MESA - NASDAQ

Thank you for standing by, and welcome to the Mesa Airlines Q3 Fiscal Year 2023 Conference Call. [Operator Instructions] This call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to [Shawn Lang]. Mr. Lang, you now may begin.

Thank you, operator, and welcome, everyone, to Mesa's earnings conference call for its fiscal third quarter 2023 ended June 30. On the call with me today are Jonathan Ornstein, Mesa's Chairman and Chief Executive Officer; Michael Lotz, President; and Torque

Thank you, Sean, and thank you to everyone for joining us today. As we have stated, fiscal 2023 remains a transition year for Mesa. We continue to focus on maximizing block hours and reducing surplus CRJ-900 assets and infrastructure. Although the adjusted pretax loss for the quarter was $29.1 million, this included approximately $15 million of surplus CRJ-900 related costs and additional $5 million related to the transition. Our third quarter block hour performance roughly tracked with our forecast of approximately 46,000 block hours. Regarding our CRJ-900 transition, the work is largely complete, and we currently have a total of 24 CRJs flying in addition to 56 E-Jets. The transition from American to United was not always easy, but our people did an amazing job. During the quarter, we carried an additional 0.5 million passengers for United on its incremental flying. While regional air service continues to see strong demand, the industry at large has faced significant challenge in recent months with widespread operational disruptions driven by inclement weather and exacerbated by air traffic control staffing shortages. While we understand United's mandate to minimize cancellations for our passengers, we believe there is significant opportunity to further optimize scheduling, allowing us to increase our block-hour capacity overall. Our top priority at Mesa continues to increase pilot production to ensure our planes operate at maximum utilization. The aviation industry continues to see significant labor constraints, with an overall shortage of pilots exacerbated by an increasingly pervasive imbalance of captains and first officers driven by hyper attrition and impacting all carriers from majors to regionals. Mesa is addressing our captain and first officer imbalance with our direct-entry captain program in cooperation with United. This effort has been supported by a new requirement in United's Aviate program that pilots must have 2 years of captain experiences before transitioning to United. In addition, unlike some carriers, Mesa has the ability to require qualified first officers to upgrade to captain. We also continue to develop our in-house recruiting and training initiatives. In particular, the Mesa Pilot Development Program has worked very well. We now have 10 aircraft at our first location in Inverness, Florida. Currently, we have approximately 2,000 applicants with commercial pilot license who need to build additional hours to reach their 1,500-hour requirement. We have already graduated an initial cadre who have performed very well in training at Mesa. Given the benefits of Aviate and MPD, in combination with our industry-leading pay scale at the top of the regional industry, we now have approximately 1,900 new hire applicants. While our pilot attrition over the last 6 months has been at pre-pandemic levels, the pacing item has now become the availability of upgradable first officers. A stable pilot base and a healthy pipeline remain essential to the turnaround of our business. The pilot shortage created by counterproductive regulation continues to cripple the industry, and Mesa is not immune. To give you an idea of the impact, here are a few important facts. In spite of consistently adding pilots from January to present, we're still only flying at approximately 70% of our full utilization capacity, which we believe is consistent with other regional carriers in the United portfolio. To meet United's target utilization, we will need approximately 150 more pilots, primarily captains. Once we reach United's target utilization, which we consistently achieved prior to the pilot shortage, we will generate pretax margins between 7% and 10% in our base business. Given our current pilot outlook, as well as cooperation and support from United Airlines, we believe we will reach United's target utilization by the end of fiscal year 2024. While Mesa's ongoing transformation has not been easy, we believe United will continue to work closely with Mesa to ensure our future success. United has assured us that they understand the strategic importance of our relationship, and we are incredibly thankful for their ongoing support. With that, I'll turn the call over to Mike.

