Mesa Air Group Inc (MESA) 2006 Q2 法說會逐字稿

Good afternoon, and welcome to second quarter 2006 investor relations conference call for Mesa Air Group.

All participants are currently in a listen-only mode.

Following today's presentation, we will conduct a question-and-answer session.

[Operator Instructions]

Today's conference is being recorded.

Those with objections may disconnect at this time.

Now it is my pleasure to introduce your host for today's call, Mr. Jonathan Ornstein, CEO of Mesa Air Group.

Sir, you may begin.

Thank you very much, operator.

Okay.

I want to first thank everyone for taking time out of -- I know was a busy day for you, to listen to the call.

We appreciate the interest of all of you and the folks around the industry.

I'd like to start with reading our forward-looking statement.

This conference call will contain various forward-looking statements that are based on management's beliefs as well as assumptions made by and information currently available to management.

While the Company believes that these expectations reflecting such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.

Such statements are subject to certain risks, uncertainties and assumptions.

Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or expected.

The Company does not intend to update these forward-looking statements made in all the calls prior to its next filing with the Securities and Exchange Commission.

Probably would be easier for me just to say we are in the airline business, however.

Let's go forward.

We had a -- we think a pretty good quarter, all things being equal.

Company is reporting second quarter pro forma net income for the quarter of 12.7 million or $0.30 per share on revenues of 312.1 million.

This compares to pro forma earnings of 11.9 million on revenues of 263.8 million or $0.28 per share for the comparable period in fiscal 2005.

As we mentioned during the last quarter's earnings call, this quarter's pro forma net income, excluded after-tax, cost associated with converting debt to equity of 7.5 million.

On a pretax basis, the Company made 21.8 million or 7% pre-tax margin pro forma versus 18.7 million for the second quarter of 2005, which was effectively the same margin.

On a GAAP basis, our reported net income was 5.3 million or $0.14 per share as compared to 10.8 or $0.26 per share for the same period of last year.

The primary items are significant affecting the second quarter of 2006 were total operating revenues for the second quarter increased 48.2 million, primarily the result of operating additional nine CRJ 900 aircraft versus the same period in 2005, as well as an increase in certain reimbursable base costs such as fuel.

Total operating expenses for ASM for the second quarter of 2006, excluding fuel charges of 103.2 million, are 4.7 cents per ASM, which, of course, are primarily reimbursable by the Company's partners-- decreased approximately 3.5% to 8.3 cents from 8.6 cents for the same quarter of 2005.

I am very pleased that we were able to report lower costs year-over-year.

During the quarter we had $3.6 million in expenses associating with our US Airways transition and Hawaii startup expenses, the majority of which were training of flight crews.

In addition, we had 900,000 in expenses related to a planned engine upgrade;

I'll go into all of it more on the CRJ 900 aircraft; and 700,000 to expenses relating to the new stock option expensing rules; we're going to talk about that as well.

Our fleet summary, our total fleet count at the end of fiscal second quarter was 180 aircraft, comprised of 91 50-seat regional jets, 15 70-seat, and 38 80-seat regional jets. 56 of those aircrafts are in America West, 60 at United, 8 at US Airways, and 20 have transitioned to Delta.

In addition, our regional jet aircraft of a -- we have 36 turboprops, including 16 37-Dash 8s, 6 at America West, 10 at United, 20 1900s, 8 are Mesa independently operated out of our Albuquerque hub, and 12 at US Airways.

For the fleet plan for 2006, as I'm sure many of you are aware, our fleet plan is going to expand beginning in the fiscal third quarter into our fourth quarter.

We have recently signed an LOI for short term leases on five ex-flightI(ph) CRJ 200 aircraft to be used in our Hawaii operations.

These aircraft will enter our fleet beginning in mid-May and transition until the end of the quarter.

In addition, we've previously announced beginning in July, Mesa will fly an additional 12 37-seat Dash 8s in support of Delta's expanding operations at New York JFK Hub airport.

We will be operating those aircraft in a similar type of revenue guarantee contract that we do our regional jets.

Service begins with three aircraft, and we will add two to four aircraft per month with the 12 aircrafts scheduled to be serviced in late September.

