SKYWEST INC 10-Q

Item 1. Financial Statements ​ SKYWEST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) ​ ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ 2023 2022 CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 74,524 ​ $ 102,984 Marketable securities ​ 861,335 ​ 944,231 Receivables, net ​ 101,036 ​ 100,523 Inventories, net ​ 122,426 ​ 123,209 Other current assets ​ 92,647 ​ 100,334 Total current assets ​ 1,251,968 ​ 1,371,281 ​ ​ ​ ​ ​ ​ ​ PROPERTY AND EQUIPMENT: ​ ​ ​ ​ ​ ​ Aircraft and rotable spares ​ 8,217,413 ​ 8,143,614 Deposits on aircraft ​ 23,931 ​ 23,931 Buildings and ground equipment ​ 277,910 ​ 265,019 Total property and equipment, gross ​ 8,519,254 ​ 8,432,564 Less-accumulated depreciation and amortization ​ ( 2,957,796 ) ​ ( 2,884,084 ) Total property and equipment, net ​ 5,561,458 ​ 5,548,480 ​ ​ ​ ​ ​ ​ ​ OTHER ASSETS: ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets ​ ​ 96,374 ​ ​ 151,928 Long-term receivables and other assets ​ 323,961 ​ 342,864 Total other assets ​ 420,335 ​ 494,792 Total assets ​ $ 7,233,761 ​ $ 7,414,553 ​ See accompanying notes to condensed consolidated financial statements. ​ 3 Table of Contents ​ SKYWEST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ 2023 2022 CURRENT LIABILITIES: ​ ​ ​ ​ ​ Current maturities of long-term debt $ 443,328 ​ $ 438,502 Accounts payable 452,214 ​ 422,001 Accrued salaries, wages and benefits 184,223 ​ 186,285 Current maturities of operating lease liabilities 18,741 ​ 71,726 Taxes other than income taxes 20,130 ​ 20,480 Other current liabilities 33,466 ​ 33,549 Total current liabilities 1,152,102 ​ 1,172,543 ​ ​ ​ ​ ​ ​ LONG-TERM DEBT, net of current maturities 2,855,524 ​ 2,941,772 ​ ​ ​ ​ ​ ​ DEFERRED INCOME TAXES PAYABLE 681,550 ​ 687,060 ​ ​ ​ ​ ​ ​ NONCURRENT OPERATING LEASE LIABILITIES 76,418 ​ 88,622 ​ ​ ​ ​ ​ ​ OTHER LONG-TERM LIABILITIES 236,109 ​ 176,925 ​ ​ ​ ​ ​ ​ COMMITMENTS AND CONTINGENCIES (Note 6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ STOCKHOLDERS’ EQUITY: ​ ​ ​ ​ ​ Preferred stock, 5,000,000 shares authorized; none issued — ​ — Common stock, no par value, 120,000,000 shares authorized; 82,800,633 and 82,592,830 shares issued as of March 31, 2023, and December 31, 2022, respectively 740,030 ​ 734,426 Retained earnings 2,214,798 ​ 2,236,869 Treasury stock, at cost, 37,093,074 and 31,994,416 shares as of March 31, 2023, and December 31, 2022, respectively ( 720,448 ) ​ ( 619,862 ) Accumulated other comprehensive loss ​ ( 2,322 ) ​ ​ ( 3,802 ) Total stockholders’ equity 2,232,058 ​ 2,347,631 Total liabilities and stockholders’ equity $ 7,233,761 ​ $ 7,414,553 ​ See accompanying notes to condensed consolidated financial statements. ​ 4 Table of Contents SKYWEST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Dollars and Shares in Thousands, Except per Share Amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ March 31, ​ 2023 2022 OPERATING REVENUES: ​ ​ ​ ​ ​ ​ Flying agreements ​ $ 663,838 ​ $ 708,063 Lease, airport services and other ​ 27,993 ​ 27,089 Total operating revenues ​ 691,831 ​ 735,152 OPERATING EXPENSES: ​ ​ ​ ​ ​ ​ Salaries, wages and benefits ​ 335,201 ​ 300,058 Aircraft maintenance, materials and repairs ​ 142,226 ​ 148,413 Depreciation and amortization ​ 94,149 ​ 102,745 Aircraft fuel ​ 20,964 ​ 25,090 Aircraft rentals ​ 19,528 ​ 15,996 Airport-related expenses ​ 18,295 ​ 19,205 Other operating expenses ​ 66,172 ​ 71,597 Total operating expenses ​ 696,535 ​ 683,104 OPERATING INCOME (LOSS) ​ ( 4,704 ) ​ 52,048 OTHER INCOME (EXPENSE): ​ ​ ​ ​ ​ ​ Interest income ​ 10,033 ​ 425 Interest expense ​ ( 33,620 ) ​ ( 28,592 ) Other income, net ​ 2,174 ​ 880 Total other expense, net ​ ( 21,413 ) ​ ( 27,287 ) INCOME (LOSS) BEFORE INCOME TAXES ​ ( 26,117 ) ​ 24,761 PROVISION (BENEFIT) FOR INCOME TAXES ​ ( 4,046 ) ​ 7,027 NET INCOME (LOSS) ​ $ ( 22,071 ) ​ $ 17,734 ​ ​ ​ ​ ​ ​ ​ BASIC EARNINGS (LOSS) PER SHARE ​ $ ( 0.45 ) ​ $ 0.35 DILUTED EARNINGS (LOSS) PER SHARE ​ $ ( 0.45 ) ​ $ 0.35 Weighted average