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Is It Worth Taking A Flier On Mesa Air?

May 05, 2021 7:00 AM ETMesa Air Group, Inc. (MESA)19 Comments
Bradley Guichard profile picture
Bradley Guichard


  • Mesa Air has survived the pandemic and in many ways is emerging stronger than before by taking advantage of government assistance.
  • The balance sheet is less leveraged than before the pandemic, and revenues should continue to bounce back as the country progresses towards full reopening.
  • Several tailwinds are present including pent-up demand and increases in consumer spending in the short term and the general increase in air travel long term.
  • Risks and uncertainties exist, and Mesa's history of underperforming the S&P 500 still makes this a speculative play.
United Express Mesa Airlines Embraer 175 airplane Atlanta airport
Photo by Boarding1Now/iStock Editorial via Getty Images

Investment Thesis:

Mesa Air Group, Inc. (NASDAQ:MESA) ((“Mesa" or “the Company”, hereafter)) has survived the pandemic and the balance sheet looks healthy. The company should benefit from travel demand tailwinds coming out of the pandemic and an overall increase in air travel demand over

This article was written by

Bradley Guichard profile picture
If you are a medium to long-term investor looking for an analysis of equities focused on cash flow, growth, and other critical metrics from a financial professional who knows financial statements inside and out, consider giving me a follow.While I am Tech-focused, I have a diversified portfolio, including growth and value equities, REITs, and dividend stocks. I like to use options for income and risk management when the opportunity arises. I have over 15 years of experience in the market. I am a practicing CPA; however, I have learned about investing more from avid reading, market watching, experience, and of course, making mistakes over the years. Also, am an admitted Excel junkie. I believe Benjamin Franklin when he said: "An investment in knowledge pays the best returns," and Warren Buffet that "The most important quality for an investor is temperament, not intellect." I am constantly learning and focusing on long-term goals - even when the market misbehaves.  Thank you very much for reading, and please feel free to leave me a message in the comments or send a private message. All the best!

Analyst’s Disclosure: I am/we are long MESA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (19)

Why MESA in investing into electric aircraft companies though? MESA is a small company, is it not too far-fetched for them? The FIRST electrical airplane in the world is expected to be delivered in 2026...
OverTheHorizon profile picture
Partners AAL UAL DPSGY. AAL rebounding, UAL flat as always and DHL ace in the whole. May not be $30 some day but won’t stay at $9 either.
Cousinspizza profile picture
PHOENIX, Feb. 11, 2021 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA), working with United Airlines, has reached an agreement in principle with air mobility company, Archer Aviation, as part of the airline’s effort to invest in emerging technologies that decarbonize air travel.

In connection with the agreement, which remains subject to final documentation, Mesa will receive 20% of United’s warrant to purchase 14,645,614 shares of Archer’s common stock (the “United Warrant”) with a $0.01 per share exercise price such that Mesa will receive a warrant exercisable for 2,929,123 shares (the “Mesa Warrant”). The Mesa Warrant will be subject to vesting upon the achievement of certain milestones and conditions. Vesting occurs as follows, subject to vesting acceleration under certain circumstances:

(i) 40% of the shares are vested immediately upon receipt of the Mesa Warrant;

(ii) 20% of the shares vest upon the closing of Mesa’s investment in the proposed PIPE transaction or a similar financing transaction;

(iii) 10% of the shares vest upon the approval of the Aircraft’s final type certificate by the FAA but only so long as the United-Archer Purchase Agreement or Collaboration Agreement is in effect on the date that such type certificate is issued; and

(iv) 30% of the shares shall vest on a pro rata basis (based on the number of Aircraft (excluding the option) deliverable under the Purchase Agreement) upon the purchase of each Aircraft as set forth in the Purchase Agreement.

(v) Concurrently with the execution of the Business Combination Agreement, Atlas entered into subscription agreements for a PIPE (Private Placement) Financing transaction. As part of the agreement with United and Archer, Mesa agreed to acquire 500,000 shares of Atlas’ Class A Common Stock in the Private Placement for a purchase price of $10.00 per share, or $5 million.
Prudent Top Sawyer profile picture
Just looks at free cash flow capacity and apply multiple of 15 you will get 30+ price
Louis_usa profile picture
Lost in this report is the relationship between the majors and the regionals. The regionals operate on a cost plus basis with the majors collecting the revenues and paying for the fuel directly. Since the pandemic the majors have relied much more on the regionals flying smaller aircraft to retain market share.the result is the majors are still losing money while the regionals are raking it in.
I sold my major airline positions and bought Mesa looking at much more quick returns. Looking at the high of $17 as a medium term value.
Majors will keep loosing money until 2023. They have to bear the rising costs of fuel and labor is less productive with less flights.
Bradley Guichard profile picture
@Louis_usa Thanks for the comment and insight. I also will not touch the majors for some time.
PriceVsValue profile picture
@Louis_usa and mesa's contract with American Airlines is set to expire on 2025, right? So I believe that's a good thing, most people are looking down on MESA because it's a regional airline. But they got the contracts in place already.
Texasstockman1 profile picture
Mr. Guichard, thanks for putting this info out there. Just started my DD on this a few days ago. You have given some insight that helps me with that. Planning to start a position soon. Looking forward to your future publications.
Bradley Guichard profile picture
@Texasstockman1 Thank you for the nice comment. Earnings were fairly underwhelming. Hard to tell if that is the reason for the decline or if it is just caught in the general market pullback right now. There are some buying opportunities out there now. All the best.
Texasstockman1 profile picture
@Bradley Guichard I think it is a all those things; poor market, uncertainty on travel/economy, ER results and strong (low risk stock) opportunities hitting lows. Those things combined make it hard to sustain an upward trend. That is a good thing for me, as I was able to get in at the bottom (I hope bottom) this morning. I am a long-term investor so we will see how goes in the coming months. It has the potential to go up from here. Please keep the writing going - people like me (research/DD dedicated) get a lot of your work.
Bradley Guichard profile picture
@Texasstockman1 Great insights, and thank you.
Cousinspizza profile picture
In my humble estimation, if MESA was profitable in the black swan of a lifetime, why wouldnt it continue to be when routes and commerce are opening up and to which it can profit from? just a simple question
Bradley Guichard profile picture
@Cousinspizza Makes sense to me. However, airlines as a group have struggled keeping up with the S&P 500 in good and bad times.
@Bradley Guichard thanks for your article. Be careful to not think of airlines as all the same.
Why no discussion on Skywest (SKYW) which is Mesa’s primary competitor that happens to be much larger?
Bradley Guichard profile picture
@Goonly good comment. I am actually going to be taking a Skywest connection in June and may write a comparison or Skywest article then. At least in the near term I expect that good news for one is good news for the other. Next time I will be sure to include them. Thanks again.
OverTheHorizon profile picture
Excellent. People (and freight) gotta get to the small places too.
MESA will be $25 summer of next year. LONG MESA.......
Bradley Guichard profile picture
@bertvillamor that sure would be great! Any reason for that price prediction? Thanks for commenting.
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