證券交易委員會
華盛頓特區20549
表格
根據1934年證券交易所法案第13或第15(d)節的季度報告 |
截至季度結束日期的財務報告
或者
根據1934年證券交易法第13或15(d)條規定的過渡報告 |
過渡期從 到
佣金文件號
根據法律設立 | ||
（I.R.S.僱主識別號碼） |
(
(首席執行官辦公室地址和電話號碼)
在法案第12(b)條的規定下注冊的證券：
請用複選標記指示，即(1)在過去12個月內已按照證券交易法的第13或15(d)條的規定提交所有必須提交的報告（或對要求提交此類報告的較短期間內向參與者提交）；及(2)曾在過去90天內遵守此類提交要求。
請以複選框標示，申請人是否按照規則S-t第405條規定提交了過去12個月內需要提交的每個互動數據文件個月（或者申請人需要提交這些文件的更短期間）
請用勾選標記指示註冊人是大型高速申報人、高速申報人、非高速申報人、較小的報告公司還是新興增長公司。請參閱《交易所法》第120億.2條中「大型高速申報人」、「高速申報人」、「較小的報告公司」和「新興增長公司」的定義：
◻ | ||
非加速文件提交者 ◻ | OJEMDA的加速批准是基於公司關鍵的開放標籤2期FIREFLY-1試驗的數據，該試驗在兩個研究組中招募了總共137例復發或難治的BRAF改變的pLGG患者。第一組招募了77例患者，用於療效分析。第二組提供了額外60例患者的安全性數據，並在第一組招募完成後啓動，以便設置訪問OJEMDA的機制。這個試驗的詳細內容在2023年11月的美國神經腫瘤學會議上通過兩次口頭報告和一篇發表在《自然醫學》上的平行發表。 | |
新興成長企業 |
如果是新興成長型企業，請勾選，表明註冊者已選擇不使用根據證券交易所法第13(a)條規定提供的任何新的或修訂的財務會計準則的延長過渡期。◻
是 否根據交易所法第120億.2條。是的
請指示在最新可行日期每個申報人普通股類別的流通股數。
班級 | 截至2024年10月25日爲止的未償金額 | |
普通股，無面值 |
2
第一部分。財務信息
項目1。基本報表
SKYWEST，INC.及其附屬公司
基本報表
（以千美元爲單位）
資產
9月30日， |
| 12月31日， | ||||
| 2024 |
| 2023 | |||
流動資產： | ||||||
現金及現金等價物 | $ | | $ | | ||
有價證券 |
| |
| | ||
應收款項，淨額 |
| |
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淨存貨 |
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其他資產 |
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總流動資產 |
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資產： | ||||||
飛機和可旋轉備件 |
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飛機按金 |
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建築物和地面設備 |
| |
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所有房地產及設備總價值，毛值 |
| |
| | ||
累積折舊和攤銷減少 |
| ( |
| ( | ||
淨房地產和設備總資產 |
| |
| | ||
其他資產: | ||||||
經營租賃權使用資產 | | | ||||
長期應收款項及其他資產 |
| |
| | ||
其他資產總計 |
| |
| | ||
資產總額 | $ | | $ | | ||
請參閱附註事項的簡明合併財務報表。
3
SKYWEST，INC.和子公司
基本報表
（以千美元爲單位）
負債和股東權益
9月30日， |
| 12月31日， | ||||
| 2024 |
| 2023 | |||
流動負債： | ||||||
長期債務的流動部分 | $ | | $ | | ||
應付賬款 |
| |
| | ||
應計的工資、工資和福利 |
| |
| | ||
經營租賃負債的到期付款 |
| |
| | ||
所得稅以外的稅費 |
| |
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其他流動負債 |
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流動負債合計 |
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長期負債，減：流動到期債務 |
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遞延所得稅應付款 |
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非流動營業租賃負債 |
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其他長期負債 |
| |
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承諾和 contingencies（見注 7） | ||||||
6.40 | ||||||
優先股， |
|
| ||||
普通股， |
| |
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保留盈餘 |
| |
| | ||
截至2024年3月31日和2023年12月31日，公司的庫藏股票分別有2,279,784股和2,693,653股。 |
| ( |
| ( | ||
累計其他綜合收益 | | | ||||
股東權益總額 |
| |
| | ||
負債和股東權益總額 | $ | | $ | | ||
請參閱附註事項的簡明合併財務報表。
4
SKYWESt，INC.及其子公司
綜合收益綜合表
(未經審計)
(金額和股數以千爲單位，每股金額除外)
三個月的結束時間 | 截至九個月結束 | |||||||||||
9月30日， | 9月30日， | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
營業收入： | ||||||||||||
飛行協議 | $ | | $ | | $ | | $ | | ||||
租賃、機場服務和其他 |
| |
| |
| |
| | ||||
總營收 |
| |
| |
| |
| | ||||
營業費用: | ||||||||||||
工資、工資和福利 |
| |
| |
| |
| | ||||
飛機維護、材料和修理 |
| |
| |
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折舊和攤銷 |
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航空燃料 |
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機場相關支出 |
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飛機租賃 |
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其他營業費用 |
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營業費用總計 |
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營業收入 |
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其他收益（費用）： | ||||||||||||
利息收入 |
| |
| |
| |
| | ||||
利息支出 |
| ( |
| ( |
| ( |
| ( | ||||
其他收入（損失），淨額 |
| |
| ( |
| ( |
| | ||||
其他支出合計，淨值 |
| ( |
| ( |
| ( |
| ( | ||||
稅前收入 |
| |
| |
| |
| | ||||
所得稅福利預提 |
| |
| |
| |
| ( | ||||
淨利潤 | $ | | $ | | $ | | $ | | ||||
每股基本收益 | $ | | $ | | $ | | $ | | ||||
每股稀釋收益 | $ | | $ | | $ | | $ | | ||||
加權平均普通股數： | ||||||||||||
基本 |
| | | | | |||||||
稀釋 |
| | | | | |||||||
綜合收益： | ||||||||||||
淨收入 | $ | | $ | | $ | | $ | | ||||
Net unrealized appreciation on marketable securities, net of taxes |
| |
| |
| |
| | ||||
綜合收益總額 | $ | | $ | | $ | | $ | | ||||
請參閱附註的並表財務報表
5
SKYWEST，INC.及其附屬公司
股東權益合併報表
(未經審計)
(以千計)
累積的 | |||||||||||||||||||
其他 | |||||||||||||||||||
普通股 | 留存收益 | 庫藏股 | 綜合 | ||||||||||||||||
股份 | 數量 | 收益 | 股份 | 數量 | 收益（損失） | 總費用 | |||||||||||||
2023年12月31日的餘額 |
| | $ | | $ | |
| ( | $ | ( | $ | | $ | | |||||
淨收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
股票津貼 |
| | — |
| — |
| — |
| — |
| — |
| — | ||||||
員工在股票獎勵上支付的個人所得稅 | — | — | — | ( | ( | — | ( | ||||||||||||
員工股票購買計劃下普通股的銷售 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
股票補償費用 |
| — |
| |
| — |
| — |
| — |
| — | | ||||||
公司回購股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
Net unrealized depreciation on marketable securities, net of tax of $ | — | — | — | — | — | ( | ( | ||||||||||||
2024年3月31日結存餘額 | | $ | | $ | | ( | $ | ( | $ | | $ | | |||||||
淨收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
股票津貼 | |
| — |
| — |
| — |
| — |
| — | — | |||||||
股票補償費用 | — |
| |
| — |
| — |
| — |
| — | | |||||||
公司回購股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
可變現證券淨未實現折舊，稅後淨值爲$ | — | — | — | — | — | ( | ( | ||||||||||||
2024年6月30日餘額 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | | |||||
淨收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
員工股票購買計劃下普通股的銷售 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
行使權證後發行的普通股，淨額 | | — |
| — |
| — |
| — |
| — |
| — | |||||||
股票補償費用 | — |
| |
| — |
| — |
| — |
| — | | |||||||
公司回購股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
證券淨未實現升值，稅後$淨額 | — | — | — | — | — | | | ||||||||||||
2024年9月30日餘額 |
| | $ | | $ | |
| ( | $ | ( | $ | | $ | | |||||
請參閱附註事項的簡明合併財務報表。
6
SKYWEST公司及其子公司
股東權益的綜合報表
(未經審計)
(以千計)
累積的 | |||||||||||||||||||
其他 | |||||||||||||||||||
普通股 | 留存收益 | 庫藏股 | 綜合 | ||||||||||||||||
股份 | 數量 | 收益 | 股份 | 數量 | 損失 | 總費用 | |||||||||||||
2022年12月31日的餘額爲 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | | |||||
淨損失 |
| — |
| — |
| ( |
| — |
| — |
| — | ( | ||||||
股票津貼 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
員工在股票獎勵上支付的個人所得稅 | — | — | — | ( | ( | — | ( | ||||||||||||
員工股票購買計劃下的普通股出售 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
股票補償費用 |
| — |
| |
| — |
| — |
| — |
| — | | ||||||
公司回購股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
可變投資未實現升值淨收益，稅後$ | — | — | — | — | — | | | ||||||||||||
2023年3月31日的餘額 | | $ | | $ | | ( | $ | ( | $ | ( | $ | | |||||||
淨收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
股票補償費用 | — |
| |
| — |
| — |
| — |
| — | | |||||||
公司回購股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
可變現證券未實現升值，稅後淨額爲$ | — | — | — | — | — | | | ||||||||||||
6,749.7 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | | |||||
淨收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
員工股票購買計劃下的普通股出售 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
股票補償費用 | — |
| |
| — |
| — |
| — |
| — | | |||||||
公司回購股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
證券投資未實現升值淨額，稅後淨額爲$ | — | — | — | — | — | | | ||||||||||||
2023年9月30日結餘 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | | |||||
請參閱附註事項的簡明合併財務報表。
7
SKYWEST，INC及其子公司
現金流量表簡明綜合報表
(未經審計)
(以千計)
截至九個月結束 | ||||||
9月30日， | ||||||
| 2024 |
| 2023 | |||
營業活動產生的現金流量淨額 | $ | | $ | | ||
投資活動產生的現金流量： | ||||||
購買有市場流通的證券 |
| ( | ( | |||
可變市場證券銷售 |
| | | |||
購置房地產和設備： | ||||||
飛機和可旋轉備件 |
| ( | ( | |||
建築物和地面設備 |
| ( | ( | |||
固定資產出售的收益 |
| | | |||
飛機按金 | — | ( | ||||
用於已獲得飛機的飛機存款款項 | | — | ||||
其他資產減少（增加） |
| ( | | |||
投資活動提供的（使用的）淨現金 |
| ( |
| | ||
籌資活動產生的現金流量： | ||||||
長期債務發行所得 |
| | | |||
償還長期債務本金 |
| ( | ( | |||
支付債券發行費 | ( | ( | ||||
普通股發行所得淨額 |
| | | |||
員工爲已獲股權獎勵支付的所得稅 | ( | ( | ||||
購買庫存股和消費稅 |
| ( | ( | |||
融資活動中使用的淨現金 |
| ( |
| ( | ||
現金及現金等價物增加 |
| | | |||
期初現金及現金等價物餘額 |
| | | |||
期末現金及現金等價物 | $ | | $ | | ||