common shares: ​ ​ ​ ​ ​ ​ Basic ​ 49,391 ​ 50,480 Diluted ​ 49,391 ​ 50,708 ​ ​ ​ ​ ​ ​ ​ COMPREHENSIVE INCOME (LOSS): ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ ( 22,071 ) ​ $ 17,734 Net unrealized appreciation on marketable securities, net of taxes ​ 1,480 ​ — TOTAL COMPREHENSIVE INCOME (LOSS) ​ $ ( 20,591 ) ​ $ 17,734 ​ See accompanying notes to condensed consolidated financial statements ​ 5 Table of Contents 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 income (loss) — ​ — ​ ( 22,071 ) — ​ — ​ — ​ ​ ​ ( 22,071 ) Exercise of common stock options and vested employee stock awards 130 ​ ​ 57 ​ — — ​ — ​ — ​ ​ 57 Employee income tax paid on vested equity 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Retained ​ Treasury Stock ​ ​ ​ ​ ​ Shares ​ Amount ​ Earnings ​ Shares ​ Amount ​ Total Balance at December 31, 2021 82,336 ​ $ 722,310 ​ $ 2,163,916 ( 31,956 ) ​ $ ( 618,712 ) ​ $ 2,267,514 Net income — ​ — ​ 17,734 — ​ — ​ 17,734 Exercise of common stock options and vested employee stock awards 139 ​ ​ 27 ​ — — ​ — ​ 27 Employee income tax paid on vested equity awards ​ — ​ ​ — ​ ​ — ​ ( 37 ) ​ ​ ( 1,123 ) ​ ​ ( 1,123 ) Sale of common stock under employee stock purchase plan 40 ​ ​ 1,487 ​ — — ​ — ​ 1,487 Stock based compensation expense ​ — ​ ​ 4,076 ​ ​ — ​ — ​ ​ — ​ ​ 4,076 Balance at March 31, 2022 82,515 ​ $ 727,900 ​ $ 2,181,650 ( 31,993 ) ​ $ ( 619,835 ) ​ $ 2,289,715 ​ See accompanying notes to condensed consolidated financial statements. ​ ​ ​ 6 Table of Contents SKYWEST, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ March 31, ​ 2023 2022 NET CASH PROVIDED BY OPERATING ACTIVITIES ​ $ 150,203 ​ $ 20,508 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​ ​ ​ Purchases of marketable securities ​ ( 289,116 ) ​ ( 595,325 ) Sales of marketable securities ​ 373,492 ​ 586,864 Acquisition of property and equipment: ​ ​ ​ ​ ​ ​ Aircraft and rotable spare parts ​ ( 92,953 ) ​ ( 111,782 ) Buildings and ground equipment ​ ( 10,319 ) ​ ( 2,236 ) Proceeds from the sale of property and equipment ​ 2,162 ​ 2,749 Deposits on aircraft ​ ​ — ​ ​ ( 28,031 ) Aircraft deposits applied towards acquired aircraft ​ ​ — ​ ​ 23,481 Decrease (increase) in other assets ​ 19,766 ​ ( 387 ) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ​ 3,032 ​ ( 124,667 ) ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ ​ Proceeds from issuance of long-term debt ​ 25,000 ​ 185,740 Principal payments on long-term debt ​ ( 107,276 ) ​ ( 93,979 ) Payment of debt issuance cost ​ ​ ( 108 ) ​ ​ ( 413 ) Net proceeds from issuance of common stock ​ 1,275 ​ 1,514 Employee income tax paid on vested equity awards ​ ​ ( 585 ) ​ ​ ( 1,123 ) Purchase of treasury stock ​ ( 100,001 ) ​ — NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ​ ( 181,695 ) ​ 91,739 ​ ​ ​ ​ ​ ​ ​ Decrease in cash and cash equivalents ​ ( 28,460 ) ​ ​ ( 12,420 ) Cash and cash equivalents at beginning of period ​ 102,984 ​ ​ 258,421 CASH AND CASH EQUIVALENTS AT END OF PERIOD ​ $ 74,524 ​ $ 246,001 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ $ 4,649 ​ $ 13,567 Derecognition of right of use assets ​ $ ( 35,062 ) ​ $ — Derecognition of operating lease liabilities ​ $ 35,062 ​ $ — Cash paid during the period for: ​ ​ ​ ​ ​ ​ Interest, net of capitalized amounts ​ $ 33,838 ​ $ 29,840 Income taxes ​ $ 533 ​ $ 116 ​ See accompanying notes to condensed consolidated financial statements. ​ 7 Table of Contents 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”) and its operating subsidiary SkyWest Airlines, Inc. (“SkyWest Airlines”) and its leasing subsidiary SkyWest Leasing, Inc. (“SkyWest Leasing”) included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). During 2022, the Company formed a new subsidiary, SkyWest Charter, with the intent to offer on-demand charter service and public charter service to underserved communities in the United States. SkyWest Charter operated its first revenue flight subsequent to March 31, 2023. 