SKYWEST INC [SKYW] Filings

American Capacity Purchase Agreement

Agreement

Aircraft type

Number of
Aircraft

Term / Termination Dates

American Agreement
(capacity purchase agreement)

•
E175
•
CRJ 700

Individual aircraft have scheduled removal dates from 2025 to 2032

Total under American Agreement

10-Q 1 skyw-20240630x10q.htm 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-14719

SKYWEST, INC.


Incorporated under the laws of Utah		87-0292166
		(I.R.S. Employer ID No.)

444 South River Road

St. George, Utah 84790

(435) 634-3000

(Address of principal executive offices and telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock, No Par Value	SKYW	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer ⌧		Accelerated filer ◻

Non-accelerated filer ◻		Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.





Class		Outstanding at July 19, 2024
Common stock, no par value		40,103,688

Table of Contents

SKYWEST, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION:
	Item 1.	Financial Statements	3
		Consolidated Balance Sheets	3
		Consolidated Statements of Comprehensive Income (Loss)	5
		Consolidated Statements of Stockholders Equity	6
		Condensed Consolidated Statements of Cash Flows	8
		Notes to Condensed Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
	Item 4.	Controls and Procedures	39

PART II	OTHER INFORMATION:
	Item 1.	Legal Proceedings	40
	Item 1A.	Risk Factors	40
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 5.	Other Information	40
	Item 6.	Exhibits	41
		Signature	42

Exhibit 31.1	Certification of Chief Executive Officer
Exhibit 31.2	Certification of Chief Financial Officer
Exhibit 32.1	Certification of Chief Executive Officer
Exhibit 32.2	Certification of Chief Financial Officer

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

ASSETS


	June 30,		December 31,
	2024		2023
CURRENT ASSETS:
Cash and cash equivalents	$	141,760	$	148,277
Marketable securities		692,509		686,946
Receivables, net		102,772		82,854
Inventories, net		134,382		127,114
Other current assets		43,733		86,705
Total current assets		1,115,156		1,131,896

PROPERTY AND EQUIPMENT:
Aircraft and rotable spares		8,407,450		8,323,107
Deposits on aircraft		77,282		77,282
Buildings and ground equipment		319,512		282,398
Total property and equipment, gross		8,804,244		8,682,787
Less-accumulated depreciation and amortization		(3,369,494)		(3,199,820)
Total property and equipment, net		5,434,750		5,482,967

OTHER ASSETS:
Operating lease right-of-use assets		82,359		86,727
Long-term receivables and other assets		330,174		324,703
Total other assets		412,533		411,430
Total assets	$	6,962,439	$	7,026,293

See accompanying notes to condensed consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY


	June 30,		December 31,
	2024		2023
CURRENT LIABILITIES:
Current maturities of long-term debt	$	497,744	$	443,869
Accounts payable		479,627		470,251
Accrued salaries, wages and benefits		197,975		194,881
Current maturities of operating lease liabilities		18,805		19,335
Taxes other than income taxes		24,659		26,077
Other current liabilities		105,118		99,879
Total current liabilities		1,323,928		1,254,292

LONG-TERM DEBT, net of current maturities		2,284,375		2,562,183

DEFERRED INCOME TAXES PAYABLE		725,430		687,600

NONCURRENT OPERATING LEASE LIABILITIES		63,554		67,392

OTHER LONG-TERM LIABILITIES		333,972		341,324

COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS’ EQUITY:
Preferred stock, 5,000,000 shares authorized; none issued		—		—
Common stock, no par value, 120,000,000 shares authorized; 83,139,289 and 82,840,372 shares issued as of June 30, 2024, and December 31, 2023, respectively		766,130		754,362
Retained earnings		2,407,087		2,271,211
Treasury stock, at cost, 43,045,566 and 42,615,347 shares as of June 30, 2024, and December 31, 2023, respectively		(941,529)		(912,396)
Accumulated other comprehensive income (loss)		(508)		325
Total stockholders’ equity		2,231,180		2,113,502
Total liabilities and stockholders’ equity	$	6,962,439	$	7,026,293

