Thank you for standing by, and welcome to the Mesa Airlines Q1 Fiscal 2022 Earnings Conference Call. All participants are in a listen-only mode until the question and answer session. At that time, please press star one, unmute your phone, and record your name at the prompt. 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 Susan Donofrio, Head of Investor Relations. Ms. Donofrio, you may begin. Thank you, operator, and welcome, everyone, to Mesa's earnings call for its first fiscal quarter ended December thirty-first. This call is being recorded and simultaneously webcast. A replay of this call can be found on our website. On the call with me today are Jonathan Ornstein, Mesa's Chairman and CEO; Michael Lotz, President; Brad Rich, EVP and COO; and Torque Zubeck, CFO, as well as other members of the management team. Following our prepared remarks, there will be a question-and-answer session for the sell-side analysts. We also wanted to remind everyone on the call today that today's discussion contains forward-looking statements that are based on the company's current expectations and are not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially from those reflected by the forward-looking statements, including the risk factors discussed in our reports on file with the SEC. We undertake no duty to update any forward-looking statements. In comparing today's results, we will be adjusting all periods to exclude special items. Please refer to our first fiscal quarter earnings release, which is available on our website for the reconciliation of our non-GAAP measures. With that, I will turn it over to Jonathan for his opening remarks. Thank you, Susan, and thanks everyone for joining us today. Obviously, this has been a very tough quarter for Mesa, and the one piece of good news I can report is that demand for our products has never been stronger. Our primary challenge will be meeting that demand. While COVID now appears to be receding and in some quarters referred to as a controllable endemic, its impact on our operations and financials is still evident. Its effect on this quarter was significant and unlike anything we have seen in 20 years. While COVID had by far the greatest impact, we had other items that negatively impacted the quarter as well. We continue to have catch-up and heavy maintenance expenses that we deferred at the start of COVID, which were discussed last quarter. We experienced unprecedented volatility in sick calls, which we believe are COVID Omicron related. In November and December, we had days with sick rates as high as 23% compared to our historical average of 5%. This continued for the first three weeks in January. Fortunately, since January 23rd, we have seen a measurable reduction in sick call rates, which we are obviously monitoring closely. While COVID's effects are lessening, we are also contending with a significant increase in pilot attrition as mainline carriers begin hiring to refill the ranks of pilots, a shortage caused by early and statutory retirements. Additionally, the national and cargo carriers continue to have a strong demand for pilots. That being said, by far the biggest impact on the current pilot shortage is the ill-advised 1,500-hour requirement for commercial pilots, a rule adopted by no other country. Unfortunately, our financial performance this year will be highly correlated to our ability to deal with this pilot attrition successfully. On a personal note, I could not be more proud of our people who bravely continue to work through the pandemic, providing safe transportation to our passengers. Managing the challenges of our core regional operation remains our team's top priority. Brad will go into more detail with some of these initiatives. As for some of the areas we have invested in and partnered in outside of our core regional operations, they continue to make progress and reach company milestones. These partnerships will help Mesa diversify its revenue and add to our future growth opportunities. As an update, turning to our DHL cargo operation, this continues to perform well with our two dedicated 737-400F aircraft. We have consistently met or exceeded DHL's operational performance requirements. We recently leased a third 737-400F aircraft and expect to take delivery this month. Going forward, we think that cargo can be an increasingly important part of our business. Our partnership with Gramercy Associates Ltd. is on track to have certification completed in the first half of 2022. We own 49% of this Malta-based regional jet operation, and we're looking forward to introducing our regional business model to Europe. In spite of the difficult environment, we have selectively continued to invest and partner in newer, environmentally friendly technologies. These partnerships are designed to position Mesa to be the first regional airline to fly electric aircraft and be at the forefront of decarbonizing air travel and reducing our reliance on fossil fuel. Our electric aviation partnerships with Archer and Heart that we entered alongside United are reaching product development milestones. At Archer, the company received a special airworthiness certificate from the FAA covering its Maker demonstrator aircraft in early December. This was followed by completing its first successful test flight in December 2021. This moment is a significant step forward for Archer's overall certification timeline and serves as a key enabler for the company's mission to launch its first commercial eVTOL flight in 2024. Heart Aerospace, our other electric aircraft partnership, is also reporting progress in the development of its 19-passenger electric aircraft. The scale model of the plane took flight for the first time at the Heart Aerospace headquarters located in Sweden this past December. Going forward, our strategy is to selectively look at other opportunities in aviation-related green technologies to ensure a leadership role in