MESA AIR GROUP INC, 10-K/A, 2000-06-01

MESA AIR GROUP INC
10-K/A, 2000-06-01
AIR TRANSPORTATION, SCHEDULED

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999

COMMISSION FILE NUMBER 0-15495

MESA AIR GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C>
NEVADA 85-0302351
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

410 NORTH 44TH STREET, SUITE 700, PHOENIX, ARIZONA 85008
(Address of Principal Executive Offices) (Zip Code)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 685-4000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)

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. [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of December 31, 1999: Common Stock, no par value: $161,262,000

On December 31, 1999, the Registrant had outstanding 34,035,608 shares of
Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

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<S> <C>
DOCUMENTS FORM 10-K REFERENCE
NONE NONE
</TABLE>

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MESA AIR GROUP, INC.
1999 FORM 10-K REPORT

TABLE OF CONTENTS

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PAGE NO.
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<S> <C> <C>
Part I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 8
Item 3. Legal proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 11
Part II
Item 5. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters...................... 12
Item 6. Selected Financial Data..................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
Item 7A. Quantitative and Qualitative Disclosure about Market Risk... 19
Item 8. Financial Statements and Supplementary Data................. 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 46

Part III
Item 10. Directors and Executive Officers of the Registrant.......... 47
Item 11. Executive Compensation...................................... 50
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 53
Item 13. Certain Relationships and Related Transactions.............. 54

Part IV
Item 14. Exhibits, Schedules and Reports on Form 8-K................. 56
</TABLE>

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PART I

This Form 10-K includes certain statements, including statements regarding
the Company's operations which are forward-looking statements within the meaning
of the safe harbor provisions of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should", "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," or the negative of such terms and other
comparable terminology. However, this Form 10-K also contains other
forward-looking statements. Such statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which could
cause Mesa's future results to differ materially from those expressed in any
forward-looking statements made by or on behalf of Mesa. Many of such factors
are not under Mesa's ability to control or predict. Readers are cautioned not to
put undue reliance on forward-looking statements. Mesa disclaims any intent or
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS-FORWARD LOOKING STATEMENTS."

ITEM 1. BUSINESS

GENERAL

Mesa Air Group, Inc. and its subsidiaries (collectively referred to herein
as "Mesa" or the "Company") is an independently owned regional airline serving
134 cities in 38 states, the District of Columbia, Toronto, Canada, and Guaymas
and Hermasillo, Mexico. As of September 30, 1999, Mesa operated a fleet of 140
aircraft and had approximately 1,100 daily departures.

Mesa's airline operations are conducted by three regional airlines
utilizing hub-and-spoke systems. Mesa Airlines, Inc. ("MAI"), a wholly-owned
subsidiary of Mesa, operates as America West Express under a code-sharing
agreement with America West Airlines, Inc. ("America West") and as USAirways
Express under code-sharing agreements with USAirways, Inc. ("USAirways") and
also operates an independent division, Mesa Airlines, from a hub in Albuquerque,
New Mexico. Air Midwest, Inc., a wholly-owned subsidiary of Mesa, operates under
a code-sharing agreement with USAirways and flies as USAirways Express. CCAIR,
Inc. ("CCAIR"), a wholly-owned subsidiary of Mesa, which was acquired during
fiscal 1999, also operates under a code-share agreement with USAirways that
permits CCAIR to operate under the name USAirways Express and to charge its
joint passengers on a combined basis with USAirways.

Approximately 97% of Mesa's consolidated revenues for the year ended
September 30, 1999, were derived from operations associated with code-sharing
agreements with America West and USAirways. These code-sharing agreements allow
use of the code-sharing partner's reservation system and flight designator code
to identify flights and fares in the computer reservation system, permit use of
the logo, service marks, exterior aircraft paint schemes, and uniforms similar
to the code-sharing partners' and provide coordinated schedules and joint
advertising. Mesa's passengers receive mileage credits in the respective
frequent flyer programs of America West and USAirways, and credits in those
programs can be used on Mesa's flights.

DURING FISCAL 1999, MESA:

- Signed a letter of intent on June 21, 1999 with Empresa Brasileria de
Aeronautica ("Embraer") to acquire 36 regional jets with options for 64
additional jets. The jets have a seating capacity of 50.

- Announced a plan to sell 30 B1900 Aircraft, during fiscal 2000.

- Acquired CCAIR, Inc. by issuing 5,933,381 shares of Mesa common stock in
exchange for all of CCAIR's outstanding common stock.

- Sold Farmington, New Mexico real estate properties, which were vacated
when the Company relocated to Phoenix, Arizona, for a total of $5.2
million.

- Put 13 additional Canadair Regional Jet ("CRJ") aircraft into service.

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- Reached an agreement between Mesa Airlines, Inc. and the Association of
Flight Attendants which becomes amendable on June 13, 2003.

CORPORATE STRUCTURE

Mesa is a Nevada corporation and has its principal executive office in
Phoenix, Arizona. In addition to its airline operating subsidiaries, MAI, Air
Midwest, Inc., a Kansas corporation and certificated air carrier ("Air
Midwest"), and CCAIR, a Delaware corporation and certified air carrier, Mesa
owns WestAir Holdings, Inc., a California corporation, and the owner of WestAir
Commuter Airlines, Inc. ("WestAir"), a certificated carrier which ceased
operations in 1998, and various non-airline operations which include:

- MPD, Inc., a Nevada corporation d.b.a. Mesa Pilot Development, which
operates Mesa's training program for new pilots in conjunction with San
Juan college in Farmington, New Mexico.

- Regional Aircraft Services, Inc., a California corporation owned by
WestAir Holdings, Inc., which performs component overhaul and repair
services.

- FCA, Inc., a Nevada corporation d.b.a. Four Corners Aviation, a fixed
based operation in Farmington, New Mexico. During 1999, substantially all
of the assets of FCA were sold for their approximate book value of $4.5
million and FCA, Inc. ceased operations.

- Mesa Leasing, Inc., a Nevada corporation, a subsidiary established to
assist Mesa's acquisition and leasing of aircraft.

- MAGI Insurance, Ltd., a Barbados, West Indies based captive insurance
company, established for the purpose of obtaining more favorable
liability rates for Mesa and its subsidiaries.

- Ritz Hotel Management Corporation, a Nevada corporation and a
wholly-owned subsidiary of the Company which was established to purchase
and own a dormitory facility for Mesa's flight crews in training.

MESA AIRCRAFT IN OPERATION AS OF SEPTEMBER 30, 1999 (OWNED AND LEASED)

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BEECH
1900* DASH 8 JETSTREAM CRJ TOTAL
----- ------ --------- --- -----
<S> <C> <C> <C> <C> <C>
USAirways Express................................. 58 10 16 15 99
America West Express.............................. 7 12 -- 14 33
Mesa.............................................. 8 -- -- -- 8
-- -- -- -- ---
Total:.......................................... 73 22 16 29 140
== == == == ===
</TABLE>

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* Five additional Beech 1900 aircraft owned or leased by Mesa were not in
operation at September 30, 1999.

In addition to carrying passengers, Mesa carries freight and express
packages on its passenger flights and has interline small cargo freight
agreements with many other carriers. Mesa has contracts with the U.S. Postal
Service for carriage of mail by air to the cities it serves and occasionally
operates charter flights when aircraft are not otherwise utilized for scheduled
service.

CODE-SHARING RELATIONSHIPS

Mesa's subsidiaries have one code-sharing agreement with America West and
five separate code-sharing agreements with USAirways. Renewal of one
code-sharing agreement with a code-sharing partner does not guarantee the
renewal of any other code-sharing agreement with the same code-sharing partner.

The code-sharing agreements provide for terms of five years for America
West (expiring in 2004), and from one to seven years for USAirways (agreement
for operations in Kansas City expire in October 2000; operations in Pittsburgh
expire in 2003; operations in Charlotte and Raleigh/Durham expire in 2003;
operations in Philadelphia, New Orleans, Florida and Washington, D.C. expire in
2004; and regional jet

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service agreement expires in 2007). Mesa intends to seek a renewal of the Kansas
City code-sharing agreement. Although the provisions of the agreements vary,
generally they are subject to cancellation should Mesa's subsidiaries fail to
meet certain operating performance standards, the breach of other contractual
terms and conditions, and, in the case of the USAirways code-sharing agreements
(other than the regional jet service agreement described below), upon six
months' notice by either party. The code-sharing agreements contain varying
provisions allowing Mesa's partners to terminate the agreements upon certain
potential operational or "change in control" events. The code-sharing agreements
do not prohibit the major carrier from having code-share relationships with
other regional carriers, although Mesa does have exclusive rights from the
code-share partner on many of the routes served by Mesa subsidiaries. A
termination or expiration without renewal of the America West code-share
relationship would have a material adverse effect on Mesa's business, financial
condition and results of operation. The same would hold true for many of the
USAirways services agreements, except for the Kansas City service agreement, the
loss of which would not be expected to have a material adverse effect on Mesa's
results of operations, financial condition or liquidity.

In November 1999, Mesa and USAirways amended the USAirways regional jet
service agreement. The agreement expanded the service from 14 regional jets to
28 regional jets and extended the term from 2004 to 2007. In addition, the
agreement was amended to eliminate the ability of USAirways to terminate the
agreement without cause. Unlike the USAirways turboprop service agreements,
which are standard prorate revenue agreements, Mesa does not have passenger
revenue exposure under the USAirways regional jet agreement. USAirways is
responsible for marketing, pricing and scheduling the regional jets. Mesa
operates the routes and is paid via a combination of direct cost reimbursements
and a negotiated formula. For the fiscal year ended September 30, 1999 (giving
effect to the CCAIR acquisition), USAirways Express represented approximately
60% of the available seat mile capacity of Mesa's aircraft, and 71% of its
consolidated passenger revenue.

Mesa operates 19 turboprops and 14 regional jets as America West Express
out of hubs in Phoenix and Columbus. Under the America West code-sharing
agreement, America West is responsible for generating passenger revenue while
Mesa is reimbursed for its operating costs. This structure covers both
turboprops and regional jets. For the fiscal year ended September 30, 1999,
America West represented approximately 37% of the available seat mile capacity
of Mesa's aircraft, and 26% of its consolidated passenger revenue.

AIRCRAFT MANUFACTURER RELATIONSHIPS

During fiscal 1999, Mesa entered into an agreement to acquire 36 ERJ-145
regional jets from Embraer, including standard technical publications, product
support, training support, maintenance support and preferred initial
provisioning pricing. The agreement has various contingencies related to
financing and product support. The aggregate list price of the 36 ERJ-145 jets
is approximately $702 million. Deliveries are expected to commence in April 2000
and continue through mid-2002 at a rate of approximately one aircraft per month.
The agreement also provides for options on at least 64 additional aircraft. The
options are at fixed prices, subject to cost escalations and delivery schedules,
and are exercisable through October 2007. Mesa intends to finance the 36 firm
aircraft with U.S. leveraged leases entered into with various third party
lessors. Mesa expects that the lessors will provide approximately 20% of the
funds required to purchase the aircraft, with the remaining 80% provided by the
Brazilian Bank for Economic and Social Development. Mesa expects to account for
the leases as operating leases. Should the contingencies remain unresolved and
cause termination of the agreement, Mesa would be entitled to a return of its
$11.8 million deposit, plus interest.

Mesa intends to introduce the ERJ-145 aircraft into revenue service early
in the third quarter of fiscal 2000 as USAirways Express. Mesa intends to
replace the CRJ-200 regional jets currently flying as USAirways Express with the
ERJ-145s. The CRJs will be transitioned over to the America West Express
operation over 18 months and by the end of 2001, the fleets will be isolated,
with ERJs operating under USAirways and CRJs with America West Express. This
discussion of the proposed allocation of the ERJs and the CRJ transition plan is
a forward-looking statement and is subject to change depending upon, among other
factors, the availability of ERJ-145 aircraft from the manufacturer, the
willingness of America West and USAirways to agree to deployment of additional
aircraft and the Company's ability to introduce the new fleet type.

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In August 1996, Mesa entered into an agreement with Bombardier Regional
Aircraft Division ("BRAD") to acquire 16 CRJ 50-passenger jet aircraft with an
option to acquire an additional 16 jet aircraft and rolling options to acquire a
third block of 16 aircraft. In August 1997, Mesa exercised options to purchase
16 of the 32 CRJ aircraft reserved under the option agreement. This exercise
included the conversion of eight of its Dash 8-200 aircraft then on order to CRJ
50-passenger jet aircraft. In addition, BRAD agreed to take Embraer Brasilia
aircraft in trade upon the delivery of CRJs. Twenty-nine (29) CRJ aircraft had
been delivered to Mesa as of September 30, 1999. The 32nd aircraft was delivered
to Mesa in January 2000.

In October 1999, Mesa resolved various disputed claims it had against BRAD
regarding Bombardier's obligation to accept trade-in Brasilia aircraft and the
availability of 16 additional rolling option CRJs. Under this settlement, Mesa
will receive up to $9 million ($8.5 million cash, $.5 million credit), $7.1
million of which has been paid to date and the remainder of which will be paid
as each of the remaining 5 CRJ aircraft are permanently financed.

Under the accord reached with an aircraft lessor in November 1997, CCAIR
agreed to replace its 14 Jetstream 31 aircraft with 20 Jetstream Super 31
aircraft. In return for renegotiated lease rates, CCAIR agreed to lease fourteen
of the Jetstream Super 31 aircraft for seven years, and the additional six
Jetstream Super 31 aircraft until December 31, 1998. CCAIR returned four of the
six Jetstream Super 31 aircraft at the end of the lease term and agreed to lease
two until December 31, 1999. Mesa is currently in negotiations to extend the
leases on these two (2) aircraft. The Jetstream Super 31 aircraft are newer and
faster than the predecessor Jetstreams 31s, and can operate with fewer weight
restrictions. CCAIR leases four Dash 8-100 aircraft from one lessor that have
leases which extend to 2007. The six additional Dash 8-100 aircraft are under
operating leases that expire at various times through 2005.

MARKET CHARACTERISTICS

The key characteristics of the regional airline market include:

- Relationships with major airlines, operating feeder service to hubs for
connecting passengers under code-sharing arrangements;

- Allocation of new-generation regional jet aircraft to routes that were
traditionally larger jet routes;

- Service in low-density markets which remain unattractive to major
airlines and low-fare carriers; and

- Ability to provide complementary service in existing major airline
markets by operating flights in scheduling gaps between those of the
major air carriers.

CORPORATE STRATEGY

Mesa's long-term business strategy is to operate a competitive and
profitable, high-frequency, quality-service airline, primarily with a
hub-and-spoke route system. The strategy is implemented through a disciplined
approach to the regional airline business which incorporates (i) the previously
discussed regional airline market characteristics, (ii) a focus on profitable
markets, (iii) reactions to the changing economic and competitive environment,
and (iv) a modern, efficient aircraft fleet that positions the airline to be
able to capitalize on future growth opportunities.

For Mesa's USAirways Express turboprop operations, Mesa's market selection
process follows an in-depth analysis on a route-by-route basis. Agreement is
then reached, where appropriate, with USAirways regarding the level of service
and fares. Mesa believes that this selection process enhances the likelihood of
profits in a given market. Under the America West agreement and the USAirways
Express regional jet agreement, market selection, pricing, and yield management
is accomplished by America West and USAirways, respectively.

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AIRLINE OPERATIONS

The Company's corporate headquarters, which includes flight operations,
dispatch, accounting, training, personnel and planning, is located in Phoenix,
Arizona. Headquarters for Mesa's Air Midwest subsidiary is located in Wichita,
Kansas, and CCAIR is located in Charlotte, North Carolina.

Over the last three fiscal years, Mesa has reduced the number and type of
aircraft it operates. In July 1997, Fokker 70 aircraft were retired and replaced
by CRJ aircraft. The May 1998 termination of Mesa's and WestAir's code-sharing
agreement with United Airlines resulted in a surplus of 21 British Aerospace
Jetstream 31 aircraft, 29 Embraer Brasilia aircraft and 39 Beech 1900D aircraft.
Management also elected to cease the operation of five Embraer Brasilia aircraft
in Florida. Through a settlement agreement reached with WestAir's creditors,
Mesa retired all 21 of the British Aerospace Jetstream 31 aircraft as well as 22
of the remaining 30-seat Embraer Brasilia aircraft. With the acquisition of
CCAIR, Mesa currently operates five (5) aircraft types: Beechcraft 1900D, Dash
8-200, Dash 8-100, Jetstream Super 31 and CRJ aircraft. The last Embraer
Brasilia aircraft in the system was parked on October 4, 1998. Seven Embraer
Brasilia aircraft remain on Mesa's operating certificate and the lease payments
are being fully reimbursed by Bombardier as part of the trade-in agreement. Of
the 39 surplus Beech 1900D aircraft, 22 were sold by Mesa prior to September 30,
1998 and 17 were sold during the fiscal year ended September 30, 1999. Mesa has
adopted a plan to dispose of thirty (30) additional Beech 1900D aircraft and,
accordingly, has recorded a $20.8 million impairment charge to operations during
fiscal 1999 to reflect the impairment in value to these aircraft. See Note 17 to
the consolidated financial statements.

MAI commenced independent jet service under its own name, "Mesa Airlines,"
between Ft. Worth and Houston, Texas in May 1997 and between Ft. Worth and San
Antonio, Texas in September 1997. Subsequent to September 30, 1997, CRJ flights
were initiated between Ft. Worth and Austin, Texas; San Antonio, Texas; and
Colorado Springs, Colorado; and Colorado Springs and Nashville, Tennessee. This
independent jet operation was discontinued in February 1998, and the CRJ
aircraft were redeployed in Mesa's USAirways Express and America West Express
operations.

MARKETING

Under Mesa's code-sharing agreements, America West and USAirways (the major
partners) coordinate advertising and public relations within their respective
regions. In addition, Mesa benefits from the major partners' advertising
programs in regions outside those served by Mesa, with the major partners'
customers becoming customers of Mesa as a result of through-fares. Under these
code-sharing arrangements, Mesa's passengers also benefit from through-fare
ticketing with the major partners and greater accessibility to Mesa's flights on
computer reservation systems and in the Official Airline Guide.

Mesa's services are promoted through listings in computer reservation
systems, the Official Airline Guide and through direct contact with travel
agencies and corporate travel departments. Mesa participates in shared
advertising with resort and rental property operators and ski areas in leisure
markets in which it operates. Mesa's non-code-share operation utilizes SABRE, a
computerized reservation system widely used by travel agents, corporate travel
offices and other airlines. The reservation systems of Mesa's code-sharing
partners are also utilized in each of Mesa's other operations through their
respective code-sharing agreements. Mesa also pays booking fees to owners of
other computerized reservation systems based on the number of passengers booked
by travel agents using such systems. Mesa believes that it has good
relationships with the travel agents handling its passengers.

FARES AND FEE PER DEPARTURE

Since 1978, airlines in the United States have been free to set their own
domestic fares without governmental regulation. Mesa has increasingly relied on
fee per departure contractual agreements with its two code-sharing partners to
generate revenue. All of Mesa's America West Express operations (except Guaymas
and Hermasillo, Mexico) and all of its USAirways Express jet operations are on a
fee per departure basis. The percentage of revenue generated under the fee per
departure agreements is expected to increase in fiscal year 2000 as Mesa adds
additional regional jets to its America West Express and USAirways Express
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operations and reduces the number of B1900 aircraft. In the fourth quarter of
fiscal 1999, 45.7% of Mesa's total operating revenue was fee per departure. This
percent is expected to grow by 2 to 4% per quarter in fiscal 2000. Mesa derives
the remainder of its passenger revenues from a combination of local fares,
through fares, joint fares and fee per departure arrangements. Local fares are
fares for one-way and round-trip travel provided by Mesa within its route
system. Passengers connecting with other carriers also frequently use local
fares. A through-fare is a fare offered to passengers by either America West or
USAirways which generally provides cost savings to the passenger who transfers
to the major carrier's code-sharing partner on routes flown by the code-sharing
partner. Through-fares are prorated in accordance with standards specified in
the various code-sharing agreements. Joint fares are single fares for travel
combining flights with Mesa and other airlines which are not code-sharing
partners with Mesa. With joint fares, the passenger generally pays a single
lower fare than the sum of the local fares charged for the combined flights.
Mesa has been able to negotiate joint-fare arrangements with some major carriers
as an additional means of deriving passengers connecting through its hub cities.

COMPETITION

The airline industry is highly competitive and volatile. Airlines compete
in the areas of pricing, scheduling (frequency and timing of flights), on-time
performance, type of equipment, cabin configuration, amenities provided to
passengers, frequent flyer plans, travel agents' commissions and the automation
of travel agents' reservation systems. Further, because of the Airline
Deregulation Act, airlines are currently free to set prices and establish new
routes without the necessity of seeking governmental approval. At the same time,
deregulation has allowed airlines to abandon unprofitable routes where the
affected communities will not be left without air service.

Mesa believes that the Airline Deregulation Act facilitated Mesa's entry
into scheduled air service markets and will allow it to compete on the basis of
service and fares. The Airline Deregulation Act, however, makes possible the
entry of other competitors, some of which may have substantial financial
resources and experience, creating the potential for intense competition among
regional air carriers in Mesa's markets.

Mesa believes its code-sharing agreements provide a significant competitive
advantage in hub airports where its major partner has a predominant share of the
market. The ability to control connecting passenger traffic by offering a
superior service makes it very difficult for other regional airlines to compete
at such hubs. In addition to the enhanced competitive edge offered by the
code-sharing agreements, Mesa competes with other airlines by offering frequent
flights, flexible schedules and numerous fare levels.

FUEL

During its operating history, Mesa has experienced few problems with the
availability of fuel, and it believes that it will be able to obtain fuel in
quantities sufficient to meet its existing and anticipated future requirements
at competitive prices. Standard industry contracts do not generally provide
protection against fuel price increases, nor do they ensure availability of
supply. Both the USAirways and America West fee per departure contracts allow
fuel costs to be passed directly back to the codeshare partner thereby reducing
the overall exposure to Mesa of fuel price fluctuations. In the fourth quarter
of fiscal 1999, 62.2% of Mesa fuel was associated to these contracts. A
substantial increase in the price of jet fuel or the lack of adequate fuel
supplies in the future would have a material adverse effect on Mesa's business,
financial condition, and results of operation and liquidity.

MAINTENANCE OF AIRCRAFT AND TRAINING

All mechanics and avionics specialists employed by Mesa have the
appropriate training and experience and hold the required licenses issued by the
Federal Aviation Administration (the "FAA"). Using a combination of FAA
certified maintenance vendors and its own personnel and facilities, Mesa
maintains its aircraft on a scheduled and "as-needed" basis. Mesa emphasizes
preventive maintenance and inspects its aircraft engines and airframes as
required. Mesa has also developed an inventory of spare parts specific to the

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aircraft it flies and has instituted a computerized tracking system to increase
maintenance efficiency and to avoid excess inventories of spare parts.

Mesa provides periodic in-house and outside training for its maintenance
and flight personnel and also takes advantage of factory training programs that
are offered when acquiring new aircraft.

Maintenance and repairs, including major engine overhauls, are charged to
operating expenses as incurred. Engine overhaul costs for the Dash 8-200's,
Jetstream Super 31's and CRJ engines are subject to power by the hour contracts
with outside vendors and considered incurred as the aircraft are flown.

INSURANCE

Mesa carries types and amounts of insurance customary in the airline
industry, including coverage for public liability, passenger liability, property
damage, product liability, aircraft loss or damage, baggage and cargo liability
and workers' compensation.

Mesa's captive insurance company, MAGI Insurance, Ltd., handles baggage and
freight claims in addition to a portion of Mesa's hull and liability insurance.

EMPLOYEES

Mesa currently has approximately 3,400 employees. Mesa's success is in part
dependent upon its ability to continue to attract and retain qualified
personnel. Historically, Mesa has had no difficulty attracting qualified
personnel to meet its requirements.

