证券交易委员会
华盛顿特区20549
表格
根据1934年证券交易所法案第13或第15(d)节的季度报告 |
截至季度结束日期的财务报告
或者
根据1934年证券交易法第13或15(d)条规定的过渡报告 |
过渡期从 到
佣金文件号
根据法律设立 | ||
（I.R.S.雇主识别号码） |
(
(首席执行官办公室地址和电话号码)
在法案第12(b)条的规定下注册的证券：
请用复选标记指示，即(1)在过去12个月内已按照证券交易法的第13或15(d)条的规定提交所有必须提交的报告（或对要求提交此类报告的较短期间内向参与者提交）；及(2)曾在过去90天内遵守此类提交要求。
请以复选框标示，申请人是否按照规则S-t第405条规定提交了过去12个月内需要提交的每个互动数据文件个月（或者申请人需要提交这些文件的更短期间）
请用勾选标记指示注册人是大型高速申报人、高速申报人、非高速申报人、较小的报告公司还是新兴增长公司。请参阅《交易所法》第120亿.2条中“大型高速申报人”、“高速申报人”、“较小的报告公司”和“新兴增长公司”的定义：
◻ | ||
非加速文件提交者 ◻ | OJEMDA的加速批准是基于公司关键的开放标签2期FIREFLY-1试验的数据，该试验在两个研究组中招募了总共137例复发或难治的BRAF改变的pLGG患者。第一组招募了77例患者，用于疗效分析。第二组提供了额外60例患者的安全性数据，并在第一组招募完成后启动，以便设置访问OJEMDA的机制。这个试验的详细内容在2023年11月的美国神经肿瘤学会议上通过两次口头报告和一篇发表在《自然医学》上的平行发表。 | |
新兴成长企业 |
如果是新兴成长型企业，请勾选，表明注册者已选择不使用根据证券交易所法第13(a)条规定提供的任何新的或修订的财务会计准则的延长过渡期。◻
是 否根据交易所法第120亿.2条。是的
请指示在最新可行日期每个申报人普通股类别的流通股数。
班级 | 截至2024年10月25日为止的未偿金额 | |
普通股，无面值 |
2
第一部分。财务信息
项目1。基本报表
SKYWEST，INC.及其附属公司
基本报表
（以千美元为单位）
资产
9月30日， |
| 12月31日， | ||||
| 2024 |
| 2023 | |||
流动资产： | ||||||
现金及现金等价物 | $ | | $ | | ||
有价证券 |
| |
| | ||
应收款项，净额 |
| |
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净存货 |
| |
| | ||
其他资产 |
| |
| | ||
总流动资产 |
| |
| | ||
资产： | ||||||
飞机和可旋转备件 |
| |
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飞机保证金 |
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建筑物和地面设备 |
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所有房地产及设备总价值，毛值 |
| |
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累积折旧和摊销减少 |
| ( |
| ( | ||
净房地产和设备总资产 |
| |
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其他资产: | ||||||
经营租赁权使用资产 | | | ||||
长期应收款项及其他资产 |
| |
| | ||
其他资产总计 |
| |
| | ||
资产总额 | $ | | $ | | ||
请参阅附注事项的简明合并财务报表。
3
SKYWEST，INC.和子公司
基本报表
（以千美元为单位）
负债和股东权益
9月30日， |
| 12月31日， | ||||
| 2024 |
| 2023 | |||
流动负债： | ||||||
长期债务的流动部分 | $ | | $ | | ||
应付账款 |
| |
| | ||
应计的工资、工资和福利 |
| |
| | ||
经营租赁负债的到期付款 |
| |
| | ||
所得税以外的税费 |
| |
| | ||
其他流动负债 |
| |
| | ||
流动负债合计 |
| |
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长期负债，减：流动到期债务 |
| |
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递延所得税应付款 |
| |
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非流动营业租赁负债 |
| |
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其他长期负债 |
| |
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承诺和 contingencies（见注 7） | ||||||
6.40 | ||||||
优先股， |
|
| ||||
普通股， |
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保留盈余 |