See accompanying notes to condensed consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(Dollars and Shares in Thousands, Except per Share Amounts)


	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
OPERATING REVENUES:
Flying agreements	$	838,170	$	700,394	$	1,616,459	$	1,364,232
Lease, airport services and other		28,948		25,249		54,273		53,242
Total operating revenues		867,118		725,643		1,670,732		1,417,474
OPERATING EXPENSES:
Salaries, wages and benefits		355,005		322,441		706,004		657,642
Aircraft maintenance, materials and repairs		183,267		162,491		328,682		304,717
Depreciation and amortization		96,814		97,169		192,684		191,318
Aircraft fuel		21,328		18,279		42,492		39,243
Airport-related expenses		17,535		16,955		38,423		35,250
Aircraft rentals		1,310		2,428		2,586		21,956
Other operating expenses		72,219		74,020		140,715		140,192
Total operating expenses		747,478		693,783		1,451,586		1,390,318
OPERATING INCOME		119,640		31,860		219,146		27,156
OTHER INCOME (EXPENSE):
Interest income		12,040		10,494		23,666		20,527
Interest expense		(28,966)		(33,718)		(58,795)		(67,338)
Other income (loss), net		(548)		9,001		(1,676)		11,175
Total other expense, net		(17,474)		(14,223)		(36,805)		(35,636)
INCOME (LOSS) BEFORE INCOME TAXES		102,166		17,637		182,341		(8,480)
PROVISION (BENEFIT) FOR INCOME TAXES		26,588		2,218		46,465		(1,828)
NET INCOME (LOSS)	$	75,578	$	15,419	$	135,876	$	(6,652)

BASIC EARNINGS (LOSS) PER SHARE	$	1.88	$	0.35	$	3.38	$	(0.14)
DILUTED EARNINGS (LOSS) PER SHARE	$	1.82	$	0.35	$	3.28	$	(0.14)
Weighted average common shares:
Basic		40,179		43,837		40,239		46,614
Diluted		41,431		44,219		41,462		46,614

COMPREHENSIVE INCOME (LOSS):
Net income (loss)	$	75,578	$	15,419	$	135,876	$	(6,652)
Net unrealized appreciation (depreciation) on marketable securities, net of taxes		(660)		1,514		(833)		2,994
TOTAL COMPREHENSIVE INCOME (LOSS)	$	74,918	$	16,933	$	135,043	$	(3,658)

See accompanying notes to condensed consolidated financial statements

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SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(UNAUDITED)

(In Thousands)


									Accumulated
									Other
	Common Stock			Retained		Treasury Stock			Comprehensive
	Shares	Amount		Earnings		Shares	Amount		Income (Loss)		Total
Balance at December 31, 2023	82,840	$	754,362	$	2,271,211	(42,615)	$	(912,396)	$	325	$	2,113,502
Net income	—		—		60,298	—		—		—		60,298
Stock awards	269		—		—	—		—		—		—
Employee income tax paid on stock awards	—		—		—	(117)		(6,930)		—		(6,930)
Sale of common stock under employee stock purchase plan	29		1,446		—	—		—		—		1,446
Stock based compensation expense	—		5,510		—	—		—		—		5,510
Treasury stock purchases	—		—		—	(136)		(8,750)		—		(8,750)
Net unrealized depreciation on marketable securities, net of tax of $56	—		—		—	—		—		(173)		(173)
Balance at March 31, 2024	83,138	$	761,318	$	2,331,509	(42,868)	$	(928,076)	$	152	$	2,164,903
Net income	—		—		75,578	—		—		—		75,578
Stock awards	1		—		—	—		—		—		—
Stock based compensation expense	—		4,812		—	—		—		—		4,812
Treasury stock purchases	—		—		—	(177)		(13,453)		—		(13,453)
Net unrealized depreciation on marketable securities, net of tax of $212	—		—		—	—		—		(660)		(660)
Balance at June 30, 2024	83,139	$	766,130	$	2,407,087	(43,045)	$	(941,529)	$	(508)	$	2,231,180

See accompanying notes to condensed consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(UNAUDITED)

(In Thousands)