Thank you, Jonathan, and good afternoon to everyone. First off, I'd like to note that we recently added 2 key operational leaders at Mesa. Lori DiMarco, our new Vice President of Maintenance and Engineering, brings over 33 years of aviation experience and maintenance oversight expertise to Mesa. We also hired Andrew Lotter as our new Vice President of Flight Operations. Andrew has over 25 years' experience in the airline industry and has significant background in pilot training. Andrew and Lori's talents will be key to ensuring Mesa can maximize our peak capacity and utilization going forward and continue to improve our operational performance. Operationally, we now fly the CRJ-900, primarily out of Houston and Denver, which was newly opened this spring. Initially, this had an impact on the CRJ-900 reliability, which has historically been supported by our Dallas and Phoenix maintenance bases. This realignment of resources has been completed, and we ran 99% completion factor for July and currently 100% in August. Next, I'd like to review our block-hour capabilities. In the June quarter, we flew 45,301 block hours, roughly in line with our estimate of approximately 46,000 that we had provided. Looking forward, we expect that our September quarter block hours is to be roughly the same or slightly higher than the June quarter. Our initial projections for fiscal 2024 are an increase of roughly 4% to 6% per quarter. Our block-hour production is highly dependent on our ability to upgrade first officers, attract direct-entry captain, and is based on our most recent attrition rates. With regards to our regional fleet, the United CPA provides for 80 large regional jets. For the third quarter, the fleet mix consisted of 56 E-Jets and 24 CRJ-900s. However, we continue to focus on increasing the utilization of our Embraer-175 fleet. For our cargo operations, we continue to operate 4 737s at DHL, 3 737-400s and 1 737-800. With that, I'd like to now turn it over to Torque to walk through some of the financial data.

