases		58,070			—		207			—		207
Net income		—			—		—			5,689		5,689
Balance at March 31, 2021		35,700,161			4,899,497	$	255,950		$	234,894	$	490,844

	Six Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2021			2020
Cash flows from operating activities:
Net income	$	12,670		$	32,330		$	19,807		$	12,670
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization		41,021			37,767			41,175			41,021
Stock compensation expense		2,513			2,752			1,658			2,513
Deferred income taxes		4,490			10,039			6,654			4,490
Amortization of deferred credits		(2,041	)		(2,575	)		(2,258	)		(2,041	)
Unfavorable lease liabilities		—			(3,095	)
Amortization of debt financing costs and accretion of interest on non-interest-bearing subordinated notes		2,149			2,000
Loss on extinguishment of debt		—			3,616
Loss (Gain) on disposal of assets		514			(33	)
Amortization of debt discount and issuance costs								4,994			2,149
Gain on extinguishment of debt								(950	)		—
Loss on disposal of assets								25			514
Provision for obsolete expendable parts and supplies		306			319			22			306
Loss on lease termination								4,508			—
Changes in assets and liabilities:
Receivables		9,019			1,734			(155	)		9,019
Expendable parts and supplies		(1,382	)		(3,890	)		(84	)		(1,382	)
Prepaid expenses and other current assets		97			(7,244	)		(1,988	)		97
Accounts payable		(602	)		(3,451	)		15,470			(602	)
Deferred revenue								10,099			—
Accrued liabilities		2,122			(499	)		(14,091	)		2,122
Change in operating lease right-of-use assets		(5,674	)		—
Change in operating lease right-of- use assets								(6,311	)		(5,674	)
Net cash provided by operating activities		65,202			69,770			78,575			65,202

Cash flows from investing activities:
Capital expenditures		(12,968	)		(34,250	)		(5,261	)		(12,968	)
Sales of investment securities		—			20,077
Lease and equipment deposits		(13,804	)		(7,296	)
Returns of lease and equipment deposits		1,999			2,978
Net returns (payments) on equipment & other deposits								(6,414	)		(11,805	)
Net cash used in investing activities		(24,773	)		(18,491	)		(11,675	)		(24,773	)

Cash flows from financing activities:
Proceeds from long-term debt		23,000			91,200			195,000			23,000
Principal payments on long-term debt and financing leases		(79,395	)		(163,748	)		(212,020	)		(79,395	)
Debt financing costs		(494	)		(2,540	)
Debt prepayment costs		—			(1,672	)
Stock issuance costs		—			185
Payments of debt and warrant issuance								(1,326	)		(494	)
Repurchase of stock		(201	)		(449	)		(176	)		(201	)
Net cash used in financing activities		(57,090	)		(77,024	)		(18,522	)		(57,090	)

Net change in cash, cash equivalents and restricted cash		(16,661	)		(25,745	)		48,378			(16,661	)
Cash, cash equivalents and restricted cash at beginning of period		72,501			107,134			102,841			72,501
Cash, cash equivalents and restricted cash at end of period	$	55,840		$	81,389		$	151,219		$	55,840

Supplemental cash flow information
Cash paid for interest	$	22,402		$	27,937		$	16,922		$	22,402
Cash paid for income taxes, net	$	45		$	51		$	49		$	45
Operating lease payments in operating cash flows ⁽¹⁾	$	26,240		$	—
Supplemental non-cash operating activities
Right-of-use assets obtained in exchange of lease liabilities	$	145,627		$	—
Supplemental non-cash investing activities
Operating lease payments in operating cash flows							$	25,716		$	26,240
Supplemental non-cash transactions
Warrants received from Archer Aviation Inc. ("Archer")							$	16.4		$	—
Right-of-use assets (disposed) obtained							$	(320	)	$	145,627
Debt issuance cost related to loan agreement with US Department of Treasury							$	(1,887	)	$	—
Accrued capital expenditures	$	98		$	6,345		$	—		$	98

See accompanying notes to these condensed consolidated financial statements.
⁽¹⁾See section 14 Leased and Commitments.

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. ("Mesa" or the "Company") is a holding company whose principal subsidiary, Mesa Airlines, Inc. ("Mesa Airlines"), operates as a regional air carrier providing scheduled flight service to ~~135~~112 cities in 3938 states, the District of Columbia, ~~Canada,~~and Mexico ~~Cuba, and the Bahamas.~~as well as cargo flight services originating from Cincinnati/Northern Kentucky International Airport. As of March 31, ~~2020,~~2021, Mesa operated a fleet of ~~145~~163 aircraft with approximately ~~662~~440 daily departures and ~~3,600~~3,111 employees. Mesa operates all of its flights on behalf of major partners as either American Eagle, United Express, or ~~United~~DHL Express flights pursuant to the terms of the ~~capacity purchase agreements~~Capacity Purchase Agreements (“CPAs”) entered into with American Airlines, Inc. (“American”) and United Airlines, Inc. (“United”) and Flight Services Agreement (“FSA”) with DHL Network Operations (USA), Inc. (“DHL”).

The financial arrangements between the Company and its major ~~airline~~ partners involve a revenue-guarantee arrangement ~~(i.e. a "capacity purchase agreement")~~ whereby the major ~~airline~~partner pays ~~a monthly guaranteed amount~~fixed-fees for each aircraft under contract, ~~a fixed fee for each~~departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour ~~(the number of hours during which the aircraft is in revenue service, measured~~(measured from ~~the time of gate departure before take-off until the time of gate arrival at the destination) and flight flown~~ takeoff to landing, including taxi time), and reimbursement of certain direct operating expenses in exchange for providing ~~regional flying.~~flight services. The major ~~airline~~ partners also pay certain expenses directly to suppliers, such as fuel, ground operations and landing fees. Under the terms of these capacity purchase agreements, the major airline controls route selection, pricing and seat inventories, ~~thereby~~ reducing the Company's exposure to fluctuations in passenger traffic, fare levels, and fuel prices.

The unprecedented and rapid spread of COVID-19 and the related travel restrictions and social distancing measures implemented throughout the world have significantly reduced demand for air travel. The length and severity of the reduction in demand due to the pandemic is uncertain. This reduction in demand has had an unprecedented and materially adverse impact on our revenues and financial position. We expect the adverse impact to grow in the June 2020 quarter. While we are planning for a modest demand recovery beginning in the September 2020 quarter, the exact timing and pace of the recovery is uncertain given the significant impact of the pandemic on the overall U.S. and global economy. Our forecasted expense management and liquidity measures may be modified as we clarify the demand recovery timing. Since a portion of our revenue is fixed due to the structure of our capacity purchase agreements, the impact to Mesa will be partially mitigated or offset. In addition, we have limited exposure to fluctuations in passenger traffic, ticket and fuel prices. While the fixed revenue remains mostly unchanged, the variable revenue based on number of block hours has been significantly reduced in the last few weeks in March and we may experience further reductions. The initiatives and measures put in place to limit the spread of the virus has and will continue to have a materially adverse impact on our business. The Company further reports that, beginning in March 2020, it has experienced a material decline in demand in block hours from both of its major airline partners, American and United Airlines, Inc. (“United” and together with American, the “Partners”) resulting from the spread of the COVID-19 virus. As a result of this decline in demand and the subsequent capacity reductions by the Company’s Partners, the Company operated 10,297 block hours in April 2020, a 72.4% drop from April 2019. The Company also anticipates similar schedule reductions will likely continue into the second quarter of 2020 and may continue throughout the remainder of 2020 and into 2021.

In response to these developments, our major partners and the Company have implemented measures to focus on the safety of our customers and employees, while at the same time seeking to mitigate the impact on our financial position and operations. These measures include, but are not limited to, the following:

•Increasing the scope of cleaning and sanitization of aircraft both while remaining overnight and on turn flights. Both on our own, and in coordination with our codeshare partners, we have taken steps to ensure that high touch areas used by both employees and customers are routinely and comprehensively cleaned and disinfected to prevent transmission of the virus on surfaces. To assist our crewmembers in keeping the aircraft clean and disinfected, we have increased the supply of sanitizing wipes onboard.

•In coordination with our codeshare partners, social distancing methods onboard have been implemented comprised of seat-blocking to encourage additional space between passengers and our Inflight teams help to encourage passenger spacing onb~~oard.~~

•We have provided, and continue to resupply, our employees with Personal Protective Equipment (PPE) consisting of gloves and face coverings for use whenever social distancing cannot be maintained or when working with our

customers. In addition, at various locations, we have coordinated with our codeshare partners to conduct temperature checks of employees reporting for duty. In those locations where this is not yet established, crewmembers have been directed to self-monitor their temperature before reporting for duty and twice daily.

•Based on recommendations from the Centers for Disease Control (CDC), we have increased facility cleaning and disinfection protocols at all of our facilities and have implemented social distancing measures includ~~ing telecommuting for many of our Corporate personnel and methods to increase physical distance between workers who remain working at our Corporate facilities~~

•~~Established protocols for employees who are positive for, or suspected of, COVID-19 to ensure t~~hat they have the necessary time off. Additionally, we have implemented protocols to ensure that proper notification is made to any affected employees. Protocols have also been put into place for the immediate disinfection of any affected aircraft above and beyond routine cleaning and disinfection protocols.

~~Expense Management.~~ ~~With the reduction in revenue, we have, and will continue to implement cost saving initiatives, including:~~

~~Balance Sheet, Cash Flow and Liquidity.~~ ~~As of March 31, 2020, our cash and cash equivalents balance was $52.4 million. We have taken the following actions to increase liquidity and strengthen our financial position.~~

As of March 31, ~~2020,~~2021, the Company operated 5945 CRJ-900 aircraft ~~for American~~ under ~~our~~the American Capacity Purchase Agreement. In exchange for providing flight services, ~~under our American Capacity Purchase Agreement,~~ we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown during each month. In addition, we may also receive incentives or incur penalties based upon our operational performance, including controllable on-time departures and controllable completion percentages. American also reimburses us for certain costs on an actual basis, including passenger liability and hull insurance and aircraft property ~~taxes, all as set forth in our~~ ~~American Capacity Purchase Agreement.~~taxes. Other expenses, including fuel and certain landing fees, are directly paid to suppliers by American. In addition, American also provides, at no cost to us, certain ground handling and customer service functions, as well as airport-related facilities and gates at American hubs and cities where we operate.

~~Our~~On November 19, 2020, we entered into an Amended and Restated American Capacity Purchase Agreement establishes utilization credits which are required to be paid if the Company does not operate at minimum levels of flight operations. In prior periods, the FAA Qualification Standards (as defined below) have negatively impacted our ability to hire pilots at a rate sufficient to support required utilization levels,(the “Amended and ~~as a result, we have issued credits to American pursuant to the terms of our~~Restated American Capacity Purchase ~~Agreement.~~

~~Our~~Agreement”). The Amended and Restated American Capacity Purchase Agreement ~~will terminate with respect~~included the following amendments to ~~different tranches of aircraft between~~the existing CPA:

On December 22, 2020, we entered into Amendment No. 1 (“Amendment No. 1”) to the Amended and Restated American Capacity Purchase Agreement. The amendments in Amendment No. 1 reflect the following:

On April 9, 2021, we entered into Amendment No. 2 (“Amendment No. 2”) to the Amended and ~~2025, unless otherwise extended or amended. As of~~Restated American Capacity Purchase Agreement. The amendments in Amendment No. 2 reflect the ~~date of this filing,~~following:

On April 19, 2021, we ~~remain~~entered into Amendment No. 3 (“Amendment No. 3”) to the Amended and Restated American Capacity Purchase Agreement. The amendments in ~~discussions with American regarding~~Amendment No. 3 reflect the ~~terms of extending the 30 aircraft that are due to expire in 2021~~following:

Our Amended and ~~the 19 aircraft that are due to expire in 2022 and the 7 aircraft that expire in 2025. Our~~Restated American Capacity Purchase Agreement is subject to termination prior to ~~that date,~~its expiration, subject to ~~our~~the Company’s right to cure, in various circumstances including:

In the event that American has the right to terminate our American Capacity Purchase Agreement, American may, in lieu of termination, withdraw up to an aggregate of 14 aircraft from service under our American Capacity Purchase Agreement. Upon any such withdrawal, American's payments to us would be correspondingly reduced by the number of withdrawn aircraft.

On January 31, 2019, the Company entered into an amendment to the American Capacity Purchase Agreement, the terms of which provide for new and revised operational performance metrics, the Company's right to earn additional incentive compensation based on the achievement of such metrics, and the right of American to permanently withdraw up to six (6) aircraft in the event the Company fails to meet such new/revised performance metrics. Under the terms of such amendment the Company agreed, effective April 2, 2019, to convert two (2) aircraft to be utilized by the Company as operational spares in the Company's sole discretion throughout its system. In July 2019, American exercised its right to permanently withdraw two (2) aircraft from the American Capacity Purchase Agreement due to the Company's failure to meet certain performance metrics. The aircraft were removed on November 2, 2019. On November 25, 2019, the Company amended its agreement with American Airlines. The Company did not meet certain performance metrics during the then most recent measurement period, which would have allowed American to remove two additional aircraft from the capacity purchase agreement. American had agreed to defer the right to remove these two aircraft but subsequently elected to remove one of the two previously deferred aircraft, effective January 2, 2020. As of January 2, 2020 American had removed three (3) of the six (6) aircraft under the January 31^st ~~amendment.~~

On April 3, 2020, the Company received a new withdrawal notice from American seeking to permanently withdraw three aircraft from the American Capacity Purchase Agreement. Two of the aircraft will be withdrawn effective May 19, 2020 and the third aircraft will be withdrawn effective June 1, 2020. The withdrawal of these three aircraft stems from withdrawal rights that American previously asserted were triggered in September 2019 and November 2019. At such time, American refrained from exercising such withdrawal rights, however, reserved the right to withdraw the three aircraft at a later date under certain circumstances. In light of the rapid grounding of aircraft caused by the COVID-19 virus, the overall reduction in demand for air travel, and the need to reduce capacity, American elected to remove such aircraft now.

~~Following the removal of the three aircraft referenced above, the Company will continue to operate 56 CRJ-900 aircraft under the American CPA.~~

As of March 31, ~~2020, the Company~~2021, we operated ~~20 CRJ-700~~60 E-175 and ~~60 E-175~~16 E-175LL aircraft for United under ~~our~~the United Capacity Purchase Agreement. In exchange for providing the flight services under our United Capacity Purchase Agreement, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown and the results of passenger satisfaction surveys. United also reimburses us for certain costs on an actual basis, including property tax per aircraft and passenger liability insurance. Other expenses, including fuel and certain landing fees, are directly paid to suppliers by United. ~~We also receive a minimum profit margin based upon our operational performance.~~

Under our United Capacity Purchase Agreement, United owns 42 of the 60 E-175 and all of the E-175LL aircraft and leases them to us at nominal amounts. United reimburses us on a pass-through basis for all costs related to heavy airframe and engine maintenance, landing gear, auxiliary power units ("~~APUs~~"APUs") and component maintenance for the 42 ~~E-175 aircraft owned by United. Our~~ United Capacity Purchase Agreement permits United, subject to certain conditions, including the payment of certain costs tied to aircraft type, to terminate the agreement in its discretion, or remove aircraft from service, by giving us notice of 90 days or more. If United elects to terminate our United Capacity Purchase Agreement in its entirety or permanently remove select aircraft from service, we are permitted to return any of the affected E-175 aircraft leased from United at no cost to us. In addition, if United removes any of our 18 owned E-175 ~~aircraft from service at its direction, United would remain obligated to assume the aircraft ownership and associated debt with respect to such aircraft through the end of the term of the agreement.~~aircraft.

On November 26, 2019, we amended and restated our United Capacity Purchase Agreement. The Amended and Restated United Purchase Agreement ~~to, among other things, incorporate~~included the terms of the 11 prior amendments to that Agreement and to extend the term thereof through the addition of twenty (20) new Embraer E175LL aircraft to the scope of such Agreement. These new aircraft will be financed and owned by us and operated for a period of twelve (12) years from the in-service date. Deliveries of the new E175LL aircraft are scheduled to begin in Mayfollowing amendments:

On November 4, 2020, and be completed by December 31, 2020. In March 2020, the deliveries of the new E175LL aircraft were negotiated between United and Embraer to begin in September 2020 and be completed by the quarter ended June 30, 2021. Commencing five (5) years after the actual in-service date, United has the right to remove the E175LL aircraft from service by giving us notice of 90 days or more, subject to certain conditions, including the payment of certain wind-down expenses plus, if removed prior to the ten (10) year anniversary of the in-service date, certain accelerated margin payments.

~~In addition to adding the 20 new E175LL aircraft to the~~we amended and restated our United Capacity Purchase ~~Agreement, we extended~~Agreement. The amendments reflect the term of our 42 E-175 aircraft leased from United for an additional five (5) years, which now expire between 2024 and 2028. As part of the amended and restated United Capacity Purchase Agreement, we agreed to lease our twenty (20) CRJ-700 aircraft to another United Express service provider for a term of seven (7) years. We will continue to operate such aircraft until they are transitioned. United has a right to purchase the CRJ 700 aircraft at the then fair market value. In addition, we own 18 E-175 aircraft that expire in 2028.following:

Our United Capacity Purchase Agreement is subject to ~~early~~following termination ~~under various~~ ~~circumstances noted above and including:~~rights prior to its expiration.

Our United Capacity Purchase Agreement provides for temporary rate reductions for the period April 2020 to September 2020. The basis for the reduction is lower labor costs due to the grant received by the Company under the Payroll Support Program (PSP). The First Amendment also provides for further temporary rate reductions if the Payroll Support Program is extended.