this area. During the quarter, we signed a letter of intent and entered into a partnership agreement with REGENT to support the development of their electric-powered transportation, utilizing wing and ground effect technology, which is designed to significantly expand the range over other electric designs. With that, I will hand it over to Brad Rich to go over more of the details and an update on our operational performance this quarter. Thank you, Jonathan, and good afternoon, everyone. Thank you for joining us today. Our main focus remains on operating our core regional business in the safest and most operationally reliable way, with the health and safety of our people and our customers always the top priority. We are focused on remaining flexible and responsive to the flying needs of our partners, American, United, and DHL. In the December quarter, we flew 86,079 block hours, which is a 24.3% increase from last year and 9.3% below last quarter. Our combined controllable completion factor was 97.8%, compared to 99.9% a year ago. Our current production is below our 2019 levels, primarily driven by a reduction in flying for American as a result of our smaller fleet under contract, as well as capacity reductions due to the spread of the Omicron variant of COVID-19 and elevated attrition to mainline carriers. Looking ahead to 2022, we are focused on preparing to operate the airline productively and reliably in a post-pandemic environment. While United and American are requesting additional flying, it is in an industry environment of increased pilot attrition to the major airlines, compounded by COVID-related absence rates. In previous calls, we discussed the increase in volume of additional heavy check requirements and the timing of such checks that compromised our aircraft availability. We feel like we are seeing some tailwinds on this issue, and after this quarter, we expect to be back to a more normal run rate of heavy maintenance, and our aircraft refurbishment program is also just about completed. Regarding our United operations, our controllable completion factor, or CCF, was 98.3% due to pilot staffing challenges caused by pilot attrition to the mainline carriers and elevated absences due to the spread of COVID-19. As far as our United fleet, we had previously removed all the CRJ-700s from our operations, and we continue the transition process of leasing these 20 CRJ-700 aircraft to GoJet Airlines as part of the previously announced agreement ending in 2030. Seventeen of the aircraft had been delivered as of December 31, 2021. The three remaining aircraft are planned to be delivered by the end of March 2022. Our United E175 fleet remains at 80 aircraft. We feel our relationship with United remains strong and productive, and we are working collaboratively with them as we navigate through the recovery. I'd like to now provide an update on our American operation. Our CCF for American was 97.2% for the quarter and driven primarily by the same issues that impacted our United performance, specifically COVID-related absence rates among our pilots, compounded by pilot attrition. Working cooperatively through the pandemic, American recognized the difficult operating environment impacted our performance and waived our performance-related requirements. As mentioned in previous quarters, the increased volume and timing of heavy maintenance impacted our ability to schedule aircraft and related spares. Maintenance and refurbishment costs should begin to return to more normalized levels after this quarter. I would like to provide a little more color on our operating performance. Unlike other regional carriers that were pulling down scheduled flying earlier due to elevated pilot attrition, the situation at Mesa was unique in that our attrition spike happened much later than others and occurred at the same time in which we experienced elevated absences due to the Omicron surge. This sequence of events is the driver for reduced performance in November, December, and January. In cooperation with our partners, we have kept our forward-scheduled block hours down to a more conservative level in order to account for COVID-related absences and pilot attrition. Given that we have outlined the industry-wide challenges, the relevant question is, what are we doing about it and how are we navigating through the recovery? Our focus is on staffing, specifically employee hiring, training, and retention. This focus will be on pilots and all critical positions that support our daily operations. Our pilot training pipeline is full, and we have implemented programs to not only continue to attract new pilots to Mesa but also increase our instructor ranks. We have secured additional simulator time and have strategically positioned this in key locations to decrease our training timelines. Furthermore, we are well-positioned to be an attractive option for pilots through opportunities such as a fleet of entirely large regional jets and narrow-body 737 aircraft, and the United Aviate program, where we're one of few independent regional airlines to be able to offer a direct pathway for our pilots to become career pilots for United Airlines. We are the only regional airline offering the opportunity to fly larger aircraft and earn the highest pay in the regional industry. We have attractive domiciles, which make it easy to commute. We're currently offering rapid captain upgrade opportunities. We have an active, targeted recruiting program, including a cadet program and on-site visits at aviation schools across the country. We have competitive new hire pay with enhanced bonus opportunities. Additionally, we are pursuing other creative initiatives to attract and retain new pilot candidates. Turning to DHL, we continue to see strong performance numbers as we complete our first full year of operations. We had a controllable completion factor of 99.8% for the quarter, which exceeded DHL's performance