Pilot turnover at times is a significant issue among regional carriers when
major carriers are hiring experienced commercial pilots away from regional
carriers. The addition of aircraft, especially new aircraft types, can result in
pilots upgrading between aircraft types and becoming unavailable for duty during
the extensive training periods required. No assurances can be made that pilot
turnover and unavailability will not again be a significant problem in the
future, particularly if major carriers expand their operations. Similarly, there
can be no assurance that sufficient numbers of new pilots will be available to
support any future growth.

During December 1996, Mesa reached a five-year agreement with the Air Line
Pilots Association ("ALPA") for a single pilot contract for MAI and Air Midwest,
Inc. The contract provides for industry-average pay, economic work rules and
opportunities for advancement. Air Midwest mechanics are represented by the
International Association of Machinists ("IAM"), and flight attendants at MAI
are represented by the Association of Flight Attendants ("AFA"). The current
agreement with the IAM is amendable on December 31, 2000 and the AFA contract is
amendable on June 13, 2003. Except for CCAIR, no other Mesa subsidiaries are
parties to any other collective bargaining agreement or union contracts.

CCAIR has three organized employee groups; pilots are represented by the
ALPA, its flight attendants are represented by the AFA and its mechanics are
represented by the International Brotherhood of Teamsters (Teamsters). The ALPA
collective bargaining agreement was renewed on November 6, 1998, and becomes
amendable on October 31, 2002. The contract with the AFA was renewed on May 16,
1996, and will become amendable on May 16, 2001. The contract with the Teamsters
was ratified on July 15, 1998, and becomes amendable on December 31, 2001. The
Company believes that relations with its employees are favorable.

ESSENTIAL AIR SERVICE PROGRAM

The Essential Air Service program administered by the United States
Department of Transportation (the "DOT") guarantees a minimum level of air
service in certain communities, predicated on predetermined guidelines set forth
by Congress. Based on these guidelines, the DOT will subsidize air service to
communities which might otherwise not have air service. Mesa services 11 such
markets for an annual subsidy of approximately $6.7 million.

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REGULATION

As an interstate air carrier, Mesa is subject to the economic jurisdiction,
regulation and continuing air carrier fitness requirements of the DOT which
include required levels of financial, managerial, and regulatory fitness. The
DOT is authorized to establish consumer protection regulations to prevent unfair
methods of competition and deceptive practices, to prohibit certain pricing
practices, to inspect a carrier's books, properties and records, and to mandate
conditions of carriage. The DOT also has the power to bring proceedings for the
enforcement of air carrier economic regulations, including the assessment of
civil penalties, and to seek criminal sanctions.

Mesa is subject to the jurisdiction of the FAA with respect to its aircraft
maintenance and operations, including equipment, ground facilities, dispatch,
communication, training, weather observation, flight personnel and other matters
affecting air safety. To ensure compliance with its regulations, the FAA
requires airlines to obtain an operating certificate, which is subject to
suspension or revocation for cause, and provides for regular inspections.

Effective in March 1997, the FAA required that regional airlines with
aircraft of 10 or more passenger seats operating under FAR Part 135 rules to
begin operating those aircraft under FAR Part 121 regulations. Mesa, one of the
largest regional airlines operating under FAR Part 135 regulations, completed
the transition to Part 121 within the FAA's deadline. These requirements have
resulted in significant increases in Mesa's costs, affecting Mesa's ability to
profitably serve certain markets. Such increased costs are primarily related to
additional training, dispatch and maintenance procedures. Efforts are being made
to minimize the cost of these new operating procedures while fully complying
with FAR Part 121 operating requirements. Management's decision to adopt a plan
to dispose of 30 B1900 aircraft is partly in response to these increased costs.

Mesa is subject to various federal and local laws and regulations
pertaining to other issues of environmental protocol. Mesa believes it is in
compliance with all governmental laws and regulations regarding environmental
protection.

Mesa is also subject to the jurisdiction of the Federal Communications
Commission regarding the utilization of its radio facilities and to the
jurisdiction of the United States Postal Service with respect to carriage of
United States mail. Local governments in certain markets have adopted
regulations governing various aspects of aircraft operations, including noise
abatement and curfews.

ITEM 2. PROPERTIES

Mesa's primary property consists of the aircraft used in the operation of
its business. The following table lists the aircraft owned and leased by Mesa as
of September 30, 1999:

<TABLE>
<CAPTION>
NUMBER OF AIRCRAFT
-----------------------------------------------------------
OPERATING ON PASSENGER
TYPE OF AIRCRAFT OWNED LEASED TOTAL SEPTEMBER 30, 1999 CAPACITY
---------------- ----- ------ ----- ------------------ ---------
<S> <C> <C> <C> <C> <C>
Beechcraft 1900................. 68 10 78 73 19
Jetstream Super 31.............. -- 16 16 16 19
Dash 8-100...................... -- 10 10 10 37
Dash 8-200...................... -- 12 12 12 37
Canadair Regional Jet........... 29 29 29 50
Embraer-Brasilia................ -- 7 7 -- 30
-- -- --- ---
Total......................... 68 84 152 140
== == === ===
</TABLE>

See "Business -- Airline Operations" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and
Capital Resources" for a discussion regarding Mesa's aircraft fleet commitments.

8
<PAGE> 11

In addition to aircraft, Mesa has office and maintenance facilities to
support its operations. The facilities are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
TYPE LOCATION OWNERSHIP SIZE
---- -------- --------- -----------
<S> <C> <C> <C>
Admin/Acctg/Exec/Training/Dispatch.. Phoenix, AZ Leased 21,003sq.ft.
Flight Operations/Training........ Phoenix, AZ Leased 7,559
Hangar............................ Farmington, NM Leased 30,000
Engine Shop....................... Farmington, NM Leased 6,000
Hangar............................ Fresno, CA Leased 50,000
Warehouse/Office.................. Fresno, CA Leased 21,750
Hangar/Officer.................... Wichita, KS Leased 30,000
Hangar/Office(1).................. Jacksonville, FL Leased 30,256
Hangar............................ Jamestown, NY Leased 30,000
Hangar/Office..................... Dubois, PA Leased 23,000
Hangar............................ Reading, PA Leased 56,250
Hangar/Office..................... Grand Junction, CO Leased 32,768
Hangar/Office..................... Bullhead City, AZ Leased 12,852
Parts Storage..................... Phoenix, AZ Leased 1,000
Office Space...................... Charlotte, NC Leased 11,018
Hangar Space...................... Charlotte, NC Leased 30,000
</TABLE>

Mesa's Administration/Executive/Accounting/Dispatch space is on a ten year
lease that commenced November 1, 1998. The Flight Operations/Training space is
subject to a two year lease that commenced on August 15, 1998. Approximately
16,000 square feet of the hangar space in Fresno also has been sub-leased.
Subsequent to September 30, 1999, Mesa entered into a letter of intent for the
sale of the Jacksonville property for a book loss of approximately $470,000,
which was recognized in the fiscal year ended September 30, 1999.

CCAIR presently occupies approximately 11,018 square feet of office space
in the Charlotte/Douglas International Airport's old terminal building, in
Charlotte, North Carolina, and 30,000 square feet of hangar space. The office
space is used for CCAIR's principal executive and administrative offices and the
hangar facility contains CCAIR's maintenance operations for its aircraft, as
well as maintenance support and inventory. The office space and hangar facility
are leased under commercial use permits with the City of Charlotte, North
Carolina. The permits are a month-to-month tenancy with an annual rental of
$171,448 and are cancelable upon thirty (30) days' notice by either party. With
respect to ground operations at the Charlotte/Douglas Airport, CCAIR provides
these services under contract with USAirways.

Mesa, as the lessee, leases space at each of the airports in which it
operates to accommodate its operations. These leases are generally
month-to-month or relatively short-term leases.

Mesa believes its current real property is both suitable and adequate for
its current and anticipated needs.

ITEM 3. LEGAL PROCEEDINGS

UNITED AIRLINES, INC.

In June 1997, United Air Lines, Inc., ("UAL") filed a complaint in the
United States District Court for the Northern District of Illinois against two
Mesa subsidiaries, MAI and WestAir. UAL filed its complaint seeking a judicial
declaration of the parties' rights and obligations under two separate written
agreements, pursuant to which MAI and WestAir allegedly agreed to provide
certain airline transportation services to UAL including the provision of
scheduled air transportation services in certain areas of the United States
under the service mark "United Express." UAL contends that, under these
agreements, UAL possessed the right to "increase, decrease, or in any other way
adjust the flight frequencies, markets, or both" in certain airports then being
served by WestAir and/or MAI. In January 1998, UAL amended its complaint to
include

9
<PAGE> 12

a claim for damages related to MAI's purported breach of its contractual
obligation to provide specified levels of service in certain cities. On November
1, 1998, UAL filed a motion to amend its complaint to include an additional $4.0
million in damages resulting from MAI's alleged failure to remit baggage fees at
Denver International Airport to UAL. This motion has not yet been considered.
MAI and WestAir dispute the principal contentions in UAL's complaint and, unless
a satisfactory negotiated resolution is achieved, intend to defend their
positions vigorously. Furthermore, MAI and WestAir believe that UAL has breached
its code-sharing agreements with the respective entities and have filed a
counterclaim seeking to recover damages for the substantial harm to the business
of MAI and WestAir. Management does not believe that ultimate resolution of this
issue will have a significant adverse impact on the Company's results of
operations, financial position or liquidity.

In addition, MAI and WestAir have asserted claims against UAL and SkyWest
Airlines, Inc. ("SkyWest"). SkyWest contracted with UAL to be MAI's successor on
the West Coast. The complaint alleges that SkyWest unlawfully interfered with
MAI's and WestAir's contracts with UAL. It further alleges improper conduct on
the part of UAL and SkyWest in terminating markets under the contract and in
leading to the non-renewal of the WestAir agreement. MAI is seeking substantial
damages against each defendant.

WESTAIR

In November 1998, Mesa settled all claims with the aircraft and equipment
lessors of WestAir for approximately $15 million. WestAir contributed
approximately $11.2 million toward the settlement and Mesa contributed
approximately $3.8 million. WestAir had operated 43 leased aircraft pursuant to
a Partnership Agreement with United Airlines, a division of UAL, and upon
cessation of United Express service had considerable liabilities for the
remaining terms of the leases. Mesa worked closely with all lessors to develop
and implement a plan that was acceptable to both Mesa and the various lessors.

In February 1999, a complaint was filed against WestAir and MAI in Superior
Court of California for Fresno County, by the former WestAir pilots, seeking
severance pay in the amount of $1.2 million plus economic and punitive damages
as a result of WestAir's termination of airline operations, following United's
non-renewal of the WestAir agreement. Mesa does not believe that the pilots will
prevail on their claims and intends to defend this matter vigorously.

LYNRISE AIR LEASE, INC.

On June 29, 1999, Lynrise Air Lease, Inc. ("Lynrise") filed suit against
Mesa and CCAIR in the Supreme Court of the State of New York. Lynrise was the
lessor of certain Shorts model 360 aircraft to CCAIR. In 1998, CCAIR
restructured its aircraft fleet and elected to terminate the leases held by
Lynrise for the Shorts aircraft. In connection with the early termination of the
leases, CCAIR issued to Lynrise an Unsecured Convertible Promissory Note (the
"Note") in the principal amount of $8,334,770. The Note was convertible into
shares of CCAIR common stock at a price of $8.00 per share of common stock, and
as a result of the June 1999 merger between CCAIR and Mesa Merger Corporation,
the Note became convertible into shares of Mesa common stock at a price of
$12.87 per share of Mesa common stock. The Note is due June 30, 2004, accrues
interest at the rate of 7% per annum and requires the repayment of principal in
10 equal semiannual installments commencing December 31, 1999, and the payment
of interest in quarterly installments commencing March 31, 1999.

The Note contains a provision that upon a change of control, Lynrise may,
at its option, require CCAIR to repay the entire unpaid balance of the note. In
its lawsuit filed against Mesa and CCAIR, Lynrise alleges that it has exercised
its option to require CCAIR to repurchase the Note after CCAIR became a wholly-
owned subsidiary of Mesa on June 9, 1999. Both Mesa and CCAIR contend that
Lynrise waived its rights with respect to the repurchase option and both intend
to defend the lawsuit vigorously. In addition, by letter dated August 9, 1999,
Lynrise declared that in accordance with the terms of the Note, an Event of
Default had occurred as against CCAIR for its failure to make a repurchase offer
and declared the principal amount of the Note and all accrued interest thereon
due and payable immediately. On October 21, 1999, Lynrise filed a motion to
amend its complaint to add a count for breach of contract against CCAIR. Lynrise
alleges that

10
<PAGE> 13

CCAIR failed to make an interest payment due June 30, 1999. Mesa made the June
30, 1999 payment in September 1999.

Lynrise's claims against CCAIR include a claim for Declaratory Judgment
that CCAIR is obligated to repurchase the Note and a claim for breach of
contract. As against Mesa, Lynrise has claimed tortious interference. Should
Lynrise prevail against CCAIR and require it to repurchase the Note, CCAIR is
without sufficient assets to repurchase the Note and would be unable to satisfy
such a judgment.

On May 2, 2000, Mesa and Lynrise reached a settlement of the above
litigation. Under the terms of the settlement, CCAIR agreed to make a principal
payment of $1.0 million and to pay accrued interest of approximately $440,000,
after which the principal balance of the note was approximately $6.9 million.
The note was amended and restated to delete any conversion rights and to provide
that prior to the maturity date of the note CCAIR shall have the right to redeem
the note for a cash payment equal to (i) the accrued interest on the note plus
(ii) $5.5 million less the aggregate amount of principal amortization paid on
the note after the date of the closing of the settlement. In addition, Mesa
agreed to unconditionally guarantee the note.

OTHER LEGAL PROCEEDINGS

Mesa is also a party to other legal proceedings and claims, which arise in
the ordinary course of its business.

Although the ultimate outcome of the above pending lawsuits cannot be
determined at this time, Mesa believes, based upon currently available
information, that the ultimate outcome of all the proceedings and claims pending
against Mesa is not expected to have a material adverse effect on Mesa's
consolidated financial position results of operations or liquidity. Mesa's
belief regarding the outcome of all pending proceedings and claims is a
forward-looking statement.

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

The Company did not submit any matters to a vote of security holders during
the fourth quarter of fiscal 1999.

11
<PAGE> 14

PART II

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED
STOCKHOLDER MATTERS

MARKET PRICE OF COMMON STOCK

Presented below are the high and low sales prices of the Common Stock of
Mesa Air Group, Inc. on the NASDAQ National Market System under the symbol
"MESA".

<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998
---------------- ----------------
QUARTER HIGH LOW HIGH LOW
------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First................................................... $8.125 $4.12 $6.875 $ 4.938
Second.................................................. 9.313 5.813 9.406 5.250
Third................................................... 7.75 6.188 8.875 7.500
Fourth.................................................. 8.344 6.063 8.313 4.672
</TABLE>

On December 31, 1999, Mesa had 1452 shareholders of record. Mesa has never
paid cash dividends on its common stock. However, the board of directors may in
the future consider the payment of dividends provided that, among other things,
it is in the best interests of the shareholders.

ITEM 6. SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA AND OPERATING STATISTICS

In thousands of dollars except per share data and average fare amounts and
as otherwise indicated.

<TABLE>
<CAPTION>
YEARS ENDED: 1999(1) 1998(2) 1997(3) 1996(3) 1995(3)
------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues............... $ 404,616 $ 494,866 $ 579,464 $ 566,597 $ 518,178
Operating expenses............... $ 402,487 $ 533,910 $ 634,805 $ 517,716 $ 488,053
Operating income (loss).......... $ 2,129 $ (39,044) $ (55,341) $ 48,881 $ 30,125
Other income (Expense)........... $ 4,152 $ 6,197 $ 3,095 $ 14,291 $ (151)
Interest expense................. $ 19,096 $ 25,382 $ 28,518 $ 13,538 $ 7,316
Earnings (loss) before income
taxes.......................... $ (12,815) $ (58,229) $ (80,704) $ 49,634 $ 22,658
Net earnings (loss).............. $ (13,412) $ (50,467) $ (50,326) $ 30,503 $ 13,650
Net earnings (loss) per share:
basic.......................... $ (0.40) $ (1.50) $ (1.52) $ 0.81 $ 0.34
Net earnings (loss) per share:
diluted........................ $ (0.40) $ (1.50) $ (1.52) $ 0.80 $ 0.33
Working capital (deficit)........ $ 33,040 $ (1,446) $ 64,940 $ 69,500 $ 114,819
Total assets........... $ 403,773 $ 484,376 $ 677,837 $ 705,621 $ 468,875
Long-term debt, excluding current
portion........................ $ 114,234 $ 245,100 $ 341,463 $ 339,649 $ 80,274
Stockholders' equity............. $ 96,435 $ 108,649 $ 183,445 $ 230,503 $ 260,916
Net book value per share......... $ 2.83 $ 2.95 $ 5.09 $ 6.06 $ 6.40
Passengers carried............... 4,255,696 5,969,104 7,514,644 7,247,687 6,931,203
Revenue passenger miles (000).... 1,324,867 1,407,345 1,544,212 1,509,376 1,321,896
Available seat miles (000)....... 2,594,861 2,581,946 2,789,575 2,749,629 2,616,283
Average passenger journey........ 311 miles 236 miles 205 miles 208 miles 191 miles
Average stage length............. 225 miles 190 miles 178 miles 169 miles 168 miles
Load factor...................... 51.1% 54.5% 55.4% 54.9% 50.5%
Break-even passenger load
factor......................... 52.7% 60.1% 60.2% 51.9% 49.20%
Revenue per available seat
mile........................... 15.3(cent) 18.7(cent) 20.4(cent) 20.6(cent) 19.8(cent)
Operating Cost per available seat
mile........................... 15.5(cent) 20.7(cent) 22.8(cent) 18.8(cent) 18.7(cent)
</TABLE>

12
<PAGE> 15

<TABLE>
<CAPTION>
YEARS ENDED: 1999(1) 1998(2) 1997(3) 1996(3) 1995(3)
------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Average yield per revenue
passenger mile................. 30.1(cent) 34.3(cent) 36.8(cent) 37.5(cent) 39.2(cent)
Average fare..................... $ 93.59 $ 80.91 $ 75.56 $ 76.43 $ 72.55
Aircraft in service.............. 140 138 204 202 203
Cities served.................... 138 134 189 188 196
Number of employees.............. 3,423 3,241 5,445 4,635 4,537
</TABLE>

The June 9, 1999 acquisition of CCAIR by Mesa was accounted for as a pooling of
interests and accordingly Mesa's consolidated financial statements have been
restated to include the results of CCAIR for all periods presented. Except for
the consolidated financial statements for the year ended September 30, 1999, the
consolidated financial statements of CCAIR for the fiscal years ended 1998,
1997, 1996, 1995, respectively, have not been restated to change CCAIR's audited
year end to September 30, 1999. The SELECTED FINANCIAL DATA AND OPERATING
STATISTICS includes results of:
---------------
(1) Mesa as of and for the twelve months ended September 30, 1999
CCAIR as of and for the twelve months ended September 30, 1999

(2) Mesa as of and for the twelve months ended September 30, 1998
CCAIR as of and for the twelve months ended December 31, 1998

(3) Mesa as of and for the twelve months ended September 30, 1997, 1996, 1995
CCAIR as of and for the twelve months ended June 30, 1997, 1996, 1995

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS

Mesa Air Group, Inc. and its subsidiaries are a group of regional airlines
and related companies providing service across the United States as America West
Express, Mesa Airlines, USAirways Express and, until May 31, 1998, as United
Express. All information has been restated to include results of CCAIR for the
periods presented.

The following tables set forth selected operating and financial data of
Mesa for the years indicated below:

<TABLE>
<CAPTION>
OPERATING DATA
YEARS ENDED SEPTEMBER 30,
-------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Passengers............................... 4,255,696 5,969,104 7,514,644
Available seat miles (000)............... 2,594,861 2,581,946 2,789,575
Revenue passenger miles (000)............ 1,324,867 1,407,345 1,544,212
Load factor.............................. 51.1% 54.5% 55.4%
Revenue per ASM.......................... 15.3(cent) 18.7(cent) 20.4(cent)
Yield per RPM............................ 30.1(cent) 34.3(cent) 36.8(cent)
Cost per ASM............................. 15.5(cent) 20.7(cent) 22.8(cent)
</TABLE>

FINANCIAL DATA
YEARS ENDED
SEPTEMBER 30

13
<PAGE> 16

<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------- -------------------------------- --------------------------------
PERCENT COST PERCENT COST PERCENT COST
AMOUNT OF PER AMOUNT OF PER AMOUNT OF PER
(000) REVENUES ASM (000) REVENUES ASM (000) REVENUES ASM
-------- -------- ---------- -------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft & Traffic.... 55,675 13.8% 2.1 cents 78,673 15.9% 3.0 cents 94,128 16.2% 3.4 cents
Promotion & Sales..... 32,550 8.0% 1.3 cents 67,706 13.7% 2.6 cents 85,316 14.7% 3.1 cents
General &
Administrative...... 31,658 7.8% 1.2 cents 31,345 6.3% 1.2 cents 30,659 5.3% 1.1 cents
Depreciation &
Amortization........ 18,053 4.5% 0.7 cents 26,580 5.4% 1.0 cents 36,558 6.3% 1.3 cents
Impairment of
long-lived assets
and goodwill........ 28,902 7.1% 1.1 cents -- -- -- -- -- --
Other Operating
Items............... (14,027) (3.5)% (0.6)cents 33,343 6.7% 1.3 cents 67,884 11.7% 2.4 cents
-------- ---- ---------- -------- ----- ---------- -------- ----- ----------
Total Operating
Expenses.............. $402,487 99.5% 15.5 cents $533,910 107.9% 20.7 cents $634,805 109.6% 22.8 cents
======== ==== ========== ======== ===== ========== ======== ===== ==========
Interest Expense...... $ 19,096 4.7% 0.7 cents $ 25,382 5.1% 1.0 cents $ 28,518 4.9% 1.0 cents
======== ==== ========== ======== ===== ========== ======== ===== ==========
</TABLE>

FISCAL 1999 VERSUS FISCAL 1998

During fiscal 1999, the Company continued to increase the number of
regional jet aircraft in its fleet. Regional jet aircraft have more seats and
generally fly longer stage lengths than turboprop aircraft. Consequently,
regional jet aircraft provide more available seat miles (ASMs) and generate
lower revenue and cost per ASM than turboprop aircraft.

Operating revenues decreased by $90 million (18.2%) for the fiscal year
ended September 30, 1999 as compared to the prior fiscal year. This decrease was
primarily due to the inclusion in 1998 of revenues associated with the since
terminated United Express operation. Capacity, measured by ASMs, increased by
0.5% due to the continued addition of regional jet aircraft into Mesa's fleet,
offset by fewer B1900 and EMB120 aircraft associated with the United Express
operation. Passenger traffic, measured by revenue passenger miles (RPMs) and
representing one passenger carried one mile, decreased by 5.9%. The passenger
load factor decreased from 54.5% to 51.1%, yield (passenger revenue per RPM)
decreased by 4.2 cents in 1999 from 34.3 cents per RPM, and revenue per ASM
decreased to 15.3 cents from 18.7 cents per ASM in fiscal 1998. The decrease in
RPMs was due primarily to the reduction in flying from the United Express
operations terminated in 1998. The decreases in load factor, yield and revenue
per ASM primarily result from Mesa's aforementioned increase in regional jet
flying.

Flight Operations expense decreased by 11.1% to $173.4 million (6.7 cents
per ASM) for the 1999 fiscal year, from $195.0 million (7.6 cents per ASM) for
the comparable period in 1998, primarily due to the discontinuation of the
United Express operation. Flight operations expense increased as a percentage of
revenue due to additional costs, primarily pilots and flight attendants,
associated with regional jet aircraft. Fuel costs, pilot costs, and dispatch
costs all declined for the 1999 fiscal year, as compared to the prior period.
Pilot training costs also declined compared to the prior period, primarily due
to the inclusion in fiscal year 1998 of a major portion of training expenses
associated with integrating CRJ aircraft into the fleet.