									Accumulated
									Other
	Common Stock			Retained		Treasury Stock			Comprehensive
	Shares	Amount		Earnings		Shares	Amount		Loss		Total
Balance at December 31, 2022	82,593	$	734,426	$	2,236,869	(31,994)	$	(619,862)	$	(3,802)	$	2,347,631
Net loss	—		—		(22,071)	—		—		—		(22,071)
Stock awards	130		57		—	—		—		—		57
Employee income tax paid on stock awards	—		—		—	(32)		(585)		—		(585)
Sale of common stock under employee stock purchase plan	78		1,218		—	—		—		—		1,218
Stock based compensation expense	—		4,329		—	—		—		—		4,329
Treasury stock purchases	—		—		—	(5,067)		(100,001)		—		(100,001)
Net unrealized appreciation on marketable securities, net of tax of $476	—		—		—	—		—		1,480		1,480
Balance at March 31, 2023	82,801	$	740,030	$	2,214,798	(37,093)	$	(720,448)	$	(2,322)	$	2,232,058
Net income	—		—		15,419	—		—		—		15,419
Stock based compensation expense	—		4,246		—	—		—		—		4,246
Treasury stock purchases	—		—		—	(3,335)		(95,998)		—		(95,998)
Net unrealized appreciation on marketable securities, net of tax of $488	—		—		—	—		—		1,514		1,514
Balance at June 30, 2023	82,801	$	744,276	$	2,230,217	(40,428)	$	(816,446)	$	(808)	$	2,157,239

See accompanying notes to condensed consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In Thousands)


	Six months ended
	June 30,
	2024		2023
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	322,962	$	333,023

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities		(722,347)		(533,465)
Sales of marketable securities		715,951		732,774
Acquisition of property and equipment:
Aircraft and rotable spare parts		(46,833)		(122,529)
Buildings and ground equipment		(10,180)		(11,338)
Proceeds from the sale of property and equipment		2,958		3,815
Decrease (increase) in other assets		(15,542)		734
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(75,993)		69,991

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		—		25,000
Principal payments on long-term debt		(225,799)		(221,148)
Payment of debt issuance cost		—		(108)
Net proceeds from issuance of common stock		1,446		1,275
Employee income tax paid on vested equity awards		(6,930)		(585)
Purchase of treasury stock and excise tax		(22,203)		(195,999)
NET CASH USED IN FINANCING ACTIVITIES		(253,486)		(391,565)

Increase (decrease) in cash and cash equivalents		(6,517)		11,449
Cash and cash equivalents at beginning of period		148,277		102,984
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	141,760	$	114,433

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing and financing activities:
Acquisition of property and equipment	$	28,244	$	73
Derecognition of right of use assets	$	—	$	(35,062)
Derecognition of operating lease liabilities	$	—	$	35,062
Cash paid during the period for:
Interest, net of capitalized amounts	$	58,801	$	66,131
Income taxes	$	14,268	$	2,902

See accompanying notes to condensed consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated financial statements of SkyWest, Inc. (“SkyWest” or the “Company”), its operating subsidiary SkyWest Airlines, Inc. (“SkyWest Airlines”), its leasing subsidiary SkyWest Leasing, Inc. (“SkyWest Leasing”) and its charter service subsidiary SkyWest Charter, LLC (“SWC”) included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented. All adjustments are of a normal recurring nature, unless otherwise disclosed. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates and assumptions.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Accounting Standard Codification (“ASC”) Topic 280) – Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (ASC Topic 740) – Improvements to Income Tax Disclosures”, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

(2) Operating Revenues

The Company recognizes revenue under its flying agreements and under its lease, airport services and other service agreements when the service is provided under the applicable agreement. Under the Company’s fixed-fee arrangements (referred to as “capacity purchase” agreements) with United Airlines, Inc. (“United”), Delta Air Lines, Inc. (“Delta”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major airline partner”), the major airline partner generally pays the Company a fixed-fee for each departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time) incurred, and an

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amount per aircraft in service each month, with additional incentives based on flight completion, on-time performance or other performance metrics. The major airline partner also directly pays for or reimburses the Company for certain direct expenses incurred under the capacity purchase agreement, such as fuel, airport landing fees and airport rents. Under the capacity purchase agreements, the Company’s performance obligation is met when each flight is completed, measured in completed block hours, and is reflected in flying agreements revenue. The transaction price for the capacity purchase agreements is determined from the fixed-fee consideration, incentive consideration and directly reimbursed expenses earned as flights are completed over the agreement term. For the six months ended June 30, 2024 and 2023, capacity purchase agreements represented approximately 87.1% and 88.3% of the Company’s flying agreements revenue, respectively.