So we will, in fact, be pretty busy in terms of pilot training and expanding the operations.

For the quarter ending March 31, 2006, our controllable completion rate was 99.1%.

While we are satisfied with our quarter-to-date performance, we continue to strive for operational excellence in order to provide our partners the best and most reliable product.

This is in spite of the fact that we do operate in some of the toughest hubs in the industry and the cities that we serve out of those hubs are also some of the really difficult East Coast airports.

At Air Midwest, as many of you know, we have focused on mitigating exposure to our Beech 1900 fleet.

We are now down to net exposure of just 20 aircraft, 17 lines of revenue service.

Our strategy of working to place all of our aircraft we operate in essential air service, combined with leasing 14 of our 1900s to other operators, and continue to focus on cost reductions has allowed us to reduce unprofitable flying, and the result of Air Midwest posting an operating loss of less than 1 million during the second quarter as compared to last year's 3.4 million.

Unfortunately, while average fares are 8.5% above forecast, fuel was roughly 50% higher than last year.

Had it not been for the fuel increase, Air Midwest would have operated at a slight profit.

For the remainder of fiscal 2006, we expect Air Midwest to post an operating loss of approximately $2 million with fuel at the current record levels.

Mesa projects ASMs of 2.3 billion in the third quarter and 2.5 billion in the fourth quarter of fiscal 2006.

Actual ASMs remainder of 2006 will be a function of final transition schedules of our aircraft moving from US Airways to Delta, as well as the marketing schedules our partners require us to fly.

Our current projections reflect an estimated 2% increase in system-wide capacity for the third quarter, resulting in some minor changes in the US Airways transition plan.

For the fourth quarter, we are forecasting 6% growth in ASM as a result of our "go!" operation in Hawaii and the startup of the Delta Dash 8 flying, combined with a 4.6% more departures and 4.3% longer stage lengths for our CRJ 900 aircraft.

Should the transition plan change from our current assumptions for the remaining US Airways aircraft and our partners schedule change versus today, actual ASMs may be impacted.

So for the full year we're looking at approximately 9,000,288,683 -- I think I got that right.

Something close to that, approximately -- ASMs.

That, of course, includes no additional growth that may come our way.

But, you know, again, we are going to be adding at least 17 aircrafts this year.

So we will have our hands full either way.

During the third quarter, we do expect to see some additional expenses associated with the startup of Hawaii operations as well as expenses relating to the startup of our new Dash 8 operations.

Again, I guess about two-thirds of that is pilot training.

In addition, we will incur another approximately 1 million in expenses relating to the continuation of the CRJ-900 engine upgrade program.

I'll go into that in a minute.

For the fourth quarter, we expect results equal or better to this quarter's results.

As always, our earnings could be impacted by changes in our partners' marketing schedule, timing and maintenance and training events, with the emphasis again on the timing of Hawaii and Delta Dash-8 startup expenses.

Let's talk a little bit.

We have some partner updates.

We have successfully transitioned all 16 CRJ-900 aircraft in two traditional US Airways hubs on the East Coast.

As always, we continue what we tend to support the new combined entity of America West and (inaudible) operation moving forward.

Separately, during the second quarter, we transitioned additional 11 aircraft from the former US Airways to both our United and Delta operations, 9 to Delta, and 2 United.

With these additional 11 aircraft, we have now transitioned 51 of the 59 US Airways aircraft out of US Airways and into those new partners.

I can tell you that has been a very big job.

I want to thank all of our operational people and certainly our people out in the field.

And when you look at kind of the numbers we are putting up in terms of our operational reliability and on time performance, I can tell you that with as much movement as we have had 51 aircraft, that impacted literally thousands of people.

I think the job has been truly outstanding.

We recently announced that we will begin operations of "go!" on a wide inter-island service that will fly from Honolulu to four major markets on June 9th.

We began that service with introductory fares at $39 one-way.

We have also unveiled a website.

It's www.iflygo.com.

I encourage you to take a look at it.

We've started to take reservations.

We have been very well received, since our announcement of the service.

The State has been very supportive.

We're getting wonderful letters to the editor about competition and how important that is to the people of Hawaii.

Our bookings have been better than originally forecasted.