現金流量信息補充披露: | ||||||
非現金投資和籌資活動: | ||||||
購置房地產和設備 | $ | | $ | | ||
攤銷使用權資產 | $ | — | $ | ( | ||
經營租賃負債的攤銷 | $ | — | $ | | ||
期間支付的現金用於： | ||||||
利息淨額，減去資本化金額 | $ | | $ | | ||
所得稅 | $ | | $ | | ||
請參閱附註事項的簡明合併財務報表。
8
西空航空公司及其子公司
簡明合併財務報表附註
(未經審計)
(1) 簡明綜合財務報表
報告範圍
西空航空公司（以下簡稱「西空航空」或「公司」）、其運營子公司西空航空公司（「西空航空公司」）、其融資子公司SkyWest Leasing, Inc.（「西空租賃」）及其包機服務子公司SkyWest Charter, LLC（「SWC」）的簡明綜合財務報表未經審計，根據美國證券交易委員會（「SEC」）的規則和法規編制。儘管公司認爲以下披露足以使所呈現的信息不會誤導，但根據這些規則和法規，根據美國通用會計準則（「GAAP」）編制的財務報表通常包括的某些信息和披露已經被簡化或省略。這些簡明綜合財務報表反映了在管理層意見中，必要進行的所有調整，以公正呈現所呈現的中期經營結果。除非另有披露，所有調整均屬於一般性反覆性質。這些簡明綜合財務報表應與公司截至2023年12月31日的年度報告表格10-K中包含的綜合財務報表和附註一起閱讀。截至2024年9月30日結束的三個和九個月的經營結果不能必然反映出可能在2024年12月31日結束的年度結果。
根據GAAP要求，財務報表的編制需要管理層進行會計估計和假設，這些估計和假設會影響資產和負債的報告金額，披露基於財務報表日期的或披露可能性資產和負債的金額，以及報告期間營業收入和費用的金額。實際結果可能會與這些估計和假設有實質性差異。
最近的會計聲明
2023年11月，財務會計準則委員會（「FASB」）發佈了會計準則更新（「ASU」）2023-07號，題爲「分部報告（會計準則法典（「ASC」）第280號）—改進可報告分部披露」，旨在通過增加對重要分部費用的披露，主要改進可報告分部披露要求。該ASU還擴大了披露要求，以使財務報表使用者更好地理解實體對分部績效和資源分配的衡量和評估。本指導意見適用於2023年12月15日後開始的財年，2023年12月15日後開始的財年內的中期期間，並可提前使用。公司目前正在評估採納這一新指導對其合併財務報表和相關披露可能產生的潛在影響。
2023年12月，FASB發佈了ASU2023-09號，題爲「所得稅（ASC第740號）—改進所得稅披露」，該指導通過要求所得稅稅率調節和所得稅支付的司法管轄區相關信息的一致分類和更多細分，提高了所得稅披露的透明度、有效性和可比性。該指導適用於2024年12月15日後開始的年度期間，並可提前使用。公司目前正在評估採納這一新指導對其合併財務報表和相關披露可能產生的潛在影響。
(2)營業收入
公司在適用協議下提供服務時，根據其飛行協議以及租賃、機場服務和其他服務協議確認營業收入。根據公司與聯合大陸航空公司（稱爲「聯合」）、達美航空公司（稱爲「達美」）、美國航空公司（稱爲「美國」）和阿拉斯加航空公司（稱爲「阿拉斯加」）（每家爲「主要航空公司合作伙伴」）的固定費用安排（稱爲「容量購買」協議），主要航空公司合作伙伴通常支付給公司每次起飛、飛行小時數（從起飛到降落，不包括滑行時間）或區間小時數（從起飛到降落，包括滑行時間）發生的固定費用，以及
9
每架飛機每月的金額，另外根據飛行完成情況、準點率或其他績效指標提供額外激勵。主要航空公司合作伙伴還直接支付公司或者基於承購協議發生的某些直接費用，例如燃料、機場降落費和機場租金。根據承購協議，公司的績效義務是在每次飛行完成時滿足，以完成的區間飛行小時數作爲度量，並反映在飛行協議收入中。承購協議的交易價格是根據完成飛行期間所獲得的固定費用、激勵費用和直接報銷費用確定的。截至2024年9月30日的九個月和2023年同期，承購協議約佔了公司飛行協議收入的
根據公司的「分攤」協議，主要航空公司合作伙伴和公司談判一個乘客票價分攤公式，根據該公式，公司就那些乘客在公司航空公司上旅行一部分並在主要航空公司上旅行另一部分的機票收入的百分比。根據公司的分攤飛行協議，績效義務在每次飛行完成時得到滿足並且收入在每次完成飛行後基於公司確定的分攤乘客票價部分而確認。分攤協議的交易價格是根據協議期間每次完成飛行上的每位乘客票價金額導出的分攤公式確定的。公司的分攤協議中的某些航線受到美國交通部根據基本航空服務（「EAS」）計劃補貼的支持，該計劃旨在確保美國小型社區維持一定程度的定期航空服務。EAS合同通常
以下表格表示截至2024年9月30日和2023年9月30日的三個月和九個月內公司按類型劃分的飛行協議營業收入（以千爲單位）：
截至9月30日止三個月的時間內， | 截至9月30日止九個月的時間內， | |||||||||||
| 2024 |
| 2023 | 2024 |
| 2023 | ||||||
容量購買協議飛行運營營業收入（非租賃元件） | $ | | $ | | $ | | $ | | ||||
容量購買協議固定飛機租賃收入 | | | | | ||||||||
容量購買協議變量飛機租賃營業收入 |
| |
| |
| |
| | ||||
按比例分配協議和SWC營業收入 |
| |
| |
| |
| | ||||
飛行協議營業收入 | $ | | $ | | $ | | $ | | ||||
公司根據獨立銷售價格，將其在容量購買協議下收到的總對價分配給租賃和非租賃元件。 公司在容量購買協議下的一部分補償涉及運營飛機，被確定爲容量購買協議的非租賃元件。 公司承認與每個報告期針對每次出發、飛行小時或區塊小時的非租賃元件收到的固定費用相關的營業收入。公司承認與每個報告期租賃元件之外的固定月度付款有關的營業收入，根據飛機區塊小時完成數量相對於公司預期在剩餘合同期內完成的區塊小時數量。因此，公司的營業收入確認可能會與公司根據其容量購買協議收到現金的時間有所不同。公司在確認營業收入之前引用其容量購買協議下收到的現金稱爲「遞延收入」，公司在向其主要航空公司合作伙伴開具賬單之前確認的營業收入稱爲每個報告期的「未開票營業收入」。 在2024年9月30日結束的九個月內，公司確認了$
10
compared to deferring revenue of $
A portion of the Company’s compensation under its capacity purchase agreements is designed to reimburse the Company for certain aircraft ownership costs. The consideration for aircraft ownership costs varies by agreement but is intended to cover either the Company’s aircraft principal and interest debt service costs, its aircraft depreciation and interest expense or its aircraft lease expense costs while the aircraft is under contract. The consideration received for the use of the aircraft under the Company’s capacity purchase agreements is accounted for as lease revenue, inasmuch as the agreements identify the 「right of use」 of a specific type and number of aircraft over a stated period of time. The lease revenue associated with the Company’s capacity purchase agreements is accounted for as an operating lease and is reflected as flying agreements revenue on the Company’s consolidated statements of comprehensive income. The Company recognizes fixed monthly lease payments as lease revenue using the straight-line basis over the capacity purchase agreement term and variable lease payments in the period when the block hours are completed. The Company recognized $
The Company’s total deferred revenue balance as of September 30, 2024 was $
公司的容量購買和按份約定包括每週從各個主要航空公司合作伙伴處的臨時現金付款，基於每月的預期飛行水平。公司和每個主要航空公司合作伙伴隨後會按月或季度的基礎覈對這些付款與實際完成的飛行活動。
在公司的協議中，公司有資格在實現某些績效標準時獲得激勵報酬。這些激勵在協議中有明確定義，並會根據每月、季度或半年的基準進行衡量和確定。在協議期間的每個期間結束時，公司計算在該期間內實現的激勵，並相應地確認與該協議有關的收入，但須符合ASC 606主題下的變量約束指導。
截至2024年9月30日，公司擁有
聯合快運協議 | ||||||
協議 |
| 飛機類型 |
| 股數 |
| 條款/終止日期 |
聯合快運協議 (容量購買協議) | • E175 • CRJ700 • CRJ200 | 個別飛機的定期到期日期爲從2024年到2029年 | ||||
美國聯合航空城市航空協議 | • CRJ200 | 終止合約需 通知 | ||||
根據美國聯合快運協議的總數 | ||||||
11
達美航空合作協議 | ||||||
協議 |
| 飛機類型 |
| 股數 |
| 條款/終止日期 |
達美航空合作協議 (購買能力協議) | • E175 • CRJ900 • CRJ700 | 各架飛機的服務期限安排在2025年至2034年之間 | ||||
達美航空連線航空公司分成協議 | • CRJ900 • CRJ700** | | 可終止 注意 | |||
根據達美航空合作協議的總計 | ||||||
美國容量購買協議 | ||||||
協議 |
| 飛機類型 |
| 股數 |
| 條款/終止日期 |
美國協議 （容量購買協議） | • E175 • CRJ700 | 各架飛機的計劃到期日期從2025年到2032年不等 | ||||
美國協議總計 | ||||||
阿拉斯加運力購買協議 | ||||||
協議 |
| 飛機類型 |
| 股數 |
| 條款/終止日期 |
阿拉斯加協議 （容量購買協議） | • E175 | 各個飛機的計劃到期日期爲2030年至2034年 | ||||
| * | 公司的按比例協議基於特定航線，而不是特定飛機數量。上述每項按比例協議列出的飛機數量大致等同於公司用於服務按比例路線的飛機數量。 |
** 包括CRJ550飛機，一種
除了上述描述的合同安排外，截至2024年9月30日，SkyWest航空已達成協議，將以下E175飛機放置在與各主要航空公司合作的容量購買協議下：
| Q4 2024 |
| 2025 |
| 2026 | 總費用 | ||
聯合大陸航空 |
| |
| |
| | | |
阿拉斯加航空 |
| — |
| |
| — | | |
總費用 |
| |
| |
| | |
The Company also entered into multiple agreements with United in September and October 2024 to place a total of
Final delivery and in-service dates for aircraft to be placed under contract are subject to change and may be adjusted based on various factors.
When an aircraft is scheduled for expiration from a capacity purchase agreement, the Company may, as practical under the circumstances, negotiate an extension with the respective major airline partner, negotiate the placement of the aircraft with another major airline partner, return the aircraft to the major airline partner when the aircraft is provided by the major airline partner, place owned aircraft for sale or pursue other uses for the aircraft. Other uses for the aircraft may include placing the aircraft in a prorate agreement, leasing the aircraft to a third party or disassembling aircraft components such as the engines and parts to be used as spare inventory.
租賃、機場服務和其他收入主要包括從出租給第三方的飛機和備用發動機以及機場客戶服務協議（例如登機口和坡道代理服務等）產生的營業收入。
12
various airports where the Company has been contracted by third parties to provide such services. The following table represents the Company’s lease, airport services and other revenues for the three and nine months ended September 30, 2024 and 2023 (in thousands):
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||
| 2024 |
| 2023 | 2024 |
| 2023 | ||||||
Operating lease revenue | $ | | $ | | $ | | $ | | ||||
Airport customer service and other revenue | | | | | ||||||||
Lease, airport services and other | $ | | $ | | $ | | $ | | ||||
The following table summarizes future minimum rental income under operating leases primarily related to leased aircraft and engines that had remaining non-cancelable lease terms as of September 30, 2024 (in thousands):
October 2024 through December 2024 |
| $ | |
2025 |
| ||
2026 |
| ||
2027 |
| ||
2028 |
| ||
Thereafter |
| ||
Total future minimum rental income under operating leases | $ |
Of the Company’s $
The transaction price for airport customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of flights handled by the Company over the agreement term.
The Company’s operating revenues could be impacted by several factors, including changes to the Company’s code-share agreements with its major airline partners, changes in flight schedules, contract modifications resulting from contract renegotiations, the Company’s ability to earn incentive payments contemplated under the Company’s code-share agreements and resolution of unresolved items with the Company’s major airline partners.