Thank you, Mike. I'll take this opportunity now to review our financial performance and our balance sheet. For the third quarter of fiscal year 2023, revenue was $114.7 million, 14.7% lower compared to $134.4 million in Q3 2022. While contract revenue fell by $24.1 million year-over-year. These decreases were driven by lower CRJ-900 block hours and fewer aircraft under contract, partially offset by higher United block-hour rates for new pilot pay scale. The decrease in contract revenue was partially offset by an increase in pass-through revenue of $4.8 million driven by pass-through maintenance expense with a net 0 P&L impact. Mesa's Q3 2023 results include, per GAAP, the recognition of $2 million of previously deferred revenue versus the recognition of $6.8 million of previously deferred revenue in Q3 2022. The remaining deferred revenue balance of $22.7 million will be recognized as flights are completed over the remaining term of the United contract. On the expense side, Mesa's overall GAAP operating expenses for Q3 2023 were $154.9 million, up $20.7 million versus Q3 2022. This increase was primarily due to a $30.5 million impairment of assets held for sale. However, adjusted operating expenses were $131.2 million or 2.3% lower versus Q3 2022. This decrease was driven by an $8.4 million year-over-year decrease in aircraft rent attributable to the reclassification from operating lease to finance lease for certain CRJ-900s as well as depreciation and amortization expense falling by $4.8 million, primarily driven by lower depreciable base from the CRJ-900 asset impairment charge in Q4 2022. The decrease was also partially offset by higher flight operations expense to $51.6 million, $8.3 million higher year-over-year, primarily reflecting higher pilot pay scales. Additionally, maintenance expense in this quarter was $51.1 million, $1.4 million higher versus Q3 2022. This is due to an increase in pass-through maintenance, partially offset by lower C check and engine expense. We expect maintenance and C check expense to be roughly consistent at this level for the next quarter. On the bottom line, we reported a net loss of $47.6 million or a loss of $1.17 per diluted share compared to a net loss of $10 million or a loss of $0.28 per diluted share for Q3 2022. On an adjusted basis, Mesa's reported a loss of $27.2 million or a loss of $0.67 per diluted share compared to a net loss of $7.1 million or a loss of $0.20 per diluted share a year ago. The adjusted loss for Q3 2023 excludes a $30.5 million asset impairment loss, a $6.7 million gain-on-asset sales and a $2.9 million gain on investments in equity and a $300,000 loss on deferred financing costs related to debt retirement. Adjusted results from Q3 2022 primarily excluded a $3.9 million loss on investments in equity securities. So looking at Q3 financial performance, there are several key items impacting the bottom line. The company's fleet still has 60 CRJ-900s, of which 24 are in the United CPA, leaving 36 as surplus. The CRJ-900 aircraft and an additional 20 CRJ spare engines continue to be a drag on earnings, estimated at roughly $15 million for the quarter. This cost primarily includes the expenses for depreciation, interest through wages and excess infrastructure. As we transition from the CRJ-900 to the E-Jets, one of our key focus areas going forward will be to continue to sell surplus CRJ-900 aircraft engines and inventory and shed infrastructure. Now let me walk you through some of these items. Of the 36 surplus CRJ-900 aircraft, we have purchased agreements on 14, the disposal of which will result in cost savings of approximately $3 million per quarter. We are also in negotiations to dispose of an additional 15 CRJs, which will deliver cost savings of approximately $2 million per quarter. The remaining 7 surplus CRJ-900s have not been disposed of and hold carrying costs of approximately $2 million per quarter. We also have 12 [olefin] engines that we are marketing. The sale of which will result in cost savings of approximately $2 million per quarter. Meanwhile, the disposition of 14 engines to United this past quarter will result in cost savings of approximately $1 million moving forward. It's important to note that all these aircraft and engines have sold above their existing debt balances. We are also in discussions with United regarding their support in eliminating the cost of our surplus CRJ-900s as we transition the fleet. Now let me turn to the balance sheet for the June quarter. As of the quarter end, cash, excluding restricted cash, decreased by $3.1 million from the March quarter to $48.3 million. Total debt was $566.3 million, down from $608.7 million at the end of the prior quarter. During the quarter, Mesa made debt payments of $40.6 million and the finance lease payment of $4.2 million. During the quarter, we also closed on the sale of the remaining 20 out of the 30 spare engines that we agreed to sell to United in Q1 2023. This transaction generated net cash of $26.9 million, while paying down approximately $19.1 million in debt during the quarter. In addition, we returned approximately $8 million of the $10 million under the bridge loan provided by United. We have $26.3 million of scheduled principal and finance lease payments remaining in 2023. And after the repayment of debt associated with asset sales, we expect fiscal year 2023 year-end debt of approximately $490 million. Notably, we expect our current transactions, involving our 14 surplus CRJs that we currently have agreements on, will reduce our debt levels by $74.3 million and provide another approximately $18 million in cash. Given ongoing uncertainties in the business, we will not provide any more specific fiscal year guidance at this time. With that, I'd like to now turn it back over to Jonathan for closing remarks.

Thank you, Torque. In sum, we knew this process would not be easy when we took dramatic steps at the beginning of the year to improve our operational and financial performance. We have rolled up our sleeves and made significant progress with our CRJ-900 transition and balance sheet actions. That being said, this is not the financial outcome that either Mesa or United anticipated. And as such, we've agreed to take actions together to correct that. With that, I'd like to thank you again for taking your time to hear us today, and we look forward to answering any questions you may have.

[Operator Instructions] Our first question comes from Savi Syth with Raymond James.

I was just curious, the fourth quarter block hours are a little bit lighter than you had thought before. And just curious where your utilization is today and what pilot trends are kind of giving you confidence on the kind of the current outlook of as you get into the fourth -- into fiscal 2024 of seeing that level of quarter-over-quarter improvement in block hours.