Maintenance costs decreased by 24.6% to $76.3 million (2.9 cents per ASM)
for the 1999 fiscal year, from $101.2 million (3.9 cents per ASM) for the prior
year. Decreased maintenance costs are the result of a smaller fleet and the
continued introduction of new, warranted CRJ aircraft.

Aircraft and Traffic Servicing costs decreased by 29.2% to $55.7 million
(2.1 cents per ASM) during fiscal 1999 from $78.7 million (3.0 cents per ASM) in
fiscal 1998. Station wages decreased due to a reduction in staffing. Station
rent decreased in fiscal 1999 from fiscal 1998 due to the elimination of the
United Express West Coast and Denver operations.

Promotion and Sales expense decreased by 51.9% to $32.5 million (1.4 cents
per ASM) during fiscal 1999 from $67.7 million (2.6 cents per ASM) in fiscal
1998. This decrease was primarily attributable to a reduction in booking fees
charged to Mesa for processing reservations on computer reservation systems.

14
<PAGE> 17

Mesa's contract with America West eliminates booking fees and travel agency
commissions being charged directly to Mesa, and thus these expenses are expected
to continue to decrease in fiscal 2000.

Depreciation and amortization decreased by $8.5 million to $18.1 million in
fiscal 1999 and interest expense decreased by $6.3 million to $19.1 million in
such period. The decrease in depreciation and amortization was due to fewer
aircraft being depreciated in fiscal year 1999 compared to fiscal year 1998. The
decrease in interest expense was due to the retirement of aircraft, the proceeds
of which were used to pay down debt secured by such aircraft.

During the fourth quarter of 1999, pursuant to the ongoing review and
evaluation of its operations, management elected to cease service on several
routes flown by Beech 1900D aircraft. Management had historically employed
numerous strategies in attempting to establish profitability on the routes but
ultimately determined that undue effort and expense would be required in
continuing to attempt to establish profitability. In connection with the
cessation of service, $8.3 million of goodwill associated with the routes was
determined to be unrecoverable and therefore charged to expense.

In connection with the cessation of service described above, Mesa
determined that 30 Beech 1900D aircraft would no longer be required in scheduled
service and were therefore impaired. Mesa plans to dispose of the 30 aircraft
during fiscal 2000. Mesa recognized an impairment loss amounting to
approximately $20.6 million. The amount of the impairment was determined by
comparing the net book value of the aircraft against data provided by Raytheon
Aircraft Corporation (RAC), the manufacturer of the aircraft, on current resale
values for aircraft of comparable age and condition. In order to expedite
disposal of the aircraft, the Company has signed an agreement with RAC wherein
RAC will broker the sale of up to 30 aircraft to third parties.

During fiscal 1998 and 1997, Mesa recognized expected costs and expenses
amounting to approximately $33.9 million and $72.1 million, respectively, for
the termination of the United Express Operations which included the non-renewal
of the WestAir, and early termination of the MAI, code-sharing agreements with
UAL. These costs and expenses are included in other operating items. (See
footnotes 12 and 16 to the accompanying consolidated financial statements for
additional discussion.) Both the $33.9 million and the $72.1 million provide for
the estimated loss on retirement or sale of aircraft, parts, and equipment which
were surplus to the needs of Mesa upon expiration and early termination of the
UAL code sharing agreements. In fiscal 1998, Mesa also recognized provisions
amounting to $4.0 million for the termination of the Ft. Worth jet operations
and $2.5 million for the settlement of a shareholder lawsuit.

FISCAL 1998 VERSUS FISCAL 1997

Operating revenues decreased by $84.6 million (14.6%) for the fiscal year
ended September 30, 1998, compared to the prior fiscal year. The decrease was
primarily attributable to the termination of Mesa's United Express operations on
the West Coast and in Denver, Colorado in April and May, 1998. Capacity,
measured by Available Seat Miles (ASM's), decreased by 7.5% and passenger
traffic, measured by Revenue Passenger Miles (RPM's) and representing one
passenger carried one mile, decreased by 8.9%. The load factor decreased from
55.4% to 54.5%, yield (passenger revenue per RPM) decreased to 34.3 cents in
fiscal 1998 from 36.8 cents in fiscal 1997, and revenue per ASM decreased to
18.7 cents from 22.8 cents per ASM in fiscal 1997. The airline industry has a
history of fare and traffic volatility. The regional jet aircraft, which are
generally faster and flown over a longer stage length than turbo prop aircraft,
typically generate lower revenue per ASM.

Flight Operations expense decreased by 8.1% to $195.0 million (7.6 cents
per ASM) for the 1998 fiscal year, from $212.3 million (7.6 cents per ASM) for
the comparable period in 1997. Fuel costs, pilot costs and aircraft lease
expense all declined in fiscal year 1998 as a result of operating fewer
aircraft, primarily due to the termination of the United Express operations.
These cost decreases were partially offset by an increase in pilot training
costs associated with adding CRJ aircraft into the fleet, and an increase in
dispatch costs due to more strict operating requirements under FAR Part 121
These cost increases were partially offset by a reduction in aircraft lease
expense, which resulted from flying fewer aircraft. Ownership costs of owned
aircraft are reported as depreciation and interest expense rather than flight
operations expense.
15
<PAGE> 18

Maintenance costs decreased by 6.2% to $101.2 million (3.9 cents per ASM)
for the 1998 fiscal year, from $107.9 million (3.9 cents per ASM) for the prior
year. Engine overhaul expense decreased due to the decline in fleet size. The
savings were partially offset by increased parts usage and accrued costs for
engine overhauls for the Dash 8 and CRJ engines on power by the hour contracts.

Aircraft and Traffic Servicing costs decreased by 16.4% to $78.7 million
($3.0 cents per ASM) during fiscal 1998 from $94.1 million (3.4 cents per ASM)
in fiscal 1997. Station wages decreased due to a reduction in staffing. Station
rent decreased in fiscal 1998 compared to fiscal 1997 due to the elimination of
the West Coast and Denver operations.

Promotion and Sales expense decreased by 20.6% to $67.7 million (2.6 cents
per ASM) during fiscal 1998 from $85.3 million (3.1 cents per ASM) in fiscal
1997. The decrease was primarily attributable to a reduction in booking fees
charged to Mesa for processing reservations on computer reservations systems.

Depreciation and amortization decreased by $10.0 million to $26.6 million
in fiscal 1998 from the prior fiscal year and interest expense decreased by $3.2
million to $25.4 million in fiscal 1998 from fiscal 1997. The decrease in
depreciation and amortization was due to fewer aircraft being depreciated in
fiscal year 1998, compared to 1997. The decrease in interest expense was due to
lower outstanding loan balances as a result of the retirement of aircraft, the
proceeds of which were used to pay down debt secured by such aircraft.

As described above, during fiscal years 1997 and 1998 Mesa recognized
provisions of $33.9 million and $72.1 million, respectively, for the termination
of the United Express operations which included the non-renewal of the WestAir,
and early termination of the MAI, code-sharing agreements with UAL. These
provisions are included in other operating items. Other operating items in
fiscal 1998 also include $4.0 million for the termination of the Ft. Worth jet
operations, and $2.5 million for the settlement of a shareholder lawsuit. Other
operating items in fiscal 1997 also include a gain from the settlement with an
aircraft manufacturer of $5.2 million and reversal of a $1 million aircraft
return provision related to the final settlement and return of Mesa's Fokker 70
aircraft.

The provisions discussed above were the primary reasons for the net losses
in 1998 and 1997. However, other factors have contributed to the net losses. The
cost of operating 19 passenger aircraft has risen sharply in the past three
years. The increase is primarily attributable to a combination of factors
discussed elsewhere herein, including increased governmental regulation, higher
labor costs due to union contracts, older aircraft requiring more maintenance,
higher training costs due to increased pilot turnover and other items. As a
result, Mesa has adopted a plan to reduce the number of 19 passenger aircraft in
fiscal 2000.

LIQUIDITY AND CAPITAL RESOURCES

Mesa's cash, cash equivalents and marketable securities as of September 30,
1999 were $56.2 million, representing an increase of $20.5 million over the
prior year. Mesa incurred a net loss of $13.4 million in 1999. After adjustment
for non-cash activities and the change in certain balance sheet accounts, the
Company provided $31.8 million in its operating activities. The primary factors
resulting in the difference between earnings from operation and cash flow were:

(1) a $20.9 million provision and a corresponding $8.3 million
write-off of goodwill related to the planned sale of up to 30 Beechcraft
1900D aircraft.

(2) the non-cash items of depreciation and amortization accounted for
$18.2 million of the difference between the net loss and the net cash flow.

(3) other differences identified in the Consolidated Statements of
Cash Flows resulting primarily from the operation of business in the normal
course.

Mesa provided cash flows from investing activities of $22.2 million in
fiscal 1999, which included $50.6 million from the sale of property and
equipment. However, these proceeds were used primarily to reduce the long-term
debt collateralized by the property and equipment sold. In addition, the Company
generated $3.9 million from the sale of investment securities and used $16.1
million for the acquisition of property and equipment and other capital assets.
16
<PAGE> 19

Under financing activities, long-term debt reduction of approximately $38.0
million resulted from scheduled debt payments during the year and the sale of 17
Beech 1900D aircraft, the proceeds of which were used principally to retire debt
secured by the aircraft. Mesa's cash, cash equivalents and investment securities
are intended to be used for working capital, capital expenditures and
acquisitions. Management believes that the Company's existing cash and cash
equivalents and currently anticipated cash flows from operations will provide
the Company with adequate capital resources to fund the Company's currently
anticipated operating requirements for the foreseeable future.

As disclosed in Note 5 to the consolidated financial statements, Mesa has
classified approximately $121 million of long-term debt and capital lease
payments as maturing in 2000. However, of this amount approximately $99 million
consists of debt secured by 30 Beech 1900 aircraft that Mesa intends to sell in
fiscal 2000. See "Fiscal 1999 Versus Fiscal 1998" elsewhere in this Management's
Discussion and Analysis and Notes 5 and 17 to the consolidated financial
statements. Although Mesa expects to sell the aircraft in fiscal 2000 and retire
the related debt, the $99 million debt is not due and payable prior to its
maturity date in 2011 unless the aircraft securing the debt are sold. Management
believes that Mesa's existing cash and cash equivalents and currently
anticipated cash flows from operations will provide the Company with adequate
capital resources to fund the scheduled long-term debt and capital lease
payments in 2000.

Mesa had receivables of approximately $22.8 million at September 30, 1999,
which consist primarily of amounts due from code-sharing partner US Airways.
Under the terms of the US Airways agreement, Mesa receives a substantial portion
of its revenues through the Airline Clearing House. Historically, Mesa has
generated adequate cash flow to meet its operating needs.

Mesa has significant lease obligations and debt payments on existing
aircraft. At September 30, 1999, Mesa had 68 aircraft with debt balances having
maturities through December 2011. During 1996, Raytheon Aircraft Credit
Corporation ("RACC") provided financing on 69 Beech 1900D aircraft. In April
1998, Mesa reached an agreement with RACC to defer the monthly principal and
interest payments due on the aircraft for the months of May, June and July of
1998, and extend the term of the financing by three months. In addition, RACC
agreed to finance two Beech 1900 aircraft owned by Mesa for an amount equal to
the monthly payments due on 69 Beech 1900D aircraft for the months of August,
September, and October 1998. Mesa then used the proceeds of the financing for
those monthly payments. The two aircraft were financed by RACC with
non-recourse, non-interest bearing loans and are currently being held for sale.
In September 1998, RACC refinanced from another lender an additional 11 Beech
1900D aircraft. The total financing by RACC is secured by the aircraft and
totals $222 million at September 30, 1999 with monthly payments of $2.1 million.
In November 1998, RACC refinanced from another lender three more Beech 1900D
aircraft.

In August 1998 Mesa reached an Agreement with RACC whereby RACC agreed to
purchase excess Beech 1900 aircraft parts from Mesa. Future lease payments due
under all aircraft operating leases were approximately $893 million at September
30, 1999. In addition, Mesa has significant lease obligations on the operating
and non-operating aircraft. These leases are classified as operating leases and
therefore are not reflected as liabilities in the accompanying consolidated
balance sheet. At September 30, 1999, 84 aircraft were leased by Mesa with terms
extending through June 2018. Total lease expense for the twelve months ended
September 30, 1999 was $29.1 million.

In June 1999 Mesa placed an $11.8 million refundable deposit with Embraer
for the purchase of regional jet aircraft to be delivered beginning in 2000.
[See Note 10 to the Consolidated Financial Statements].

In August 1996, Mesa entered into an agreement with BRAD to acquire 16 CRJ
50-passenger jet aircraft with an option to acquire an additional 16 of the jet
aircraft and rolling options to acquire a third block of 16 aircraft. In August
1997, Mesa exercised options to purchase 16 of the 32 CRJ aircraft reserved
under the option agreement. This exercise included the conversion of eight of
its Dash 8-200 aircraft then on order to CRJ 50-passenger jet aircraft. In
addition, BRAD agreed to take Embraer Brasilia aircraft in trade upon delivery
of CRJs. Twenty-nine (29) CRJ aircraft were delivered to Mesa by September 30,
1999. The remaining three (3) CRJ aircraft have been delivered subsequent to
September 30, 1999, with the final delivery taking place in January, 2000.

17
<PAGE> 20

In October 1999 Mesa resolved various disputed claims it had against BRAD
regarding Bombardier's obligation to accept trade in Brasilia aircraft and the
availability of 16 additional rolling option CRJs. Under this settlement, Mesa
will receive up to $9.0 million ($8.5 million cash, $0.5 million credit), $7.1
million of which has been paid to date, and the remainder of which will be paid
as each of the remaining 5 CRJ aircraft are permanently financed. For the
portion of the settlement attributable to BRAD's refusal to accept trade in
EMB-120 aircraft, Mesa will recognize $2 million of other income in the quarter
ended December 31, 1999. The remainder of the settlement ($5.1 million) will be
recorded as a deferred purchase incentive, to be amortized over the remaining
terms of Mesa's CRJ aircraft leases.

At September 30, 1999, the average age of Mesa's aircraft fleet deployed in
revenue service was:

- six years for the Beech 1900D fleet

- four years for the Dash 8 fleet

- one and three quarter years for the Canadair Regional Jet fleet

Due to the young age of Mesa's fleet, Mesa does not anticipate replacing
any of its aircraft with newer aircraft of the same model type during the
foreseeable future.

Mesa sold Farmington, New Mexico real estate properties, which were vacated
when the Company relocated to Phoenix, Arizona, for $5.2 million during fiscal
1999. The amount received approximated book value.

During fiscal 1999, Mesa, through its wholly owned subsidiary Ritz Hotel
Management Corporation, purchased a motel in Mesa, Arizona for use as a
dormitory facility for its flight crews in training. The hotel was purchased for
$1.475 million and financed with a 10 year mortgage loan of $1.125 million.

WestAir ceased operations on May 31, 1998 as a result of the termination of
its United Express code-share agreement. In November 1998, Mesa settled all
claims with the aircraft and equipment lessors of WestAir for approximately $15
million. WestAir contributed approximately $11.2 million of the settlement and
Mesa contributed approximately $3.8 million. Mesa anticipates recovering up to
$2 million from WestAir's receivables and deposits in the future. WestAir had
operated 43 leased aircraft pursuant to the United Express code-sharing
agreement, and upon cessation of United Express service had considerable
liabilities for the remaining terms of the leases. Mesa worked closely with all
lessors to develop and implement a plan that was acceptable to both Mesa and the
various lessors.

Mesa has negotiated 10-year maintenance contracts with General Electric
Aircraft Engines ("GE") for the CRJ and with Pratt and Whitney, Canada Aircraft
Services ("PWC") for the Dash 8-200 aircraft. The GE engine maintenance contract
provides coverage for the engines on the first 16 CRJ aircraft to be delivered.
Mesa is presently negotiating with GE to add the CRJ aircraft engines for 16
additional CRJ aircraft to this maintenance contract. The PWC contract provides
coverage for all Dash 8-200 aircraft engines operated by Mesa. Both contracts
provide for payment at the time of the repair event and a fixed dollar amount
per flight hour, subject to escalation based on changes in the CPI, for the
number of flight hours incurred since the previous event.

Management's belief that Mesa will have adequate cash flow to meet its
operating needs is a forward-looking statement. Actual cash flow could
materially differ from this forward-looking statement as a result of many
factors, including: in the event of the termination of one or more code-sharing
agreements; failure to sell, dispose of, or re-deploy excess aircraft in a
timely manner; a substantial decrease in the number of routes allocated to MAI
under its code-sharing agreement with US Airways; reduced levels of passenger
revenue, additional taxes or costs of compliance with governmental regulations;
fuel cost increases; increases in competition; increases in interest rates;
general economic conditions; and unfavorable settlement or disposition of
existing or potential litigation. Mesa has minimal market risk with respect to
market risk instruments such as foreign currency exchange risk and commodity
price risk. Mesa is subject to interest rate risk with respect to current and
future aircraft financing.

18
<PAGE> 21

YEAR 2000 ISSUES

The Company so far has experienced no disruptions in the operation of its
internal information systems or in the availability of its facilities during its
transition to the year 2000. The Company is not aware that any of its vendors
experienced any disruptions during their transition to the year 2000 or that
there have been any year 2000 problems with its material held for sale. The
Company will continue to monitor the transition to year 2000 and will act
promptly to resolve any problems that occur. If the Company or any third parties
with which it has business relationships experience problems related to the year
2000 transition that have not yet been discovered, it could have a material
adverse impact on the Company.

NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board ("FASB") has issued several new
pronouncements that have been adopted by Mesa.

In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," to establish standards for
reporting and display of comprehensive income (all changes in equity during a
period except those resulting from investments by and distributions to owners)
and its components in financial statements. This new standard was effective for
Mesa for the fiscal year ended September 30, 1999.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," to establish standards for reporting
information about operating segments in annual financial statements, selected
information about operating segments in interim financial reports and
disclosures about products and services, geographic areas and major customers.
This new standard was effective for Mesa for the fiscal year ended September 30,
1999.

Mesa has not yet adopted the following new pronouncement. In June 1998, the
FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments and hedging activities and requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The provisions of SFAS No.
133 are effective for all fiscal quarters of fiscal years beginning after June
15, 1999. In July 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Data of FASB
Statement No.133, an Amendment of FASB Statement No. 133, "which defers the
effective date of SFAS No.133 to be effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. Management does not expect adoption of SFAS
No. 133 will have a material effect on the Company's financial condition,
results of operations or liquidity.

ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has exposure to market risk associated with changes in interest
rates related primarily to its debt obligations and short term investment
portfolio. The Company's debt obligations are primarily variable in rate and
therefore have minimal exposure to change in interest rates. The Company's
investment portfolio has minimal exposure to change in interest rates due to the
short term nature of its maturities. The Company has not generally experienced
material losses due to the sale of short-term securities prior to maturity.

The Company has exposure to certain market risks associated with its
aircraft fuel. Aviation fuel expense is a significant expense for any air
carrier and even marginal changes greatly impact a carriers profitability.
Standard industry contracts do not generally provide protection against fuel
price increases, nor do they insure availability of supply. However, both the
USAirways and America West fee for departure contracts allow fuel costs to be
passed directly back to the codeshare partner, thereby reducing the overall
exposure of Mesa to fuel price fluctuations. In the fourth quarter of fiscal
1999, 62.2% of Mesa fuel requirements were associated with these contracts. A
substantial increase in the price of jet fuel or the lack of adequate fuel
supplies in the future would have a material adverse effect on Mesa's business,
financial condition, and the results of operations and liquidity. A one cent
change in the price of fuel oil has an impact on the Company's operating
expenses of approximately $26,000 per month.

19
<PAGE> 22

FORWARD-LOOKING STATEMENTS

This Form 10-K contains certain statements including, but not limited to,
information regarding the replacement, deployment, and acquisition of certain
numbers and types of aircraft, and projected expenses associated therewith;
costs of compliance with FAA regulations and other rules and acts of Congress;
the passing of taxes, fuel costs, inflation, and various expenses to the
consumer; the relocation of certain operations of Mesa; the resolution of
litigation in a favorable manner; compliance with Year 2000 issues, and certain
projected financial obligations. These statements, in addition to statements
made in conjunction with the words "expect," "anticipate," "intend," "plan,"
"believe," "seek," "estimate," and similar expressions, are forward-looking
statements within the meaning of the Safe harbor provision of Section 27A of the
Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act
of 1934 as amended. These statements relate to future events or the future
financial performance of Mesa and only reflect Management's expectations and
estimates. The following is a list of factors, among others, that could cause
actual results to differ materially from the forward-looking statements:
changing business conditions in certain market segments and industries; an
increase in competition along the routes Mesa operates or plans to operate;
material delays in completion by the manufacturer of the ordered and yet-to-be
delivered aircraft; changes in general economic conditions; changes in fuel
price; changes in regional economic conditions; Mesa's relationship with
employees and the terms of future collective bargaining agreements; and the
impact of current and future laws, Congressional investigations, and
governmental regulations affecting the airline industry and Mesa's operations;
bureaucratic delays; amendments to existing legislation; consumers unwilling to
incur greater costs for flights; unfavorable resolution of negotiations with
municipalities for the leasing of facilities; and risks associated with
litigation outcomes. One or more of these or other factors may cause Mesa's
actual results to differ materially from any forward-looking statement. Mesa is
not undertaking any obligation to update any forward-looking statements
contained in this Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

1. CONSOLIDATED FINANCIAL STATEMENTS

Page 28 -- Independent Auditors' Report

Page 29 -- Consolidated Statements of Operations -- Years ended September
30, 1999, 1998, and 1997.

Page 30 -- Consolidated Balance Sheets -- September 30, 1999 and 1998.

Page 31, -- Consolidated Statements of Cash Flows -- Years ended September
30, 1999, 1998 and 1997.

Page 32 -- Consolidated Statements of Stockholders' Equity and
Comprehensive Loss -- Years ended September 30, 1999, 1998 and 1997.

Page 33 -- Notes to Consolidated Financial Statements.

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not applicable, not required or the information has been furnished
elsewhere.

20
<PAGE> 23

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders

Mesa Air Group, Inc.:

We have audited the accompanying consolidated balance sheets of Mesa Air
Group, Inc. and subsidiaries as of September 30, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and comprehensive
loss and cash flows for each of the years in the three-year period ended
September 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mesa Air
Group, Inc. and subsidiaries as of September 30, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended September 30, 1999, in conformity with generally accepted
accounting principles.

