What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-17 compared with 2025-02-13 · 104 added, 127 removed, 209 unchanged (53% of the section changed)

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Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

We have the largest regional airline operation in the United States.

We have the largest regional airline operation in the United States through our operating subsidiary SkyWest Airlines.

As of December 31, 2025, we offered scheduled passenger and air freight service with approximately 2,260 total daily departures to destinations in the United States, Canada and Mexico.

Our fleet of E175, CRJ900, CRJ700 and CRJ550 have a multiple-class seat configuration, whereas our CRJ200 have a single-class seat configuration.

Our fleet of E175, CRJ900, CRJ700 and

CRJ550 have a multiple-class seat configuration, whereas our CRJ200 have a single-class seat configuration.

During 2022, we formed SWC, which offers on-demand charter services using CRJ200 aircraft in a 30-seat configuration.

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(1) As of December 31, 2025, 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.

supplemental spare aircraft supporting our code-share agreements that may be placed under future code-share or leasing agreements, aircraft scheduled to be placed under a code-share agreement with one of our major airline partners or aircraft that are scheduled to be disassembled for use as spare parts.

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.

During the year

ended December 31, 2024, we made changes to our fleet, including the addition of five new E175 aircraft and 20 partner-financed E175 aircraft.

We anticipate our fleet will continue to evolve, as we are scheduled to add a total of 15 new E175 aircraft with United from 2025 to 2026 and one new E175 aircraft with Alaska in 2025.

We also have multiple agreements with United to place 30 used CRJ550 aircraft into service throughout 2025 and 2026.

In exchange for such services, our major airline partners pay us either fixed fees to operate the flight, referred to as “capacity purchase agreement,” or we receive a percentage of applicable passenger ticket revenues on the designated flights we operate, referred to as “prorate agreement.” 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.

During the year ended December 31, 2025, we made changes to our fleet, including the addition of seven new E175 aircraft and one partner-financed E175 aircraft.

We anticipate our fleet will continue to evolve, as we are scheduled to add a total of eight new E175 aircraft with United in 2026, 16 new aircraft with Delta between 2027 and 2028 (which are expected to replace 12 CRJ900s and four CRJ700s we are currently flying under contract with Delta) and one new E175 aircraft with Alaska in 2026.

We also have multiple agreements with United to place 23 used CRJ550 aircraft into service in 2026.

Timing of placing these additional aircraft into service, including delivery timing on acquired aircraft, 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 CRJ700, CRJ550, CRJ900 and E175 aircraft, commonly referred to as “ dual-class CRJ aircraft,” to capacity purchase agreements or prorate agreements, and potentially removing older aircraft from service that typically require higher maintenance costs.

Our primary objective in the fleet changes is to improve our profitability by adding new E175 aircraft and used CRJ700, CRJ550, CRJ900 and E175 aircraft, commonly referred to as “ dual-class aircraft” due to the first-class seat offerings, to our capacity purchase agreements or prorate agreements, and potentially removing older aircraft from service that typically require higher maintenance costs.

For the year ended December 31, 2025, approximately 44.4% of our aircraft in scheduled service or under contract were operated for United, approximately 28.1% were operated for Delta, approximately 18.9% were operated for American and approximately 8.6% 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 our capacity purchase agreements and our prorate flying agreements.

For the year ended December 31, 2025, our capacity purchase revenue represented approximately 84.3% of our total flying agreements revenue and our prorate and SWC revenue, combined, represented approximately 15.7% of our total flying agreements revenue.

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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 increased from 485 as of December 31, 2023, to 492 as of December 31, 2024, or by 1.4%;

and the number of block hours increased from 1.14 million in 2023 to 1.29 million in 2024, or by 13.3%, 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 $502.4 million, or 20.5%, from 2023 to 2024, primarily as a result of an increase in completed block hours for the comparable period and recognizing previously deferred revenue for the year ended December 31, 2024, compared to deferring the recognition of revenue on fixed monthly payments we received during the year ended December 31, 2023.

The number of flights we operate and the corresponding number of passengers we carry are the primary drivers of our revenue under our prorate agreements.

The number of aircraft we have in scheduled service or under contract pursuant to our code-share agreements decreased from 492 as of December 31, 2024, to 487 as of December 31, 2025, or by 1.0%;

and the number of block hours increased from 1.3 million in 2024 to 1.5 million in 2025, or by 14.7%, primarily due to an increase in the scheduled daily utilization of our aircraft driven by an increase in the number of available captains.

Our capacity purchase revenue increased $319.3 million, or 10.8%, from 2024 to 2025, primarily as a result of an increase in completed block hours for the comparable periods.

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 $153.0 million, or 33.5%, in 2025, as compared to 2024.