We don't have a curve to really look at.

So it's hard to sort of judge what's that's going to mean.

But I can tell you that we have a feel that the price has been very well accepted and the numbers are coming in.

You compare our curve for example to the curve of the Shuttle, which is something that I think is probably the closest related.

We are significantly above where the Shuttle would be for the same period out.

So we are really looking forward to beginning service.

We think we're going to have a significant impact out there on the whole way travel is looked at.

Interestingly, in Hawaii, I think it is fair to say that it is not really air travel, but it's sort of the highway system there, given the fact that it is the best and only way to get around the island.

I can tell you our people are also incredibly enthusiastic.

We had more than sufficient number of volunteers to go to work there, from our pilots and flight attendants.

And I think it's going to be a great operation for us.

I will mention for those of you who have talked to me offline that this is going to be less than 2% of our total ASMs.

So, you know, this is something certainly, while we are confident that it will work, you know, you never can be sure.

But bottom line is we're going to control our risk just by the fact that as small as it is to start.

We've got a bunch of other pieces of information I'd like to talk about.

First, I'd like to go over some cost saving initiatives that we did, because I mentioned that earlier.

On the 900, GE came to us with an engine upgrade and the cost is about $2 million.

However, the MPV is about 4 million.

So we will see those benefits going forward as the engines now have extended live on a number of parts.

So this is an engine upgrade that we felt made a lot of sense.

Also, we have introduced some new and I think very creative health plan at the Company.

We had our enrollment go up pretty significantly.

But on the same hand, I think what we've been able to do is put together a program that will in fact save us some money going forward, certainly buffer us against some of the increasing costs that everyone has suffered from.

Mesa is different than most companies that we have not made any changes to our healthcare plan benefits or premiums for over four years.

So we did revamp that.

And I think the results will be positive both for the Company as well as increasing the number of people that we cover at the Company.

We also are looking at some creative ways to lessen the impact of the stock option expense, which now is running close to $3 million a year.

This, of course, is a new expense based on the new rules.

We do think we have some creative ways to continue to tie our people's performance to the stock.

We think that it's obviously very good long-term.

Mesa gives options to employees very much down into middle management.

Our mechanics get options.

You know, I think though, that given the way the accounting rules have gone that we are looking at some creative ways that will continue to tie their own financial future to the success of the Company.

And I think that we can significantly reduce that almost $3 million a year expense.

And if I had to put a number on it, I think we could come close to cutting it in half.

But still the employees would feel very much that they benefit from any improvement in the stock price.

Also, I am very pleased to announce that we've have had a leadership change at our local ALPA unit.

The folks that were elected, this is the first change we have had since I've been at the Company, are for the most part folks who have been with Mesa for their entire career.

I know the new NEC Chairman came through our MAPD program.

They have taken what is, from our view a very different position, one much more conducive, I think, to everyone's interest.

We have had a feel that this has now been ongoing for a few months.

And we have been able to put some things that have been sort of nagging behind us very quickly.

We introduced a couple of new programs, including the CAS system, which allows the pilots to jump seat on other airlines, which is something that they had been wanting to do.

We are putting in a new scheduling system that we think will benefit both the pilots and the Company significantly.

And I can tell you that I want to welcome those folks.

And we think that this is going to really, hopefully set an example of how management and the unions can work together.

We all know that in past, the industry has suffered in this area and one that I know we are dedicated to doing the right thing going forward.

And that means the right thing long term, and I think that the pilot leadership understands that as well.

Mesa has added more pilots over the last three years than any other ALPA carrier.

We have no one on furlough.

We have never moved someone from the left seat to the right seat.

We've never had a career go backwards.

In the entire history of the Company, we have never had a five-year FO.

We are upgrading people.

We are providing opportunity, we're providing job security.

And that is what I intend to try my best to continue.

And I know that now the leadership at ALPA agrees with me that the future is such that working together is the only way to ensure our collective success.

At AFA our flight attendant union, there has been some cause and some issues.

That contract is now or shortly is going to be beginning the renegotiation.

I want to allay anyone is concerns about that.

We've had a wonderful relationship with the AFA.

In fact over term of the contract we have never had a grievance even get to arbitration.

