Mesa Air Group, which provides regional lift for United and American, is diversifying into cargo, the latest airline to tap into a lucrative revenue stream as the pandemic squelches travel demand. It’s not about to get out of of the business of operating United Express and American Eagle flights. Mesa actually reported a small quarterly profit of $3.4 million (even as its mainline partners continued to hemorrhage red ink).
Instead, Mesa says its new foray into cargo is a way to diversify its core business, important now as the pandemic has made its mainline partners reassess their schedules and networks. Mesa struck a deal last with cargo carrier DHL to operate two Boeing 737-400Fs from Cincinnati, and as part of the deal is opening a pilot base at the airport. The cargo flights begin in October.
The deal works for both DHL and Mesa, in that the smaller aircraft allow DHL to greater reach into the country and more frequent freight flights that with larger aircraft, Mesa CEO Jonathan Ornstein said on the company’s earnings call. “We think there is…a trend toward the smaller aircraft, and we would like to be right in the middle of that operating the 737 variant.”
Mesa expects the cargo operation to break even or slightly better to start, but it expects cargo could be profitable down the line, when it is operating 8-10 aircraft for DHL. The company expects it could operate that many cargo Boeing 737s within 18 months.
There’s another benefit for Mesa. Before the pandemic struck, both regional and mainline airlines warned of a looming pilot shortage. Regional carriers have struggled with recruiting and retaining pilots, and pilots usually come through the regionals before jumping to the mainline. Ornstein said even during the pandemic, Mesa has struggled with attrition.
Adding the larger Boeing 737s to its fleet gives Mesa pilots a more compelling career path, Ornstein said. Pilots can progress from a regional jet to a small narrowbody like the B737 without moving to a mainline carrier — most of which, now, are offering pilots voluntary leave packages or are warning of impending layoffs. “We clearly now feel that being in the cargo business is probably, we think, a pretty good long-term bet,” Ornstein said.