Other ancillary revenues commonly associated with airlines, such as baggage fee revenue, ticket change fee revenue and the marketing component of the sale of mileage credits, are retained by the Company’s major airline partners on flights that the Company operates under its code-share agreements.
Allowance for Credit Losses
The Company monitors publicly available credit ratings for entities for which the Company has a significant receivable balance. As of September 30, 2024, the Company had gross receivables of $
13
The following table summarizes the changes in allowance for credit losses:
| Allowance for Credit Losses | ||
Balance at December 31, 2023 | $ | | |
Adjustments to credit loss reserves |
| ( | |
Write-offs charged against allowance |
| — | |
Balance at September 30, 2024 | $ | | |
(3) Capital Transactions
Stock-Based Compensation
During the nine months ended September 30, 2024, the Company granted
The Company accounts for forfeitures of restricted stock units and performance shares when forfeitures occur. The estimated fair value of the restricted stock units and performance shares is amortized over the applicable vesting periods. Stock-based compensation expense for the performance shares is based on the Company’s anticipated outcome of achieving the performance metrics. During the nine months ended September 30, 2024 and 2023, the Company recorded pre-tax stock-based compensation expense of $
Warrants
In 2020 and 2021, the Company issued to U.S. Department of the Treasury (“U.S. Treasury”) warrants to purchase shares of the Company’s common stock pursuant to the
(4) Stock Repurchase
The Company’s Board of Directors adopted a stock repurchase program in May 2023, which authorizes the Company to repurchase shares of the Company’s common stock in the public market or in private transactions, from time to time, at prevailing prices. Under the May 2023 repurchase program, the Company’s Board of Directors authorized up to $
During the nine months ended September 30, 2024, the Company repurchased
14
(5) Net Income Per Common Share
Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock.
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2024 | 2023 |
| 2024 | 2023 | ||||||||
Treasury Warrants(1) | — | | — | | ||||||||
Employee Stock Awards | — | — | — | | ||||||||
Total antidilutive securities |
| — |
| |
| — |
| | ||||
| (1) | Warrants originally issued to U.S. Treasury to purchase shares of SkyWest common stock issued pursuant to the three Payroll Support Program Agreements and a loan agreement with the U.S. Treasury. |
Additionally, during the nine months ended September 30, 2024 and 2023,
The calculation of the weighted average number of shares of common stock outstanding for Basic EPS and Diluted EPS are as follows for the periods indicated (in thousands, except per share data):
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2024 | 2023 |
| 2024 | 2023 | ||||||||
Numerator: |
|
|
|
|
|
|
| |||||
Net income | $ | | $ | | $ | | $ | | ||||
Denominator: | ||||||||||||
Basic earnings per share weighted average shares |
| |
| |
| |
| | ||||
Dilutive effect of employee stock awards and warrants |
| |
| |
| |
| | ||||
Diluted earnings per share weighted average shares |
| |
| |
| |
| | ||||
Basic earnings per share | $ | | $ | | $ | | $ | | ||||
Diluted earnings per share | $ | | $ | | $ | | $ | | ||||
(6) Segment Reporting
The Company’s
The Company’s chief operating decision maker analyzes the profitability of operating new aircraft financed through the issuance of debt, including the Company’s E175 fleet, separately from the profitability of the Company’s capital deployed for ownership and financing of such aircraft. The SkyWest Airlines and SWC segment includes revenue earned under the applicable capacity purchase agreements attributed to operating such aircraft and the respective operating costs. The SkyWest Airlines and SWC segment also includes revenue and operating expenses attributed to
15
other flying agreements and airport services agreements. The SkyWest Leasing segment includes applicable revenue earned under the applicable capacity purchase agreements attributed to the ownership of new aircraft acquired through the issuance of debt and the respective depreciation and interest expense of such aircraft. The SkyWest Leasing segment also includes the activity of leasing regional jet aircraft and spare engines to third parties and other activities. The SkyWest Leasing segment’s total assets and capital expenditures include new aircraft acquired through the issuance of debt and assets leased to third parties. Additionally, aircraft removed from SkyWest Airlines’ operations and held for sale are included in the SkyWest Leasing segment.
The following represents the Company’s segment data for the three-month periods ended September 30, 2024 and 2023 (in thousands):
Three months ended September 30, 2024 | |||||||||
SkyWest Airlines | SkyWest | ||||||||
| and SWC |
| Leasing |
| Consolidated | ||||
Operating revenues (1) | $ | | $ | | $ | | |||
Operating expense |
| |
| |
| | |||
Depreciation and amortization expense |
| |
| |
| | |||
Interest expense |
| |
| |
| | |||
Segment profit (2) |
| |
| |
| | |||
Total assets (as of September 30, 2024) |
| |
| |
| | |||
Capital expenditures (including non-cash) |
| |
| |
| | |||
Three months ended September 30, 2023 | |||||||||
SkyWest Airlines | SkyWest | ||||||||
| and SWC |
| Leasing |
| Consolidated | ||||
Operating revenues (1) | $ | | $ | | $ | | |||
Operating expense |
| |
| |
| | |||
Depreciation and amortization expense |
| |
| |
| | |||
Interest expense |
| |
| |
| | |||
Segment profit (loss) (2) |
| ( |
| |
| | |||
Total assets (as of September 30, 2023) |
| |
| |
| | |||
Capital expenditures (including non-cash) |
| |
| |
| | |||
| (1) | Prorate revenue and airport customer service revenue are reflected in the SkyWest Airlines and SWC segment. |
| (2) | Segment profit (loss) is equal to operating income less interest expense. |
The following represents the Company’s segment data for the nine-month periods ended September 30, 2024 and 2023 (in thousands):
Nine months ended September 30, 2024 | |||||||||
SkyWest Airlines | SkyWest | ||||||||
| and SWC |
| Leasing |
| Consolidated | ||||
Operating revenues (1) | $ | | $ | | $ | | |||
Operating expense |
| |
| |
| | |||
Depreciation and amortization expense |
| |
| |
| | |||
Interest expense |
| |
| |
| | |||
Segment profit (2) |
| |
| |
| | |||
Total assets (as of September 30, 2024) |
| |
| |
| | |||
Capital expenditures (including non-cash) |
| |
| |
| | |||
16
Nine months ended September 30, 2023 | |||||||||
SkyWest Airlines | SkyWest | ||||||||
| and SWC |
| Leasing |
| Consolidated | ||||
Operating revenues (1) | $ | | $ | | $ | | |||
Operating expense |
| |
| |
| | |||
Depreciation and amortization expense |
| |
| |
| | |||
Interest expense |
| |
| |
| | |||
Segment profit (loss) (2) |
| ( |
| |
| ( | |||
Total assets (as of September 30, 2023) |
| |
| |
| | |||
Capital expenditures (including non-cash) |
| |
| |
| | |||
| (1) | Prorate revenue and airport customer service revenue are reflected in the SkyWest Airlines and SWC segment. |
| (2) | Segment profit (loss) is equal to operating income less interest expense. |
(7) Leases, Commitments, Guarantees and Contingencies
The Company leases property and equipment under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company used its incremental borrowing rate to discount the lease payments based on information available at lease commencement.
Aircraft
As of September 30, 2024, excluding aircraft financed by the Company’s major airline partners that the Company operates for them under contract, the Company leased
Airport facilities
The Company has operating leases for facility space including airport terminals, office space, cargo warehouses and maintenance facilities. The Company generally leases this space from government agencies that control the use of the various airports. The remaining lease terms for facility space vary from
Leases
As of September 30, 2024, the Company’s right-of-use assets were $
The table below presents lease related terms and discount rates as of September 30, 2024:
Weighted-average remaining lease term for operating leases | |
Weighted-average discount rate for operating leases |
17
The Company’s lease costs for the three and nine months ended September 30, 2024 and 2023 included the following components (in thousands):
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Operating lease cost | $ | | $ | | $ | | $ | | ||||
Variable and short-term lease cost |
| |
| |
| |
| | ||||
Sublease income | ( | ( | ( | ( | ||||||||
Total lease cost | $ | | $ | |
| $ | | $ | | |||
As of September 30, 2024, the Company leased aircraft, airport facilities, office space and other property and equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property. The Company expects that, in the normal course of business, such operating leases that expire will be renewed or replaced by other leases.
October 2024 through December 2024 |
| $ | |
2025 |
| ||
2026 |
| ||
2027 |
| ||
2028 |
| ||
Thereafter |
| ||
Total future minimum operating lease payments | $ |
As of September 30, 2024, the Company had a firm purchase commitment for
The following table summarizes the Company’s commitments and obligations as noted for each of the next five years and thereafter (in thousands):
| Total |
| Oct- Dec 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 |
| Thereafter | ||||||||
Operating lease payments for aircraft and facility obligations | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Firm aircraft and spare engine commitments |
| | | | | — | — | — | |||||||||||||
Interest commitments (1) |
| | | | | | | | |||||||||||||
Principal maturities on long-term debt |
| | | | | | | | |||||||||||||
Total commitments and obligations | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
| (1) | At September 30, 2024, the Company’s long-term debt had fixed interest rates. |
In addition to the table above, in September 2024, the Company entered into a master equipment purchase agreement with another airline to acquire certain airframes and engines from the airline and lease the assets back to the airline under a -year term. At September 30, 2024, the Company had not acquired any airframes or engines under the master equipment purchase agreement. The Company estimates the purchase obligation will be between $
18
Guarantees
In 2022, the Company agreed to guarantee $
In 2023, the Company agreed to guarantee up to $
The purpose of these guarantees is to help reduce the financing costs of aircraft for the third-parties in an effort to increase the potential number of commercial pilots in the Company’s hiring pipeline. The Company also recorded the estimated credit loss associated with the guarantees based on publicly available historical default rates issued by a third party for companies with similar credit ratings, factoring the collateral and guarantee term.
(8) Fair Value Measurements
The Company holds certain assets that are required to be measured at fair value in accordance with GAAP. The Company determined the fair value of these assets based on the following three levels of inputs:
Level 1 | — | Quoted prices in active markets for identical assets or liabilities. | ||
Level 2 | — | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities. | ||
Level 3 | — | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, therefore requiring an entity to develop its own assumptions. |
As of September 30, 2024, and December 31, 2023, the Company held certain assets that are required to be measured at fair value on a recurring basis.
Fair Value Measurements as of September 30, 2024 | ||||||||||||
| Total |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Marketable Securities | ||||||||||||
Bonds and bond funds | $ | | $ | — | $ | | $ | — | ||||
Commercial paper |
| |
| — |
| |
| — | ||||
| — | | — | |||||||||
Investments in Other Companies | | — | — | | ||||||||
Cash and Cash Equivalents | | | — | — | ||||||||
Total Assets Measured at Fair Value | $ | | $ | | $ | | $ | | ||||
19
Fair Value Measurements as of December 31, 2023 | ||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||
Marketable Securities |
|
|
|
|
|
|
|
| ||||
Bonds and bond funds | $ | $ | — | $ | | $ | — | |||||
Commercial paper |
|
| — |
| |
| — | |||||
— | — | |||||||||||
Investments in Other Companies |
| — |
| | ||||||||
Cash and Cash Equivalents | | — | — | |||||||||
Total Assets Measured at Fair Value | $ | $ | $ | $ | | |||||||
The Company’s “Marketable Securities” classified as Level 2 securities primarily utilize broker quotes in a non-active market for valuation of these securities. See Note 11 “Investments in Other Companies” regarding the Company’s investments in other companies, for the nine months ended September 30, 2024.
The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during the nine months ended September 30, 2024. The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period.