On December 20, 2019, the Company entered into a Flight Services Agreement with DHL. Under the terms of this agreement, Mesa operates 2 Boeing 737-400F aircraft to provide cargo air transportation services to DHL. In exchange for providing air services, the Company receives a fee per block hour with a minimum block hour guarantee. The Company is eligible for a monthly performance bonus or subject to a monthly penalty based on timeliness and completion performance. Ground support including fueling and airport fees are paid directly by DHL.

Under our Flight Services Agreement, DHL leases 2 Boeing 737-400F aircraft, and subleases them to us at nominal amounts. DHL reimburses us on a pass-through basis for all costs related to heavy maintenance including c-checks, off-wing engine maintenance and overhauls including LLPs, Landing Gear overhauls and LLPs, thrust reverser overhauls, and APU overhauls and LLPs. Certain items such as fuel, de-icing fluids, landing fees, aircraft ground handling fees, en-route navigation fees and custom fees are paid directly to suppliers by DHL or otherwise reimbursed if incurred by the Company.

The Flight Services Agreement expires five (5) years from the commencement date of the first aircraft placed into service. DHL has the option to extend the agreement with respect to one or more aircraft for a period of one year with 90 days’ advance written notice.

Our DHL Flight Services Agreement is subject to following termination rights prior to its expiration:

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company and its wholly owned operating subsidiaries. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). All intercompany accounts and transactions have been eliminated in consolidation. Reclassifications of certain immaterial prior period amounts have been made to conform to the current period presentation.

These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto as of and for the year ended September 30, ~~2019~~2020 included in the Company's Annual Report on Form 10-K for the year ended September 30, ~~2019~~2020 on file with the U.S. Securities and Exchange Commission (the "SEC"). Information and footnote disclosures normally included in financial statements have been condensed or omitted in these condensed consolidated financial statements pursuant to the rules and regulations of the SEC and GAAP. These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented.

The Company is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act,") and may remain an emerging growth company until the last day of its fiscal year following the fifth anniversary of the ~~IPO,~~Company’s initial public offering (“IPO”), subject to specified conditions. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to "opt out" of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

As of ~~New Lease Standard~~March 31, 2021, our chief operating decision maker was the Chief Executive Officer. While the Company operates under separate capacity purchase agreements, we do not manage our business based on any performance measure at the individual contract level. Our chief operating decision maker 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. Accordingly, we have a single operating and reportable segment.

The preparation of the Company's condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results could differ from those estimates.

~~Effective October 1, 2019, we have adopted~~ ~~ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02") which provides guidance requiring lessees~~

A portion of the Company's compensation under its capacity purchase agreements with American and United is designed to ~~recognize~~reimburse the Company for certain aircraft ownership costs including aircraft principal and interest debt service costs, aircraft depreciation and interest expense or aircraft lease expense costs while the aircraft is under contract. The Company has concluded that a ~~right-of-use asset~~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 ~~liability on the balance sheet for substantially all leases,~~ revenue associated with the ~~exception of short-term leases. Leases will be classified~~Company's capacity purchase agreements is accounted for as ~~either financing 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 current lease activities are recorded in operating lease right-of-use (“ROU”) assets, current maturities of~~ operating lease and ~~noncurrent operating~~is reflected as contract revenue on the Company's consolidated statements of operations. The Company recognized $18.1 million and $52.4 million of lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of long-term debt and financing leases, long-term debt and financing leases, excluding current portion.

~~ROU assets represent our right to use an underlying asset~~revenue for the ~~lease term~~three months ended March 31, 2021 and ~~lease liabilities represent our obligation to make lease payments arising from~~2020, respectively, and $67.6 million and $105.7 million during the ~~lease. Operating lease ROU assets~~six months ended March 31, 2021 and ~~liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Variable lease payments are~~2020, respectively. The Company has not ~~included in the calculation of the right-of-use assets~~separately stated aircraft rental income and ~~lease liability due to uncertainty of the payment amount and are recorded as lease~~aircraft rental expense in the ~~period incurred. As most~~consolidated statements of operations and comprehensive income because the use of the aircraft is not a separate activity of the total service provided under our capacity purchase agreements.

The Company recognizes pass-through revenue when the service is provided under its capacity purchase agreements and flight services agreement. Pass-through revenue represents reimbursements for certain direct expenses incurred including passenger liability and hull insurance, property taxes, other direct costs defined within the capacity purchase agreements, and major maintenance on aircraft leased at nominal rates. The Company’s performance obligation is met when each flight is completed or as the maintenance services are performed, and revenue is recognized and reflected in pass-through and other revenue.

The Company entered into lease agreements with GoJet Airlines LLC (“GoJet”) to lease 6 CRJ 700 aircraft as of March 2021. The lease agreements are accounted for as operating leases ~~do not provide an implicit rate, we use~~and have a term of nine-years beginning on the delivery date of each aircraft. The Company intends to lease our ~~incremental borrowing rate~~entire fleet of 20 CRJ 700 aircraft to GoJet with final aircraft deliveries expected by October 2021. 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 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 leaseagreements. Lease revenue for fixed monthly rent payments is recognized ratably within pass-through and other revenue. Lease revenue for supplemental rent is deferred and recognized within pass-through and other revenue when it is ~~reasonably certain~~probable that weamounts received will ~~exercise that option. Lease expense~~not be reimbursed for ~~lease payments is recognized on a straight-line basis~~future qualifying maintenance events over the lease term.

The Company mitigates the residual asset risks through supplemental rent payments and by leasing aircraft and engine types that can be operated by the Company in the event of a default. Additionally, the operating leases have specified lease return condition requirements and the Company maintains inspection rights under the leases. As ~~a lessor,~~of March 31, 2021, the Company recognized $4.8 million of lease incentive assets and $4.2 million of related lease incentive obligations for ~~our~~reimbursement of certain aircraft ~~operated under our capacity purchase agreements, we have historically accounted for the non-lease component under ASC 606 and have historically accounted for~~maintenance costs defined within the lease ~~component under ASC 840. Under the available practical expedient, we have elected~~agreements. Lease incentive assets will be recognized as a reduction to ~~account for~~lease revenue over the lease term.

Lease revenue recognized and ~~non-lease components~~amounts deferred for supplemental rent payments were immaterial as ~~a single component for all classes~~ of ~~underlying assets. As the predominant component~~March 31, 2021. The following table summarizes future minimum rental income under operating leases related to leased aircraft that had remaining non-cancelable lease terms as of the combined components are the flights services, the leases are being accounted for entirely under ASC 606. 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).March 31, 2021 (In thousands):

The Company records deferred revenue when cash payments are received or are due from our airline partners in advance of the Company’s performance, including amounts that are refundable. During the three months ended March 31, 2021, the Company deferred $4.9 million of revenue which was billed and paid by our partners.

The deferred revenue balance as of March 31, 2021 represents our aggregate remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied, and is expected to be recognized as revenue as follows (In thousands):

~~In addition to the~~As discussed in Note 1, we lease, at nominal rates, certain aircraft ~~we receive~~ from United and DHL under our United Capacity Purchase Agreement and DHL Flight Services Agreement, which are excluded from operating lease assets and liabilities as the lease contracts do not represent embedded leases under ASC 842. Other than nominal leases with our major partners, approximately ~~12%~~10% of our aircraft are leased from third parties. All of our aircraft leases have been classified as operating leases, which results in rental payments being charged to expense over the term of the related leases. In the event that we or one of our major airline partners decide to exit an activity involving leased aircraft, losses may be incurred. In the event that we exit an activity that results in exit losses, these losses are accrued as each aircraft is removed from operations for early termination penalties, lease settle up and other charges. Additionally, any remaining ROU assets and lease liabilities ~~will~~would be written off.

The majority of the Company's leased aircraft are leased through trusts that have a sole purpose to purchase, finance, and lease these aircraft to the Company; therefore, they meet the criteria of a variable interest entity. However, since these are single-owner trusts in which the Company does not participate, the Company is not at risk for losses and is not considered the primary beneficiary. Management believes that the Company's maximum exposure under these leases is the remaining lease payments.

In March 2021, the Company purchased a leased CRJ 900 aircraft prior to the expiration of the lease term resulting in the lease termination expenses of $4.5 million. Termination expenses primarily related to the reversal of maintenance deposits on the aircraft that were no longer refundable from the lessor at termination of the lease.

Contract liabilities consist of deferred credits for cost reimbursements from major airline partners related to aircraft modifications and employee training associated with capacity purchase ~~agreements and pilot training.~~agreements. The deferred credits are recognized over time depicting the pattern of transfer of control of services resulting in ratable recognition of revenue over the remaining term of the capacity purchase agreements.

Current and non-current deferred credits are recorded to other accrued expenses and non-current deferred credits in the condensed consolidated balance sheets. The Company's total current and non-current deferred credit balances at March 31, ~~2020~~2021 and September 30, ~~2019~~2020 are ~~$10.2~~$5.2 million and ~~$12.1~~$8.5 million, respectively. The Company recognized ~~$0.9~~$1.1 million and ~~$1.4~~$0.9 million of the deferred credits towithin contract revenue ~~in the condensed consolidated statements of operations~~ during the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively, and ~~$2.0~~$1.9 million and ~~$2.6~~$2.0 million during the six months ended March 31, 2021 and 2020, ~~and 2019, respectively.~~respectively.

The Company ~~recognizes assets from~~operates under an FAA approved continuous inspection and maintenance program. The cost of non-major scheduled inspections and repairs and routine maintenance costs for all aircraft and engines are charged to maintenance expense as incurred.

The Company accounts for heavy maintenance and major overhaul costs on our owned E-175 fleet under the ~~costs incurred to fulfill a contract including aircraft painting~~deferral method whereby the cost of heavy maintenance and ~~reconfiguration~~major overhaul is deferred and ~~flight service personnel training costs. These costs are~~ amortized ~~based on~~until the ~~pattern of transfer~~earlier of the ~~services in relation to flight hours over the term~~end of the ~~contract. Contract assets are recorded as other assets in~~useful life of the ~~condensed consolidated balance sheets. The Company's contract assets balances at~~related asset or the next scheduled heavy maintenance event. Amortization of heavy maintenance and major overhaul costs charged to depreciation and amortization expense was immaterial for the three months and six months ended March 31, ~~2020~~2021 and 2020. At March 31, 2021 and September 30, ~~2019 are $2.8~~2020, the Company had deferred heavy maintenance balance, net of accumulated amortization, of $1.2 million and ~~$3.9~~$0 million, respectively. ~~Contract cost amortization was $0.4~~

The Company accounts for heavy maintenance and major overhaul costs for all other fleets under the direct expense method where costs are expensed to maintenance expense 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.

Engine overhaul expense totaled $6.9 million and ~~$0.5~~$14.5 million for the three months ended March 31, 2021, and 2020, ~~and 2019,~~ respectively, ~~and $0.9~~of which $2.2 million and ~~$1.0~~$0.7 million, respectively, was pass-through expense. Engine overhaul expense totaled $21.3 million and $25.1 million for the six months ended March 31, 2021, and 2020, respectively, of which $11.8 million and ~~2019, respectively.~~

The Company operates under a Federal Aviation Administration ("FAA") approved continuous inspection and maintenance program. The Company uses the direct expense method of accounting for its maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance wherein the Company recognizes the expense 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. For leased aircraft, the Company is subject to lease return provisions that require a minimum portion of the "life" of an overhaul be remaining on the engine at the lease return date. The Company estimates the cost of maintenance lease return obligations and accrues such costs over the remaining lease term when the expense is probable and can be reasonably estimated.

Under the Company's aircraft operating lease agreements and FAA operating regulations, it is obligated to perform all required maintenance activities on its fleet, including component repairs, scheduled air frame checks and major engine restoration events. The Company estimates the timing of the next major maintenance event based on assumptions including estimated usage, FAA-mandated maintenance intervals and average removal times as recommended by the manufacturer. The timing and the cost of maintenance are based on estimates, which can be impacted by changes in utilization of its aircraft, changes in government regulations and suggested manufacturer maintenance intervals. Major maintenance events consist of overhauls to major components.

~~Engine overhaul~~$2.6 million, respectively, was pass-through expense. Airframe C-check expense totaled ~~$14.5~~$14.1 million and ~~$5.2~~$10.5 million for the three months ended March 31, ~~2020,~~2021, and ~~2019,~~2020, respectively, of which ~~$0.7~~$5.6 million and ~~$(0.4)~~$3.9 million, respectively, was pass-through expense. ~~Engine overhaul~~Airframe C-check expense totaled ~~$25.1~~$24.2 million and ~~$9.4~~$17.8 million for the six months ended March 31, ~~2020,~~2021, and ~~2019,~~2020, respectively, of which ~~$2.6~~$12.7 million and ~~$1.2~~$5.1 million, respectively, was pass-through expense. ~~Airframe C-check expense totaled $10.5~~

In February 2021, the Company was granted $48.7 million ~~and $4.7~~in financial assistance by the Department of the Treasury under the Payroll Support Program Extension (“PSP2”) under the Consolidated Appropriations Act of 2021. In March 2021, we were notified that, based on funding availability, recipients that were currently in compliance with executed PSP agreements would receive an additional award amount. As a result, the company was granted an additional $7.3 million through the PSP2 for a total grant of $56.0 million. The additional $7.3 million was received in April 2021. PSP2 funding must be used exclusively for the ~~three months ended~~continuation of payment of employee wages, salaries, and benefits and is conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs from the date of the extension agreement through March ~~31, 2020,~~2021. Other conditions include prohibitions on share repurchases and ~~2019, respectively,~~dividends through March 2022 and certain limitations on executive compensation until October 2022. The Department of Transportation also has the authority until March 1, 2022 to require airlines that received payroll support program funds to maintain scheduled air service deemed necessary to any point served by the airline before March 1, 2020.

On April 15, 2021, the Company was notified by the U.S. Department of the Treasury we are eligible to receive funds under the third Payroll Support Program (PSP3), which ~~$3.9 million~~was created under the American Recovery Plan Act of 2021 (ARP), enacted on March 11, 2021. PSP3 provides additional funding for passenger air carriers and ~~$0.0 million, respectively, was pass-through expense. Airframe C-check expense totaled $17.8 million and $6.2 million~~contractors that received financial assistance under the Payroll Support Program Extension (PSP2). PSP3 funding must be used exclusively for the continuation of payment of employee wages, salaries, and benefits. Based on the share of funds we received from the first extension of the payroll support program, and the similar structures of both extensions, we estimate that we will receive approximately $52.2 million. However, the actual amounts received and the allocation could differ from our estimates. The Company received the first PSP3 installment of $26.1 million on April 23, 2021. These payments are conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through September 2021 or the date on which assistance provided under the agreement is exhausted, whichever is later. Other conditions would include prohibitions on share repurchases and dividends through September 2022 and certain limitations on executive compensation until April 2023.

During the three and six months ended March 31, ~~2020, and 2019, respectively, of which $5.1~~2021, the Company recognized $56.0 million and ~~$0.0~~$67.3 million respectively, for the payroll support government funds. We deferred $11.3 million under PSP1 that was ~~pass-through expense.~~recognized during the three months ended December 31,2020. As of March 31,2021, there are 0 deferred payments.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). This ASU provides optional expedients and exceptions for a limited period of time for accounting for contracts, hedging relationships, and other transactions affected by the London Interbank Offered Rate (LIBOR) or another reference rate expected to be

discontinued. Optional expedients can be applied from March 12, 2020 through December 31, 2022. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In June 2016, the FASB issued ~~ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses~~new guidance requiring all expected credit losses for financial instruments held at the reporting date to be measured based on ~~Financial Instruments ("ASU 2016-13").~~historical experience, current conditions and reasonable supportable forecasts. This ~~ASU introduces a new accounting~~replaces the existing incurred loss model ~~known as Credit Expected Credit Losses (“CECL”). CECL requires earlier recognition~~and is applicable to the measurement of credit losses ~~while~~on financial instruments measured at amortized cost and also ~~providing additional transparency about~~applies to some off-balance sheet credit ~~risk. The CECL model utilizes~~exposures. Our adoption of this guidance on a lifetime expected credit loss measurement objective for the recognition of credit losses for receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is recognized. The new standard will also apply to receivables arising from revenue transactions such as contract assets and accounts receivables. There are other provisions within the standard affecting how impairments of other financial assets may be recorded and presented, as well as expanded disclosures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), 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. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of income. The Company adopted Topic 842 effective October 1, 2019 and elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company’s contracts are or contain leases, (2) lease classification and (3) initial direct costs. In July 2018, the FASB issued ASU No. 2018-11, "Targeted Improvements - Leases (Topic 842)." The Company did not elect the hindsight practical expedient. This update provides an optional transition method that allows entities to elect to apply the standard using the modified retrospective ~~approach at its effective date, versus recasting the~~ prior years presented. If this adoption method is elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. The Company elected this adoption methodbasis on October 1, ~~2019.There was no adjustment to retained earnings.~~

Additionally, the Company’s adoption of Topic 842 did not have a significant impact on the recognition, measurement or presentation of lease revenue and lease expenses within the consolidated statements of operations or the consolidated statements of cash flows. The Company’s adoption of Topic 8422020 did not have a material impact as credit losses have not been, and are not expected to be, significant based on historical collection trends, the ~~timing or amount~~financial condition of our airline partners and external market factors.

Financial instruments that potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents that are primarily held by financial institutions in the United States and accounts receivable. Amounts on deposit with a financial institution may at times exceed federally insured limits. The Company maintains its cash accounts with high credit quality financial institutions and, accordingly, minimal credit risk exists with respect to the financial institutions. As of March 31, 2021, the Company had $3.4 million in restricted cash. We have an agreement with a financial institution for letter of credit facility and to issue letters of credit for particular airport authorities, worker's compensation insurance, property and casualty insurance and other business needs as required in certain lease agreements. Pursuant to the term of this agreement, $3.4 million of outstanding letters of credit are required to be collateralized by amounts on deposit.