KPMG LLP

Phoenix, Arizona
January 20, 2000

21
<PAGE> 24

PART 1. FINANCIAL INFORMATION

MESA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Operating revenues:
Passenger................................................ $398,206 $482,936 $567,842
Freight and other........................................ 6,410 11,930 11,622
-------- -------- --------
Total operating revenues.............................. 404,616 494,866 579,464
-------- -------- --------
Operating expenses:
Flight operations........................................ 173,367 195,037 212,352
Maintenance.............................................. 76,309 101,226 107,908
Aircraft and traffic servicing........................... 55,675 78,673 94,128
Promotion and sales...................................... 32,550 67,706 85,316
General and administrative............................... 31,658 31,345 30,659
Depreciation and amortization............................ 18,053 26,580 36,558
Impairment of long-lived assets and goodwill............. 28,902 -- --
Other operating items.................................... (14,027) 33,343 67,884
-------- -------- --------
Total operating expenses.............................. 402,487 533,910 634,805
-------- -------- --------
Operating income (loss).................................. 2,129 (39,044) (55,341)
-------- -------- --------
Other income (expense):
Interest expense......................................... (19,096) (25,382) (28,518)
Interest income.......................................... 2,166 899 1,837
Other.................................................... 1,986 5,298 1,258
-------- -------- --------
Total other expense................................... (14,944) (19,185) (25,423)
-------- -------- --------
Loss before income taxes.............................. (12,815) (58,229) (80,764)
Income taxes (benefit)..................................... 597 (7,762) (30,438)
-------- -------- --------
Net loss.............................................. $(13,412) $(50,467) $(50,326)
======== ======== ========
Average common shares outstanding: Basic and diluted....... 33,826 33,636 33,085
Net loss per share: Basic and Diluted...................... $ (.40) $ (1.50) $ (1.52)
</TABLE>

See accompanying notes to consolidated financial statements.
22
<PAGE> 25

MESA AIR GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 52,905 $ 35,668
Investment securities..................................... 3,306 --
Receivables, primarily traffic............................ 30,859 29,153
Refundable income taxes................................... -- 9,057
Expendable parts and supplies, less allowance for
obsolescence of $2,313 and $2,418, respectively........ 24,727 31,687
Aircraft held for sale.................................... 77,412 --
Prepaid expenses and other current assets................. 12,739 6,791
-------- --------
Total current assets................................... 201,948 112,356
Property and equipment, net................................. 160,453 336,194
Lease and equipment deposits................................ 22,392 11,515
Intangible assets, less accumulated amortization of $5,140
and $6,625, respectively.................................. 10,855 20,646
Other assets................................................ 8,125 3,665
-------- --------
Total assets........................................... $403,773 $484,376
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital leases...... $121,297 $ 35,714
Accounts payable.......................................... 17,480 17,784
Air traffic liability..................................... 2,128 4,758
Accrued compensation...................................... 2,324 3,834
Other accrued expenses.................................... 25,679 51,712
-------- --------
Total current liabilities.............................. 168,908 113,802
Long-term debt and capital leases, excluding current
portion................................................... 114,234 245,100
Deferred credits and other liabilities...................... 24,196 16,825
-------- --------
Total liabilities...................................... 307,338 375,727
-------- --------
Stockholders' equity:
Common stock of no par value, 75,000,000 shares
authorized; 34,197,752 and 33,727,340 shares issued and
outstanding............................................ 123,492 122,174
Accumulated deficit....................................... (27,057) (13,525)
-------- --------
Total stockholders' equity............................. 96,435 108,649
Commitments, contingencies and subsequent events (notes 5,
8, 9, 10, 12, 16, 17, 18, and 19)
-------- --------
Total liabilities and stockholders' equity............. $403,773 $484,376
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
23
<PAGE> 26

MESA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................... $(13,412) $(50,467) $(50,326)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation and amortization............................ 18,053 26,637 40,532
Lease payments in excess of expense amounts.............. -- -- (488)
Provision for cancellation of code share agreements and
other operating items................................. (14,027) 40,443 72,100
Impairment of long-lived assets.......................... 20,562 -- --
Write-off of goodwill.................................... 8,340 -- --
Deferred income taxes.................................... -- (1,600) (20,439)
(Gain) loss on disposal of property and equipment........ 164 (20) 5
Gain on sale of investment securities.................... (1,213) (4,544) --
Amortization and write-off of deferred credits........... (529) (5,721) (1,745)
Stock bonus plan......................................... -- -- 349
Provision for doubtful accounts.......................... 159 1,036 --
Changes in assets and liabilities:
Receivables........................................... (1,865) 29,235 (12,439)
Refundable income taxes............................... 9,057 (2,058) (6,999)
Expendable parts and supplies......................... 6,960 1,405 (4,745)
Prepaid expenses and other current assets............. (5,938) 3,656 90
Accounts payable...................................... (304) (12,229) 8,047
Other accrued liabilities............................. 5,756 (42,240) (6,060)
-------- -------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES.............. 31,763 (16,467) 17,882
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................................... (16,140) (9,774) (11,517)
Proceeds from sale of property and equipment............... 50,637 17,659 1,877
Proceeds from sale of investment securities................ 3,907 11,102 1,000
Purchases of investment securities......................... (6,000) -- --
Change in other assets..................................... 1,559 (481) 9,539
Lease and equipment deposits............................... (11,800) (1,161) (339)
-------- -------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES.............. 22,163 17,345 560
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long term debt................... -- 29,697 573
Principal payments on long-term debt and obligations under
capital leases........................................... (37,997) (53,449) (18,446)
Proceeds from issuance of common stock..................... 1,308 2,200 123
Change in short term borrowings............................ -- (904) 641
Common stock repurchased and retired....................... -- -- --
Change in deferred credits................................. -- 1,023
-------- -------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES.............. (36,689) (22,454) (16,086)
-------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS............... 17,237 (21,576) 2,356
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........... 35,668 57,244 54,888
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................. $ 52,905 $ 35,668 $ 57,244
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
24
<PAGE> 27

MESA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

<TABLE>
<CAPTION>
RETAINED ACCUMULATED
EARNINGS OTHER
YEARS ENDED SEPTEMBER 30, NUMBER OF COMMON COMPREHENSIVE (ACCUMULATED COMPREHENSIVE
1999, 1998 AND 1997 SHARES STOCK LOSS DEFICIT) INCOME TOTAL
------------------------- ---------- -------- ------------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996
as previously reported....... 28,243,382 $100,876 $121,283 $2,507 $224,666
Effect of merger with CCAIR.... 4,810,068 17,803 (16,492) -- 1,311
---------- -------- -------- ------ --------
Balance at September 1996...... 33,053,450 118,679 104,791 2,507 225,977
Exercise of options............ 16,333 123 -- -- 123
Stock bonus plan............... 34,869 349 -- -- 349
Tax benefits from sale of
optioned stock............... -- 13 -- -- 13
Other comprehensive income:
Net unrealized change in
investment securities, net
of taxes................... -- -- $ 534 534 534
Net loss..................... -- -- (50,326) (50,326) -- (50,326)
--------
Total comprehensive loss....... -- -- $(49,792) -- -- --
---------- -------- -------- -------- ------ --------
Balance at September 30,
1997......................... 33,104,652 119,164 54,465 3,041 176,670
Exercise of options............ 159,745 623 -- -- 623
Issuance of stock.............. 649,363 3,125 -- -- 3,125
Grant of compensatory
warrants..................... -- 240 -- -- 240
Retirement of stock............ (186,420) (1,022) -- -- (1,022)
Tax benefits from sale of
optioned stock............... -- 44 -- -- 44
Other comprehensive income:
Net unrealized change in
investment securities, net
of taxes................... -- -- (3,041) -- (3,041) (3,041)
Net loss..................... -- -- (50,467) (50,467) -- (50,467)
--------
Total comprehensive loss....... -- -- $(53,508) -- -- --
========
CCAIR, Inc. net loss for the
six months ended December 31,
1997......................... -- -- (17,523) -- (17,523)
---------- -------- -------- ------ --------
Balance at September 30,
1998......................... 33,727,340 122,174 (13,525) -- 108,649
Exercise of options............ 470,412 1,308 -- -- 1,308
Tax benefits from sale of
optioned stock............... -- 10 -- -- 10
Net loss and total
comprehensive loss........... -- -- (13,412) -- (13,412)
CCAIR, Inc. net loss for the
quarter ended December 31,
1998......................... -- -- (120) -- (120)
---------- -------- -------- ------ --------
Balance at September 30,
1999......................... 34,197,752 $123,492 $(27,057) -- $ 96,435
========== ======== ======== ====== ========
</TABLE>

See accompanying notes to consolidated financial statements.
25
<PAGE> 28

MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Principles of Consolidation and Organization

Mesa Air Group, Inc. and its subsidiaries ("Mesa") is a group of regional
airlines providing service in various regions across the United States, plus the
District of Columbia, as well as Toronto, Canada and Guaymas and Hermasillo,
Mexico. Mesa operates as America West Express in the Southwest, USAirways
Express throughout the East Coast and Midwest, and independently as Mesa
Airlines in New Mexico and Colorado, utilizing 116 turboprop aircraft and 29 jet
aircraft.

Mesa is a Nevada corporation which owns Mesa Airlines, Inc. ("MAI"), a
Nevada corporation and certificated air carrier; WestAir Holdings, Inc., a
California corporation and owner of certificated air carrier WestAir Commuter
Airlines, Inc. which ceased operations in 1998; Air Midwest, Inc., a Kansas
corporation and certificated air carrier and CCAIR, Inc., a Delaware corporation
and certificated air carrier. Mesa's non-certified subsidiaries are MPD, Inc., a
Nevada corporation, d.b.a. Mesa Pilot Development, Mesa's pilot training
program; FCA, Inc., a Nevada Corporation, d.b.a. Four Corners Aviation; Mesa
Leasing, Inc., a Nevada corporation established to facilitate Mesa's acquisition
and leasing of aircraft; and MAGI Insurance, Ltd., a Barbados, West Indies-based
captive insurance company. The consolidated financial statements include the
accounts of Mesa and its wholly owned subsidiaries. All significant
inter-company balances and transactions have been eliminated in consolidation.

Mesa operates as America West Express under a code-sharing agreement that
expires in 2004 with America West Airlines, utilizing Phoenix, Arizona and
Columbus, Ohio as hubs.

Mesa utilizes an Albuquerque, New Mexico hub as Mesa Airlines, serving the
Southwest and Rocky Mountain regions.

Mesa operates as USAirways Express under five code-sharing agreements with
US Airways, Inc. ("US Airways"). One agreement covers operations utilizing a
Kansas City hub and expires in 2000. Another US Airways code-sharing agreement
covers operations out of the Pittsburgh hub and expires in 2003. The third
agreement covers hubs in New Orleans, Tampa, Orlando, Philadelphia and Boston
and expires in 2004. The agreement that provides for Canadair Regional Jet
("CRJ") 50-passenger jet service on certain defined routes expires in 2007. The
fifth code-share agreement between CCAIR, Inc. and US Airways covers operations
from the Charlotte, North Carolina hub and expires in 2003.

MPD, Inc. provides flight training in coordination with a community
college. FCA, Inc. is a fixed-base operation in Farmington, New Mexico and,
during 1999, substantially all of the assets of FCA, Inc. were sold for their
approximate book value of $4.5 million. Regional Aircraft Services, Inc. and
Desert Turbine Services provide aircraft and engine maintenance services to
Mesa. MAGI Insurance, Ltd. is a captive insurance company created to handle
freight and baggage claims in addition to a portion of Mesa's aviation
insurance.

Substantially all of the Company's operating revenues are derived from the
America West Express (26%) and US Airways (71%) code-sharing agreements.

b. Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, Mesa considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents. At September 30, 1999, the Company had $2.7 million
of cash restricted as collateral for letters of credit.

26
<PAGE> 29
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

c. Investment Securities

Investment securities consist of common stock. Investment securities are
stated at market value as determined by the most recently traded price of each
security at the balance sheet date. All investment securities are defined as
either trading securities or available-for-sale securities under the provisions
of Statement of Financial Accounting Standards No. ("SFAS") 115, "Accounting for
Certain Investments in Debt and Equity Securities."

Management determines the appropriate classification of its investments in
securities at the time of purchase, and reevaluates such determination at each
balance sheet date. Securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and unrealized holding gains and losses are included in earnings. Debt
securities for which the Company does not have the intent or ability to hold to
maturity and equity securities not classified as trading are classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of stockholders' equity. The cost of investments sold is determined on
the specific identification or the first-in, first-out method.

d. Receivables

Mesa provides commercial air transportation into most regions of the United
States. The majority of the passenger tickets collected by Mesa at the time of
travel are sold by other air carriers largely as a result of the code-sharing
agreements discussed above. As a result, Mesa has a significant concentration of
its accounts receivable with other air carriers and does not have any collateral
securing such accounts receivable. At September 30, 1999 and 1998, accounts
receivable from air carriers totaled approximately $20.0 million and $21.2
million, respectively. Accounts receivable credit losses have not been
significant and have been within management's expectations.

e. Expendable Parts and Supplies

Expendable parts and supplies are stated at the lower of average cost or
market, less an allowance for obsolescence. Expendable parts and supplies are
charged to expense as they are used.

f. Property and Equipment

Flight equipment and other property and equipment are carried at cost.
Major additions, betterments, and renewals are capitalized. Depreciation and
amortization to estimated residual values is computed on the straight-line basis
over the estimated useful lives of the related assets.

At the time assets are retired or otherwise disposed of, the cost and
accumulated depreciation and amortization are removed from the related accounts,
and the difference, net of proceeds, is recorded as a gain or loss.

Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the related carrying amount may
not be recoverable. When required, impairment losses on assets to be held and
used are recognized based on the fair value of the asset. Certain long-lived
assets to be disposed of are reported at the lower of carrying amount or fair
value less cost to sell.

Interest related to deposits on aircraft purchase contracts is capitalized
as part of the aircraft. The Company capitalized $896,000 of interest during
fiscal 1999.

Leases primarily for flight equipment are classified and accounted for as
capital leases under FASB Statement No. 13.

27
<PAGE> 30
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Estimated useful lives of the various classifications of property and
equipment are as follows:

<TABLE>
<S> <C>
Buildings................................... 30 years
Flight equipment............................ 7-20 years
Leasehold improvements...................... Life or term of lease,
whichever is less
Equipment................................... 5-12 years
Furniture and fixtures...................... 3-5 years
Vehicles.................................... 5 years
</TABLE>

Assets utilized under capital leases are amortized over the lesser of the
lease term or the estimated useful life of the asset using the straight-line
method. Amortization of capital leases is included in depreciation and
amortization expense.

g. Intangible Assets

Mesa evaluates the recoverability of its intangible assets by measuring the
carrying amount of the assets against the estimated undiscounted future cash
flows associated with such assets. At the time such evaluations indicate that
the future undiscounted cash flows are not sufficient to recover the carrying
value of such assets, the assets are adjusted to their fair values.

In July 1991, Mesa acquired Air Midwest, Inc. This acquisition resulted in
purchased intangible goodwill of approximately $10.2 million, which is being
amortized over a 40-year period. The cost basis of the goodwill intangible has
been reduced by approximately $4.7 million as a result of tax benefits realized
through utilization of net operating loss and investment tax credit carryovers
acquired in the Air Midwest purchase.

In 1994, Mesa entered into separate Asset Purchase Agreements related to
developing its operations as USAirways. Intangible assets acquired amounting to
$21.8 million in the aggregate are being amortized over a 20-year period. During
fiscal year 1999, Mesa determined that the goodwill amount related to a
separately identified segment of the U.S. Airways acquired operations was
impaired and, accordingly, a charge for approximately $8,340,000 was recognized
to write-off the unamortized balance of the asset.

In connection with the discontinuance of United Express operations (Notes
12 and 16), the related intangible assets were determined to be impaired and the
related unamortized carrying amount of $26.3 million was charged to operations
during fiscal year 1997.

h. Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in future years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Mesa and its subsidiaries file a consolidated federal income tax
return.

i. Deferred Credits

Deferred lease incentives consist of credits for parts or services and
deferred gains from the sale and leaseback of aircraft. Deferred credits are
amortized on a straight-line basis as a reduction of lease expense over the term
of the respective leases.

28
<PAGE> 31
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

j. Revenues

Passenger, freight and other revenues are recognized as earned when the
service is provided. Mesa receives public service revenues (subsidies) for
providing scheduled air service to certain small or rural communities. These
revenues are recognized as earned in the period to which the payments relate.
The amount of such payments is determined by the Department of Transportation on
the basis of its evaluation of the amount of revenue needed to meet operating
expenses and to provide a reasonable return on investment with respect to
eligible routes.

k. Maintenance

Maintenance and repairs, including major engine overhauls, are charged to
operating expenses as incurred. Engine overhaul costs for the Jetstream 31's
Dash 8 and CRJ engines are subject to power by the hour contracts with external
vendors and considered incurred as the aircraft are flown. Accrued maintenance
of $18.3 million and $10.1 million is included in other accrued liabilities as
of September 30, 1999 and 1998, respectively.

l. Net Loss Per Share

The numbers of shares used in the net loss per share calculation are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1999 1998 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Basic:
Weighted average shares outstanding during the year.... 33,826 33,636 33,085
====== ====== ======
</TABLE>

Options to purchase 605,000, 447,000 and 161,000 shares of common stock and debt
convertible into common stock were outstanding during 1999, 1998, and 1997,
respectively, but were not included in the computation of diluted loss per share
because to do so would have been anti-dilutive for the period presented.

m. Stock Options

Mesa accounts for its stock-based compensation arrangements in accordance
with the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Effective October 1, 1996, Mesa adopted Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which
permits entities to recognize as expense over the vesting period the fair value
of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the measurement provisions of APB Opinion
No. 25 and provide pro forma net earnings and pro forma earnings per share
disclosures for employee stock option grants made in fiscal 1996 and future
years as if the fair-value-based measurement method defined in SFAS No. 123 had
been applied. Mesa has elected to continue to apply the measurement provisions
of APB Opinion No. 25, and to provide pro forma disclosures required by SFAS No.
123. (See note 7, "Stockholders' Equity.")

n. Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities. Actual
results could differ significantly from those estimates. Material estimates that
are particularly susceptible to significant change include the determination of
impairment of long-lived and other intangible assets, the valuation of deferred
tax

29
<PAGE> 32
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assets and accruals for loss contingencies. Management believes that such
estimates have been appropriately established in accordance with generally
accepted accounting principles.

o. Operating Segment

The Company is engaged in one line of business, the scheduled and chartered
transportation of passengers, which constitutes nearly all of its operating
revenues.

p. New Statements of Financial Accounting Standards

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. This
statement requires that all items recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements and is
effective for fiscal years beginning after December 15, 1997. The Company
adopted the provisions of SFAS No. 130 in fiscal 1999. Financial statements
presented for earlier periods have been reclassified in accordance with the
requirements of SFAS No. 130.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement provides guidance for
public business enterprises in reporting information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports to
shareholders. This statement also establishes standards for related disclosures
about products and services, geographic areas and major customers. This
statement is effective for fiscal years beginning after December 15, 1997. SFAS
No. 131 need not be applied to interim financial statements in the initial year
of its application. The Company adopted the provisions of SFAS No. 131 in fiscal
1999.

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which amends the disclosure
requirements of SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions." This statement
standardizes the disclosure requirements of SFAS No.'s 87 and 106 to the extent
practicable and recommends a parallel format for presenting information about
pensions and other postretirement benefits. SFAS No. 132 addresses disclosure
only and does not change any of the measurement or recognition provisions
provided for in SFAS No.'s 87, 88 or 106. This statement is effective for
financial statements for periods beginning after December 15, 1997. Adoption of
the provisions of SFAS No. 132 in fiscal 1999 did not impact the Company's
financial reporting.

In June 1998, the FASB Issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities and requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
provisions of SFAS No. 133 are effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In July 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133, an Amendment of FASB Statement No.
133," which defers the effective date of SFAS No. 133 to be effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Management does
not expect adoption of SFAS No. 133 will have a material effect on the Company's
financial condition, results of operations or liquidity.

30
<PAGE> 33
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

q. Reclassifications

Certain 1998 and 1997 balances have been reclassified to conform to the
1999 presentation.

2. MERGER

Effective June 9, 1999, Mesa merged with CCAIR, Inc. (CCAIR), a regional
carrier based in Charlotte, North Carolina, and in connection therewith the
Company issued 5,933,381 shares of common stock in exchange for all of CCAIR's
outstanding common stock. CCAIR is a regional airline serving the East Coast as
US Airways Express.

The merger was accounted for as a pooling of interests and, accordingly,
the companies' consolidated financial statements have been restated to include
the results of CCAIR for all periods presented.

Combined and separate results of Mesa and CCAIR are as follows (in
thousands):

<TABLE>
<CAPTION>
MESA CCAIR ADJUSTMENTS COMBINED
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Year ended September 30, 1999
Operating revenues.................... $325,559 $79,057 $ -- $404,616
Net earnings (loss)................... $(16,428) $ 2,194 $ 822 $(13,412)
Year ended September 30, 1998
(CCAIR as of December 31, 1998)
Operating revenues.................... $423,541 $71,325 $ -- $494,866
Net earnings (loss)................... $(53,434) $ 3,380 $ (413) $(50,467)
Year ended September 30, 1997
(CCAIR as of June 30, 1997) Operating
revenues.............................. $510,977 $68,487 $ -- $579,464
Net earnings (loss)................... $(48,597) $ 519 $(2,248) $(50,326)
</TABLE>

The combined financial information contains adjustments to conform the
accounting policies of the two companies. This conforming adjustment reflects
the restatement of CCAIR's engine overhaul amounts to the direct expense method
from the accrual method from July 1, 1997 forward and from the deferral method
prior to July 1, 1997. Mesa owned 300,000 shares of common stock in CCAIR prior
to the merger, which has been accounted for as a stock repurchase as of the date
acquired.

The consolidated financial statements for September 30, 1998 and 1997 have
not been restated to change CCAIR's fiscal year from December 31, 1998 and June
30, 1997 to September 30. Those consolidated financial statements include Mesa's
results of operations on a September 30 fiscal year and CCAIR's for the twelve
month periods ended December 31, 1998 and June 30, 1997, respectively. CCAIR
changed its fiscal year end from June 30 to December 31 in 1997. The year ends
have been conformed beginning October 1, 1998 and include CCAIR's results of
operations for the quarter ended December 31, 1998, which results were also
included in its year ended December 31, 1998. CCAIR reflected net income from
operations for the quarter of $120,000 which has been reflected as an adjustment
to retained earnings in the accompanying consolidated financial statements. The
1997 combined results of operations include CCAIR's results for its fiscal year
ended June 30, 1997, and, accordingly, CCAIR's loss from operations for the
six-month period

31
<PAGE> 34
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ended December 31, 1997 of $17,523,000 has also been reflected as an adjustment
to retained earnings. CCAIR's results of operations for the six-month period
ended December 31, 1997 were:

<TABLE>
<S> <C>
Operating revenues...................................... $ 32,836
Operating expenses...................................... (49,743)
--------
Operating loss.......................................... (16,907)
--------
Net loss................................................ $(17,523)
========
</TABLE>

3. INVESTMENT SECURITIES

Investment securities classified as trading are summarized as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------------
1999 1998
---------------- ---------------
COST MARKET COST MARKET
BASIS VALUE BASIS VALUE
------ ------ ----- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Trading securities........................ $3,139 $3,306 $-- $--
====== ====== == ==
</TABLE>

Mesa purchased a less than 5% interest in an aviation related company
during 1999 and sold a majority of those shares for a realized gain of
$1,045,000 during 1999. The unrealized gain totaled $167,000 as of September 30,
1999.

In 1994, Mesa invested $18.7 million in America West Class A shares of
common stock, Class B shares of common stock and warrants. In 1996, Mesa sold a
portion of the America West Class B common stock, resulting in a realized gain
of $22 million. In January 1998, Mesa sold its remaining investment in America
West comprising Class A common shares, Class B common shares and warrants to
acquire Class B common shares. Mesa received cash of approximately $11.1 million
and recognized other income of approximately $4.5 million on the sale of these
securities.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Flight equipment, substantially pledged..................... $190,974 $392,969
Other equipment............................................. 19,285 16,255
Leasehold improvements...................................... 4,457 3,685
Furniture and fixtures...................................... 2,603 1,802
Buildings................................................... 4,150 10,091
Land........................................................ -- 525
Vehicles.................................................... 1,573 1,662
-------- --------
223,042 426,989
Less accumulated depreciation and amortization.............. (62,589) (90,795)
-------- --------
Net property and equipment.................................. $160,453 $336,194
======== ========
</TABLE>

32
<PAGE> 35
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT AND CAPITAL LEASES

Long-term debt and capital leases consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1999 1998
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to manufacturers: approximately $2.1 million,
including interest, due monthly through 2011. Notes
provide variable rates of interest ranging from 6.87% to
7.5% at September 30, 1999. Secured by aircraft........... $ 220,079 $236,639
Notes payable to manufacturers: principal and interest due
in October 1999. Notes provide for fixed interest at 7.5%.
Secured by aircraft....................................... 2,100 23,100
Notes payable to banks: Approximately $93,500 in principal
due monthly plus interest indexed to adjusted LIBOR rates
(7.31% to 7.56% at September 30, 1999) through 2006.
Secured by aircraft....................................... 1,500 8,174
Mortgage note payable to bank, secured by real estate, due
monthly: interest only in year one at 7%, years 2-10
principal plus interest at 7 1/2%, with balance due April
2009...................................................... 1,114 --
Capital leases: due in monthly installments through
December 1999; interest indexed to the prime rate Secured
by equipment.............................................. 36 2,677
Note payable to manufacturer (note 12)...................... 8,336 8,336
Other....................................................... 2,366 1,888
--------- --------
Total long-term debt and capital leases..................... 235,531 280,814
Less current portion........................................ (121,297) (35,714)
--------- --------
Net long-term debt and capital leases....................... $ 114,234 $245,100
========= ========
</TABLE>

Principal maturities of long-term debt and capital leases for each of the
next five years and thereafter are as follows:

<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30,
--------------------------
(IN THOUSANDS)
<S> <C>
2000........................................ $121,297
2001........................................ 7,185
2002........................................ 7,606
2003........................................ 7,926
2004........................................ 8,277
Thereafter.................................. 83,240
</TABLE>

At September 30, 1999, Mesa owned 68 aircraft collateralizing debt with
maturities through December 2011. During 1996, Raytheon Aircraft Credit
Corporation ("RACC") provided financing on 69 Beech 1900D aircraft. In April
1998, Mesa reached an agreement with RACC to defer the monthly principal and
interest payments due on the aircraft for the months of May, June and July. The
payments were deferred by extending the financing terms for an additional three
months. In addition, RACC agreed to finance two Beech 1900 aircraft owned by
Mesa for an amount equal to the monthly payments due on 69 Beech 1900D aircraft
for the months of August, September and October 1998. Mesa then used the
proceeds of the financing for those monthly payments. The two aircraft were
financed by RACC with non-recourse, non-interest bearing loans and are in the
process of being sold. In September 1998, RACC refinanced from another lender an
additional 11 Beech 1900D aircraft. The total financing by RACC is secured by
the aircraft and totals approximately $220 million at September 30, 1999, with
monthly payments of approximately $2.1 million. In

33
<PAGE> 36
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

November 1998, RACC refinanced from another lender three more Beech 1900D
aircraft. Unpaid amounts associated with aircraft held for sale at September 30,
1999 and classified as a current liability in the accompanying consolidated
balance sheet totalled $98.8 million.

