UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý   No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

 

Yes o   No ý

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

CAUTIONARY STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

 

Statements in this Quarterly Report on Form 10-Q under the caption “Business” and “Management’s Discussion and Analysis of  Financial Condition and Results of Operations” as well as oral statements that may be made by the Company or its subsidiaries or by officers, directors or employees of the Company or its subsidiaries acting on the Company’s behalf, that are not historical fact may constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve factors that could cause the actual results of the Company to differ materially from historical results or from any results expressed or implied by such forward-looking statements.  The Company cautions the public not to place undue reliance on forward-looking statements, which may be based on assumptions and anticipated events that do not materialize.  Factors which could cause the Company’s actual results to differ from forward-looking statements include material changes in the relationship between the Company, its subsidiaries and Northwest Airlines (“Northwest”); the outcome of the potential termination of Mesaba Aviation, Inc’s.  Regional Jet Services Agreement by Northwest; changes in Northwest’s air service; reduced passenger and flight activity as a result of severe acute respiratory syndrome and terrorist events; expenses associated with restructuring operations; a slow-down in the overall United States economy; increased operating costs due to heightened security measures; the impact of United States government programs on operations; changes in regulations affecting the airline industry, including those issued by the Department of Transportation (“DOT”), Transportation Security Administration (“TSA”) and Federal Aviation Administration (“FAA”); seasonal factors; labor relations, including labor shortages, slow downs and/or work stoppages; and ongoing legal proceedings.

 

2

 

Part I.  FINANCIAL INFORMATION

 

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

 

MAIR HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

		September 30 2003			March 31 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	69,987		$	60,908
Short term investments		56,839			40,464
Accounts receivable, net of reserves of $395 and $389		30,348			40,682
Inventories, net		8,181			8,459
Prepaid expenses and deposits		5,880			4,925
Deferred income taxes and other		10,767			10,706
Total current assets		182,002			166,144
PROPERTY AND EQUIPMENT:
Flight equipment		80,442			78,549
Other property and equipment		40,817			37,916
Less: Accumulated depreciation and amortization		(80,240		)	(72,667		)
Net property and equipment		41,019			43,798
LONG TERM INVESTMENTS		24,090			21,762
OTHER ASSETS, net		14,532			15,706
		$	261,643		$	247,410

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

3

 

MAIR HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(Unaudited)

 

		September 30 2003			March 31 2003
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	14,227		$	15,285
Accrued liabilities:
Payroll		15,224			14,295
Maintenance		16,413			16,031
Deferred income		2,602			2,619
Other, primarily property and income taxes		21,770			14,445
Total current liabilities		70,236			62,675
OTHER NONCURRENT LIABILITIES		5,515			6,790
COMMITMENTS AND CONTINGENCIES (Notes 2 and 12)
SHAREHOLDERS’ EQUITY:
Common stock, $.01 par value; 60,000,000 shares authorized, 20,323,141 and 20,320,641 shares issued and outstanding		203			203
Paid-in capital		51,145			50,615
Warrants		16,500			16,500
Accumulated other comprehensive income		93			116
Retained earnings		117,951			110,511
Total shareholders’ equity		185,892			177,945
		$	261,643		$	247,410

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4

 

MAIR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

(Unaudited)

 

		Three Months Ended September 30						Six Months Ended September 30
		2003			2002			2003			2002
OPERATING REVENUES:
Passenger		$	109,683		$	113,042		$	216,445		$	222,072
Freight and other		7,779			5,593			15,050			9,917
Total operating revenues		117,462			118,635			231,495			231,989
OPERATING EXPENSES:
Wages and benefits		36,555			33,967			71,783			65,756
Aircraft fuel		5,759			6,399			11,476			12,106
Aircraft maintenance		20,575			19,953			38,955			39,465
Aircraft rents		26,764			27,022			53,542			53,524
Landing fees		1,805			2,127			3,570			3,789
Insurance and taxes		2,671			4,303			5,498			8,628
Depreciation and amortization		4,334			4,708			8,833			9,571
Administrative and other		12,723			15,209			26,819			27,976
Total operating expenses		111,186			113,688			220,476			220,815
Operating income		6,276			4,947			11,019			11,174
NONOPERATING INCOME (EXPENSE):
Interest income		449			664			818			1,452
Other, net		(89		)	(46		)	2,521			(2,752		)
Other nonoperating income (expense), net		360			618			3,339			(1,300		)
Income before provision for income taxes		6,636			5,565			14,358			9,874
PROVISION FOR INCOME TAXES		2,702			3,194			6,918			5,927
NET INCOME		$	3,934		$	2,371		$	7,440		$	3,947
NET INCOME PER SHARE:
Earnings per common share - basic		$	0.19		$	0.12		$	0.37		$	0.19
Earnings per common share - diluted		$	0.19		$	0.12		$	0.36		$	0.19
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		20,323			20,298			20,322			20,298
Diluted		20,540			20,302			20,414			20,318

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

5

 

MAIR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

		Six Months Ended September 30
		2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	7,440		$	3,947
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,833			9,571
Writedown of investment		—			2,994
Amortization of deferred credits		(1,175		)	(1,398		)
Stock-based compensation		515			—
Changes in current operating items:
Accounts receivable		10,334			6,569
Inventories		278			437
Prepaid expenses and deposits		(955		)	(1,259		)
Accounts payable and other		7,413			4,966
Net cash provided by operating activities		32,683			25,827
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments		(37,381		)	(61,594		)
Sales of investments		18,655			83,660
Purchases of property and equipment		(4,793		)	(4,852		)
Net cash provided by (used in) investing activities		(23,519		)	17,214
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of other noncurrent liabilities		(100		)	—
Proceeds from issuance of common stock		15			—
Net cash used in financing activities		(85		)	—
NET INCREASE IN CASH AND CASH EQUIVALENTS		9,079			43,041
CASH AND CASH EQUIVALENTS:
Beginning of period		60,908			31,250
End of period		$	69,987		$	74,291
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during period for:
Interest		$	47		$	—
Income taxes		$	347		$	1,127

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

6

 

MAIR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The consolidated financial statements included herein have been prepared by MAIR Holdings, Inc. (the “Company” or “Holdings”), formerly known as Mesaba Holdings, Inc., without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The information furnished in the consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such consolidated financial statements.  The Company’s business is seasonal and, accordingly, interim results are not indicative of results for a full year.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.  It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements for the year ended March 31, 2003, and the notes thereto, included in the Company’s Annual Report on Form 10-K as filed with the SEC.