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, 2022. Due in part to the uncertain rate of recovery from workforce shortages, in addition to other factors, the results of operations for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. 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. (2) Flying Agreements Revenue and Lease, Airport Services and Other 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 amount per aircraft in service each month with additional incentives based on flight completion and on-time performance. 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 three months ended March 31, 2023 and 2022, capacity purchase agreements represented approximately 88.4 % and 88.8 % of the Company’s flying agreements revenue, respectively. Under the Company’s prorate arrangements (also referred to as a “prorate” or “revenue-sharing” agreement), 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 8 Table of Contents completed flight over the agreement term. For the three months ended March 31, 2023 and 2022, prorate flying agreements represented approximately 11.6 % and 11.2 % of the Company’s flying agreements revenue, respectively. The following table represents the Company’s flying agreements revenue by type for the three months ended March 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended March 31, ​ 2023 2022 Capacity purchase agreements flight operations revenue (non-lease component) ​ $ 468,916 ​ $ 504,808 Capacity purchase agreements fixed aircraft lease revenue ​ ​ 74,480 ​ ​ 124,085 Capacity purchase agreements variable aircraft lease revenue ​ 43,105 ​ — Prorate agreements revenue ​ 77,337 ​ 79,170 Flying agreements revenue ​ $ 663,838 ​ $ 708,063 ​ 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 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 (loss). During the three months ended December 31, 2022, the Company amended certain of its capacity purchase agreements resulting in a portion of the Company’s aircraft lease revenue becoming variable beginning in the fourth quarter of 2022. Additionally, as a result of these capacity purchase agreement amendments executed in 2022, during the three months ended March 31, 2023, the Company deferred recognizing lease revenue on $ 20.6 million of the allocated fixed monthly lease payments received during the three months ended March 31, 2023, under the straight-line method. The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statement of comprehensive income (loss) because the use of the aircraft is not a separate activity of the total service provided under the capacity purchase agreements. 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. During the three months ended March 31, 2023, the Company deferred $ 39.3 million of fixed monthly payments under certain agreements and decreased unbilled revenue by $ 3.3 million under certain other agreements, compared to recognizing $ 7.5 million of previously deferred revenue and $ 3.6 million of unbilled revenue during the three months ended March 31, 2022. The Company’s total deferred revenue balance, as of March 31, 2023 was $ 204.6 million, including $ 5.6 million in other current liabilities and $ 199.0 million in other long-term liabilities. The Company’s unbilled revenue balance was $ 16.6 million as of March 31, 2023, including $ 7.1 million in other current assets and $ 9.5 million in other long-term assets. The Company’s deferred revenue balance was $ 144.7 million as of December 31, 2022, including $ 5.2 million in other current liabilities and $ 139.5 million in other long-term liabilities. The Company’s unbilled revenue balance was $ 19.9 million as of December 31, 2022, including $ 9.9 million in other current assets and $ 10.0 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. 