Shares of Mesa Air Group (MESA 5.12%) traded down 20% on Friday morning in response to the airline's earnings report. Costs are weighing on results, and Wall Street is worried those headwinds won't subside anytime soon.
After markets closed Thursday, Mesa reported a fiscal fourth-quarter loss of $0.06 per share on revenue of $130.78 million. That's well below the $0.12 per share profit on revenue of $150 million analysts had expected.
The loss was driven by higher-than-expected expenses, including $9 million for airframe maintenance, $3 million for parts, and $2 million in increased training expenses.
Mesa is a regional airline, operating flights on behalf of larger partners instead of under its own brand. The company provides service to 129 cities as well as cargo operations operating as American Eagle for American Airlines Group, United Express for United Airlines Holdings, and for DHL Express' air freight unit.
"The rapid contraction and expansion of demand has been taxing for the industry and 2021 has proven to be a difficult year as a result," CEO Jonathan Ornstein said in a statement. "Due to the timing of regular and deferred maintenance events, the supply of labor, and fluctuating prices in the supply chain, exiting Covid is proving to be more challenging than entering it."
After earnings Deutsche Bank downgraded Mesa to a hold from a buy and cut the bank's price target to $7 from $15. Analyst Michael Linenberg wrote that staffing and maintenance expenses are likely to continue to be elevated for at least the next two quarters.
As Ornstein notes, these are trying times for the airline industry. Mesa ended the quarter with more than $120 million in liquidity and should be able to fly through the turbulence, but the results provided little reason for investors to climb on board for now.