 

1. Basis of Presentation

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Mesaba Aviation, Inc. (“Mesaba”) and Big Sky Transportation Co. (“Big Sky”).  All significant intercompany transactions and balances have been eliminated in consolidation.

 

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities, as well as the reported amounts of revenues and expenses.  The most significant use of estimates relates to accrued maintenance expenses, aircraft property and equipment lives, and inventory obsolescence reserves.  Ultimate results could differ from those estimates.

 

Certain balances in the fiscal 2003 consolidated financial statements have been reclassified to conform with the fiscal 2004 presentation.  These reclassifications had no impact on net income or shareholders’ equity as previously reported.

 

2. Operations

 

Mesaba

Mesaba operates as a regional air carrier providing scheduled passenger service as Mesaba Airlines/Northwest Airlink and Mesaba Airlines/Northwest Jet Airlink under two separate agreements with Northwest Airlines, Inc. (“Northwest”).  As of October 31, 2003, Mesaba served 114 cities in the United States and Canada from Northwest’s hub airports, Minneapolis/St. Paul, Detroit and Memphis.

 

Under the Airline Services Agreement (the “Airlink Agreement”), Mesaba operates Saab 340 jet-prop aircraft (“Saab”) for Northwest.  The Airlink agreement provides for exclusive rights to designated service areas and extends through June 30, 2007.  Under the Airlink Agreement, Mesaba recognizes revenue for each completed available seat mile.  Additionally, under the Airlink Agreement, Mesaba purchases fuel, ground handling and other services from Northwest.  For these services, Mesaba paid to Northwest $7.6 million and $5.5 million for the three months ended September 30, 2003 and 2002.  For these services, Mesaba paid to Northwest $14.5 million and $10.4 million for the six months ended September 30, 2003 and 2002.  Either Northwest or Mesaba may terminate the Airlink Agreement on 365 days notice or may be terminated immediately by either party for certain provisions provided for in the Airlink Agreement.

 

Under the Regional Jet Services Agreement (the “Jet Agreement”), Mesaba operates Avro RJ85 regional jets (“RJ85”) for Northwest.  The Jet Agreement extends through October 25, 2006, unless terminated earlier in accordance with its provisions.  Under the Jet Agreement, Mesaba recognizes revenue for each block hour flown.  Northwest provides fuel and airport and passenger related services at Northwest’s expense.  The Jet Agreement may be terminated immediately by Mesaba or Northwest in accordance with certain provisions provided in the Jet Agreement.  Northwest can also cause the Jet Agreement to terminate on April 25, 2004, by giving notice not later than December 15, 2003.  Also, see the subsequent event discussed at Note 12.

 

Under the agreements, all Mesaba flights appear in Northwest’s timetables and Mesaba receives ticketing and certain check-in, baggage and freight-handling services from Northwest at certain airports.  Mesaba also benefits from its relationship with

 

7

 

Northwest through advertising and marketing programs.  The Airlink and Jet Agreements provide for certain incentive payments from Northwest to Mesaba based on achievement of certain operational or financial goals.  Such incentives totaled $0.7 million and $0.9 million for the three months ended September 30, 2003 and 2002 and $2.5 million and $2.9 million for the six months ended September 30, 2003 and 2002, and are included in passenger revenues in the accompanying consolidated statements of operations.  Approximately 78% and 73% of the September 30, 2003 and March 31, 2003 accounts receivable balances in the accompanying consolidated balance sheets are due from Northwest.

 

Cancellation of the Airlink or Jet Agreements or Northwest’s failure to make timely payment of amounts owed to Mesaba or to otherwise materially perform under the Airlink or Jet Agreements would have a material adverse effect on Mesaba’s and the Company’s operations, financial position and cash flows.  Northwest and Mesaba review contract compliance on a periodic basis.

 

Big Sky

Big Sky operates as a regional carrier based in Billings, Montana, primarily providing scheduled passenger, airfreight, express package and charter services.  Big Sky operates daily scheduled flights providing interline and online connecting services and local market services.

 

Big Sky provides scheduled air service to 19 communities in Montana, North Dakota, Washington and Idaho via its Billings, Montana hub.  Big Sky has code-sharing agreements with Alaska Airlines/Horizon Airlines, America West Airlines and Northwest Airlines, where its services are marketed jointly with those air carriers for connecting flights.  Big Sky participates in the Essential Air Service (“EAS”) program with the DOT.  The EAS program subsidizes air carriers to provide air service to designated rural communities throughout the country that could not otherwise economically justify that service on the basis of its passenger traffic.  The DOT pays EAS subsidies for each departure in a covered market.

 

3. Acquisition

 

On September 26, 2002, the Company executed a definitive merger agreement providing for the acquisition of Big Sky for $3.2 million, net of cash acquired of $0.3 million.  The transaction closed on December 1, 2002.

 

The Company funded the acquisition with cash from operations and accounted for the acquisition using the purchase method of accounting.  Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair market values at the date of acquisition.  Certain of the assets and liabilities have been recorded based upon preliminary estimates as of the date of the acquisition and are subject to future adjustments.  The excess of the purchase price over the fair market value of the net assets acquired was allocated to certain intangible assets and goodwill.  Results of Big Sky’s operations have been included in the accompanying consolidated financial statements since the date of acquisition.  Due to the lack of materiality of Big Sky’s operations, pro forma financial results are not presented.

 

4. Goodwill and Other Intangibles

 

The excess of the purchase price over the fair market value of the net assets acquired was allocated to certain identifiable intangible assets, including Big Sky’s pilot labor contract and an air carrier certificate, and to goodwill.  These intangible assets were recorded based upon preliminary estimates and are subject to future adjustments.  Goodwill and other intangible assets and related accumulated amortization were as follows, in thousands:

 

		September 30, 2003									March 31, 2003
		Gross			Accumulated Amortization			Net			Gross			Accumulated Amortization			Net
Air carrier certificate		$	925					$	925		$	925					$	925
Goodwill and other		3,222						3,222			3,222						3,222
Amortized intangible assets:
Employee contracts		2,840			(338		)	2,502			2,840			(135		)	2,705
		$	6,987		$	(338	)	$	6,649		$	6,987		$	(135	)	$	6,852

 

The amortizable intangible is amortized over its estimated period of benefit.  Intangible asset amortization expense for the quarter and year to date ended September 30, 2003 was $0.1 million and $0.2 million.  Based on the current amount of intangible assets subject to amortization, estimated amortization expense for each of the succeeding five fiscal years is $0.4 million per year.  The recoverability of goodwill and the intangible assets are evaluated annually, at a minimum, or on an interim basis if events or circumstances indicate a possible inability to realize the carrying amounts.