9 Table of Contents As of March 31, 2023, the Company had 491 aircraft in scheduled service or under contract pursuant to code-share agreements. The following table summarizes the significant provisions of each code-share agreement the Company has with each major airline partner through SkyWest Airlines: ​ ​ ​ ​ ​ ​ ​ ​ United Express Agreements Agreement Aircraft type Number of Aircraft Term / Termination Dates United Express Agreements (capacity purchase agreement) ​ • E175 • CRJ 700 • CRJ 200 ​ 90 19 70 ​ • Individual aircraft have scheduled removal dates from 2024 to 2029 United Express Prorate Agreement (prorate agreement) ​ • CRJ 200 ​ 25 * ​ • Terminable with 120-days’ notice Total under United Express Agreements ​ ​ ​ 204 ​ ​ ​ Delta Connection Agreements Agreement Aircraft type Number of Aircraft Term / Termination Dates Delta Connection Agreement (capacity purchase agreement) ​ • E175 • CRJ 900 • CRJ 700 ​ ​ 84 35 5 ​ • Individual aircraft have scheduled removal dates from 2023 to 2033 ​ ​ ​ ​ ​ ​ ​ Delta Connection Prorate Agreement (prorate agreement) ​ • CRJ 900 • CRJ 200 ​ ​ 1 * 21 * ​ • Terminable with 30-days’ notice Total under Delta Connection Agreements ​ ​ ​ 146 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ American Capacity Purchase Agreement Agreement Aircraft type Number of Aircraft Term / Termination Dates American Agreement (capacity purchase agreement) ​ • E175 • CRJ 700 ​ 20 79 ​ • Individual aircraft have scheduled removal dates from 2024 to 2032 Total under American Agreement ​ ​ ​ 99 ​ ​ ​ ​ Alaska Capacity Purchase Agreement Agreement Aircraft type Number of Aircraft Term / Termination Dates Alaska Agreement (capacity purchase agreement) ​ • E175 ​ 42 ​ • Individual aircraft have scheduled removal dates from 2030 to 2034 * The Company’s prorate agreements are based on specific routes, not a specific aircraft count. The number of aircraft listed above for each prorate agreement approximates the number of aircraft the Company uses to serve the prorate routes. In addition to the contractual arrangements described above, as of March 31, 2023, SkyWest Airlines has a capacity purchase agreement with Delta to place a total of three additional E175 regional jet aircraft (“E175”) from Embraer, S.A. (“Embraer”) into service, with delivery dates currently s cheduled in 2023 and 2024. SkyWest Airlines has a capacity purchase agreement with Alaska to place one additional E175 aircraft into service with a delivery date currently scheduled for 2025. Final delivery and in-service dates for aircraft to be placed under contract may be adjusted based on various factors. When an aircraft is scheduled to be removed from a capacity purchase arrangement, 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 lessor if the aircraft is leased and the lease is expiring, 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 or to lease the engines to a third party. 10 Table of Contents Lease, airport services and other revenues primarily consist of revenue generated from aircraft and spare engines leased to third parties and airport customer services, such as gate and ramp agent services at applicable airports where the Company has agreements with third parties. The following table represents the Company’s lease, airport services and other revenues for the three months ended March 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended March 31, ​ ​ 2023 2022 Operating lease revenue ​ $ 16,560 ​ $ 16,555 ​ Airport customer service and other revenue ​ ​ 11,433 ​ ​ 10,534 ​ Lease, airport services and other ​ $ 27,993 ​ $ 27,089 ​ 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 March 31, 2023 (in thousands): ​ ​ ​ ​ April 2023 through December 2023 $ 34,183 2024 ​ 45,441 2025 ​ 40,470 2026 ​ 34,904 2027 ​ 34,882 Thereafter ​ 86,244 Total future minimum rental income under operating leases ​ $ 276,124 ​ Of the Company’s $ 5.6 billion of net property and equipment as of March 31, 2023, $ 216.8 million of regional jet aircraft and spare engines were leased to third parties under operating leases. The Company’s mitigation strategy for the residual asset risks of these assets includes leasing aircraft and engine types that can be operated by the Company in the event of a