I don't think there is another carrier in the industry that can say that, that has an AFA agreement in place.

And for those of you concerned about pay issues and what the potential impact there is, I'd point out to you that during the first five years of our flight attendant contract, our wages are in fact 6% higher than America West wages.

So I don't see that -- as going to be lot of pressure for us.

I think we're going to look to do some things that will make the flight attendant lives a little bit easier, but again from a cost standpoint, we do not feel that this is something that is going to impact us significantly.

Another thing I want to point out was -- and is interesting I was at an analyst conference dinner a while back in New York and it was sort of a parody of the major carriers.

And I sort of chuckled because I felt that the US Air's and United's and Delta's as of the world would make a pretty strong comeback as they emerged from this bankruptcy process and frankly who would think today, 18 months ago that Jet Blue was a sale(ph) and US Air as a buy and one going from the worst margins to the best and vice versa.

I think that there has been a huge turn in the industry.

I think the turn will continue and as a result of that I think that there is going to be significant opportunities for regional carrier supporting the new restructured carriers.

It was never the hub and (inaudible) system that was in question, it was the cost structure associated and now that those cost have been addressed primarily through the bankruptcy process in some cases in less difficult manners, more cooperatively, for example American and Continental.

But I think that we're about to see an era that will allow for future expansion.

I know that there has been some talk about cannibalization among the regional carriers.

I will tell you that having been somewhat familiar that even in those situations I think the deals are very attractive.

I think Republic deal with Continental will be a very good deal for Republic.

And I would not be concerned, for example, that they may not receive a margin on aircraft ownership because, frankly, that's a deal, I think at Mesa we do all day, if we did have to have responsibility for the aircraft, not to get paid a margin on that would probably be a very attractive alternative for us in fact.

I also want to address some of the concerns that folks have had about new business potentially being kept in house.

We can argue about who has the lowest cost in the industry.

I think it's fair to say the independent regionals, most primarily Republic and ourselves, would have lower costs than any of the internally - the captured regional carriers.

And the concept of building those up to the -- and spin them up.

I think we've all seen what's happened there with a couple of those examples over last few years.

And the fact is if you are just going to take a higher cost carrier and put a margin on top of that to spin it off, even if the valuations that you could achieve today, which frankly if you ask me is not that good.

Now unlike in the past just to finance the aircraft, I would argue that to make a down payment on the aircraft you would probably have to spend more money and then you could spin the carrier upward(ph).

In today's terms, if Mesa had to go out and finance the existing aircraft fleet that we have, we think it would require probably somewhere in neighborhood of $350 million in down payments to get those aircraft.

So I think there is a lot of arguments and these major carriers management's have come to this process, I think a lot smarter and I think will do the right thing.

The model that we've chosen is probably the best one.

We're going to provide those carriers with the lowest cost, even in spite of the margin, and the fact that financing aircraft has become a whole different ball of wax.

I think only it's even further evidence that would continue to be the trend.

Also this concept of the aircraft and that the companies could be spun off, I think Wall Street this time around will be a little bit smarter.

And I think the types of contracts that they would require before they underwrote those types would be such that would again make that a less attractive alternative for the major carrier.

We think that they're going to be lots of opportunities going forward.

Some of that will obviously continue to be the restructuring at the major carriers.

We know that certainly at least two or three opportunities exist in that area, but I will go out on a limb and say that I think that there is also going to be some growth, as these carriers began to get their financial footing under them.

Certainly the price of oil is not helping that.

I will tell you, I spoke to one of my partners recently as of yesterday who was talking about 50 seaters, which of course everyone have knowledge that the 50 seaters is no longer working.

And that carrier told me that the margin had improved almost 15% year-over-year on the 50 seaters in spite of the fuel increase.

I will tell you my feeling is it with any kind of moderation in fuel that could turn very quickly in terms of what's happening at the 50 seat level.

We actually just took some additional 50 seaters for Hawaii(ph).

What we think are attractive rates, but we did maintain our flexibility and I think that over time, while the movement will be to continue go to larger aircraft, I think you're going to find some homes and some interesting places for some of those 50 seaters.

We have also mentioned for the press release out not that long ago, we are looking at China.