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Our total operating expenses increased $407.1 million, or 13.4%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

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 for the year ended December 31, 2024, compared to the year ended December 31, 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 for the year ended December 31, 2025, compared to the year ended December 31, 2024.

Departures increased from 766,742 for the year ended December 31, 2024 to 863,513 for the year ended December 31, 2025, or by 12.6%, and our total block hours increased 14.7% in 2025, as compared to 2024.

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Fleet Activity

The following table summarizes our fleet scheduled for service or under contract as of 2024:

The following table summarizes our fleet in service or under contract as of December 31, 2024 and December 31, 2025:

Aircraft in Service or Under Contract

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CRJ700/CRJ550s

During 2024, we took delivery of five new E175 aircraft and placed the aircraft into service under capacity purchase agreements and we placed 20 partner-financed E175 aircraft into service under a capacity purchase agreement.

During 2025, we took delivery of seven new E175 aircraft and placed the aircraft into service under capacity purchase agreements, and we placed one partner-financed E175 aircraft into service under a capacity purchase agreement.

We placed 18 SkyWest owned CRJ550 aircraft into service under a capacity purchase agreement or prorate agreement, while removing 14 CRJ700 aircraft from flying agreements.

We placed four SkyWest owned CRJ900 aircraft into service under a prorate agreement while removing four partner-financed CRJ900 aircraft from flying agreements.

We also removed 17 CRJ200 aircraft from service during 2025.

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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 year ended December 31, 2024, compared to the year ended December 31, 2023, w as primarily due to an increase in the number of available captains during 2024, compared to 2023, which allowed for a higher scheduled utilization of our aircraft.

The increase in block hours, departures and passengers carried during the year ended December 31, 2025, compared to the year ended December 31, 2024, w as primarily due to an increase in the number of block hours incurred per aircraft as the number of available captains did not significantly limit our flight schedules during 2025, compared to 2024, which allowed for a higher scheduled utilization of our aircraft.

For the year ended December 31,

Block hours by aircraft type:

CRJ700s/CRJ550s

Total block hours

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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.

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, providing maintenance services to other airlines and providing airport counter, gate and ramp services.

We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands):

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Flying agreements revenue

The increase in “Capacity purchase agreements flight operations revenue” of $438.9 million, or 22.2%, was primarily due to a 13.3% 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 year ended December 31, 2024, compared to the year ended December 31, 2023.

The increase in “Capacity purchase agreements flight operations revenue” of $175.1 million, or 7.3%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to a 14.7% year-over-year increase in block hour production from aircraft under our capacity purchase agreements, offset by a capacity purchase agreement contract extension in 2025 that decreased the allocation of certain fixed monthly revenue from flight

operations revenue and increased the allocation of such payments to aircraft lease revenue based on relative standalone selling prices of the lease and non-lease components for the year ended December 31, 2025.

Under our capacity purchase agreements, we are paid a fixed amount per month per aircraft over the contract term.

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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 was the primary driver in recognizing previously deferred revenue during the year ended December 31, 2024, whereas we deferred recognizing revenue associated with the fixed monthly payments for the year ended December 31, 2023.

Based on the number of completed block hours during the year ended December 31, 2024, we recognized $43.4 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 year ended December 31, 2023, we deferred recognizing $164.0 million of revenue, net of unbilled revenue, related to the non-lease fixed monthly payments received associated with our flight operations revenues.

Based on the number of completed block hours during the year ended December 31, 2025, we recognized a total of $38.3 million of previously deferred revenue and unbilled revenue related to the non-lease fixed monthly payments we received associated with our flight operations revenues.

For the year ended December 31, 2024, we recognized a total of $43.4 million of previously deferred revenue and unbilled revenue related to non-lease 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 $63.5 million, or 13.3%, was primarily due to a transition from certain scheduled fixed monthly lease payments to variable lease payments under our capacity purchase agreements beginning January 1, 2024.

The increase in “Capacity purchase agreements aircraft lease revenue” of $144.2 million, or 26.7%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily driven by a change in the mix of aircraft under our capacity purchase agreements from the year ended December 31, 2024 and a capacity purchase agreement contract extension in 2025 that decreased the allocation of certain fixed monthly revenue from flight operations revenue and increased the allocation of such payments to aircraft lease revenue based on relative standalone selling prices of the lease and non-lease components for the year ended December 31, 2025.

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 year ended December 31, 2024, using the straight-line basis for fixed monthly lease payments, whereas we deferred recognizing $78.5 million during the year ended December 31, 2023.

Additionally, we recognized a total of $19.5 million of previously deferred lease revenue and unbilled revenue during the year ended December 31, 2025, using the straight-line basis for fixed monthly lease payments, compared to recognizing a total of $1.5 million of previously deferred revenue and unbilled revenue during the year ended December 31, 2024.