goals. We are expecting delivery of our third 737-400F aircraft this month. This aircraft is expected to provide additional lift as well as additional operational support. With that, I'd now like to turn the time over to Torque to walk through our financial performance. Thank you, Brad. I'll review our financial performance, capital outlook, and balance sheet, and then I'll provide some more detail on our business outlook. For the first quarter of fiscal year 2022, we reported a net loss of $14.3 million or $0.40 per diluted share, and an adjusted net loss of $9.3 million or $0.26 per diluted share. The adjusted net loss excludes the $6.5 million mark-to-market non-cash losses on our investments in equity securities and related impact on our income tax expense. Revenue in Q1 2022 was $147.8 million, a decrease of $2.6 million or 1.7% from $150.4 million for Q1 2021. While contract revenue increased by $9.7 million due to more flying on all fleets relative to the prior period, this increase was offset by a decrease in the number of aircraft flown for American. There was also a decrease in pass-through and other revenue of $12.4 million, primarily due to a decrease in pass-through maintenance expense. As a reminder, the pass-through expense has no P&L impact. Mesa's Q1 2022 results include, per GAAP, the recognition of $4.2 million of previously deferred revenue versus the deferral of $5.2 million of revenue in Q1 2021. The remaining deferred revenue balance will be recognized as flights are completed over the remaining terms of the contract. On the expense side, Mesa's overall operating expenses for Q1 2022 were $151.7 million, up $26 million over Q4 2021 and $28.3 million versus Q1 2021. The single biggest cost variance compared to Q1 2021 is the $11.3 million PSP-related grant that did not exist in Q1 2022. Mesa's flight operations expense was up $10.6 million versus last year. Over 60% of the increase is related to increased block hour flying for both pilots and flight attendants. Additionally, pilot training and recruiting bonuses accounted for $3.3 million. Maintenance expense for Q1 2022 was $59 million, up $6.1 million versus 2021, but down $2.1 million versus Q4 2021. Labor costs were up $7.3 million versus Q1 2021, reflecting increased flying activity and pay scale increases for the maintenance technicians. Compared to Q4 2021, labor costs and other expenses were up only $1.1 million. C-check expenses, excluding pass-through amounts, were $9.1 million in Q1 2022, up $6.1 million versus Q1 2021, but down $1.5 million compared to Q4 2021. Rotables, expendables, and component contracts were up $3.4 million versus last year, but down $1.4 million from Q4 2021. Now let me review where we are on cash and liquidity. Cash for the quarter, excluding restricted cash, decreased by $18.2 million to $102.3 million. This amount is right where we expected it to be last quarter. The reduction from Q4 to Q1 was primarily due to planned scheduled debt payments and financing costs of $26.8 million, $19.8 million in spare engines and other equipment, and $7 million in deposits paid toward future spare engine purchases. These expenditures were partially offset by $30.8 million in gross debt proceeds. Total debt at the end of the quarter was $678.6 million, which is up $8.3 million from the prior quarter. Assuming no additional debt, the balance will be reduced by roughly $93 million during the remainder of fiscal year 2022 and $95 million during fiscal year 2023. This brings the total debt balance down to roughly $490 million at fiscal year-end 2023. Now let me touch on guidance. Although there's still a lot of uncertainty, we did want to provide guidance in a few areas. As Brad pointed out, we are going to see quite a bit of pressure on block hours through the rest of the fiscal year. Based on prior COVID trends, we believe this quarter will be the most impacted at 15%–20% below Q1 2022, as we have been conservative with our partners on block hour production. By calendar year-end, we anticipate that our block hour production levels will be 5%–10% below Q1 2022. The heavy maintenance that we deferred at the start of COVID will be winding down at the end of this quarter. Pilot training will remain at elevated levels as we continue to hire and train new pilots with added sim capacity for the E-Jet in February and additional CRJ sim capacity coming up in the next quarter. We're also looking for cost-saving opportunities such as parking excess aircraft, evaluating underused facilities, leases, and equipment to eliminate unneeded costs in our business. Clearly, Q2 will be a challenge, but we are focused on our plan to get to breakeven by Q4, our September quarter. Getting our pilot attrition under control and increasing our pilot training output will be the most critical focus areas for increasing our block hour production. We will also be working with our partners to address the contractual performance requirements in an industry environment that has dramatically changed. I'd like to now turn it over to Jonathan. Thank you, Torque. We appreciate the financial report. Given the operational initiatives outlined, we expect to see an improvement in block hour production by the end of the year. We are also aggressively focused on the cost-savings initiatives that Torque outlined. In conclusion, while we face some significant near-term issues, we believe that the fundamentals of the industry remain unchanged over the long term. This last quarter demonstrates the extreme volatility of the industry and has required us to redouble our efforts to operate at pre-COVID performance and utilization levels. It clearly will not be easy, but we will get there and be stronger as a result. At this point, operator, please open up the call. I'd be happy to field any questions that analysts may have. Absolutely. Thank you. If you would like to ask a question at this time, please press star one