Exhibit 10.17
THIRD AMENDMENT
This Third Amendment is entered and made as of this 17th day of October, 2002
(the "Amendment") as an amendment to the Service Agreement dated as of November
11, 1997, by and between US Airways, Inc. ("US Airways") and Mesa Airlines, Inc.
as amended ("MesaJet" or "Mesa") (the "Agreement").
WITNESSETH:
WHEREAS, US Airways and MesaJet have entered into the Agreement; and
WHEREAS, US Airways and MesaJet have entered into the First Amendment to the
Agreement dated as of November 24, 1999 (the "First Amendment"); and
WHEREAS, US Airways and MesaJet have entered into the Second Amendment to the
Agreement dated as of October 6, 2000 (the "Second Amendment"); and
WHEREAS, MesaJet has entered into a Consent Agreement dated as of October 6,
2000;
WHEREAS, US Airways and MesaJet desire to amend certain provisions of the
Agreement;
NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter
set forth and for good and valuable consideration, the receipt and sufficiency
of which is acknowledged, US Airways and MesaJet hereby agree as follows:
1. ARTICLE 2.1 is hereby deleted in its entirety and replaced with the
following:
"2.1 At all times during the term of this Agreement and any amendment or
extension thereof, MesaJet will schedule and operate US Airways Express air
transportation service between various domestic city-pairs (hereinafter referred
to as "the Service") using up to * seat jet aircraft (hereinafter referred to as
"the Aircraft"). The city-pairs from which the air transportation services are
to be provided by MesaJet pursuant to this agreement will be selected by US
Airways in its sole discretion. US Airways may, * days' advance written notice
to MesaJet, designate changes in the following: city-pairs served, aircraft
routings, or flight frequencies."
2. Exhibit 2.1 shall be deleted in its entirety.
3. The first sentence of ARTICLE 2.2 is hereby deleted in its entirety
and replaced with the following:
"2.2 The Aircraft will have the capacities and payloads the same as those of
the Aircraft performing the Service as of the date of this Amendment, unless
established otherwise by mutual agreement."
2. Exhibit 2.2 shall be deleted in its entirety.
3. ARTICLE 5 is hereby deleted in its entirety and replaced with the
following:
"ARTICLE 5 COMPENSATION FOR SERVICES
SECTION 5.1 PRICING MODEL DESCRIPTION
US Airways and MesaJet have developed a certain invoicing model, hereinafter
referred to as "the Pricing Model" and set forth in Exhibit 5.1, which, in
addition to US Airways' requirement in Section 5.12, will be used to determine
the full and total compensation to be paid by US Airways for city-pairs flown by
the Aircraft pursuant to this Agreement.
2
The Pricing Model is a Microsoft Excel spreadsheet application that calculates
the amounts due to/from MesaJet based on defined variables and flight activity
of the Aircraft in a particular billing month. The Pricing Model inputs are set
into three categories, *, and are collectively referred to as the Pricing Model
Variables.
For any given billing month, the Pricing Model will be used to calculate * "*"
and the Pricing Model will be used to calculate * "*".
SECTION 5.2 MONTHLY PRICING MODEL VARIABLES
Monthly Pricing Model Variables will refer to the Pricing Model Variables that
change from month to month based on *. Examples of support resources are *.
Descriptions of the Monthly Pricing Model Variables and the conditions under
which the variable may change are presented below and in Exhibit 5.1.
(a) The "Active RJ - US" variable set forth in Exhibit 5.1 for a given
month shall mean the number of the Aircraft, * flown in the Service, available,
by mutual agreement, for scheduled service in a billing month. For any changes
to the number of Aircraft under this Agreement, Mesa shall notify and US Airways
shall confirm the number of Aircraft available to schedule * days before the
billing month. When an Aircraft is placed into service in the middle of a
billing month, the Active RJ - US variable shall be calculated by *.
(b) The "Spare RJ - US" variable set forth in Exhibit 5.1 for a given month
shall mean the number of * Aircraft assigned, by mutual agreement, as a spare
aircraft in the billing month. Mesa shall notify and US Airways shall confirm
the Aircraft identified as a spare aircraft * days before the billing month. In
addition, each month, Mesa shall provide US Airways with a schedule of planned
maintenance events or other out of service time for the Aircraft over the next *
period. When a spare aircraft is assigned in the middle of a billing month, the
Spare RJ - US variable shall be calculated by the
3
number of available aircraft days with respect to the Aircraft as a spare
aircraft divided by the number of days in the month.
(c) The "Total RJ - US" variable set forth in Exhibit 5.1 for a given month
shall mean the sum of the Active RJ - US variable and the Spare RJ - US
variable.