In August 1998, Mesa reached an Agreement with RACC whereby RACC agreed to
purchase excess Beech 1900 aircraft parts from Mesa. As a result of disputes
between Mesa and RACC regarding the applicability and value of certain aircraft
parts under the Agreement, Mesa withheld its monthly payment on 83 Beech 1900
aircraft to RACC for the months of October and November 1998. In an Agreement
dated January 7, 1999, Mesa and RACC resolved the issues regarding these parts
and RACC accepted them in lieu of payment for the months of October and
November, 1998. To the extent that any Event of Default, as defined in the
Loans, may have occurred for the months of October and November 1998, they have
been deemed fully cured pursuant to the terms of the Agreement with RACC.

As more fully described in note 12, a holder of an $8.3 million note has
declared an Event of Default and demanded payment in full from CCAIR on the note
as a result of such alleged default. Additionally, as a result of certain cross
covenant default provisions, CCAIR may be in technical default on the $1.5
million note payable to bank. While the bank has not yet declared CCAIR in
default, CCAIR may be required to pay in full the bank debt on demand. Both of
the aforementioned debt amounts have been classified current in the accompanying
consolidated balance sheet as of September 30,1999. In addition, CCAIR is party
to an operating lease agreement containing certain cross covenant default
provisions. The operating lease is for four aircraft and CCAir may be in
technical default as a result of the previously discussed Lynrise issue. In the
event CCAir were declared in default on the operating lease, the lessor would
have the right to take possession of the aircraft on demand. Management does not
believe that resolution of these matters will have a significant adverse impact
on the Company's financial condition, results of operations or liquidity.

6. INCOME TAXES

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
1999 1998 1997
---- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................... $422 $(6,162) $ (9,999)
State................................................. 175 -- --
---- ------- --------
597 (6,162) (9,999)
---- ------- --------
Deferred:
Federal............................................... -- (1,451) (16,054)
State................................................. -- (149) (4,385)
---- ------- --------
-- (1,600) (20,439)
---- ------- --------
$597 $(7,762) $(30,438)
==== ======= ========
</TABLE>

34
<PAGE> 37
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The actual income tax expense (benefit) differs from the "expected" tax
expense benefit (computed by applying the U.S. federal corporate income tax rate
of 35 percent in 1999, 1998 and 1997 to loss before income taxes) as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1999 1998 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax benefit..................... $(4,485) $(20,380) $(28,246)
Increase (reduction) in income taxes resulting from:
Non-deductible amortization of intangibles........ 207 98 98
Utilization of net operating loss carryforward.... -- (1,183) --
Tax exempt interest............................... -- -- (1)
State taxes, net of federal tax impact Benefit.... 114 (97) (2,850)
Other............................................. (636) (700) 561
Increase in valuation allowance..................... 5,397 14,500 --
------- -------- --------
Total income tax expense (benefit)................ $ 597 $ (7,762) $(30,438)
======= ======== ========
</TABLE>

Elements of deferred income tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Assets:
Inventory, parts and equipment allowances.............. $ 5,170 $ 3,729
Accrued expenses....................................... 279 1,860
Other accrued liabilities.............................. 11,376 2,825
Provisions not deductible for tax...................... 19,642 20,764
AMT credit carryover................................... 2,751 2,233
Benefit of net operating loss and tax credit carry
forwards.................................................. 52,459 61,461
-------- --------
91,677 92,872
Valuation allowance.................................... (28,497) (23,100)
-------- --------
Net deferred tax assets................................ 63,180 69,772
Deferred tax liabilities:
Property and equipment................................. (63,180) (69,772)
-------- --------
$ 0 $ 0
======== ========
</TABLE>

Deferred tax assets include benefits expected to be realized from the
utilization of minimum tax credits carryforwards of $2.8 million which do not
expire; from the utilization of investment tax credit carryforwards of $3.67
million which will expire in 2000 through 2001; and net operating loss
carryforwards of $7.2 million and $96.1 million which will expire during 2012
and 2018 respectively. In addition, the acquisition during the year of CCAIR
brought the carryover of separately restricted net operating loss carryforwards
totaling $17.7 million which will expire at various dates from 2006 though 2018.
The tax benefits from the investment tax credit and loss carryforwards that were
obtained in the acquisition of Air Midwest, Inc. have been recorded as a
reduction of intangibles. During 1999 and 1998, the valuation allowance was
increased by $5.4 million and $14.5 million, respectively.

35
<PAGE> 38
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. STOCKHOLDERS' EQUITY

At September 30, 1999, Mesa sponsors the following stock-based compensation
plans:

A. On June 2, 1992, Mesa adopted an employee stock option plan that
provides for the granting of options to purchase up to 2,250,000 shares
of Company common stock at the fair market value on the date of grant.
Under this plan, 1,999,481 options have been granted. In 1996,
shareholders voted to reduce the number of options available for
granting under the plan by 250,519. This action eliminated all remaining
options available for granting under this plan.

B. On December 1, 1995, Mesa adopted an additional employee stock option
plan under the new management incentive program (Omnibus Plan) which
provides for the granting of options to purchase up to 2,800,000 shares
of Company common stock at the fair market value on the date of grant.
On July 24, 1998, an additional 1,250,000 options were approved by the
stockholders to be granted under this plan. Under the plan, options to
acquire 2,399,797 common shares are outstanding.

C. In March 1993, Mesa adopted a directors' stock option plan for outside
directors. This plan provides for the grant of options for up to 800,000
shares of Mesa's common stock at the fair market value on the date of
grant. This is a formula-based plan under which options to acquire
150,000 shares have been granted. In 1996, shareholders voted to reduce
the number of options available for granting under the plan by 590,000.
There are options to acquire 60,000 common shares remaining under this
plan.

D. On December 9, 1994, Mesa adopted an additional directors' stock option
plan for outside directors. This plan provides for the grant of options
for up to 50,000 shares of Mesa's common stock at the fair market value
on the date of grant. This is a formula-based plan under which options
to acquire 33,000 common shares have been granted and are outstanding.

E. On June 1, 1998, Mesa adopted a Key Officer Stock Option Plan, which
provided for the granting of options to purchase up to 1,600,000 shares
of Mesa common stock at the fair market value on the date of grant.
Under this plan, 1,150,000 options have been granted.

Generally, options granted to employees vest over a three-year period and
options granted to directors vest immediately upon grant. At September 30, 1999,
2,051,541 shares of common stock were available for grant under these plans.

Transactions involving stock options under these plans are summarized as
follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(000) PRICE (000) PRICE (000) PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year:..................... 5,165 8.29 4,174 8.49 4,087 9.03
Granted..................... 1,305 5.86 1,619 8.05 824 5.54
Exercised................... (470) 2.78 (128) 4.67 (20) 6.43
Canceled/Forfeited.......... (90) 5.32 (500) 9.75 (717) 7.92
----- ---- ----- ---- ----- ----
Outstanding at end of
year...................... 5,910 8.24 5,165 8.34 4,174 8.54
===== ==== ===== ==== ===== ====
</TABLE>

At September 30, 1999, the range of exercise prices for the aforementioned
options was $4.88 -- $17.25 and the weighted-average contractual life of all
options was 9.2 years. The number of options exercisable at September 30, 1999
was 2,779,633, and the weighted-average exercise price of these options was
$10.04.

36
<PAGE> 39
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The per share weighted-average fair value of stock options granted during
1999, 1998 and 1997 was $4.24, $3.24, and $4.97, respectively, on the grant date
using a Black-Scholes option pricing model with the following average
assumptions: expected dividend yield 0.0%, risk-free interest rate of 4.5% in
1999 and 5.9% in 1998 and 1997, volatility of 54.2% in each year and an expected
life of 6 years.

Mesa applies the provisions of APB Opinion No. 25 and related
Interpretations in accounting for its stock-based compensation plans.
Accordingly, no compensation cost has been recognized for awards made pursuant
to its fixed stock option plans. Had the compensation cost for Mesa's four fixed
stock-based compensation plans been determined consistent with the measurement
provisions of SFAS No. 123, Mesa's net loss and loss per share would have been
as indicated by the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net loss
As reported........................................ $(13,412) $(50,467) $(50,326)
======== ======== ========
Pro forma..................................... $(18,863) $(50,741) $(50,391)
======== ======== ========
Loss per share -- Basic:
As reported................................... $ (0.40) $ (1.50) $ (1.52)
======== ======== ========
Pro forma..................................... $ (0.56) $ (1.51) $ (1.52)
======== ======== ========
Loss per share -- Diluted:
As reported................................... $ (0.40) $ (1.50) $ (1.52)
======== ======== ========
Pro forma..................................... $ (0.53) $ (1.51) $ (1.52)
======== ======== ========
</TABLE>

Pro forma net loss does not reflect options granted prior to 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected over the option vesting period and
compensation cost for options granted prior to October 1, 1995 is not
considered.

8. BENEFIT PLANS

Mesa previously sponsored three 401(k) plans, one for employees of WestAir
Commuter, another for employees of MAI, Air Midwest and the airline support
operations, and one for CCAIR, Inc., under which employees may contribute up to
15 percent of their annual compensation, as defined. The WestAir plan was
terminated in fiscal year 1998. Mesa currently makes matching contributions of
50 percent of employee contributions up to 10 percent of employee compensation.
These plans are not available to certain union employees. Upon completing three
years of service, the employee is 20 percent vested in employer contributions
and the remainder of the employer contributions vest 20 percent per year.
Employees become fully vested in employer contributions after seven years of
employment. Mesa has the right to terminate the 401(k) plans at any time.

CCAIR sponsors an employee savings plan (the "Plan") which permits
participants to make contributions by tax deferred salary deductions pursuant to
Section 401(k) of the Internal Revenue Code. In accordance with the Plan
document and union contracts, CCAIR is required to make a matching contribution
on behalf of certain employees for the Plan years ended December 31, 1998 and
1997. Contributions by CCAIR to this plan were nil, $351,000 and $200,000 in
1999, 1998 and 1997, respectively.

Contributions by Mesa to the above plans for the years ended September 30,
1999, 1998 and 1997 were $1,485,618, $1,679,802, and $1,286,746, respectively.

On March 9, 1993, Mesa adopted an Employee Stock Bonus Plan that provides
for employees of Mesa to receive shares of Common Stock in lieu of discretionary
cash bonuses accrued each quarter. The custodian of

37
<PAGE> 40
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the plan is empowered to determine the times at which and the conditions under
which the plan, on behalf of participating employees, purchases shares of Common
Stock. All purchases of Common Stock by the custodian will be made at prices
approximating fair market value on the date of purchase, subject to the
limitation that only 1,000,000 shares may be purchased over the life of the
plan. Bonuses paid under the plan for the year ended September 30, 1997 amounted
to $348,693. No bonuses were paid under this program for fiscal year 1998.
Effective May 9, 1997 the Employee Stock Bonus Plan was discontinued and
replaced with a monthly completion bonus based on improvements in percentage of
on time completed flights. As of September 30, 1999, a total of 405,501 shares
have been issued pursuant to the plan. This monthly completion bonus program was
discontinued in the second calendar quarter of 1998.

9. LEASE COMMITMENTS

At September 30, 1999, Mesa leased 58 aircraft under non-cancelable
operating leases with remaining terms ranging up to 18.5 years. The aircraft
leases require Mesa to pay all taxes, maintenance, insurance and other operating
expenses. Mesa has the option to terminate certain of the leases at various
times throughout the lease. At September 30, 1999, 12 of the CRJ aircraft are
subject to interim financing agreements. The Company expects to replace these
interim arrangements with operating leases and, accordingly, requirements under
the interim arrangements are included in the minimum lease commitments table
below.

Under an accord reached with British Aerospace Asset Management (BAAM) in
November 1997, CCAIR agreed to replace its fourteen Jetstream 31 aircraft with
twenty Jetstream Super 31 aircraft. In return for renegotiated lease rates,
CCAIR agreed to lease fourteen of the Jetstream Super 31 aircraft for seven
years, and the additional six Jetstream Super 31 aircraft through December 31,
1998. In December 1998, CCAIR extended the lease on two of these aircraft for an
additional year and in January 1999, returned four of the aircraft to BAAM. The
terminated leases on the fourteen Jetstream 31 aircraft would have expired on
December 31, 2001. This new agreement with BAAM provides for reductions in lease
payments of approximately $140,000 per month on the fourteen long-term Jetstream
Super 31 leases as compared to the predecessor Jetstream 31 aircraft leases,
commencing November 1997.

CCAIR leases four Dash 8 aircraft from CIT Leasing Corporation
("CIT"),which leases expire in June 2007. (See note 5.)

Aggregate rental expense totaled $46.9 million (net of approximately $8
million in aircraft rental payments recorded against the United Express
code-share provision (note 16)), $53.6 million, and $69 million for the years
ended September 30, 1999, 1998 and 1997 respectively.

Future minimum lease payments under non-cancelable operating leases are as
follows:

<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30: (IN THOUSANDS)
-------------------------- --------------
<S> <C>
2000................................................... $ 61,770
2001................................................... 60,379
2002................................................... 60,185
2003................................................... 59,351
2004................................................... 58,834
Thereafter............................................. 529,688
</TABLE>

10. AIRCRAFT ACQUISITIONS AND COMMITMENTS

During 1999, Mesa entered into an agreement with Embraer to acquire
thirty-six fifty-seat ERJ 145 regional jets. Mesa secured its order of the jets
by paying a deposit of $11.8 million. Mesa also received the right to purchase
an additional 64 Option Aircraft. Deliveries could commence as soon as March
2000 and continue through mid-2002 at a rate of approximately one aircraft per
month. The transaction includes

38
<PAGE> 41
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

standard product support provisions, including training support, preferred
initial provisioning pricing, maintenance support and technical publication
support. The transaction has various contingencies related to financing and
product support, which at the time of publication of this report are still open.
The value of the regional jets at listed prices is $19.5 million per aircraft.
Should Mesa exercise its right to terminate the transaction, Embraer would
return to Mesa a deposit of $11.8 million, plus interest.

Mesa has ordered 32 CRJ aircraft for use in its America West Express
operation in Phoenix, Arizona and Columbus, Ohio, and for its USAirways Express
operations on the East Coast. As of January 4, 2000, Mesa had received all 32 of
the CRJ aircraft. The value of these 16 CRJ aircraft at listed prices is
approximately $320 million.

On January 9, 1997, one of Mesa's wholly owned subsidiaries, FCA, Inc.,
entered into a distributorship agreement ("the Distributorship Agreement") with
Sino Swearingen Aircraft Company, L.P. ("SSAC"). On March 31, 1999, the assets
of FCA were sold to SB Aviation Group, Inc. In conjunction with the purchase of
the FCA assets, SB Aviation Group, Inc., was assigned FCA's rights under the
Distributorship Agreement.

On September 9, 1998, Mesa Airlines, Inc. entered into an agreement with
International Airline Support Group ("IASG") whereby Mesa would consign surplus
aircraft parts to IASG to sell on the open market. IASG in turn would submit the
proceeds to Mesa less a fee of 25%. During 1999 Mesa consigned approximately $8
million in parts at cost to IASG and realized $1.7 million in proceeds. The
chief operating officer of IASG is a member of the Board of Directors of Mesa
Air Group, Inc.

Mesa has negotiated 10-year engine maintenance contracts with General
Electric Aircraft Engines ("GE") for the CRJ and with Pratt and Whitney, Canada
Aircraft Services ("PWC") for the Dash 8-200 aircraft. The GE engine maintenance
contract provides coverage for the engines on the CRJ aircraft. The PWC contract
provides coverage for all Dash 8-200 aircraft engines operated by Mesa. Both
contracts provide for payment at the time of the repair event and a fixed dollar
amount per flight hour, subject to escalation based on changes in the CPI, for
the number of flight hours incurred since the previous event.

11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------
1999 1998 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid for interest, net of amounts capitalized.... $15,702 $15,889 $28,499
Cash paid for income taxes............................ -- $ 4,138 $ 2,697
</TABLE>

In 1999, Mesa purchased property and equipment amounting to $3.5 million
which was principally financed by issuing a note to the seller amounting to $1.1
million.

12. COMMITMENTS AND CONTINGENCIES

Mesa operates under a five-year agreement with the Air Line Pilots
Association (ALPA) covering pilots at MAI and Air Midwest, Inc. Air Midwest
mechanics are represented by the International Association of Machinists (IAM)
and flight attendants are represented by the Association of Flight Attendants
(AFA). CCAIR has three organized employee groups; pilots are represented by
ALPA, its flight attendants by the AFA and its mechanics by the International
Brotherhood of Teamsters (Teamsters.)

The ALPA collective bargaining agreement was renewed on November 6, 1998
and becomes amendable on October 31, 2002. Mesa's contract with the AFA was
renewed on May 16, 1995 and becomes amendable on May 15, 2001. Mesa's contract
with the Teamsters was ratified on July 15, 1998 and becomes amendable on
December 31, 2002.

39
<PAGE> 42
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective in March 1997, the FAA required that commuter airlines with
aircraft of 10 or more passenger seats begin operating those aircraft under FAR
Part 121 regulations instead of FAR Part 135. Mesa completed the transition to
FAR Part 121 by the FAA's deadline. Company management is monitoring the cost
increases resulting from compliance with FAR Part 121 regulations. The cost
increase is primarily related to additional training, dispatch and maintenance
procedures.

During 1994, seven shareholder class action complaints were filed in the
United States District Court for the District of New Mexico against Mesa,
certain of its present and former corporate officers and directors, its
independent auditor, and certain underwriters who participated in Mesa's June
1993 public offering of Common Stock. During October 1995, the court certified a
class consisting of persons who purchased Mesa stock between January 28, 1993
and August 5, 1994. The complaints were consolidated by court order, and, after
the court granted in part a motion to dismiss in May 1996, a third amended
consolidated complaint was filed alleging that during the class period the
defendants caused or permitted Mesa to issue publicly misleading financial
statements and other misleading statements in the registration statement for the
June 1993 public offering, annual and quarterly reports to shareholders, press
releases and interviews with securities analysts. In May 1998, Mesa entered into
a memorandum of understanding with the plaintiffs to settle the litigation.
While Mesa and its corporate officers and directors believed substantial and
meritorious defenses against the plaintiff's allegations existed and defended
their position vigorously, a settlement was reached to avoid ongoing litigation.
A total of $8 million was paid to the class plaintiffs on behalf of the
defendants. Mesa, for its part, paid a substantial portion of the settlement. On
December 1, 1998, the Court approved the settlement and the cases were
dismissed.

In June 1997, UAL filed a complaint in the United States District Court for
the Northern District of Illinois against two subsidiaries of Mesa, Mesa
Airlines, Inc. ("MAI") and WestAir Commuter Airlines, Inc. ("WestAir"), seeking
a judicial declaration of the parties' rights and obligations under two separate
written agreements, pursuant to which MAI and WestAir allegedly agreed to
provide certain airline transportation services to UAL including the provision
of scheduled air transportation services in certain areas of the United States
under the service mark "United Express." UAL contends that, under these
agreements, UAL has the right to "increase, decrease, or in any other way adjust
the flight frequencies, or markets, or both" in certain airports currently
serviced by WestAir and/or MAI. In January 1998, UAL amended its complaint to
include damages related to MAI's purported breach of contract to provide
specified levels of service in certain cities. On November 30, 1998, UAL filed a
motion with the Court to amend its Complaint to include an additional $4 million
in damages resulting from Mesa's alleged failure to remit baggage fees at Denver
International Airport to UAL. The motion has not yet been considered. MAI and
WestAir dispute the principal contentions in UAL's complaint, and unless a
satisfactory negotiated resolution is achieved, intend to defend their positions
vigorously. Furthermore, MAI and WestAir contend that UAL breached its
code-sharing agreements with the respective entities and have filed a
counterclaim seeking to recover for the damage to the business of MAI and
WestAir which management believes has been incurred as a result of UAL's breach
of contract pertaining to premature termination and revenue sharing.

In addition, Mesa and WestAir have filed suit against UAL and SkyWest
Airlines, Inc. ("SkyWest"). SkyWest was contracted to be Mesa's successor on the
West Coast. The complaint alleges that SkyWest unlawfully interfered with Mesa's
and WestAir's contracts with UAL. It further alleges improper conduct on the
part of UAL, and SkyWest in terminating markets under the Mesa agreement and in
leading to the non-renewal of the WestAir agreement. Mesa is seeking damages
against each defendant.

In November 1998, Mesa settled all claims with the aircraft and equipment
lessors of WestAir for approximately $15 million. WestAir contributed
approximately $11.2 toward the settlement and Mesa contributed approximately
$3.8 million. WestAir had operated 43 leased aircraft pursuant to a Partnership
Agreement with United Airlines, a division of UAL, and upon cessation of United
Express service had

40
<PAGE> 43
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

considerable liabilities for the remaining terms of the leases. Mesa worked
closely with all lessors to develop and implement a plan that was acceptable to
both Mesa and the various lessors.

On June 29, 1999, Lynrise Air Lease, Inc. ("Lynrise") filed suit against
the Company and CCAIR in Supreme Court of the State of New York. Lynrise was the
lessor of certain Shorts model 360 aircraft to CCAIR. In 1999, CCAIR
restructured its aircraft fleet and elected to terminate the leases held by
Lynrise for the Shorts aircraft. In connection with the early termination of the
leases, CCAIR issued to Lynrise an Unsecured Convertible Promissory Note (the
"Note") in the principal amount of $8,334,370, the Note was convertible into
CCAIR stock at a price of $8.00 per share of common stock, and as result of the
merger with CCAIR, the Note is convertible into Mesa stock at a price of $12.47
per share of common stock. The Note is due June 30, 2004, accrues interest at
the rate of 7% per annum and requires the repayment of principal in 10 equal
semiannual installments commencing December 31, 1999 and the payment of interest
in quarterly installments commencing March 31, 1999.

The Note contains a provision that upon a change of control, Lynrise may,
at its option, require CCAIR to repurchase the Note. In its lawsuit filed
against the Company and CCAIR, Lynrise alleges that it has exercised its option
to require CCAIR to repurchase the Note after CCAIR became a wholly owned
subsidiary of the Company on June 9, 1999. Both the Company and CCAIR contend
that Lynrise waived its rights with respect to the repurchase option and both
intend to defend the lawsuit vigorously. In addition, by letter dated August 9,
1999, Lynrise declared that in accordance with the terms of the Note, an Event
of Default had occurred as against CCAIR for its failure to make the Repurchase
Offer and declared the principal amount of the Note and all accrued interest
there on due and payable immediately. Accordingly, the entire unpaid balance of
$8.3 million is classified as a current liability in the accompanying
consolidated balance sheet as of September 30, 1999.