Under the Company’s “prorate” agreements, the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a Company airline and the other portion of their trip on the major airline partner. Under the Company’s prorate flying agreements, the performance obligation is met and revenue is recognized when each flight is completed based upon the portion of the prorate passenger fare the Company determines that it will receive for each completed flight. The transaction price for the prorate agreements is determined from the proration formula derived from each passenger ticket amount on each completed flight over the agreement term. Certain routes under the Company’s prorate agreements are subsidized by the U.S. Department of Transportation under the Essential Air Service (“EAS”) program, a program created to ensure small communities in the United States maintain a minimum level of scheduled air service. The EAS contracts are generally two years in duration and the Company recognizes EAS revenue on a per-completed-flight basis pursuant to the terms of each contract. Under the Company’s charter operations, SWC, the Company negotiates a fare for the charter flight with the customer. The performance obligation is met and revenue is recognized upon completion of the flight. For the six months ended June 30, 2024 and 2023, prorate flying agreements and SWC revenue represented approximately 12.9% and 11.7% of the Company’s flying agreements revenue, respectively.

The following table represents the Company’s flying agreements revenue by type for the three and six months ended June 30, 2024 and 2023 (in thousands):


	For the three months ended June 30,				For the six months ended June 30,
	2024		2023		2024		2023
Capacity purchase agreements flight operations revenue (non-lease component)	$	595,127	$	499,142	$	1,139,287	$	968,058
Capacity purchase agreements fixed aircraft lease revenue		75,131		74,042		150,290		148,522
Capacity purchase agreements variable aircraft lease revenue		60,841		44,984		118,727		88,089
Prorate agreements and SWC revenue		107,071		82,226		208,155		159,563
Flying agreements revenue	$	838,170	$	700,394	$	1,616,459	$	1,364,232

The Company allocates the total consideration received under its capacity purchase agreements between lease and non-lease components based on stand-alone selling prices. A portion of the Company’s compensation under its capacity purchase agreements relates to operating the aircraft, identified as the non-lease component of the capacity purchase agreement. The Company recognizes revenue attributed to the non-lease component received as fixed-fees for each departure, flight hour or block hour on an as-completed basis for each reporting period. The Company recognizes revenue attributed to the non-lease component 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 the Company anticipates completing over the remaining contract term. Accordingly, the Company’s revenue recognition will likely vary from the timing of cash receipts under the Company’s capacity purchase agreements. The Company refers to cash received under its capacity purchase agreements prior to recognizing revenue as “deferred revenue,” and the Company refers to revenue recognized prior to billing its major airline partners under its capacity purchase agreements as “unbilled revenue” for each reporting period. During the six months ended June 30, 2024, the Company recognized $6.0 million of previously deferred revenue associated with the non-lease fixed monthly payments under certain agreements and decreased unbilled revenue by $0.6 million under certain other agreements, compared to

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deferring revenue of $77.4 million and decreasing unbilled revenue by $6.0 million during the six months ended June 30, 2023.

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 $1.0 million of previously deferred lease revenue during the six months ended June 30, 2024, whereas the Company deferred recognizing lease revenue of $40.0 million during the six months ended June 30, 2023, under the straight-line basis. The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statement of comprehensive income because the use of the aircraft is not a separate activity of the total service provided under the capacity purchase agreements.