The deferred revenue balance applicable to each contract will be recorded as revenue over the term of each respective contract.

For clarity, under our “Capacity purchase agreements flight operations revenue” and “Capacity purchase agreements aircraft lease revenue” combined, we recognized $44.9 million of previously deferred revenue, net of unbilled revenue, during the year ended December 31, 2024, compared to deferring revenue, net of unbilled revenue, of $242.5 million during the year ended December 31, 2023.

For clarity, under our “Capacity purchase agreements flight operations revenue” and “Capacity purchase agreements aircraft lease revenue” combined, we recognized a total of $57.8 million of previously deferred revenue and unbilled revenue during the year ended December 31, 2025, compared to recognizing a total of $44.9 million of previously deferred revenue and unbilled revenue during the year ended December 31, 2024.

Our total deferred revenue balance, associated with our “Capacity purchase agreements flight operations revenue” and our “Capacity purchase agreements aircraft lease revenue,” net of unbilled revenue, was $264.6 million as of December 31, 2025, compared to total deferred revenue, net of unbilled revenue of $322.4 million as of December 31, 2024.

The increase in prorate agreements and SWC revenue of $76.0 million, or 19.9%, was primarily due to an increase in prorate passengers and passenger revenue we received on routes we operated under our prorate agreements during the year ended December 31, 2024, compared to the year ended December 31, 2023.

Additionally, a portion of

the increase was attributed to an increase in SWC revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, as SWC began operations in 2023.

The increase in lease, airport services and other revenues of $14.1 million, or 13.9%, was primarily due to an incr ease in the number of leased assets and lease rates for leases to third parties during 2024 compared to 2023.

The increase in prorate agreements and SWC revenue of $153.0 million, or 33.5%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to an increase in prorate departures, passengers and passenger revenue we received on routes we operated under our prorate agreements driven by an improvement in the number of available captains during the year ended December 31, 2025, compared to the year ended December 31, 2024.

The increase in lease, airport services and other revenues of $57.9 million, or 50.3%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to an incr ease in maintenance services provided to third parties, an increase in the number of leased assets, and increase in lease rates during 2025 compared to 2024.

Operating Expenses

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Depreciation and amortization

Aircraft fuel

Airport-related expenses

Aircraft rentals

Aircraft fuel

Other operating expenses

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Salaries, wages and benefits.

The $141.3 million, or 10.7%, increase in salaries, wages and benefits was due to an increase in direct labor costs that resulted from the higher number of flights we operated during the year ended December 31, 2024, compared to the year ended December 31, 2023.

The $95.4 million, or 6.5%, increase in salaries, wages and benefits for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated, partially offset by operating efficiencies from higher utilization of our aircraft during the year ended December 31, 2025, compared to the year ended December 31, 2024.

Aircraft maintenance, materials and repairs.

The $39.2 million, or 5.8%, increase in aircraft maintenance expense was primarily due to h igher flight volume, which increased our maintenance activity and related expenses, for the year ended December 31, 2024, compared to the year ended December 31, 2023.

The $231.1 million, or 32.4%, increase in aircraft maintenance expense for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to incremental maintenance costs incurred on our CRJ fleet, an increase in our flight volume, which increased our maintenance activity and related expenses, and an increase in maintenance service activities provided to third parties for the year ended December 31, 2025, compared to the year ended December 31, 2024.

Depreciation and amortization.

The $0.8 million, or 0.2%, increase in depreciation and amortization expense was primarily due to an increase in depreciation expense related to the acquisition of five new E175 aircraft and spare engines since December 31, 2023, significantly offset by lower depreciation on our older CRJ fleet that reached our previously estimated useful life estimates during the 2024 year.

The $19.4 million, or 5.0%, decrease in depreciation and amortization expense for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to certain fixed assets that became fully depreciated during 2024 and as a result of extending the estimated useful lives on our CRJ700/CRJ550 fleet by an average of three years and revising the residual values of the assets accordingly during the fourth quarter of 2024, which had a full year effect in 2025, partially offset by an increase in depreciation expense related to the acquisition of seven new E175 aircraft and spare engines since December 31, 2024.

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.

The $35.8 million, or 41.7%, increase in airport-related expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to an increase in subcontracted airport services, station rents, weather related aircraft deicing costs and landing fees as a result of an increase in the number of flights we operated under our prorate agreements.

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.

Aircraft fuel.

The $1.5 million, or 1.7%, increase in fuel cost was primarily due to an increase in the number of flights we operated under our prorate agreements and under SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $3.70 in 2023 to $3.19 in 2024.

The $33.0 million, or 37.7%, increase in fuel cost for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to an increase in the number of flights we operated under our prorate agreements and under SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $3.19 in 2024 to $3.00 in 2025.