 

8

 

5. Investments

 

Investments consist principally of municipal securities and corporate bonds and are classified as available-for-sale as of September 30, 2003 and March 31, 2003.  Available-for-sale investments are reported at fair value with unrealized gains and losses excluded from operations and reported as a separate component of shareholders’ equity, except for other-than-temporary impairments, which are reported as a charge to current operations and result in a new cost basis for the investment.  The Company recorded an other-than-temporary impairment loss of $3.0 million on its investment in a WorldCom bond during the six months ended September 30, 2002 in the unaudited consolidated statements of operations.  In March 2003, the Company sold its investment in WorldCom for $0.8 million, which resulted in a gain of approximately $0.4 million.  The Company classifies investments that mature within one year as short term.  Investments with maturity dates greater than one year are classified as long term.

 

As of September 30, 2003, the amortized cost, gross unrealized gains and losses, and fair value of investments were as follows, in thousands:

 

		Amortized Cost			Gross Unrealized Gain			Gross Unrealized Losses			Fair Value
Debt securities – available for sale		$	80,715		$	234		$	(20	)	$	80,929

 

The Company recorded realized gains and losses on the sale of investments as follows, in thousands:

 

		Three Months Ended September 30						Six Months Ended September 30
		2003			2002			2003			2002
Gross realized gains		$	1		$	183		$	1		$	208
Gross realized losses		—			(81		)	(2		)	(81		)
Net realized gains (losses)		$	1		$	102		$	(1	)	$	127

 

6. Nonoperating Gain

 

On April 16, 2003, President Bush signed into law the Emergency Wartime Supplemental Appropriations Act (“Wartime Act”).  Among other items, the legislation includes a $2.3 billion government grant for airlines.  In accordance with this Act, for the six months ended September 30, 2003, Mesaba recognized $2.3 million as “other nonoperating income” and Big Sky recognized $0.3 million as “other nonoperating income” and $0.2 million as a reduction of “administrative and other expense” in the accompanying consolidated statements of operations.

 

7. Stock Options

 

The Company accounts for its stock-based compensation plans using the intrinsic value method prescribed under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.  The Company has approved stock option plans for key employees, directors, consultants and advisors to the Company.  As such, the Company records compensation expense for stock options and awards only if the exercise price is less than the fair market value of the stock on the measurement date.

 

For purposes of the pro forma disclosures of compensation expense under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” the Company uses the Black-Scholes option model to estimate the fair value of options not subject to variable plan accounting.

 

9

 

The following information summarizes the pro forma effects assuming compensation for such awards had been recorded based upon the estimated fair value, in thousands, except per share information:

 

		Three Months Ended September 30						Six Months Ended September 30
		2003			2002			2003			2002
Net income, as reported		$	3,934		$	2,371		$	7,440		$	3,947
Stock-based compensation, net of tax		(353		)	(289		)	(658		)	(590		)
Pro forma net income		$	3,581		$	2,082		$	6,782		$	3,357
Earnings per share – basic:
As reported		$	0.19		$	0.12		$	0.37		$	0.19
Pro forma		$	0.18		$	0.10		$	0.33		$	0.17
Earnings per share – diluted:
As reported		$	0.19		$	0.12		$	0.36		$	0.19
Pro forma		$	0.17		$	0.10		$	0.33		$	0.17

 

In December 2002, the Company repriced stock options to purchase 745,000 shares of the Company’s common stock with exercise prices ranging from $9.05 to $18.00 to an exercise price of $5.97, which represented the fair market value on the date of the repricing.  In accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation,” the Company has adopted variable plan accounting for these options from the date of the repricing.  The Company recorded compensation expense of $0.5 million in the quarter ended September 30, 2003 and none in any prior period as a result of the repricing.

 

8. Earnings Per Share

 

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock that would have been outstanding if potentially dilutive common shares related to stock options and warrants had been issued.

 

10

 

The following tables reconcile the number of shares utilized in the consolidated earnings per share calculations, in thousands, expect per share information:

 

		Three Months Ended September 30						Six Months Ended September 30
		2003			2002			2003			2002
Net income		$	3,934		$	2,371		$	7,440		$	3,947
For earnings per common share - basic:
Weighted average number of issued shares outstanding		20,323			20,298			20,322			20,298
Effect of dilutive securities:
Computed shares outstanding under the Company’s stock option plan utilizing the treasury stock method		217			4			92			20
For earnings per common share - diluted:
Weighted average common shares and common share equivalents outstanding		20,540			20,302			20,414			20,318
Earnings per share -basic		$	0.19		$	0.12		$	0.37		$	0.19
Earnings per share - diluted		$	0.19		$	0.12		$	0.36		$	0.19
Antidilutive options and warrants		4,510			5,964			4,530			5,282

 

9. Consolidated Comprehensive Income

 

The following table presents the calculation of comprehensive income.  Comprehensive income has no impact on reported net income.  The components of comprehensive income are as follows, in thousands:

 

		Three Months Ended September 30						Six Months Ended September 30
		2003			2002			2003			2002
Net income		$	3,934		$	2,371		$	7,440		$	3,947
Unrealized gains on investments classified as available for sale, net of tax		23			206			23			64
Comprehensive income		$	3,957		$	2,577		$	7,463		$	4,011

 

10. New Accounting Pronouncements

 

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise became effective September 30, 2003.  The adoption of SFAS No. 150 did not have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

 

11. Segment Information

 

The Company follows the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”.  SFAS No. 131 establishes annual and interim reporting standards for an enterprise’s business segments and related disclosures about its products, services, geographic areas and major customers.  The method for determining what information to report is based upon the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance.

 

11

 

Prior to the acquisition of Big Sky on December 1, 2002, the Company had one reportable segment: Mesaba.  After the acquisition of Big Sky, the Company has determined that it has two reportable segments:  Mesaba and Big Sky.

