Phoenix-based Mesa Air Group Inc. announced Tuesday that it finalized a key contract to keep operating flights for American Airlines Inc. for at least another five years.
The regional airline has operated flights for American and United Airlines for years, but the majority of Mesa’s previous contract with American was set to expire in 2021. The Covid-19 pandemic delayed negotiation talks between the two airlines earlier this year
Under the new five-year term, which starts on Jan. 1, Mesa (Nasdaq: MESA) will operate 40 CRJ-900s jets for American, under the American Eagle brand. Under the previous contract 30 CRJ-900 aircraft were set to expire in 2021 with an additional 17 expiring in 2022.
“This new contract will position Mesa for long term stability and improved performance on our American operation,” Mesa Air Group’s CEO and chairman Jonathan Ornstein said in a statement. “This year has been difficult for our entire industry, but I’m thankful that despite the obstacles, American has chosen to continue its long-standing relationship with Mesa.”
The news of the new contract, released at the close of Markets on Tuesday, was well-liked on Wall Street, sending Mesa shares 14.6% higher in premarket trading Wednesday. However, at the close of regular trading Wednesday, Mesa finished up 9 cents, or 1.46% to close at $6.24. Track the stock price here.
While still having its struggles, Mesa has turned a profit for much 2020, at a time when most commercial airlines have presented major losses. Mesa intentionally operates with a low cost structure – one of its selling points for working with American and United – and its contracts with those companies take away some of the risk of reduced passenger traffic.
“Efficiency and flexibility have been the pillars of our operation and the key to our low-cost structure,” Brad Rich, Mesa’s executive vice president and chief operating officer said in a statement. “We are optimistic about our relationship with American and believe this new contract will be beneficial to both parties.”
The company is set to release its next quarterly earnings report on Dec. 9.