| |
| | ||
截至2024年3月31日和2023年12月31日，公司的库藏股票分别有2,279,784股和2,693,653股。 |
| ( |
| ( | ||
累计其他综合收益 | | | ||||
股东权益总额 |
| |
| | ||
负债和股东权益总额 | $ | | $ | | ||
请参阅附注事项的简明合并财务报表。
4
SKYWESt，INC.及其子公司
综合收益综合表
(未经审计)
(金额和股数以千为单位，每股金额除外)
三个月的结束时间 | 截至九个月结束 | |||||||||||
9月30日， | 9月30日， | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
营业收入： | ||||||||||||
飞行协议 | $ | | $ | | $ | | $ | | ||||
租赁、机场服务和其他 |
| |
| |
| |
| | ||||
总营收 |
| |
| |
| |
| | ||||
营业费用: | ||||||||||||
工资、工资和福利 |
| |
| |
| |
| | ||||
飞机维护、材料和修理 |
| |
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折旧和摊销 |
| |
| |
| |
| | ||||
航空燃料 |
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机场相关支出 |
| |
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飞机租赁 |
| |
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其他营业费用 |
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营业费用总计 |
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营业收入 |
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其他收益（费用）： | ||||||||||||
利息收入 |
| |
| |
| |
| | ||||
利息支出 |
| ( |
| ( |
| ( |
| ( | ||||
其他收入（损失），净额 |
| |
| ( |
| ( |
| | ||||
其他支出合计，净值 |
| ( |
| ( |
| ( |
| ( | ||||
税前收入 |
| |
| |
| |
| | ||||
所得税福利预提 |
| |
| |
| |
| ( | ||||
净利润 | $ | | $ | | $ | | $ | | ||||
每股基本收益 | $ | | $ | | $ | | $ | | ||||
每股稀释收益 | $ | | $ | | $ | | $ | | ||||
加权平均普通股数： | ||||||||||||
基本 |
| | | | | |||||||
稀释 |
| | | | | |||||||
综合收益： | ||||||||||||
净收入 | $ | | $ | | $ | | $ | | ||||
Net unrealized appreciation on marketable securities, net of taxes |
| |
| |
| |
| | ||||
综合收益总额 | $ | | $ | | $ | | $ | | ||||
请参阅附注的并表财务报表
5
SKYWEST，INC.及其附属公司
股东权益合并报表
(未经审计)
(以千计)
累积的 | |||||||||||||||||||
其他 | |||||||||||||||||||
普通股 | 留存收益 | 库藏股 | 综合 | ||||||||||||||||
股份 | 数量 | 收益 | 股份 | 数量 | 收益（损失） | 总费用 | |||||||||||||
2023年12月31日的余额 |
| | $ | | $ | |
| ( | $ | ( | $ | | $ | | |||||
净收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
股票津贴 |
| | — |
| — |
| — |
| — |
| — |
| — | ||||||
员工在股票奖励上支付的个人所得税 | — | — | — | ( | ( | — | ( | ||||||||||||
员工股票购买计划下普通股的销售 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
股票补偿费用 |
| — |
| |
| — |
| — |
| — |
| — | | ||||||
公司回购股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
Net unrealized depreciation on marketable securities, net of tax of $ | — | — | — | — | — | ( | ( | ||||||||||||
2024年3月31日结存余额 | | $ | | $ | | ( | $ | ( | $ | | $ | | |||||||