(d) The "Total RJ - Mesa" variable set forth in Exhibit 5.1 for a given
month shall mean the number of *, or such other regional jet aircraft flown by
Mesa either in the Service or on behalf of itself or another air carrier, in the
billing month. When such aircraft is placed into service in the middle of a
billing month, the Total RJ - Mesa variable shall be calculated *.
(e) The "Block Hours" variable set forth in Exhibit 5.1 for a given month
shall mean the block hours for actual revenue flights operated in the Service
under the terms of this Agreement in the billing month. For the purpose of
developing a Pre-Xxxx Invoice, the Block Hours variable shall be equal to *.
(f) The "Revenue Passengers" variable set forth in Exhibit 5.1 for a given
month shall mean the actual number of enplaned US Airways Express passengers on
the Aircraft in the billing month. For the purpose of developing a Pre-Xxxx
Invoice, the Revenue Passengers variable shall be calculated by *.
(g) The "Departures" variable set forth in Exhibit 5.1 for a given month
shall mean the actual revenue departures operated in the Service under the terms
of this Agreement in the billing month. For the purpose of developing a Pre-Xxxx
Invoice, the Departures variable shall be equal to *.
(h) The "RPMs" variable set forth in Exhibit 5.1 for a given month shall
mean the actual number of US Airways Express revenue passenger miles (RPMs)
produced in the billing month by the Aircraft in the Service. For the purpose of
developing a Pre-Xxxx Invoice, the RPMs variable shall be calculated by *.
4
(i) The "Crew Ratio - Pilots" variable set forth in Exhibit 5.1 for a given
month shall be calculated by dividing *. The total number of XXX-000 (xxx/xx
XXX-000, if applicable) pilots shall be determined by selecting pilots who meet
one of the four (4) criteria below from the pilot crew bid roster from the
fifteenth (15th) day of the billing month. Mesa agrees to provide to US Airways
the crew bid roster for the billing month. For the purpose of developing a
Pre-Xxxx Invoice, the Crew Ratio - Pilots variable shall be equal to the prior
month's ratio. Note that the Pricing Model applies a formula to adjust the Crew
Ratio - Pilots if it is greater than *.
1) Captains who are non-management line holding pilots qualified
as Captains for the Aircraft in the Service.
2) First Officers who are non-management line holding pilots
qualified as First Officers for Aircraft in the Service.
3) Pilots who are in training for Captain positions for Aircraft
in the Service.
4) Pilots who are in training for First Officer positions for
Aircraft in the Service.
Notwithstanding the above, for the billing months of June 2002 to January 2003,
the Crew Ratio - Pilots will be fixed at *. In January 2003, US Airways and Mesa
will jointly review the crew ratio based on optimized Xxxxxxxxx crew schedule
and practical allocation of crew bases against the March 2003 published flight
schedule, and will establish a revised Crew Ratio - Pilots in good faith which
is based on such joint review. If the parties can not reach agreement as to a
new fixed Crew Ratio - Pilots based on such joint review, the parties agree to
use *.
(j) The "Crew Ratio - Flight Attendants" variable set forth in Exhibit 5.1
for a given month shall be calculated by *. Mesa agrees to provide the flight
attendant crew bid schedule for the crew bid closest from the fifteenth (15th)
day of the billing month as well as the number of aircraft requires a flight
attendant or flight attendants by the FAA. Note that if an aircraft requires
more than one flight attendant then the block hours will be weighted
accordingly. Note also that the Pricing Model applies a formula to adjust the
Crew Ratio - Flight Attendants if it is greater than *.
5
Notwithstanding the above, for the billing months of June 2002 to January 2003,
the Crew Ratio - Flight Attendants will be the lower of *. In January 2003, US
Airways and Mesa will jointly review the crew ratio based on optimized Xxxxxxxxx
crew schedule and practical allocation of crew bases against the March 2003
published flight schedule, and will establish a revised Crew Ratio - Flight
Attendants in good faith which is based on such joint review. If the parties can
not reach agreement as to a new fixed Crew Ratio - Flight Attendants based on
such joint review, the parties agree to use *.
(k) The "Number of Maintenance Bases" variable set forth in Exhibit 5.1 for
a given month shall mean *.
(l) The "Spare Parts Value - US" variable set forth in Exhibit 5.1 for a
given month shall mean *. For the purposes of developing a Pre-Xxxx, the Spare
Parts Value - US variable shall be set at the most recent month's actual amount.