Significant customers are those which represent more than 10% of the Company’s ~~lease~~total revenue ~~as a lessor.~~ ~~The Company’s prepaid aircraft rents, accrued aircraft rents and deferred rent credits that were separately stated in the Company’s September 30, 2019~~or net accounts receivable balance at each respective balance sheet have been classified as a component of the Company’s right-of-use assets effective October 1, 2019. The consolidated financial statements for the three months ended December 31, 2019 are presented under the new standard~~, while comparative years presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy.~~ ~~See Note 14, "Leases, Commitments and Contingencies," for more information~~.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements, which contains amendments that affect a wide variety of Topics in the Codification, including amendment to Subtopic 718-40, Compensation-Stock Compensation-Income Taxes, that clarifies the timing of when an entity should recognize excess tax benefits. We adopted this standard on October 1, 2019 and it did not have a material impact on our condensed consolidated financial statements.

date. At March 31, ~~2020,~~2021, the Company had capacity purchase agreements with American and ~~United. All~~United and a flight services agreement with DHL. Substantially all of the Company's condensed consolidated revenue for the six months ended March 31, ~~2020~~2021 and ~~2019~~2020 and accounts receivable at March 31, ~~2020~~2021 and September 30, ~~2019~~2020 was derived from these agreements. ~~The terms~~American accounted for approximately 45% and 51% of ~~both~~the Company's total revenue for the three months ended March 31, 2021 and 2020, respectively, and 46 % and 51% for the six months ended March 31, 2021 and 2020. United accounted for approximately 53% and 49% of the Company's revenue for the three months ended March 31, 2021 and 2020, respectively, and 52% and 49% for the six months ended March 31, 2021 and 2020. A termination of either the American ~~and~~or the United capacity purchase ~~agreements are not aligned with the lease obligations~~agreement would have a material adverse effect on the ~~aircraft performing services under such agreements.~~Company's business prospects, financial condition, results of operations, and cash flows.

Amounts billed by the Company under capacity purchase agreements are subject to the Company's interpretation of the applicable capacity purchase agreement and are subject to audit by the Company's major airline partners. Periodically, the Company's major airline partners dispute amounts billed and pay amounts less than the amount billed. Ultimate collection of the remaining amounts not only depends upon the Company prevailing under the applicable audit, but also upon the financial well-being of the major airline partner. As such, the Company periodically reviews amounts ~~past~~ due based on historical collection trends, the financial condition of airline partners and external market factors and records a reserve for amounts estimated to be uncollectible. The allowance for doubtful accounts was ~~$2.8~~$1.3 million and ~~$1.0~~$0.8 million at March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively. If the Company's ability to collect these receivables and the financial viability of its partners is materially different than estimated, the Company's estimate of the allowance could be materially impacted.

American accounted for approximately 51% and 55% of the Company's total revenue for the three months ended March 31, 2020 and 2019, respectively, and 51 % and 54 % for the six months ended March 31, 2020 and 2019. United accounted for approximately 49% and 45% of the Company's revenue for the three months ended March 31, 2020 and 2019, respectively, and 49% and 46% for the six months ended March 31, 2020 and 2019. A termination of either the American or the United capacity purchase agreement would have a material adverse effect on the Company's business prospects, financial condition, results of operations, and cash flows.

The Company monitors for any indicators of impairment of the intangible assets. When certain conditions or changes in the economic situation such as the current environment brought by COVID-19 exist, the assets may be impaired and the carrying amount of the assets exceed its fair value. The assets need to be tested for recoverability of carrying amount.

We determined that our reduced flying schedules and cash flow projections as a result of the COVID-19 pandemic indicate that an impairment loss may have been incurred. Therefore, we quantitatively assessed whether it was more likely than not that the intangible assets we hold have been impaired as of March 31, 2020. We reviewed our previous forecasts and assumptions based on our current projections that are subject to various risks and uncertainties, including: (1) forecasted revenues, expenses and cash flows, including the duration and extent of impact to our business from the COVID-19 pandemic, (2) current discount rates, (3) changes to the regulatory environment and (4) the nature and amount of government support that will be provided.

Based on our carrying amount recoverability test, we have concluded that our finite-lived intangible assets are not impaired as of March 31, 2020. Given the uncertain future amid COVID-19, we will conduct additional tests in 3^rd ~~quarter 2020.~~

Information about the intangible assets of the Company atas of March 31, ~~2020~~2021 and September 30, ~~2019, were~~2020, is as follows (in thousands):

	March 31,			September 30,			March 31,			September 30,
	2020			2019			2021			2020
Customer relationship	$	43,800		$	43,800		$	43,800		$	43,800
Accumulated amortization		(35,018	)		(34,268	)		(36,388	)		(35,768	)
	$	8,782		$	9,532
Net carrying value							$	7,412		$	8,032

Total amortization expense recognized was approximately ~~$0.4~~$0.3 million and ~~$0.5~~$0.4 million for the three months ended March 31, 2021 and 2020, respectively, and ~~2019, respectively,~~$0.6 million and $0.7 ~~million and $0.9~~ million for the six months ended March 31, 2021 and

2020 ~~and 2019 respectively.~~respectively. The Company expects to record amortization expense of ~~$0.7~~$0.6 million for the remainder of ~~2020,~~2021, and ~~$1.2 million, $1.0~~$1.0 million, $0.9 million, $0.8 million, $0.7 million for fiscal years ~~2021,~~ 2022, 2023, 2024 and ~~2024~~2025, respectively.

15As of March 31, 2021, the Company’s intangible assets remaining weighted average term is 14.6 years.

Certain significant amounts included in the Company's condensed consolidated balance sheet as of March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, consisted of the following (in thousands):

	March 31,			September 30,			March 31,			September 30,
	2020			2019			2021			2020
Expendable parts and supplies, net:
Expendable parts and supplies	$	26,527		$	25,336		$	27,324		$	27,431
Less: obsolescence and other		(4,149	)		(3,999	)		(4,280	)		(4,460	)
	$	22,378		$	21,337		$	23,044		$	22,971

Prepaid expenses and other current assets:
Prepaid aircraft rent	$	-		$	35,786
Deferred offering and reimbursed costs		1,514			2,092		$	—		$	1,261
Other		4,397			3,045			8,956			14,806
	$	5,911		$	40,923		$	8,956		$	16,067
Property and equipment, net:
Aircraft and other flight equipment	$	1,588,462		$	1,582,199
Aircraft and other flight equipment substantially pledged							$	1,603,377		$	1,596,174
Other equipment		5,122			5,122			5,189			5,147
Leasehold improvements		2,797			2,797			2,763			2,763
Vehicles		962			924			1,114			1,032
Building		699			699			699			699
Furniture and fixtures		302			302			303			302
Total property and equipment		1,598,344			1,592,043			1,613,445			1,606,117
Less: accumulated depreciation		(355,547	)		(318,458	)		(432,761	)		(393,702	)
	$	1,242,797		$	1,273,585		$	1,180,684		$	1,212,415
Other Assets:
Warrants							$	16,374		$	—
Other								4,273			—
							$	20,647		$	—
Other accrued expenses:
Accrued property taxes	$	5,707		$	9,186		$	5,996		$	11,354
Accrued interest		4,488			4,497			2,480			3,268
Accrued vacation		5,538			6,128			5,718			5,975
Accrued wheels, brakes and tires		2,705			1,513
Other		8,700			7,564			14,416			24,881
	$	27,138		$	28,888		$	28,610		$	45,478

The Company ~~monitors for any indicators of~~records impairment ~~of the~~charges on long-lived ~~fixed assets. When certain conditions or changes~~assets used in ~~the economic situation such as the current environment brought by COVID-19 exist,~~operations when events and circumstances indicate that the assets may be impaired, ~~and~~the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets, and the net book value of the assets ~~exceed its~~exceeds their estimated fair value. The Company has assessed whether any impairment of its long-lived assets ~~need to be tested for recoverability of carrying amount.~~

~~To determine whether impairments exist, we group assets at the Capacity Purchase Agreement~~existed and fleet-type level (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity purchase arrangements, block hours, maintenance events, labor costs and other relevant factors. Due to our reduced flying schedules and projections of future cash flows, we evaluated each of our fleets to determine if any of the fleets are impaired.

~~Based on our carrying amount recoverability test, we have concluded~~has determined that no ~~fleet was impaired~~charges were deemed necessary under applicable accounting standards as of March 31, ~~2020~~2021. The Company’s assumptions about future conditions important to its assessment of potential impairment of its long-lived assets, including the impact of the COVID-19 pandemic to its business, are subject to uncertainty, and the Company will continue to monitor these conditions in future periods as ~~the future cash flows exceeded the carrying value of our long-lived fixed assets. Given the uncertain future amid COVID-19, we~~new information becomes available, and will ~~conduct additional tests in 3~~^rd ~~quarter 2020.~~update its analyses accordingly.

Depreciation expense totaled approximately ~~$20.1~~$20.4 million and ~~$18.8~~$20.1 million for the three months ended March 31, 2021 and 2020, respectively, and ~~2019, respectively,~~$40.6 million and $40.3 ~~million and $36.9~~ million for the six months ended March 31, 2021 and 2020, respectively.

In connection with a negotiated forward purchase contract for electrically-powered vertical takeoff and ~~2019, respectively.~~

~~Prior~~landing aircraft (eVTOL aircraft) executed in February 2021, we obtained equity warrant assets giving us the right to acquire 1,171,649 shares of common stock in Archer Aviation, Inc. (Archer), a private, venture-backed company. Our investments in Archer do not have a readily determinable fair value, so we account for them using the measurement alternative under ASC 321 and measure the investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments from the same issuer. We consider a range of factors when adjusting the fair value of these investments, including, but not limited to, the ~~Company’s adoption of Topic 842 on October 1, 2019, the Company recorded amortization~~term and nature of the ~~unfavorable lease liability~~investment, local market conditions, values for comparable securities, current and projected operating performance, financing transactions subsequent to the acquisition of ~~approximately $1.5~~the investment or other features that indicate a discount to fair value is warranted. Any changes in fair value from the grant date fair value of the equity warrant assets will be recognized as increases or decreases on our balance sheet and as net gains or losses on equity warrant assets, in other (expense) income, net. We estimated the initial equity warrant asset value to be $16.4 million ~~for~~based on the ~~three months ended~~Archer enterprise valuation disclosed within a February 10, 2021 S-4 filing with the SEC. There were no observable price changes or transactions as of March 31, ~~2019~~2021, and as such no adjustments to the recorded grant date fair value of the equity warrant assets was recorded.

The grant date value of the warrants, $16.4 million, was recognized as a vendor credit liability within other noncurrent liabilities. The liability related to the warrant assets will be settled in the future, as a reduction ~~to lease~~

~~expense. Upon~~of the ~~Company’s adoption~~acquisition date value of ~~Topic 842,~~ the ~~unfavorable lease liability is now included~~eVTOL aircraft contemplated in ~~its ROU~~the related asset ~~balance and amortized therein.~~purchase agreement.

The carrying values reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments.

The Company's debt agreements are not traded on an active market. The Company has determined the estimated fair value of its debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable and, therefore, could be sensitive to changes in inputs. The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt.

The ~~carrying value and~~ estimated fair value of the Company's total long-term debt, including current maturities were as follows (in millions):

Long-term debt as of March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, consisted of the following (in thousands):

	March 31,			September 30,			March 31,			September 30,
	2020			2019			2021			2020
Notes payable to financial institution, collateralized by the underlying
aircraft, due 2022⁽¹⁾⁽²⁾	$	41,472		$	49,795		$	—		$	41,472
Notes payable to financial institution, collateralized by the underlying
aircraft, due 2024⁽³⁾		55,674			60,761			—			55,674
Senior and subordinated notes payable to secured parties, collateralized
by the underlying aircraft, due 2027⁽⁴⁾		105,540			110,912			106,092			105,887
Notes payable to secured parties, collateralized by the underlying
aircraft, due 2028⁽⁵⁾		181,776			191,168			162,247			172,137
Senior and subordinated notes payable to secured parties, collateralized
by the underlying aircraft, due 2028⁽⁶⁾		145,592			152,945			130,505			138,114
Senior and subordinated notes payable to secured parties, collateralized
by the underlying aircraft, due 2022⁽⁷⁾		59,868			71,998			—			47,319
Senior and subordinated notes payable to secured parties, collateralized
by the underlying aircraft, due 2022⁽⁸⁾		38,903			47,309			—			29,682
Notes payable to financial institution, collateralized by the underlying
equipment, due 2020⁽⁹⁾		829			1,659
Notes payable to financial institution due 2020⁽¹⁰⁾		1,523			2,329			1,523			1,523
Notes payable to financial institution, collateralized by the underlying
equipment, due 2020⁽¹¹⁾		4,182			6,962			—			4,182
Other obligations due to financial institution, collateralized by the underlying
equipment, due 2023⁽¹²⁾		7,904			8,530			5,663			6,864
Notes payable to financial institution, collateralized by the underlying
equipment, due 2024⁽¹³⁾		71,865			80,153			54,573			63,341
Notes payable to financial institution, collateralized by the underlying
aircraft, due 2023⁽¹⁴⁾		56,875			65,625			39,375			48,125
Notes payable to financial institution due 2023 ⁽¹⁵⁾		7,000			8,000			5,000			6,000
Working capital draw loan, used to cover operational needs ⁽¹⁶⁾		23,000			—
Revolving Credit Facility ⁽¹⁶⁾								22,930			22,930
Notes payable to financial institution due 2025 ⁽¹⁷⁾								197,525			—
Gross long-term debt, including current maturities		802,003			858,145			725,433			743,250
Less unamortized debt issuance costs		(14,039	)		(14,822	)		(10,598	)		—
Less Notes payable warrants								(10,797	)		(11,526	)
Net long-term debt, including current maturities		787,964			843,323			704,038			731,724
Less current portion		(168,171	)		(165,900	)		(103,980	)		(189,268	)
Net long-term debt	$	619,793		$	677,423		$	600,058		$	542,456

Principal maturities of long-term debt as of March 31, ~~2020,~~2021, and for each of the next five years are as follows (in thousands):

Periods Ending March 31,	Total Principal
Remainder of 2020	$	168,170
2021		160,080
March 31, 2021			Total Principal
Remainder of 2021			$	59,013
2022		149,834		113,682
2023		89,635		89,462
2024		58,131		61,209
2025				56,526
Thereafter		176,153		345,541
	$	802,003	$	725,433

The net book value of collateralized aircraft and equipment as of March 31, ~~2020~~2021 was ~~$1,168.0~~$1,060.0 million.

In December 2015, an Enhanced Equipment Trust Certificate ("EETC") pass-through trust was created to issue pass-through certificates to obtain financing for new E-175 aircraft. At March 31, ~~2020~~2021 Mesa has ~~$181.8~~$162.2 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the condensed consolidated balance

sheets. The structure of the EETC financing consists of a pass-through trust created by Mesa to issue pass-through certificates, which represent fractional undivided interests in the pass-through trust and are not obligations of Mesa.

The proceeds of the issuance of the pass-through certificates were used to purchase equipment notes which were issued by Mesa and secured by its aircraft. The payment obligations under the equipment notes are those of Mesa. Proceeds received from the sale of pass-through certificates were initially held by a depositary in escrow for the benefit of the certificate holders until Mesa issued equipment notes to the trust, which purchased such notes with a portion of the escrowed funds.

Mesa evaluated whether the pass-through trust formed for its EETC financing is a Variable Interest Entity ("VIE") and required to be ~~consolidated.~~consolidated. The pass-through trust was determined to be a VIE, however, the Company has determined that it does not have a variable interest in the pass-through trust, and therefore, has not consolidated the pass-through trust with its financial statements.

On January 28, 2019, the Company entered into a Term Loan Agreement (the "Term Loan") pursuant to which the lenders thereunder committed to lend to the Company term loans in the aggregate principal amount of $91.2 million. Borrowings under the Term Loan bear interest at LIBOR plus 3.10%. This interest rate is significantly lower than the interest rate under the Company's Spare EngineCIT Revolving Credit Facility (defined below), which the Term Loan refinanced and replaced. The Spare Engine Facility accrued interest at LIBOR plus 7.25%. The Term Loan has a term of five years, with principal and interest payments due monthly over the term of the loan in accordance with an amortization schedule. The Company recorded a loss on extinguishment of debt of $3.6 million, due to a $1.9 million write-off of financing fees and $1.7 million in prepayment penalties, in connection with the repayment of the Spare Engine Facility.

On June 14, 2019, the Company completed the purchase of ten CRJ-700 aircraft, which were previously leased under the aircraft lease facility with Wells Fargo Bank Northwest, National Association, as owner trustee and lessor (the “GECAS Lease Facility”), for $70.0 million. The Company financed the aircraft purchase with $70.0 million in new debt. The notes payable of $70.0 million require monthly payments of principal and interest through fiscal 2023 bearing interest at LIBOR plus 5.0%. The Company recorded non-cash lease termination expense of $9.5 million in connection with the lease buyout.

On September 25, 2019, the Company extended the term on their $35.0 million working capital draw loan by three years, which now terminates in September 2022. Interest is assessed on drawn amounts at one-month LIBOR plus ~~5.24%~~3.75%. ~~In 2~~^nd ~~quarter, 2020, $23.0~~As of March 31, 2021, $22.9 million ~~was~~has been drawn on the revolver.