We purchase and incur expense for all fuel on flights operated under our prorate agreements and SWC.

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Fuel gallons purchased

Airport-related expenses .

The $13.2 million, or 18.2%, increase in airport-related expenses for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to an increase in subcontracted airport services, weather related aircraft deicing costs and landing fees as a result of an increase in the number of flights we operated under our prorate agreements.

Aircraft rentals.

The $20.3 million, or 79.4%, decrease in aircraft rentals was primarily related to early lease buyouts we executed during 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, crew hotel costs and credit loss reserves.

The $26.2 million, or 9.8%, increase in other operating expenses was primarily related to an increase in other operating costs, such as crew per diem and crew hotel costs, as a result of the higher number of flights we operated during 2024, compared to 2023.

Other operating expenses primarily consist of aircraft rentals, property taxes, hull and liability insurance, simulator costs, crew per diem, crew hotel costs and credit loss reserves.

The $31.2 million, or 10.4%, increase in other operating expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily related to an increase in operating expenses associated with our higher flight volume in 2025 compared to 2024, such as crew per diem and crew hotel costs, and an increase in our credit loss reserve in 2025 as a result of our assessment of higher credit risk of certain outstanding receivables.

Summary of interest expense, interest income, other income (expense) and provision for income taxes:

Interest expense.

The $16.6 million, or 12.7%, decrease in interest expense was primarily related to a decrease in outstanding debt from $3.0 billion at December 31, 2023 to $2.7 billion at December 31, 2024.

The $9.9 million, or 8.7%, decrease in interest expense for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily related to a decrease in outstanding debt from $2.7 billion at December 31, 2024 to $2.4 billion at December 31, 2025.

Our average effective interest rate for 2025 and 2024 was 4.3% and 4.2%, respectively.

Interest income.

Interest income increased $4.0 million, from $43.9 million during the year ended December 31, 2023 to $47.9 million during the year ended December 31, 2024.

Our interest income increased primarily from an increase in average interest rates attributed to our marketable securities for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Interest income decreased $4.6 million, from $47.9 million for the year ended December 31, 2024 to $43.3 million for the year ended December 31, 2025.

The decrease in interest income was primarily related to a decrease in interest rates earned on our marketable securities from December 31, 2024 to December 31, 2025.

Other income, net.

Other income, net decreased $19.4 million in 2024, compared to 2023.

Other income, net primarily consists of the realized and unrealized gains or 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, net was primarily due to a decrease in gains from the sale of assets and a decrease in unrealized gains on our investments in other companies for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Other income, net of expenses increased $5.0 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.

Other income, 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, net of expenses was primarily a result of an increase in the fair value of our investments in other companies for the year ended December 31, 2025, compared to the year ended December 31, 2024.

Provision for income taxes.

For the years ended December 31, 2025, and December 31, 2024, our effective income tax rates were 24.3% and 25.3%, respectively, which included the statutory federal income tax rate of 21.0% and other reconciling income tax items, including state income taxes and the impact of non-deductible expenses.

For the year ended December 31, 2023, the lower effective tax rate was primarily related to a benefit of $7.6 million for the release of a previously recorded uncertain tax position liability.

For the year ended December 31, 2025, the lower effective tax rate was primarily related to a higher deduction benefit related to employee equity awards that vested in 2025 compared to 2024.

Our income tax provision rate may fluctuate each reporting period based on various factors including, but not limited to, the amount of our non-deductible operating expenses, relative to our income before income taxes.

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Our Business Segments 2025 compared to 2024 :

Our reporting segments consist of (1) the operations of SkyWest Airlines and SWC, which had its first revenue generating flight in 2023, (collectively, “SkyWest Airlines and SWC”) and (2) SkyWest Leasing activities.

Our chief operating decision maker analyzes the profitability of operating aircraft under our code-share agreements separately from the profitability of financing new aircraft acquired through debt and cash placed under our capacity purchase agreements, currently consisting of our E175 fleet, and our return on such aircraft financing.

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, and revenue and operating expenses attributed to other flying or airport services agreements and charter flight services.

Our reportable segments consist of (1) the operations of SkyWest Airlines and SWC (collectively, “SkyWest Airlines and SWC”) and (2) SkyWest Leasing activities.

Our chief operating decision maker analyzes the profitability of operating aircraft separately from the profitability of our capital deployed for new aircraft and the related financings of such aircraft, including our E175 fleet.

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, and revenue and operating expenses attributed to prorate agreements, airport services agreements and charter flight services.

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.

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The SkyWest Leasing segment’s total assets and capital expenditures include new aircraft acquired through the issuance of debt and our aircraft and engines leased to third parties.