 

Operating segment information for Mesaba, Big Sky (from the date of acquisition), and Holdings were as follows, in thousands:

 

		Three Months Ended September 30						Six Months Ended September 30
		2003			2002			2003			2002
Operating revenues:
Mesaba		$	112,976		$	118,635		$	222,845		$	231,989
Big Sky		4,486			n/a			8,650			n/a
Holdings and eliminations		—			—			—			—
Consolidated		$	117,462		$	118,635		$	231,495		$	231,989
Depreciation and amortization expense:
Mesaba		$	4,141		$	4,708		$	8,446		$	9,571
Big Sky		192			n/a			383			n/a
Holdings and eliminations		1			—			4			—
Consolidated		$	4,334		$	4,708		$	8,833		$	9,571
Interest expense:
Mesaba		$	—		$	—		$	—		$	—
Big Sky		82			n/a			160			n/a
Holdings and eliminations		(61		)	—			(113		)	—
Consolidated		$	21		$	—		$	47		$	—
Income (loss) before income taxes:
Mesaba		$	7,084		$	5,655		$	14,855		$	12,322
Big Sky		(603		)	n/a			(1,077		)	n/a
Holdings and eliminations		155			(90		)	580			(2,448		)
Consolidated		$	6,636		$	5,565		$	14,358		$	9,874
Capital expenditures, net:
Mesaba		$	2,323		$	1,583		$	4,757		$	4,852
Big Sky		19			n/a			26			n/a
Holdings and eliminations		10			—			10			—
Consolidated		$	2,352		$	1,583		$	4,793		$	4,852
Total assets at end of period:
Mesaba								$	114,774		$	141,484
Big Sky								10,806			n/a
Holdings								143,967			105,727
Eliminations								(7,904		)	(13,162		)
Consolidated								$	261,643		$	234,049

 

12. Subsequent Events

 

Jet Agreement

On October 7, 2003, Northwest announced that it is considering exercising its right to terminate the Jet Agreement under which Mesaba leases and operates the 36 RJ85 regional jets.  At Mesaba’s request, the two parties agreed to extend the early termination notice period.  If Northwest gives notice of termination not later than December 15, 2003, the Jet Agreement will terminate on April 25, 2004.

 

12

 

The Company is determining the financial impact from the potential contract termination.  During the first six months of fiscal 2004, approximately 40% of Mesaba’s revenues were derived from the RJ85 operations.  If Northwest terminates the Jet Agreement, Mesaba would experience a substantial reduction in revenue as RJ85 aircraft are removed from service and could incur material expenses in winding down jet operations.  Mesaba would not be exposed to the lease payments for returned aircraft and would seek to minimize expenses associated with the RJ85 operations.  Mesaba has various assets and liabilities, which could be materially impacted by this possible contract termination.  The following summarizes the significant RJ85 related balance sheet accounts, as of September 30, 2003, in thousands:

 

Assets
Inventories		$	3,763
Property and equipment, net		7,211
Other assets, net		3,394
Liabilities
Accrued maintenance			8,299

 

Mesaba and Northwest have also agreed to remove five of the RJ85 regional jets from service.  Three of the RJ85 are expected to be removed from service during December 2003 and two in January 2004.

 

Pilot Negotiations

The Air Line Pilots Association (“ALPA”) represents Mesaba’s pilots.  Mesaba is currently negotiating with the ALPA under Section 6 of the Railway Labor Act for a new agreement.  On October 28, 2003, the ALPA membership voted to give its governing body authorization to conduct a strike at a future point in time.  ALPA may not call a strike until a proffer to arbitrate is issued by the National Mediation Board and declined by one or both parties, and a thirty day cooling off period has elapsed without an agreement being reached.

 

13

 

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

 

Results of Operations

 

Three Months Ended September 30, 2003 and 2002

The Company’s consolidated net income for the quarter ended September 30, 2003 was $3.9 million, or $0.19 per diluted share, compared with net income of $2.3 million, or $0.12 per diluted share, for the quarter ended September 30, 2002.  On December 1, 2002, the Company acquired all the outstanding shares of Big Sky and accounted for the transaction using the purchase method of accounting.  As such, the Company has consolidated Big Sky’s results of operations from the acquisition date, December 1, 2002.  For the three months ended September 30, 2003, Big Sky generated operating revenues of $4.5 million and incurred operating expenses of $5.0 million.  Because comparative information for Big Sky is not included, a detailed discussion of Big Sky’s operating results and statistics is not presented.

 

Mesaba Operating Statistics		Three months ended September 30
		2003			2002
Passengers		1,537,022			1,577,336
Available seat miles (000’s)		776,363			744,514
Revenue passenger miles (000’s)		495,981			450,811
Load factor		63.9		%	60.6		%
Departures		58,492			63,148
Revenue per available seat mile		$	.146		$	.159
Cost per available seat mile		$	.136		$	.153
Aircraft in service (average)		105			116

 

Big Sky Operating Statistics		Three months ended September 30
		2003			2002
Passengers		30,055			n/a
Available seat miles (000’s)		20,425			n/a
Revenue passenger miles (000’s)		7,604			n/a
Load factor		37.2		%	n/a
Departures		6,294			n/a
Revenue per available seat mile		$	.220		n/a
Cost per available seat mile		$	.245		n/a
Aircraft in service (average)		13			n/a

 

Operating Revenues  Total operating revenues decreased 4.8% in the current quarter of fiscal 2004 to $113.0 million from $118.6 million in the prior year’s quarter primarily due to a decrease of 9.5% in completed available seat miles under the Airlink Agreement offset slightly by an increase of 6.7% in block hours flown under the Jet Agreement and an increase in ground handling activities.

 

Operating Expenses  Total operating expenses decreased 6.5% in the current quarter of fiscal 2004 to $105.9 million from $113.3 million in the prior year’s quarter primarily due to the change in the mix of RJ85 and Saab flying and decrease in current period insurance rates and security fees.