净收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
股票津贴 | |
| — |
| — |
| — |
| — |
| — | — | |||||||
股票补偿费用 | — |
| |
| — |
| — |
| — |
| — | | |||||||
公司回购股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
可变现证券净未实现折旧，税后净值为$ | — | — | — | — | — | ( | ( | ||||||||||||
2024年6月30日余额 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | | |||||
净收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
员工股票购买计划下普通股的销售 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
行使权证后发行的普通股，净额 | | — |
| — |
| — |
| — |
| — |
| — | |||||||
股票补偿费用 | — |
| |
| — |
| — |
| — |
| — | | |||||||
公司回购股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
证券净未实现升值，税后$净额 | — | — | — | — | — | | | ||||||||||||
2024年9月30日余额 |
| | $ | | $ | |
| ( | $ | ( | $ | | $ | | |||||
请参阅附注事项的简明合并财务报表。
6
SKYWEST公司及其子公司
股东权益的综合报表
(未经审计)
(以千计)
累积的 | |||||||||||||||||||
其他 | |||||||||||||||||||
普通股 | 留存收益 | 库藏股 | 综合 | ||||||||||||||||
股份 | 数量 | 收益 | 股份 | 数量 | 损失 | 总费用 | |||||||||||||
2022年12月31日的余额为 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | | |||||
净损失 |
| — |
| — |
| ( |
| — |
| — |
| — | ( | ||||||
股票津贴 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
员工在股票奖励上支付的个人所得税 | — | — | — | ( | ( | — | ( | ||||||||||||
员工股票购买计划下的普通股出售 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
股票补偿费用 |
| — |
| |
| — |
| — |
| — |
| — | | ||||||
公司回购股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
可变投资未实现升值净收益，税后$ | — | — | — | — | — | | | ||||||||||||
2023年3月31日的余额 | | $ | | $ | | ( | $ | ( | $ | ( | $ | | |||||||
净收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
股票补偿费用 | — |
| |
| — |
| — |
| — |
| — | | |||||||
公司回购股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
可变现证券未实现升值，税后净额为$ | — | — | — | — | — | | | ||||||||||||
6,749.7 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | | |||||
净收入 |
| — |
| — |
| |
| — |
| — |
| — | | ||||||
员工股票购买计划下的普通股出售 |
| | |
| — |
| — |
| — |
| — |
| | ||||||
股票补偿费用 | — |
| |
| — |
| — |
| — |
| — | | |||||||
公司回购股份 | — |
| — |
| — |
| ( |
| ( |
| — | ( | |||||||
证券投资未实现升值净额，税后净额为$ | — | — | — | — | — | | | ||||||||||||
2023年9月30日结余 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | | |||||
请参阅附注事项的简明合并财务报表。
7
SKYWEST，INC及其子公司
现金流量表简明综合报表
(未经审计)
(以千计)
截至九个月结束 | ||||||
9月30日， | ||||||
| 2024 |
| 2023 | |||
营业活动产生的现金流量净额 | $ | | $ | | ||