As of September 30, 2024, and December 31, 2023, the Company classified $
(9) Assets Held for Sale
In 2022, the Company committed to a formal plan to sell
(10) Long-term Debt
Long-term debt consisted of the following as of September 30, 2024, and December 31, 2023 (in thousands):
September 30, 2024 | December 31, 2023 | ||||
Current portion of long-term debt | $ | $ | |||
Current portion of unamortized debt issue cost, net | ( | ( | |||
Current portion of long-term debt, net of debt issue costs | $ | $ | |||
Long-term debt, net of current maturities | $ | $ | |||
Long-term portion of unamortized debt issue cost, net | ( | ( | |||
Long-term debt, net of current maturities and debt issue costs | $ | $ | |||
Total long-term debt (including current portion) | $ | $ | |||
Total unamortized debt issue cost, net | ( | ( | |||
Total long-term debt, net of debt issue costs | $ | $ |
20
As of September 30, 2024, the Company had $
As of September 30, 2024 and December 31, 2023, the Company had $
As of September 30, 2024, SkyWest Airlines had a $
The Company’s debt agreements are not traded on an active market and are recorded at carrying value on the Company’s consolidated balance sheet. The fair value of the Company’s long-term debt is estimated based on current rates offered to the Company for similar debt. Debt is primarily classified as Level 2 within the fair value hierarchy.
September 30, 2024 | December 31, 2023 | |||||
Carrying value | $ | $ | ||||
Fair value | $ | $ | ||||
(11) Investments in Other Companies
Equity Method Investments
During 2019, the Company created a joint venture with Regional One, Inc. and, as of September 30, 2024, has invested a total of $
In December 2023, the Company invested $
The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable.
21
Fair Value Method Investments
In 2021, the Company entered into a strategic partnership with Eve UAM, LLC (“Eve UAM”), to develop a network of deployment for Eve UAM’s electric vertical takeoff and landing (“eVTOL”) aircraft.
In 2022, the Company acquired
The shares of common stock of Eve were classified as Level 1 within the fair value hierarchy as Eve common stock is actively traded on the New York Stock Exchange, and the value is determined using quoted market prices for the equity security. The warrant and put option (prior to the exercise of the put option) were classified as Level 3 within the fair value hierarchy (“Eve Level 3 Investments”). The Company used the Black Scholes Option Pricing Model to determine the estimated fair market value of the Eve Level 3 Investments.
Eve Level 3 Investments: | |||
Balance at December 31, 2023 |
| $ | |
Purchases |
| — | |
Exercise of put option for aircraft parts credits | ( | ||
| ( | ||
Balance at September 30, 2024 | $ | ||
During the nine months ended September 30, 2024, the Company recorded a net loss of $
(12) Income Taxes
The Company’s effective tax rate for the nine months ended September 30, 2024 was
The Company’s effective tax rate for the nine months ended September 30, 2023 was (
22
expiration. These benefits were partially offset by the provision for state income taxes, the impact of non-deductible expenses and a discrete tax expense on employee equity transactions that occurred during the nine months ended September 30, 2023.
(13) Legal Matters
The Company is subject to certain legal actions which it considers routine to its business activities. As of September 30, 2024, the Company’s management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of operations.
23
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis presents factors that had a material effect on the results of operations of SkyWest, Inc. (“SkyWest” “we” or “us”) during the three- and nine-month periods ended September 30, 2024 and 2023. Also discussed is our financial condition as of September 30, 2024, and December 31, 2023. You should read this discussion in conjunction with our condensed consolidated financial statements for the three and nine months ended September 30, 2024, including the notes thereto, appearing elsewhere in this Report. This discussion and analysis contains forward-looking statements. Please refer to the section of this Report entitled “Cautionary Statement Concerning Forward-Looking Statements” for discussion of uncertainties, risks and assumptions associated with these statements.
Cautionary Statement Concerning Forward-Looking Statements
Certain of the statements contained in this Report should be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “hope,” “likely,” and “continue” and similar terms used in connection with statements regarding our outlook, anticipated operations, the revenue environment, our contractual relationships, and our anticipated financial performance. These statements include, but are not limited to, statements about the continued demand for our product, the effect of economic conditions on SkyWest’s business, financial condition and results of operations, the scheduled aircraft deliveries and fleet size for SkyWest in upcoming periods and the related execution of SkyWest’s fleet transition strategy and expected timing thereof, expected production levels in future periods and associated staffing challenges, pilot attrition trends, SkyWest’s coordination with United Airlines, Inc. (“United”), Delta Air Lines, Inc. (“Delta”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major airline partner” and together, “major airline partners”) to optimize the delivery of aircraft under previously announced agreements, the expected terms, timing and benefits related to SkyWest’s leasing and joint venture transactions, SkyWest’s provision of assets to Corporate Flight Management, Inc. d/b/a Contour Airlines (“Contour”), as well as SkyWest’s future financial and operating results, plans, objectives, expectations, estimates, intentions and outlook, and other statements that are not historical facts. All forward-looking statements included in this Report are made as of the date hereof and are based on information available to SkyWest as of such date. SkyWest assumes no obligation to update any forward-looking statements unless required by law. Readers should note that many factors could affect the future operating and financial results of SkyWest and could cause actual results to vary materially from those expressed in forward-looking statements set forth in this Report. These factors include, but are not limited to the challenges of competing successfully in a highly competitive and rapidly changing industry; developments associated with fluctuations in the economy and the demand for air travel, including related to inflationary pressures, and related decreases in customer demand and spending; uncertainty regarding continued recovery from the COVID-19 pandemic and other potential future outbreaks of infectious diseases or other health concerns, and the consequences of such outbreaks to the travel industry, including travel demand and travel behavior, and our major airline partners in general and the financial condition and operating results of SkyWest in particular; the prospects of entering into agreements with existing or other carriers to fly new aircraft; ongoing negotiations between SkyWest and its major airline partners regarding their contractual obligations; uncertainties regarding operation of new aircraft; the ability to attract and retain qualified pilots, including captains, and related staffing challenges; the impact of regulatory issues such as pilot rest rules and qualification requirements; the ability to obtain aircraft financing; the financial stability of SkyWest’s major airline partners and any potential impact of their financial condition on the operations of SkyWest; fluctuations in flight schedules, which are determined by the major airline partners for whom SkyWest conducts flight operations; variations in market and economic conditions; significant aircraft lease and debt commitments; estimated useful life of long-lived assets, residual aircraft values and related impairment charges; labor relations and costs and labor shortages; the impact of global instability; rapidly fluctuating fuel costs and potential fuel shortages; the impact of weather-related, natural disasters and other air safety incidents on air travel and airline costs; aircraft deliveries; uncertainty regarding ongoing hostility between Russia and the Ukraine, as well as Israel and Hamas, and the related impacts on macroeconomic conditions and on the international operations of any of our major airline partners as a result of such conflict; as well as the other factors identified under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, under the heading “Risk Factors” in Part II, Item 1A of this Report, elsewhere in this Report, in our other filings with the Securities and Exchange Commission (the “SEC”) and other unanticipated factors.
24
There may be other factors that may affect matters discussed in forward-looking statements set forth in this Report, which factors may also cause actual results to differ materially from those discussed. We assume no obligation to publicly update any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these statements other than as required by applicable law.
Overview
We have the largest regional airline operation in the United States through our operating subsidiary SkyWest Airlines, Inc. (“SkyWest Airlines”). As of September 30, 2024, we offered scheduled passenger and air freight service with approximately 2,240 total daily departures to destinations in the United States, Canada and Mexico. Our fleet of Embraer E175 regional jet aircraft (“E175”), Canadair CRJ900 regional jet aircraft (“CRJ900”) and Canadair CRJ700 regional jet aircraft (“CRJ700”) have a multiple-class seat configuration, whereas our Canadair CRJ200 regional jet aircraft (“CRJ200”) have a single-class seat configuration. During 2022, we formed SkyWest Charter, LLC (“SWC”), which offers on-demand charter services using CRJ200 aircraft in a 30-seat configuration. As of September 30, 2024, we had 615 total aircraft in our fleet, including 484 aircraft in scheduled service or under contract pursuant to our code-share agreements, summarized as follows:
| E175 |
| CRJ900 |
| CRJ700(2) |
| CRJ200 |
| Total | |
United |
| 110 | — | 19 | 81 | 210 | ||||
Delta | 86 | 36 | 19 | — | 141 | |||||
American |
| 20 | — | 71 | — | 91 | ||||
Alaska |
| 42 | — | — | — | 42 | ||||
Aircraft in scheduled service or under contract | 258 | 36 | 109 | 81 | 484 | |||||
SWC | — | — | — | 17 | 17 | |||||
Leased to third parties |
| — | 5 | 35 | — | 40 | ||||
Other (1) |
| — | 8 | 24 | 42 | 74 | ||||
Total Fleet |
| 258 | 49 | 168 | 140 | 615 |
| (1) | As of September 30, 2024, other aircraft included: supplemental spare aircraft supporting our code-share agreements that may be placed under future code-share or leasing arrangements, aircraft transitioning between code-share agreements with our major airline partners or aircraft that are scheduled to be disassembled for use as spare parts. |
| (2) | Includes CRJ550 aircraft, a 50-seat configuration of the CRJ700 aircraft. |
Our business model is based on providing scheduled regional airline service under code-share agreements (commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its flights) with our major airline partners. Our success is principally centered on our ability to meet the needs of our major airline partners by providing a reliable and safe operation at attractive economics. From September 30, 2023, to September 30, 2024, we made changes to our fleet, including the addition of three new E175 aircraft and 20 partner-financed E175 aircraft.
We anticipate our fleet will continue to evolve, as we are scheduled to add 19 new E175 aircraft with United (four in the fourth quarter of 2024, seven in 2025 and eight in 2026) and one new E175 aircraft with Alaska in 2025. We also entered into multiple agreements with United in September and October 2024 to place a total of 40 used CRJ550 aircraft into service between the fourth quarter of 2024 and the end of 2026. Timing of these anticipated deliveries may be subject to change as we are coordinating with our major airline partners in response to labor availability or other factors. Our primary objective in the fleet changes is to improve our profitability by adding new E175 aircraft and used CRJ aircraft to capacity purchase agreements, and potentially removing older aircraft from service that typically require higher maintenance costs.
As of September 30, 2024, approximately 43.4% of our aircraft in scheduled service or under contract were operated for United, approximately 29.1% were operated for Delta, approximately 18.8% were operated for American and approximately 8.7% were operated for Alaska.
Historically, multiple contractual relationships with major airlines have enabled us to reduce our reliance on any single major airline code and to enhance and stabilize operating results through a mix of fixed-fee arrangements (referred
25
to as “capacity purchase” agreements) and “prorate” agreements. For the nine months ended September 30, 2024, our capacity purchase revenue represented approximately 86.8% of our total flying agreement revenue and our prorate and SWC revenue, combined, represented approximately 13.2% of our total flying agreements revenue. On capacity purchase routes, the major airline partner controls scheduling, ticketing, pricing and seat inventories and we are compensated by the major airline partner at contracted rates based on completed block hours (measured from takeoff to landing, including taxi time), flight departures, the number of aircraft under contract and other operating measures. We control scheduling, pricing and seat inventories on certain prorate routes, and we share passenger fares with our major airline partners according to prorate formulas. We are also responsible for the operating costs of the prorate flights, including fuel and airport costs.
Third Quarter Summary
We had total operating revenues of $912.8 million for the three months ended September 30, 2024, a 19.1% increase compared to total operating revenues of $766.2 million for the three months ended September 30, 2023. We had net income of $89.7 million, or $2.16 per diluted share, for the three months ended September 30, 2024, compared to net income of $23.5 million, or $0.55 per diluted share, for the three months ended September 30, 2023. The significant items affecting our revenue and operating expenses during the three months ended September 30, 2024, are outlined below:
Revenue
The number of aircraft we have in scheduled service or under contract pursuant to our code-share agreements and the number of block hours we incur on our flights are primary drivers of our flying agreements revenue under our capacity purchase agreements. The number of flights we operate and the corresponding number of passengers we carry are the primary drivers of our revenue under our prorate flying agreements. The number of aircraft we have in scheduled service or under contract pursuant to our code-share agreements decreased from 493 as of September 30, 2023 to 484 as of September 30, 2024; and the number of block hours increased from 290,830 for the three months ended September 30, 2023 to 334,459 for the three months ended September 30, 2024, or by 15.0%, due to an increase in scheduled daily utilization of our aircraft driven by an increase in the number of available captains.
