10-Q 1 skyw-20240930x10q.htm 10-Q
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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 September 30, 2024

OR

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 October 25, 2024

Common stock, no par value

40,327,811

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

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

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

41

PART II

OTHER INFORMATION:

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 5.

Other Information

42

Item 6.

Exhibits

42

Signature

43

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

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

ASSETS

September 30,

    

December 31,

    

2024

    

2023

CURRENT ASSETS:

Cash and cash equivalents

$

177,609

$

148,277

Marketable securities

 

658,433

 

686,946

Receivables, net

 

111,199

 

82,854

Inventories, net

 

136,480

 

127,114

Other current assets

 

50,496

 

86,705

Total current assets

 

1,134,217

 

1,131,896

PROPERTY AND EQUIPMENT:

Aircraft and rotable spares

 

8,462,449

 

8,323,107

Deposits on aircraft

 

71,457

 

77,282

Buildings and ground equipment

 

343,870

 

282,398

Total property and equipment, gross

 

8,877,776

 

8,682,787

Less-accumulated depreciation and amortization

 

(3,460,508)

 

(3,199,820)

Total property and equipment, net

 

5,417,268

 

5,482,967

OTHER ASSETS:

Operating lease right-of-use assets

85,303

86,727

Long-term receivables and other assets

 

319,812

 

324,703

Total other assets

 

405,115

 

411,430

Total assets

$

6,956,600

$

7,026,293

See accompanying notes to condensed consolidated financial statements.

3

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY

September 30,

    

December 31,

    

2024

    

2023

CURRENT LIABILITIES:

Current maturities of long-term debt

$

496,789

$

443,869

Accounts payable

 

460,276

 

470,251

Accrued salaries, wages and benefits

 

211,149

 

194,881

Current maturities of operating lease liabilities

 

18,496

 

19,335

Taxes other than income taxes

 

26,660

 

26,077

Other current liabilities

 

100,804

 

99,879

Total current liabilities

 

1,314,174

 

1,254,292

LONG-TERM DEBT, net of current maturities

 

2,196,548

 

2,562,183

DEFERRED INCOME TAXES PAYABLE

 

751,983

 

687,600

NONCURRENT OPERATING LEASE LIABILITIES

 

66,807

 

67,392

OTHER LONG-TERM LIABILITIES

 

315,591

 

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; 83,601,235 and 82,840,372 shares issued as of September 30, 2024, and December 31, 2023, respectively

 

772,320

 

754,362

Retained earnings

 

2,496,796

 

2,271,211

Treasury stock, at cost, 43,262,997 and 42,615,347 shares as of September 30, 2024, and December 31, 2023, respectively

 

(957,994)

 

(912,396)

Accumulated other comprehensive income

375

325

Total stockholders’ equity

 

2,311,497

 

2,113,502

Total liabilities and stockholders’ equity

$

6,956,600

$

7,026,293

See accompanying notes to condensed consolidated financial statements.

4

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

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

Three months ended

Nine months ended

September 30,

September 30,

    

2024

    

2023

    

2024

    

2023

OPERATING REVENUES:

Flying agreements

$

883,494

$

741,898

$

2,499,953

$

2,106,130

Lease, airport services and other

 

29,292

 

24,273

 

83,565

 

77,515

Total operating revenues

 

912,786

 

766,171

 

2,583,518

 

2,183,645

OPERATING EXPENSES:

Salaries, wages and benefits

 

377,435

 

333,017

 

1,083,439

 

990,659

Aircraft maintenance, materials and repairs

 

181,652

 

178,465

 

510,334

 

483,182

Depreciation and amortization

 

96,662

 

96,560

 

289,346

 

287,878

Aircraft fuel

 

22,724

 

23,330

 

65,216

 

62,573

Airport-related expenses

 

22,642

 

18,398

 

61,065

 

53,648

Aircraft rentals

 

1,339

 

2,099

 

3,925

 

24,055

Other operating expenses

 

78,897

 

65,011

 

219,612

 

205,203

Total operating expenses

 

781,351

 

716,880

 

2,232,937

 

2,107,198

OPERATING INCOME

 

131,435

 

49,291

 

350,581

 

76,447

OTHER INCOME (EXPENSE):

Interest income

 

12,460

 

11,234

 

36,126

 