投资活动产生的现金流量： | ||||||
购买有市场流通的证券 |
| ( | ( | |||
可变市场证券销售 |
| | | |||
购置房地产和设备： | ||||||
飞机和可旋转备件 |
| ( | ( | |||
建筑物和地面设备 |
| ( | ( | |||
固定资产出售的收益 |
| | | |||
飞机保证金 | — | ( | ||||
用于已获得飞机的飞机存款款项 | | — | ||||
其他资产减少（增加） |
| ( | | |||
投资活动提供的（使用的）净现金 |
| ( |
| | ||
筹资活动产生的现金流量： | ||||||
长期债务发行所得 |
| | | |||
偿还长期债务本金 |
| ( | ( | |||
支付债券发行费 | ( | ( | ||||
普通股发行所得净额 |
| | | |||
员工为已获股权奖励支付的所得税 | ( | ( | ||||
购买库存股和消费税 |
| ( | ( | |||
融资活动中使用的净现金 |
| ( |
| ( | ||
现金及现金等价物增加 |
| | | |||
期初现金及现金等价物余额 |
| | | |||
期末现金及现金等价物 | $ | | $ | | ||
现金流量信息补充披露: | ||||||
非现金投资和筹资活动: | ||||||
购置房地产和设备 | $ | | $ | | ||
摊销使用权资产 | $ | — | $ | ( | ||
经营租赁负债的摊销 | $ | — | $ | | ||
期间支付的现金用于： | ||||||
利息净额，减去资本化金额 | $ | | $ | | ||
所得税 | $ | | $ | | ||
请参阅附注事项的简明合并财务报表。
8
西空航空公司及其子公司
简明合并财务报表附注
(未经审计)
(1) 简明综合财务报表
报告范围
西空航空公司（以下简称“西空航空”或“公司”）、其运营子公司西空航空公司（“西空航空公司”）、其融资子公司SkyWest Leasing, Inc.（“西空租赁”）及其包机服务子公司SkyWest Charter, LLC（“SWC”）的简明综合财务报表未经审计，根据美国证券交易委员会（“SEC”）的规则和法规编制。尽管公司认为以下披露足以使所呈现的信息不会误导，但根据这些规则和法规，根据美国通用会计准则（“GAAP”）编制的财务报表通常包括的某些信息和披露已经被简化或省略。这些简明综合财务报表反映了在管理层意见中，必要进行的所有调整，以公正呈现所呈现的中期经营结果。除非另有披露，所有调整均属于一般性反复性质。这些简明综合财务报表应与公司截至2023年12月31日的年度报告表格10-K中包含的综合财务报表和附注一起阅读。截至2024年9月30日结束的三个和九个月的经营结果不能必然反映出可能在2024年12月31日结束的年度结果。
根据GAAP要求，财务报表的编制需要管理层进行会计估计和假设，这些估计和假设会影响资产和负债的报告金额，披露基于财务报表日期的或披露可能性资产和负债的金额，以及报告期间营业收入和费用的金额。实际结果可能会与这些估计和假设有实质性差异。
最近的会计声明
2023年11月，财务会计准则委员会（“FASB”）发布了会计准则更新（“ASU”）2023-07号，题为“分部报告（会计准则法典（“ASC”）第280号）—改进可报告分部披露”，旨在通过增加对重要分部费用的披露，主要改进可报告分部披露要求。该ASU还扩大了披露要求，以使财务报表使用者更好地理解实体对分部绩效和资源分配的衡量和评估。本指导意见适用于2023年12月15日后开始的财年，2023年12月15日后开始的财年内的中期期间，并可提前使用。公司目前正在评估采纳这一新指导对其合并财务报表和相关披露可能产生的潜在影响。
2023年12月，FASB发布了ASU2023-09号，题为“所得税（ASC第740号）—改进所得税披露”，该指导通过要求所得税税率调节和所得税支付的司法管辖区相关信息的一致分类和更多细分，提高了所得税披露的透明度、有效性和可比性。该指导适用于2024年12月15日后开始的年度期间，并可提前使用。公司目前正在评估采纳这一新指导对其合并财务报表和相关披露可能产生的潜在影响。
(2)营业收入
公司在适用协议下提供服务时，根据其飞行协议以及租赁、机场服务和其他服务协议确认营业收入。根据公司与联合大陆航空公司（称为“联合”）、达美航空公司（称为“达美”）、美国航空公司（称为“美国”）和阿拉斯加航空公司（称为“阿拉斯加”）（每家为“主要航空公司合作伙伴”）的固定费用安排（称为“容量购买”协议），主要航空公司合作伙伴通常支付给公司每次起飞、飞行小时数（从起飞到降落，不包括滑行时间）或区间小时数（从起飞到降落，包括滑行时间）发生的固定费用，以及
9
每架飞机每月的金额，另外根据飞行完成情况、准点率或其他绩效指标提供额外激励。主要航空公司合作伙伴还直接支付公司或者基于承购协议发生的某些直接费用，例如燃料、机场降落费和机场租金。根据承购协议，公司的绩效义务是在每次飞行完成时满足，以完成的区间飞行小时数作为度量，并反映在飞行协议收入中。承购协议的交易价格是根据完成飞行期间所获得的固定费用、激励费用和直接报销费用确定的。截至2024年9月30日的九个月和2023年同期，承购协议约占了公司飞行协议收入的