Additionally, aircraft removed from SkyWest Airlines operations and held for sale are included in the SkyWest Leasing segment.

Corporate overhead expenses, primarily consisting of administrative labor costs, were allocated to the operating expenses of SkyWest Airlines and SWC and SkyWest Leasing.

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Other segment items (1)

SkyWest Airlines and SWC Segment profit (loss) (2)

(1) Other segment items include aircraft fuel;

SkyWest Airlines and SWC Segment profit (2)

(1) Other segment items for SkyWest Airlines and SWC include aircraft fuel;

airport related expenses;

aircraft rentals;

other operating expenses consisting primarily of property taxes, hull and liability insurance, simulator costs, crew per diem and crew hotel costs;

other operating expenses consisting primarily of property taxes, hull and liability insurance, simulator costs, crew per diem and crew hotel costs and credit loss reserves;

interest income and other income, net.

(2) Segment profit (loss) is equal to income before income taxes.

As a result of adopting ASC 2023-07, the Company included interest income and other income in the recast segment profit (loss) for each segment for the year ended December 31, 2023.

SkyWest Airlines and SWC Segment Profit (Loss).

SkyWest Airlines and SWC segment profit was $138.9 million for the year ended December 31, 2024, compared to a segment loss of $165.2 million for the year ended December 31, 2023.

(2) Segment profit is equal to income before income taxes.

SkyWest Airlines and SWC Segment Profit.

SkyWest Airlines and SWC segment profit was $263.0 million for the year ended December 31, 2025, compared to $138.9 million for the year ended December 31, 2024.

SkyWest Airlines and SWC block hour production increased 14.7%, from 1,292,040 for the year ended December 31, 2024 to 1,481,723 for the year ended December 31, 2025, 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 year ended December 31, 2025 are set forth below.

SkyWest Airlines and SWC operating revenues increased $513.2 million, or 21.5%, from 2024 to 2023.

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 year ended December 31, 2024, SkyWest Airlines recognized $43.4 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 $164.0 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the year ended December 31, 2023.

Additionally, the increase in SkyWest Airlines and SWC operating revenues was attributed to an increase in block hour production during the year ended December 31, 2024, compared to the year ended December 31, 2023.

SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $141.3 million, or 10.7%, primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the year ended December 31, 2024, compared to the year ended December 31, 2023.

SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense increased $27.4 million, or 4.2%, primarily due to higher flight volume, which increased the maintenance activity and related expenses, for the year ended December 31, 2024, compared to the year ended December 31, 2023.

SkyWest Airlines and SWC’s depreciation and amortization expense decreased $4.2 million, or 2.8%, primarily due to lower depreciation on our older CRJ fleet that reached our previously estimated useful life estimates during the 2024 year.

SkyWest Airlines and SWC’s interest expense decreased $4.1 million, or 24.3%, primarily due a decrease in outstanding debt from December 31, 2023 to December 31, 2024.

SkyWest Airlines and SWC’s other segment items increased $48.7 million, or 11.8%, primarily related to an increase in other operating costs, such as crew per diem and crew hotel costs, as a result of the higher number of flights we operated during the year ended December 31, 2024, compared to the year ended December 31, 2023, offset by a decrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft in 2023.

SkyWest Airlines and SWC operating revenues increased $509.7 million, or 17.5%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to an increase in block hour production during the year ended December 31, 2025, compared to the year ended December 31, 2024.

SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $95.4 million, or 6.5%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated, partially offset by operating efficiencies from higher utilization of our aircraft during the year ended December 31, 2025, compared to the year ended December 31, 2024.

SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense increased $192.6 million, or 28.1%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to incremental maintenance costs incurred on our CRJ fleet and higher flight volume, which increased the maintenance activity and related expenses, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

SkyWest Airlines and SWC’s depreciation and amortization expense increased $12.5 million, or 8.6%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to acquiring additional assets, including spare engines and CRJ550 aircraft since December 31, 2024.

SkyWest Airlines and SWC’s interest expense decreased $1.2 million, or 9.4%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to a decrease in outstanding debt from December 31, 2024 to December 31, 2025.

SkyWest Airlines and SWC’s other segment items increased $86.4 million, or 18.7%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily related to an increase in fuel costs, airport-related expenses, such as subcontracted airport services, station rents, weather-related aircraft deicing costs and

landing fees and other operating costs, such as crew per diem and crew hotel costs, as a result of the higher number of flights we operated during the year ended December 31, 2025, compared to the year ended December 31, 2024.

The following table sets forth our SkyWest Leasing segment data for the years ended December 31, 2025 and 2024 (in thousands):

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SkyWest Leasing Segment profit (2)

(1) Other segment items for SkyWest Leasing primarily consists of interest income and other income, net;

and aircraft rentals and other operating expenses consisting primarily of property taxes.