 

14

 

Mesaba’s operating costs per available seat mile were as follows:

 

		Three months ended September 30
		2003		2002
Wages and benefits		4.4	¢	4.6	¢
Aircraft fuel		0.7		0.9
Aircraft maintenance		2.6		2.7
Aircraft rents		3.4		3.6
Landing fees		0.2		0.3
Insurance and taxes		0.3		0.6
Depreciation and amortization		0.5		0.6
Administrative and other		1.5		2.0
Total		13.6	¢	15.3	¢

 

Wages and benefits increased 0.4% to $34.1 million in the second quarter of fiscal 2004 from $34.0 million in the second quarter of fiscal 2003 due to the offsetting impact of increased health and dental costs and the decreased number of employees.

 

Aircraft fuel decreased 19.0% to $5.2 million in the second quarter of fiscal 2004 from $6.4 million in the second quarter of fiscal 2003 due primarily to a decrease of 10.2% in the number of Saab block hours flown and favorable rates of fuel burn.  Provisions of the Airlink Agreement with Northwest protect Mesaba from changes in fuel prices.  Mesaba’s actual cost of fuel, including taxes and pumping fees, was 83.5 cents per gallon for both periods.  Northwest is responsible for fuel for the jet operation.

 

Aircraft maintenance, excluding wages and benefits, decreased 0.4% to $19.9 million in the second quarter of fiscal 2004 from $20.0 million in the second quarter of fiscal 2003 due to the offsetting impact of a 4.2% decrease in flight hours and an increase in rates charged under flight hour agreements and costs to maintain an aging fleet.

 

Aircraft rents decreased 3.4% to $26.1 million in the second quarter of fiscal 2004 from $27.0 in the second quarter of fiscal 2003 due to the return of 10 Saab 340 model aircraft.

 

Landing fees decreased 19.5% to $1.7 million in the second quarter of fiscal 2004 from $2.1 million in the second quarter of fiscal 2003 due to decreased Saab departures.  Northwest provides landing fees for the jet operation at their expense.

 

Insurance and taxes decreased 42.3% to $2.5 million in the second quarter of fiscal 2004 from $4.3 million in the second quarter of fiscal 2003 due primarily to a reduction in the rates charged for war risk insurance and fewer aircraft.

 

Depreciation and amortization decreased 12.0% to $4.1 million in the second quarter of fiscal 2004 compared to $4.7 million in the second quarter of fiscal 2003 due primarily to reduced capital expenditures.

 

Administrative and other decreased 19.5% to $12.2 million in the second quarter of fiscal 2004 from $15.2 million in the second quarter of fiscal 2003 primarily due to a reduction in customer and outside service costs, the recognition of a prior year bad debt reserve and the temporary suspension of the TSA security cost.

 

Consolidated Nonoperating Income (Expense)  Non-operating income decreased to $0.4 million in the current quarter of fiscal 2004 from income of $0.6 million for the prior year quarter primarily due to the impact of lower interest rates on the Company’s cash and investments.

 

Consolidated Provision for Income Taxes The Company’s effective tax rate was 40.7% for the current quarter of fiscal 2004 as compared to 57.4% in the prior year quarter.  The Company adjusts its effective tax rate quarterly based on forecasted operating results for the fiscal year.  The rate is affected principally by the level of nondeductible expenses relative to projected taxable income.

 

15

 

Six Months Ended September 30, 2003 and 2002

The Company’s consolidated net income for the period ended September 30, 2003 was $7.4 million, or $0.36 per diluted share, compared with net income of $3.9 million, or $0.19 per diluted share, for the period ended September 30, 2002.  On December 1, 2002, the Company acquired all the outstanding shares of Big Sky and accounted for the transaction using the purchase method of accounting.  As such, the Company has consolidated Big Sky’s results of operations from the acquisition date, December 1, 2002.  For the six months ended September 30, 2003, Big Sky generated operating revenues of $8.7 million and incurred operating expenses of $9.8 million.  Because comparative information for Big Sky is not included, a detailed discussion of Big Sky’s operating results and statistics is not presented.

 

Mesaba Operating Statistics		Six months ended September 30
		2003			2002
Passengers		2,989,982			3,003,858
Available seat miles (000’s)		1,490,913			1,440,001
Revenue passenger miles (000’s)		917,012			860,523
Load factor		61.5		%	59.8		%
Departures		114,507			121,817
Revenue per available seat mile		$	.149		$	.161
Cost per available seat mile		$	.141		$	.153
Aircraft in service (average)		106			115

 

Big Sky Operating Statistics		Six months ended September 30
		2003			2002
Passengers		57,932			n/a
Available seat miles (000’s)		42,007			n/a
Revenue passenger miles (000’s)		14,923			n/a
Load factor		35.5		%	n/a
Departures		13,098			n/a
Revenue per available seat mile		$	.206		n/a
Cost per available seat mile		$	.234		n/a
Aircraft in service (average)		13			n/a

 

Operating Revenues  Total operating revenues decreased 3.9% in the six months ended September 30, 2003 to $222.8 million from $232.0 million in the prior period primarily due to a decrease of 9.0% in completed available seat miles under the Airlink Agreement offset slightly by an increase of 6.9% in block hours flown under the Jet Agreement and an increase in ground handling activities.

 

Operating Expenses  Total operating expenses decreased 4.4% in the six months ended September 30, 2003 to $210.3 million from $220.1 million in the prior period primarily due to the change in the mix of RJ85 and Saab flying and decrease in current period insurance rates.

 

Mesaba’s operating costs per available seat mile were as follows:

 

		Six months ended September 30
		2003		2002
Wages and benefits		4.5	¢	4.6	¢
Aircraft fuel		0.7		0.8
Aircraft maintenance		2.5		2.7
Aircraft rents		3.5		3.7
Landing fees		0.2		0.3
Insurance and taxes		0.3		0.6
Depreciation and amortization		0.6		0.7
Administrative and other		1.8		1.9
Total		14.1	¢	15.3	¢

 

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Wages and benefits increased 2.5% to $67.4 million in the six months ended September 30, 2003 from $65.8 million in the prior period due primarily to increased health and dental insurance costs, which were partially offset by the decreased number of employees.  On a unit basis, the cost went down due to a 3.5% increase in available seat miles in the current period.

 

Aircraft fuel decreased 14.9% to $10.3 million in the six months ended September 30, 2003 from $12.1 million in the prior period due primarily to a decrease of 10.2% in the number of Saab block hours flown and favorable rates of fuel burn.  Provisions of the Airlink Agreement with Northwest protect Mesaba from changes in fuel prices.  Mesaba’s actual cost of fuel, including taxes and pumping fees, was 83.5 cents per gallon for both periods.  Northwest is responsible for fuel for the jet operation.