根据公司的“分摊”协议，主要航空公司合作伙伴和公司谈判一个乘客票价分摊公式，根据该公式，公司就那些乘客在公司航空公司上旅行一部分并在主要航空公司上旅行另一部分的机票收入的百分比。根据公司的分摊飞行协议，绩效义务在每次飞行完成时得到满足并且收入在每次完成飞行后基于公司确定的分摊乘客票价部分而确认。分摊协议的交易价格是根据协议期间每次完成飞行上的每位乘客票价金额导出的分摊公式确定的。公司的分摊协议中的某些航线受到美国交通部根据基本航空服务（“EAS”）计划补贴的支持，该计划旨在确保美国小型社区维持一定程度的定期航空服务。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日的三个月和九个月内公司按类型划分的飞行协议营业收入（以千为单位）：
截至9月30日止三个月的时间内， | 截至9月30日止九个月的时间内， | |||||||||||
| 2024 |
| 2023 | 2024 |
| 2023 | ||||||
容量购买协议飞行运营营业收入（非租赁元件） | $ | | $ | | $ | | $ | | ||||
容量购买协议固定飞机租赁收入 | | | | | ||||||||
容量购买协议变量飞机租赁营业收入 |
| |
| |
| |
| | ||||
按比例分配协议和SWC营业收入 |
| |
| |
| |
| | ||||
飞行协议营业收入 | $ | | $ | | $ | | $ | | ||||
公司根据独立销售价格，将其在容量购买协议下收到的总对价分配给租赁和非租赁元件。 公司在容量购买协议下的一部分补偿涉及运营飞机，被确定为容量购买协议的非租赁元件。 公司承认与每个报告期针对每次出发、飞行小时或区块小时的非租赁元件收到的固定费用相关的营业收入。公司承认与每个报告期租赁元件之外的固定月度付款有关的营业收入，根据飞机区块小时完成数量相对于公司预期在剩余合同期内完成的区块小时数量。因此，公司的营业收入确认可能会与公司根据其容量购买协议收到现金的时间有所不同。公司在确认营业收入之前引用其容量购买协议下收到的现金称为“递延收入”，公司在向其主要航空公司合作伙伴开具账单之前确认的营业收入称为每个报告期的“未开票营业收入”。 在2024年9月30日结束的九个月内，公司确认了$
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 $
公司的容量购买和按份约定包括每周从各个主要航空公司合作伙伴处的临时现金付款，基于每月的预期飞行水平。公司和每个主要航空公司合作伙伴随后会按月或季度的基础核对这些付款与实际完成的飞行活动。
在公司的协议中，公司有资格在实现某些绩效标准时获得激励报酬。这些激励在协议中有明确定义，并会根据每月、季度或半年的基准进行衡量和确定。在协议期间的每个期间结束时，公司计算在该期间内实现的激励，并相应地确认与该协议有关的收入，但须符合ASC 606主题下的变量约束指导。
截至2024年9月30日，公司拥有
联合快运协议 | ||||||
协议 |
| 飞机类型 |
| 股数 |
| 条款/终止日期 |
联合快运协议 (容量购买协议) | • E175 • CRJ700 • CRJ200 | 个别飞机的定期到期日期为从2024年到2029年 | ||||
美国联合航空城市航空协议 | • CRJ200 | 终止合约需 通知 | ||||
根据美国联合快运协议的总数 | ||||||
11
达美航空合作协议 | ||||||
协议 |
| 飞机类型 |
| 股数 |
| 条款/终止日期 |
达美航空合作协议 (购买能力协议) | • E175 • CRJ900 • CRJ700 | 各架飞机的服务期限安排在2025年至2034年之间 | ||||
达美航空连线航空公司分成协议 | • CRJ900 • CRJ700** | | 可终止 注意 | |||
根据达美航空合作协议的总计 | ||||||
美国容量购买协议 | ||||||
协议 |
| 飞机类型 |
| 股数 |
| 条款/终止日期 |
美国协议 （容量购买协议） | • E175 • CRJ700 | 各架飞机的计划到期日期从2025年到2032年不等 | ||||
美国协议总计 | ||||||
阿拉斯加运力购买协议 | ||||||
协议 |
| 飞机类型 |
| 股数 |
| 条款/终止日期 |
阿拉斯加协议 （容量购买协议） | • E175 | 各个飞机的计划到期日期为2030年至2034年 | ||||
| * | 公司的按比例协议基于特定航线，而不是特定飞机数量。上述每项按比例协议列出的飞机数量大致等同于公司用于服务按比例路线的飞机数量。 |
** 包括CRJ550飞机，一种
除了上述描述的合同安排外，截至2024年9月30日，SkyWest航空已达成协议，将以下E175飞机放置在与各主要航空公司合作的容量购买协议下：
| Q4 2024 |
| 2025 |
| 2026 | 总费用 | ||
联合大陆航空 |
| |
| |
| | | |
阿拉斯加航空 |
| — |
| |
| — | | |
总费用 |
| |
| |
| | |
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.
租赁、机场服务和其他收入主要包括从出租给第三方的飞机和备用发动机以及机场客户服务协议（例如登机口和坡道代理服务等）产生的营业收入。
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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