(m) The "Owned Engine Value - US" variable set forth in Exhibit 5.1 for a
given month shall mean the *. When an engine is assigned in the middle of a
billing month, the Owned Engine Value - Total RJ - Mesa variable shall be
calculated by *. For the purposes of developing a Pre-Xxxx, the Owned Engine
Value - US variable shall be set at the most recent month's actual amount.
(n) The "Leased Engine Costs Per Month - US" variable set forth in Exhibit
5.1 for a given month shall mean *. When an engine is assigned in the middle of
a billing month, the Leased Engine Costs Per Month - US variable shall be
calculated by the number of days the engine was available days divided by the
number of days in the month. For the purposes of developing a Pre-Xxxx, the
Leased Engine Costs Per Month - US variable shall be set at the most recent
month's actual amount.
(o) The "RJ Consignments Cost Per Month - US" variable set forth in Exhibit
5.1 for a given month shall mean *. For the purposes of developing a Pre-Xxxx,
the ERJ Consignments Cost Per Month - US variable shall be set at the most
recent month's actual amount.
6
(p) The "Aircraft Ownership Cost Per Month" variable set forth in Exhibit
5.1 for a given month shall mean *. Mesa agrees to provide an aircraft ownership
schedule as shown in Exhibit 5.1. For the purposes of developing a Pre-Xxxx, the
Aircraft Ownership Cost Per Month variable shall be set at the most recent
month's actual amount plus an estimate for any additional aircraft.
SECTION 5.3 MONTHLY PASS-THROUGH COST VARIABLES
Monthly Pass-Through Cost Variables will refer to the Pricing Model Variables
that change from month to month based on actual costs incurred by the MesaJet
operation. Mesa will provide invoices to support the Monthly Pass-Through Costs
and will be reimbursed accordingly. Examples include *. Descriptions of the
Monthly Pass-Through Costs variables and the conditions under which the variable
is changed is presented below and in Exhibit 5.1.
(a) The "Hull Insurance Per Aircraft" variable set forth in Exhibit 5.1 for
a given month shall mean the *. The insured value of the aircraft shall be *.
Mesa agrees to provide a schedule of hull insurance by aircraft as shown in
Exhibit 5.1.
(b) The "Property Tax Per Aircraft" variable set forth in Exhibit 5.1 for a
given month shall mean *. Mesa agrees to provide the property tax rate that will
be applicable in a calendar year and has been validated by Mesa's auditor.
(c) The "Fuel Cost" variable set forth in Exhibit 5.1 for a given month *.
Any fuel costs in excess of * per gallon shall be paid directly by US Airways.
Mesa agrees to provide the invoices that support the fuel costs. For the
purposes of developing a Pre-Xxxx, the fuel cost shall be calculated by *.
e) The "Oil Cost" variable set forth in Exhibit 5.1 for a given month
shall mean the *. Mesa agrees to provide the invoices that support the oil cost.
For the purposes of developing a Pre-Xxxx, the oil cost will be calculated by *.
7
(f) The "Catering Cost" variable set forth in Exhibit 5.1 for a given month
shall mean *. Mesa agrees to provide the invoices that support the catering
costs. For the purposes of developing a Pre-Xxxx, the catering cost shall be
calculated by multiplying the most recent month's actual catering cost per
passenger by the Revenue Passengers.
(g) The "Pax Liability Cost" variable set forth in Exhibit 5.1 for a given
month shall mean the actual passenger liability insurance cost for MesaJet
Revenue Passengers enplaned on the Aircraft in the Service for that billing
month. For the purposes of developing a Pre-Xxxx, the passenger liability cost
shall be calculated by *.
(h) The "Landing Fees" variable set forth in Exhibit 5.1 for a given month
shall mean *. Mesa agrees to provide the invoices that support the landing fee
costs. For the purposes of developing a Pre-Xxxx, the Landing Fees variable
shall be calculated by *.
SECTION 5.4 SET PRICING MODEL VARIABLES
Set Pricing Model Variables will be defined as *. *. Descriptions of the Set
Pricing Model Variables and the conditions under which the variable is changed
are presented below and in Exhibit 5.1.
(a) The "CPI Adjustment" variable set forth in Exhibit 5.1 shall mean the
consumer price index (CPI) adjustment that is reset once a year on November 11th
and is calculated by dividing the current year CPI as reported by the Bureau of
Labor Statistics to the CPI reported in November of 1999.
(b) The "Annual Wages Per Crew -- Pilot" variable set forth in Exhibit 5.1
for a given month shall mean * per year, based on a captain rate of * per block
hour and a first officer rate of * per block hour and assuming * block hours per
crew per year. The base amount shall be adjusted when Mesa's pilot contract wage
scales are changed. *. *.
