Arizona-based regional carrier, Mesa Airlines is entering into a sale-leaseback agreement with United Airlines. The agreement, involving the transfer of 18 Embraer E175 regional jets, will raise approximately $230 million. The sale-leaseback agreement comes just in time for the regional carrier. The deal closure gives Mesa the lifeline it needs to stay afloat, providing the carrier with a critical opportunity to substantially reduce its outstanding debts. This isn’t the first time United Airlines is supporting the regional carrier’s financial stability. Operating under the United Express brand, Mesa Airlines has a significant partnership with the United States airline giant.
Mesa Airlines and United Airlines Partnership
Mesa Airlines serves numerous markets throughout the Western Hemisphere. Serving regions across the United States, Canada, Cuba, Mexico, and the Bahamas, the regional carrier has been connecting smaller communities with major hubs since 1982. In late 2022, United Airlines’ acquisition of a 10% stake in Mesa contributed approximately $10.5 million to the regional airline operator’s financial stability. The partnership was further secured as United Airlines entered into a five year Capacity Purchase Agreement (CPA) with its newly inaugurated United Express affiliate. Now, as Mesa Airlines faces outstanding government debt, United Airlines see an opportunity to strengthen its relationship with its official United Express partner. United has decided to capitalise on it’s CPA with the regional carrier, coming to the rescue with a significant sale-leaseback agreement.
Deal Structure
Involving 18 Embraer E175 aircraft, the sale-leaseback transaction is being executed in two phases. Following their transfer on December 31, 2024, eight E175s are already under the new ownership of United. Meanwhile, the remaining 10 aircraft are scheduled for transfer in late January or early February 2025. With the sale’s completion, Mesa will lease back each of the 18 aircraft from United. After which, the regional carrier will be able to resume full operational capacity. Meanwhile, Mesa will be able to use the proceeds of this deal to reduce its loan with the U.S. Treasury.
The anticipated total gross proceeds from the sale will be around the $229-230 million mark. Mesa will be allocating approximately $142 million of these proceeds to alleviating the pressure of its government debt. The expectation is that the deal will further strengthen Mesa airlines’ partnership with United Airlines. Mesa continues to be a key player in America’s regional airline market. This sale-leaseback agreement marks a significant step in the carrier’s journey towards financial stabilisation.
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