31,761

Interest expense

 

(27,808)

 

(32,543)

 

(86,603)

 

(99,881)

Other income (loss), net

 

109

 

(3,631)

 

(1,567)

 

7,544

Total other expense, net

 

(15,239)

 

(24,940)

 

(52,044)

 

(60,576)

INCOME BEFORE INCOME TAXES

 

116,196

 

24,351

 

298,537

 

15,871

PROVISION (BENEFIT) FOR INCOME TAXES

 

26,487

 

873

 

72,952

 

(955)

NET INCOME

$

89,709

$

23,478

$

225,585

$

16,826

BASIC EARNINGS PER SHARE

$

2.23

$

0.56

$

5.61

$

0.37

DILUTED EARNINGS PER SHARE

$

2.16

$

0.55

$

5.44

$

0.37

Weighted average common shares:

Basic

 

40,253

41,826

40,244

45,018

Diluted

 

41,561

42,580

41,495

45,540

COMPREHENSIVE INCOME:

Net income

$

89,709

$

23,478

$

225,585

$

16,826

Net unrealized appreciation on marketable securities, net of taxes

 

883

 

624

 

50

 

3,618

TOTAL COMPREHENSIVE INCOME

$

90,592

$

24,102

$

225,635

$

20,444

See accompanying notes to condensed consolidated financial statements

5

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

Net income

 

 

 

89,709

 

 

 

89,709

Sale of common stock under employee stock purchase plan

 

18

1,418

 

 

 

 

 

1,418

Issuance of common stock upon warrant exercise, net

444

 

 

 

 

 

Stock based compensation expense

 

4,772

 

 

 

 

4,772

Treasury stock purchases

 

 

 

(218)

 

(16,465)

 

(16,465)

Net unrealized appreciation on marketable securities, net of tax of $283

883

883

Balance at September 30, 2024

 

83,601

$

772,320

$

2,496,796

 

(43,263)

$

(957,994)

$

375

$

2,311,497

See accompanying notes to condensed consolidated financial statements.

6

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

Net income

 

 

 

23,478

 

 

 

23,478

Sale of common stock under employee stock purchase plan

 

39

1,536

 

 

 

 

 

1,536

Stock based compensation expense

 

4,321

 

 

 

 

4,321

Treasury stock purchases

 

 

 

(1,192)

 

(50,500)

 

(50,500)

Net unrealized appreciation on marketable securities, net of tax of $201

624

624

Balance at September 30, 2023

 

82,840

$

750,133

$

2,253,695

 

(41,620)

$

(866,946)

$

(184)

$

2,136,698

See accompanying notes to condensed consolidated financial statements.

7

SKYWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In Thousands)

Nine months ended

September 30,

    

2024

    

2023

NET CASH PROVIDED BY OPERATING ACTIVITIES

$

506,565

$

511,907

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities

 

(1,212,208)

(982,331)

Sales of marketable securities

 

1,240,771

1,236,009

Acquisition of property and equipment:

Aircraft and rotable spare parts

 

(131,880)

(151,600)

Buildings and ground equipment

 

(21,685)

(13,978)

Proceeds from the sale of property and equipment

 

4,117

6,574

Deposits on aircraft

(55,528)

Aircraft deposits applied towards acquired aircraft

5,825

Decrease (increase) in other assets

 

(3,941)

21,857

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

(119,001)

 

61,003

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt

 

23,059

25,000

Principal payments on long-term debt

 

(338,221)

(331,183)

Payment of debt issuance cost

(336)

(108)

Net proceeds from issuance of common stock

 

2,864

2,811

Employee income tax paid on vested equity awards

(6,930)

(585)

Purchase of treasury stock and excise tax

 

(38,668)

(246,499)

NET CASH USED IN FINANCING ACTIVITIES

 

(358,232)

 

(550,564)

Increase in cash and cash equivalents

 

29,332

22,346

Cash and cash equivalents at beginning of period

 

148,277

102,984

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

177,609

$

125,330

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Non-cash investing and financing activities:

Acquisition of property and equipment

$

15,979

$

16,614

Derecognition of right of use assets

$

$

(39,247)

Derecognition of operating lease liabilities

$

$

39,247

Cash paid during the period for:

Interest, net of capitalized amounts

$

87,072

$

98,196

Income taxes

$

14,930

$

9,184

See accompanying notes to condensed consolidated financial statements.