This is Jonathan, Savi, thank you, and I'll let Mike chime in also at the end if he wants to. The quarter versus our projection was a little bit light. We did get impacted somewhat by some of the operational issues that everybody was impacted by. We did lose a few more people to Aviate than we had anticipated. We obviously are facing the same captain crunch, pardon that. But that we're all sort of short a little bit in terms of upgrading people. We do have the ability to upgrade people, and we have. But I think that those are probably most of the issue. The other point of it is, we mentioned that we thought that there was maybe some more efficient scheduling. I think we have more block hours available to us in the CRJ flying. United took a particularly conservative approach in the transition. We think that as we've now gotten people and equipment and spare parts where they need to be, I think there's some more confidence in terms of that. That was not an insignificant reduction over what our crew max said we could fly. So I think that those -- one of the areas that we've talked about is we probably can fly more CRJ hours. And what's interesting is that when you do look at us compared to the other regional carriers, from at least what we can tell from the data we see, our actual utilization across the fleet, in other words total number of hours divided by the total number of aircraft in the CPA, is almost identical to the other operators. So it's not as if we're doing -- flying less and not holding our own. We're actually doing a pretty good job on pilots vis-a-vis the other carriers. But it was just a question of the transition in building up those hours. And now we have to continue to focus primarily on pushing up hours in the E-Jets, which, as you can imagine, is sort of the aircraft of choice going forward, to a large degree. Do you want to add anything, Mike, on that?

No, I think we just had -- we did have fewer upgrades than we had planned. We are scheduling our FOs to upgrade as they qualify with hours, but we had fewer than we anticipated. But our projections going forward, that number starts to increase as we do more and more of these upgrade classes of our first officers. We also are going to have a pretty major emphasis on this direct-entry captain program in cooperation with United. That's been extended a couple of times, and we're going to come out with some -- at least try to capitalize on that program as well.

And our next question comes from Helane Becker with TD Cowen.

Question about the current portion of debt. I think -- and I have a clarification question. Torque, I think you said you had $26 million in debt repayment scheduled, I wasn't sure, is that calendar '23 remaining? Or is that just the fourth quarter? And then how are you thinking about refinancing that debt that's due over the next year? Or are you intending to pay it as it's due?

Thanks, Helane. That's a great question. So debt remaining in 2023 is in the fiscal year, not the calendar year. So that's a comment on there, if that makes sense. And obviously, we're looking to -- we're working on selling assets and retiring debt that way. But if we do need to look at refinancing something, that's certainly something we would consider.

Okay. That's helpful. And then the other question I have, just on clarification on the purchase agreement and the potential for 15 more, the $3 million, the $2 million per quarter and the $1 million, that's not all per aircraft? That's just in the aggregate, the total amount, right? I know that's probably a dumb question, but I just want to make sure I get that right.

Yes.

It's in the aggregate?

Yes, it's the aggregate.

Yes. Okay. That's perfect. And then, Jonathan, so in the current FAA bill, it's clear that the FAA is going to let pilots fly a couple of -- or I guess, the negotiation still lets them fly two more years but not change the 1,500-hour rule. So it looks like that's going to be with us and continue to be with us for a while. Do you guys think about hiring retired captains from the other airlines that might still want to fly but that were kind of forced out during the pandemic and are maybe only 58 or 60 or 61 and nabbing them for another few years? Or does that not make financial sense?

