Mesa Air Group soars 55% on merger with peer

Mesa Air Group, a U.S. regional airline with a market capitalization of $45.4 million, jumped almost 55% yesterday, April 7, after the company announced it would merge with peer Republic Airways. The deal paves the way for Mesa to pay down its debt and for Republic to go public.

Yesterday, shares of Mesa Air Group, the holding company of regional air carrier Mesa Airlines, jumped almost 55% to $1.10 per share before giving back more than 10% in the first minutes of premarket trading today.  

Earlier in the day yesterday, the airline announced a merger with peer Republic Airways. The combined company will be renamed Republic Airways Holdings. Upon completion of the merger, Republic shareholders will own 88% of the new entity, while Mesa shareholders will hold between 6% and 12%, depending on “certain pre-closing criteria.”

The deal is expected to close late in the third quarter or early in the fourth quarter. The new company’s stock will continue to trade on the Nasdaq but under a new ticker symbol — RJET.

The merger is the latest move in a long-running “shake-out” among regional airlines that fly on behalf of larger carriers, the Journal reports. Mesa operates flights for United Airlines, and Republic for American Airlines, United Airlines, and Delta Air Lines, according to the press release.

Regional airlines faced stiff headwinds in the wake of the COVID-19 pandemic, the WSJ notes. Larger carriers tried to lure away their pilots with higher wages, driving up costs for smaller players. Mesa was affected by this, too: In the first nine months of 2024, its operating revenue fell almost 6% year over year to $361 million, although the net loss shrank 28% to $66 million. To regain its footing and boost liquidity, the company has been selling planes, engines, and other assets, the WSJ adds.

The deal is meant to tackle these issues, according to the press release. By merging with Republic, Mesa aims to streamline flight management, ensure financial stability, and become more attractive to institutional investors. It expects the combined company to generate about $1.9 billion in revenue.

Before the merger is completed, Mesa must dispose of some assets and settle certain liabilities. Republic will assume the remaining debt, meaning it will not be carried over to the new entity. As of June 30, Mesa had $529.5 million in liabilities.

According to MarketWatch, the single analyst covering Mesa has a “hold” recommendation, with a target price of $2 per share, implying nearly 82% upside versus the last closing price.