Our capacity purchase revenue increased $128.5 million, or 20.3%, from the three months ended September 30, 2023 to the three months ended September 30, 2024, primarily as a result of an increase in completed block hours for the comparable periods and recognizing previously deferred revenue for the three months ended September 30, 2024, compared to deferring revenue for the three months ended September 30, 2023. As a result of a higher number of passengers carried on our prorate routes and an increase in the number of prorate and charter flights operated year-over-year, our prorate and SWC revenue increased $13.1 million, or 11.9%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.
Operating Expenses
Our total operating expenses increased $64.5 million, or 9.0%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase in operating expenses was primarily due to an increase in our direct operating expenses associated with the increase in the number of flights we operated. Departures increased from 180,069 for the three months ended September 30, 2023 to 201,397 for the three months ended September 30, 2024, or by 11.8%. Additional details regarding the increase in our operating expenses are described in the section of this Report entitled “Results of Operations.”
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Fleet Activity
The following table summarizes our fleet scheduled for service or under contract as of:
Aircraft in Service or Under Contract |
| September 30, 2024 |
| December 31, 2023 |
| September 30, 2023 |
E175s |
| 258 |
| 237 |
| 235 |
CRJ900s |
| 36 |
| 41 |
| 37 |
CRJ700s |
| 109 |
| 118 |
| 117 |
CRJ200s |
| 81 |
| 89 |
| 104 |
Total |
| 484 |
| 485 |
| 493 |
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 1 to our consolidated financial statements for the year ended December 31, 2023, and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are presented in our Annual Report on Form 10-K for the year ended December 31, 2023. Critical accounting policies are those policies that are most important to the preparation of our 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. Our critical accounting policies relate to revenue recognition, long-lived assets, and income tax. The application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results will likely differ, and may differ materially, from such estimates. There have been no significant changes in our critical accounting estimates during the nine months ended September 30, 2024.
Recent Accounting Pronouncements
See Note 1 to the condensed consolidated financial statements for a description of recent accounting pronouncements.
Results of Operations
Three Months Ended September 30, 2024 and 2023
Operational Statistics
The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below. The increase in block hours, departures and passengers carried during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was primarily due to an increase in the number of available captains during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, which allowed for a higher scheduled utilization of our aircraft.
For the three months ended September 30, | |||||||
Block hours by aircraft type: |
| 2024 |
| 2023 |
| % Change | |
E175s |
| 206,607 | 171,615 | 20.4 | % | ||
CRJ900s | 22,957 | 18,979 | 21.0 | % | |||
CRJ700s | 59,807 | 56,117 | 6.6 | % | |||
CRJ200s |
| 45,088 | 44,119 | 2.2 | % | ||
Total block hours | 334,459 | 290,830 | 15.0 | % | |||
| |||||||
| |||||||
Departures |
| 201,397 | 180,069 | 11.8 | % | ||
Passengers carried |
| 11,263,322 | 10,208,005 | 10.3 | % | ||
Passenger load factor |
| 83.7 | % | 85.1 | % | (1.4) | pts |
Average passenger trip length (miles) |
| 455 | 446 | 2.0 | % | ||
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Operating Revenues
The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):
For the three months ended September 30, | ||||||||||||
| 2024 |
| 2023 |
| $ Change |
| % Change | |||||
Flying agreements | $ | 883,494 | $ | 741,898 | $ | 141,596 | 19.1 | % | ||||
Lease, airport services and other |
| 29,292 |
| 24,273 |
| 5,019 | 20.7 | % | ||||
Total operating revenues | $ | 912,786 | $ | 766,171 | $ | 146,615 |
| 19.1 | % | |||
Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity purchase agreements and prorate agreements with our major airline partners and on-demand charter flights. Lease, airport services and other revenues consist of revenue earned from leasing aircraft and spare engines to third parties separate from our capacity purchase agreements and providing airport counter, gate and ramp services.
We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands):
For the three months ended September 30, | ||||||||||||
| 2024 |
| 2023 |
| $ Change |
| % Change | |||||
Capacity purchase agreements flight operations revenue |
| $ | 624,342 |
| $ | 511,929 |
| $ | 112,413 |
| 22.0 | % |
Capacity purchase agreements aircraft lease revenue | 136,392 | 120,289 | 16,103 | 13.4 | % | |||||||
Prorate agreements and SWC revenue |
| 122,760 |
| 109,680 |
| 13,080 |
| 11.9 | % | |||
Flying agreements revenue |
| $ | 883,494 |
| $ | 741,898 |
| $ | 141,596 |
| 19.1 | % |
The increase in “Capacity purchase agreements flight operations revenue” of $112.4 million, or 22.0%, was primarily due to a 15.0% increase in block hour production and a decrease in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Under our capacity purchase agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the fixed amount per aircraft related to operating the aircraft as revenue proportionately to the number of block hours we complete for each reporting period. Under our capacity purchase agreements, the performance obligation of each completed flight is measured in block hours incurred for each completed flight. Beginning January 1, 2024, certain scheduled fixed monthly payments under our capacity purchase agreements transitioned to variable payments, which are calculated at a rate per block hour. Based on the number of completed block hours during the three months ended September 30, 2024, we recognized $18.2 million of previously deferred revenue, net of unbilled revenue, related to the non-lease fixed monthly payments we received associated with our flight operations revenues. For the three months ended September 30, 2023, we deferred recognizing $37.2 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues. The timing of our revenue recognition related to the fixed payments associated with our flight operations will be adjusted over the remaining contract term for each capacity purchase agreement based on the number of block hours we complete each reporting period relative to the number of block hours we anticipate completing over the remaining contract term of each capacity purchase agreement.
The increase in “Capacity purchase agreements aircraft lease revenue” of $16.1 million, or 13.4%, was primarily due to an increase in variable lease revenue as a result of certain scheduled fixed monthly lease payments that transitioned beginning January 1, 2024 to variable payments under our capacity purchase agreements. Under our capacity purchase agreements, a portion of the consideration we are paid is designed as reimbursement for certain aircraft ownership costs and is considered lease revenue, including fixed monthly payments and variable payments. We recognize the fixed monthly lease payments as lease revenue using the straight-line basis over the capacity purchase agreement term and variable lease payments are recognized in the period when the block hours are completed. We recognized $0.5 million of previously deferred lease revenue during the three months ended September 30, 2024, using the straight-line basis for fixed monthly lease payments, whereas we deferred recognizing lease revenue on $19.3 million during the three months ended September 30, 2023.
The deferred revenue balance applicable to each contract will be recorded as revenue over the term of each respective contract. For clarity, in total we recognized $18.7 million of previously deferred revenue, net of unbilled
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revenue, during the three months ended September 30, 2024, compared to deferring revenue, net of unbilled revenue, of $56.5 million during the three months ended September 30, 2023. Our total deferred revenue balance, net of unbilled revenue, was $342.2 million as of September 30, 2024, compared to total deferred revenue, net of unbilled revenue, of $367.3 million as of December 31, 2023.
The increase in prorate agreements and SWC revenue of $13.1 million, or 11.9%, was primarily due to an increase in prorate passengers and passenger revenue we received on routes we operated under our prorate agreements during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Additionally, a portion of the increase was attributed to an increase in SWC revenue during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
The increase in lease, airport services and other revenues of $5.0 million, or 20.7%, was primarily due to an increase in leased assets and lease rates for leases to third parties during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
Operating Expenses
Individual expense components attributable to our operations are set forth in the following table (dollar amounts in thousands):
For the three months ended September 30, | ||||||||||||
2024 | 2023 | $ Change | % Change | |||||||||
Salaries, wages and benefits | $ | 377,435 | $ | 333,017 | $ | 44,418 | 13.3 | % | ||||
Aircraft maintenance, materials and repairs |
| 181,652 |
| 178,465 |
| 3,187 |
| 1.8 | % | |||
Depreciation and amortization |
| 96,662 |
| 96,560 |
| 102 |
| 0.1 | % | |||
Aircraft fuel |
| 22,724 |
| 23,330 |
| (606) |
| (2.6) | % | |||
Airport-related expenses |
| 22,642 |
| 18,398 |
| 4,244 |
| 23.1 | % | |||
Aircraft rentals |
| 1,339 |
| 2,099 |
| (760) |
| (36.2) | % | |||
Other operating expenses |
| 78,897 |
| 65,011 |
| 13,886 |
| 21.4 | % | |||
Total operating expenses | $ | 781,351 | $ | 716,880 | $ | 64,471 |
| 9.0 | % | |||
Salaries, wages and benefits. The $44.4 million, or 13.3%, increase in salaries, wages and benefits was primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
Aircraft maintenance, materials and repairs. The $3.2 million, or 1.8%, increase in aircraft maintenance expense was primarily due to higher flight volume, which increased our maintenance activity and related expenses, offset by a decrease in our engine maintenance events and related expenses for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
Depreciation and amortization. The $0.1 million, or 0.1%, increase in depreciation and amortization expense was primarily due to an increase in depreciation expense related to the acquisition of three new E175 aircraft and spare engines since September 30, 2023, offset by certain CRJ aircraft and engines that were depreciated to their estimated residual value since September 30, 2023.
Aircraft fuel. The $0.6 million, or 2.6%, decrease in fuel cost was primarily due to a decrease in our average fuel cost per gallon from $3.83 for the three months ended September 30, 2023, to $3.10 for the three months ended September 30, 2024, offset by an increase in the number of flights we operated under our prorate agreements and SWC and the corresponding increase in gallons of fuel we purchased. We purchase and incur expense for all fuel on flights operated under our prorate agreements and SWC. All fuel costs incurred under our capacity purchase agreements are either purchased directly by our major airline partner, or if purchased by us, we record the direct reimbursement as a reduction to our fuel expense. The following table summarizes the gallons of fuel we purchased under our prorate agreements and SWC, for the periods indicated:
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For the three months ended September 30, | |||||||||
(in thousands) |
| 2024 |
| 2023 |
| % Change | |||
Fuel gallons purchased | 7,336 | 6,097 | 20.3 | % | |||||
Fuel expense | $ | 22,724 | $ | 23,330 |
| (2.6) | % | ||
Airport-related expenses. Airport-related expenses include airport-related customer service costs such as outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees and station rents. For clarity, our employee airport customer service labor costs are reflected in salaries, wages and benefits and customer service labor costs we outsource to third parties are included in airport-related expenses. The $4.2 million, or 23.1%, increase in airport-related expenses for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was primarily due to an increase in subcontracted airport services and landing fees as a result of an increase in the number of flights we operated under our prorate agreements.
Aircraft rentals. The $0.8 million, or 36.2%, decrease in aircraft rentals was primarily related to a decrease in our leased aircraft since the three months ended September 30, 2023. During 2023, we acquired 26 CRJ700 aircraft, eight CRJ200 aircraft and one CRJ900 aircraft under early lease buyouts.
Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability insurance, simulator costs, crew per diem and crew hotel costs. The $13.9 million, or 21.4%, increase was primarily a result of the higher number of flights we operated during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, such as increased crew per diem and crew hotel costs.
Summary of interest expense, interest income, other income (loss), net and provision for income taxes
Interest Expense. The $4.7 million, or 14.5%, decrease in interest expense was primarily related to a decrease in outstanding debt. At September 30, 2024 we had $2.7 billion of outstanding debt, compared to $3.1 billion at September 30, 2023.