Lynrise's claim against CCAIR is for Declaratory Judgement that CCAIR is
obligated to repurchase the Note and a claim for breach of contract. As against
the Company, Lynrise has claimed tortuous interference.

Mesa is also a party to various other legal proceedings and claims which
arise in the ordinary course of business.

In the belief of management, based upon information available at this time,
the ultimate outcome of all the proceedings and claims pending against Mesa
referred to above is not expected to have a material adverse effect on Mesa's
consolidated financial position, results of operation or liquidity.

13. FINANCIAL INSTRUMENT DISCLOSURE

The carrying amount of cash and cash equivalents, receivables, refundable
income taxes, accounts payable, income taxes payable, accrued compensation and
other liabilities approximate fair values due to the short maturity periods of
these instruments. The fair value of securities is based on quoted marked prices
(see note 3). The carrying value of Mesa's long-term debt approximates fair
value based on the current terms offered for debt of the same or similar
remaining maturities. The difference between the estimated fair values and
carrying values of the Company's financial instruments are not material.

41
<PAGE> 44
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO
BALANCE AT COSTS AND BALANCE AT
BEGINNING OF YEAR EXPENSES DEDUCTIONS END OF YEAR
----------------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ALLOWANCE FOR OBSOLESCENCE DEDUCTED FROM
EXPENDABLE PARTS AND SUPPLIES
September 30, 1999....................... $2,418 $ -- $(105) $2,313
September 30, 1998....................... 3,097 -0- (679) 2,418
September 30, 1997....................... 1,816 1,281 -0- 3,097
</TABLE>

15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents selected unaudited quarterly financial data
(in thousands):

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1999
Operating revenues...................... $ 97,720 $ 97,194 $105,272 $104,430
Operating income (loss)................. 5,838 7,587 8,374 (19,670)
Net earnings (loss)..................... 1,762 4,302 4,782 (24,258)
Net earnings (loss) per
share -- basic........................ 0.05 0.13 0.14 (0.72)
Net earnings (loss) per
share -- diluted...................... 0.05 0.13 0.14 (0.72)
1998
Operating revenues...................... $139,122 $137,726 $117,590 $100,428
Operating income (loss)................. (35,094) (9,026) 1,275 3,801
Net earnings (loss)..................... (38,543) (11,156) (3,263) 2,495
Net earnings (loss) per
share -- basic........................ (1.14) (0.33) (0.10) 0.07
Net earnings (loss) per
share -- diluted...................... (1.14) (0.33) (0.10) 0.07
</TABLE>

The net loss in the fourth quarter ended September 30, 1999, includes an
asset impairment charge of $28.9 million.

The net earnings in the fourth quarter ended September 30, 1998 includes an
income tax benefit of $5.3 million.

The net loss in the first quarter ended December 31, 1997 includes a
provision for the non-renewal of the WestAir code-share agreement and early
termination of the Denver code-share agreement with UAL and other adjustments as
discussed in note 16.

42
<PAGE> 45
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. OTHER OPERATING ITEMS

Other operating items consist of the following expenses (income):

<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1999 1998 1997
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for non-renewal of the WestAir and Early
termination of the UAL code-share agreement
(elimination of excess reserve).................... $(14,027) $26,843 $72,100
Cessation of Ft. Worth jet operations................ -- 4,000 --
Settlement of shareholder lawsuit.................... -- 2,500 --
Settlement with manufacturer......................... -- -- (5,220)
Aircraft return provision............................ -- -- 1,004
-------- ------- -------
$(14,027) $33,343 $67,884
======== ======= =======
</TABLE>

In July 1997, WestAir received a proposal from UAL for the extension of
WestAir's code-sharing agreement that was due to expire on May 31, 1998. The
proposal contained certain material amendments to the existing code-sharing
agreement. The Company did not accept this proposal because it provided for
significant cost increases and did not include certain changes to the proposal
requested by the Company. Management continued to negotiate for improvements in
the proposal. On July 22, 1997, UAL awarded WestAir's eight Los Angeles contract
markets to SkyWest Airlines, effective October 1, 1997. UAL subsequently granted
additional pro rata markets to WestAir, sufficient to utilize the aircraft
previously serving the eight Los Angeles system contract markets. There was no
material cost of transition to these new pro rata markets, and the new pro rata
markets were attaining similar financial results as the discontinued contract
markets. The Company is in litigation to resolve UAL's unilateral termination of
WestAir's contract markets in the Los Angeles area (note 12).

In late November 1997, WestAir received written notice from UAL that
WestAir's code-sharing agreement would not be renewed. Subsequent to November
1997, management on repeated occasions sought a reconsideration of UAL's
decision and to renew the WestAir code-sharing agreement. At a meeting on
January 6, 1998, UAL confirmed that it would not reconsider renewing WestAir's
code-sharing agreement upon its expiration. WestAir had significant assets in
excess of its needs upon expiration of the agreement on May 31, 1998.
Accordingly, by resolution of the Board of Directors on January 10, 1998, the
Company recognized a loss provision to provide for the cost of discontinuation
of WestAir operations.

The $72.1 million provision recognized in fiscal 1997 provided for the
estimated loss on the retirement or sale of aircraft, parts and equipment which
were surplus to the needs of Mesa upon expiration and early termination of the
code-share agreements. In addition, the provision included an estimate for all
other anticipated costs of discontinuation of the WestAir, Denver and Pacific
Northwest operations. The provision consisted of an impairment charge of $26.3
million for the Denver intangibles; $39.5 million for costs to sell or retire
aircraft and related parts and equipment; and $6.3 million for severance and
other costs.

On January 22, 1998, Mesa received notice from UAL of the termination of
the Company's code-sharing agreement covering the Denver system, Pacific
Northwest and Los Angeles markets to be effective April 22, 1998. UAL also
terminated WestAir's markets in the Pacific Northwest as of April 22, 1998. Mesa
notified UAL that the Company considered the termination notice, although
improper, wrongful and arbitrary, to have been effective as of February 6, 1998,
15 days after issuance of the January 22, 1998 termination notice in accordance
with the termination provisions of the contract. All service to these markets
was discontinued by April 22, 1998. As a result of UAL's new code-sharing
partners for these markets not needing the Company's aircraft and equipment
associated with these operations, the Company recorded a $33.9 million loss
provision

43
<PAGE> 46
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in the quarter ended December 31, 1997, to provide for costs to dispose of or
redeploy certain aircraft, as well as other costs to shut down the Denver
system.

Termination of Mesa's and WestAir's code-sharing agreement with United
Airlines resulted in a surplus of 21 British Aerospace Jetstream 31 aircraft, 29
Embraer Brasilia aircraft, 39 1900D Beech aircraft and 11 Dash 8 aircraft, for a
total of 100 aircraft. The British Aerospace Jetstream 31 aircraft, the Embraer
aircraft and the Dash 8 aircraft are subject to long-term leases. Although the
surplus 1900D Beech aircraft are not specifically identified, the majority of
these aircraft are owned with an average net book value of approximately $3.3
million per aircraft.

The Company recognized a loss provision of approximately $4.0 million
during the quarter ended March 31, 1998, to provide for the expense of closing
the facilities associated with the Ft. Worth independent jet operation and
relocating the related aircraft.

The restructuring provisions and the activity in the accruals, related to
the UAL code-share agreements and the Ft. Worth operations, can be summarized as
follows:

<TABLE>
<CAPTION>
PROVISION
------------------------------------------
SEPTEMBER 30, DECEMBER 30, MARCH 31, TOTAL
1997 1997 1998 PROVISION
------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Aircraft and related parts.......... $39,500 $21,943 $ -- $ 61,443
Denver intangibles.................. 26,343 -- -- 26,343
Severance and other................. 6,257 12,000 -- 18,257
Ft. Worth operations................ -- -- 4,000 4,000
------- ------- ------ --------
$72,100 $33,943 $4,000 $110,043
======= ======= ====== ========
</TABLE>

<TABLE>
<CAPTION>
PROVISION BALANCE PROVISION BALANCE
TOTAL UTILIZED/ SEPTEMBER 30, UTILIZED/ SEPTEMBER 30,
PROVISION RELEASED 1998 RELEASED 1999
--------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Aircraft and related parts...... $ 61,443 $(34,172) $27,271 $(27,271) $ --
Denver intangibles.............. 26,343 (26,343) -- -- --
Severance and other............. 18,257 (11,423) 6,834 (6,008) 826
Ft. Worth operations............ 4,000 (3,723) 277 (277) --
-------- -------- ------- -------- ----
$110,043 $(75,661) $34,382 $(33,556) $826
======== ======== ======= ======== ====
</TABLE>

Mesa believes that the provisions remaining at September 30, 1999 will be
adequate to satisfy any remaining costs associated with the UAL Code Share
Agreement cancellations. Previously established reserves amounting to
approximately $14.0 million were considered to be excess and such amount is
reflected as a reduction in operating expenses in fiscal year 1999.

17. IMPAIRMENT OF LONG-LIVED ASSETS

At September 30, 1999, Mesa had approximately 30 surplus Beech 1900D
aircraft which Mesa intends to dispose of and which were determined to be
impaired during fiscal year 1999. Mesa's plan of disposition of these surplus
aircraft, as approved by the Board of Directors in September 1999, calls for
disposal of all 30 aircraft prior to September 30, 2000. Mesa has entered into a
brokerage agreement with Raytheon Aircraft Credit Corporation for disposition on
a part time basis or until specific routes are abandoned. All related routes are
expected to be abandoned prior to May 31, 2000 and management believes such
routes may be abandoned at the Company's discretion on 30 days notice.
Consequently, Mesa recorded an impairment charge in fiscal year 1999 of $20.6
million.

44
<PAGE> 47
MESA AIR GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Additionally, Mesa recognized an $8.3 million charge against the previously
recorded goodwill of the related east coast operations acquired in fiscal 1994
which have been deemed to have insufficient undiscounted cash flow to recover
the intangible asset.

18. RELATED PARTY TRANSACTIONS

19. SUBSEQUENT EVENTS

On November 4, 1999, Mesa settled various outstanding disputes with
Bombardier, Inc. Under terms of the settlement, Bombardier will pay to Mesa a
total of $8,500,000. To date, Bombardier has paid $7,100,000. For the portion of
the settlement attributable to BRAD's refusal to accept trade in EMB-120
aircraft, Mesa will recognize $2 million of other income in the quarter ended
December 31, 1999. The remainder of the settlement ($5.1 million) will be
recorded as a deferred purchase incentive, to be amortized over the remaining
terms of Mesa's CRJ aircraft leases.

During December 1999, the Company's Board of Directors authorized the
Company to repurchase up to ten percent of the outstanding shares of its Common
Stock. As of January 14, 2000, the Company has acquired 458,800 shares of Common
Stock for approximately $2,381,000.

45
<PAGE> 48

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

46
<PAGE> 49

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names and ages of the directors and
executive officers of Mesa and certain additional information:

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- --------
<S> <C> <C> <C>
Jonathan G. Ornstein...................... 42 Chairman of the Board, Director, 1998
President and Chief Executive Officer
Paul R. Madden............................ 73 Vice Chairman of the Board and Director 1997
Daniel J. Altobello....................... 59 Director 1998
Jack Braly................................ 58 Director 1993
Herbert A. Denton......................... 52 Director 1998
Ronald R. Fogleman........................ 57 Director 1998
Maurice A. Parker......................... 53 Director 1998
George Murnane III........................ 41 Director 1999
Larry L. Risley........................... 55 Chairman Emeritus and Director 1983
James E. Swigart.......................... 48 Director 1998
Michael J. Lotz(1)........................ 39 Chief Operating Officer --
Robert B. Stone(2)........................ 43 Chief Financial Officer and Treasurer --
Blaine M. Jones(3)........................ 44 Chief Financial Officer and Treasurer --
Andre H. Merrett.......................... 35 Vice President and General Counsel --
William P. Kostel......................... 36 Vice President of Planning --
Michael Ferverda.......................... 55 Senior Vice President of Flight --
Operations
George Lippemeier......................... 58 Vice President of Safety and Regulatory --
Compliance
Robert Moye............................... 54 Senior Vice President of Maintenance --
Greg Stephens............................. 35 Vice President of Customer Service --
Pete Hayes................................ 59 Vice President of Flight Training --
Mike Suckow............................... 41 Vice President of Systems Control --
</TABLE>

---------------
(1) Served as Chief Financial Officer and Treasurer from August 1999 to January
2000.

(2) Named Chief Financial Officer and Treasurer, January, 2000.

(3) Served as Chief Financial Officer and Treasurer until August, 1999.

Jonathan G. Ornstein, age 42, was appointed President and Chief Executive
Officer effective May 1, 1998. Mr. Ornstein was appointed to the Executive
Committee on March 13, 1998. He has also served as a member of the Compensation
Committee. Mr. Ornstein became a director on January 29, 1998. Mr. Ornstein
assumed the role of Chairman of the Board on June 9, 1999. Mr. Ornstein is the
controlling shareholder of Barlow Management, Inc., the general partner of
Barlow Partners II, L.P., an investment partnership. From April 1996 to his
joining Mesa as Chief Executive Officer, Mr. Ornstein served as President and
Chief Executive Officer and Chairman of Virgin Express S.A./N.V. (a European jet
carrier). From 1995 to April 1996, Mr. Ornstein served as Chief Executive
Officer of Virgin Express Holdings, plc. Mr. Ornstein joined Continental Express
Airlines, Inc., as President and Chief Executive Officer in July 1994, and in
November 1994, he assumed additional duties at Continental Airlines, Inc., as
Senior Vice President, Airport Services. Mr. Ornstein was employed by Mesa from
1988 to July 1994 where his positions included President

47
<PAGE> 50

of Mesa's WestAir Holding, Inc., subsidiary and Executive Vice President. Mr.
Ornstein's employment agreement provides that the Company will use its
good-faith efforts to cause the Board to include Mr. Ornstein among its nominees
and to appoint him as Chief Executive Officer through March 31, 2001. From March
1985 to December 1987, Mr. Ornstein was a securities broker.

Paul R. Madden, age 73, has served as a director since April 1997, and
served as Chairman of the Board from February 3, 1998 to June 8, 1999. On June
8, 1999 he was appointed Vice Chairman of the Board. Mr. Madden has served as
Chairman of the Executive Committee since Feb 3, 1998 and as a member of the
Audit Committee since June 8, 1999. Mr. Madden is currently Of Counsel to the
Phoenix law firm of Gallagher & Kennedy and specializes in the corporate and
securities areas. From June 1994 through November 1997, Mr. Madden was a partner
in the Chicago firm of Chapman and Cutler serving in its Phoenix office. Mr.
Madden was a partner in the Phoenix law firm of Beus, Gilbert & Morrill from
January 1991 until June 1994. Prior to joining the Board, Mr. Madden served as
securities counsel to Mesa for approximately nine years.

Daniel J. Altobello, age 59, has been a director of Mesa since January 29,
1998, and has served as Chairman of the Compensation and Nominating Committees.
Since September 1995, Mr. Altobello has been the Chairman of Onex Food Services,
Inc., the parent corporation of Caterair International, Inc., and LSG/ SKY
Chefs, and the largest airline catering company in the world. From 1989 to 1995,
Mr. Altobello served as Chairman, President and Chief Executive Officer of
Caterair International Corporation. From 1979 to 1989, he held various
managerial position with the food service management and in-flight catering
divisions of Marriott Corporation, including Executive Vice President of
Marriott Corporation and President, Marriott Airport Operations Group. Mr.
Altobello began his management career at Georgetown University, including
service as Vice President, Administration Service. He is a member of the board
of directors of American Management Systems, Inc., Colorado Prime Foods, Care
First, Inc., Care First of Maryland, Inc., Mesa Air Group, Inc., World Airways,
Inc., First Union Realty Trust, Atlantic Aviation Holdings and SodexhoMarriott,
Inc. and a trustee of Loyola Foundation, Inc., Mt. Holyoke College, Suburban
Hospital Foundation, Inc., and the Woodstock Theological Center at Georgetown
University.

Jack Braly, age 58, has served as a director of Mesa since December 6,
1993, as a member and Chairman of its Audit Committee since March 1994, as a
member of Mesa's Compensation Committee since December 6, 1993, as a member of
its Nominating Committee since April 27, 1998. Since August 5, 1996, Mr. Braly
has served as the President, Chief Executive Officer and a member of the Board
of Directors of Sino Swearingen Aircraft Company, a private aircraft
manufacturer. From June 1994 to August 5, 1996, Mr. Braly was an officer of the
North American Aircraft Modification division of Rockwell International. He
served as Vice President Aircraft Manufacturing from June 1994 to October 1994,
as Executive Vice President from October 1994 to October 1995 and was Vice
President and General Manager from October 1995 to August 5, 1996. Before
joining Rockwell International, Mr. Braly served as a consultant to various
aircraft manufacturers and regional airlines from August 1993 until June 1994.
Prior thereto, Mr. Braly was President of Beech Aircraft Corporation from March
1991 until July 1993.

Herbert A. Denton, age 52, has been a director since January 29, 1998, and
has been a member of Mesa's Executive Committee since February 3, 1998. Mr.
Denton is the President of Providence Capital Inc., an investment-banking firm
he co-founded in 1991. He also serves on the Board of Directors of Chic by
H.I.S., Inc., an apparel manufacturing company, where he is the Chairman of the
Compensation Committee.

General Ronald R. Fogleman, U.S.A.F., retired, age 57, has been a director
since January 29, 1998. General Fogleman has been a member of Mesa's Audit
Committee since February 3, 1998, its Executive Committee since March 13, 1998,
and its Nominating Committee since April 27, 1998. In September 1997, he retired
from the Air Force with the rank of General. He served as Chief of Staff of the
United States Air Force from 1994 until 1997 and as Commander-in-Chief of the
United States Transportation Command from 1992 until 1994. General Fogleman
currently serves on the Board of Directors of North American Airlines, a feeder
airline for El Al; Southern Air, a private air transportation company; Rolls
Royce of North America; and World Airways.

48
<PAGE> 51

Maurice A. Parker, age 53, has served as a director since November 18,
1998, and has been a member of the Compensation Committee since January 22,
1999. From 1978 to January 1997, Mr. Parker served as a Federal Mediator, Labor
Mediation, for the National Mediation Board of the United States government.

George Murnane, III, age 41, has served as a director since June 8, 1999,
and has been a member of the Audit Committee since June 8, 1999. Mr. Murnane is
the President of Barlow Management, Inc., general partner of Barlow Partners II,
L.P. Mr. Murnane is also currently the Executive Vice President and Chief
Operating Officer and serves on the Board of Directors of International Airlines
Support Group, Inc., a leading redistributor of aftermarket commercial aircraft
spare parts and lessor and trader of commercial aircraft and engines. From 1995
to 1996, Mr. Murnane served as Executive Vice President and Chief Operating
Officer of Atlas Air, Inc., an air cargo company. From 1986 to 1995, he was an
investment banker with the New York investment-banking firm of Merrill Lynch &
Co., most recently as a Director in the firm's Transportation Group.

Larry L. Risley, age 55, is Chairman Emeritus of the Board of Directors of
Mesa and presently serves a Manager of Special Projects. He formerly served as
Chairman of the Board from the incorporation of Mesa until February 3, 1998, and
as Chief Executive Officer from the incorporation of Mesa until April 30, 1998.
He served as President of Mesa from 1983 through January 13, 1995. Mr. Risley's
employment agreement with Mesa provides that the directors will continue to vote
to nominate Mr. Risley and to use their best efforts to cause his election to
the Board through the fiscal year ending September 30, 2003.

James Swigart, age 48 has served as a director since January 29, 1998. Mr.
Swigart served as Vice Chairman until June 8, 1999. Mr. Swigart was a member of
the Audit Committee from February 3, 1998 to June 8, 1999. Additionally, Mr.
Swigart has been a member of the Nominating Committee since April 27, 1998. Mr.
Swigart is a minority shareholder of Barlow Management, Inc., the general
partner of Barlow Partners II, L.P. Mr. Swigart is the former President and
Chief Executive of Virgin Express, S.A./N.V., a low-cost European commuter
airline. He was appointed a member of the Board of Directors of Virgin Express
Holdings, plc on May 22, 1998. From December 1995 to April 1998, Mr. Swigart
served as the Chief Financial Officer of Virgin Express Holdings, plc. From
April 1996 to April 1998, he served as Chief Financial Officer of Virgin
Express, S.A./N.V. Mr. Swigart served as the Chief Financial Officer of
Continental Express Airlines, Inc., from July 1994 to November 1995 and
President and controlling shareholder of Hydralign, a manufacturing company for
the paper and plastics industries, from September 1993 to July 1994. From 1986
until August 1993, Mr. Swigart served as the Senior Vice President of the
Transportation Group at Lehman Brothers. He previously served as a member of the
Board of the Company from December 6, 1993, until August 10, 1994.

2. EXECUTIVE OFFICERS

Michael J. Lotz, age 39, joined Mesa in July 1998 to facilitate Mesa's
Restructuring efforts. In August 1999, Mr. Lotz became Mesa's Chief Financial
Officer and in January 2000 returned to the position of Chief Operating Officer.
Prior to joining Mesa, Mr. Lotz served as Chief Operating Officer of Virgin
Express, S.A./N.V., positions he held from October 1996 to June 1998. From
September 1986 to October 1996, Mr. Lotz served in various capacities at
Continental Airlines, Inc., including Manager of Systems and Procedures,
Director of Finance and Administration, Senior Director of Contract Services,
Senior Director of Purchasing, and Vice President of Airport Operations,
Properties and Facilities at Continental Express. Prior to joining Continental,
Mr. Lotz served as Controller of New York Air from 1985 to 1986 and as Senior
Corporate Accountant and Assistant Controller for John Brown Engineering and
Construction from 1983 to 1985.

Robert B. Stone, age 43, joined Mesa in January 2000 as Chief Financial
Officer and Treasurer. Prior to Joining Mesa, Mr. Stone had a twenty-year career
with the Boeing Company, most recently as Vice President, Financial Planning and
Analysis. He also held a series of executive positions including Assistant
Treasurer and Senior Director, Customer Financing. Mr. Stone obtained his MBA
from Pacific Lutheran University and his Bachelor of Arts in Business
Administration at the University of Washington.

49
<PAGE> 52

Andre H. Merrett, age 35, Vice President and General Counsel, joined Mesa
in August 1999. Prior to joining Mesa, Mr. Merrett was a litigation associate
with the firm of Squire, Sanders & Dempsey L.L.P., in the firm's Phoenix office.
Mr. Merrett joined Squire, Sanders, & Dempsey in October 1998. At Squire,
Sanders & Dempsey, Mr. Merrett devoted the majority of his practice to various
Mesa legal matters. Mr. Merrett was a litigation associate with the Des Moines,
Iowa firm of Nyemaster, Goode, Voigts, West, Hansell & O'Brien from May 1994
until joining Squire, Sanders, & Dempsey. Mr. Merrett is a 1994 graduate of the
University of Iowa College of Law.

William P. Kostel, age 36, Vice President of Planning, joined Mesa in
February 1999. Prior to joining Mesa, Mr. Kostel spent nine years in the employ
of American Airlines where he last held the position of Director of Fleet
Planning at American Eagle. Mr. Kostel was also a member of the American
Airlines' Pricing and Yield Management Department. Mr. Kostel obtained his MBA
from Texas Christian University and his Bachelor of Science in Engineering from
Iowa State University.

Michael Ferverda, age 55, Senior Vice President of Flight Operations,
joined Mesa in September 1990. Mr. Ferverda has served Mesa in several
capacities including pilot, Flight Instructor/Check Airman, Assistant Chief
Pilot, FAA Designated Examiner, FAA Director of Operations and Divisional Vice
President. Mr. Ferverda was a pilot with Eastern Airlines from 1973 to 1989.
Prior to joining Eastern Airlines, Mr. Ferverda served as an Aviator in the
United States Navy. Mr. Ferverda is a graduate of Indiana University.