No, I think, look, we're looking at all the different possibilities. I mean, if people are direct-entry captains, people are qualified, I mean I think we're paying a $100,000-plus bonus to people who are bringing that. And we are going to announce shortly some new programs to further enhance that in order to get the direct-entry captain or what they call high time first officers. Right now, we have almost, I think, 2,000 applicants who have qualifications to be pilots. The problem with that, of course, is that everybody is basically struggling to find captains. And the reason why the captains are gone is because the more qualified FOs through this hyper attrition that we're facing, due to the shortage, have all moved up. I think that what we've done is to say, "Look, let's just create a pipeline," which we do through MPD. We have the Aviate program, which then guarantees the jobs to the United. Aviate, thankfully, was restructured. That now requires those folks to become captain. They can no longer sit in the right seat and wait to become hired by United. They have to have what basically equates out to at least two years of time as a captain. Once that kicks in -- and they did give -- and they grandfathered some of the existing people, but once that kicks in, I think the industry will start to right itself because folks will be out there saying, "If we hire you, you're going to have to accept an upgrade when you're capable of doing it." And particularly at Mesa, as a result of our participation in Aviate, and I think 85% of our pilots are signed up for Aviate, will, in fact, get upgraded rather than being lifetime first officers. Back in the old days, that expression was well known as up or out, you didn't have a choice. I think that you're going to see that more and more frequently in these programs where the pilots will, in fact, be put in a position to upgrade. And I think that will ultimately solve this issue regarding upgradable first officers. But it will take time to wash through the system. And clearly, that's the thing that we're preparing by having this stream of pilots coming in, all of whom never reached upgrade and are in the Aviate program. So it will take time. And that's why in Mike's projections, we think that we can get there by the end of '24, fiscal '24, we can be at our targeted block hours, which will generate the kind of margins that we need because, clearly, the situation has to change. There's no doubt about that. And thankfully, we have United that agrees with us and knows that things need to be done right now to see us through to that point. And I feel very confident that they'll do that.

Your next question comes from Andrew Didora with Bank of America.

Torque, just a question on the cost savings from the sale of all these incremental CRJs and engines, just trying to understand what the cash flow impact of that would be. So from a cost savings perspective, is that mostly D&A? Or is that a combination of D&A, is it interest expense? Are there some other cash operating costs that you have on these aircraft right now? Just trying to get a sense of the cash flow benefit.

Yes. We're primarily looking at elimination of the interest and depreciation. That's the biggest piece. But also when you have aircraft, unless they're in storage, you have to maintain them. And there's a certain amount of expenses associated with keeping them active. And so the sooner we can get these sold, the biggest piece is certainly the interest and depreciation, but there's also some other cost savings that we probably see on the maintenance side just because we have few aircraft to work on and maintain.

And I also think, too, Andrew, one of the things that Torque mentioned and I think it really is important to restate again, is that we have not sold anything that we haven't generated cash from the sale. And so I think that it took a little while of us to convince United and convince other parties. But all of our sales, even the aircraft that we sold that had 100% run-out engines, were sold at above our debt balance. And so when you look at all these sales, not only do they take expense off of our income statement and improve our cash flow, but they also will generate cash. And Torque can walk through that, but it's not an insignificant amount of cash. We've actually built up a fair amount of equity in all these aircraft and, in particular, in the engines.

Got it. Okay. That's helpful. And then, Jonathan, you mentioned about 150 more pilots you need to reach kind of the United's targeted utilization rate next year. I guess, like what are the milestones needed? Or like what are some of the things we should be on the lookout for or goals that you have from a pilot perspective, just to give us more confidence as we move through fiscal '24 that you're on track for meeting this goal?

Yes, Andrew, look, I can't even begin to tell you how frustrating the fact that Mesa's numbers are where they are. And we are, in fact, flying utilization at the same levels as other carriers, the other operators of large regional jets. So that, in itself, is frustrating. But we need 150 pilots, which again, just seems that 150 pilots is 150 people that we need to find. Now obviously, we have the issue of retention, and we do lose captains, obviously, as we go. We actually lost a little bit more than we had anticipated earlier. But that was just due to an issue with Aviate, which has since been resolved. And I think that we're going to have to rely on bringing in some of the direct-entry captains, although you can count the number on one hand how many we need per month to make these numbers. And then we absolutely need to ensure that our first officers who are coming up for upgrade are capable and able to upgrade, which we're putting a lot of energy into that as well, so that we have qualified people. Because the fact of the matter is, we're not going to upgrade anyone who's not capable. So I think that that's probably the biggest area is just, once we get the Aviate program kicking in where pilots will be required to upgrade, I think all that helps, which is why we feel confident that we can get to that number once we have the benefit of that as well. So between those three, just the natural upgrade of people who would be coming along, the Aviate program kicking in requiring people to upgrade and the direct-entry captain positions should give us enough oomph, assuming attrition levels stay where they are, that we should be okay. As I mentioned, we've actually reduced the number of FOs that we hire pretty significantly as everyone else has. And now we're focusing strictly on direct-entry captains or high time FOs in terms of our new hires. Anything else, Mike?