8

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 nine months ended September 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

9

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 nine months ended September 30, 2024 and 2023, capacity purchase agreements represented approximately 86.8% and 87.2% 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 nine months ended September 30, 2024 and 2023, prorate flying agreements and SWC revenue represented approximately 13.2% and 12.8% of the Company’s flying agreements revenue, respectively.

The following table represents the Company’s flying agreements revenue by type 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

Capacity purchase agreements flight operations revenue (non-lease component)

$

624,342

$

511,929

$

1,763,629

$

1,479,987

Capacity purchase agreements fixed aircraft lease revenue

75,084

73,794

225,374

222,316

Capacity purchase agreements variable aircraft lease revenue

 

61,308

 

46,495

 

180,035

 

134,584

Prorate agreements and SWC revenue

 

122,760

 

109,680

 

330,915

 

269,243

Flying agreements revenue

$

883,494

$

741,898

$

2,499,953

$

2,106,130

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 nine months ended September 30, 2024, the Company recognized $24.5 million of previously deferred revenue associated with the non-lease fixed monthly payments under certain agreements and decreased unbilled revenue by $0.9 million under certain other agreements,

10

compared to deferring revenue of $111.9 million and decreasing unbilled revenue by $8.7 million during the nine months ended September 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 $1.5 million of previously deferred lease revenue during the nine months ended September 30, 2024, whereas the Company deferred recognizing lease revenue of $59.3 million during the nine months ended September 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 September 30, 2024 was $348.6 million, including $59.6 million in other current liabilities and $289.0 million in other long-term liabilities. The Company’s unbilled revenue balance was $6.4 million as of September 30, 2024, including $1.1 million in other current assets and $5.3 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 September 30, 2024, the Company had 484 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

CRJ700

CRJ200

110

19

61

Individual aircraft have scheduled expiration dates from 2024 to 2029

United Express Prorate Agreement

CRJ200

20*

Terminable with 120-days’ notice

Total under United Express Agreements

210

11

Delta Connection Agreements

Agreement

    

Aircraft type

    

Number of
Aircraft

    

Term / Termination Dates

Delta Connection Agreement

(capacity purchase agreement)

E175

CRJ900

CRJ700

86

35

5

Individual aircraft have scheduled expiration dates from 2025 to 2034

Delta Connection Prorate Agreement

CRJ900

CRJ700**

1*

14*

Terminable with 30-days’ notice

Total under Delta Connection Agreements

141

American Capacity Purchase Agreement

Agreement

    

Aircraft type

    

Number of
Aircraft

    

Term / Termination Dates

American Agreement

(capacity purchase agreement)

E175

CRJ700

20

71

Individual aircraft have scheduled expiration dates from 2025 to 2032

Total under American Agreement

91

Alaska Capacity Purchase Agreement

Agreement

    

Aircraft type

    

Number of
Aircraft

    

Term / Termination Dates

Alaska Agreement

(capacity purchase agreement)

E175

42

Individual aircraft have scheduled expiration 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.

** Includes CRJ550 aircraft, a 50-seat configuration of the CRJ700 aircraft.

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

    

Q4 2024

    

2025

    

2026

Total

United Airlines

 

4

 

7

 

8

19

Alaska Airlines

 

 

1

 

1

Total

 

4

 

8

 

8

20

The Company also entered into multiple agreements with United in September and October 2024 to place a total of 40 used CRJ550s under multi-year contracts. Pursuant to these agreements, the Company is in the process of acquiring 11 used CRJ550s and will convert 29 of its CRJ700s to CRJ550s. The aircraft are anticipated to be placed into service between the fourth quarter of 2024 and the end of 2026. One of such CRJ550 aircraft was acquired during the three months ended September 30, 2024.

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.

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

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

$

22,134

$

16,091

$

60,918

$

49,442

Airport customer service and other revenue

7,158

8,182

22,647

28,073

Lease, airport services and other

$

29,292

$

24,273

$

83,565

$

77,515

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

    

$

11,711

2025

 

42,248

2026

 

36,641

2027

 

36,626

2028

 

35,739

Thereafter

 

54,543

Total future minimum rental income under operating leases

$

217,508

Of the Company’s $