Future borrowings, if any, under this facility are subject to, ~~cover operational needs.~~among other things, the Company having sufficient unencumbered assets to meet the borrowing base requirements under the facility.

On ~~September 27, 2019,~~October 30, 2020, the Company ~~financed certain flight equipment~~entered into a Loan and Guarantee Agreement with ~~$8.0~~United States Department of Treasury (the “U.S. Treasury”) for a secured loan facility of up to $200.0 million that matures in ~~new debt.~~October 2025 (“the Treasury Loan Agreement”). On October 30, 2020, the Company borrowed $43.0 million (“the $43M Treasury Loan”) and on November 13, 2020, the Company borrowed an additional $152.0 million (“the $152M Treasury Loan”), collectively referred to as the “Treasury Term Loan Facility”. NaN further borrowings are available under the Treasury Loan Agreement. The ~~debt~~Company also issued warrants to purchase shares of ~~$8.0 million require monthly payments of principal~~common stock to the U.S. Treasury.

The Loan and ~~interest through fiscal 2023 bearing~~Guarantee Agreement bear interest at ~~Libor~~a variable rate equal to (a)(i) the LIBOR rate divided by (ii) one minus the Eurodollar Reserve Percentage plus ~~5.0%~~(b) 3.50%. Accrued interest on the loans will be payable in arrears on the first business day following the 14^th day of each March, June, September and December, beginning with December 15, 2021.

All principal amounts outstanding under the Loan and Guarantee Agreement are due and payable in a single installment on October 30, 2025 (the “Maturity Date”). Interest will be paid by increasing the principal amount of the loan by the amount of such interest due on an interest payment date for the first 12 months. Mesa's obligations under the Treasury Loan Agreement are secured by certain aircraft, aircraft engines, accounts receivable, ground service equipment and tooling (collectively, the “Collateral”). The obligations under the Loan Agreement are guaranteed by the Company and Mesa Air Group Inventory Management. The proceeds may be used for general corporate purposes and operating expenses, to the extent permitted by the CARES Act. Voluntary prepayments of loans under the Loan Agreement may be made, in whole or in part, by Mesa Airlines, without premium or penalty, at any time and from time to time. Amounts prepaid may not be reborrowed. Mandatory prepayments of loans under the Loan Agreement 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 Loan Agreement) occurs with respect to Mesa Airlines, Mesa Airlines will be required to repay the loans outstanding under the Loan Agreement.

20The Loan Agreement requires the Company, under certain circumstances, including within ten (10) business days 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 1.6 to 1.0, Mesa Airlines will be required either to provide additional Collateral (which may include cash collateral) to secure its obligations under the Loan Agreement or repay the term loans under the Loan Agreement, in such amounts that the recalculated collateral coverage ratio, after giving effect to any such additional Collateral or repayment, is at least 1.6 to 1.0.

The Loan Agreement contains two financial covenants, a minimum collateral coverage ratio and a minimum liquidity level. The Loan Agreement 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; (c) restrictions on certain dispositions, investments and acquisitions; (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.

In connection with the Loan and Guarantee Agreement and as partial compensation to Treasury for the provision of financial assistance under the Loan and Guarantee Agreement, the Company issued to Treasury warrants to purchase an aggregate of 4,899,497 shares of the Company’s common stock at an exercise price of $3.98 per share, which was the closing price of the Common Stock on The Nasdaq Stock Market on April 9, 2020. The exercise price and number of shares of common stock issuable under the Warrants are subject to adjustment as a result of anti-dilution provisions contained in the Warrants for certain stock issuances, dividends, and other corporate actions. The warrants expire on the fifth anniversary of the date of issuance and are exercisable either through net share settlement or net cash settlement, at the Company’s option. For accounting purposes, the fair value for the Treasury Loan Warrant Shares is estimated using a Black-Scholes option pricing model and recorded in stockholders' equity with an offsetting debt discount to the Treasury Term Loan Facility in the condensed consolidated balance sheet.

The Company incurred $3.1 million in debt issuance costs relating to the Loan and Guarantee Agreement. In accordance with the applicable guidance, Mesa allocated the debt issuance costs between the Treasury Loan and related warrants. At funding on October 30, 2020, the $43M Treasury Loan was recorded net of $0.7 million in capitalized debt issuance costs. At funding on November 13, 2020, the $152M Treasury Loan was recorded net of $2.3 million in capitalized debt issuance costs. The remaining $0.1 million in debt issuance costs was allocated to the warrants as a reduction to the warrant value within additional paid-in capital. Debt issuance costs allocated to the debt are amortized into interest expense using the effective interest method over the term of the related loan.

Prior to the November 13, 2020 funding of the $152M Treasury Loan, the Company repaid $167.7 million in existing aircraft debt covering 44 aircraft, including indebtedness under its (a) Senior Loan Agreements, dated June 27, 2018, (b) Junior Loan Agreements, also dated June 27, 2018, (c) Credit Agreements, dated January 31, 2007, April 16, 2014, and May 23, 2014, (d) Senior Loan Agreements, dated December 27, 2017, and (e) Junior Loan Agreements, also dated December 27, 2017 (collectively, “the EDC Loans”). The Company made payments totaling $164.1 million to repay the EDC Loans, consisting of principal of $167.7 million, and a $3.6 million discount on the balance owed. Additionally, in connection with the repayment, $2.5 million of unamortized original issue discount and deferred financing costs were recorded as a loss on debt extinguishment, resulting in a net gain on extinguishment of $1.0 million recorded within other income.

Calculations of net income per common share attributable to Mesa Air Group were as follows (in thousands, except per share data):

	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended March 31,				Six Months Ended March 31,
	2020		2019		2020		2019		2021		2020		2021		2020
Net income attributable to Mesa Air Group	$	1,885	$	13,249	$	12,670	$	32,330	$	5,689	$	1,885	$	19,807	$	12,670
Basic weighted average common shares outstanding		35,141		34,699		35,082		34,607		35,628		35,141		35,579		35,082
Add: Incremental shares for:
Dilutive effect of restricted stock		124		263		138		434
Dilutive share adjustment - UST Warrant										3,038		—		2,183		138
Dilutive share adjustment - Restricted Shares										766		124		620		—
Diluted weighted average common shares outstanding		35,265		34,962		35,220		35,041		39,432		35,265		38,382		35,220
Net income per common share attributable to Mesa Air Group:
Basic	$	0.05	$	0.38	$	0.36	$	0.93	$	0.16	$	0.05	$	0.56	$	0.36
Diluted	$	0.05	$	0.38	$	0.36	$	0.92	$	0.14	$	0.05	$	0.52	$	0.36

Basic income per common share is computed by dividing net income attributable to Mesa Air Group by the weighted average number of common shares outstanding during the period.

The number of incremental shares from the assumed issuance of shares relating to restricted stock and exercise of warrants (excluding warrants with a nominal conversion price) is calculated by applying the treasury stock method. Share-based awards and warrants whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income or loss per share calculation. In loss periods, these incremental shares are excluded from the calculation of diluted loss per share, as the inclusion of unvested restricted stock and warrants would have an anti-dilutive effect. There were no0 anti-dilutive shares relating to restricted stock and exercise of warrants that were excluded from the calculation of diluted loss per share for the three and six months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

The Company previously issued warrants to third parties, which had a five-year term to be converted to common stock at an exercise price of $0.004 per share. ~~Certain persons~~Persons who ~~are~~were not U.S. citizens ~~currently hold~~held certain of these outstanding ~~warrants to purchase shares of the Company's common stock.~~warrants. The warrants are exercisable if consistent with federal law, which requires that no more than 24.9% of the Company's stock be voted, directly or indirectly, or controlled by persons who are not U.S. citizens. The warrants can be converted to common stock upon warrant holders demonstrating U.S. citizenship or if consistent with above described federal law ownership limitations. In June 2018, the Company and holders agreed to extend the term of outstanding warrants set to expire by five years (through fiscal year 2023). AsAll of ~~March 31, 2020 all the outstanding~~these warrants were converted to common ~~shares.~~shares as of March 31, 2020 and these warrants were not related to any of the warrants the Company issued pursuant to the terms of a Treasury Warrant Agreement under the Loan and Guarantee Agreement entered on October 30, 2020.

In July 2018, the Company's Board of Directors and Compensation Committee approved the issuance of shares of restricted common stock under its 2018 Equity Incentive Plan (the "2018 Plan") immediately following completion of the Company's IPO to certain of its employees and directors in exchange for the cancellation of existing restricted phantom stock units, unvested restricted shares and SARs. The shares of restricted common stock issued under the 2018 Plan in exchange for the cancellation of restricted phantom stock units, unvested restricted shares and SARs are subject to vesting on the same terms set forth in the prior vesting schedules and are not subject to acceleration in connection with the 2018 Plan issuances.

On August 8, 2018, the Company filed its Second Amended and Restated Articles of Incorporation, which, among other things: (i) effected a 2.5-for-1 stock split of its common stock; and (ii) increased the authorized number of shares of its common and preferred stock to 125,000,000 and 5,000,000, respectively. All references to share and per share amounts in the Company's condensed consolidated financial statements have been retrospectively revised to reflect the stock split and increase in authorized shares.

The Company's shares of common stock were listed on The NASDAQ Global Select Market under the symbol "MESA" effective August 10, 2018. On August 14, 2018, the Company completed its IPO, in which it issued and sold 9,630,000 shares of common stock, no par value, at a public offering price of $12.00 per share (the "Firm Shares"). Additionally, in connection with the IPO, the Company granted the underwriters an option to purchase up to an additional 1,444,500 shares of common stock at the same price. On September 11, 2018, the Company closed the sale of 1,344,500 shares ("Option Shares") of its common stock, in connection with the partial exercise of the overallotment option granted to the underwriters in its IPO. Of the 1,344,500 Option Shares sold, 723,985 were purchased directly from the Company and the remaining 620,515 shares were purchased directly from the selling shareholders. The Firm Shares and Option Shares were sold to the public for a price of $12.00 per share. The aggregate gross proceeds to us from the IPO were approximately $124.2 million. The Company received $111.7 million in net proceeds after deducting $8.7 million of underwriting discounts and commissions and $3.6 million in offering costs.

On April 9, 2019, and pursuant to Section 4.4 of the 2018 Plan in connection with the 2.5-for-1 stock split effected on August 8, 2018, the board of directors approved an increase in the number of shares authorized for issuance under the 2018 Plan by 1,000,000 shares of common stock.

On October 30, 2020, the Company entered into the Loan and Guarantee Agreement with the United States Department of the Treasury (the “Treasury”) and the Bank of New York Mellon, as Administrative and Collateral Agent, under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

In connection with the Loan and Guarantee Agreement and as partial compensation to the Treasury for the provision of financial assistance under the Loan and Guarantee Agreement, the Company issued warrants to the Treasury to purchase shares of the Company’s common stock, no par value, at an exercise price of $3.98 per share (the “Exercise Price”), which was the closing price of the Common Stock on The Nasdaq Stock Market on April 9, 2020. The Warrants were issued pursuant to the terms of a Treasury Warrant Agreement entered into by the Company and the Treasury. The exercise price and number of Warrant Shares issuable under the Warrants are subject to adjustment as a result of anti-dilution provisions contained in the Warrants for certain stock issuances, dividends, and other corporate actions. The warrants expire on the fifth anniversary of the date of issuance and are exercisable either through net share settlement or net cash settlement, at the Company’s option.The warrants will be accounted for within equity at a grant date fair value determined under the Black Scholes Option Pricing Model. As of March 31, 2021, 4,899,497 warrants were issued and outstanding.

The Company has not historically paid dividends on shares of its common stock. Additionally, the Loan and Guarantee Agreement and the Company's aircraft lease facility (the "RASPRO" Lease Facility) with RASPRO Trust 2005, a pass-through trust, ~~contains~~contain restrictions that limit the Company's ability to or prohibit it from paying dividends to holders of its common stock.

The Company’s effective tax rate (ETR) from continuing operations was 24.9% and 25.3% for the three months and six months ended March 31, 2021, respectively and 40.9% and 27.6% for the three months and six months ended March ~~31, 2020, respectively, and 23.6% and 23.7% for the three months and six months ended March 31, 2019,~~31,2020, respectively. The Company's ETR during the three months and six months ended March 31, ~~2020~~2021 was different from the ~~federal~~prior year tax rates as a result of vesting of stock compensation where the tax deduction state taxes differed from the book expense, changes in the valuation allowance against state net operating losses, and changes in state statutory rates.

The Company's ETR during the six months ended March 31, 2020 was different than the statutory rate of 21% as a result of the vesting and exercise of stock compensation, state taxes, and changes in valuation allowance against state net operating losses, as well as differences between the book and tax deductions associated with meals, entertainment, employer provided parking, and compensation of officers.

The Company's ETR during the six months ended March 31, 2019 was different than the statutory rate as a result of state taxes, the vesting and exercises of stock compensation, differences in the GAAP and tax deductibility of meals and parking benefits, and changes in the valuation allowance against state net operating losses.

As of September 30, ~~2019,~~2020, the Company had aggregate federal and state net operating loss carryovers of approximately ~~$478.2~~$512.4 million and ~~$228.0~~$223.9 million, respectively, which expire in fiscal years ~~2027-2037~~2027-2038 and ~~2020-2039,~~2021-2040, respectively. Approximately ~~$2.7~~$0.7 million of state net operating loss carryforwards are expected to expire in the current fiscal year.

The restricted share activity for the ~~three~~six months ended March 31, ~~2020~~2021 were summarized as follows:

				Weighted-					Weighted-
				Average					Average
	Number			Grant Date		Number			Grant Date
	of Shares			Fair Value		of Shares			Fair Value
Restricted shares unvested at September 30, 2019		847,974		$	9.56
Restricted shares unvested at September 30, 2020							1,195,548		$	5.47
Granted		156,498			6.33		121,688			8.58
Vested		(160,528	)		5.97		(132,109	)		8.75
Forfeited		(6,000	)		7.03		(17,500	)		4.90
Restricted shares unvested at March 31, 2020		837,944		$	8.65
Restricted shares unvested at March 31, 2021							1,167,627		$	5.44

As of March 31, ~~2020,~~2021, there was $4.4 million, of total unrecognized compensation cost related to unvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of ~~1.9~~2.3 years.

Compensation cost for share-based awards are recognized on a straight-line basis over the vesting period. Share-based compensation expense for the three months ended March 31, 2021 and 2020 was $0.8 million and ~~2019 was~~ $1.2 million, ~~and $1.3 million,~~ respectively, and for the six months ended March 31, 2021 and 2020 was $1.7 million and ~~2019 was~~ $2.5 million, ~~and $2.8 million,~~ respectively.

The Company repurchased ~~18,244~~175,925 shares of its common stock for ~~$0.04~~$0.2 million to cover the income tax obligation on vested employee equity awards and warrant conversions during the six months ended March 31, ~~2020.~~ 2021.

The Company has granted ~~restricted stock awards (“RSAs”) and~~ restricted stock units (“RSUs”) as part of its long-term incentive compensation to employees and non-employee members of the Board of Directors. ~~RSAs and~~ RSUs generally vest over a period of 3 to 5 years for employees and over one year for members of the Board of Directors. The restricted common stock underlying ~~RSAs are deemed issued and outstanding upon grant, and carry the same voting rights of unrestricted outstanding common stock. The restricted common stock underlying~~ RSUs are not deemed issued or outstanding upon grant, and do not carry any voting rights.

The Mesa Air Group, Inc. 2019 Employee Stock Purchase Plan (the "2019 ESPP") is a nonqualified plan that provides eligible employees of Mesa Air Group, Inc. with an opportunity to purchase Mesa Air Group, Inc. ordinary shares through payroll deductions. Under the 2019 ESPP, eligible employees may purchase Mesa Air Group, Inc. ordinary shares through the Employee Stock Purchase Plan. Under the 2019 ESPP, eligible employees may elect to contribute 1% to 15% of their eligible compensation during each semi-annual offering period to purchase Mesa Air Group, Inc. ordinary shares at a 10% discount.

A maximum of 500,000 Mesa Air Group, Inc. ordinary shares may be issued under the 2019 ESPP. As of March 31, ~~2020,~~2021, eligible employees purchased and the ~~company~~Company issued ~~43,934~~157,714 Mesa Air Group, Inc. ordinary shares under the 2019 ESPP.

~~Effective October 1, 2019, the Company adopted Topic 842 and recorded ROU assets and lease liabilities~~Leases

As of $154.6 million and $141.9 million, respectively. As part of the adoption, prepaid aircraft rent, deferred rent credits and accrued aircraft rents of $35.8 million, $21.3 million and $1.8 million, respectively, were classified as a component of the Company’s ROU assets.

At March 31, ~~2020,~~2021, the Company leased 1817 aircraft, airport facilities, office space, and other property and equipment under non-cancelable operating leases. The leases require the Company to pay all taxes, maintenance, insurance, and other operating expenses. Rental expense is recognized on a straight-line basis over the lease term, net of lessor rebates and other incentives. The Company expects that, in the normal course of business, such operating leases that expire will be renewed or replaced by other leases, or the property may be purchased rather than leased.

It is common for us, as the lessee, to agree to indemnify the lessor and the lessor's related parties for tort, environmental and other liabilities that arise out of or relate to our use or occupancy of the leased airport facility and office space premises. This type of indemnity typically makes us responsible to indemnified parties for liabilities arising out of the conduct of, among others, contractors, licensees and invitees at, or in connection with, the use or occupancy of the leased premises. This indemnity often extends to related liabilities arising from the negligence of the indemnified parties but usually excludes any liabilities caused by either their sole or gross negligence or their willful misconduct.

Our aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the lessee or obligor, to indemnify the other parties to those agreements, including certain of those parties' related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or other equipment.