No, I think, Andrew, just as far as gauging where we are, we'll know each quarter based on how many block hours we're flying because our partners aren't holding us back on pilot block hours.

Yes. I mean, initially, we would have probably hoped to have been a little more aggressive on the CRJ. But obviously, with everything going on in the industry, the majors are a little reticent. The delays and cancellations get a lot of attention from the government and from the press. So I think they were a little conservative, which is understandable. But I think now that we've proven that these aircraft can fly reliably, I think there's more room in the CRJ schedule, for example, which would help significantly. The one thing that I will tell you that both United and Mesa underestimated was the sensitivity to our numbers based on just a few aircraft flying. So I think that as we get that resolved and future schedule changes are already addressing that, I think we'll be in far better shape just with the existing crew staff that we have, and that's without increasing any numbers.

Our next question comes from Michael Linenberg with Deutsche Bank.

Jonathan, just getting back to that target block-hour number for United by the end of next year, I think you or Torque mentioned 4% to 6% per quarter. Now is that a year-over-year number? Or is that sequential from where we are today on a block-hour production basis?

Sequential.

Okay. And then with respect to with your first officers, and I want to go back and just kind of touch on the point that you made that you have the ability to upgrade pilots to captains, I think, unlike your competitors. And you talked about they get to -- or they're scheduled for an upgrade. I think at a lot of carriers, it's on a voluntary basis. Do you see a falloff or high attrition in first officers when they get to that point where they're supposed to upgrade to captain, where they elect to not become a junior captain, and decide at that point in time to break from the company and maybe go elsewhere? Is that a potential breakpoint? Or is that an issue that you've been seeing?

No, we haven't really seen it. The numbers are not that big, so it would be hard to really put a finger on it. But I don't think we have people saying, "Oh, gee, I'm going to be forced to upgrade. I need to go somewhere else." Because most of those folks -- remember, 85% of our pilots are in Aviate. They do not want to leave Aviate just because they may have to upgrade. And we work with people, but I think the fact of the matter is, no, it hasn't been a problem. And again, once the Aviate requirement kicks in entirely, we clearly -- I firmly believe this issue will go away. The problem also, to be frank, we created ourselves, because the first officer pay went up so much, I have FOs coming up to the airport saying, "Gee whiz, I've never even dreamed of making this much money." And the fact of the matter is being an FO is, in itself, not a bad job. I mean our pay for starting FOs is $100 an hour. So I think we created a little bit ourselves, maybe the differential should have been greater between FO and captains. But it is what it is, and we'll deal with it. I do think that United making the change in Aviate will be what will really make things work as well as the fact that all the new people coming in are well aware of what's going on, and I think that will help us down the road as these folks are put in a position to upgrade.

Okay. And then just the last one, just on completion factor. Clearly, you look at the difference between your controllable completion factor and your total completion factor. And I just -- you look at the daily data. And the fact is you can see that your partners, in this case, your partner, in many cases, are telling you that you have to cancel, right, that they're going to dispatch, I don't know, the flight to London rather than a flight to Presque Isle, Maine. What sort of financial impact, though, is that having on you? You're doing well on a completion basis, at least on a controllable completion basis, but it's got to put airplanes and crews out of sync, and it's got to have some sort of cost. Is that a margin point or 2 where you're getting hit every quarter because you're being told to stand down and not cancel the flight by your partner?