Interest income. Interest income increased $1.3 million, from $11.2 million for the three months ended September 30, 2023, to $12.5 million for the three months ended September 30, 2024. The increase in interest income was primarily related to an increase in average interest rates attributed to our marketable securities for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
Other income (loss), net. Other income (loss), net increased $3.7 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Other income (loss), net primarily consists of the unrealized and realized gains and losses on our investments in other companies, income or loss related to our equity method investments and gains or losses on the sale of assets. The increase in other income (loss), net was primarily a result of a decrease in the loss on the fair value of our investments in other companies for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
Provision (benefit) for income taxes. For the three months ended September 30, 2024 and 2023, our effective income tax rates were 22.8% and 3.6%, respectively, which included the statutory federal income tax rate of 21% and other reconciling income tax items, including state income taxes and the impact of non-deductible expenses. The increase in the effective tax rate was primarily related to lower pre-tax income for the three months ended September 30, 2023, compared to the three months ended September 30, 2024, and a release of $7.6 million of a previously recorded uncertain tax position liability for the three months ended September 30, 2023.
Net income. Primarily due to the factors described above, we generated net income of $89.7 million, or $2.16 per diluted share, for the three months ended September 30, 2024, compared to net income of $23.5 million, or $0.55 per diluted share, for the three months ended September 30, 2023.
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Nine Months Ended September 30, 2024 and 2023
Operational Statistics
The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below. The increase in block hours, departures and passengers carried during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was primarily due to an increase in the number of available captains during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
For the nine months ended September 30, | |||||||
Block hours by aircraft type: |
| 2024 |
| 2023 |
| % Change | |
E175s |
| 580,799 | 500,782 | 16.0 | % | ||
CRJ900s | 61,172 | 59,390 | 3.0 | % | |||
CRJ700s | 176,403 | 158,239 | 11.5 | % | |||
CRJ200s |
| 123,348 | 131,278 | (6.0) | % | ||
Total block hours | 941,722 | 849,689 | 10.8 | % | |||
| |||||||
| |||||||
Departures |
| 560,154 | 514,529 | 8.9 | % | ||
Passengers carried |
| 31,103,792 | 28,671,654 | 8.5 | % | ||
Passenger load factor |
| 83.0 | % | 83.7 | % | (0.7) | pts |
Average passenger trip length (miles) |
| 467 | 456 | 2.4 | % | ||
Operating Revenues
The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):
For the nine months ended September 30, | ||||||||||||
| 2024 |
| 2023 |
| $ Change |
| % Change | |||||
Flying agreements | $ | 2,499,953 | $ | 2,106,130 | $ | 393,823 | 18.7 | % | ||||
Lease, airport services and other |
| 83,565 |
| 77,515 |
| 6,050 | 7.8 | % | ||||
Total operating revenues | $ | 2,583,518 | $ | 2,183,645 | $ | 399,873 |
| 18.3 | % | |||
Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity purchase agreements and prorate agreements with our major airline partners and on-demand charter flights. Lease, airport services and other revenues consist of revenue earned from leasing aircraft and spare engines to third parties separate from our capacity purchase agreements and providing airport counter, gate and ramp services.
We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands):
For the nine months ended September 30, | ||||||||||||
2024 | 2023 | $ Change | % Change | |||||||||
Capacity purchase agreements flight operations revenue |
| $ | 1,763,629 |
| $ | 1,479,987 |
| $ | 283,642 |
| 19.2 | % |
Capacity purchase agreements aircraft lease revenue |
| 405,409 |
| 356,900 |
| 48,509 |
| 13.6 | % | |||
Prorate agreements and SWC revenue |
| 330,915 | 269,243 | 61,672 |
| 22.9 | % | |||||
Flying agreements revenue | $ | 2,499,953 | $ | 2,106,130 | $ | 393,823 |
| 18.7 | % | |||
The increase in “Capacity purchase agreements flight operations revenue” of $283.6 million, or 19.2%, was primarily due to a 10.8% increase in block hour production and a decrease in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Under our capacity purchase agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the fixed amount per aircraft related to operating the aircraft as revenue proportionately to the number of block hours we complete for each reporting period. Under our capacity purchase agreements, the performance obligation of each completed flight is measured in block hours incurred for each completed flight. Beginning January 1, 2024, certain scheduled fixed monthly payments
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under our capacity purchase agreements transitioned to variable payments, which are calculated at a rate per block hour. Based on the number of completed block hours during the nine months ended September 30, 2024, we recognized $23.6 million of previously deferred revenue, net of unbilled revenue, related to the non-lease fixed monthly payments we received associated with our flight operations revenues. For the nine months ended September 30, 2023, we deferred recognizing $120.6 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues. The timing of our revenue recognition related to the fixed payments associated with our flight operations will be adjusted over the remaining contract term for each capacity purchase agreement based on the number of block hours we complete each reporting period relative to the number of block hours we anticipate completing over the remaining contract term of each capacity purchase agreement.
The increase in “Capacity purchase agreements aircraft lease revenue” of $48.5 million, or 13.6%, was primarily due to an increase in variable lease revenue as a result of certain scheduled fixed monthly lease payments that transitioned beginning January 1, 2024 to variable payments under our capacity purchase agreements. Under our capacity purchase agreements, a portion of the consideration we are paid is designed as reimbursement for certain aircraft ownership costs and is considered lease revenue, including fixed monthly payments and variable payments. We recognize the fixed monthly lease payments as lease revenue using the straight-line basis over the capacity purchase agreement term and variable lease payments are recognized in the period when the block hours are completed. We recognized $1.5 million of previously deferred lease revenue during the three and nine months ended September 30, 2024, using the straight-line basis for fixed monthly lease payments, whereas we deferred recognizing lease revenue on $59.3 million during the nine months ended September 30, 2023.
The deferred revenue balance applicable to each contract will be recorded as revenue over the term of each respective contract. For clarity, in total we recognized $25.1 million of previously deferred revenue, net of unbilled revenue, during the nine months ended September 30, 2024, compared to deferring revenue, net of unbilled revenue, of $179.9 million during the nine months ended September 30, 2023. Our total deferred revenue balance, net of unbilled revenue, was $342.2 million as of September 30, 2024, compared to total deferred revenue, net of unbilled revenue, of $367.3 million as of December 31, 2023.
The increase in prorate agreements and SWC revenue of $61.7 million, or 22.9%, was primarily due to an increase in prorate passengers and passenger revenue we received on routes we operated under our prorate agreements during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Additionally, a portion of the increase was attributed to an increase in SWC revenue during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, as SWC began operations in May 2023.
The increase in lease, airport services and other revenues of $6.1 million, or 7.8%, was primarily due to an increase in leased assets and lease rates for leases to third parties during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Operating Expenses
Individual expense components attributable to our operations are set forth in the following table (dollar amounts in thousands):
For the nine months ended September 30, | ||||||||||||
2024 | 2023 | $ Change | % Change | |||||||||
Salaries, wages and benefits | $ | 1,083,439 | $ | 990,659 | $ | 92,780 | 9.4 | % | ||||
Aircraft maintenance, materials and repairs |
| 510,334 |
| 483,182 |
| 27,152 |
| 5.6 | % | |||
Depreciation and amortization |
| 289,346 |
| 287,878 |
| 1,468 |
| 0.5 | % | |||
Aircraft fuel |
| 65,216 |
| 62,573 |
| 2,643 |
| 4.2 | % | |||
Airport-related expenses |
| 61,065 |
| 53,648 |
| 7,417 |
| 13.8 | % | |||
Aircraft rentals |
| 3,925 |
| 24,055 |
| (20,130) |
| (83.7) | % | |||
Other operating expenses |
| 219,612 |
| 205,203 |
| 14,409 |
| 7.0 | % | |||
Total operating expenses | $ | 2,232,937 | $ | 2,107,198 | $ | 125,739 |
| 6.0 | % | |||
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Salaries, wages and benefits. The $92.8 million, or 9.4%, increase in salaries, wages and benefits was primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Aircraft maintenance, materials and repairs. The $27.2 million, or 5.6%, increase in aircraft maintenance expense was primarily due to higher flight volume, which increased maintenance activity and related expenses, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Depreciation and amortization. The $1.5 million, or 0.5%, increase in depreciation and amortization expense was primarily due to an increase in depreciation expense related to the acquisition of three new E175 aircraft and spare engines since September 30, 2023.
Aircraft fuel. The $2.6 million, or 4.2%, increase in fuel cost was primarily due to an increase in the number of flights we operated under our prorate agreements and SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $3.71 for the nine months ended September 30, 2023, to $3.30 for the nine months ended September 30, 2024. We purchase and incur expense for all fuel on flights operated under our prorate agreements and SWC. All fuel costs incurred under our capacity purchase agreements are either purchased directly by our major airline partner, or if purchased by us, we record the direct reimbursement as a reduction to our fuel expense. The following table summarizes the gallons of fuel we purchased under our prorate agreements and SWC, for the periods indicated:
For the nine months ended September 30, | |||||||||
(in thousands) |
| 2024 |
| 2023 |
| % Change | |||
Fuel gallons purchased | 19,776 | 16,863 | 17.3 | % | |||||
Fuel expense | $ | 65,216 | $ | 62,573 |
| 4.2 | % | ||
Airport-related expenses. Airport-related expenses include airport-related customer service costs such as outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees and station rents. For clarity, our employee airport customer service labor costs are reflected in salaries, wages and benefits and customer service labor costs we outsource to third parties are included in airport-related expenses. The $7.4 million, or 13.8%, increase in airport-related expenses for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was primarily due to an increase in subcontracted airport services and landing fees as a result of an increase in the number of flights we operated under our prorate agreements.
Aircraft rentals. The $20.1 million, or 83.7%, decrease in aircraft rentals was primarily related to a decrease in our leased aircraft since the nine months ended September 30, 2023. During 2023, we acquired 26 CRJ700 aircraft, eight CRJ200 aircraft and one CRJ900 aircraft under early lease buyouts.
Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability insurance, simulator costs, crew per diem and crew hotel costs. The $14.4 million, or 7.0%, increase was primarily related to an increase in other operating costs as a result of the higher number of flights we operated during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, such as crew per diem and crew hotel costs, offset by the timing and the higher number of training events during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2024.
Summary of interest expense, interest income, other income (loss), net and provision for income taxes
Interest Expense. The $13.3 million, or 13.3%, decrease in interest expense was primarily related to a decrease in outstanding debt. At September 30, 2024 we had $2.7 billion of outstanding debt, compared to $3.1 billion at September 30, 2023.
Interest income. Interest income increased $4.3 million, from $31.8 million for the nine months ended September 30, 2023, to $36.1 million for the nine months ended September 30, 2024. The increase in interest income was primarily related to an increase in average interest rates attributed to our marketable securities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
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Other income (loss), net. Other income (loss), net decreased $9.1 million during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Other income (loss), net primarily consists of the unrealized and realized gains and losses on our investments in other companies, income or loss related to our equity method investments and gains or losses on the sale of assets. The decrease in other income (loss), net was primarily a result of a decrease in the fair value of our investments in other companies for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Provision (benefit) for income taxes. For the nine months ended September 30, 2024 and 2023, our effective income tax rates were 24.4% and (6.0)%, respectively, which included the statutory federal income tax rate of 21% and other reconciling income tax items, including state income taxes, the impact of non-deductible expenses and a discrete tax benefit or expense on employee equity transactions. The increase in the effective tax rate was primarily related to higher pre-tax earnings for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and a release of $7.6 million of a previously recorded uncertain tax position liability for the nine months ended September 30, 2023, partially offset by the impact of non-deductible expense on lower pre-tax earnings for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2024.