 

Aircraft maintenance, excluding wages and benefits, decreased 4.8% to $37.6 million in the six months ended September 30, 2003 from $39.5 million in the prior period due primarily to a 4.3% reduction in flight hours flown in fiscal 2004.

 

Aircraft rents decreased 2.3% to $52.3 million in the six months ended September 30, 2003 from $53.5 million in the prior period due to the return of 10 Saab 340 model aircraft following the first quarter of fiscal 2003.

 

Landing fees decreased 11.0% to $3.4 million in the six months of fiscal 2004 from $3.8 million in the prior period of fiscal 2003 due to decreased Saab departures.  Northwest provides landing fees for the jet operation at their expense.

 

Insurance and taxes decreased 40.9% to $5.1 million in the six months ended September 30, 2003 from $8.6 million in the prior period due primarily to a reduction in the rates charged for war risk insurance and fewer aircraft.

 

Depreciation and amortization decreased 11.8% to $8.4 million in the six months ended September 30, 2003 compared to $9.6 million in the prior period due primarily to reduced capital expenditures.

 

Administrative and other decreased 7.6% to $25.8 million in the six months ended September 30, 2003 from $28.0 million in the prior period primarily due to a reduction in customer and outside service costs, the recognition of a prior year bad debt reserve and the temporary suspension of the TSA security cost.

 

Consolidated Nonoperating Income (Expense)  Non-operating income increased to $3.3 million in the six months ended September 30, 2003 from an expense of $1.3 million for the prior period primarily due to the recognition of $2.6 million in federal grant proceeds recorded in fiscal 2004 for the reimbursement of security fees remitted to the TSA versus the Company’s recognition of a $2.8 million other-than-temporary impairment loss on its investment in a WorldCom bond in fiscal 2003.  The increase was partially offset by a decrease in interest income to $0.8 million from $1.5 million in the periods ended September 30, 2003 and 2002 due to lower interest rates on the Company’s cash and investments.

 

Consolidated Provision for Income Taxes: The Company’s effective tax rate was 48.2% for the six months ended September 30, 2003 as compared to 60.0% in the prior period.  The Company adjusts its effective tax rate quarterly based on forecasted operating results for the fiscal year.  The rate is affected principally by the level of nondeductible expenses relative to projected taxable income.

 

 

Liquidity and Capital Resources

 

The Company’s working capital increased to $111.8 million with a current ratio of 2.6 at September 30, 2003 as compared to working capital of $103.5 million and a current ratio of 2.7 at March 31, 2003.  Cash and cash equivalents increased by $9.1 million to $70.0 million at September 30, 2003 due primarily to cash from operations of $32.7 million, a net increase in the Company’s investments of $18.7 million, property and equipment additions of $4.8 million and the repayment of debt of $0.1 million.  Long and short-term investments increased $18.7 million to $80.9 million at September 30, 2003 compared to $62.2 million at March 31, 2003.

 

Investments consist principally of municipal securities and corporate bonds and are classified as available-for-sale as of September 30, 2003 and March 31, 2003.  Available-for-sale investments are reported at fair value with unrealized gains and losses excluded from operations and reported as a separate component of shareholders’ equity, except for other-than-temporary impairments, which are reported as a charge to current operations and result in a new cost basis for the investment.  The Company classifies investments that mature within one year as short term.  Investments with maturities greater than one year are classified as long term.

 

17

 

As of September 30, 2003, Mesaba’s fleet consisted of 104 aircraft covered under operating leases with remaining terms of less than a month to 13 years and aggregate monthly lease payments of approximately $9.1 million.  Mesaba has the ability to return to the lessor up to 10 turbo-prop aircraft, which, if all were returned, would reduce the Mesaba’s aggregate monthly lease payment by a total of $0.3 million.  Mesaba leases all of its Saab 340 aircraft, either directly from aircraft leasing companies or through subleases with Northwest under operating leases with original terms up to 17 years.  Mesaba leases its RJ85 aircraft from Northwest under operating leases with terms of up to 10 years.  The Company believes that Mesaba will have sufficient revenues to make lease payments on its aircraft as long as the current Airlink and Jet Agreements remain in effect.

 

As of September 30, 2003, Big Sky’s fleet consisted of 13 aircraft covered under operating leases with remaining terms of three months to 51 months and aggregate monthly lease payments of approximately $0.2 million.  Big Sky leases 12 of its aircraft from leasing companies and an aircraft from a municipality under operating leases with initial terms of up to six years.  During the three month ended September 30, 2003, Big Sky exercised its option to return two aircraft to the lessor.  Five of the remaining leases contain purchase options.  Big Sky will depend on maintaining or increasing passenger boardings to generate sufficient cash flow to pay its aircraft lease obligations.  A material reduction in Big Sky’s passenger revenues could jeopardize its ability to make lease payments.

 

On October 7, 2003, Northwest announced that it is considering exercising its right to terminate the Jet Agreement under which Mesaba leases and operates the 36 RJ85 regional jets.  At Mesaba’s request, the two parties agreed to extend the early termination notice period.  If Northwest gives notice of termination not later than December 15, 2003, the Jet Agreement will terminate on April 25, 2004.  The Company is determining the financial impact from the potential contract termination.  During the first six months of fiscal 2004, approximately 40% of Mesaba’s revenues were derived from the RJ85 operations.  If Northwest terminates the Jet Agreement, Mesaba would experience a substantial reduction in revenue as RJ85 aircraft are removed from service and could incur material expenses in winding down jet operations.  Mesaba would not be exposed to the lease payments for returned aircraft and would seek to minimize expenses associated with the RJ85 operations.  See Financial Statements Note 12 for additional information.

 

Approximately 78% of the Company’s accounts receivable balance as of September 30, 2003 was due from Northwest.  Cancellation of the Airlink or Jet Agreements or Northwest’s failure to make timely payment of amounts owed to Mesaba or to otherwise materially perform under the Airlink or Jet Agreement for any reason would have a material adverse effect on the Company’s results of operations, financial position and cash flows.

 

The Company has historically relied upon cash and cash equivalents, investments and internally generated funds to support its working capital requirements.  Management believes that funds from operations will provide adequate resources for meeting non-aircraft capital needs for the remainder of fiscal 2004.