default. Additionally, the operating leases typically have specified lease return condition requirements paid by the lessee to the Company and the Company typically maintains inspection rights under the leases. The transaction price for airport customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of flights handled by the Company over the agreement term. The Company’s operating revenues could be impacted by several factors, including changes to the Company’s code-share agreements with its major airline partners, changes in flight schedules, contract modifications resulting from contract renegotiations, the Company’s ability to earn incentive payments contemplated under the Company’s code-share agreements and settlement of reimbursement disputes with the Company’s major airline partners. Other ancillary revenues commonly associated with airlines, such as baggage fee revenue, ticket change fee revenue and the marketing component of the sale of mileage credits, are retained by the Company’s major airline partners on flights that the Company operates under its code-share agreements. Allowance for credit losses The Company monitors publicly available credit ratings for entities for which the Company has a significant receivable balance. As of March 31, 2023, the Company had gross receivables of $ 120.0 million in current assets and gross receivables of $ 195.5 million in other long-term assets. The Company has established credit loss reserves based on publicly available historic default rates issued by a third party for companies with similar credit ratings, factoring in the term of the respective accounts receivable or notes receivable. During the three months ended March 31, 2023, the Company wrote-off a $ 3.6 million receivable that was fully reserved as of December 31, 2022. There were no other significant changes in the outstanding accounts receivable, notes receivable or credit ratings of the entities. 11 Table of Contents The following table summarizes the changes in allowance for credit losses: ​ ​ ​ ​ ​ Allowance for Credit Losses Balance at December 31, 2022 ​ $ 37,385 Adjustments to credit loss reserves ​ ( 631 ) Write-offs charged against allowance ​ ( 3,570 ) Balance at March 31, 2023 ​ $ 33,184 ​ ​ (3) Stock-Based Compensation During the three months ended March 31, 2023, the Company granted 125,780 restricted stock units and 391,810 performance shares to certain employees of the Company under the SkyWest, Inc. 2019 Long-Term Incentive Plan. Both the restricted stock units and performance shares have a three-year vesting period, during which the recipient must remain employed with the Company. The number of performance shares awardable from the 2023 grants can range from 0 % to 250 % of the original amount granted depending on the Company’s performance over three one-year measurement periods against the pre-established targets. Upon vesting, each restricted stock unit and performance share will be replaced with one share of common stock. The weighted average fair value of these restricted stock units and performance shares on their date of grant was $ 18.65 per share . During the three months ended March 31, 2023, the Company did not grant any options to purchase shares of common stock to employees. Additionally, during the three months ended March 31, 2023, the Company granted 37,534 fully vested shares of common stock to the Company’s directors at a grant date fair value of $ 18.65 . The Company accounts for forfeitures of restricted stock units and performance shares when forfeitures occur. The estimated fair value of the restricted stock units and performance shares is amortized over the applicable vesting periods. Stock-based compensation expense for the performance shares is based on the Company’s anticipated outcome of achieving the performance metrics. During the three months ended March 31, 2023 and 2022, the Company recorded pre-tax stock-based compensation expense of $ 4.3 million and $ 4.1 million, respectively. (4) Net Income (Loss) Per Common Share Basic net income (loss) per common share (“Basic EPS”) excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income (loss) per common share. Securities that could potentially dilute Basic EPS in the future, and which were excluded from the calculation of Diluted EPS because inclusion of such share would be anti-dilutive, are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2023 ​ 2022 PSP1 and Treasury Loan Warrants (1) ​ ​ 582 ​ ​ — PSP2 Warrants (2) ​ ​ 125 ​ ​ 125 PSP3 Warrants (3) ​ ​ 78 ​ ​ 78 Employee Stock Awards ​ ​ 700 ​ ​ — Total antidilutive securities ​ 1,485 ​ 203 (1) Pursuant to the payroll support program established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (“PSP1”) and Loan and Guarantee Agreement with the U.S. Department of the Treasury (“U.S. Treasury”), SkyWest issued to U.S. Treasury warrants to purchase shares of SkyWest common stock for an exercise price of $ 28.38 per share. 12 Table of Contents (2) Pursuant to the payroll support program established under the Consolidated Appropriations Act, 2021 (“PSP2”), SkyWest issued to U.S. Treasury warrants to purchase shares of SkyWest common stock for an exercise price of $ 40.41 per share. (3) Pursuant to the payroll support program established under the American Rescue Plan Act of 2021 (“PSP3”), SkyWest issued to U.S. Treasury warrants to purchase shares of SkyWest common stock for an exercise price of $ 57.47 per share. Additionally, during the three months ended March 31, 2023 and 2022, 538,000 and 361,000 performance shares (at target performance) were excluded from the computation of Diluted EPS because the Company had not achieved the minimum target thresholds as of the three months ended March 31, 2023 and 2022, respectively. The calculation of the weighted average number of shares of common stock outstanding for Basic EPS and Diluted EPS are as follows for the periods indicated (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2023 ​ 2022 Numerator: ​ ​ Net income (loss) ​ $ ( 22,071 ) ​ $ 17,734 Denominator: ​ ​ ​ ​ ​ ​ Basic earnings per share weighted average shares ​ 49,391 ​ 50,480 Dilutive effect of employee stock awards and warrants ​ — ​ 228 Diluted earnings per share weighted average shares ​ 49,391 ​ 50,708 ​ ​ ​ ​ ​ ​ ​ Basic earnings (loss) per share ​ $ ( 0.45 ) ​ $ 0.35 Diluted earnings (loss) per share ​ $ ( 0.45 ) ​ $ 0.35 ​ ​ (5) Segment Reporting The Company’s two reporting segments consist of the operations of SkyWest Airlines and SkyWest Leasing activities. The Company’s chief operating decision maker analyzes the profitability of operating new aircraft financed through the issuance of debt, including the Company’s E175 fleet, separately from the profitability of the Company’s capital deployed for ownership and financing of such aircraft. The SkyWest Airlines segment includes revenue earned under the applicable capacity purchase agreements attributed to operating such aircraft and the respective operating costs. The SkyWest Leasing segment includes applicable revenue earned under the applicable capacity purchase agreements attributed to the ownership of new aircraft acquired through the issuance of debt and the respective depreciation and interest expense of such aircraft. The SkyWest Leasing segment also includes the activity of leasing regional jet aircraft and spare engines to third parties and other activities. The SkyWest Leasing segment’s total assets and capital expenditures include new aircraft acquired through the issuance of debt and assets leased to third parties. Additionally, aircraft removed from SkyWest Airlines’ operations and held for sale are included in the SkyWest Leasing segment. 