(1) Other segment items for SkyWest Leasing include other operating expenses consisting primarily of property taxes and credit loss reserves;

aircraft rentals;

interest income and other income, net.

(2) Segment profit is equal to income before income taxes.

As a result of adopting ASC 2023-07, the Company included interest income and other income in the recast segment profit (loss) for each segment for the year ended December 31, 2023.

SkyWest Leasing Segment Profit.

SkyWest Leasing profit increased $87.7 million, or 42.7%, during 2024, compared to 2023.

For the year ended December 31, 2024, SkyWest Leasing recognized $1.5 million of previously deferred lease revenue, compared to deferring $78.5 million of lease revenue on the fixed monthly lease payments received for the year ended December 31, 2023, under the straight-line basis.

Additionally, SkyWest Leasing profit increased due to additional lease revenue from the E175 aircraft placed under contract since December 31, 2023, a decrease in interest expense as a result of a lower outstanding debt balance for the year ended December 31, 2024, compared to the year ended December 31, 2023, and a gain related to reclassifying assets held for sale as held and used during the year ended December 31, 2024.

SkyWest Leasing profit increased $9.4 million, or 3.2%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to an increase in revenue from maintenance services provided to third parties, a decrease in interest expense due to a decrease in outstanding debt from December 31, 2024 to December 31, 2025 and a decrease in depreciation and amortization expense primarily due to certain fixed assets that became fully depreciated during 2024 and as a result of extending the estimated useful lives on our CRJ700/CRJ550 fleet during the fourth quarter of 2024 with a full year effect in 2025.

These increases in segment profit were partially offset by an increase in aircraft maintenance, materials and repairs due to incremental maintenance services provided to third parties and an increase in our credit loss reserve as a result of our assessment of the credit risk of the outstanding receivables.

Liquidity and Capital Resources

As of December 31, 2024, we had $801.6 million in cash, cash equivalents and marketable securities and $75.1 million available for borrowings under our line of credit.

As of December 31, 2025, we had $706.9 million in cash and cash equivalents and marketable securities.

As of December 31, 2025, we had $75.6 million available for borrowings under our line of credit.

Given our available liquidity as of December 31, 2025, 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 of cash, cash equivalents and marketable securities decreased from $835.2 million as of December 31, 2023, to $801.6 million as of December 31, 2024, or by $33.6 million.

Our total long-term debt, including current maturities decreased from $3.0 billion as of December 31, 2023, to $2.7 billion as of December 31, 2024, or by $0.3 billion, primarily due to scheduled debt payments for the 2024 year, partially offset by debt issued to finance five new E175 aircraft.

Additionally, we used $43.3 million to repurchase 0.6 million shares of our common stock during the year ended December 31, 2024.

At December 31, 2024, our total capital mix (measured as a ratio of total stockholder equity

and total long-term debt, including current maturities) was 47.4% equity and 52.6% total long-term debt, compared to 41.3% equity and 58.7% total long-term debt at December 31, 2023.

Our total cash, cash equivalents and marketable securities decreased from $801.6 million as of December 31, 2024, to $706.9 million as of December 31, 2025, or by $94.7 million.

Our total long-term debt, including current maturities decreased from $2.7 billion as of December 31, 2024, to $2.4 billion as of December 31, 2025, or by $0.3 billion, primarily due to scheduled debt payments for the 2025 year, partially offset by debt issued to finance seven new E175 aircraft.

Additionally, we repurchased 0.8 million shares of our common stock for $84.5 million under a share repurchase program authorized by our Board of Directors during the year ended December 31, 2025.

At December 31, 2025, our total capital mix (measured as a ratio of total stockholder equity and total long-term debt, including current maturities) was 53.4% equity and 46.6% total long-term debt, compared to 47.4% equity and 52.6% total long-term debt at December 31, 2024.

As of December 31, 2025 and 2024, we had $47.2 million and $47.1 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions.

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Our cash flows provided by operating activities was $940.4 million for the year ended December 31, 2025, compared to $692.5 million for the year ended December 31, 2024.

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, asset impairment charges, 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 year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to the timing of cash payments on our current liability accounts, timing of cash receipts on our accounts receivables and a decrease in cash received in excess of revenue recognized for the year ended December 31, 2024, compared to the year ended December 31, 2023, offset by an increase in net income, adjusted for non-cash items and deferred income taxes, for the year ended December 31, 2024, compared to the year ended December 31, 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, income taxes, accrued liabilities, deferred revenue and unbilled revenue.

The increase in our cash flow from operations for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to an increase in income before income taxes for the year ended December 31, 2025, compared to the year ended December 31, 2024, and an increase in accounts payable and other liabilities due to the timing of cash payments for the comparable periods.