on your phone, unmute your line, and record your name so you may be introduced. Again, to ask a question, please press star one. Our first question comes from Savanthi Syth. Go ahead, please. Your line is open. Hey, good afternoon, everyone. Just if I might, regarding the $22.5 million COVID-related impact that you called out for the December quarter, could you break out or at least provide a little bit of goalposts on how much of it was sick calls versus how much was heavy maintenance? As you pointed out, I think both of those should be less of an issue as you look into the second half of the fiscal year. I'm just trying to understand maybe the items that linger on into the end of the year. Hey, Savi. This is Torque. The heavy maintenance component of that, we will have most of that completed in this current quarter, and we'll really have that behind us. The other element that we referred to is really related to the increased training costs that go along with increased training the rest of the year as we try to still backfill our pilots. I don't know if that helps you, but, you know, we'll be doing a lot more training and recruiting as part of the program, which includes bonuses that we'll be paying as well. Sorry, if you could provide any color, is there any you can provide either on a per block hour basis or on an annual basis, just how much higher in terms of training and hiring costs you expect to see in this fiscal year? Yes. Well, I think in my prepared remarks, I talked about $3.3 million in the quarter for additional pilot training and recruiting costs. That's probably a reasonable estimate. Sorry. That's perfect. I missed that. Thank you. Then, you mentioned that the attrition rates kind of increased here, November, December, January. I know one of your competitors called out another thing: they're seeing this a lot more on the captain side. You know, I'm just trying to understand your comfort about kind of getting to that ever-decreasing level of declines in block hours. You know, what are you seeing on the attrition front and your comfort to be able to reach those kinds of block hour rates by the September quarter? Yeah. Hey, Savi. This is Jonathan. Clearly, the attrition issue has been, you know, significant. You know, a big part of it is, in fact, the backfill and being able to get the training done. We're fortunate in that we actually have adequate sim time. We secured a bunch of sim time right as this problem began to sort of erupt back in 2021. So we just put another E-Jet simulator online, as a matter of fact, three days ago. We have another CRJ sim coming, and we actually have another sim coming in, you know, 10 months. So we think from that standpoint, just the structural piece, we can do it. We have to continue to fill classes, which, you know, given the 1,500-hour rule, has made it obviously more difficult with, you know, what we feel to be actually less qualified people than the students that we were getting from the programs that we train people ab initio. Clearly, the attrition piece is the wild card. You know, Mesa was fortunate, and part of the problem that we've had is our attrition was actually, you know, on the low side of the industry for, you know, the first three or four months of the year and didn't pick up until really November, December, where we had a significant spike. Believe it or not, our spike was actually in FOs, and you know, it just caused us, for example, in one of our operations, literally all of our cancellations were due to a lack of FOs. You know, obviously, the issue is going to be going forward, you know, what the majors do. I mean, it's fortunate that we've had very open conversations with United and American about this. You know, United has been extremely helpful in understanding it. We've put together the Aviate program with them. We're the only large jet independent regional carrier with a flow-through like we have with United. At American, given that they operate their own regionals, they are very much aware of the problem and, you know, are sympathetic because they're dealing with the same thing. You know, I think that while this is an industry problem, I'd like to think that Mesa is reasonably well-positioned given our relationships with American and United. I do think that there are some things that we are doing that are a little bit different that should help us. I think primarily the piece about the sim times, I don't think people should underestimate just the ability to get enough sim training to qualify people is going to become challenging, and I think we're reasonably well-positioned in that. I mean, if attrition stabilizes, you know, I think we can pull our way through this. It's not going to be easy, but I think that, you know, the outlook is really going to be based on attrition. I think one more thing just to mention quickly is while attrition impacted us this last quarter, please do not underestimate the impact of COVID because when you're dealing with 23%-25% absence rates, I mean, I don't care what the attrition is. If you had no attrition, you would not be able to cover that on a day-to-day basis where we were canceling. You know, there were days we canceled more flights in a day than we had canceled in the previous twelve months. That really had to do with attrition. You know, the other thing I'd like to point out on that because I think it's important because people have asked, you know, what's is there an issue with the pilots? Is there some kind of, you know, problem there? I'm like, "Well, you know, we've had COVID for the last, you know, almost two years, and we've had no problems with attendance." We really only had a problem when you had Omicron and Delta, which really, in, you know, had a big impact on the group. To give you an idea how big the impact was, again, you know, there were a period of time where our infection rate was actually up thirtyfold over the previous months. I