We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft and other equipment lease and financing agreements described above. While our insurance does not typically cover environmental liabilities, we have insurance policies in place as required by applicable environmental laws. We cannot reasonably estimate our potential future payments under the indemnities and related provisions described above because we cannot predict (1) when and under what circumstances these provisions may be triggered and (2) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.

Aggregate rental expense under all operating aircraft, equipment and facility leases totaled approximately ~~$18.6~~$13.9 million and ~~$18.7~~$18.6 million for the three months ended March 31, 2021 and 2020, respectively, and ~~2019, respectively,~~$27.7 million and $35.4 ~~million and $37.8~~ million for the six months ended March 31, 2021 and 2020, ~~and 2019.~~

As of March 31, ~~2020,~~2021, the Company’s operating leases have a remaining weighted average lease ~~right-of-use assets were $140.8 million, the Company’s current maturities~~terms of 3.1 years and our operating lease liabilities were ~~$43.6 million, and the Company’s noncurrent lease liabilities were $78.7 million.~~measured using a weighted average discount rate of 4.2%.

As of March 31, 2020, the Company’s operating lease payments in operating cash flows for the six months ended March 31, 2020 is $26.2 million. The disclosure is not applicable for the six months ended March 31, 2019 due to the method of adoption of the new leasing Standard ASC-842.⁽¹⁾

~~The table below presents lease related terms and discount rates as of March 31, 2020:~~

The following table summarizes future minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining non-cancelable lease terms as of March 31, 2020 (in thousands):

~~The following represents future minimum lease obligations under non-cancelable operating leases as of September 30, 2019 (in thousands):~~

On ~~March~~February 26, ~~2020,~~2021, the Company and General Electric Company (“GE”), acting through its GE-Aviation business unit, entered into ~~(a)~~an Amended and Restated Letter Agreement No. 13-1 (“Letter Agreement No. 13-1”), which amends and restates Letter Agreement No. 13 entered into by the parties effective December 11, 2019, and (b) Amended and Restated Letter Agreement No. 12-1 (“Letter Agreement No. 12-1” and together with Letter Agreement No. 13-1, the “Amended and Restated Letter Agreements”), which amends and restates Letter Agreement No. 12 entered into by the parties effective October 22, 2019.13-3. The ~~Amended and Restated Letter Agreements each provide that they are effective March 20, 2020.~~

~~Under Letter Agreement No. 13-1, the~~ Company ~~has~~ agreed to purchase and take delivery of 2010 new ~~spare~~ CF34-8C5 ~~engines. Delivery of~~or CF34-8E5 engines with delivery dates starting from July 1, 2021 through November 1^,2022. During the ~~new spare~~quarter ended March 31, 2021, a $7.0 million non-refundable purchase deposit was made for the first 5 engines ~~will now commence in April 2021, with the final spare engine being~~to be delivered in ~~December~~calendar 2021. The parties had previously agreed to commence delivery of the new spare engines in August 2020. The payment terms for the new spare engines were also amended, with payments to now be made in four (4) separate tranches commencing in October and December 2020 and February and March 2021.

~~Under Letter Agreement No. 12-1, the~~ Company has ~~agreed~~options to purchase ~~and take delivery of two (2) new spare CF34-8C5~~an additional (10) ten similar engines by no later than March 31, 2020. The parties agreed that progress payments previously made by the Company constitute full payment for these engines. The Company does not consider this Letter Agreement to be a material definitive agreement, as defined by the rules and regulations of the Securities and Exchange Commission, but has elected to voluntarily file such Letter Agreement along with the filing of Letter Agreement No. 13-1.beyond 2022. The total purchase commitment ~~under~~related to these ~~agreements~~10 engines is approximately ~~$118.9~~$50.0 million.

If the Company fails to accept delivery of the spare engines when duly tendered, the Company may be assessed a minimum cancellation charge based on the engine price determined as of the date of scheduled engine delivery to the Company.

The Company is ~~involved~~subject to 2 putative class action lawsuits alleging federal securities law violations in ~~various~~connection with our IPO, 1 in the Superior Court of the State of Arizona and 1 in U.S. District Court of Arizona. These purported class actions were filed in March and April 2020 against the Company, certain current and former officers and directors, and certain underwriters of the Company’s IPO. The state and federal lawsuits each make the same or similar allegations of violations of the Securities Act of 1933, as amended, for allegedly making materially false and misleading statements in, or omitting material information from, our IPO registration statement. The plaintiffs seek unspecified monetary damages and other relief. In addition, we are subject to certain legal ~~proceedings (including, but not limited~~actions which we consider routine to ~~insured claims) and FAA civil action proceedings~~our business activities. As of March 31, 2021, our management believed, after consultation with legal counsel, that the ~~Company does~~ultimate outcome of the two putative class action lawsuits and such other routine legal matters are not ~~believe will~~likely to have a material adverse effect ~~upon its business,~~on our financial ~~condition,~~position, liquidity or results of ~~operations, although no assurance can be given to the ultimate outcome of any such proceedings.~~operations.

The Company adopted ASU 2016-18 on a retrospective basis during the quarter ended December 31, 2018. The following is a reconciliation of the captions in the Condensed Consolidated Balance Sheets to the Condensed Consolidated Statements of Cash Flows (in thousands):

~~The restricted cash balance primarily includes deposits in trust accounts to collateralize letters of credit and to fund workers' compensation claims, landing fees, and other business needs.~~

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") into law. This relief package includes financial grant providing the airline industry with up to $25 billion to be used for employee wages, salaries and benefits.

In April ~~2020,~~15, 2021, the Company was granted $92.5 million in emergency relief through the payroll support program of the CARES Act to be paid in installments through September 2020. The Company received the first installment of $30.8 million in April 2020 and the remaining $61.6 million is scheduled to be paid to Mesa in four equal payments from June to September 2020.

The relief payments are conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other conditions include prohibitions on share repurchases and dividends through September 30, 2021, continuing essential air service as directednotified by the U.S. Department of ~~Transportation and certain limitations on executive compensation.~~the Treasury we are eligible to receive funds under the third Payroll Support Program (PSP3) as described in Note 2.

~~The CARES Act provides for up to $25 billion in secured loans~~On April 9, 2021, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the ~~airline industry. The Company has submitted the application for a loan under the loan program~~Amended and ~~is awaiting the outcome of the application. Under the Loan Program,~~Restated American Capacity Purchase Agreement as described in Note 1.

On April 19, 2021, the Company expects to have the ability, through September 30, 2020, to borrow a currently undetermined amount from the U.S. Treasury Department for a term of up to five years. Any loans issued under the Loan Program are expected to be senior secured obligations of the Company, with collateral to be determined. If the Company borrows any amounts under the Loan Program, the Company expects to issueentered into Amendment No. 3 (“Amendment No. 3”) to the ~~U.S. Treasury Department warrants to purchase shares of MESA common stock.~~

The CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020. The Company expects to defer approximately $7.0 million with 50% of the deferred amount to be repaid on December 31, 2021Amended and ~~the remaining 50% to be repaid on December 31, 2022.~~

~~These aforementioned reliefs under the CARES Act are expected to provide liquidity during the locked down and recovery periods this year.~~

One of our aircraft lenders has agreed to defer $28 million of principal debt payments otherwise due beginning on March 19, 2020, to and including September 30, 2020. All Deferred Payments shall be dueRestated American Capacity Purchase Agreement as described in a lump sum payment on September 30, 2020 per the letter agreement dated April 9, 2020. Although the agreement is to pay the full amount back on September 30, 2020, the Company is seeking more favorable repayment terms from the lender. There is no certainty on whether the repayment terms will be able to be modified.

~~Removal of Aircraft from Code Share and Revenue Sharing Agreement with American Airlines~~

In April 2020, the Company received a withdrawal notice from American seeking to permanently withdraw three aircraft from the Code Share and Revenue Sharing Agreement. Two of the aircraft will be withdrawn effective May 19, 2020 and the third aircraft will be withdrawn effective June 1, 2020. American’s withdrawal of these three aircraft stems from withdrawal rights that American previously asserted were triggered in September 2019 and November 2019. At such time, American refrained from exercising such withdrawal rights, however, reserved the right to withdrawal the three aircraft at a later date under certain circumstances. In light of the rapid grounding of aircraft caused by the COVID-19 virus, the overall reduction in demand for air travel, and the need to reduce capacity, American has elected to remove such aircraft now.

~~Following the removal of the three aircraft referenced above, the Company will continue to operate 56 CRJ-900 aircraft under the American CPA.~~

The Company further reports that, beginning in March 2020, it has experienced a material decline in demand in block hours from both of its major airline partners, American and United Airlines, Inc. (“United” and together with American, the “Partners”) resulting from the spread of the COVID-19 virus. As a result of this decline in demand and the subsequent capacity reductions by the Company’s Partners, the Company operated 10,297 block hours in April 2020, a 72.4% drop from April 2019. The Company also anticipates similar schedule reductions will likely continue into the second quarter of 2020 and may continue throughout the remainder of 2020 and into 2021. Note 1.

Item 2. ~~Management'~~sManagement'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 condensed consolidated financial statements, the accompanying notes, and the other financial information included elsewhere in this Quarterly Report on Form 10-Q. 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 these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the sections titled "Cautionary Notes Regarding Forward-Looking Statements" above and "Risk Factors" below.

Mesa Airlines is a regional air carrier providing scheduled flight service to ~~135~~112 cities in 3938 states, the District of Columbia, ~~Canada,~~and Mexico ~~Cuba and the Bahamas.~~ as well as cargo services out of Cincinnati/Northern Kentucky International Airport. All of our flights are operated as either American Eagle, United Express, or ~~United~~DHL Express flights pursuant to the terms of capacity purchase agreements we entered into with American Airlines, Inc. ("(“American"”) and United Airlines, Inc. ("(“United"”), and DHL Express pursuant to the terms of a Flight Services Agreement (“FSA”) with DHL Network Operations (USA), Inc. (each, our "major airline partner"). We have a significant presence in several of our major airline partners' key domestic hubs and focus cities, including Dallas, Houston, Phoenix and Washington-Dulles.

As of March 31, ~~2020,~~2021, we operated, under the Capacity Purchase Agreements, FSA or as spare, a fleet of ~~145~~163 aircraft with approximately ~~662~~440 daily departures. We operate 5945 CRJ-900 aircraft under our capacity purchase agreement with American (our "American Capacity Purchase Agreement") ~~and 20 CRJ-700~~ and 60 E-175 and 16 E-175LL aircraft under our capacity purchase agreement with United (our "United Capacity Purchase Agreement"). We operate 2 Boeing 737- F400 aircraft under the Flight Services Agreement with DHL Network Operations. For the three months ended March 31, ~~2020,~~2021, approximately ~~49%~~53% of our aircraft in scheduled service were operated for United, ~~and~~ approximately ~~51%~~45% were operated for ~~American.~~American and 2% were operated for DHL. All of our operating revenue in our ~~fiscal year ended September 30, 2019 (our "2019 fiscal year") and the~~ six months ended March 31, ~~2020~~2021 was derived from operations associated with our American and United Capacity Purchase ~~Agreements.~~Agreements and DHL Flight Services Agreement.

Our long-term capacity purchase agreements provide us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour (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) and flight actually flown, and reimbursement of certain direct operating expenses in exchange for providing regional flying on behalf of our major airline partners. Our capacity purchase agreements also shelter 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 capacity purchase agreements, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of our major airline partners. Our major airline partners control route selection, pricing, seat inventories, marketing and scheduling, and provide us with ground support services, airport landing slots and gate access.

On January 30, 2020 the World Health Organization declared an outbreak of a highly contagious form of an upper respiratory infection caused by COVID-19, a novel coronavirus strain commonly referred to as “coronavirus”. In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread, including in all of the markets in which we operate. The COVID-19 outbreak has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses; “shelter in place” and other governmental regulations; reduced spending due to both job losses and other effects attributable to COVID-19; an unprecedented decline in air travel.

The unprecedented and rapid spread of COVID-19 and the related travel restrictions and social distancing measures implemented throughout the world have significantly reduced demand for air travel. This reduction in demand has had an unprecedented and materially adverse impact on our revenues and financial position. The length and severity of the reduction in demand due to the pandemic is uncertain; accordingly, we expect the adverse impact to grow in the June 2020 quarter. While we are planning for a modest demand recovery beginning in the September 2020 quarter, the exact timing and pace of the recovery is uncertain given the significant impact of the pandemic on the overall U.S. and global economy. Our forecasted expense management and liquidity measures may be modified as we clarify the demand recovery timing. Since a portion of our revenue is fixed due to the structure of our capacity purchase agreements, the impact to Mesa will be less severe due to the significant reduction in our scheduled flying. In addition, we have limited exposure to fluctuations in passenger traffic, ticket and fuel prices. While our fixed revenue remains mostly unchanged, our variable revenue which based on the number of block hours actually flown, was significantly reduced in the last few weeks of March and we may experience further reductions. The initiatives and measures put in place to limit the spread of the virus has and will continue to have a material adverse impact on our business, financial position and results of operations.

In response to these developments, we have implemented measures to focus on the safety of our customers and employees, while at the same time seeking to mitigate the impact on our financial position and operations. These measures include, but are not limited to, the following:

~~Expense Management.~~ ~~With the reduction in revenue, we have, and will continue to implement cost saving initiatives, including:~~

The following discussion summarizes the key components of our condensed consolidated statements of operations.

Our condensed consolidated operating revenues consist primarily of contract revenue ~~flight services~~ as well as pass-through and other revenues.

Contract Revenue. Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our capacity purchase agreements with our major airline partners, along with the additional amounts received based on the number of flights and block hours flown. Contract revenues we receive from our major airline partners are paid and recognized by us on a weekly basis.

Pass-Through and Other. Pass-through and other revenue consists of passenger and hull insurance, aircraft property taxes, and certain maintenance costs related to our E-175 aircraft.

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. Fuel expense includes fuel and related fueling costs for flying we undertake outside of our capacity purchase agreements and flight service agreement, including aircraft repositioning and maintenance. All aircraft fuel and related fueling costs for flying under our capacity purchase agreements were directly paid and supplied by our major airline partners. ~~Accordingly, we~~The fuel and related cost for flying under our FSA were directly paid and supplied by DHL. We do not record an expense or the related revenue for fuel supplied by American and United for flying under our capacity purchase ~~agreements.~~agreements and DHL under our FSA.

Maintenance. Maintenance expense includes ~~costs related to engine overhauls, airframe, landing gear~~routine repair and ~~normal recurring~~ maintenance ~~which includes pass-through~~and heavy maintenance costs ~~related~~for airframes, engines, auxiliary power units and landing gears. Maintenance costs are expensed as incurred, except for certain maintenance contracts where labor and materials price risks have been transferred to ~~our E-175 aircraft,~~the service provider and require payment on a utilization basis, such as ~~well as~~flight hours. Costs incurred for maintenance ~~lease return obligations on our leased aircraft when~~and repair for utilization maintenance contracts where labor and materials price risks have been transferred to the expense is probable and can be reasonably estimated. We record these expenses using the direct expense method of accounting, wherein the expense is recognized 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. As a result of using the direct expense method, the timing ofservice provider are charged to maintenance expense ~~reflected in the financial statements may vary significantly period to period.~~based on contractual payment terms.

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

Aircraft and Traffic Servicing. Aircraft and traffic servicing includes expenses related to our capacity purchase agreements, including aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by our major airline 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 and Amortization. Depreciation expense is a periodic non-cash charge primarily related to aircraft, engine and equipment depreciation. Amortization expense is a periodic non-cash charge related to our customer relationship intangible asset.

Interest Expense. Interest expense is interest on our debt incurred to finance purchases of aircraft, engines, equipment as well as debt financing costs amortization.

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

Other Expense. Other expense includes expense derived from activities not classified in any other area of the condensed consolidated statements of income, including write-offs of miscellaneous third-party fees.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker 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 capacity purchase agreements.

While we operate under two separate capacity purchase agreements and one flight services agreement, we do not manage our business based on any performance measure at the individual contract level. Additionally, our chief operating decision maker (“CODM”) uses condensed 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.

We present Adjusted EBITDA and Adjusted EBITDAR in this Quarterly Report on Form 10-Q, which are not recognized financial measures under 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.

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

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

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; and (vi) 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. 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.

Three Months Ended March 31, ~~2020~~2021 Compared to Three Months Ended March 31, ~~2019~~2020

We had operating income of $16.8 million in our three months ended March 31, 2021 compared to operating income of $13.9 million in our three months ended March 31, ~~2020~~2020. In our three months ended March 31, 2021, we had net income of $5.7 million compared to ~~operating~~net income of ~~$34.4~~$1.9 million in our three months ended March 31, ~~2019. In our three months ended March 31, 2020, we had net income of $1.9 million compared to net income of $13.2 million in our three months ended March 31, 2019.~~2020. Our operating results for the three months ended March 31, ~~2020~~2021 reflected a decrease in contract revenue ~~primarily~~due to reduced rates to partners related to PSP2 and lower flying on our CRJ-900, CRJ-700, and E-175 fleet due to the impact of ~~COVID-19 and an increase in pass-through and other revenues primarily due to an increase in maintenance pass-through expense.~~COVID-19.