Cash Flows used in Investing Activities

Our cash flows used in investing activities was $228.6 million for the year ended December 31, 2024, compared to $23.2 million for the year ended December 31, 2023.

Our cash flows used in investing activities was $651.8 million for the year ended December 31, 2025, compared to cash flows used in investing activities of $228.6 million for the year ended December 31, 2024.

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;

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.

and timing of cash payments and cash receipts attributed to our investments in other entities.

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 increased from $341.2 million for the year ended December 31, 2024, to $642.0 million for the year ended December 31, 2025.

The increase 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 an increase of $59.4 million used in the acquisition of property and equipment for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the acquisition of five new E175 aircraft in 2024.

Additionally, there was an increase in our cash used to acquire other long-term assets,

including our investment in Contour, for the year ended December 31, 2024, offset by a decrease of $47.5 million in aircraft deposits in 2024, compared to 2023.

Excluding the transfer of dollars between our investments in marketable securities and our cash accounts, the remaining increase in cash used in investing activities was primarily due to an increase of $267.3 million used in the acquisition of property and equipment and an increase of $57.8 million used for aircraft deposits for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the acquisition of seven new E175 aircraft and spare engines in 2025.

Cash Flows used in Financing Activities

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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 $283.1 million decrease in cash used in financing activities for the year ended December 31, 2024, compared to the year ended December 31, 2023, w as primarily due to a decrease of $248.6 million in cash used to purchase treasury stock and an increase of $46.5 million in proceeds from the issuance of long-term debt, offset by an increase of $5.3 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 year ended December 31, 2024, compared to the year ended December 31, 2023.

The $8.5 million increase in cash used in financing activities for the year ended December 31, 2025, compared to the year ended December 31, 2024, w as primarily due to an increase of $41.6 million in cash used to purchase treasury stock and an increase of $20.3 million in cash used for employee income taxes paid on vested equity awards in lieu of shares, offset by an increase of $53.6 million in proceeds from the issuance of long-term debt for the purchase of seven new E175 aircraft, net of principal payments on long-term debt during the year ended December 31, 2025, compared to the year ended December 31, 2024.

Significant Commitments and Obligations

The following table summarizes our commitments and obligations as noted for each of the next five years and thereafter (in thousands):

The following table summarizes our commitments and obligations for future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms as of December 31, 2025, firm aircraft and spare engine commitments, interest commitments and principal maturities on long-term debt as noted for each of the next five years and thereafter (in thousands):

Operating lease payments for aircraft and facility obligations

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Total commitments and obligations

(1) At December 31, 2024, all of our total long-term debt had fixed interest rates.

In addition to the table above, in 2024, we entered into a master equipment purchase agreement with another airline to acquire certain airframes and engines and lease the assets back to the airline under a five-year term.

At December 31, 2024, we estimate the remaining financing obligation under the agreement will be between $60.0 million and $70.0 million and anticipate closing on the remaining financings during 2025.

We accounted for the transaction as a failed sale-leaseback in accordance with Accounting Standard Codification Topic 842 as the criteria for a sale were not met.

At December 31, 2025, we estimated the remaining financing obligation under the agreement will be between $20.0 million and $25.0 million and anticipated closing on the remaining financings during 2026.

Purchase Commitments and Options

We are coordinating with our major airline partners and aircraft manufacturers on the timing of upcoming fleet deliveries under previously announced deals.

The anticipated future aircraft delivery dates are subject to change.

As of December 31, 2025, we had a firm purchase commitment for 69 new E175 aircraft from Embraer with delivery dates anticipated into 2032.

We also have a firm purchase commitment to purchase four used CRJ550 aircraft with anticipated delivery dates in 2025.

We also had firm purchase commitments to purchase two used E170 aircraft with anticipated delivery dates in 2026.

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.

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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 16 E175 aircraft with approximately 75-85%

debt and the remaining balance with cash.

We intend to fund the purchase of the four used CRJ550 aircraft through cash on hand.

We intend to finance the firm purchase commitment for 69 E175 aircraft with approximately 75-85% debt and the remaining balance with cash.

We intend to use cash to purchase the two used E170 aircraft.

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 four to six years as of December 31, 2024.

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 three years to five years as of December 31, 2025.

These eight leased aircraft are subleased to a third party.

Future minimum lease payments due under all long-term operating leases were approximately $119.0 million at December 31, 2025.

Assuming a 6.2% 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 $87.7 million at December 31, 2024.

Assuming a 6.2% 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 $81.9 million at December 31, 2025.

Long-term Debt Obligations

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The average effective interest rate on our debt obligations was approximately 4.3% at December 31, 2025.

Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning 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.