Net income. Primarily due to the factors described above, we generated net income of $225.6 million, or $5.44 per diluted share, for the nine months ended September 30, 2024, compared to net income of $16.8 million, or $0.37 per diluted share, for the nine months ended September 30, 2023.
Our Business Segments
Three Months Ended September 30, 2024 and 2023
For the three months ended September 30, 2024, we had two reportable segments, which were the basis of our internal financial reporting: (1) the operations of SkyWest Airlines and SWC and (2) SkyWest Leasing activities. Our segment disclosure relates to components of our business for which separate financial information is available to, and regularly evaluated by, our chief operating decision maker.
For the three months ended September 30, | ||||||||||||
(dollar amounts in thousands) | ||||||||||||
| 2024 |
| 2023 |
| $ Change |
| % Change | |||||
Operating Revenues: | ||||||||||||
SkyWest Airlines and SWC | $ | 758,425 | $ | 626,780 | $ | 131,645 |
| 21.0 | % | |||
SkyWest Leasing |
| 154,361 |
| 139,391 |
| 14,970 |
| 10.7 | % | |||
Total Operating Revenues | 912,786 | 766,171 | 146,615 |
| 19.1 | % | ||||||
Operating Expenses and Interest Expense: | ||||||||||||
SkyWest Airlines and SWC | 715,514 | 657,049 | 58,465 |
| 8.9 | % | ||||||
SkyWest Leasing | 93,645 | 92,374 | 1,271 |
| 1.4 | % | ||||||
Total Operating Expenses and Interest Expense (1) | 809,159 | 749,423 | 59,736 |
| 8.0 | % | ||||||
Segment profit (loss): | ||||||||||||
SkyWest Airlines and SWC | 42,911 | (30,269) | 73,180 |
| (241.8) | % | ||||||
SkyWest Leasing | 60,716 | 47,017 | 13,699 |
| 29.1 | % | ||||||
Total Segment Profit | 103,627 | 16,748 | 86,879 |
| 518.7 | % | ||||||
Interest Income |
| 12,460 |
| 11,234 | 1,226 |
| 10.9 | % | ||||
Other Income (Loss), net |
| 109 |
| (3,631) |
| 3,740 |
| (103.0) | % | |||
Consolidated Income Before Taxes | $ | 116,196 | $ | 24,351 | $ | 91,845 |
| 377.2 | % | |||
| (1) | We include interest expense in our segment profit (loss) given our interest expense is primarily attributed to debt associated with financing aircraft under our capacity purchase agreements and revenue earned under our capacity purchase agreements is intended to compensate us for our aircraft ownership costs, including interest expense. |
SkyWest Airlines and SWC Segment Profit (Loss). SkyWest Airlines and SWC segment profit was $42.9 million for the three months ended September 30, 2024, compared to a segment loss of $30.3 million for the three months ended September 30, 2023.
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SkyWest Airlines and SWC block hour production increased to 334,459, or 15.0%, for the three months ended September 30, 2024, from 290,830 for the three months ended September 30, 2023, primarily due to an increase in the number of available captains, which allowed for a higher scheduled utilization of our aircraft. Significant items contributing to the SkyWest Airlines and SWC segment profit for the three months ended September 30, 2024 are set forth below.
SkyWest Airlines and SWC operating revenues increased $131.6 million, or 21.0%, from the three months ended September 30, 2023, to the three months ended September 30, 2024. SkyWest Airlines recognizes revenue attributed to flight operations received as fixed monthly payments per aircraft proportionate to the number of block hours completed during each reporting period, relative to the estimated number of block hours we anticipate completing over the remaining contract term. During the three months ended September 30, 2024, SkyWest Airlines recognized $18.2 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues, compared to deferring $37.2 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the three months ended September 30, 2023. Additionally, the increase in SkyWest Airlines and SWC operating revenues was attributed to an increase in block hour production during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
SkyWest Airlines and SWC operating expenses and interest expense increased $58.5 million, or 8.9%, from the three months ended September 30, 2023, to the three months ended September 30, 2024, due to the following primary factors:
| ● | SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $44.4 million, or 13.4%, primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. |
| ● | SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense decreased $0.6 million, or 0.3%, primarily due to a decrease in our engine maintenance events and related expenses for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, offset by higher flight volume, which increased the other maintenance activity and related expenses, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. |
| ● | SkyWest Airlines and SWC’s depreciation and amortization expense decreased by $0.2 million, or 0.6%, primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since September 30, 2023. |
| ● | SkyWest Airlines and SWC’s fuel expense decreased $0.6 million, or 2.6%, due to a decrease in our average fuel cost per gallon from $3.83 for the three months ended September 30, 2023, to $3.10 for the three months ended September 30, 2024, offset by an increase in the number of flights we operated under our prorate agreements and SWC and the corresponding increase in gallons of fuel we purchased. |
| ● | SkyWest Airlines and SWC’s remaining airline expense increased $15.5 million, or 17.2%, primarily related to an increase in other operating costs as a result of the higher number of flights we operated during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, such as crew per diem and crew hotel costs. |
SkyWest Leasing Segment Profit. SkyWest Leasing profit increased $13.7 million, or 29.1%, during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. For the three months ended September 30, 2024, SkyWest Leasing recognized $0.5 million of previously deferred lease revenue, compared to deferring $19.3 million of lease revenue on the fixed monthly lease payments received for the three months ended September 30, 2023, under the straight-line basis. Additionally, SkyWest Leasing profit increased due to additional lease revenue from the E175 aircraft placed under contract since September 30, 2023, a decrease in interest expense as a result of a lower outstanding debt balance for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, offset by an increase in maintenance costs for certain leased engines for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
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Nine Months Ended September 30, 2024 and 2023
For the nine months ended September 30, 2024, we had two reportable segments, which were the basis of our internal financial reporting: (1) the operations of SkyWest Airlines and SWC and (2) SkyWest Leasing activities. Our segment disclosure relates to components of our business for which separate financial information is available to, and regularly evaluated by, our chief operating decision maker.
For the nine months ended September 30, | ||||||||||||
(dollar amounts in thousands) | ||||||||||||
| 2024 |
| 2023 |
| $ Change |
| % Change | |||||
Operating Revenues: | ||||||||||||
SkyWest Airlines and SWC | $ | 2,117,018 | $ | 1,781,429 | $ | 335,589 |
| 18.8 | % | |||
SkyWest Leasing |
| 466,500 |
| 402,216 |
| 64,284 |
| 16.0 | % | |||
Total Operating Revenues | 2,583,518 | 2,183,645 | 399,873 |
| 18.3 | % | ||||||
Operating Expenses and Interest Expense: | ||||||||||||
SkyWest Airlines and SWC | 2,041,710 | 1,923,688 | 118,022 |
| 6.1 | % | ||||||
SkyWest Leasing | 277,830 | 283,391 | (5,561) |
| (2.0) | % | ||||||
Total Operating Expenses and Interest Expense (1) | 2,319,540 | 2,207,079 | 112,461 |
| 5.1 | % | ||||||
Segment profit (loss): | ||||||||||||
SkyWest Airlines and SWC | 75,308 | (142,259) | 217,567 |
| (152.9) | % | ||||||
SkyWest Leasing | 188,670 | 118,825 | 69,845 |
| 58.8 | % | ||||||
Total Segment Profit (Loss) | 263,978 | (23,434) | 287,412 |
| (1,226.5) | % | ||||||
Interest Income |
| 36,126 | 31,761 | 4,365 |
| 13.7 | % | |||||
Other Income (Loss), net |
| (1,567) |
| 7,544 |
| (9,111) |
| (120.8) | % | |||
Consolidated Income Before Taxes | $ | 298,537 | $ | 15,871 | $ | 282,666 |
| 1,781.0 | % | |||
| (1) | We include interest expense in our segment profit (loss) given our interest expense is primarily attributed to debt associated with financing aircraft under our capacity purchase agreements and revenue earned under our capacity purchase agreements is intended to compensate us for our aircraft ownership costs, including interest expense. |
SkyWest Airlines and SWC Segment Profit (Loss). SkyWest Airlines and SWC segment profit was $75.3 million for the nine months ended September 30, 2024, compared to a segment loss of $142.3 million for the nine months ended September 30, 2023.
SkyWest Airlines and SWC block hour production increased to 941,722, or 10.8%, for the nine months ended September 30, 2024, from 849,689 for the nine months ended September 30, 2023, primarily due to an increase in the number of available captains, which allowed for a higher scheduled utilization of our aircraft. Significant items contributing to the SkyWest Airlines and SWC segment profit for the nine months ended September 30, 2024 are set forth below.
SkyWest Airlines and SWC operating revenues increased $335.6 million, or 18.8%, from the nine months ended September 30, 2023, to the nine months ended September 30, 2024. SkyWest Airlines recognizes revenue attributed to flight operations received as fixed monthly payments per aircraft proportionate to the number of block hours completed during each reporting period, relative to the estimated number of block hours we anticipate completing over the remaining contract term. During the nine months ended September 30, 2024, SkyWest Airlines recognized $23.6 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues, compared to deferring $120.6 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the nine months ended September 30, 2023. Additionally, the increase in SkyWest Airlines and SWC operating revenues was attributed to an increase in block hour production during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
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SkyWest Airlines and SWC operating expenses and interest expense increased $118.0 million, or 6.1%, from the nine months ended September 30, 2023, to the nine months ended September 30, 2024, due to the following primary factors:
| ● | SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $92.8 million, or 9.4%, primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. |
| ● | SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense increased $20.1 million, or 4.3%, primarily due to higher flight volume, which increased the maintenance activity and related expenses, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. |
| ● | SkyWest Airlines and SWC’s depreciation and amortization expense decreased by $3.3 million, or 2.9%, primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since September 30, 2023. |
| ● | SkyWest Airlines and SWC’s fuel expense increased $2.6 million, or 4.2%, due to an increase in the number of flights we operated under our prorate agreements and SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $3.71 for the nine months ended September 30, 2023, to $3.30 for the nine months ended September 30, 2024. |
| ● | SkyWest Airlines and SWC’s remaining airline expense increased $5.8 million, or 2.0%, primarily related to an increase in other operating costs as a result of the higher number of flights we operated during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, such as crew per diem and crew hotel costs, offset by a decrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft in 2023. |
SkyWest Leasing Segment Profit. SkyWest Leasing profit increased $69.8 million, or 58.8%, during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. For the nine months ended September 30, 2024, SkyWest Leasing recognized $1.5 million of previously deferred lease revenue, compared to deferring $59.3 million of lease revenue on the fixed monthly lease payments received for the nine months ended September 30, 2023, under the straight-line basis. Additionally, SkyWest Leasing profit increased due to additional lease revenue from the E175 aircraft placed under contract since September 30, 2023, a decrease in interest expense as a result of a lower outstanding debt balance for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and a gain related to reclassifying assets held for sale as held and used during the nine months ended September 30, 2024.
Liquidity and Capital Resources
As of September 30, 2024, we had $836.0 million in cash and cash equivalents and marketable securities. As of September 30, 2024, we had $75.1 million available for borrowings under our line of credit. Given our available liquidity as of September 30, 2024, we believe the working capital currently available to us will be sufficient to meet our present financial requirements, including planned capital expenditures, scheduled lease payments and debt service obligations for at least the next 12 months.
Our total cash and marketable securities increased from $835.2 million as of December 31, 2023 to $836.0 million as of September 30, 2024, or by $0.8 million. At September 30, 2024, our total capital mix was 51.3% equity and 48.7% long-term debt, compared to 45.2% equity and 54.8% long-term debt at December 31, 2023. During the nine months ended September 30, 2024, we repurchased 0.5 million shares of our common stock for $38.4 million under share repurchase programs authorized by our Board of Directors.