Yes, I think the bigger issue is not the day-to-day cancels that we have. And look, I mean, we all had operational issues. The transition could have gone a little bit smoother. There was a little bit -- there was a point in time when I think some aircraft will probably move too quickly out of Dallas to Houston. I think those kinds of things probably were more of it. The bigger issue that we have is just being able to fly to crew max. We're doing -- we're flying to crew max on the E-Jets right now, but I think we could fly to crew max on the CRJs. And I think if we have scheduled this E-Jets more efficiently, we could create spare aircraft just by putting more hours per shell on each aircraft, and that would ultimately then create more spares. So I think that there are solutions to this that, working with United, we're able to do. I don't think the problem is the day-to-day cancellations. It's just the planned block hours. Those numbers have to go up. And as you can imagine, United has been fairly conservative given all the attention that completion rate and on-time performance has been given by the government officials as well as the press right now.

Our next question comes from Savi Syth with Raymond James.

Just two quick ones based on the questions so far. Just do you have kind of a target you can give us for cash or something like that, maybe cash and debt, when all of this is done? I appreciate the kind of the fiscal year-end debt level that you gave. But given that a lot of the sales are happening by kind of calendar year, I was wondering if you can give a little bit of color of where this all ends as you get through some of those sales. And if I might, just also, what was the revenue mix of kind of cargo and lease in this quarter now that most of it is focused on United flying?

Well, on the revenue piece, I think the United portion is going to be like 97%, and the cargo will be 2% or 3% on debt distribution. As far as cash, we don't have any -- we're not putting out any projections. It's really going to be highly dependent on not only the sales of most of these surplus assets, but the timing of them. Obviously, the quicker we can get rid of some of these 900 assets, the more benefit will be to us. So we're just not putting any long-term projections on cash right now. And it will be highly dependent on when we sell these surplus 900 assets that we have, aircraft engines, parts, whatnot.

Yes. And even when we close on the aircraft that we're already contracted for, I mean, that is not an insignificant number in itself.

Is there a certain target you want to kind of keep cash at that you don't want to kind of go below?

I'd say our target is as much as possible, but I'm trying to think what -- Mike, do you have any idea where are we -- I think -- let me answer that. Obviously, we're in constant discussions with United. United is well aware of the situation. We had Board participation for the first time with United at its last Board meeting, which I thought was incredibly productive. I think that we all understand that the problem needs to get solved, and that it's going to take cooperation from United to do that, which they have made it incredibly clear that they intend to do, that Mesa is an important part of the family. We are certainly part of the balancing of all the equipment. I mean, if you look at it, the two other operators of large regional jets operate about the same number of aircraft that we do. We actually operate a little more than one of them. So I think that United understands that and knows what needs to be done to help get this fixed, and we'll do what it takes to ensure that our cash balances are at an adequate level that we can operate the business without being what I would call cash strapped. We do operate a little bit differently than the other operators in terms of cash. We've historically done that. But nonetheless, I think we all feel that we need a healthy balance in order to operate the business on a day-to-day basis at the level that United requires us to do.

I'm showing no other questions at this time.

Okay. Well, let me just wrap up in conclusion. Again, we're not particularly pleased with these numbers. We know that things have to change. I mean the good news is that we feel we have a very strong partner to help make that happen with us. They've been very supportive, will continue to be supportive. We didn't mention much about the cargo business, but the cargo business has actually been consistent, steady this quarter. I think there could be opportunities down the road in terms of cargo. But nonetheless, our focus has been primarily just on -- continues to be on the whole pilot situation. And I think it goes without saying that if things were different in terms of regulation, none of this would be happening right now. And I think at this point, all we're doing is focusing on getting through this bubble to the point where we can get back up to the target utilization which -- by the way, I think it's fair to add that target utilization is actually below where we had been operating in the past and that our financial results will reflect numbers that, in the past, we were able to achieve even at lower utilization rates than we were. So I think that the targets are doable. I think we have the means in place. And most importantly, I think we have the support that we need from United to make all this happen. So thank you very much. We will talk to you next quarter. We appreciate your time.