We have guaranteed the obligations of SkyWest Airlines under the Delta Connection Agreement and the United Express Agreement for the E175 aircraft.

Under our capacity purchase agreements, our major airline partners compensate us for our costs of the aircraft on a monthly basis.

The consideration for aircraft ownership costs we receive varies by agreement but is intended to compensate us for our ownership of the aircraft while the aircraft is under contract.

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 our aircraft financing and leasing agreements.

We have guaranteed $24.7 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.

We have guaranteed $12.6 million in promissory notes of a third party in the event the third party defaults on their payments.

The third party’s loans are secured by aircraft and engines.

Critical Accounting Policies and Estimates

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A portion of the consideration received for the use of the aircraft is a fixed monthly payment per aircraft.

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 in the period when the block hours are completed.

We recognized $1.5 million of previously deferred lease revenue during the year ended December 31, 2024, under the straight-line basis.

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 in the period when the block hours are completed.

We recognized $13.9 million of previously deferred lease revenue and $5.6 million unbilled revenue during the year ended December 31, 2025, under the straight-line basis.

Additionally, a portion of our compensation under our capacity purchase agreements relates to operating the aircraft, identified as the non-lease component of the capacity purchase agreement.

We recognize 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 we anticipate completing over the remaining contract term.

In 2024, we recognized $35.5 million of previously deferred fixed monthly payments and unbilled revenue increased $7.9 million.

The amount of deferred revenue and unbilled revenue from fixed monthly payments we recognize will increase or decrease in future reporting periods depending on the number of block hours we complete during such reporting period and our then-current forecast of block hours we anticipate completing over the remaining contract term based on information available to us as that time.

Our revenues could be impacted by several factors, such as our flight schedules, passenger fares we receive under our prorate agreements, terminations, extensions or other amendments to our code-share agreements, our estimates used to determine the amount of revenue we defer under our capacity purchase agreements, and our ability to earn incentive payments contemplated under applicable agreements.

In 2025, we recognized $30.1 million of previously deferred fixed monthly payments as revenue and $8.2 million of unbilled revenue.

The amount of deferred revenue and unbilled revenue from fixed monthly payments we recognize will increase or decrease in future reporting periods depending on the number of block hours we

complete during such reporting period and our then-current forecast of block hours we anticipate completing over the remaining contract term based on information available to us as that time.

Our revenues could be impacted by several factors, such as our flight schedules, passenger fares we receive under our prorate agreements, terminations, extensions or other amendments to our code-share agreements (which may also cause a reassessment of stand-alone selling prices of the lease and non-lease consideration), our estimates used to determine the amount of revenue we defer under our capacity purchase agreements, and our ability to earn incentive payments contemplated under applicable agreements.

In the event contracted rates are not finalized at a quarterly or annual financial statement date, we record that period’s revenues based on the lower of the prior period’s approved rates or our estimate of rates that will be implemented upon completion of negotiations.

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Asset groupings are done at the fleet type or contract level.

During 2023, we recorded a non-cash impairment loss of $2.3 million related to a change in the estimate of fair value for 14 CRJ700 aircraft that were classified as held for sale in 2022.

We presented the $54.3 million of assets held for sale at the lower of their current carrying value or their fair market value less costs to sell and included the amount in “Other current assets” on the Company’s consolidated balance sheet.

In March 2024, we decided not to sell the 14 CRJ700 aircraft based on improved pilot availability and reclassified the aircraft as held for use assets in “Aircraft and rotable spares” on the Company’s consolidated balance sheet.

We remeasured the fair value of the held for use assets at the time of the reclassification and, as a result, we recorded a $4.2 million gain (pre-tax) for the year ended December 31, 2024, as an offset to “Other Operating Expenses” in our consolidated statement of income, primarily due to the elimination of the estimated costs to sell the assets.

The fair values were based upon observable and unobservable inputs, including market trends and conditions.

The gain of $4.2 million is included in “Other operating expenses” on the Company’s consolidated statements of comprehensive income and in the SkyWest Leasing segment for the year ended December 31, 2024.

The impairment of $2.3 million is included in “Other operating expenses” on the Company’s consolidated statements of comprehensive income and in the SkyWest Leasing segment for the year ended December 31, 2023.

Factors that may impact our estimates used for depreciation include anticipated useful lives of each aircraft type and estimated residual values of each aircraft.

As we operate our aircraft under code-share agreements with our major

airline partners, changes in anticipated demand by our major airline partners for regional aircraft may impact our estimated useful lives and residual values for our aircraft, spare engines and other long-lived assets.

As we operate our aircraft under code-share agreements with our major airline partners, changes in anticipated demand by our major airline partners for regional aircraft may impact our estimated useful lives and residual values for our aircraft, spare engines and other long-lived assets.

Deferred income taxes are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis