Harbor Diversified Inc.

06/29/2026 | Press release | Distributed by Public on 06/29/2026 09:58

Quarterly Report for Quarter Ending March 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements (the "condensed consolidated financial statements") and the related condensed notes included in this Quarterly Report, and with the audited consolidated financial statements, accompanying notes, and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report"). While certain of the following disclosures in this section are intended to capture the conditions existing as of and during the three months ended March 31, 2025, this discussion also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied by the forward-looking statements below. Factors that could cause or contribute to differences in our actual results include, but are not limited to, those discussed below and elsewhere in this Quarterly Report, including those set forth in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and Part II, Item 1A, Risk Factors.
General
Harbor Diversified, Inc. ("Harbor") is a non-operating holding company that is the parent of a consolidated group of subsidiaries, including AWAC Aviation, Inc. ("AWAC"), which, until January 9, 2026, was the sole member of Air Wisconsin Airlines LLC ("Air Wisconsin"), which had historically operated as an independent air carrier. Harbor is also the direct parent of three other subsidiaries: (1) Lotus Aviation Leasing, LLC ("Lotus"), which leased flight equipment to Air Wisconsin, (2) Air Wisconsin Funding LLC ("AWF"), which provided flight equipment financing to Air Wisconsin, and (3) Harbor Therapeutics, Inc. ("Therapeutics"), which is a non-operating entity with no material assets.
Because Harbor consolidated Air Wisconsin for financial statement purposes prior to the Aviation Disposition, for purposes of this Quarterly Report, disclosures relating to activities of Air Wisconsin also apply to Harbor, unless otherwise noted. Where reference is made only to Harbor Diversified, Inc. (such as when referring to the outstanding shares of common stock), it is referred to as "Harbor." Where reference is made only to Air Wisconsin (such as where it is named specifically for its historical contractual obligations and operations), it is referred to as "Air Wisconsin." Where reference is intended to include Harbor and its consolidated subsidiaries, they are jointly referred to as the "Company," "we," "us," or "our."
Unless otherwise indicated, the discussion below reflects our historical financial condition and results of operations for the three months ended March 31, 2025, during which Air Wisconsin conducted airline operations. Our business operations and financial condition following the Aviation Disposition are materially different from our historical operations and financial condition reflected in the periods presented, and historical results should not be viewed as indicative of future performance.
Business Overview and Recent Developments
Aviation Disposition
As previously disclosed, on January 9, 2026, Harbor completed the last in a series of transactions pursuant to which it disposed of all of its aviation assets, including its membership interests in Air Wisconsin (the completion of all such transactions, collectively, the "Aviation Disposition"). The aggregate consideration received in connection with the Aviation Disposition was approximately $125.9 million, subject to certain customary purchase price adjustments and the impact of required tax obligations.
After giving effect to the Aviation Disposition, neither Harbor nor any of its remaining subsidiaries has any material operating assets or infrastructure to support an airline, provided that the Company did retain certain non-operating assets, which primarily relate to lease payments for a single aircraft, insurance claims, and state and federal tax refunds.
The Company currently does not have any material operating assets, is not engaged in any operating business, and does not have any source of revenue from operations.
Historical Regional Airline Services and Supplemental Operations
Prior to the termination of the American capacity purchase agreement, our primary business strategy consisted of providing regional airline services under capacity purchase agreements with major airlines and certain other supplemental
operations including charter flights. As of March 31, 2025, Air Wisconsin owned a fleet of 62 CRJ-200 regional jets, all of which were manufactured by Bombardier, Inc. Following the Aviation Disposition, the Company has no material operating assets.
Charter Flights
In the fourth quarter of 2024, Air Wisconsin began offering on-demand charter service within the contiguous United States. This service was seasonal in nature with a significant portion of charter flights provided to collegiate athletic teams, whose seasons typically end late spring or early summer and do not resume until fall. Under this service, Air Wisconsin negotiated a fare for the charter operations with the customer where such fare was calculated based on anticipated costs, including fuel and oil, landing fees and passenger screening fees. As many of such costs were estimated, contracts included reconciliation language, however, under some circumstances such costs were borne by Air Wisconsin. With the wind-down of the American capacity purchase agreement commencing in the first quarter of 2025, Air Wisconsin increased its availability for its charter flights operations. For the three months ended March 31, 2025, charter revenues were $7.2 million, representing 11.9% of Contract revenues.
American Capacity Purchase Agreement
In August 2022, Air Wisconsin entered into a capacity purchase agreement (the "American capacity purchase agreement") with American Airlines, Inc. ("American"), pursuant to which Air Wisconsin agreed to provide regional airline services for American. Air Wisconsin commenced flying operations for American in March 2023. As of March 31, 2025, Air Wisconsin had 30 aircraft in service for American. For the three months ended March 31, 2025, approximately 88.1% of our operating revenues were derived from operations associated with the American capacity purchase agreement.
Under the American capacity purchase agreement Air Wisconsin was entitled to receive certain payments based on the number of aircraft covered under the agreement, block hours, departures and certain performance metrics. Air Wisconsin was also eligible to receive bonus compensation, and was required to pay rebates, upon the achievement of, or failure to achieve, certain pre-established performance criteria.
Air Wisconsin was responsible for certain customary costs relating to the flight operation and maintenance of the covered aircraft along with other customary controllable expenses, including expenses associated with flight crews, line maintenance and overhead. American reimbursed Air Wisconsin for certain customary costs and expenses incurred in connection with Air Wisconsin's flight operations, including fuel, landing and air traffic control, changes to livery and branding, aircraft and passenger liability insurance, property taxes and systems support. American had the right to schedule all aircraft covered by the agreement, including determining route selection and frequency, and the timing of scheduled arrivals and departures, in each case subject to certain scheduling parameters. American also had the right to determine and publish fares and to establish seat inventories, overbooking levels, and allocation of seats among fare categories. American provided all ground handling services, including gate and ticket counter services, baggage handling, cargo handling, aircraft loading/unloading services, passenger ticketing, and aircraft cabin cleaning. American had the right to all revenues resulting from the sale of passenger tickets associated with the covered aircraft and all other sources of revenue associated with the operation of the covered aircraft, including revenues relating to baggage charges, food and beverage sales and ticket change fees. The American capacity purchase agreement protected Air Wisconsin, to an extent, from many of the elements that typically cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in the number of passengers.
On January 3, 2025, American delivered to Air Wisconsin notice of termination of the agreement, effective April 3, 2025. On that date, all remaining Air Wisconsin aircraft covered by that agreement were withdrawn from service under the agreement.
For additional information, please refer to Note 1, Summary of Significant Accounting Policies - Contract Revenues, Note 2, Capacity Purchase Agreement with American, and Note 13, Subsequent Events, in the condensed notes to the condensed consolidated financial statements in this Quarterly Report.
Prior Dispute with United Airlines, Inc.
Prior to its termination, a dispute arose under the capacity purchase agreement between Air Wisconsin and United Airlines, Inc. ("United") which was resolved by arbitration and the issuance of a decision and award in February 2024 (the "United Arbitration Award"). The United Arbitration Award held, among other things, that Air Wisconsin was not entitled to the payments from United that were at issue in the arbitration and denied United's claim that Air Wisconsin breached the
agreement by terminating it and its claim that Air Wisconsin owed it damages for the alleged wrongful termination. As a result, neither party owed to the other party any amounts claimed in the arbitration.
Federal and State Tax Refunds
We determined that, as a result of the United Arbitration Award, we would amend our 2021 and 2022 federal and state income tax returns to recover federal and state income taxes previously paid related to the disputed amounts. As a result, in previous periods we recorded federal and state tax assets of approximately $7.4 million in the aggregate related to the amendment of our 2021 and 2022 federal and state income tax returns. As of March 31, 2025, we had yet to receive $6.9 million related to the 2022 and 2021 amended tax returns. The Internal Revenue Service commenced a routine review of the Company's 2022 amended federal income tax return which is subject to further review by the Joint Committee on Taxation. We continue to pursue collection of these anticipated federal and state income tax refunds; however, the timing and receipt of such funds remain subject to review by the applicable taxing authorities.
The decrease in revenues and interest income also resulted in federal and state net operating losses as of December 31, 2022 and much of these losses remained as of December 31, 2024. While we established valuation allowances against our deferred tax assets beginning with the year ended December 31, 2022 and continuing through the year ended December 31, 2024, the federal and state net operating losses are available to reduce future taxable income.
For additional information, please refer to Note 3, Income Taxes, in the condensed notes to the condensed consolidated financial statements in this Quarterly Report.
Net Operating Losses
The decrease in revenues and interest income, as a result of the United arbitration, also resulted in federal and state net operating losses as of December 31, 2022. We also incurred federal and state net operating losses for the years ended December 31, 2023 and December 31, 2024. We established valuation allowances against our deferred tax assets beginning with the year ended December 31, 2022 and continuing through the year ended December 31, 2024. Based on the net income for the three months ended March 31, 2025, we reduced our federal and state valuation allowances. However, after doing so a significant amount of federal and state net operating losses remained, and the Company continues to maintain a significant amount of valuation allowances on our federal and state net operating loss deferred tax assets. The federal and state net operating losses are available to reduce future taxable income. For additional information, please refer to Note 3, Income Taxes, in the condensed notes to the condensed consolidated financial statements in this Quarterly Report.
Alternative Business Strategies
As discussed above, on January 3, 2025, American gave notice to Air Wisconsin of the termination of the American capacity purchase agreement, effective April 3, 2025. Given the dynamics in the airline industry, including the decision by multiple major airlines to eliminate from their fleets single class 50-seat aircraft, such as those owned by Air Wisconsin, the Company realized that it was unlikely Air Wisconsin would be able to enter into a new capacity purchase agreement with a major airline to provide regional airline service. In response, Air Wisconsin expanded its charter operations and explored the possibility of providing Essential Air Service Program ("EAS") services and transitioning its prior relationship with American to a codeshare and interline relationship. Although our charter operations generated $7.2 million in revenue through the three months ended March 31, 2025, these efforts did not lead to sustainable operations. As discussed above, charter operations were seasonal with limited opportunities following the end of the collegiate athletic programs seasons.
In the second and third quarters of 2025, while Air Wisconsin continued to pursue charter operations, it also began exploring other strategic alternatives, including the sale of its business or of substantially all of its assets, either in one transaction or a series of multiple transactions. Management had discussions with several different parties and considered various proposals, some of which involved the acquisition of Air Wisconsin as a DOT-approved operating entity and others of which involved the acquisition of some of Air Wisconsin's aircraft and engines. The primary factors Air Wisconsin considered in analyzing various proposals included anticipated deal consideration, legal structure, expected tax implications, regulatory timing and impacts, and certainty of closing. The strategic review process culminated in the Aviation Disposition.
Following the Aviation Disposition, we are evaluating potential strategic alternatives that may include investments in, or acquisitions of, one or more businesses, assets, technologies, joint ventures, or other strategic opportunities. Any such transactions could involve one or multiple investments or acquisitions, be in any number of industries or lines of business
and involve the use of cash, equity securities, or a combination thereof. In addition, the Company may pursue other strategic alternatives, which could include, without limitation, the issuance of one or more cash dividends, share repurchases, tender offers, registration as an investment company, a liquidation of the Company, or other potential transactions. Until a strategic alternative is identified and completed, if at all, we expect our business to remain focused primarily on investment management, capital preservation, liquidity and the evaluation of potential opportunities.
Additionally, since our remaining assets are predominantly comprised of cash and cash equivalents, restricted cash and marketable securities, the Company could potentially be deemed an "investment company" pursuant to the Investment Company Act of 1940, as amended, and the rules promulgated thereunder (the "Investment Company Act"). Becoming an investment company would impose on the Company additional regulatory and disclosure requirements, compliance with which could be expensive and time-consuming. The Investment Company Act provides a number of exemptions, including a one-year safe harbor for companies that are seeking to acquire an operating business. The Company is availing itself of this exemption. If the Company is not able to meet the requirements of the exemption, it may be required to register as an investment company, seek the availability of a different exemption, or pursue an alternative strategy.
Reduction in Force
On January 10, 2025, Air Wisconsin announced the strategic transition of its operations following the termination of the American capacity purchase agreement. In connection with that transition, Air Wisconsin implemented a workforce reduction plan to re-balance its workforce to better align with that transition. On January 30, 2025, Air Wisconsin issued notices to all employees pursuant to the Worker Adjustment and Retraining Notification Act ("WARN"). On March 14, 2025, Air Wisconsin notified approximately 240 employees, consisting of 123 management employees, 100 pilots, and 13 dispatchers, that they would be furloughed or terminated effective March 31, 2025, or within a short period of time thereafter. On April 10, 2025, Air Wisconsin announced additional workforce reductions that affected approximately 400 additional employees that became effective on June 9, 2025, or a short period of time thereafter, and included the furlough of certain unionized employees. On August 29, 2025, Air Wisconsin issued new notices to all employees pursuant to WARN. No further workforce reductions were made pursuant to WARN and the notice period expired on December 31, 2025.
Dependence on Investment Income
Following the Aviation Disposition, our primary assets consist of cash and cash equivalents, restricted cash and marketable securities. Consistent with our investment policies, those assets are primarily invested in deposit accounts, money market funds, government-backed securities, and similar investments, with the primary objectives of maintaining liquidity and preserving principal. Since we are no longer engaged in any operating business, and do not have any source of revenue from operations, our primary source of earnings for the foreseeable future is expected to be investment income generated from those assets. Accordingly, our future results of operations and cash flows are expected to be materially influenced by factors such as prevailing interest rates, the credit quality of counterparties, the composition and maturity of our investment portfolio, and broader macroeconomic conditions. Further, our investment returns must be sufficient to offset our ongoing corporate expenses, including costs associated with maintaining our public company status, pursuing strategic alternatives, and compensating our management team. To the extent our operating expenses exceed investment income over an extended period, our assets would decline, reducing the capital available for strategic transactions or other strategic opportunities.
Economic Conditions, Challenges and Risks Impacting Financial Results
The general and specific factors and trends affecting our business and results of operations have not materially changed relative to the disclosure in the 2024 Annual Report. For additional information, please refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the 2024 Annual Report.
Results of Operations
The following discussion reflects Air Wisconsin's airline operations prior to the Aviation Disposition. Our business operations and financial condition following the termination of the American capacity purchase agreement and the
Aviation Disposition are materially different from our historical business operations and financial condition, and historical results should not be viewed as indicative of future performance.
Comparison of the Three Months Ended March 31, 2025 and March 31, 2024
We had operating income of $14.4 million for the three months ended March 31, 2025, compared to an operating loss of $10.9 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, we had net income of $16.5 million compared to a net loss of $9.6 million for the three months ended March 31, 2024.
The following table sets forth our major operational statistics and the associated percentage changes for the periods presented:
Three Months Ended
March 31,
2025 2024 Change
Operating Data:
Available Seat Miles ("ASMs") (in thousands) 136,864 176,016 (39,152) (22.2 %)
Actual Block Hours 15,690 17,757 (2,067) (11.6 %)
Actual Departures 11,195 12,680 (1,485) (11.7 %)
Revenue Passenger Miles ("RPMs") (in thousands) 105,874 136,524 (30,650) (22.5 %)
Average Stage Length (in miles) 260 285 (25) (8.8 %)
Contract Revenue Per Available Seat Mile (in cents) 44.02 ¢ 24.80 ¢ 19.22 ¢ 77.5 %
Passengers 402,409 478,098 (75,689) (15.8 %)
The decrease in ASMs, block hours, departures, RPMs and passengers during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, was primarily due to the wind-down of operations under the American capacity purchase agreement. In early March 2025, Air Wisconsin withdrew 15 aircraft from service with American based on the wind-down schedule delivered by American. The decrease in average stage length is the result of American scheduling Air Wisconsin's aircraft on shorter routes during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. During the three months ended March 31, 2025, the increase in contract revenue per available seat mile was the result of contract revenues on a per-departure basis being spread over shorter stage lengths, combined with higher contract rates provided for under Amendment No. 4.
Operating Revenues
The following table sets forth our operating revenues and the associated dollar and percentage changes for the periods presented:
Three Months Ended
March 31,
2025 2024 Change
Operating Revenues (in thousands):
Contract Revenues $ 60,241 $ 43,655 $ 16,586 38.0 %
Contract Services and Other 2 2 - - %
Total Operating Revenues $ 60,243 $ 43,657 $ 16,586 38.0 %
Total operating revenues increased $16.6 million, or 38.0%, during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to increased revenues of $9.4 million under Amendment No. 4 to the American capacity purchase agreement and approximately $7.2 million from charter operations. For additional information, please refer to Note 1, Summary of Significant Accounting Policies -- Contract Revenues, in the condensed notes to the condensed consolidated financial statements in this Quarterly Report.
Operating Expenses
The following table sets forth our operating expenses and the associated dollar and percentage changes for the periods presented:
Three Months Ended March 31,
2025 2024 Change
Operating Expenses ($ in thousands):
Payroll and Related Costs $ 27,736 $ 31,508 $ (3,772) (12.0 %)
Aircraft Fuel and Oil 202 52 150 288.5 %
Aircraft Maintenance, Materials and Repairs 10,592 12,118 (1,526) (12.6 %)
Other Rents 1,119 1,696 (577) (34.0 %)
Depreciation, Amortization and Obsolescence 2,610 6,355 (3,745) (58.9 %)
Purchased Services and Other
3,622 2,862 760 26.6 %
Total Operating Expenses $ 45,881 $ 54,591 $ (8,710) (16.0 %)
Our consolidated operating expenses consist of the following items:
Payroll and Related Costs. Payroll and related costs decreased $3.8 million, or 12.0%, to $27.7 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease was primarily driven by decreases of $1.4 million in pilot wages, $1.0 million in employee benefits, $0.8 million for management wage expense and other management wage expense, $0.3 million in mechanic wages, $0.2 million in payroll taxes, and $0.1 million in flight attendant wages.
Aircraft Fuel and Oil. Substantially all of the fuel costs incurred as a result of flying pursuant to the American capacity purchase agreement during the three months ended March 31, 2025 and March 31, 2024, were directly paid to suppliers by American. Fuel expense increased by approximately $0.2 million during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to increased charter operations, which were not associated with the American capacity purchase agreement. We were responsible for the cost of aircraft oil under the American capacity purchase agreement, although this expense was not material.
Aircraft Maintenance, Materials and Repairs. Aircraft maintenance, materials and repairs costs decreased $1.5 million, or 12.6%, to $10.6 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily as a result of reduced flying levels relative to the prior period. The decrease was primarily driven by decreases in airframe repairs of $2.0 million, net scraps of $0.4 million, and overhaul amortization of $0.2 million. The decrease was partially offset by an increase in engine repairs of $0.8 million and materials used of $0.3 million.
Other Rents. Other rents decreased $0.6 million, or 34.0%, to $1.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily as a result of a decrease in flight simulator rent of $0.6 million.
Depreciation, Amortization and Obsolescence. Depreciation, amortization and obsolescence expense decreased $3.7 million, or 58.9%, to $2.6 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease was primarily due to a $3.7 million decrease in flight property and equipment depreciation expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.
Purchased Services and Other. Purchased services and other expense increased $0.8 million, or 26.6%, to $3.6 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase was primarily due to an increase of $0.3 million in legal expenses, $0.3 million in technology fees, and $0.2 million in professional and technical fees.
Other Income (Expense)
Interest and Dividend Income. Interest and dividend income increased $0.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase was primarily the result of slightly
higher marketable securities and cash and cash equivalent balances during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.
Interest Expense. Interest expense was immaterial and remained relatively unchanged for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.
Gain (Loss) on Marketable Securities and Long-Term Restricted Investments (SESP). Gain on marketable securities and long-term restricted investments (SESP) increased $1.3 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to an increase in the value of marketable securities of $1.7 million, partially offset by a loss in the value of long-term restricted investments (SESP) of $0.4 million.
Other, Net. Other income and expense was immaterial and relatively unchanged for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.
Net Income (Loss)
Net income for the three months ended March 31, 2025 was $16.5 million, or $0.28 per basic and diluted share, compared to net loss of $9.6 million, or $0.23 per basic and diluted share, for the three months ended March 31, 2024. For additional information, please refer to Note 9, Earnings Per Share and Equity, in the condensed notes to the condensed consolidated financial statements in this Quarterly Report.
The change from a net loss to net income for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily driven by increases of $9.4 million in revenues from the American capacity purchase agreement, primarily related to Amendment No. 4, and $7.2 million in charter revenues. At the same time, due to our lower overall flying levels, operating expenses decreased $8.7 million while other income increased $1.3 million. The noted increases to earnings were minimally offset by an increase in tax expense of $0.5 million.
Income Tax Expense (Benefit)
For the three months ended March 31, 2025, our effective tax rate was 1.6%, compared to 2.4% for the three months ended March 31, 2024. Our tax rate can vary depending on a number of factors, including changes in tax laws, adoption of accounting standards, the amount of income we earn in each state and the state tax rate applicable to such income, as well as changes in valuation allowances required on our deferred tax assets.
We recorded income tax expense of $0.3 million and income tax benefit of $0.2 million for the three months ended March 31, 2025 and March 31, 2024, respectively.
The income tax expense for the three months ended March 31, 2025 resulted in an effective tax rate of 1.6%, which differed from the U.S. federal statutory rate of 21.0%, primarily due to the impact of state income taxes, permanent differences between financial statement and taxable income, and a decrease in the valuation allowances recorded against federal and state deferred tax assets that were ordinary in nature, as well as a decrease in the valuation allowances on federal and state deferred tax assets that are capital in nature. The decrease in the valuation allowances recorded against federal and state deferred tax assets that are ordinary in nature was primarily due to the income earned during the period. The decrease in the valuation allowances was the most notable reason why the effective tax rate for the period was significantly lower than the statutory rate of 21%. Substantial judgment is required in estimating the change in valuation allowances during the period which impacts the effective tax rate and tax expense recognized during the period.
The income tax benefit for the three months ended March 31, 2024 resulted in an effective tax rate of 2.4%, which differed from the U.S. federal statutory rate of 21.0%, primarily due to the impact of state income taxes, permanent differences between financial statement and taxable income, and an increase in the valuation allowances recorded against federal and state deferred tax assets that were ordinary in nature, partially offset by a decrease in the valuation allowances on deferred tax assets that are capital in nature. The increase in the valuation allowances recorded against federal and state deferred tax assets that are ordinary in nature was primarily due to the losses incurred during the period, with limited sources of additional future income to enable expected future utilization of the losses. The increase in the valuation allowances was the most notable reason why the effective tax rate for the period was significantly lower than the statutory rate of 21%. Substantial judgment is required in estimating the change in valuation allowances during the period which impacts the effective tax rate and deferred tax benefit recognized during the period.
For additional information, please refer to Note 3, Income Taxes, in the condensed notes to the condensed consolidated financial statements in this Quarterly Report.
Liquidity and Capital Resources
Historical Operational Performance
During the three months ended March 31, 2025, our liquidity was primarily driven by Air Wisconsin's airline operations. Air Wisconsin's total operating revenues and income from operations increased relative to the three months ended March 31, 2024 primarily due to an increase in charter flights and scheduling changes under the American capacity purchase agreement.
On January 3, 2025, American delivered notice to Air Wisconsin of its election to terminate the American capacity purchase agreement, the wind-down of operations with American began in early March 2025, and the American capacity purchase agreement terminated on April 3, 2025.
On January 9, 2026, we consummated the Aviation Disposition. As a result, we no longer conduct airline operations and our future liquidity is materially different from the historical operating periods discussed below.
Historical Sources and Uses of Liquidity
Historically, our principal sources of liquidity were our cash, cash equivalents, marketable securities balances, and Air Wisconsin's cash flows from operations. As of March 31, 2025, our cash and cash equivalents balance was $27.1 million, and we held $99.3 million of marketable securities. For the three months ended March 31, 2025, cash provided by operations was $12.6 million, and for the three months ended March 31, 2024, cash used in operations was $0.5 million.
In January 2026, we received aggregate gross consideration of approximately $125.9 million as a result of the Aviation Disposition, subject to certain customary purchase price adjustments and the impact of required tax obligations. As a result, our primary sources of liquidity now consist of cash, cash equivalents, and marketable securities, and we no longer generate operating cash flows from airline activities.
Restricted Cash
As of March 31, 2025, in addition to cash and cash equivalents of $27.1 million, the Company had $0.6 million in restricted cash, which related to a credit facility used for the issuance of cash collateralized letters of credit supporting Air Wisconsin's obligations under certain lease agreements, airport agreements and insurance policies, as well as cash held for the repurchase of shares under Harbor's stock repurchase program. Restricted cash includes amounts escrowed in an interest-bearing account that secures the credit facility. The obligations supported by these letters of credit remained with Air Wisconsin following the Aviation Disposition.