~~Our maintenance expense increased primarily due to more airframe C-checks and engine heavy maintenance events due to timing of events.~~ Flight operations expense ~~also increased this quarter due to higher pilot wages and pilot training expenses. Our aircraft rent~~ decreased in the three months ended March 31, ~~2020 compared~~2021 due to ~~the same period in 2019~~lower pilot and flight attendant wages and pilot training expenses. Our maintenance expense decreased primarily due to fewer heavy engine maintenance events and lower component contracts, parts, and labor expense, offset by higher c-check expense and pass-through maintenance. Aircraft rent expense decreased primarily due fewer leased engines. In addition, general and administrative expense decrease as a result of ~~purchasing ten CRJ-700 aircraft that were previously leased~~lower pass-through property taxes. Lastly, we recognized the Federal Grant received through the Payroll Support Agreement under ~~our GECAS Lease Facility. We also had an increase in depreciation expense primarily due to~~ the ~~purchase~~CARES Act with the U.S. Department of ~~ten CRJ-700 aircraft that were previously leased under our GECAS Lease Facility.~~the Treasury.

	Three Months Ended March 31,									Three Months Ended March 31,
	2020		2019		Change					2021		2020		Change
Operating revenues ($ in thousands):
Contract	$	165,781	$	169,771	$	(3,990	)	(2.4	)%	$	81,712	$	165,781	$	(84,069	)	(50.7	)%
Pass-through and other		14,115		7,376		6,739		91.4	%		15,568		14,115		1,453		10.3	%
Total operating revenues	$	179,896	$	177,147	$	2,749		1.6	%	$	97,280	$	179,896	$	(82,616	)	(45.9	)%

Operating data:
Available seat miles—ASMs (thousands)		2,611,940		2,654,286		(42,346	)	(1.6	)%		1,771,498		2,611,940		(840,442	)	(32.2	)%
Block hours		108,305		112,030		(3,725	)	(3.3	)%		73,942		108,305		(34,363	)	(31.7	)%
Revenue passenger miles—RPMs (thousands)		1,785,153		2,079,589		(294,436	)	(14.2	)%		1,148,498		1,785,153		(636,655	)	(35.7	)%
Average stage length (miles)		619		589		30		5.1	%		690		619		71		11.5	%
Contract revenue per available seat mile—CRASM (in cents)	¢ 6.35		¢ 6.40		¢ (0.05)			(0.8	)%	¢ 4.61		¢ 6.35		¢ 1.74			(27.4	)%
Passengers		2,838,412		3,483,947		(645,535	)	(18.5	)%		1,684,043		2,838,412		(1,154,369	)	(40.7	)%

"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.

Total operating revenue ~~increased~~decreased by ~~$2.7~~$82.6 million, or ~~1.6%~~45.9%, to ~~$179.9~~$97.3 million for our three months ended March 31, ~~2020~~2021 as compared to our three months ended March 31, ~~2019.~~2020. Contract revenue decreased by ~~$4.0~~$84.1 million, or ~~2.4%~~50.7%, to ~~$165.8~~$81.7 million primarily due to a decrease in flying on our CRJ-900, CRJ-700, and E-175 fleet as a result of the impact of COVID-19, temporary reduced rates to our partners and ~~removal of five~~flying fewer aircraft ~~from our~~under the American ~~Capacity Purchase Agreement.~~CPA. Our block hours flown during our three months ended March 31, ~~2020~~2021, decreased ~~3.3%~~31.7% compared to the three months ended March 31, ~~2019 primarily~~2020 due to decreased flying on all our ~~CRJ-900 and E-175~~ fleets. Our pass-through and other revenue increased during our three months ended March 31, ~~2020~~2021 by ~~$6.7~~$1.5 million, or ~~91.4%~~10.3%, to ~~$14.1~~$15.6 million primarily due to pass-through maintenance revenue related to our E-175 fleet. In addition, the decrease is attributable to reduced rates to partners related to PSP2 and fewer aircraft operating under the Amended and Restated American Purchase Agreement

	Three Months Ended March 31,									Three Months Ended March 31,
	2020		2019		Change					2021			2020		Change
Operating expenses ($ in thousands):
Flight operations	$	52,891	$	49,366	$	3,525		7.1	%	$	37,403		$	52,891	$	(15,488	)	(29.3	)%
Fuel		188		101		87		86.1	%		198			188		10		5.3	%
Maintenance		64,335		45,380		18,955		41.8	%		51,773			64,335		(12,562	)	(19.5	)%
Aircraft rent		12,285		14,110		(1,825	)	(12.9	)%		9,992			12,285		(2,293	)	(18.7	)%
Aircraft and traffic servicing		1,336		1,065		271		25.4	%		743			1,336		(593	)	(44.4	)%
General and administrative		14,500		13,472		1,028		7.6	%		11,164			14,500		(3,336	)	(23.0	)%
Depreciation and amortization		20,469		19,276		1,193		6.2	%		20,705			20,469		236		1.2	%
Lease termination											4,508			—		4,508		100.0	%
Government grant recognition											(55,967	)		—		(55,967	)	100.0	%
Total operating expenses	$	166,004	$	142,770	$	23,234		16.3	%	$	80,519		$	166,004	$	(85,485	)	(51.5	)%

Operating data:
Available seat miles—ASMs (thousands)		2,611,940		2,654,286		(42,346	)	(1.6	)%		1,771,498			2,611,940		(840,442	)	(32.2	)%
Block hours		108,305		112,030		(3,725	)	(3.3	)%		73,942			108,305		(34,363	)	(31.7	)%
Average stage length (miles)		619		589		30		5.1	%		690			619		71		11.5	%
Departures		55,435		59,225		(3,790	)	(6.4	)%		35,344			55,435		(20,091	)	(36.2	)%

Flight Operations. Flight operations expense ~~increased $3.5~~decreased $15.5 million, or ~~7.1%~~29.3%, to ~~$52.9~~$37.4 million for our three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The ~~increase~~decrease was primarily driven by ~~an increase~~a decrease in pilot and flight attendant wages due to lower block hours as well as pilot training related costs.

Fuel.Fuel expense increased ~~$0.09~~$0.01 million, or ~~86.1%~~5.3%, to $0.2 million for our three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The increase was primarily driven by ~~an increase in ferry flight fuel.~~fuel expense related to c-checks. All fuel costs related to flying under our capacity purchase agreements during our three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were directly paid to suppliers by our major airline partners.

Maintenance.Aircraft maintenance costs ~~increased $19.0~~decreased $12.6 million, or ~~41.8%~~19.5%, to ~~$64.3~~$51.8 million for our three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. This ~~increase~~decrease was primarily driven by a decrease in engine overhaul, component contracts, parts, and labor and other expense. This decrease was partially offset by an increase in c-check, pass-through c-check, and pass-through engine overhaul ~~expense and airframe C-Check~~ expense. Total pass-through maintenance expenses reimbursed by our major airline partners increased by ~~$6.8~~$2.3 million during our three months ended March 31, ~~2020.~~2021.

The following table presents information regarding our maintenance costs during ~~our~~the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 (in thousands):

	Three Months Ended March 31,										Three Months Ended March 31,
	2020		2019			Change					2021		2020		Change
Engine overhaul	$	13,794	$	5,610		$	8,184		145.9	%	$	4,709	$	13,794	$	(9,085	)	(65.9	)%
Pass-through engine overhaul		704		(352	)		1,056		(300.0	)%		2,173		704		1,469		208.7	%
C-check		6,640		4,702			1,938		41.2	%		8,506		6,640		1,866		28.1	%
Pass-through C-check		3,873		—			3,873		100.0	%		5,603		3,873		1,730		44.7	%
Component contracts		9,395		9,178			217		2.4	%		6,370		9,395		(3,025	)	(32.2	)%
Rotable and expendable parts		7,461		7,593			(132	)	(1.7	)%		5,064		7,461		(2,397	)	(32.1	)%
Other pass-through		4,511		2,657			1,854		69.8	%		3,658		4,511		(853	)	(18.9	)%
Labor and other		17,957		15,992			1,965		12.3	%		15,690		17,957		(2,267	)	(12.6	)%
Total	$	64,335	$	45,380		$	18,955		41.8	%	$	51,773	$	64,335	$	(12,562	)	(19.5	)%

Aircraft Rent. Aircraft rent expense decreased ~~$1.8~~$2.3 million, or ~~12.9%~~18.7%, to ~~$12.3~~$10.0 million for our three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The decrease is attributable to a ~~$3.9~~$2.3 million decrease ~~in aircraft lease expense as a result of purchasing ten CRJ-700 aircraft which were previously leased under the GECAS Lease Facility in June 2019, offset by a $2.1 million increase~~ in engine rent due to ~~additional~~fewer leased engines.

Aircraft and Traffic Servicing. Aircraft and traffic servicing expense ~~increased $0.3~~decreased $0.6 million, or ~~25.4%~~44.4%, to ~~$1.3~~$0.7 million for our three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The ~~increase~~decrease is primarily due to ~~an increase~~a decrease in interrupted trip expense ~~offset partially by~~and pass-through regulatory charges. For our three months ended March 31, 2021 and 2020, 49.9% and ~~2019,~~ 32.0% ~~and 57.3%~~, respectively, of our aircraft and traffic servicing expenses were reimbursed by our major airline partners.

General and Administrative. General and administrative expense ~~increased $1.0~~decreased $3.3 million, or ~~7.6%~~23.0%, to ~~$14.5~~$11.2 million for our three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The ~~increase~~decrease is primarily due to ~~an increase~~a decrease in ~~wage expense.~~pass-through property tax. For our three months ended March 31, 2021 and 2020, ~~and 2019, $4.9~~$2.9 million and ~~$4.5~~$4.9 million, respectively, of our insurance and property tax expenses were reimbursed by our major airline partners.

Depreciation and Amortization. Depreciation and amortization expense increased ~~$1.2~~$0.2 million, or ~~6.2%~~1.2%, to ~~$20.5~~$20.7 million for our three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The increase is primarily attributable to an increase in ~~depreciation expense related to the purchase of ten CRJ-700 aircraft which were previously leased under the GECAS Lease Facility. The increase was also partially related to the purchase of~~rotable inventory and spare engines ~~and rotable inventory,~~depreciation expense, partially offset by a decrease in ~~aircraft enhancement depreciation.~~amortization of intangibles expense.

~~Other~~Lease Termination. Lease termination expense ~~decreased $6.3~~increased $4.5 million, or ~~37.2%~~100.0%, to ~~$10.7~~$4.5 million for our three months ended March 31, ~~2020,~~2021 compared to the same period in ~~2019.~~2020.This increase is attributable to the termination expense resulting from the purchase of CRJ-900 aircraft, which were previously leased from Bombardier Capital.

Government grant recognition. Payroll Support Government Plan funds increased $56.0 million, or 100.0%, to $56.0 million for our three months ended March 31, 2021 compared to the same period in 2020. Under the CARES Act, the government provided the Company with a grant of $56.0 million in payroll support for the period of December 2020 through March 2021.

Other expense decreased $1.5 million, or 14.2%, to $9.2 million for our three months ended March 31, 2021, compared to the same period in 2020. The decrease is primarily a result of a decrease in interest expense due to lower interest rates on our ~~new Spare Engine Facility~~loan agreement with U.S. Department of Treasury and a decrease in outstanding aircraft principal balances. ~~Additionally, we had one-time $3.6 million early termination fee related to our engine financing in the three months ended March 31, 2019.~~

The Company's effective tax rate (ETR) from continuing operations was 24.9% for the three months ended March 31, 2021 and 40.9% for the three months ended March 31, ~~2020 and 23.6% for~~2020. The Company's ETR during the three months ended March 31, ~~2019.~~ 2021 was different from the U.S. federal statutory rate of 21% primarily due to permanent book and tax deductible expense differences, vesting of stock compensation where the tax deduction differed from the book expense, state taxes, changes in the valuation allowance against state net operating losses, and changes in state apportionment and state statutory rates. 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.

The Company's current year effective tax rate increased compared to the prior year tax rate as a result of ~~an increase~~a decrease to the forecast for the current fiscal year, as the Company's permanent differences between book and taxable income intherefore have a larger impact on the ~~deductibility of meals, employer provided parking, and compensation of officers.~~Company's effective tax rate. In addition, the Company's rate varied from the prior year's as a result of the vesting of stock compensation where the tax deduction differed from the book expense, state taxes, changes in the valuation allowance against state net operating losses, and changes in state statutory rates. In addition, changes to the Company forecast for fiscal 2020 related to the implications of the coronavirus pandemic had the effect of increasing the effective tax rate for the quarter, as the Company’s forecasted pre-tax book income decreased substantially from the prior year.

The income tax provision for the three months ended March 31, 2020 results in an effective tax rate of 40.9% which differs from the U.S. federal statutory rate of 21% primarily due to permanent book and tax deductible expense differences, state taxes, changes in the valuation allowance against state net operating losses, routine stock vestings and exercises, and changes in state apportionment and state statutory rates, and the impact of a lower forecasted income projection for the year due to concerns around the coronavirus pandemic and the impact on air travel.

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, ~~2019,~~2020, the Company had aggregate federal and state net operating loss carryforwards of ~~$478.2~~$512.4 million and ~~$228.0~~$223.9 million, respectively, which expire in ~~2027-2037~~2027-2038 and ~~2020-2039,~~2021-2040, respectively. Approximately ~~$2.7~~$0.7 million of state net operating loss carryforwards are ~~expiring~~expected to expire in ~~2020.~~

Six Months Ended March 31, ~~2020~~2021 Compared to Six Months Ended March 31, ~~2019~~2020

We had operating income of $43.7 million in our six months ended March 31, 2021 compared to operating income of $41.1 million in our six months ended March 31, ~~2020~~2020. In our six months ended March 31, 2021, we had net income of $19.8 million compared to ~~operating~~net income of ~~$73.6~~$12.7 million in our six months ended March 31, ~~2019. In our six months ended March 31, 2020, we had net income of $12.7 million compared to net income of $32.3 million in our six months ended March 31, 2019.~~ 2020. Our operating results for the six months ended March 31, ~~2020~~2021 reflected a decrease in contract revenue ~~primarily~~due to reduced rates to partners related to ~~removal~~PSP2 and lower flying on our CRJ-900, CRJ-700, and E-175 fleet due to the impact of ~~five aircraft from our American Capacity Purchase Agreement~~COVID-19 and an increase in pass-through and other revenues primarily due to an increase in E-175 maintenance pass-through expense.

Flight operations expense ~~increased primarily due to more airframe C-Checks and engine heavy maintenance events due to timing of events. Our aircraft rent~~ decreased in the six months ended March 31, ~~2020 compared~~2021 due to ~~the same period in 2019~~lower pilot and flight attendant wages and pilot training expenses. Our maintenance expense decreased primarily due to fewer c-checks and heavy engine maintenance events and lower component contracts, parts, and labor expense, offset by higher pass-through maintenance. Aircraft rent expense decreased primarily due fewer leased engines. In addition, general and administrative expense decreased as a result of ~~purchasing ten CRJ-700 aircraft that were previously leased~~lower pass-through property taxes. Lastly, we recognized the Federal Grant received through the Payroll Support Agreement under ~~our GECAS Lease Facility. We also had an increase in depreciation expense primarily due to~~ the ~~purchase~~CARES Act with the U.S. Department of ~~ten CRJ-700 aircraft that were previously leased under our GECAS Lease Facility.~~the Treasury.

Operating Revenues	Six Months Ended March 31,
										Six Months Ended March 31,
	2020		2019		Change					2021		2020		Change
Operating revenues ($ in thousands):
Contract	$	337,580	$	340,220	$	(2,640	)	(0.8	)%	$	208,870	$	337,580	$	(128,710	)	(38.1	)%
Pass-through and other		26,351		15,083		11,268		74.7	%		38,781		26,351		12,430		47.2	%
Total operating revenues	$	363,931	$	355,303	$	8,628		2.4	%	$	247,651	$	363,931	$	(116,280	)	(32.0	)%

Operating data:
Available seat miles—ASMs (thousands)		5,347,325		5,363,185		(15,860	)	(0.3	)%		3,442,441		5,347,325		(1,904,884	)	(35.6	)%
Block hours		223,866		227,030		(3,164	)	(1.4	)%		143,189		223,866		(80,677	)	(36.0	)%
Revenue passenger miles—RPMs (thousands)		3,936,747		4,190,783		(254,036	)	(6.1	)%		2,319,909		3,936,747		(1,616,838	)	(41.1	)%
Average stage length (miles)		595		583		12		2.1	%		664		595		69		11.6	%
Contract revenue per available seat mile—CRASM (in cents)	¢ 6.31		¢ 6.34		¢ (0.03)			(0.5	)%	¢ 6.07		¢ 6.31		¢ (0.24)			(3.8	)%
Passengers		6,535,550		7,104,062		(568,512	)	(8.0	)%		3,513,757		6,535,550		(3,021,793	)	(46.2	)%

"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.

Total operating revenue ~~increased~~decreased by ~~$8.6~~$116.3 million, or ~~2.4%~~32.0%, to ~~$363.9~~$247.7 million for our six months ended March 31, ~~2020~~2021 as compared to our six months ended March 31, ~~2019.~~2020. Contract revenue decreased by ~~$2.6~~$128.7 million, or ~~0.8%~~38.1%, to ~~$337.6~~$208.9 million primarily due to a decrease in flying on our CRJ-900, ~~fleet~~CRJ-700, and ~~removal of five aircraft from our American Capacity Purchase Agreement, offset by an increase in the United contract revenue~~E-175 fleet as a result of ~~changing~~ the ~~structure~~impact of COVID-19, temporary reduced rate to our ~~incentive reimbursement.~~partners and flying fewer aircraft under the American CPA. Our block hours flown during our six months ended March 31, ~~2020~~2021 decreased ~~1.4%~~36.0% compared to the six months ended March 31, ~~2019~~2020 primarily due to decreased flying on our CRJ-900, CRJ-700, and E-175 fleets. Our pass-through and other revenue increased during our six months ended March 31, ~~2020~~2021 by ~~$11.3~~$12.4 million, or ~~74.7%~~47.2%, to ~~$26.4~~$38.8 million primarily due to pass-through maintenance revenue related to our E-175 fleet.