The Company’s total deferred revenue balance as of June 30, 2024 was $367.6 million, including $64.2 million in other current liabilities and $303.4 million in other long-term liabilities. The Company’s unbilled revenue balance was $6.7 million as of June 30, 2024, including $1.1 million in other current assets and $5.6 million in other long-term assets. The Company’s total deferred revenue balance was $374.6 million as of December 31, 2023, including $61.0 million in other current liabilities and $313.6 million in other long-term liabilities. The Company’s unbilled revenue balance was $7.3 million as of December 31, 2023, including $1.2 million in other current assets and $6.1 million in other long-term assets.

The Company’s capacity purchase and prorate agreements include weekly provisional cash payments from the respective major airline partner based on a projected level of flying each month. The Company and each major airline partner subsequently reconcile these payments to the actual completed flight activity on a monthly or quarterly basis.

In several of the Company’s agreements, the Company is eligible to receive incentive compensation upon the achievement of certain performance criteria. The incentives are defined in the agreements and are measured and determined on a monthly, quarterly or semi-annual basis. At the end of each period during the term of an agreement, the Company calculates the incentives achieved during that period and recognizes revenue attributable to that agreement accordingly, subject to the variable constraint guidance under ASC Topic 606.

As of June 30, 2024, the Company had 475 aircraft in scheduled service or under contract pursuant to code-share agreements. The following table summarizes the significant provisions of each code-share agreement the Company has with each major airline partner through SkyWest Airlines:


United Express Agreements
Agreement	Aircraft type	Number of Aircraft	Term / Termination Dates
United Express Agreements (capacity purchase agreement)	• E175 • CRJ 700 • CRJ 200	101 19 68	Individual aircraft have scheduled removal dates from 2024 to 2029
United Express Prorate Agreement	• CRJ 200	19*	Terminable with 120-days’ notice
Total under United Express Agreements		207

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Delta Connection Agreements
Agreement	Aircraft type	Number of Aircraft	Term / Termination Dates
Delta Connection Agreement (capacity purchase agreement)	• E175 • CRJ 900 • CRJ 700	85 35 5	Individual aircraft have scheduled removal dates from 2025 to 2034

Delta Connection Prorate Agreement	• CRJ 900 • CRJ 700	6* 4*	Terminable with 30-days’ notice
Total under Delta Connection Agreements		135

Alaska Capacity Purchase Agreement

Agreement

Aircraft type

Number of
Aircraft

Term / Termination Dates

Alaska Agreement

(capacity purchase agreement)

•

E175

Individual aircraft have scheduled removal dates from 2030 to 2034

*	The Company’s prorate agreements are based on specific routes, not a specific aircraft count. The number of aircraft listed above for each prorate agreement approximates the number of aircraft the Company uses to serve the prorate routes.

In addition to the contractual arrangements described above, as of June 30, 2024, SkyWest Airlines reached agreements to place the following E175 aircraft under a capacity purchase agreement with the respective major airline partners:


	Q3 and Q4 2024	2025	2026	Total
Delta Air Lines	1	—	—	1
United Airlines⁽¹⁾	13	7	8	28
Alaska Airlines	—	1	—	1
Total	14	8	8	30

(1)

Nine of the E175 deliveries scheduled for the second half of 2024 are partner-financed, meaning the major airline partner will provide the aircraft for SkyWest Airlines to operate.

Final delivery and in-service dates for aircraft to be placed under contract may be adjusted based on various factors.

When an aircraft is scheduled to be removed 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.

Lease, airport services and other revenues primarily consist of revenue generated from aircraft and spare engines leased to third parties and from airport customer service agreements, such as gate and ramp agent services at various airports where the Company has been contracted by third parties to provide such services. The following table

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represents the Company’s lease, airport services and other revenues for the three and six months ended June 30, 2024 and 2023 (in thousands):


	For the three months ended June 30,				For the six months ended June 30,
	2024		2023		2024		2023
Operating lease revenue	$	22,116	$	16,791	$	38,784	$	33,351
Airport customer service and other revenue		6,832		8,458		15,489		19,891
Lease, airport services and other	$	28,948	$	25,249	$	54,273	$	53,242

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 June 30, 2024 (in thousands):


July 2024 through December 2024	$	23,417
2025		42,017
2026		36,410
2027		36,395
2028		35,508
Thereafter		54,377
Total future minimum rental income under operating leases	$	228,124

Of the Company’s $5.4 billion of net property and equipment as of June 30, 2024, $207.6 million of regional jet aircraft and spare engines were leased to third parties under operating leases. The Company’s mitigation strategy for the residual asset risks of these assets includes leasing aircraft and engine types that can be operated by the Company in the event of a default. Additionally, the operating leases typically have specified lease return condition requirements paid by the lessee to the Company and the Company typically maintains inspection rights under the leases.

