United Airlines Takes $10.5 Million Stake in Affiliate Mesa

United Airlines took a nearly 10 percent stake in its regional partner Mesa Air Group in a deal unveiled after markets closed. The transaction is worth an estimated $10.5 million based on the closing price of Mesa's stock of $2.61 per share on Monday.

The 4.04 million shares were issued as part of a larger deal including, additional flying for United by Mesa, that the two airlines reached in December, a filing with the Securities & Exchange Commission show. As part of that agreement, United provided Mesa with a $10 million revolving loan due in January 2024, plus other financial commitments.

The equity stake comes amid a shakeup in the U.S. regional airline sector. A pilot shortage across the industry has morphed into a captain shortage at the carriers that fly small aircraft for the Big 3 — in other words, the airlines that operate American Eagle, Delta Connection, and United Express flights. The shortage has forced hundreds of the smallest jets to be parked. Delta President Glen Hauenstein said earlier in January he does not believe the situation will ease until 2024.

And a dramatic pay raise by American for pilots at the three affiliates — Envoy, Piedmont Airlines, and PSA Airlines — it owns last June, has reset the cost structure of regional flying. Mesa and others have matched the pay rates, which for some crew members are more than double what they were before. The reset has heightened concerns that regional airlines may shrink further, and cut air service to more small U.S. cities.

Mesa lost $10 million during the quarter ending in June, its latest financial statement shows. Costs during the period increased nearly 21 percent year-over-year on a 7 percent increase in revenues.

United's investment in Mesa likely signals a closer relationship between the two going forward. The major carrier also owns stakes a 40 percent stake of its affiliate CommuteAir, and 19 percent of partner Republic Airways.