~~Operating Expenses~~ In addition, the decrease is attributable to reduced rates to partners related to PSP2 and fewer aircraft operating under the Amended and Restated American Purchase Agreement.

	Six Months Ended March 31,									Six Months Ended March 31,
	2020		2019		Change					2021			2020		Change
Operating expenses ($ in thousands):
Flight operations	$	105,535	$	102,611	$	2,924		2.8	%	$	74,367		$	105,535	$	(31,168	)	(29.5	)%
Fuel		358		222		136		61.3	%		588			358		230		64.2	%
Maintenance		122,430		85,182		37,248		43.7	%		104,637			122,430		(17,793	)	(14.5	)%
Aircraft rent		23,614		28,229		(4,615	)	(16.3	)%		20,040			23,614		(3,574	)	(15.1	)%
Aircraft and traffic servicing		2,400		1,999		401		20.1	%		1,644			2,400		(756	)	(31.5	)%
General and administrative		27,496		25,686		1,810		7.0	%		24,237			27,496		(3,259	)	(11.9	)%
Depreciation and amortization		41,021		37,767		3,254		8.6	%		41,175			41,021		154		0.4	%
Lease termination											4,508			—		4,508		100.0	%
Government grant recognition											(67,278	)		—		(67,278	)	100.0	%
Total operating expenses	$	322,854	$	281,696	$	41,158		14.6	%	$	203,918		$	322,854	$	(118,936	)	(36.8	)%

Operating data:
Available seat miles—ASMs (thousands)		5,347,325		5,363,185		(15,860	)	(0.3	)%		3,442,441			5,347,325		(1,904,884	)	(35.6	)%
Block hours		223,866		227,030		(3,164	)	(1.4	)%		143,189			223,866		(80,677	)	(36.0	)%
Average stage length (miles)		595		583		12		2.1	%		664			595		69		11.6	%
Departures		118,160		120,759		(2,599	)	(2.2	)%		182,557			118,160		64,397		54.5	%

Flight Operations. Flight operations expense ~~increased $2.9~~decreased $31.2 million, or ~~2.8%~~29.5%, to ~~$105.5~~$74.4 million for our six months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~ 2020. The ~~increase~~decrease was primarily driven by ~~an increase~~a decrease in pilot and flight attendant ~~wages.~~wages due to lower block hours as well as pilot training related costs.

Fuel.Fuel expense increased ~~$0.1~~$0.2 million, or ~~61.3%~~64.2%, to ~~$0.4~~$0.6 million for our six months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~ 2020. The increase was primarily driven by ~~an increase in ferry flight fuel.~~fuel expense related to the delivery of the new E-175 aircraft. All fuel costs related to flying under our capacity purchase agreements during our six months ended March 31, ~~2020~~2021 and ~~2019~~2020 were directly paid to suppliers by our major airline partners.

Maintenance.Aircraft maintenance costs ~~increased $37.2~~decreased $17.8 million, or ~~43.7%~~14.5%, to ~~$122.4~~$104.6 million for our six months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. This ~~increase~~decrease was primarily driven by ~~an increase~~a decrease in engine overhaul expense, ~~airframe C-Check expense,~~component contracts, parts, and labor and other expense. This decrease was partially offset by an increase in pass-through engine overhaul and pass-through c-check expense. Total pass-through maintenance expenses reimbursed by our major airline partners increased by ~~$10.3~~$14.8 million during our six months ended March 31, ~~2020.~~2021.

The following table presents information regarding our maintenance costs during our six months ended March 31, ~~2020~~2021 and ~~2019~~2020 (in thousands):

	Six Months Ended March 31,								Six Months Ended March 31,
	2020		2019		Change				2021		2020		Change
Engine overhaul	$	22,545	$	8,230	$	14,315	173.9	%	$	9,462	$	22,545	$	(13,083	)	(58.0	)%
Pass-through engine overhaul		2,555		1,189		1,366	114.9	%		11,806		2,555		9,251		362.1	%
C-check		12,692		6,212		6,480	104.3	%		11,464		12,692		(1,228	)	(9.7	)%
Pass-through C-check		5,093		—		5,093	100.0	%		12,741		5,093		7,648		150.2	%
Component contracts		19,082		18,373		709	3.9	%		12,157		19,082		(6,925	)	(36.3	)%
Rotable and expendable parts		14,866		14,777		89	0.6	%		10,382		14,866		(4,484	)	(30.2	)%
Other pass-through		8,848		5,025		3,823	76.1	%		6,770		8,848		(2,078	)	(23.5	)%
Labor and other		36,749		31,376		5,373	17.1	%		29,855		36,749		(6,894	)	(18.8	)%
Total	$	122,430	$	85,182	$	37,248	43.7	%	$	104,637	$	122,430	$	(17,793	)	(14.5	)%

Aircraft Rent. Aircraft rent expense decreased ~~$4.6~~$3.6 million, or ~~16.3%~~15.1%, to ~~$23.6~~$20.0 million for our six months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~ 2020. The decrease is attributable to ~~a $7.8~~$3.6 million decrease ~~in aircraft lease expense as a result of purchasing ten CRJ-700 aircraft which were previously leased under the GECAS Lease Facility in June 2019, offset by a $3.2 million increase~~ in engine rent due to ~~additional~~fewer leased engines.

Aircraft and Traffic Servicing. Aircraft and traffic servicing expense ~~increased $0.4~~decreased $0.8 million, or ~~20.1%~~31.5%, to ~~$2.4~~$1.6 million for our six months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The ~~increase~~decrease is primarily due to ~~an increase~~a decrease in interrupted trip expense ~~offset partially by~~and pass-through regulatory ~~charges.~~charges, partially offset by an increase in pass-through legal fees related to our GoJet lease. For our six months ended March 31, 2021 and 2020, 54.7% and ~~2019,~~ 36.5% ~~and 57.2%~~, respectively, of our aircraft and traffic servicing expenses were reimbursed by our major airline partners.

General and Administrative. General and administrative expense ~~increased $1.8~~decreased $3.3 million, or ~~7.0%~~11.9%, to ~~$27.5~~$24.2 million for our six months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The ~~increase~~decrease is primarily due to ~~an increase~~a decrease in pass-through ~~insurance expenses and wage expense.~~property taxes. For our six months ended March 31, 2021 and 2020, ~~and 2019, $9.3~~$7.4 million and ~~$7.6~~$9.3 million, respectively, of our insurance and property tax expenses were reimbursed by our major airline partners.

Depreciation and Amortization. Depreciation and amortization expense increased ~~$3.3~~$0.2 million, or ~~8.6%~~0.4%, to ~~$41.0~~$41.2 million for our six months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~ 2020. The increase is primarily attributable to an increase in ~~depreciation expense related to the purchase of ten CRJ-700 aircraft which were previously leased under the GECAS Lease Facility. The increase was also partially related to the purchase of~~ spare engines ~~and rotable inventory,~~depreciation expense, partially offset by a decrease in ~~aircraft improvement depreciation.~~amortization of intangibles expense.

~~Other~~Lease Termination. Lease termination expense ~~decreased $7.7~~increased $4.5 million, or ~~24.6%~~100.0%, to ~~$23.6~~$4.5 million for our six months ended March 31, ~~2020,~~2021 compared to the same period in ~~2019.~~ 2020. This increase is attributable to the termination expense resulting from the purchase the purchase of CRJ-900 aircraft, which was previously leased from Bombardier Capital.

Government grant recognition. Payroll Support Government Plan funds increased $67.3 million, or 100.0%, to $67.3 million for our six months ended March 31, 2021 compared to the same period in 2020. Under the CARES Act, the government provided the Company with a grant of $56.0 million in payroll support for the period of December 2020 through March 2021. We also recognized $11.3 million of the grant amount received for the period of April through October 2020 as of December 31, 2020.

Other expense decreased $6.4 million, or 26.9%, to $17.2 million for our six months ended March 31, 2021, compared to the same period in 2020. The decrease is primarily a result of a decrease in interest expense due to lower interest rates on our ~~new Spare Engine Facility~~loan agreement with U.S. Department of Treasury and a decrease in outstanding aircraft principal ~~balances. Additionally, we had one-time $3.6 million early termination fee related to our engine financing in the six months ended March 31, 2019.~~balances.

The income tax expense ~~(benefit)~~ totaled $6.7 million for the six months ended March 31, 2021 as compared to a tax expense of $4.8 million for the six months ended March 31, ~~2020 as compared to a tax expense (benefit) of $10.0 million for the six months ended March 31, 2019.~~2020. The effective tax rate was ~~27.6%~~25.3% versus ~~23.7%~~27.6% in the prior year.

The effective tax rate for the six months ended March 31, ~~2020~~2021 was impacted by ~~permanent difference between~~vesting of stock compensation where the tax deduction differed from the book ~~and taxable income in the deductibility of meals, employer provided parking, and compensation of officers. The effective rate was also impacted by~~expense, state taxes, changes in the valuation allowance against state net operating losses, ~~vesting and exercises of stock compensation,~~ and changes in ~~state apportionment and~~ state statutory rates.

We file income tax returns in the US and in various state jurisdictions with varying statutes of limitations. We are generally no longer subject to income tax examination by tax authorities for years prior to ~~2016~~2017 and ~~2015~~2016 for federal and state purposes, respectively, with the exception of the examination of our net operating losses. The balance of unrecognized tax benefits is not anticipated to fluctuate significantly from fiscal ~~2019~~2020 to fiscal ~~2020.~~2021. It is our policy to recognize interest expense and penalties related to uncertain income tax matters as a component of income tax expense.

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

	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Reconciliation:
Net income	$	1,885		$	13,249		$	12,670		$	32,330		$	5,689		$	1,885		$	19,807		$	12,670
Income tax expense		1,307			4,086			4,842			10,035			1,890			1,307			6,711			4,842
Income before taxes	$	3,192		$	17,335		$	17,512		$	42,365		$	7,579		$	3,192		$	26,518		$	17,512
Adjustments ⁽¹⁾⁽²⁾		—			3,616			—			3,616			4,508			—			3,558			—
Adjusted income before taxes	$	3,192		$	20,951		$	17,512		$	45,981			12,087			3,192			30,076			17,512
Interest expense		11,673			13,772			24,300			28,614			8,755			11,673			17,837			24,300
Interest income		(36	)		(299	)		(94	)		(455	)		(79	)		(36	)		(205	)		(94	)
Depreciation and amortization		20,469			19,276			41,021			37,767			20,705			20,469			41,175			41,021
Adjusted EBITDA	$	35,298		$	53,700		$	82,739		$	111,907		$	41,468		$	35,298		$	88,883		$	82,739
Aircraft rent		12,285			14,110			23,614			28,229			9,992			12,285			20,040			23,614
Adjusted EBITDAR	$	47,583		$	67,810		$	106,353		$	140,136		$	51,460		$	47,583		$	108,923		$	106,353

As a result of the COVID-19 pandemic, we have taken, and are continuing to take, certain actions to increase liquidity and strengthen our financial ~~position which~~position. These actions include:

~~Reducing planned heavy engine and airframe maintenance events by approximately $3.7 million in the current fiscal year.~~

Working with our major partners and original equipment manufacturers ("OEM") to delay the timing of our future aircraft and spare engine deliveries.

~~Drew $23.0~~In February 2021, the Company was granted $48.7 million ~~from our previously undrawn revolving credit facility~~in financial assistance by the Department of the Treasury under the Payroll Support Program Extension (“PSP2”) under the Consolidated Appropriations Act of 2021. In March 2021, we were notified that, based on funding availability, recipients that were currently in compliance with ~~CIT Bank, N.A.~~executed PSP agreements would receive an additional award amount. As a result, the Company was granted an additional $7.3 million through the PSP2 for a total grant of $56.0 million. The additional $7.3 million was received in April 2021.

~~One~~On April 15, 2021, the Company was notified by the U.S. Department of ~~our aircraft lenders has agreed~~the Treasury we are eligible to ~~defer $28 million~~receive funds under the third Payroll Support Program (PSP3), which was created under the American Recovery Plan Act of ~~principal debt payments with one of our aircraft lenders otherwise due beginning~~2021 (ARP), enacted on March 19, 2020, to and including September 30, 2020. All Deferred Payments shall be due in a lump sum payment on September 30, 2020 per the letter agreement dated April 9, 2020. Although the agreement is to pay the full amount back on September 30, 2020, the11, 2021. The Company ~~is seeking more favorable repayment terms from the lender. There is no certainty on whether the repayment terms~~expects it will be ~~able to be modified.~~

~~In April 2020, we were granted $92.5 million in emergency relief through~~eligible and estimates the ~~payroll support program of the CARES Act to be paid in installments through September 2020. We~~amount is approximately $52.2 million.The Company received the first installment of ~~$30.8~~$26.1 million inon April ~~2020 and the remaining $61.6 million is scheduled to be paid to Mesa in four equal payments from June to September 2020.~~

The relief payments are conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other conditions include continuing essential air service as directed by the U.S. Department of Transportation and certain limitations on executive compensation.

The CARES Act also provides for up to $25 billion in secured loans to the airline industry. We have submitted an application for a loan under the loan program of $184 million for working capital, $568 million for financing new equipment and $252 million for financing existing equipment and are awaiting the outcome of the application process.

The CARES Act provides for deferred payment of the employer portion of social security taxes through the end of 2020. The Company expects to defer approximately $7.0 million with 50% of the deferred amount to be repaid on December 31, 2021 and the remaining 50% to be repaid on December 31, 2022.

~~These aforementioned reliefs from the CARES Act are expected to provide liquidity during the stay at home and recovery periods this year.~~

We expect to meet our cash needs for the next twelve months with cash and cash equivalents, financing arrangements, government assistance from the CARES Act, and cash flows from operations. As of March 31, 2020, we had $52 million in unrestricted liquidity. Additionally, we have five unencumbered CRJ-700 aircraft available for potential financing arrangements if needed.23, 2021.

We require cash to fund our operating expenses and working capital requirements, including outlays for capital expenditures, aircraft pre-delivery payments, maintenance, aircraft rent and to pay 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 the cash grant we received under the payroll support programs (PSP, PSP2, PSP3) and the Loan and Guarantee Agreement we entered into with the Treasury (the “US Treasury

Loan Agreement”), each under the CARES Act, cash on hand, cash generated from operations and funds from external borrowings. In the near term, we expect to fund our primary cash requirements through cash generated from operations and cash and cash equivalents on hand. We also have the ability to utilize our credit and guaranty agreement (the "CIT Revolving Credit Facility") pursuant to which the CIT Lenders committed to lend to Mesa Airlines and Mesa Air Group—Airline Inventory Management, LLC, ("~~MAG-AIM") revolving loans in the aggregate principal amount of up to $35.0 million. As of March 31, 2020, $12.0 remains available until the facility matures on August 12, 2022.~~borrowings.

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

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 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, short-term investments, existing credit facilities, financing arrangements and government assistance ~~from~~under the CARES Act, 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 are primarily directed toward our aircraft fleet and flight equipment. Our capital expenditures, net of purchases of rotable spare parts and aircraft and spare engine financing for ~~three~~the six months ending March ~~31,2020~~31,2021 is approximately ~~2.9%~~0.9% of annual revenue, which is ~~higher~~lower compared to our historical expense ~~of approximately 1.2% to 1.5% of annual revenues~~as the Company is focusing on cost savings due to ~~expenses incurred related to aircraft enhancements.~~COVID 19 pandemic impact on the airline industry. 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 March 31, ~~2020,~~2021, our principal sources of liquidity were cash and cash equivalents of ~~$52.4~~$147.9 million. In addition, we had restricted cash of $3.4 million as of March 31, 2020. Restricted cash includes certificates of deposit that secure letters of credit issued for particular airport authorities as required in certain lease agreements. Primary uses of liquidity are capital expenditures, and debt repayments. 2021. As of March 31, ~~2020,~~2021, we also had $718.2 million in secured indebtedness incurred primarily in connection with our financing of aircraft. As of March 31, 2021, we had ~~$168.2~~$101.8 million of short-term debt, excluding ~~financing~~capital leases, and ~~$619.8~~$618.0 million of long-term debt excluding ~~financing leases.~~

Sources of cash for the six months ended March 31, 2020 were primarily cash flows from operations of $65.2 million. This positive cash flow was primarily driven by receipts from performance under our capacity purchase agreements.capital leases.

As of March 31, ~~2020,~~2021, we had $3.4 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,~~particular airport authorities, worker's compensation insurance, property and casualty insurance and other business ~~needs.~~needs as required in certain lease agreements. Pursuant to the term of this agreement, ~~$3.5~~$3.4 million of outstanding letters of credit are required to be collateralized by amounts on deposit.

The following table presents information regarding our cash flows for each of the ~~three~~six months ended March 31, ~~2020~~2021 and ~~2019~~2020 (in thousands):

	Six Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2021			2020
Net cash provided by operating activities	$	65,202		$	69,770		$	78,575		$	65,202
Net cash used in investing activities		(24,773	)		(18,491	)		(11,675	)		(24,773	)
Net cash used in by financing activities		(57,090	)		(77,024	)
Net decrease in cash and cash equivalents		(16,661	)		(25,745	)
Net cash used in financing activities								(18,522	)		(57,090	)
Net increase (decrease) in cash and cash equivalents								48,378			(16,661	)
Cash and cash equivalents at beginning of period		72,501			107,134			102,841			72,501
Cash and cash equivalents at end of period	$	55,840		$	81,389		$	151,219		$	55,840

During our six months ended March 31, 2021, we had cash flow provided by operating activities of $78.6 million. We had net income of $19.8 million adjusted for the following significant non-cash items: depreciation and amortization of $41.2 million, stock-based compensation of $1.7 million, deferred income taxes of $6.6 million, amortization of deferred credits of $(2.3) million, amortization of debt discount and issuance costs of $5.0 million, gain on extinguishment of debt of $(1.0) million, loss on contract termination of $4.5 million. We had a net change of $2.9 million within other net operating assets and liabilities largely driven by an increase in accounts payable, deferred revenue and decrease in accrued liabilities during our six months ended March 31, 2021.