mean, there was a confluence of issues here that clearly impacted us on the pilot side, which, you know, we're gonna do everything we can to fix. The one piece of good news is that, you know, for the last five days, we've had one infection, which is a, you know, really a drop off that we did not expect or even hope could happen so fast. Hopefully at least that piece of it is behind us right now. Helpful. Thank you. Our next question comes from Helane Becker. Go ahead, please. Your line is open. Oh, thanks very much, operator. Hi, everybody, and thank you for the time. Savi asked most of the questions I would have asked you, but you know, just trying to think through the differences between the two subsidiaries, not so much American and United, but the passenger and the cargo. Did you have similar issues with cargo pilots, or was it kind of more confined to the passenger side of the business, A? And B, do you have trouble finding pilots for the 737s and finding sim time for them? You know, interestingly, I will say on the seven three seven, we did not have the same impact. Although I think it would be remiss for me not to mention that we did actually lose 1 of our seven three seven pilots, who was a dear friend of mine, who actually passed away as a result of COVID. Other than that, we did not have the same impact. We did not. I think the number of cancels during the quarter were like maybe 1 or 2 or actually Mike is shaking his head. I think maybe no cancels on the cargo side. It was a small group of people, and they were, you know, able to cover for each other if there was an issue. We just didn't have the same problem on the cargo side. On the passenger side, obviously, we just had much bigger groups. You know, unfortunately, what happened too was that it was in waves. It wasn't even distributed. I mean, we'd have one week it would be everybody in Dallas, and one week it'd be everybody in Houston. You know, we just would literally find ourselves in a position where, you know, we'd come in and have a 20-25% call-out rate. You know, this was, you know, compared to a month earlier where we had a 5% call-out rate, you know, while there was still COVID going on. You know, I think it would be fair to say we got, I would say, lucky on the cargo side with the exception of a fatality. We don't have a problem recruiting the pilots on the cargo side because they come through the Mesa seniority list. We always have lots of volunteers because, I mean, to be frank, the pay is very good and you know, we're very proud about that. We have the highest pay in the regional industry. I mean, we have some pilots making over $200 an hour. It's become a good tool for us in terms of recruiting as well. The cargo side is probably, you know, the right now, you know, probably our you know, the best news that we have for today. We are adding a third aircraft in the very near future. It's just coming on out of the C-check. It's on its way this month, and it will go into service. You know, we're looking to continue to expand the cargo business, you know, as best we can. Thanks, Jonathan. I'm sorry for your loss. The other question I have is on penalties. Normally you would have to pay penalties to your partners if you couldn't meet the contract, the contractual obligations. In this case, it's partly their fault that you can't meet the obligations, because they're hiring them away from you. How are you dealing with that? Are they like cutting you some slack there? Like, what's going on with that? And I know you can't necessarily disclose the amount, but- Oh, no, we're happy to. I mean, I'm I think that, you know, when we're looking at for this quarter, we disclosed that we had booked $4 million of penalty. I think that is under the conversation with our partners. You know, we feel strongly that for the reasons that you mentioned, that there is a very good argument, and it's not so much their fault. I mean, as much as they, you know, as I said, a big chunk of it is COVID. The hiring, you know, is obviously part of the issue, no doubt. But I think our partners are also, both of our partners, like I said, for different reasons maybe, but understand the situation. You know, I feel pretty strongly that we will have productive conversations with them around this because I don't think anybody, anyone wants to take advantage of another company as a result of COVID-related illnesses. I think that given the attrition situation, I think that everyone's just trying to come up with the best solution. You know, just to penalize us for a situation like this just doesn't seem productive when I think they'd much rather see us putting our money into, you know, additional recruiting and training and bringing on more pilots. It seems like a much better use of that money than to pay, you know, what are millions of dollars to them that may not be as helpful as what it would be to us in terms of, you know, bringing in, you know, bringing in more pilots. Again, you know, they have the same issues. I mean, every airline in the country has talked about pilot shortages and training problems. You know, I said, particularly with American having their own regionals. You know, we had a conversation just recently, and you know, they fully understand the challenges, and I think that I'm hopeful and I feel confident, frankly, that these conversations will be productive. You know, some of the penalties that we've anticipated or even booked, I think there could be some discussions about those. That's really helpful. Thank you. I'm sorry, go ahead. Just a reminder. I'm sorry, go ahead. I apologize. Just a reminder, if you would still like to ask a question, you may press star one and record your name at this time. Our next question comes from Mike Linenberg. Go ahead, please. Your line is open. Oh, yeah. Hey, good afternoon, everyone. I have a few here. If I could just start off with Torque. You know, you identified a