We recently hired a major consulting firm to move forward on that program.

We think that there is tremendous opportunity there.

There are currently only 40 regional jets in the entire country of 1.0 - I don't know -- 3 or 4 billion people.

As that environment matures there, the aviation environment you will see I think the development of hub and spoke operations, which will require fees.

So we feel that this could be a very interesting opportunity for us.

Obviously it's not something that happens overnight but nonetheless one that as you are looking long-term as we do could be very interesting.

With that, I would like just again thank all of our wonderful 5,000 employees out there, working very hard every day to provide safe and reliable service.

They've done a terrific job through the winter as well as through this transition, which has been difficult.

We are looking forward to some growth going forward, which is something that all of our people enjoy and again I think that Mesa is well poised financially and operationally to continue its path of growth and opportunity.

With that I would like to open up to any questions that you may have and again thank you for taking time to spend with us this morning.

[Operator instructions]

Our first question comes from Mike Linenberg from Merrill Lynch.

You may ask your question.

Hi Jonathan this is [Kathleen Gilroy(ph)] on behalf of Mike.

Sure.

I was wondering, if you could just clarify for me those 59 aircraft moving out of airways.

I was under the impression that say 30 of them are going to United and 30 going to Delta and your one short.

And for this time reading the press release, 31 is that United and balance 20 is at Delta.

If you could just reconcile those numbers for me that will be great?

Yes.

No.

I'll look at the press release but its 30 aircraft United and 30 going to Delta.

And we are one short as a result of that.

We're also short another aircraft because we had an aircraft returned to the lessor.

Okay.

So it's interesting as Mesa, as some of you know, we do have a natural, sort of, short position on 50-seaters for the next five or six years.

Because we have aircraft that are going to be returned, I think, we have about 15 or 16 aircraft that are going to returned as well as putting some 50-seaters into Hawaii on a short-term basis will create potentially a home for other 50-seaters down the road, if necessary.

Got it.

All right.

Thanks for taking my questions.

Thank you.

Our next question is from Ray Neidl from Calyon Securities.

You may ask your questions.

Yes.

Jonathan, I was trying to get the onetime costs in the third question, you mention $1 million CRJs and upgrades.

How much of that is Hawaiian service, and are you still incurring costs for transferring of aircraft, onetime costs?

I think that -- you know, want to just go Peter?

Yes.

Ray, the 1 million has nothing to do with Hawaii.

Yes.

What were the costs of Hawaii?

Yes.

What I'm trying to get is the total onetime costs that are going to be in the third quarter and if any of these are going to carry over into your fourth quarter?

They should be -- we mentioned it was 3.6 million this quarter.

That's a pretty good run rate for the next quarter.

The transition expenses from US air to Delta are going to be minimal.

But slack will be picked up, if you will, by the cost of putting in Dash 8s through Delta.

Okay.

And then going to the fourth quarter, will there be any onetime costs or should that just pretty much be cleared up by then?

It should be pretty much cleared up by then.

Okay.

And looking at the operating margin, 9%, with these onetime costs in the air, how much of -- what kind of amount are you getting with the onetime costs?

Do you think in the first quarter, would you be up toward around 10% industry norm, or would you still be below industry norm, what do you think?

No, you'd be closer to the 10%.

Okay.

Great.

And the last thing is, I guess it more of a broad question.

Jonathan, being an industry expert that you are, it seems like turboprops, more turboprops are starting to make a comeback in the US, would you agree with that?

It seems like you're moving in that direction with some of your contracts and because of high fuel cost, do you think the under 50-seat turboprops, you are going to start replacing some of the smaller RJs?

I can tell you that we did have a - somewhat of a more difficult time than you would imagine to get the 12 Dash 8s that we needed.

But ultimately we're able to get them at, roughly the price we thought we could.

I don't see a wholesale replacement.

There are some interesting aircraft out there like that Dash 8-400 potentially.

But I think most folks are less convinced that long-term, that's the direction the market is heading.

Especially, from the standpoint of passenger acceptance it's just as a tougher sell.

I think the Dash 8s, that are operating at JFK, make a lot of sense because the average day bunch is only going to be about a 170 miles, so it's hard to make those numbers work even with -- I mean completely we had looked at putting 50 seat jets in that market.