Historical Operating Expenses and Capital Expenditures
Historically, Air Wisconsin required cash to fund its operating expenses and working capital requirements, which included outlays for capital expenditures, labor, and maintenance costs. In the ordinary course of business, we would evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect changes in labor costs, projected demand for our flying services, required maintenance events and current market conditions. Our capital expenditures were typically used to acquire or maintain aircraft and flight equipment for Air Wisconsin. During the three months ended March 31, 2025, we incurred $0.02 million in capital expenditures primarily related to purchases of rotable parts. Because the airline operations and related maintenance programs remained with Air Wisconsin after the Aviation Disposition, we do not anticipate incurring any airline-related operating expenses or capital expenditures going forward.
Ongoing Liquidity Considerations
After giving effect to the Aviation Disposition, our primary sources of liquidity now consist of our cash, cash equivalents and marketable securities balances (collectively, the "Liquid Assets"). Since we are no longer engaged in any operating business, and do not have any source of revenue from operations, our primary source of earnings for the foreseeable future is expected to be investment income generated from the Liquid Assets. Our investment returns must be sufficient to offset our ongoing corporate expenses, including costs associated with maintaining our public company status, pursuing strategic alternatives, and compensating our management team. We believe the Liquid Assets are sufficient to meet our liquidity requirements for at least the next 12 months from the date of this filing.
Our stockholders should be aware that, following the Aviation Disposition, we are not engaged in an operating business and our ability to create stockholder value will depend to a large extent on our ability to generate investment income and our execution of strategic alternatives. For additional information, please refer to Part II. Item 1A, Risk Factors, in this Quarterly Report.
Cash Flows
The following table presents information regarding our cash flows for each of the periods presented ($ in thousands):
Three Months Ended
March 31,
2025 2024 Change
Net cash provided by (used in) operating activities $ 12,592 $ (522) $ 13,114 (2,512.3 %)
Net cash used in investing activities
(509) (1,989) 1,480 (74.4 %)
Net cash used in financing activities
$ (46) $ (1,458) $ 1,412 (96.8 %)
Net Cash Provided by (Used in) Operating Activities
During the three months ended March 31, 2025, net cash provided by operating activities was $12.6 million. We had net income for the period of $16.5 million. Net cash flows were further adjusted for increases in cash primarily related to depreciation, amortization and obsolescence of $3.2 million, which were partially offset by decreases in contract liabilities of $4.8 million, non-cash gain on marketable securities of $1.8 million, and accrued payroll and employee benefits of $1.4 million.
During the three months ended March 31, 2024, net cash used in operating activities was $0.5 million. We had a net loss for the period of $9.6 million. Net cash flows were further adjusted for increases in cash primarily related to depreciation, amortization and obsolescence of $7.2 million, accounts payable of $2.3 million, accounts receivable of $1.9 million, and contract liabilities of $0.1 million, which were partially offset by decreases in spare parts and supplies of $1.6 million, accrued payroll and employee benefits of $0.4 million, deferred income taxes of $0.2 million, and non-cash gain on marketable securities of $0.1 million.
Net Cash Used in Investing Activities
During the three months ended March 31, 2025, our net cash used in investing activities was $0.5 million, substantially all of which was for the purchase of marketable securities.
During the three months ended March 31, 2024, net cash used in investing activities was $2.0 million, of which approximately $1.6 million was for additions to property and equipment and $0.5 million was for purchases of marketable securities.
Net Cash Used in Financing Activities
During the three months ended March 31, 2025, net cash used in financing activities was $0.05 million, of which all was used to repurchase shares of Harbor's common stock.
During the three months ended March 31, 2024, net cash used in financing activities was $1.5 million, reflecting $1.0 million to repurchase shares of Harbor's common stock and $0.5 million to pay dividends on preferred stock.
Commitments and Contractual Obligations
Operating Lease Obligations
As of March 31, 2025, Air Wisconsin had $3.3 million of operating lease obligations primarily related to certain training simulators and facilities.
The following table summarizes the future minimum lease payments required under operating leases that had initial or remaining non-cancelable lease terms greater than three months as of March 31, 2025:
Fiscal Year Amount
April 2025 through December 31, 2025 $ 2,149
2026 572
2027 392
2028 148
2029 79
Thereafter 239
Total lease payments $ 3,579
These operating leases remained with Air Wisconsin following the Aviation Disposition, and we do not expect to have ongoing airline-related lease commitments. Following the Aviation Disposition, we have a single lease for approximately 1,000 square feet of office space located in Appleton, Wisconsin.