whole bunch of areas for cost savings, various initiatives. Did you say what the target was maybe on an annual run rate, what you hope to achieve and maybe the timing of achieving those cost savings? Thanks. We're not ready to share the exact details on that, Michael, right now. What we are looking at is, I think you're aware, you know, we were flying 54 aircraft for American. We're now down to 40. We're looking at is how do we look at our current footprint with bases, maintenance bases that we have for American and how we can pull those together, eliminate lease costs, and get better utilization out of our mechanic group. That's one of the opportunities that we're considering. We've already been going through opportunities for cost savings and finding all of our contractors to go back and say, what are we doing? How much more can we find more money in those areas? I'm not ready to share the details yet because we haven't announced any specific plans. You know, I think it'd be easy to say that, you know, we think we could pick up $several hundred thousand a month potentially in there, but not ready to share the exact numbers. Okay. No, that's helpful. Brad, you know, on the operational side, in the queue, you know, you guys provided a little bit more, you know, sort of detail around kind of the American situation. The question I guess I have for you is, in return for the waivers that they granted you, for the late, you know, sort of, you know, November, December and January, in return, were there any modifications to your American contract as a result of that? It just wasn't clear. No. Mike, that's a good question. I think I mean, the simple and quick answer to that is no. Okay. What we do expect is what Jonathan alluded to earlier is, you know, we just expect to continue some, what we think will be productive dialogue surrounding the economic penalties. No, there are no other modifications of the agreement. Okay. That's super helpful. Then just lastly, Jonathan, maybe this is kind of a two-part question. One, where is your attrition now, and where has it been historically, sort of part A? Part B is, when I look at the number of cities that are losing service, that are losing all air service, they're in states with very powerful members of the House and the Senate. At the end of the day, you know, you think about where the rubber meets the road. You know, when states like I saw United's pulling out of Lewisburg, West Virginia, you know, West Virginia doesn't have a lot of airports, and there are people, you know, in that state who care about air service. At some point, you've got to get enough senators and members of the House to start looking at this 1,500-hour rule because rural America is going to lose all of its service. I mean, you know, your comments about 50, you know, all the CRJ-200s being, you know, nonexistent in a year or two, that's going to have a big impact on America's national airway system. I mean, you know, I see, you know, we're going to get, you know, something's going to give here. I figure, you know, you're probably the person here who can help deliver that message. Yeah. Mike, let me tell you, I mean, as you know, way back in 1995 or so, they went to one level of safety, and I spoke out about the fact that it would destroy the Part 135 business, and 2,500 Part 135 aircraft that had flown into rural America are now parked. There's not a single 19- or 30-seat aircraft currently in operation flying into those cities. I said on the 1,500-hour rule that it would only be a matter of time before the demographics of the retirements at the majors would have this kind of impact. When you couple that with COVID, it is the perfect storm. Yeah. You know, there were some issues. You know, we can all talk about the early retirements that probably were, you know, not the best idea, but at the time, no one quite knew where COVID was going to go. Mm-hmm. The fact of the matter is now the industry needs to pull together, and for the first time, you are hearing other CEOs talk about the 1,500-hour rule, and hopefully more people will, because in the end, who's going to pay for it? All the small communities that will lose service entirely. The other folks that will pay for it will have reduced service, reduced supply, and that will only do one thing: raise prices. Yeah. I think that everybody realizes, too, and I think it's very important to hit on this: this is not a safety issue. I mean, there is not a shred of evidence that says that a 1,500-hour pilot is safer than a 300-hour pilot with intense training. Our failure rate is probably 10 times higher with 1,500-hour pilots than it was for the 300-hour pilots coming out of our own programs that we headed in Farmington or at ASU. This is not a safety issue, and I think it's important that some of the politicians start to act and take this up, because if they don't, they're putting the industry in jeopardy. That doesn't matter if you're Mesa or any other regional airline; everyone is going to face the same outcome, and it's just not sustainable if they don't do something to fix this. Jon. You know, Mike wanted to make a point that this is a law that was adopted, and no other country in the world has adopted this law. Not a single one, right? I mean, it seems crazy that a 300-hour FO can land a Lufthansa A350 into JFK, flying over Queens, and a U.S. pilot can't do the same thing. Attrition levels, you know, I will tell you that attrition has clearly been elevated. Mm-hmm. You know, one month it's high, one month it's low. I mean, it's really been all over the board. I think it's fair to say that it's running anywhere from, you know, we look at like 3%-5% per month. You know, we are doing our best to keep up on the training side. You know, the only problem that you have with training, which has caught us a little bit behind, is that normally pilots give us two weeks' notice, maybe 30 days' notice. Mm-hmm. It