 

Critical Accounting Policies and Estimates

 

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, revenues and expenses during the reporting period and related disclosures of contingent assets and liabilities in the consolidated financial statements and the accompanying notes.  The SEC has defined a company’s most critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.  Based on this definition, the Company has identified its critical accounting policies to include those discussed in the following paragraphs.  The Company also has other key accounting policies, which involve the use of estimates, judgments and assumptions.  See Note 2 “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K filed with the SEC, for additional discussion of these items.

 

Management believes that its estimates and assumptions are reasonable, based on information presently available; however, changes in these estimates, judgments and assumptions will occur as a result of future events, and accordingly actual results could differ from amounts estimated.

 

Aircraft Property and Equipment – Estimated lives are used to record depreciation on aircraft property and equipment.  Aircraft utilization, technology and changes in the business strategy or operating agreements with Northwest may affect the economic lives used to record depreciation by Mesaba or Big Sky.  The foregoing may also impact depreciation rates, impairment, or both.  Management of Mesaba and Big Sky regularly review the estimated useful lives and salvage values for aircraft property and equipment.

 

18

 

Excess and Obsolete Inventories – Estimated recovery percentages are used to record obsolescence reserves for parts inventories.  Aircraft utilization, parts availability and changes in the cost of parts may affect the valuation of parts inventories and obsolescence reserve levels.  Management of Mesaba and Big Sky regularly review recovery percentages, reserve levels and inventory valuations for parts inventories.

 

Aircraft Maintenance – Estimated maintenance costs and anticipated aircraft activity are used to determine maintenance reserves.  Changes in maintenance contracts, parts and labor costs and aircraft activity may affect the maintenance reserves.  Management of Mesaba and Big Sky regularly review airplane activity, expected aircraft return dates, changes in its maintenance contracts and parts and labor costs for maintenance reserves.

 

New Accounting Pronouncements

 

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise became effective September 30, 2003.  The adoption of SFAS No. 150 did not have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

 

 

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company’s principal market risks are the availability and price of jet fuel and changes in interest rates.

 

Mesaba and Big Sky have not experienced difficulties with fuel availability.  As a part of the Airlink Agreement, Northwest bears the economic risk of fuel price fluctuations for Mesaba’s fuel requirements.  As part of the Jet Agreement, Northwest provides all fuel at its expense to support Mesaba’s jet operations.  Big Sky is subject to fluctuations in fuel prices, but currently fuel expense is not a material cost in relation to the Company’s total operating expenses.  The Company expects that its results of operations will not be materially affected by fuel price volatility.

 

The Company’s investment policy requires purchasing investments with high credit quality issuers and limits the amount of credit exposure to any one issuer.  The Company’s investments principally consist of municipal securities and corporate bonds with varying maturity dates, all of which are two years or less.  Because of the credit criteria of the Company’s investment policies, the primary market risk associated with these investments is interest rate risk.  The Company does not use derivative financial instruments to manage interest rate risk or to speculate on future changes in interest rates.

 

 

Item 4.  CONTROLS AND PROCEDURES

 

Based on an evaluation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, Paul F. Foley, President and Chief Executive Officer of the Company, and Robert E. Weil, Vice President, Chief Financial Officer and Treasurer of the Company, have concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.  There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

19

 

Part II.  OTHER INFORMATION

 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

The Company filed with the SEC a definitive proxy statement dated July 23, 2003 in connection with its annual meeting of shareholders held on August 21, 2003.  At the annual meeting, the Company’s shareholders elected the following persons as Class Two directors, each for a term of three years:

 

		Votes For		Votes Withheld
Richard H. Anderson		16,961,331		2,911,122
Paul F. Foley		17,110,999		2,761,454
Robert C. Pohlad		17,094,464		2,777,989

 

The Company’s shareholders also ratified the appointment of Deloitte & Touche LLP as the Company’s independent public accountants for the fiscal year ending March 31, 2004 with 18,248,526 votes “for”, 1,615,588 votes “against” and 8,339 abstentions.  There were no broker non-votes.

 

The Company’s shareholders also approved and amendment to the Company’s Articles of Incorporation to change the name of the Company to MAIR Holdings, Inc. with 19,685,552 votes “for”, 174,654 votes “against” and 12,247 abstentions.  There were no broker non-votes.

 

ITEM 5. OTHER INFORMATION

 

On October 7, 2003, Northwest announced that it is considering exercising its right to terminate the Jet Agreement under which Mesaba leases and operates the 36 RJ85 regional jets. At Mesaba's request, the two parties agreed to extend the early termination notice period. If Northwest gives notice of termination not later than December 15, 2003, the Jet Agreement will terminate on April 25, 2004. Mesaba and Northwest have also agreed to remove five of the RJ85 regional jets from service. Three of the RJ85 are expected to be removed from service during December 2003 and two in January 2004. See Financial Statements Note 12 and Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

 

The Air Line Pilots Association (“ALPA”) represents Mesaba's pilots. Mesaba is currently negotiating with the ALPA under Section 6 of the Railway Labor Act for a new agreement. On October 28, 2003, the ALPA membership voted to give its governing body authorization to conduct a strike at a future point in time. ALPA may not call a strike until a proffer to arbitrate is issued by the National Mediation Board and declined by one or both parties, and a thirty-day cooling off period has elapsed without an agreement being reached.

 

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

 