8
(c) The "Benefits As A Percent of Wages" variable set forth in Exhibit 5.1
for a given month shall mean *.
(d) The "Per Block Hour -- Pilots" variable set forth in Exhibit 5.1 for a
given month shall mean *. *.
(e) The "Add'l Per Bhr -- Pilots > 12 AC" variable set forth in Exhibit 5.1
for a given month shall mean *. The base amount shall be changed by mutual
agreement *. Note the Add'l Per Block Hour -- Pilots > 12 AC variable applies to
block hours generated by aircraft number *. The block hours generated by
aircraft number *.
(f) The "Annual Wages Per FA" variable set forth in Exhibit 5.1 for a given
month shall mean *. *. The adjustment amount will be determined by *. The
adjustment percentage is the percent increase or decrease of the average annual
wage in the new contract for a flight attendant with the weighted average
seniority of the flight attendant population at the time of the adjustment.
(g) The "Cost Per FA Training" variable set forth in Exhibit 5.1 for a
given month shall mean *. The base amount shall be adjusted each year on
November 11th by *.
(h) The "Per Block Hour Driven -- FA" variable set forth in Exhibit 5.1 for
a given month shall mean the base amount of *. The base amount shall be adjusted
each year on November 11th by *.
(i) The "Mtx Per Block Hour" variable set forth in Exhibit 5.1 for a given
month shall mean *. The base amount shall be adjusted each year on November 11th
by *.
(j) The "Mtx Per Cycle" variable set forth in Exhibit 5.1 for a given month
shall mean the base amount *. *.
(k) The "Cost Per Maintenance Base Per Month" variable set forth in Exhibit
5.1 for a given month shall mean the *. The base amount shall be adjusted each
year on
9
November 11th by *. Mesa shall reduce the Cost per Maintenance Base per Month in
an amount equal to *.
(l) The "G/A Per Active Aircraft Per Month" variable set forth in Exhibit
5.1 for a given month shall mean the base amount of *. *.
(m) The "G/A Per Pilot Per Month" variable set forth in Exhibit 5.1 for a
given month shall mean the base amount of *. The base amount shall be adjusted
each year on November 11th by *. Note the pilots assigned to each entity is
calculated by *.
(n) The "Crew XXX Per Active Aircraft Per Day" variable set forth in
Exhibit 5.1 for a given month shall mean *. The base amount shall be adjusted
each year on November 11th by *.
(o) The "Dispatch Per Departure" variable set forth in Exhibit 5.1 for a
given month shall mean the base amount *. The base amount shall be adjusted each
year on November 11th by multiplying *.
(p) The "Indirect G/A Per Total Aircraft Per Month" variable set forth in
Exhibit 5.1 for a given month shall mean the base amount of * for *. The base
amount shall be adjusted each year on November 11th by *.
(q) The "Mesa Profit as a Percent of Total" set forth in Exhibit 5.1 for a
given month shall mean *.
10
SECTION 5.5 DELIVERY OF PRE-XXXX INVOICE PRICING MODEL VARIABLES
Mesa agrees to provide the Pricing Model Variables to US Airways ten days prior
to the first day of each month for the purpose of validating the inputs to be
used to prepare the Pre-Xxxx Invoice.
SECTION 5.6 REVIEW OF PRE-XXXX INVOICE PRICING MODEL VARIABLES
Upon receipt of the Pricing Model Variables, US Airways will review the Pricing
Model Variables for reasonability. If any Pricing Model Variable is missing or
determined by the US Airways to be unreasonable, then US Airways will request,
in writing, further support for the "challenged" variable. *. Such "substitute"
variables will be reported to Mesa within one business day of their calculation.
SECTION 5.7 CALCULATION OF PRE-XXXX INVOICE
Mesa agrees to prepare the Pre-Xxxx invoice using the Pricing Model Variables as
adjusted per Section 5.6 above and provide the Pricing Model Exhibit 5.1 and
related support schedules with each invoice.
SECTION 5.8 PAYMENT OF PRE-XXXX INVOICE
US Airways will pay the Pre-Xxxx Invoice, *, by wire transfer on the first
business day of the billing month provided the Pricing Model Variables were
received by US Airways ten days prior to the first business day of the month per
Section 5.5 above. * will be paid on a Friday or the last business day of each
week in the amount of the following week's projected * from * or applicable
vendor as approved by US Airways. A payment will not be made when the fuel
invoice from * or applicable vendor has no scheduled payment in the following
week.