George Lippemeier, age 58, Vice President of Safety and Regulatory
Compliance joined Mesa in September 1998. Mr. Lippemeier served as the Director
of Quality Assurance at Virgin Express S.A./N.V. from April 1997 to July 1998.
Mr. Lippemeier held several positions with Mesa from November 1989 to March 1997
including, Director of Operations, Vice President of Flight
Operations -- WestAir Airlines, and President -- Desert Sun Airlines. Prior to
joining Mesa in 1989, Mr. Lippemeier spent 25 years in the United States Air
Force as a pilot, serving in numerous management and command positions.

Robert Moye, age 54, Senior Vice President of Maintenance, joined Mesa in
January 1999. Prior to joining Mesa, Mr. Moye spent 33 years in the aviation
industry serving in various capacities with Western Airlines, Eastern Airlines,
Mark Air, Polaris Aircraft Leasing and Pegasus Capital. Mr. Moye attended San
Fernando State College and is a 1976 graduate of the Mid Valley College of Law.

Greg Stephens, age 35, President, Air Midwest, joined Mesa in September,
1998. Prior to joining Mesa, Mr. Stephens was employed by AirMidwest, Inc., for
13 years where he served in various capacities including, Ramp Agent, Freight
Agent/Customer Service Agent, Operations Agent, Director of Systems Control,
Director of Pricing and Planning, Director of Safety and Vice President and
General Manager.

ITEM 11. EXECUTIVE COMPENSATION

EMPLOYMENT AGREEMENTS

Employment Agreements have been entered into with the Chief Executive
Officer, Chief Financial Officer and Vice President and General Counsel.

50
<PAGE> 53

COMPENSATION SUMMARY OF EXECUTIVE OFFICERS

The following table sets forth certain compensation paid or accrued by Mesa
during the fiscal year ended September 30, 1999, to the Chief Executive Officer
and the four other most highly compensated executive officers of Mesa whose
total annual salary and bonuses exceeded $100,000.

<TABLE>
<CAPTION>
OTHER
ANNUAL ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)
--------------------------- ---- ------- ------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan G. Ornstein........... 1999 200,000 5,128 150,000
Chief Executive Officer 1998 84,615 1,000,000
Larry Risley................... 1999 349,038
Manager of Special Projects 1998 318,315
Archille Paquette.............. 1999 132,692 75,054 2,353
President, AirMidwest, Inc. 1998 130,000 65,000 60,000
Robert Moye.................... 1999 69,808 35,000
Sr. VP of Maintenance 1998 100,000 60,000
Michael J. Lotz................ 1999 122,654 90,054 385 300,000
Chief Financial Officer
Blaine Jones................... 1999 84,615 90,000 4,423 150,000
Chief Financial Officer(2) 1998 46,154 75,000
</TABLE>

---------------
(1) These amounts represent both vested and non-vested Mesa contributions to the
individual named executive officer's 401(k) plan. Under Mesa's 401(k) plan,
employees may contribute up to 15% of their annual salary and bonus up to a
specified maximum. Mesa currently makes matching contributions equal to 50%
of employees' contribution (including officers) with a cap of 10% of the
employees' annual compensation. Contributions by Mesa to the 401(k) plans
for the year ended September 30, 1999 were $1,485,618.

(2) Mr. Jones ceased to be employed by the Company as of August 13, 1999.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS/SARS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OF BASE OPTION TERM
OPTIONS/SARS IN FISCAL PRICE EXPIRATION -----------------------------
NAME GRANTED(#) YEAR ($/SH)(3) DATE 5%(4) 10%(4)
---- ------------ ------------ --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan G.
Ornstein(1)............ 150,000 11.5% 6.19 04/01/09 $ 562,841 $1,462,308
Michael J. Lotz(2),
(3).................... 300,000 23.0% 6.00 12/28/08 $1,055,725 $2,721,997
Larry Risley............. 5,486 0.4% 6.19 04/01/04 $ 21,962 $ 57,944
Robert Moye(2)........... 30,000 2.3% 6.19 04/01/09 $ 112,568 $ 292,461
Archille Paquette........ 60,000 4.6% 5.00 10/21/08 $ 194,102 $ 512,112
Blaine Jones(5).......... 75,000 5.7% 6.19 04/01/09 $ 300,252 $ 792,173
</TABLE>

---------------
(1) The options to Mr. Ornstein were granted under 1998 Key Officer Stock Option
Plan and are exercisable in annual 1/3 increments with 1/3 vesting
immediately on the grant date of April 1, 1999.

(2) The options to Messrs. Lotz and Moye were granted under 1st Amendment to the
Restated & Amended Mesa Airline Stock Option Plan. The shares issued under
the Mesa Airline Stock Option Plan vest in annual 1/3 increments beginning
one year after the date of the grant.

(3) The exercise price per share of the options granted of $6.00 per share was
less than the fair market value of the shares of Mesa Common Stock of $6.50
per share on the date of the grant.

51
<PAGE> 54

(4) Potential realizable values shown above represent the potential gains based
upon annual compound stock price appreciation of 5% and 10% from September
30, 1999 through the full option term. The actual value realized, if any, on
stock option exercises will be dependent upon overall market conditions and
the future performance of Mesa and Mesa Common Stock. There is no assurance
that the actual value realized will approximate the amounts reflected in
this table.

(5) Mr. Jones ceased to be employed by the Company as of August 13, 1999 and
these options expired 90 days thereafter.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ----------- -------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Jonathan G. Ornstein... 0 0 729,667/433,333 $0/$0
Michael J. Lotz........ 0 0 0/300,000 $0/$0
Larry Risley........... 0 0 550,000/50,000 $25,000/$12,500
Robert Moye............ 0 0 0/60,000 $0/$0
Archille Paquette...... 0 0 109,333/68,333 $0/$0
Blaine Jones........... 0 0 125,000/100,000 $0/$0
</TABLE>

---------------
(1) Based on the closing price of Mesa common stock on September 30, 1999 of
$6.125 per share, as reported by the NASDAQ National Market.

COMPENSATION OF DIRECTORS

Each non-employee director receives a salary of $10,000 per year, along
with the payment of $1,000 per meeting attended in person; $500 for each
committee meeting attended in person; $500 for each telephone Board meeting
attended and reimbursement of all expenses associated with attending committee
or Board of Directors meetings. In addition, each non-employee director was
granted 3,000 options in fiscal 1999 pursuant to a stock option plan which
automatically grants 3,000 options to each non-employee director on an annual
basis.

Each non-employee director also participates in Mesa's Outside Director's
Stock Option Plan (the "Plan"). Under the Plan, each non-employee director
serving on the board as of April 1, 1998 received (i) 3,000 options to purchase
3,000 shares of Common Stock, no par value, plus (ii) the number of options to
purchase Common Stock equivalent to a cash value of $13,000 as calculated
pursuant to the Black-Scholes valuation method at a risk-free rate of a ten year
zero coupon bond (collectively referred to herein as the "Formula Amount")
effective as of April 1, 1998. Each non-employee director receives an additional
Formula Amount on each April 1st thereafter or, if at any time there is an
insufficient number of options to make the full Formula Amount allocation, a
pro-rata amount of the options available under the Plan shall be granted to each
non-employee director.

Any non-employee director who was not serving as a director as of April 1,
1998, upon the first business day after being appointed as a director, is
granted a pro-rata portion of the Formula Amount ("Pro Rata Options") and
options are granted to such director pursuant to the Plan on each succeeding
April 1st in the Formula Amount. The amount of Pro Rata Options granted to each
new non-employee director are calculated by dividing the number of days prior to
April 1st by the number of days in the calendar year and multiplying the
quotient by the Formula Amount. Any non-employee director who is serving as
Chairman of the Board of Directors receives an annual grant of the number of
options equal to a value of $10,000 calculated in accordance with the
Black-Scholes method as specified above (the "Chairman's Options") on each April
1st, which is in addition to any other options granted to him as director.

Each director who is not an employee of Mesa also receives free travel on
Mesa for himself and certain family members and through arrangements with
certain major air carriers receives free or reduced-fare travel

52
<PAGE> 55

on those carriers at no cost to Mesa. Mesa believes that the directors' use of
free air travel is "de minimis" and therefore did not maintain any records of
their travel during fiscal 1999.

COMPENSATION COMMITTEE INTERLOCKS

During the fiscal year ended September 30, 1998, the Compensation Committee
consisted of Dan Altobello, Jack Braly, Ronald Fogleman, James Swigart and
Maurice Parker. None of the members of the committee held any executive officer
position or other employment with Mesa Airlines, Inc. prior to or during such
service.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of Mesa's Common Stock as of December 10, 1999 by all directors, by
each person who is known by Mesa to be the beneficial owner of more than five
percent of the outstanding Common Stock, by each executive officer named in the
Summary Compensation Table and by all directors and executive officers as a
group.

The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission (the
"Commission"), and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has the sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days of December 10, 1999 through the exercise of any stock
option or other right. Unless otherwise indicated, each person has sole
investment and voting power (or shares such powers with his or her spouse) with
respect to the shares set forth in the following table and the address of the
listed beneficial owner is that of Mesa Air. In certain instances, the number of
shares listed includes, in addition to shares owned directly, shares held by the
spouse or children of the person, or by a trust or estate of which the person is
a trustee or an executor or in which the person may have a beneficial interest.
The table that follows is based upon information supplied by executive officers,
directors and principal stockholders and Schedules 13D and 13G filed with the
SEC.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
------------------------
NAME AND ADDRESS OF OPTIONS/
BENEFICIAL OWNER SHARES WARRANTS(1) TOTAL(1) PERCENT(1)
------------------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Larry L. Risley.............................. 516,380 561,258 1,077,638 3.10
Jack Braly................................... 24,258 24,258 *
Paul R. Madden............................... 5,000 28,302 33,302 *
Jonathan G. Ornstein(2)...................... 2,291,223 724,860 3,016,083 8.64
James E. Swigart(3).......................... 2,136,926 40,010 2,176,936 6.36
Daniel J. Altobello.......................... 1,000 24,258 25,258 *
Herbert A. Denton(4)......................... 416,552 24,258 440,810 1.29
Ronald R. Fogleman........................... 200 24,258 24,458 *
George Murnane III........................... 43,837 21,021 64,858 *
Maurice Parker............................... 7,297 7,297 *
Michael J. Lotz.............................. 100,000 100,000 *
Archille Paquette............................ 111,667 111,667 *
Blaine Jones................................. 264 264 *
Bob Moye..................................... *
Barlow Partners II, LP(5).................... 2,099,121 2,099,121 6.14
1954 Airport Rd., Suite 200
Atlanta, GA 30341
Wisconsin Investment Board................... 3,190,000 3,190,000 9.33
P.O. Box 7842
Madison, Wisconsin 53702
</TABLE>

53
<PAGE> 56

---------------
(1) Includes options and warrants exercisable on December 10, 1999 or within 60
days thereafter. Holdings of less than 1% are indicated by "*".

(2) Includes 2,099,121 shares of Common Stock held by Barlow Partners, L.P.,
Barlow Partners II, L.P., Barlow Management, Inc. or any one of them
individually or jointly. Mr. Ornstein is a limited partner in Barlow
Partners, L.P. and/or Barlow Partners II, L.P., and is a shareholder of
Barlow Management, Inc. (which is the general partner of Barlow Partners II,
L.P.). Mr. Ornstein disclaims beneficial ownership of such shares to the
extent exceeding his proportionate interest in such entities.

(3) Includes 2,099,121 shares of Common Stock held by Barlow Partners, L.P.,
Barlow Partners II, L.P., Barlow Management, Inc. or any one of them
individually or jointly. Mr. Swigart is a limited partner in Barlow
Partners, L.P. and/or Barlow Partners II, L.P., and is a shareholder of
Barlow Management, Inc. (which is the general partner of Barlow Partners II,
L.P.). Mr. Swigart disclaims beneficial ownership of such shares to the
extent exceeding his proportionate interest in such entities

(4) Includes shares of stock held in the name of Providence Capital, Inc.,
Providence Investors LLC, US Value Investment Company, PLC and Providence
Jet, LLC. As such, he claims beneficial ownership of the shares held by
these entities to the extent of his proportional interest therein.

(5) Includes shares of Common Stock held certain affiliated entities (including
Barlow Partners, L.P. and/or Barlow Management, Inc.), as to which Barlow
Partners II, L.P. disclaims beneficial ownership.

(6) Filed by the Equitable Companies Incorporated in its capacity as a parent
holding company with respect to the holdings of Alliance Capital Management
L.P.

(7) Acquired solely for investment purposes on behalf of client discretionary
investment advisory accounts.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In August 1998, CCAIR entered into a letter agreement with Barlow Partners,
L.P. ("Barlow") pursuant to which Barlow agreed to act as CCAIR's exclusive
financial advisor with respect to possible business combinations involving
CCAIR. Under the terms of that agreement, Barlow received a fee from CCAIR equal
to two percent (2%) of the aggregate consideration paid by Mesa upon the closing
of the merger transaction ($1.1 million). Jonathan Ornstein, Chairman of the
Board and Chief Executive Officer of Mesa, and James Swigart, member of the
Board of Directors of Mesa, are partners in Barlow. George Murnane III, member
of the CCAIR Board of Directors, is also a partner in Barlow. Upon the
completion of the merger, Mr. Murnane became a member of the Mesa Board of
Directors.

On September 9, 1998, Mesa Airlines, Inc. entered into an agreement with
International Airline Support Group ("IASG") whereby Mesa would consign certain
surplus airplane parts to IASG to sell on the open market. IASG in turn would
submit proceeds to Mesa less a market-based fee. George Murnane, III, a member
of the Board of Directors of Mesa, is a member of executive management and the
Board of Directors of IASG. During 1999, Mesa paid IASG approximately $400,000.

54
<PAGE> 57

In February 1999, Mesa entered into an agreement with Barlow Partners, LP
("Barlow") whereby Barlow would provide financial advisory services related to
aircraft leases, mergers and acquisitions, and route profitability. During
fiscal 1999, fees totaling $120,000 were paid to Barlow. Jonathan Ornstein,
Chairman of the Board and Chief Executive Officer of Mesa, James Swigart and
George Murnane III, members of the Board of Directors of Mesa, are partners in
Barlow.

Mesa will enter into future business arrangements with related parties only
where such arrangements are approved by a majority of disinterested directors
and are on terms at least as favorable as available from unaffiliated third
parties.

55
<PAGE> 58

PART IV

ITEM 14. EXHIBITS, SCHEDULES AND REPORTS ON FORM 8-K

(A) Documents filed as part of this report:

1. Reference is made to consolidated financial statement schedules in
item 8 hereof.

2. Reports on Form 8-K
None

3. Exhibits

The following exhibits are either filed as part of this report or are
incorporated herein by reference from documents previously filed with the
Securities and Exchange Commission:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
2.1 Plan and Agreement of Merger of Mesa Air Filed as Exhibit 2.1 to Registrant's Form
Group, Inc. into Mesa Holding, Inc. dated 10-K for the fiscal year ended September
September 16, 1996 30, 1996, incorporated herein by
reference
2.2 Merger Agreement, dated as of January 28, Filed as Annex A to the Registrant's Form
1998 between Mesa Air Group, Inc., Mesa S-4 Registration Statement, Registration
Merger Corporation and CCAIR, Inc. No. 333-76591, incorporated herein by
reference
3.1 Articles of Incorporation of Mesa Air Filed as Exhibit 3.1 to Registrant's Form
Holdings, Inc. dated May 28, 1996 10-K for the fiscal year ended September
30, 1996, incorporated herein by
reference
3.2 Bylaws of Mesa Air Group, Inc., as Filed as Exhibit 3.2 to Registrant's Form
amended 10-K for the fiscal year ended September
30, 1996, incorporated herein by
reference
4.1 Form of Common Stock certificate Filed as Exhibit 4.5 to Amendment No. 1
to Registrant's Form S-18, Registration
No. 33-11765 filed March 6, 1987,
incorporated herein by reference
4.2 Form of Common Stock certificate (issued Filed as Exhibit 4.8 to Form S-1,
after November 12, 1990) Registration No. 33-35556 effective
December 6, 1990, incorporated herein by
reference
10.1 Form of Employee Non-Incentive Stock Filed as Exhibit 4.12 to Registrant's
Option Plan, dated as of June 2, 1992 Form 10-K for the fiscal year ended
September 30, 1992, Commission File No.
33-15495, incorporated herein by
reference
10.2 Form of Non-Incentive Stock Option issued Filed as Exhibit 4.13 to Registrant's
under Mesa Airlines, Inc. Employee Form 10-K for the fiscal year ended
Non-Incentive Stock Option Plan, dated as September 30, 1992, Commission File No.
of June 2, 1992 33-15495, incorporated herein by
reference
10.3 Form of Mesa Airlines, Inc. Outside Filed as Exhibits 4.1, 4.2 and 4.3 to
Directors Stock Option Plan, dated as of Registration No. 33-09395 effective
March 9, 1993 August 1, 1996
10.4 Form of Stock Option issued under Mesa Filed as Exhibit 4.4 to Registration No.
Airlines, Inc. Outside Director's Stock 33-09395 effective August 1, 1996
Option Plan, dated as of March 9, 1993
</TABLE>

56
<PAGE> 59

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.5 Form of Mesa Airlines, Inc. Additional Filed as Exhibit 4.5 to Registration No.
Outside Directors Stock Option Plan dated 33-09395 effective August 1, 1996
as of December 9, 1994
10.6 Form of Non-Qualified Stock Option Issued Filed as Exhibit 4.6 to Registration No.
Under Mesa Airlines, Inc. Additional 33-09395 effective August 1, 1996
Outside Directors' Stock Option Plan
10.7 Form of Mesa Air Group, Inc. Restated and Filed as Exhibit 4.1 to Registration No.
Amended Employee Stock Option Plan dated 33-02791 effective April 24, 1996
April 23, 1996
10.8 Form of Non-Qualified Stock Option issued Filed as Exhibit 4.2 to Registration No.
under Mesa Air Group, Inc. Restated and 33-02791 effective April 24, 1996
Amended Employee Stock Option Plan dated
April 23, 1996
10.9 Form of Qualified Stock Option issued Filed as Exhibit 4.3 to Registration No.
under Mesa Air Group, Inc. Restated and 33-02791 effective April 24, 1996
Amended Employee Stock Option Plan dated
April 23, 1996
10.10 Mesa Air Group, Inc. Key Officer Stock Filed as Appendix A to Registrant's
Option Plan Definitive Proxy Statement, dated June
19, 1998
10.11 Outside Directors' Stock Option Plan Filed as Appendix B to Registrant's
Definitive Proxy Statement, dated June
19, 1998
10.12 Employee Stock Option Plan, as amended Filed as Appendix C to Registrant's
Definitive Proxy Statement, dated June
19, 1998
10.13 Agreement between Beech Aircraft Filed as Exhibit 10.30 to Form S-1,
Corporation and Mesa Airlines, Inc., Registration No. 33-35556 effective
dated April 30, 1990 December 6, 1990, incorporated herein by
reference
10.14 Sublease Agreement between Air Midwest, Filed as Exhibit 10.32.1 to Form S-1,
Inc. and Mesa Airlines, Inc., dated April Registration No. 33-35556 effective
27, 1990 for Embraer Brasilia aircraft December 6, 1990, incorporated herein by
120.180 reference
10.15 Agreement between Air Midwest, Inc. and Filed as Exhibit 10.32.3 to Form S-1,
Mesa Airlines, Inc., dated February 27, Registration No. 33-35556 effective
1990, for purchase of four Embraer December 6, 1990, incorporated herein by
Brasilia aircraft reference
10.16 Letter Agreement between McDonnell Filed as Exhibit 10.32.4 to Form S-1,
Douglas Finance Corporation, Air Midwest, Registration No. 33-35556 effective
Inc. and Mesa Airlines, Inc., dated March December 6, 1990, incorporated herein by
19, 1990, as amended, regarding lease and reference
sublease of four Embraer Brasilia
aircraft
10.17 Sublease Agreement between Air Midwest Filed as Exhibit 10.32.5 to Form S-1,
Inc. and Mesa Airlines, Inc., dated July Registration No. 33-35556 effective
26, 1990, for Embraer Brasilia aircraft December 6, 1990, incorporated herein by
120.193 reference
</TABLE>

57
<PAGE> 60

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.18 Lease Agreement between McDonnell Douglas Filed as Exhibit 10.32.6 to Form S-1,
Finance Corporation and Mesa Airlines, Registration No. 33-35556 effective
Inc., dated July 26, 1990, for Embraer December 6, 1990, incorporated herein by
Brasilia aircraft 120.193 reference
10.19 Sublease Agreement between Air Midwest Filed as Exhibit 10.32.7 to Form S-1,
Inc. and Mesa Airlines, Inc., dated Registration No. 33-35556 effective
September 26, 1990, for Embraer Brasilia December 6, 1990, incorporated herein by
aircraft 120.203 reference
10.20 Lease Agreement between McDonnell Douglas Filed as Exhibit 10.32.8 to Form S-1,
Finance Corporation and Mesa Airlines, Registration No. 33-35556 effective
Inc., dated September 26, 1990, for December 6, 1990, incorporated herein by
Embraer Brasilia aircraft 120.203 reference
10.21 Form of Directors' and Officers' Filed as Exhibit 10.41 to Form S-1,
Indemnification Agreement Registration No. 33-35556 effective
December 6, 1990, incorporated herein by
reference
10.22 Agreement Relating to the Settlement of Filed as Exhibit 10.45 to Form S-1,
Interline Accounts through Airlines Registration No. 33-35556 effective
Clearing House, Inc., between Airlines December 6, 1990, incorporated herein by
Clearing House, Inc. and Mesa Airlines, reference
Inc., dated September 2, 1981
10.23 Agreement between Beech Aircraft Filed as Exhibit 10.42 to Form 10-K for
Corporation and Mesa Airlines, Inc., fiscal year ended September 30, 1991,
dated September 18, 1991 Commission File No. 0-15495, incorporated
herein by reference
10.24 Agreement between USAirways, Inc. and Air Filed as Exhibit 10.43 to Form 10-K for
Midwest, Inc. fiscal year ended September 30, 1991,
Commission File No. 0-15495, incorporated
herein by reference
10.25 Agreement between USAirways, Inc. and Filed as Exhibit 10.44 to Form 10-K for
FloridaGulf Airlines, Inc. fiscal year ended September 30, 1991,
Commission File No. 0-15495, incorporated
herein by reference
10.26 Sublease agreement between Trans States Filed as Exhibit 10.45 to Form 10-K for
Airlines, Inc. and Air Midwest, Inc. fiscal year ended September 30, 1992,
Commission File No. 0-15495, incorporated
herein by reference
10.27 Agreement between Beech Aircraft Filed as Exhibit 10.47 to Form 10-K for
Corporation, Beech Acceptance fiscal year ended September 30, 1992,
Corporation, Inc. and Mesa Airlines, Commission File No. 0-15495, incorporated
Inc., dated August 21, 1992 herein by reference
10.28 Agreement between America West Airlines, Filed as Exhibit 10.48 to Form 10-K for
Inc. and Mesa Airlines, Inc. fiscal year ended September 30, 1992,
Commission File No. 0-15495, incorporated
herein by reference
</TABLE>