But even with lease rates, you know, in the $50,000 assuming you get the aircraft, it was just literally impossible to make that work.

So there are aircraft coming back into the system.

There is a -- no -- for example there are no Dash 8-200s available worldwide.

There are no Dash 8-400s available but whether or not they are going to take (inaudible) out of mothballs, I think that might be a stretch at this point.

Thanks, guys.

Okay.

Our next question comes from Helane Becker from Benchmark.

You may ask your question.

Thank you very much, operator.

Hi, guys.

Hi, Helane.

How are you?

I'm okay.

Thank you.

Do you have or does Peter have available the number of departures in this quarter?

Yes.

I will get back to you with that.

We'll get that for you.

Okay.

That would be good.

And then, on the Hawaii side, I know you talk a little bit about the editorial assessment and the favorable publicity you're getting.

Are you seeing any signs that some of the competitors already in the market are raising fares or kind of backing away from the start-up first that you have?

Well, I don't know, I mean I can, it's hard to say.

And again, I look at the booking curve and I've been very pleased with the bookings but without the history it's really hard to tell.

We've been told that the booking curve is very steep.

Especially, since we focus on local track and people generally don't make decisions six weeks out.

But it's hard to say.

I know, yesterday we had a very good day.

And our average fare, which even though we have a $39 fare, our average fare was closer to $50.

So it seems like maybe some of those bookings classes are starting to get closed down.

But again, it's hard to say what our competitors are doing.

I think most people understand our strategy.

We want to get the product out in the marketplace, we want people to try us.

We understand that the 50 seater may not be the ideal aircraft.

But again with only four lines of flight, we can get out there, get our product well known.

Operating with a high load factor with fair levels, if you are looking at the high 40s, you know, low 50s, believe me those numbers are not bad for us.

At the right time, which we think is 12-24 months down the road, putting more efficient, larger regional jets, and as you know, we have been looking at the Embraer(ph) 195, which we think is a perfect candidate, that aircraft with fare levels that are significantly below what was out there before, but was reasonable market share that we would built with the 50 seaters would be very profitable for Mesa.

Very profitable.

Okay.

We don't expect to see results immediately but we think again that given the long-term prospects there we think it's a very good bet.

Okay.

So we should think about this in terms of a full year?

Right, a full year before we see results?

Yes.

I think that we again, it's less than 2% of our capacity.

We're talking about four aircraft out of roughly 200.

So it's going to take a little time to develop but you know, one of the things I found is that when you cut the fares in half you get a response pretty quick.

And I think that's what we're seeing right now.

So the answer to your question is we had 91,533 departures.

91,533.

Okay.

And then my last question, just with respect to the share repurchase, at one point you guys had talked about buying back stock and being in the market an so on.

And you haven't really talked about that the last couple of conference calls.

And I was just kind of wondering, is the use of cash the Hawaiian operation?

Or could you just talk about what cash uses you might have and where you stand on the potential for share repurchase?

I think that's a great question, because interestingly last year, we raised $200 million in two separate convertible issues.

As you guys know, we've never even come close to touching the money.

And I hate to tell you when I do the math of when I take the dilution out where we would be right now.

But that being said, I think having the money in the bank, especially through this very difficult period, has been a good decision.

We have bought back over I think approximately $50 million worth of stock over the last five years.

But to the extent, we do time a little bit.

We have used it when there have been difficulties in the industry or a problem with a partner and our stock has traded at levels that are significantly below what we think the value is.

We are continuing to look at it.

I mean I can tell you that if we bought back -- if we bought stock today it would be significantly additive.

And we are making that decision every day based on the prospects.

Certainly, there are still some question marks in our business which is why I think the stock is valued where it is.

We'd like to see Delta emerge from bankruptcy.

We feel very confident that our relationship with them is secure and expanding.

And I would like to stay hopeful that it will continue to expand.

I do not think we would have gotten the additional business that we did with them if they didn't have any thought to continuing their relationship with us.

Our people on the Delta side operationally have been just remarkable.

Total completion rate since inception has been over 99.5%.