For additional information, please refer to Note 5, Lease Obligations, in the notes to the audited consolidated financial statements in the 2024 Annual Report.
Series C Convertible Redeemable Preferred Stock
In January 2020, Harbor issued 4,000,000 shares of the Series C Preferred. The rights, preferences, privileges, qualifications, restrictions and limitations relating to the Series C Preferred are set forth in the Certificate of Designations, Preferences and Rights of Series C Convertible Redeemable Preferred Stock ("Certificate of Designations"), which Harbor filed with the Secretary of State of the State of Delaware.
Harbor accounted for its Series C Preferred in accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity. Based on the applicable accounting guidance, preferred stock that is conditionally redeemable was classified as temporary or "mezzanine" equity. Accordingly, the Series C Preferred, which was subject to conditional redemption, is presented at redemption value as mezzanine equity outside of the stockholders' equity section of the condensed consolidated balance sheets.
On March 28, 2024, the board of directors declared aggregate dividends in the amount of $466 on the Series C Preferred, which was paid on March 29, 2024.
Each share of Series C Preferred was initially convertible at the election of the holders, at any time after issuance, into that number of shares of common stock determined by dividing the then applicable Series C Liquidation Amount (as defined below) by $0.80, subject to certain adjustments set forth in the Certificate of Designations ("Conversion Price"). The Conversion Price was subsequently adjusted to be $0.15091.
Based on the applicable accounting guidance, Harbor was required to apply the "if-converted" method to the Series C Preferred to determine the weighted average number of shares outstanding for purposes of calculating the net income (loss) per share of common stock. However, conversion of the Series C Preferred was not assumed for purposes of computing diluted earnings per share for the period ended March 31, 2024.
On June 28, 2024, 754,550 shares of Series C Preferred were converted into 16,500,000 shares of Harbor's common stock, and all of the 3,245,450 Conversion Cap Excess Shares were redeemed for $10,710. After giving effect to such conversion and redemption, no shares of Series C Preferred were outstanding as of March 31, 2025, and such shares did not have any impact on the calculation of diluted earnings per share as of that date. In addition, following the conversion no dividends were declared or paid on the Series C Preferred.
Debt and Credit Facilities
Payroll Support Program
Beginning in April 2020, Air Wisconsin entered into a series of agreements with respect to payroll support from the U.S. Department of Treasury ("Treasury") under a program provided by the Coronavirus Aid, Relief, and Economic
Security Act. Under the first of those agreements, Air Wisconsin received approximately $42,185. In September 2020, the Treasury commenced a routine audit in connection with Air Wisconsin's receipt of funds under that agreement. Although Treasury's review of payments made to Air Wisconsin may be ongoing, Air Wisconsin does not believe that it will be required to repay any amount to the Treasury.
Maintenance Commitments
As of March 31, 2025, Air Wisconsin was party to a non-exclusive heavy maintenance services agreement for certain maintenance, repair and modification services with respect to airframes owned or operated by Air Wisconsin. Since the maintenance program and related agreements remained with Air Wisconsin following the Aviation Disposition, we do not anticipate incurring any ongoing airline maintenance costs.
Off-Balance Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (i) made guarantees, (ii) a retained or a contingent interest in transferred assets, (iii) an obligation under derivative instruments classified as equity or (iv) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us.
We have no off-balance sheet arrangements that would have or are reasonably likely to have a material current or future effect on our financial condition, results of operations or liquidity.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles. Critical accounting policies are those policies that are most important to the preparation of our condensed consolidated financial statements and require management's subjective and complex judgments due to the need to make estimates about the effect of matters that are inherently uncertain. In doing so, we must make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. To the extent there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience, existing and known circumstances, authoritative accounting guidance, and other factors and assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies relate to revenue recognition, long-lived assets, and income taxes. The application of these accounting policies involves the exercise of judgment and the use of assumptions as to the future uncertainties and, as a result, actual results will likely differ, and may differ materially, from such estimates.
For additional information, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates", in the 2024 Annual Report.
Harbor Diversified Inc. published this content on June 29, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on June 29, 2026 at 15:58 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]