takes three months to train a pilot. You know, we've got a pipeline, as Brad mentioned, that is full. We now have, in fact, additional sim time that will double our output, but we absolutely have some catching up to do right now. There is no doubt about it, and it's going to take some time. You know, one of the big question marks is, you know, right now we fill up our classes. I am concerned that as we go down the road, depending upon how future attrition looks, how dry does that reservoir get? Yeah Before Congress takes action and allows us to refill with highly qualified, well-trained students who don't have 1,500 hours, but have high-quality training in simulators and advanced aircraft types. Yeah. Well, great. Thanks for that, Jonathan. Thanks, everyone else, for the answers. Appreciate it. Thank you, Mike. Our next question comes from Andrew Didora. Go ahead, please. Your line is open. Hey, everyone. Jonathan, actually, my question was on your last point. I guess, at what point do you start worrying about filling up your classes, right? I know your training pipeline is full, but what does your pool of applications stand at for pilots today? What was it pre-pandemic? Kind of where do you see your pilot hiring needs over the course of 2022? Okay. No, that's a good question. You know, again, dependent upon attrition, and I just hesitate to say which direction it's heading. I mean, you know, we saw, for example, a significant drop in January, which we thought may have been a trend. Then, you know, it went back up to previous levels in February. We are currently, as I said, having multiple hundreds of people in training right now. The biggest problem we had was just getting adequate sim time, which we've now secured. Our pilot applicants, the numbers are probably a little bit less than they were pre-pandemic, you know, in terms of applications. We still are finding that we can fill the class. You know, I mean, we've got an entire department that's out recruiting right now. I mean, there was a time when, in fact, people used to pay us to apply for jobs. I mean, things have changed dramatically, and it's just a question of how we see things going forward and if we can get any relief whatsoever. I mean, there have been some long-term fixes being put into place, you know, things that, you know, frankly, we had been advocating for a long time, and had started to do, and then the pandemic hit. You know, I think that some of these schools, fortunately, are out there, you know, with United, for example, beginning Aviate, and, you know, there are other academies out there that will help. The problem is, you know, you can get someone up to the point where they have their 350 hours, having gone through a couple of your programs, and then they have to sort of scramble to get to the next 1,200. It's very expensive. It takes a long time, and, you know, you're also asking people to stay out of the workforce for two years. You know, to be frank, in today's environment, I mean, you know, I feel even more passionate against it because, frankly, it basically discriminates against anyone who doesn't have a ton of money. I mean, unless you are, you know, a very wealthy person, you are not going to become a pilot without, you know, basically trying to, you know, hock your entire future if you can make that happen. I mean, it's clearly problematic. I think for Mesa, I mean, we're in a reasonably good position, because we do fly large jets. We have very good, you know, very desirable, you know, domiciles in Dallas and Houston, Phoenix and Washington, D.C. We have the Aviate program with United, which has been obviously helpful in terms of attracting people. On the other hand, you know, with Aviate, we also lose people to United. It's a little bit of a double-edged sword, but net, I think it still, you know, is advantageous for us. Maybe I should know this, but in a normal pre-COVID year, how many pilots would you typically hire? I think when we look back, if there's ever considered to be a normal year in this industry, our normal training classes would probably run between 20 and 30 a month, I think. Is that a fair statement, Mike? Yes. You know, just depending upon what our needs are. 250, 300 a year. Yeah, 250-300 a year. Okay. You know, that number has obviously gone up from there. I mean, in COVID, we were literally losing two people a month. Yeah. Understood. Lastly, from me, maybe toward the $4 million of penalties in the December quarter, where does that hit the P&L? Is that the flight ops cost, or is that a contra revenue? Just curious from a modeling perspective. Yeah, I'm not going to. I really can't speak to that. Sorry, not something we've shared publicly previously. Contra revenue. It would be in contra revenue. Okay. Got it. Thank you. Yes. Yeah, I mean, to Savi's question, you know, I talked about the penalties. I don't know, maybe I shouldn't have, but the fact is that we did have it out in earlier drafts, so I'm happy we did because I'd like to be transparent. You know, we looked at the $4 million in penalties, and then we looked at what would have happened if we did not have COVID and had the absence rates and had just flown the same amount of flying as we did in October, you know, for October, November, December. Without the absence rates, that probably was an additional $5 million. It's very easy for us to say, without any of the other COVID-related problems, like the delay in our systems and all the other things that happened, we could easily identify $9 million of COVID-related expenses, or, excuse me, loss of revenue, in this quarter that we feel pretty easily we can identify. Just a reminder that you may still press star one and record your name to ask a question. Our next question comes from Savanthi Syth. Go ahead, please. Your line is open. Hey, thanks for the follow-up. Just to follow up on Helane's question, you know, with cargo not seeing as much