11
SECTION 5.9 DELIVERY OF FINAL INVOICE PRICING MODEL VARIABLES
Mesa agrees to provide Pricing Model Variables and supporting invoices for each
Monthly Pass-Through Cost Variable to US Airways no later than one hundred
twenty (120) days after the end of the billing month for the purpose of
preparing the Final Invoice. Since the statistics and fuel costs for a given
month are expected to be available less than thirty (30) days after the end of a
billing month, a "Statistical True-up" shall be calculated using the Pre Xxxx
invoice input variables except for actual statistics and fuel costs and settled
in the next billing month.
SECTION 5.10 REVIEW OF FINAL INVOICE PRICING MODEL VARIABLES
Upon receipt of the Pricing Model Variables and Monthly Pass-Through Cost
Variable supporting invoices, US Airways will review the Pricing Model Variables
for reasonability. For example, US Airways will verify the statistics provided
by Mesa using the US Airways statistical database. If any Pricing Model Variable
is missing or determined by US Airways to be unreasonable, US Airways will
request, in writing, further support for the "challenged" variable. The
challenged variable must be must be at least * different from the most recent
accepted value. If US Airways reviews the additional support of the "challenged"
variable and continues to consider the variable unreasonable, a "substitute"
variable which will be no greater than the most recent month's validated amount
will be substituted for the "challenged" variable. Such "substitute" variables
will be reported to Mesa within one business day of their calculation and prior
to payment of the Final Invoice. Disputes regarding "challenged" variables will
be resolved following the procedures described in Article 15 of the Agreement.
12
SECTION 5.11 CALCULATION OF FINAL INVOICE
Mesa agrees to prepare the Final Invoice using the Pricing Model Variables as
adjusted per Section 5.10 above. The amount calculated by the Pricing Model
final input will be compared to the amount paid in the Pre-Xxxx Invoice. If the
amount calculated by the Pricing Model with the final input variables is greater
than the amount paid in the Pre-Xxxx Invoice, then the difference will be due to
Mesa. If the amount calculated by the Pricing Model with the final input
variables is less than the Pre-Xxxx Invoice, then the difference will be due to
US Airways.
SECTION 5.12 REIMBURSED EXPENSES
US Airways and Mesa recognize that certain expenses that are the responsibility
of US Airways will be paid by Mesa each month and that Mesa will be reimbursed
by US Airways for these expenses. In order to be reimbursed for these expenses,
Mesa must submit an invoice with supporting documentation for each item within
one hundred twenty (120) days of the billing month to US Airways. Examples of
reimbursed expenses include, but are not limited to, *. In addition to
reimbursing the invoiced amount, US Airways agrees to pay an administrative fee
equal to * of the invoiced amount.
SECTION 5.13 PAYMENT OF FINAL INVOICE AND REIMBURSED EXPENSES
If US Airways owes Mesa per the calculation in Section 5.11 above, US Airways
will pay the amount owed by wire transfer on the first business day of the next
billing month. If Mesa owes US Airways per the calculation in Section 5.11
above, US Airways will take a credit for the amount due from Mesa on the wire
transfer for the next billing month. If no amount is due to Mesa in the next
billing month, then Mesa will pay via wire transfer the amount owed to US
Airways on the first day of the next billing month. Further, US Airways will pay
the invoice for reimbursed expenses via wire transfer on
13
the first business day of the next billing month provided however, that the
invoice was received ten days before the first of the next billing month.
SECTION 5.14 EXCLUSIVE EMBRAER ERJ-145 FLEET
The Aircraft assigned to fly under this Agreement are expected to be entirely
ERJ-145 aircraft. Should Mesa's entire ERJ-145 aircraft be assigned to this
Agreement, the following Pricing Model Variables will be reviewed and revised by
mutual agreement.
a) The "Actual Crew Ratio -- Pilots" variable
b) The "Annual Wages Per Crew -- Pilots" variable
c) The "Spare Parts Value -- Total RJ - Mesa" variable
d) The "Owned Engine Value -- Total RJ - Mesa" variable
e) The "Leased Engine Costs Per Month -- Total RJ - Mesa" variable
f) The "ERJ Consignments Cost Per Month -- Total RJ - Mesa" variable
14
Except as reflected above, the Agreement remains unchanged in all other
respects. Upon its execution, this Third Amendment, together with the Agreement,
will be the complete and binding understanding of the Parties with respect to
the terms and conditions of the Agreement, as amended by the terms set forth
herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
MESA AIRLINES, INC. US AIRWAYS, INC.
/S/ Xxxxxxx Xxxx /S/ N. Xxxxx Xxxxx
-------------------------------- ----------------------------------
By: Xxxxxxx Xxxx By: N. Xxxxx Xxxxx
Title: President Title: Senior Vice President,
Corporate Development
15