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 June 30, 2024, the Company had gross receivables of $106.9 million in current assets and gross receivables of $206.0 million in other long-term assets. The Company has established credit loss reserves based on publicly available historic default rates issued by a third party for companies with similar credit ratings, factoring in the term of the respective accounts receivable, notes receivable or guarantees. During the six months ended June 30, 2024, there were no significant changes in the outstanding accounts receivable, notes receivable, guarantees or credit ratings of the entities.

The following table summarizes the changes in allowance for credit losses:


	Allowance for Credit Losses
Balance at December 31, 2023	$	18,699
Adjustments to credit loss reserves		974
Write-offs charged against allowance		—
Balance at June 30, 2024	$	19,673

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(3) Stock-Based Compensation

During the six months ended June 30, 2024, the Company granted 50,577 restricted stock units and 118,021 performance shares to certain employees of the Company under the SkyWest, Inc. 2019 Long-Term Incentive Plan. Both the restricted stock units and performance shares have a three-year vesting period, during which the recipient must remain employed with the Company. The number of performance shares awardable from the 2024 grants can range from 0% to 200% of the original amount granted depending on the Company’s performance over three one-year measurement periods against the pre-established targets. Upon vesting, each restricted stock unit and performance share will be replaced with one share of common stock. The weighted average fair value of these restricted stock units and performance shares on their date of grant was $59.57 per share. Additionally, during the six months ended June 30, 2024, the Company granted 14,179 fully vested shares of common stock and 2,632 fully vested restricted stock units to the Company’s directors at a weighted average grant date fair value of $61.13. During the six months ended June 30, 2024, the Company did not grant any options to purchase shares of common stock to employees.

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 six months ended June 30, 2024 and 2023, the Company recorded pre-tax stock-based compensation expense of $10.3 million and $8.6 million, respectively.

(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 $250.0 million for the repurchase of the Company’s common stock, superseding a prior Board authorization. At June 30, 2024, $68.8 million remains available under the May 2023 authorization.

During the six months ended June 30, 2024, the Company repurchased 313,381 shares of common stock for $22.1 million at a weighted average price per share of $70.44. The Company also recorded $0.1 million of excise tax related to the stock repurchases as Treasury Stock in the Company’s Stockholders Equity for the six months ended June 30, 2024. During the six months ended June 30, 2023, the Company repurchased 8.4 million shares of common stock for $194.1 million at a weighted average price per share of $23.10 and recorded $1.9 million of excise tax related to the stock repurchases as Treasury Stock in the Company’s Stockholders Equity.

(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. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common share. Securities that could potentially dilute Basic EPS in the future, and which were excluded from the calculation of Diluted EPS because inclusion of such share would be anti-dilutive, are as follows (in thousands):

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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Treasury Warrants⁽¹⁾		—		203		—		785
Employee Stock Awards		—		—		—		676
Total antidilutive securities		—		203		—		1,461

(1)

Warrants originally issued to U.S. Department of the Treasury (“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 six months ended June 30, 2024 and 2023, 400,000 and 538,000 performance shares (at target performance) were excluded from the computation of Diluted EPS because the Company had not achieved the minimum target thresholds for these shares for the six months ended June 30, 2024 and 2023, respectively.

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				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Numerator:
Net income (loss)	$	75,578	$	15,419	$	135,876	$	(6,652)
Denominator:
Basic earnings per share weighted average shares		40,179		43,837		40,239		46,614
Dilutive effect of employee stock awards and warrants		1,252		382		1,223		—
Diluted earnings per share weighted average shares		41,431		44,219		41,462		46,614

Basic earnings per share	$	1.88	$	0.35	$