During our six months ended March 31, 2020, we had cash flow provided by operating activities of $65.2 million. We had net income of $12.7 million adjusted for the following significant non-cash items: depreciation and amortization of $41.0 million, stock-based compensation of $2.5 million, deferred income taxes of $4.5million, amortization of deferred credits of $(2.0) million, amortization of debt financing costs and accretion of interest on non-interest bearing subordinated notes of $2.1 million and $0.5 million loss on disposal of assets. We had a net change of $3.9 million within other net operating assets and liabilities largely driven by an increase in accrued liability during our six months ended March 31, 2020.

During our six months ended March 31, ~~2019,~~2021, net cash flow ~~provided by operating~~used in investing activities of $69.8 million reflects our growth and execution of our strategic initiatives. We had net income of $32.3 million adjusted for the following significant non-cash items: depreciation and amortization of $37.8 million, stock-based compensation of $2.8 million, deferred income taxes of $10.0 million, amortization of unfavorable lease liabilities and deferred credits of $(5.7) million, amortization of debt financing costs and accretion of interest on non-interest bearing subordinated notes of $2.0 million, and loss on extinguishment of debt of $3.6totaled $11.7 million. We ~~had a~~invested $2.9 million in inventory, $1.6 million in aircraft purchases, $0.1 million in vehicles, $0.7 million in tools, equipment and miscellaneous projects and $6.4 million in net ~~change of $(13.1) million within other net operating assets~~returns and ~~liabilities largely driven by an increase in prepaid expenses~~payments on equipment and other ~~current assets primarily due to aircraft lease payments during our six months ended March 31, 2019.~~

During our six months ended March 31, 2020, net cash flow used in investing activities totaled ~~$(24.8)~~$24.8 million. We invested ~~$(3.6)~~$3.6 million in aircraft improvements, ~~$(7.6)~~$7.6 million in inventory, ~~$(1.7)~~$1.7 million in miscellaneous projects and ~~$(13.8)~~$11.8 million in ~~lease~~net returns and payments on equipment ~~deposits offset~~and other deposits.

Net Cash Flows Provided by ~~$2.0 million from return of lease and equipment deposits.~~Financing Activities

During our six months ended March 31, ~~2019,~~2021, net cash flow used in ~~investing~~financing activities ~~totaled $(18.5)~~was $18.5 million. We ~~invested $(34.3)~~received $195.0 million ~~in six spare engines and aircraft improvements, and $(7.3)~~of proceeds from our US Treasury Loan Agreement. We made $212.0 million ~~in lease and equipment deposits offset by $3.0~~of principal repayments on long-term debt during the period. We incurred $1.3 million ~~from return~~ of ~~lease and equipment deposits million in net equipment deposits, and $20.0 million from sales of investment securities.~~

During our six months ended March 31, 2020, net cash flow used in financing activities was ~~$(57.1)~~$57.1 million. We drew $23.0 million from our $35.0 million working capital draw loan for operational needs. We made ~~$(79.4)~~$79.4 million of principal repayments on long-term debt during the period. We incurred ~~$(0.5)~~$0.5 million of costs related to debt financing and ~~$(0.2)~~$0.2 million of costs related to the repurchase of shares of our common stock.

During our six months ended March 31, 2019, net cash flow used in financing activities was $(77.0) million. We received $91.2 million in proceeds from long-term debt related to spare aircraft engine financing. We made $(163.7) million of principal repayments on long-term debt during the period. We incurred $(2.5) million of costs related to debt financing, and $(1.7) million in debt prepayment costs.

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a ~~company~~Company has (i) made guarantees, (ii) a retained or a contingent interest in transferred assets, (iii) an obligation under derivative instruments classified as equity or (iv) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the ~~company,~~Company, or that engages in leasing, hedging or research and development arrangements with the ~~company.~~Company.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission (the "SEC").

A majority of our leased aircraft are leased through trusts formed for the sole purpose of purchasing, financing and leasing aircraft to us. Because these are single-owner trusts in which we do not participate, we are not at risk for losses and we are not considered the primary beneficiary. We believe that our maximum exposure under the leases are the remaining lease payments and any return condition obligations.

We prepare our condensed 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 accompanying discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated interim financial statements included elsewhere in this Form ~~10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.~~10-Q. We believe certain of our accounting policies are critical to understanding our financial position and results of operations. Except with respect to our revenue recognition practices included in Note 2: "Summary of Significant Accounting Policies" in the notes to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, thereThere have been no changes to the critical accounting policies as explained in Part 1, Item 7 of the ~~2018~~2020 Form 10-K under the heading "Critical Accounting Policies."

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3:2: "Summary of Significant Accounting Policies" to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

We are subject to market risks in the ordinary course of our business. These risks include interest rate risk and, on a limited basis, commodity price risk with respect to foreign exchange transactions. The adverse effects of changes in these markets could pose a potential loss as discussed below. The sensitivity analysis provided does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.

Interest Rate Risk. We are subject to market risk associated with changing interest rates on our variable rate long-term debt; the variable interest rates are based on LIBOR. The interest rates applicable to variable rate notes may rise and increase the amount of interest expense on our variable rate long-term debt. We do not purchase or hold any derivative instruments to protect against the effects of changes in interest rates.

As of March 31, ~~2020,~~2021, we had ~~$533.1~~$533.8 million of variable-rate debt including current maturities. A hypothetical 50 basis point change in market interest rates would have affected interest expense by approximately $2.7 million in the ~~twelve~~six months ended March 31, ~~2020.~~2021.

As of March 31, ~~2020,~~2021, we had ~~$272.4~~$192.2 million of fixed-rate debt, including current maturities. A hypothetical 50 basis point change in market interest rates would not impact interest expense or have a material effect on the fair value of our fixed-rate debt instruments as of March 31, ~~2020.~~2021.

On July 27, 2017, the U.K. Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become acceptable alternatives to LIBOR, or what effect these changes in views or alternatives may have on financial markets for LIBOR-linked financial instruments. While the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U.S. dollar LIBOR with a newly created index, calculated based on repurchase agreements backed by Treasury securities, we cannot currently predict whether this index will gain widespread acceptance as a replacement

for LIBOR. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere.

We may in the future pursue amendments to our LIBOR-based debt transactions to provide for a transaction mechanism or other reference rate in anticipation of LIBOR’s discontinuation, but we may not be able to reach agreement with our lenders on any such amendments. As of March 31, ~~2020,~~2021, we had ~~$533.1~~$533.8 million of borrowings based on LIBOR. The replacement of LIBOR with a comparable or successor rate could cause the amount of interest payable on our long-term debt to be different or higher than expected.

Foreign Currency Risk. We have de minimis foreign currency risks related to our station operating expenses denominated in currencies other than the U.S. dollar, primarily the Canadian dollar. Our revenue is U.S. dollar denominated. To date, foreign currency transaction gains and losses have not been material to our financial statements and we have not had a formal hedging program with respect to foreign currency. A 10% increase or decrease in current exchange rates would not have a material effect on our financial results.

Fuel Price Risk. Unlike other airlines, our capacity purchase agreements largely shelter us from volatility related to fuel prices, which are directly paid and supplied by our major airline partners.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on

Form 10-Q. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the ~~company's~~Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

~~The Company is~~We are subject to two putative class action lawsuits alleging federal securities law violations in connection with ~~its~~our IPO— one in the Superior Court of the State of Arizona and one in U.S. District Court of Arizona. These purported class actions were filed in March and April 2020 against the Company, certain current and former officers and directors, and certain underwriters of the Company’s IPO. The state and federal lawsuits each make the same or similar allegations of violations of the Securities Act of 1933, as amended, for allegedly making materially false and misleading statements in, or omitting material information from, our IPO registration statement. The plaintiffs seek unspecified monetary damages and other relief. ~~We do~~

In addition, we are subject to certain legal actions which we consider routine to our business activities. As of March 31, 2021, our management believed, after consultation with legal counsel, that the ultimate outcome of the two putative class action lawsuits and such other routine legal matters are not ~~currently believe that this matter is~~ likely to have a material adverse ~~impact~~effect on our ~~consolidated~~financial position, liquidity or results of operations, cash flows, or our financial position. However, any litigation is inherently uncertain, and any judgment or injunctive relief entered against us or any adverse settlement could materially and adversely impact our business, results of operations, financial condition, and prospects. operations.

In addition, from time to time the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. Although the results of such litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business, operating results, financial condition or cash flows. Regardless of the outcome, any such litigation and claims can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

We refer you to documents filed by us with the SEC, specifically "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019,~~2020, which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled "Cautionary Statements Regarding Forward-looking Statements" of this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019~~2020 and herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

We have updated our existing risk factors to add the following risk factor related to recent developments. Except for the update set forth below, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

The outbreak and global spread of COVID-19 has resulted in a severe decline in demand for air travel which has adversely impacted the business of our airline partners, American Airlines, Inc. (“American”) and United Airlines, Inc. (“United”), and in turn our business, operating results, financial condition and liquidity. The duration and severity of the COVID-19 pandemic, and similar public health threats that we may face in the future, could result in additional adverse effects on our business, operating results, financial condition and liquidity.

The COVID-19 outbreak, along with the measures governments and private organizations worldwide have implemented in an attempt to contain the spread of this pandemic, has resulted in a severe decline in demand for air travel, which has adversely affected the business of our major airline partners, American and United (the “Partners”), from whom we derive all of our operating revenue, and in turn has adversely affected our business, operations and financial condition to an unprecedented extent. Measures ranging from travel restrictions, “shelter in place” and quarantine orders, limitations on public gatherings to cancellation of public events and many others have resulted in a precipitous decline in demand for both business and leisure travel worldwide.

In response to this material deterioration in demand, both American and United made significant cuts in capacity in their domestic and international schedules in April and announced their expectations regarding making further reductions in May and plans to proactively evaluate and cancel flights on a rolling 90-day basis until they see signs of a recovery in demand. These capacity reductions have impacted flights operated by the Company. The initiatives and measures put in place to limit the spread of the virus has and will continue to have a materially adverse impact on our business. The Company further reports that, beginning in March 2020, it has experienced a material decline in demand in block hours from both of its major airline partners, American and United Airlines, Inc. (“United” and together with American, the “Partners”) resulting from the spread of the COVID-19 virus. As a result of this decline in demand and the subsequent capacity reductions by the Company’s Partners, the Company operated 10,297 block hours in April 2020, a 72.4% drop

~~from April 2019. The Company also anticipates similar schedule reductions will likely continue into the second quarter of 2020 and may continue throughout the remainder of 2020 and into 2021.~~

As a result of the foregoing, the Company has implemented cost saving initiatives, including reducing employee-related costs through voluntary unpaid leaves, compensation reductions for Executive level employees, a company-wide hiring freeze, and delaying non-essential heavy maintenance expense and reducing or suspending discretionary spending, We have also taken steps to increase liquidity and strengthen our financial position, including reducing planned heavy engine and airframe maintenance, working with major partners and OEMs to delay the timing of the delivery of our future aircraft and spare engine deliveries, and drew $23 million under our previously undrawn revolving credit facility. While the severity, magnitude and duration of the COVID-19 pandemic remain uncertain, there can be no assurance that these actions will be sufficient to sustain our business operations through this pandemic.

We have taken and intend to take additional actions to improve our financial position, including measures to improve liquidity, such as obtaining financial assistance under the CARES Act. In April 2020, we were granted $92.5 million in emergency relief through the Payroll Support Program of the CARES Act. We received the first installment of $30.8 million in late April 2020 and expect to receive the remaining $61.6 million in four equal installments from June to September 2020. In connection with the financial assistance we have received and expect to receive under this legislation, we will be required to comply with certain provisions of the CARES Act, including the requirement that funds provided pursuant to the Payroll Support Program be used exclusively for the continuation of payment of employee wages, salaries and benefits; the requirement against involuntary furloughs and reductions in employee pay rates and benefits through September 2020; the requirement of continuing essential air service; restrictions on share repurchases and dividends; and limits on the payment of certain executive compensation. The substance and duration of these restrictions may materially affect our operations, and we may not be successful in managing these impacts.

The full extent of the ongoing impact of COVID-19 on our future operational and financial performance will depend on future developments, many of which are outside our control, including the effectiveness of the mitigation strategies discussed above, the severity, magnitude, duration and spread of COVID-19, including any recurrence of the pandemic, and related travel advisories and restrictions, the impact of COVID-19 on overall long-term demand for air travel, the impact on demand and capacity which could result from government mandates on air service including, for instance, any requirement for passengers to wear masks while traveling or have their temperature checked or have administered other tests or examinations prior to entering an airport or boarding an airplane, or which would limit the number of seats that can be occupied on an aircraft to allow for social distancing, the impact of COVID-19 on the financial health and operations of our Partners and future governmental actions, all of which are highly uncertain and cannot be predicted.

In addition, an outbreak of another disease or similar public health threat, or fear of such an event, that affects travel demand, travel behavior or travel restrictions could adversely impact our business, financial condition and operating results. Outbreaks of other diseases could also result in increased government restrictions and regulation, such as those actions described above or otherwise, which could adversely affect our operations.

~~None.~~The Company repurchased 175,925 shares of its common stock for $0.2 million to cover the income tax obligation on vested employee equity awards and warrant conversions during the six months ended March 31, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Nevada		85-0302351
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

410 North 44th Street, Suite 700 Phoenix, Arizona 85008		85008
(Address of principal executive offices)		(Zip Code)

Title of ~~Each Class~~each class		Trading Symbol(s)		Name of ~~Each Exchange of Which Registered~~each exchange on which registered
Common Stock, no par value		MESA		Nasdaq Global Select Market

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements	2

Condensed Consolidated Balance Sheets	2

Condensed Consolidated Statements of Operations and Comprehensive Income	3

~~Condensed Consolidated Balance Sheets~~	3

Condensed Consolidated Statements of ~~Operations~~Stockholders' Equity	4

Condensed Consolidated Statements of ~~Stockholders' Equity~~Cash Flows	56

Notes to Condensed Consolidated Financial Statements ~~of Cash Flows~~	7

~~Notes to Condensed Consolidated Financial Statements~~	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	2725

Item 3. Quantitative and Qualitative Disclosures About Market Risk	4037

Item 4. Controls and Procedures	4038

PART II – OTHER INFORMATION	4239

Item 1. Legal Proceedings	4239

Item 1A. Risk Factors	4239

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4339

Item 3. Defaults Upon Senior Securities	4339

Item 4. Mine Safety Disclosures	4339

Item 5. Other Information	4339

Item 6. Exhibits	4339

SIGNATURES	4541

	Three Months Ended March 31,
	2020		2019		$ Change			% Change
Operating lease cost	$	18,583	$	18,714	$	(131	)		(0.7	)%


	Six Months Ended March 31,
	2020		2019		$ Change			% Change
Operating lease cost	$	35,366	$	37,804	$	(2,438	)		(6.4	)%

Periods Ending March 31,	Total Maturities
2020	$	22,120
2021		46,777
2022		31,916
2023		14,547
2024		13,982
Thereafter		1,654
Less: Interest	$	(8,740	)
Amounts recorded in the Consolidated Balance Sheet	$	122,256

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☒

	Six Months Ended March 31, 2019
							Common
							Stock and
							Additional
	Number of			Number of			Paid-In			Retained
	Shares			Warrants			Capital			Earnings		Total
Balance at September 30, 2018		23,902,903			10,614,990		$	234,683		$	139,784	$	374,467

Stock compensation expense		—			—			1,454			—		1,454
Stock issuance costs		—			—			157			—		157
Net income		—			—			—			19,081		19,081

Balance at December 31, 2018		23,902,903			10,614,990		$	236,294		$	158,865	$	395,159

Stock compensation expense		—			—		$	1,298			—	$	1,298
Repurchased shares		(52,967	)		—			(449	)		—		(449	)
Stock issuance costs		—			—			28			—		28
Warrants converted to common stock		3,834,693			(3,834,693	)		—			—		—
Restricted shares issued		284,846			—			—			—		—
Net Income		—			—			—			13,249		13,249

Balance at March 31, 2019		27,969,475			6,780,297		$	237,171		$	172,114	$	409,285

Periods Ending March 31,	Total Payments
Remainder of 2021	$	3,276
2022		6,552
2023		6,552
2024		6,552
2025		6,552
Thereafter		28,962
Total	$	58,446

	March 31, 2020				September 30, 2019
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Long-term debt and financing leases, including current maturities(1)	$	802.0	$	815.5	$	858.1	$	882.7


	March 31, 2021				September 30, 2020
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Long-term debt and financing leases, including current maturities⁽¹⁾	$	725.4	$	731.4	$	743.3	$	768.7

Periods Ending September 30,	Total Payments
2020		47,814
2021		46,007
2022		31,090
2023		13,726
2024		13,185
Thereafter		1,368
Total	$	153,190

Exhibit No.		Exhibit Description

10.1		Payroll ~~Support~~support Program Agreement between The Department of the Treasury and Mesa Airlines, Inc., dated as of ~~April 16, 20~~February 3, 202120

31.1		Certification of Principal Executive Officer pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1*		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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	MESA AIR GROUP, INC.

Date: May ~~11, 2020~~10, 2021	By:	/s/ Michael J. Lotz
		Michael J. Lotz President and Chief Financial Officer (Principal Financial Officer)