(a)		Exhibits
		3A		Restated Articles of Incorporation.  Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed August 27, 2003
		3C		Bylaws.  Incorporated by reference to Exhibit 3.2 to the Form S-4, Registration No. 333-22977
		4A		Specimen certificate for shares of the Common Stock of the Company.  Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed August 27, 2003
		4B		Common Stock Purchase Warrant dated October 25, 1996 issued to Northwest Airlines, Inc. Incorporated by reference to Exhibit 4A to the Company’s 10-Q for the quarter ended September 30, 1996
		4C		Common Stock Purchase Warrant dated October 17, 1997 issued to Northwest Airlines, Inc. Incorporated by reference to Exhibit 4A to the Company’s 10-Q for the quarter ended September 30, 1997
		9A		Shareholder’s Agreement regarding election of representative of Northwest Aircraft Inc. to Board of Directors.  Incorporated by reference to Exhibit 9A to Mesaba’s Registration Statement on Form S-1, Registration No. 33-820
		10A		FAA Air Carrier Operating Certificate.  Incorporated by reference Exhibit 10A to Mesaba’s Form 10-K for the year ended March 31, 1989
		10B		CAB Part 298 Registration.  Incorporated by reference to Exhibit 10G to Mesaba’s Form 10-K for the year ended March 31, 1987
		10C		Airline Services Agreement between Mesaba Aviation, Mesaba Holdings, Inc. and Northwest Airlines, Inc. dated July 1, 1997 (certain potions of this agreement are subject to an order granting confidential treatment pursuant to Rule 24b-2).  Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q for the quarter ended September 30, 1997
		10D		Regional Jet Services Agreement between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated October 25, 1996 (certain provisions of this agreement are subject to an order granting confidential treatment pursuant to Rule 24b-2).  Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q for the quarter ended September 30, 1996
		10E		Foreign Air Carrier Operating Certificates issued May 6, 1991 by the Canadian Department of Transport.  Incorporated by reference to Exhibit 10H to the Company’s Form 10-K for the year ended March 31, 1991
		10F		Special Facilities Lease dated as of August 1, 1990 between Charter County of Wayne, State of Michigan and Mesaba Aviation, Inc. Incorporated by reference to Exhibit 10B to the Company’s Form 10-Q for the quarter ended September 30, 1990

 

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		10G		Ground Lease dated August 1, 1990 between Charter County of Wayne, State of Michigan and Mesaba Aviation, Inc. Incorporated by reference to Exhibit 10C to the Company’s Form 10-Q for the quarter ended September 30,1990
		10H		Letter Agreement dated December 24, 1992 relating to the repurchase of shares of Common Stock from Northwest Aircraft, Inc. Incorporated by reference to Exhibit 10EE to the Company’s Form 10-K for the year ended March 31, 1993
		10I		DOT Certificate of Public Convenience and Necessity dated October 26, 1992.  Incorporated by reference to Exhibit 10FF of the Company’s Form 10-K for the year ended March 31, 1993
		10J		Stock Purchase Agreement between AirTran Corporation and Carl R. Pohlad dated as of October 18, 1993.  Incorporated by reference to Exhibit 10 of the Company’s Form 8-K dated October 19, 1993
		10K		Term Sheet Proposal for the Acquisition of Saab 340 Aircraft by Mesaba Aviation, Inc. dated March 7, 1996 (certain portions of this document have been deleted pursuant to an application for confidential treatment under Rule 24b-2).  Incorporated by reference to Exhibit 10U to the Company’s Form 10-K/A for the year ended March 31, 1996
		10L		Letter Agreement regarding Saab 340B Plus Acquisition Financing dated March 7, 1996 (certain portions of this document have been deleted pursuant to an application for confidential treatment under Rule 24b-2).  Incorporated by reference to Exhibit 10V to the Company’s Form 10-K/A for the year ended March 31, 1996
		10M		Letter Agreement of October 25, 1996 relating to Regional Jet Services Agreement between Mesaba Aviation, Inc. and Northwest Airlines, Inc. (certain portions of this document have been deleted pursuant to an application for confidential treatment under Rule 24b-2).  Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q/A for the quarter ended September 30, 1996
		10N		Amendment No. 1 to Regional Jet Services Agreement dated April 1, 1998 between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc. (certain portions of this document have been deleted pursuant to an application for confidential treatment under rule 24b-2).  Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q for the quarter ended June 30, 1998
		10O		Amendment No. 2 to Regional Jet Services Agreement dated June 2, 1998 between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc. (certain portions of this document have been deleted pursuant to an application for confidential treatment under rule 24b-2).  Incorporated by reference to Exhibit 10B to the Company’s Form 10-Q for the quarter ended June 30, 1998
		10P		Lease Agreement, dated as of July 1, 1999, between Kenton County Airport Board and Mesaba Aviation, Inc. Incorporated by reference to Exhibit 10AA to the Company’s Form 10-K for the year ended March 31, 2000
		10Q		Ground Lease, dated as of September 1, 1999, between Kenton County Airport Board and Mesaba Aviation, Inc. Incorporated by reference to Exhibit 10BB to the Company’s Form 10-K for the year ended March 31, 2000
		10R		Letter Agreement, dated November 20, 2001, between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc. relating to service expansion and rate reductions.  Incorporated by reference to the Company’s Form 8-K filed November 23, 2001
		10S		Agreement and Plan of Merger among Mesaba Holdings, Inc. Ranger Acquisition Corp. and Big Sky Transportation Co. dated September 26, 2002.  Incorporated by reference to the Company’s Form 8-K filed September 27, 2002
		10T		Employment Agreement between Big Sky Transportation Co. and Kim B. Champney dated April 3, 1998.  Incorporated by reference to Big Sky’s Form 10-KSB dated September 28, 1999
		10U		Aircraft Hangar Facility Lease Agreement between Metropolitan Airports Commission Minneapolis - St. Paul and Mesaba Aviation, Inc. dated September 2002
		10V		Lease between Spectrum Investment Group, L.L.C. and Mesaba Aviation, Inc. entered into as of April 25, 2003
		10W		Amendment to Regional Jet Services Agreement, dated October 7, 2003.  Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed October 8, 2003
		21		Subsidiaries.  Incorporated by reference to Exhibit 21 to the Company’s Form 10-Q for the quarter ended December 31, 2002
		31.1		Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  Filed herewith

 

21

 

		31.2		Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  Filed herewith
		32		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  Filed herewith

 

(b)		Reports on Form 8-K
		The Company filed the following reports on Form 8-K during the quarter ended September 30, 2003:
		(a)	Form 8-K filed on August 1, 2003 containing disclosure under Item 12 regarding the Company’s earnings for the quarter ended June 30, 2003.
		(b)	Form 8-K filed on August 27, 2003 containing disclosure under Items 5 and 7 regarding an amendment to the Company’s articles of incorporation changing its name to MAIR Holdings, Inc.
		(c)	Form 8-K filed on September 8, 2003 containing disclosure under Items 5 and 7 regarding the resignation of two directors.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.

 

	MAIR Holdings, Inc.
Dated: November 14, 2003	By:	/s/ Robert E. Weil
	Vice President, Chief Financial Officer and Treasurer (principal financial officer and an authorized signatory)

 

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Exhibit Index

 

31.1 Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

 

31.2 Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

 

32. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

 

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