pilot attrition, is there an opportunity to expand cargo given how strong that market is, even if you're having pilot issues on the CPA side? Or, because of that, does that kind of constrain any cargo ambitions? No, I think, Savi, that the cargo business is clearly, for us, a very important growth area because not only has the business continued to grow and be strong in terms of just the macro aspects, but the more cargo aircraft we add, I think it becomes a much more attractive place and makes it easier to recruit pilots. Because clearly, as I said, it gives pilots at Mesa the opportunity to make, you know, narrow-body rates without ever having to leave. I think the opposite. I think even our partners realize. I mean, I actually had a conversation with one partner who said, "Why don't you grow cargo? It's a great way to attract more pilots." You know, this is even, you know, coming from our own, you know, major airline partners. I think we are focusing on that growth. We've done an excellent job operationally. I have to say, hats off to our people there. Without a spare aircraft, we went months without a cancellation. You know, it's an area where we think there could be some real opportunity for us, you know, in the narrow-body area. No, it's a very important growth avenue for us going forward. What's the Mike, I can also add, look, you know, for our DHL, you know, we've only done it for about a year, and, you know, we used that to prove ourselves, and now we have another aircraft, and, you know, that's just a good indication of our potential that we can grow that as well as any other cargo business. Mike, what's a gating factor in growing that? It sounded like you had this proving. Now that you've proved it, is it just maybe one aircraft a year, and you just kind of have to show, "Okay, you have another one," and give a year of good performance? Or what's the gating factor there? Look, you know, I think the gating factor really is just demand on the side of the cargo operators. I think that, you know, Mesa has proven itself to be, you know, maybe the most reliable of the 737 operators right now. I think as a result, if there's growth out there, I think we stand a really good chance of getting our fair share. I think the real issue is just, you know, what do the cargo operators see as the demand for narrow-body aircraft in their system. Makes sense. If I might just quickly ask a question about the European JV. It seems like the timing is slipping a bit. I think the first quarter was the expectation, calendar first quarter, and maybe now it's the first half. Could you remind us again what comes after the certification and when that can start contributing? This is Mike. There is no 1,500-hour rule in Europe, so I could start with that. The pilot situation there is much different than what we would see here. Our plan is still to get the operating certificate by mid-year. We've already talked to some customers and will add customers throughout the year and kind of mimic the model in the U.S., which is much different than what they do in Europe right now, where they have a couple of aircraft here and a couple of aircraft there and not a lot of structure to it. We think the model in the U.S. will work well in Europe. Is that something that's more seasonal too, Mike? Is it that the opportunity is really in the summertime when the demand is strong, and then maybe not as much in the winter? No, we're really not trying to do the, you know, traditional European ACMI. We'll pick up the summer peaks. This is more about establishing partnerships with major carriers in Europe, like we do in the U.S., for long-term relationships for, you know, larger fleets of aircraft. Got it. Thank you. Speakers, I am showing no additional questions at this time. You may proceed. All right. Well, look, folks, you know, clearly this has been a difficult quarter. You know, the effects of COVID combined with the attrition have obviously been difficult. To be frank, I think probably the single biggest issue was how rapidly things changed. We responded, we thought, as quickly as we could. We brought back and started classes back in April to try to, you know, get ahead of this. You know, there were some constraints in regard to, you know, being able to put people through training and sim time, particularly in the E-Jet fleet, which we just solved this week. It's going to take us some time to dig our way out, but I think it's fair to say that besides the structural problem that exists within the industry in terms of pilots, we are hopeful that Washington will address it before it's too late. I mean, I think it's very fair to say that in terms of what's happening at Mesa and our partners at United, American, and DHL, there is no structural issue there that would cause, at least from my perspective, any concern. It's much more about dealing with some of these industry issues, and then it's a question of how fast we can address them. I can assure you that everyone here is working at full speed. We're all back in the office. I think that, you know, we're very much focused on getting this turned around, and the biggest aspect there is just getting our folks through training and getting people back out on the line flying airplanes. I want to thank, in particular again, all of our people. I also think it's really important for us to thank our partners, all of whom have been incredibly supportive throughout this whole period. I think that that's probably one of my single biggest reasons for confidence: the fact that our partners have really stepped up and have been very helpful throughout this whole period. With that, I want to thank everybody for taking the time, and we'll hopefully talk to you next quarter. Thank you very much. That concludes today's conference, and we thank you for participating. You may disconnect at this time. Have a wonderful day. Speakers, please stand by for your post-conference.