I just feel that having that cash and ready to do something, whether it be to continue to grow the company, which as I mentioned before is going to cost you $2 million, $3 million or $4 million a pop to take on a large capacity regional jet.

Whether we make an acquisition, I think that cash is going to be very helpful to us down the road.

So we haven't done anything at this point, but it is something that we look at literally every day.

There is one thing I do want to point out to you Helane because it sounded like what you were saying is what are we currently using our cash for, or why is our cash down.

This quarter is our typically highest quarter for paying aircraft leases, which we pay either on a semi-annual or a quarterly basis.

So if you -- When you do look at our balance sheet you will see that our prepaid have increased I believe by almost $25 million which reflects prepaid leases.

What's our cash balance as of today, Peter?

Well at the close it was 287.

I believe.

As of today.

Sorry 282.

No, as of today.

As of today, it's about the same.

Okay.

All right.

Yes if there is some timing in terms of the payments of leases, so we're close to our low point right now, is that correct?

Yes.

But I mean my only point is that if you took out the effects of prepaid leases, our cash balances would have been above where it ended December 31st .

Right, it would have been over 300 million.

Yes.

Yes, got you.

Okay great.

Thank you so much.

[Operator Instructions]

Our next question comes from Glenn Engel from Goldman Sachs.

You may ask your question.

Good afternoon.

Couple of questions.

One is a technical one.

If I look at the expense items, maintenance dropped a lot from December to the March quarter and wasn't up first last year, G&A dropped significantly and was down versus last year.

What is driving those numbers?

Well on the maintenance side, as you know, we had put forward or started -- now it's probably six months ago, six-nine months ago, our power by the hour for our spare parts.

That is now kicking in and doing nicely.

On G&A that is down primarily as a result of higher -- in the last couple of quarters, workman's compensation expense.

So the past few quarters were overstated and this is a normal number?

Yes.

Second question, on the ExpressJet transfer that went to Republic, did you bid and if you did why don't you think you won?

I think that you probably have to ask the people at Continental why we did not.

But the fact is we are covered by confidentiality agreements.

I am not sure I am allowed to say anything about it.

Is that a fair statement, Brian?

Yes.

As I said, I think it is a great piece of business and I applaud Republic for having won the business.

I would like to think that maybe that opens up some more opportunities for us because I imagine they will be pretty busy putting out eight, nine airplanes a month.

So Mesa in the past had won half of all the new business that went out to regionals, it was their turn to win.

That's fine.

I think that Republic and Mesa have a lot of similarities.

And the fact is that we can't win them all.

And do you think it was from a price reason or do you think it was just from a service reason?

I think that our costs are about the same but I really cannot tell you why I would - I don't know because I am privy to how all the various operators operate with their partners because we see everyone's data.

And frankly, I can tell you that Mesa ranked very highly in those comparisons.

So I just cannot tell you.

Finally, can you talk about the cost of the Hawaiian planes, how they compare to your existing 50-seat RJs?

They are less expensive.

Give me a rough percentage?

I am afraid again, I am subject to confidentiality.

There's good friends of ours out there marketing those aircraft.

So I can only tell you that we feel that at the price we got them, we might have been able to get them cheaper, I guess, but we have so much flexibility and that's really what we are going for.

I think we have the aircraft for six months and then technically month to month after that on a two-year deal.

So it really -- the deal was shaped to give us the flexibility we needed.

And I think that that is really what we're going for on that deal.

And they are nice airplanes.

They have got nice new leather interiors.

Thank you very much.

Thank you.

At this time, I have no further questions.

Okay.

Well, I want to again thank everybody.

I know that if I could say that people are -- when I talked to some of the folks in the field concerned and saying, what are you guys going to do next?

Mesa has been growing every year.

And certainly since we have been here and literally, throughout our 25 year history, we do have if not the lowest, among the lowest cost in the industry.

We have got a strong balance sheet, we have got great people.

And I am highly confident that as we go forward there'll be opportunities that we will be able to take advantage of and as long as we continue to work together, which clearly is a key in this industry, with our people, I think that there is a lot of good things going forward for us.

Okay and thank you very much.

And we look forward to speaking to you again next quarter.

Have a great day.

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