58
<PAGE> 61

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.29 Plan and Agreement to Merge between Mesa Filed as Exhibit A to Form S-4
Airlines, Inc., Mesa Acquisition Registration No. 33-45638, effective
Corporation and WestAir Holding, Inc., April 17, 1992, incorporated herein by
dated February 7, 1992. reference
10.30 Certificate of Public Convenience and Filed as Exhibit 10.1(a) to WestAir
Necessity for WestAir Commuter Airlines, Holding, Inc.'s Registration Statement on
Inc. Form S-1, Commission File No. 33-24316,
incorporated herein by reference
10.31 Original Agreement to Lease dated as of Filed as Exhibit 10.44 to WestAir
April 27, 1987 between NPA, Inc. ("NPA") Holding, Inc.'s Registration Statement on
and British Aerospace, Inc. ("BAe") with Form S-1, Commission File No. 33-24316,
a Letter to FG Holdings, Inc. ("FGH") incorporated herein by reference
dated March 11, 1988 and Amendment No. 1
to Agreement to Lease dated as of March
3, 1988 between BAe and FGH
10.32 Side Letter Agreement to NPA from JACO Filed as Exhibit 10.48 to WestAir
dated June 4, 1987 Holding, Inc.'s Registration Statement on
Form S-1, Commission File No. 33-24316,
incorporated herein by reference
10.33 Promissory Note to Textron for spare Filed as Exhibit 10.80 to WestAir
parts as executed by WestAir, dated Holding, Inc.'s Form 10-K dated December
December 30, 1988 31, 1988, Commission File No. 33-24316,
incorporated herein by reference
10.34 Amended and Restated Stock Purchase Filed as Exhibit 10.42(a) to WestAir
Agreement, dated September 30, 1991 among Holding, Inc.'s Form 10-K for the year
WestAir Holding, Inc., WestAir Commuter ended December 31, 1991, Commission File
Airlines, Inc. and Atlantic Coast No. 33-24316, incorporated herein by
Airlines, Inc., relating to the sale of reference
the Atlantic Coast division of WestAir
Commuter Airlines, Inc.
10.35 Agreement of Purchase and Sales of Assets Filed as Exhibit 10.90 to Mesa Airlines,
by and among Crown Airways, Inc., Phillip Inc. Form 10-K for the year ended
R. Burnaman, A. J. Beiga and Mesa September 30, 1994, Commission File No.
Airlines, Inc., dated as of December 16, 0-15495
1993
10.36 Supplemental Agreement No. 9/03/94 Filed as Exhibit 10.66 to Mesa Airlines,
Beechcraft 1900 D Airliner Acquisition Inc. Form 10-K for the year ended
Master Agreement between Mesa Airlines, September 30, 1994, Commission File No.
Inc., Beech Aircraft Corporation and 0-15495
Beech Acceptance Corporation, Inc., dated
as of September 23, 1994
10.37 Form of Lease Agreement between Beech Filed as Exhibit 10.67 to Mesa Airlines,
Acceptance Corporation, Inc. and Mesa Inc. Form 10-K for the year ended
Airlines, Inc., negotiated September 30, September 30, 1994, Commission File No.
1994 for all prospective 1900 D Airliner 0-15495
leases.
10.38 Asset Purchase Agreement dated July 29, Filed as Exhibit 10.68 to Mesa Airlines,
1994 among Pennsylvania Commuter Inc. Form 10-K for the year ended
Airlines, Inc., d.b.a. Allegheny Commuter September 30, 1994, Commission File No.
Airlines, USAirways Leasing and Services, 0-15495
Inc., and Mesa Airlines, Inc.
</TABLE>

59
<PAGE> 62

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.39 Letter Agreement in Principle dated as of Filed as Exhibit 10.69 to Mesa Airlines,
October 16, 1994 among Air Wisconsin, Inc. Form 10-K for the year ended
Inc., United Air Lines Inc. and Mesa September 30, 1994, Commission File No.
Airlines, Inc. (Certain portions deleted 0-15495
pursuant to request for confidential
treatment) (Referred to erroneously as
Exhibit 10.94 in letter asking for
confidential treatment to Securities and
Exchange Commission dated 12-23-94 from
Chapman & Cutler)
10.40 Subscription Agreement between AmWest Filed as Exhibit 10.70 to Mesa Airlines,
Partners, L.P. and Mesa Airlines, Inc. Inc. Form 10-K for the year ended
dated as of June 28, 1994 September 30, 1994, Commission File No.
0-15495
10.41 Omnibus Agreement Filed as Exhibit 10.71 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.42 Aircraft Purchase and Sale Agreement Filed as Exhibit 10.72 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.43 Expendable and Rotable Spare Parts and Filed as Exhibit 10.73 to Mesa Air Group,
Sale Agreement Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.44 United Express Agreement Amendment Filed as Exhibit 10.74 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.45 Side Letter Agreement Filed as Exhibit 10.75 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.46 First Amendment to Omnibus Agreement Filed as Exhibit 10.76 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.47 Operating Lease Agreement Filed as Exhibit 10.77 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.48 Item 3. Legal Proceedings -- Form 10-K Filed as Exhibit 10.78 to Mesa Air Group,
dated September 30, 1994 Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.49 Purchase Agreement B95-7701-PA-200 Filed as Exhibit 10.79 to Mesa Air Group,
between Bombardier Inc. and Mesa Inc. Form 10-Q for the quarter ended
Airlines, Inc. March 31, 1995, Commission File No.
0-15495
</TABLE>

60
<PAGE> 63

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.50 Letter of Understanding between Mesa Air Filed as Exhibit 10.81 to Mesa Air Group,
Group, Inc. and Raytheon Aircraft Company Inc. Form 10-Q for the quarter ended
(RAC) dated April 12, 1996. March 31, 1996, Commission File No.
0-15495
10.51 Supplemental Agreement No. 05/22/96, Filed as Exhibit 10.82 to Mesa Air Group,
Beechcraft 1900D Airliner Acquisition Inc. Form 10-Q for the quarter ended
Master Agreement between Mesa Air Group, March 31, 1997, Commission File No.
Inc., Raytheon Aircraft Company and 0-15495
Raytheon Aircraft Credit Corporation
10.52 Bombardier Regional Aircraft Division Filed as Exhibit 10.83 to Mesa Air Group,
Purchase Agreement CRJ-0351 between Inc. Form 10-Q for the quarter ended
Bombardier Inc. and Mesa Air Group, Inc. December 31, 1996, Commission File No.
0-15495
10.53 Aircraft Option Exercise Filed as Exhibit 10.84 to Mesa Air Group,
B97-7701-RJTL-3492L dated as of August Inc. Form 10-Q for the quarter ended
15, 1997 between Mesa Air Group, Inc. and December 31, 1997, Commission File No.
Bombardier Inc. (Request for confidential 0-15495
treatment submitted to SEC.)
10.54 Bombardier Regional Aircraft Division Filed as Exhibit 10.85 to Mesa Air Group,
Settlement Agreement B97-7701-RJTL-3493L Inc. Form 10-Q for the quarter ended
dated as of August 15, 1997 between Mesa December 31, 1997, Commission File No.
Air Group, Inc. and Bombardier Inc. 0-15495
(Request for confidential treatment
submitted to SEC.)
10.55 Service Agreement dated as of November Filed as Exhibit 10.86 to Mesa Air Group,
11, 1997 between Mesa Airlines, Inc. and Inc. Form 10-Q for the quarter ended
US Airways, Inc. (Request for December 31, 1997, Commission File No.
confidential treatment submitted to SEC.) 0-15495
10.56 Letter Agreement dated as of March 26, Filed as Exhibit 10.86 to Mesa Air Group,
1998 between Mesa Airlines, Inc. and Inc. Form 10-Q for the quarter ended
America West Airlines, Inc. (Request for March 31, 1997, Commission File No.
confidential treatment submitted to SEC.) 0-15495.
10.57 Employment Agreement dated as of March Filed as Exhibit 10.86 to Mesa Air Group,
13, 1998, between Mesa Air Group, Inc. Inc. Form 10-Q for the quarter ended
and Jonathan G. Ornstein March 31, 1998, Commission File No.
0-15495.
10.58 Form of Employment Agreement dated as of Filed as Exhibit 10.86 to Mesa Air Group,
January 5, 1998 entered into by and Inc. Form 10-Q for the quarter ended
between Mesa Air Group, Inc. and Gary E. March 31, 1998, Commission File No.
Risley, W. Stephen Jackson, J. Clark 0-15495.
Stevens and various other officers of
Mesa and its subsidiaries
10.59 Letter Agreement dated as of February 4, Filed as Exhibit 10.86 to Mesa Air Group,
1998 between Mesa Air Group, Inc. and Inc. Form 10-Q for the quarter ended
Larry L. Risley March 31, 1998, Commission File No.
0-15495.
23.1 Independent Auditors' Consent of KPMG LLP Filed herewith
</TABLE>

61
<PAGE> 64

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

MESA AIR GROUP, INC.

By: /s/ JONATHAN G. ORNSTEIN
------------------------------------
Jonathan G. Ornstein
President and Chief Executive
Officer

By: /s/ MICHAEL J. LOTZ
------------------------------------
Michael J. Lotz
Chief Financial Officer and
Treasurer

(Principal Financial and Accounting
Officer)

Dated: January 21, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

/s/ PAUL MADDEN Vice Chairman of the Board January 21, 2000
--------------------------------------------------- and Director
Paul R. Madden

Director January 21, 2000
---------------------------------------------------
James E. Swigart

/s/ JONATHAN G. ORNSTEIN President, Chairman of the January 21, 2000
--------------------------------------------------- Board and Chief Executive
Jonathan G. Ornstein Officer (Principal
Executive Officer)

/s/ MICHAEL J. LOTZ Chief Financial Officer and January 21, 2000
--------------------------------------------------- Treasurer (Principal
Michael J. Lotz Financial and Accounting
Officer)

/s/ DANIEL ALTOBELLO Director January 21, 2000
---------------------------------------------------
Daniel J. Altobello

/s/ JACK BRALY Director January 21, 2000
---------------------------------------------------
Jack Braly

/s/ HERBERT DENTON Director January 21, 2000
---------------------------------------------------
Herbert A. Denton

Director January 21, 2000
---------------------------------------------------
Ronald R. Fogleman
</TABLE>

62
<PAGE> 65
<TABLE>
<C> <S> <C>
/s/ MAURICE A. PARKER Director January 21, 2000
---------------------------------------------------
Maurice A. Parker

Chairman Emeritus of the January 21, 2000
--------------------------------------------------- Board and Director
Larry L. Risley

/s/ GEORGE MURNANE, III Director January 21, 2000
---------------------------------------------------
George Murnane, III
</TABLE>

63
<PAGE> 66

EXHIBIT INDEX

<PAGE> 67

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.8 Form of Non-Qualified Stock Option issued Filed as Exhibit 4.2 to Registration No.
under Mesa Air Group, Inc. Restated and 33-02791 effective April 24, 1996
Amended Employee Stock Option Plan dated
April 23, 1996
10.9 Form of Qualified Stock Option issued Filed as Exhibit 4.3 to Registration No.
under Mesa Air Group, Inc. Restated and 33-02791 effective April 24, 1996
Amended Employee Stock Option Plan dated
April 23, 1996
10.10 Mesa Air Group, Inc. Key Officer Stock Filed as Appendix A to Registrant's
Option Plan Definitive Proxy Statement, dated June
19, 1998
10.11 Outside Directors' Stock Option Plan Filed as Appendix B to Registrant's
Definitive Proxy Statement, dated June
19, 1998
10.12 Employee Stock Option Plan, as amended Filed as Appendix C to Registrant's
Definitive Proxy Statement, dated June
19, 1998
10.13 Agreement between Beech Aircraft Filed as Exhibit 10.30 to Form S-1,
Corporation and Mesa Airlines, Inc., Registration No. 33-35556 effective
dated April 30, 1990 December 6, 1990, incorporated herein by
reference
10.14 Sublease Agreement between Air Midwest, Filed as Exhibit 10.32.1 to Form S-1,
Inc. and Mesa Airlines, Inc., dated April Registration No. 33-35556 effective
27, 1990 for Embraer Brasilia aircraft December 6, 1990, incorporated herein by
120.180 reference
10.15 Agreement between Air Midwest, Inc. and Filed as Exhibit 10.32.3 to Form S-1,
Mesa Airlines, Inc., dated February 27, Registration No. 33-35556 effective
1990, for purchase of four Embraer December 6, 1990, incorporated herein by
Brasilia aircraft reference
10.16 Letter Agreement between McDonnell Filed as Exhibit 10.32.4 to Form S-1,
Douglas Finance Corporation, Air Midwest, Registration No. 33-35556 effective
Inc. and Mesa Airlines, Inc., dated March December 6, 1990, incorporated herein by
19, 1990, as amended, regarding lease and reference
sublease of four Embraer Brasilia
aircraft
10.17 Sublease Agreement between Air Midwest Filed as Exhibit 10.32.5 to Form S-1,
Inc. and Mesa Airlines, Inc., dated July Registration No. 33-35556 effective
26, 1990, for Embraer Brasilia aircraft December 6, 1990, incorporated herein by
120.193 reference
10.18 Lease Agreement between McDonnell Douglas Filed as Exhibit 10.32.6 to Form S-1,
Finance Corporation and Mesa Airlines, Registration No. 33-35556 effective
Inc., dated July 26, 1990, for Embraer December 6, 1990, incorporated herein by
Brasilia aircraft 120.193 reference
10.19 Sublease Agreement between Air Midwest Filed as Exhibit 10.32.7 to Form S-1,
Inc. and Mesa Airlines, Inc., dated Registration No. 33-35556 effective
September 26, 1990, for Embraer Brasilia December 6, 1990, incorporated herein by
aircraft 120.203 reference
10.20 Lease Agreement between McDonnell Douglas Filed as Exhibit 10.32.8 to Form S-1,
Finance Corporation and Mesa Airlines, Registration No. 33-35556 effective
Inc., dated September 26, 1990, for December 6, 1990, incorporated herein by
Embraer Brasilia aircraft 120.203 reference
</TABLE>

<PAGE> 68

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.21 Form of Directors' and Officers' Filed as Exhibit 10.41 to Form S-1,
Indemnification Agreement Registration No. 33-35556 effective
December 6, 1990, incorporated herein by
reference
10.22 Agreement Relating to the Settlement of Filed as Exhibit 10.45 to Form S-1,
Interline Accounts through Airlines Registration No. 33-35556 effective
Clearing House, Inc., between Airlines December 6, 1990, incorporated herein by
Clearing House, Inc. and Mesa Airlines, reference
Inc., dated September 2, 1981
10.23 Agreement between Beech Aircraft Filed as Exhibit 10.42 to Form 10-K for
Corporation and Mesa Airlines, Inc., fiscal year ended September 30, 1991,
dated September 18, 1991 Commission File No. 0-15495, incorporated
herein by reference
10.24 Agreement between USAirways, Inc. and Air Filed as Exhibit 10.43 to Form 10-K for
Midwest, Inc. fiscal year ended September 30, 1991,
Commission File No. 0-15495, incorporated
herein by reference
10.25 Agreement between USAirways, Inc. and Filed as Exhibit 10.44 to Form 10-K for
FloridaGulf Airlines, Inc. fiscal year ended September 30, 1991,
Commission File No. 0-15495, incorporated
herein by reference
10.26 Sublease agreement between Trans States Filed as Exhibit 10.45 to Form 10-K for
Airlines, Inc. and Air Midwest, Inc. fiscal year ended September 30, 1992,
Commission File No. 0-15495, incorporated
herein by reference
10.27 Agreement between Beech Aircraft Filed as Exhibit 10.47 to Form 10-K for
Corporation, Beech Acceptance fiscal year ended September 30, 1992,
Corporation, Inc. and Mesa Airlines, Commission File No. 0-15495, incorporated
Inc., dated August 21, 1992 herein by reference
10.28 Agreement between America West Airlines, Filed as Exhibit 10.48 to Form 10-K for
Inc. and Mesa Airlines, Inc. fiscal year ended September 30, 1992,
Commission File No. 0-15495, incorporated
herein by reference
10.29 Plan and Agreement to Merge between Mesa Filed as Exhibit A to Form S-4
Airlines, Inc., Mesa Acquisition Registration No. 33-45638, effective
Corporation and WestAir Holding, Inc., April 17, 1992, incorporated herein by
dated February 7, 1992. reference
10.30 Certificate of Public Convenience and Filed as Exhibit 10.1(a) to WestAir
Necessity for WestAir Commuter Airlines, Holding, Inc.'s Registration Statement on
Inc. Form S-1, Commission File No. 33-24316,
incorporated herein by reference
10.31 Original Agreement to Lease dated as of Filed as Exhibit 10.44 to WestAir
April 27, 1987 between NPA, Inc. ("NPA") Holding, Inc.'s Registration Statement on
and British Aerospace, Inc. ("BAe") with Form S-1, Commission File No. 33-24316,
a Letter to FG Holdings, Inc. ("FGH") incorporated herein by reference
dated March 11, 1988 and Amendment No. 1
to Agreement to Lease dated as of March
3, 1988 between BAe and FGH
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.32 Side Letter Agreement to NPA from JACO Filed as Exhibit 10.48 to WestAir
dated June 4, 1987 Holding, Inc.'s Registration Statement on
Form S-1, Commission File No. 33-24316,
incorporated herein by reference
10.33 Promissory Note to Textron for spare Filed as Exhibit 10.80 to WestAir
parts as executed by WestAir, dated Holding, Inc.'s Form 10-K dated December
December 30, 1988 31, 1988, Commission File No. 33-24316,
incorporated herein by reference
10.34 Amended and Restated Stock Purchase Filed as Exhibit 10.42(a) to WestAir
Agreement, dated September 30, 1991 among Holding, Inc.'s Form 10-K for the year
WestAir Holding, Inc., WestAir Commuter ended December 31, 1991, Commission File
Airlines, Inc. and Atlantic Coast No. 33-24316, incorporated herein by
Airlines, Inc., relating to the sale of reference
the Atlantic Coast division of WestAir
Commuter Airlines, Inc.
10.35 Agreement of Purchase and Sales of Assets Filed as Exhibit 10.90 to Mesa Airlines,
by and among Crown Airways, Inc., Phillip Inc. Form 10-K for the year ended
R. Burnaman, A. J. Beiga and Mesa September 30, 1994, Commission File No.
Airlines, Inc., dated as of December 16, 0-15495
1993
10.36 Supplemental Agreement No. 9/03/94 Filed as Exhibit 10.66 to Mesa Airlines,
Beechcraft 1900 D Airliner Acquisition Inc. Form 10-K for the year ended
Master Agreement between Mesa Airlines, September 30, 1994, Commission File No.
Inc., Beech Aircraft Corporation and 0-15495
Beech Acceptance Corporation, Inc., dated
as of September 23, 1994
10.37 Form of Lease Agreement between Beech Filed as Exhibit 10.67 to Mesa Airlines,
Acceptance Corporation, Inc. and Mesa Inc. Form 10-K for the year ended
Airlines, Inc., negotiated September 30, September 30, 1994, Commission File No.
1994 for all prospective 1900 D Airliner 0-15495
leases.
10.38 Asset Purchase Agreement dated July 29, Filed as Exhibit 10.68 to Mesa Airlines,
1994 among Pennsylvania Commuter Inc. Form 10-K for the year ended
Airlines, Inc., d.b.a. Allegheny Commuter September 30, 1994, Commission File No.
Airlines, USAirways Leasing and Services, 0-15495
Inc., and Mesa Airlines, Inc.
10.39 Letter Agreement in Principle dated as of Filed as Exhibit 10.69 to Mesa Airlines,
October 16, 1994 among Air Wisconsin, Inc. Form 10-K for the year ended
Inc., United Air Lines Inc. and Mesa September 30, 1994, Commission File No.
Airlines, Inc. (Certain portions deleted 0-15495
pursuant to request for confidential
treatment) (Referred to erroneously as
Exhibit 10.94 in letter asking for
confidential treatment to Securities and
Exchange Commission dated 12-23-94 from
Chapman & Cutler)
10.40 Subscription Agreement between AmWest Filed as Exhibit 10.70 to Mesa Airlines,
Partners, L.P. and Mesa Airlines, Inc. Inc. Form 10-K for the year ended
dated as of June 28, 1994 September 30, 1994, Commission File No.
0-15495
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<PAGE> 70

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.41 Omnibus Agreement Filed as Exhibit 10.71 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.42 Aircraft Purchase and Sale Agreement Filed as Exhibit 10.72 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.43 Expendable and Rotable Spare Parts and Filed as Exhibit 10.73 to Mesa Air Group,
Sale Agreement Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.44 United Express Agreement Amendment Filed as Exhibit 10.74 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.45 Side Letter Agreement Filed as Exhibit 10.75 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.46 First Amendment to Omnibus Agreement Filed as Exhibit 10.76 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.47 Operating Lease Agreement Filed as Exhibit 10.77 to Mesa Air Group,
Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.48 Item 3. Legal Proceedings -- Form 10-K Filed as Exhibit 10.78 to Mesa Air Group,
dated September 30, 1994 Inc. Form 10-Q for the quarter ended
December 31, 1994, Commission File No.
0-15495
10.49 Purchase Agreement B95-7701-PA-200 Filed as Exhibit 10.79 to Mesa Air Group,
between Bombardier Inc. and Mesa Inc. Form 10-Q for the quarter ended
Airlines, Inc. March 31, 1995, Commission File No.
0-15495
10.50 Letter of Understanding between Mesa Air Filed as Exhibit 10.81 to Mesa Air Group,
Group, Inc. and Raytheon Aircraft Company Inc. Form 10-Q for the quarter ended
(RAC) dated April 12, 1996. March 31, 1996, Commission File No.
0-15495
10.51 Supplemental Agreement No. 05/22/96, Filed as Exhibit 10.82 to Mesa Air Group,
Beechcraft 1900D Airliner Acquisition Inc. Form 10-Q for the quarter ended
Master Agreement between Mesa Air Group, March 31, 1997, Commission File No.
Inc., Raytheon Aircraft Company and 0-15495
Raytheon Aircraft Credit Corporation
10.52 Bombardier Regional Aircraft Division Filed as Exhibit 10.83 to Mesa Air Group,
Purchase Agreement CRJ-0351 between Inc. Form 10-Q for the quarter ended
Bombardier Inc. and Mesa Air Group, Inc. December 31, 1996, Commission File No.
0-15495
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<PAGE> 71

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<C> <S> <C>
10.53 Aircraft Option Exercise Filed as Exhibit 10.84 to Mesa Air Group,
B97-7701-RJTL-3492L dated as of August Inc. Form 10-Q for the quarter ended
15, 1997 between Mesa Air Group, Inc. and December 31, 1997, Commission File No.
Bombardier Inc. (Request for confidential 0-15495
treatment submitted to SEC.)
10.54 Bombardier Regional Aircraft Division Filed as Exhibit 10.85 to Mesa Air Group,
Settlement Agreement B97-7701-RJTL-3493L Inc. Form 10-Q for the quarter ended
dated as of August 15, 1997 between Mesa December 31, 1997, Commission File No.
Air Group, Inc. and Bombardier Inc. 0-15495
(Request for confidential treatment
submitted to SEC.)
10.55 Service Agreement dated as of November Filed as Exhibit 10.86 to Mesa Air Group,
11, 1997 between Mesa Airlines, Inc. and Inc. Form 10-Q for the quarter ended
US Airways, Inc. (Request for December 31, 1997, Commission File No.
confidential treatment submitted to SEC.) 0-15495
10.56 Letter Agreement dated as of March 26, Filed as Exhibit 10.86 to Mesa Air Group,
1998 between Mesa Airlines, Inc. and Inc. Form 10-Q for the quarter ended
America West Airlines, Inc. (Request for March 31, 1997, Commission File No.
confidential treatment submitted to SEC.) 0-15495.
10.57 Employment Agreement dated as of March Filed as Exhibit 10.86 to Mesa Air Group,
13, 1998, between Mesa Air Group, Inc. Inc. Form 10-Q for the quarter ended
and Jonathan G. Ornstein March 31, 1998, Commission File No.
0-15495.
10.58 Form of Employment Agreement dated as of Filed as Exhibit 10.86 to Mesa Air Group,
January 5, 1998 entered into by and Inc. Form 10-Q for the quarter ended
between Mesa Air Group, Inc. and Gary E. March 31, 1998, Commission File No.
Risley, W. Stephen Jackson, J. Clark 0-15495.
Stevens and various other officers of
Mesa and its subsidiaries
10.59 Letter Agreement dated as of February 4, Filed as Exhibit 10.86 to Mesa Air Group,
1998 between Mesa Air Group, Inc. and Inc. Form 10-Q for the quarter ended
Larry L. Risley March 31, 1998, Commission File No.
0-15495.
23.1 Independent Auditors' Consent of KPMG LLP Filed herewith
</TABLE>