As of September 30, 2024, and December 31, 2023, we had $47.1 million and $49.1 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions. We had no restricted cash as of September 30, 2024, and December 31, 2023.
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Sources and Uses of Cash
Cash Position and Liquidity. The following table provides a summary of the net cash provided by (used in) our operating, investing and financing activities for the nine months ended September 30, 2024 and 2023, and our total cash and marketable securities positions as of September 30, 2024, and December 31, 2023 (in thousands):
For the nine months ended September 30, | ||||||||||||
| 2024 |
| 2023 |
| $ Change |
| % Change | |||||
Net cash provided by operating activities | $ | 506,565 | $ | 511,907 | $ | (5,342) | (1.0) | % | ||||
Net cash provided by (used in) investing activities |
| (119,001) |
| 61,003 |
| (180,004) |
| (295.1) | % | |||
Net cash used in financing activities |
| (358,232) |
| (550,564) |
| 192,332 |
| (34.9) | % | |||
| September 30, |
| December 31, |
|
|
| ||||||
2024 | 2023 | $ Change | % Change | |||||||||
Cash and cash equivalents | $ | 177,609 | $ | 148,277 | $ | 29,332 |
| 19.8 | % | |||
Marketable securities |
| 658,433 |
| 686,946 |
| (28,513) |
| (4.2) | % | |||
Total | $ | 836,042 | $ | 835,223 | $ | 819 |
| 0.1 | % | |||
Cash Flows provided by Operating Activities
Our cash flows provided by operating activities was $506.6 million for the nine months ended September 30, 2024, compared to $511.9 million for the nine months ended September 30, 2023. Our operating cash flows are typically impacted by various factors including our net income, adjusted for non-cash expenses and gains such as depreciation expense, stock-based compensation expense and gains or losses on the disposal of assets; and timing of cash payments and cash receipts attributed to our various current asset and liability accounts, such as accounts receivable, inventory, accounts payable, accrued liabilities, deferred revenue and unbilled revenue.
The decrease in our cash flow from operations for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was primarily due to the timing of cash payments on our current liability accounts and a decrease in cash received in excess of revenue recognized for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, offset by the increase in net income, adjusted for non-cash items, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Cash Flows provided by (used in) Investing Activities
Our cash flows used in investing activities was $119.0 million for the nine months ended September 30, 2024, compared to cash flows provided by investing activities of $61.0 million for the nine months ended September 30, 2023. Our investing cash flows are typically impacted by various factors including our capital expenditures, such as the acquisition of aircraft and spare engines; deposit payments and refunds of previously made deposits on new aircraft; purchase and sales of marketable securities; proceeds from the sale of assets; and timing of cash payments and cash receipts attributed to our various long-term asset and long-term liability accounts.
Excluding the purchase and sale of marketable securities, which results in the transfer of dollars between our investments in marketable securities and our cash accounts, our cash used in investing activities decreased from $192.7 million for the nine months ended September 30, 2023, to $147.6 million for the nine months ended September 30, 2024. The decrease in cash used in investing activities, excluding the transfer of dollars between our investments in marketable securities and our cash accounts, was primarily due to a decrease of $55.5 million in aircraft deposits and $12.0 million in the acquisition of property and equipment for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, due to the early lease buyouts we executed during the nine months ended September 30, 2023. This was offset by an increase in our cash used to acquire other long-term assets, including our investment in Contour, for the nine months ended September 30, 2024.
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Cash Flows provided by (used in) Financing Activities
Our cash flows used in financing activities was $358.2 million for the nine months ended September 30, 2024, compared to cash used in financing activities of $550.6 million for the nine months ended September 30, 2023. Our financing cash flows are typically impacted by various factors including proceeds from issuance of debt, principal payments on debt obligations, repurchases of our common stock and payment of cash dividends.
The $192.3 million decrease in cash used for financing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was primarily due to a decrease of $207.8 million in cash used to purchase treasury stock, offset by an increase of $7.0 million in principal payments on long-term debt and an increase of $6.3 million for employee income taxes paid on vested equity awards during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Significant Commitments and Obligations
General
See Note 7, “Leases, Commitments and Contingencies,” to the condensed consolidated financial statements for our commitments and obligations for each of the next five years and thereafter.
Purchase Commitments and Options
As of September 30, 2024, we had a firm purchase commitment for 20 new E175 aircraft from Embraer with delivery dates anticipated into 2026. We also have a firm purchase commitment to purchase 11 used CRJ550 aircraft with anticipated delivery dates into 2025. One of such CR550 aircraft was acquired during the three months ended September, 30, 2024.
At the time of each aircraft acquisition, we evaluate the financing alternatives available to us, and select one or more of these methods to fund the acquisition. In recent years, we have issued long-term debt to finance our new aircraft. At present, we intend to fund our aircraft purchase commitments through a combination of cash on hand and debt financing. Based on current market conditions and discussions with prospective leasing organizations and financial institutions, we currently believe that we will be able to obtain financing for our committed acquisitions, as well as additional aircraft. We intend to finance the firm purchase commitment for 20 E175 aircraft with approximately 75-85% debt and the remaining balance with cash. We intend to fund the purchase of the remaining 10 used CRJ550 aircraft through cash on hand.
Aircraft Lease and Facility Obligations
We also have long-term lease obligations, primarily relating to our facilities, aircraft and engines. Excluding aircraft financed by our major airline partners that we operate for them under contract, we had eight aircraft under lease with remaining terms ranging from five years to six years as of September 30, 2024. Future minimum lease payments due under all long-term operating leases were approximately $127.6 million at September 30, 2024. Assuming a 6.3% discount rate, which is the average incremental borrowing rate we anticipate we would have incurred on debt obtained over a similar term to acquire these assets, the present value of these lease obligations would have been equal to approximately $85.3 million at September 30, 2024.
Long-term Debt Obligations
As of September 30, 2024, we had $2.7 billion of long-term debt, which consisted of $2.5 billion of debt used to finance aircraft and spare engines and $200.6 million of unsecured debt payable to U.S. Department of the Treasury. The average effective interest rate on our debt was approximately 4.1% at September 30, 2024.
Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning or leasing the aircraft on a monthly basis. The aircraft compensation structure varies by agreement, but is intended to cover either our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease expense costs while the aircraft is under contract.
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Guarantees
We have guaranteed the obligations of SkyWest Airlines under the United Express Agreement and the Delta Connection Agreement for the E175 aircraft. In addition, we have guaranteed certain other obligations under SkyWest Airlines’ aircraft financing and leasing agreements.
We have guaranteed $25.6 million in promissory notes of third parties in event the third parties default on their payments. The third parties’ loans are secured by aircraft and engines.
Seasonality
Our results of operations for any interim period are not necessarily indicative of those for an entire year, because the airline industry is subject to seasonal fluctuations and general economic conditions. Our operations are somewhat favorably affected by increased travel on our prorate routes, historically occurring during the summer months, and unfavorably affected by decreased travel during the months of November through February and by inclement weather, which may occasionally or frequently, depending on the severity of the inclement weather in any given winter, result in cancelled flights during the winter months.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Aircraft Fuel
In the past, we have not experienced sustained material difficulties with fuel availability, and we currently expect to be able to obtain fuel at prevailing prices in quantities sufficient to meet our future needs. Pursuant to our contract flying arrangements, United, Delta, American and Alaska have agreed to bear the economic risk of fuel price fluctuations on our contracted flights. We bear the economic risk of fuel price fluctuations on our prorate and SWC operations. For the nine months ended September 30, 2024, approximately 13.2% of our total flying agreements revenue was derived from prorate agreements and SWC. For the nine months ended September 30, 2024, the average price per gallon of aircraft fuel was $3.30. For illustrative purposes only, we have estimated the impact of the market risk of fuel price fluctuations on our prorate and SWC operations using a hypothetical increase of 25% in the price per gallon we purchase. Based on this hypothetical assumption, we would have incurred an additional $16.3 million in fuel expense for the nine months ended September 30, 2024.
Interest Rates
As of September 30, 2024, our long-term debt had fixed interest rates. We currently intend to finance the acquisition of aircraft through manufacturer financing or long-term borrowings. Changes in interest rates may impact our actual cost to acquire future aircraft. To the extent we place new aircraft in service under our capacity purchase agreements with United, Delta, American, Alaska or other carriers, our capacity purchase agreements currently provide that reimbursement rates will be adjusted to reflect the interest rates effective at the closing of the respective aircraft financing. A hypothetical 50 basis point change in market interest rates would not have a material effect on our financial results.
Labor and Inflation Risk
The global economy has experienced, and continues to experience high rates of inflation. We cannot predict how long these inflationary pressures will continue, or how they may change over time, but we expect to see continued impacts on the global economy and our Company.
As a result, our costs have become, and we expect they will continue to be, subject to significant inflationary pressures, and we may not be able to fully offset such higher costs through price increases under our capacity purchase agreements. Salaries, wages and benefits expense represented 48.5% of our total operating expense for the nine months ended September 30, 2024. For illustrative purposes, a hypothetical increase of 25% to our salaries, wages and benefits during the nine months ended September 30, 2024, would have increased our operating expenses by approximately $270.9 million.
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Our inability or failure to offset a material increase in costs due to inflation and/or labor costs could harm our business, financial condition and operating results. Additionally, in the event we are unable to hire and retain qualified pilots or other operational personnel, including flight attendants and maintenance technicians, we may be unable to operate requested flight schedules under our capacity purchase agreements, which could result in a reduction in revenue and operating inefficiencies, such as incremental new-hire training costs, and could harm our business, financial condition and operating results.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of our disclosure controls and procedures, which have been designed to ensure that information we are required to disclose in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of September 30, 2024, those controls and procedures were effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control
During the nine months ended September 30, 2024, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to certain legal actions which we consider routine to our business activities. As of September 30, 2024, our management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters was not likely to have a material adverse effect on our financial position, liquidity or results of operations.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, and in our other filings with the SEC, which factors could materially affect our business, financial condition and results of operations. The risks described in our reports filed with the SEC are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and results of operations.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Our Board of Directors has adopted stock repurchase programs which authorize us to repurchase shares of our common stock in the public market or in private transactions, from time to time, at prevailing prices. Our current stock repurchase program was authorized in May 2023 for the repurchase of up to $250.0 million of our common stock. At September 30, 2024, $52.5 million remains available under the May 2023 authorization. The following table summarizes the repurchases under our stock purchase program during the three months ended September 30, 2024:
| Total Number of Shares Purchased | Average Price Paid Per Share |
| Total Number of Shares Purchased as Part of a Publicly Announced Program (1) | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (in Thousands) | |||||
July 1, 2024 - July 31, 2024 | 62,253 | $ | 80.27 | 62,253 | $ | 63,851 | ||||
August 1, 2024 - August 31, 2024 | 137,252 | $ | 72.23 | 137,252 | $ | 53,937 | ||||
September 1, 2024 - September 30, 2024 | 17,926 | $ | 77.63 | 17,926 | $ | 52,545 | ||||
Total | 217,431 | $ | 74.98 | 217,431 | $ | 52,545 | ||||
| (1) | In May 2023, our Board of Directors approved a stock purchase program, which superseded our prior repurchase program and authorized us to repurchase up to $250.0 million of our common stock. Purchases are made at management’s discretion based on market conditions and financial resources. As of September 30, 2024, we had repurchased 4,779,973 shares of our common stock for $197.5 million and had $52.5 million remaining availability under the May 2023 authorization. |
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2024, no director or officer of the Company
ITEM 6. EXHIBITS
3.1 | ||
3.2 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, to be signed on its behalf by the undersigned, thereunto duly authorized, on November 1, 2024.
SKYWEST, INC. | ||
By | /s/ Robert J. Simmons | |
Robert J. Simmons | ||
Chief Financial Officer | ||
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