13 Table of Contents The following represents the Company’s segment data for the three-month periods ended March 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, 2023 ​ ​ SkyWest ​ SkyWest ​ ​ ​ Airlines Leasing Consolidated Operating revenues (1) ​ $ 568,173 ​ $ 123,658 ​ $ 691,831 Operating expense ​ 633,392 ​ 63,143 ​ 696,535 Depreciation and amortization expense ​ 38,258 ​ 55,891 ​ 94,149 Interest expense ​ 4,062 ​ 29,558 ​ 33,620 Segment profit (loss) (2) ​ ( 69,281 ) ​ 30,957 ​ ( 38,324 ) Total assets (as of March 31, 2023) ​ 2,629,521 ​ 4,604,240 ​ 7,233,761 Capital expenditures (including non-cash) ​ 21,111 ​ 86,810 ​ 107,921 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, 2022 ​ ​ SkyWest ​ SkyWest ​ ​ ​ Airlines Leasing Consolidated Operating revenues (1) ​ $ 603,048 ​ $ 132,104 ​ $ 735,152 Operating expense ​ 621,028 ​ 62,076 ​ 683,104 Depreciation and amortization expense ​ 47,694 ​ 55,051 ​ 102,745 Interest expense ​ 1,789 ​ 26,803 ​ 28,592 Segment profit (loss) (2) ​ ( 19,769 ) ​ 43,225 ​ 23,456 Total assets (as of March 31, 2022) ​ 2,953,902 ​ ​ 4,195,056 ​ 7,148,958 Capital expenditures (including non-cash) ​ 32,696 ​ ​ 94,889 ​ 127,585 (1) Prorate revenue and airport customer service revenue are primarily reflected in the SkyWest Airlines segment. (2) Segment profit (loss) is equal to operating income less interest expense. (6) Leases, Commitments, Guarantees and Contingencies The Company leases property and equipment under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company used its incremental borrowing rate to discount the lease payments based on information available at lease commencement. Aircraft During the three months ended March 31, 2023, the Company acquired 32 CRJ aircraft under an early lease buyout arrangement with the lessor for $ 125.5 million. As of March 31, 2023, excluding aircraft financed by the Company’s major airline partners that the Company operates for them under contract, the Company leased 11 aircraft under long-term lease agreements with remaining terms ranging from one year to eight years . Airport facilities The Company has operating leases for facility space including airport terminals, office space, cargo warehouses and maintenance facilities. The Company generally leases this space from government agencies that control the use of the various airports. The remaining lease terms for facility space vary from one month to 33 years . The Company’s operating leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable factors are excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting guidance. Leases As of March 31, 2023, the Company’s right-of-use assets were $ 96.4 million, the Company’s current maturities of operating lease liabilities were $ 18.7 million, and the Company’s noncurrent lease liabilities were $ 76.4 million. 14 Table of Contents During the three months ended March 31, 2023, the Company paid $ 13.6 million under operating leases reflected as a reduction from operating cash flows. The table below presents lease related terms and discount rates as of March 31, 2023: ​ ​ ​ ​ ​ Weighted-average remaining lease term for operating leases 9.8 years Weighted-average discount rate for operating leases 6.0 % ​ The Company’s lease costs for the three months ended March 31, 2023 and 2022 included the following components (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended March 31, ​ 2023 2022 Operating lease cost ​ $ 24,948 ​ $ 21,841 Variable and short-term lease cost ​ 803 ​ 1,018 Sublease income ​ ​ ( 1,350 ) ​ ​ ( 1,803 ) Total lease cost ​ $ 24,401 ​ $ 21,056 ​ As of March 31, 2023, the Company leased aircraft, airport facilities, office space and other property and equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property. The Company expects that, in the normal course of business, such operating leases that expire may be renewed or replaced by other leases, or the property may be purchased rather than leased. The following table summarizes future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms as of March 31, 2023 (in thousands): ​ ​ ​ ​ April 2023 through December 2023 $ 14,586 2024 ​ 22,180 2025 ​ 16,517 2026 ​ 13,436 2027 ​ 12,293 Thereafter ​ 54,321 Total future minimum operating lease payments ​ $ 133,333 As of March 31, 2023, the Company had a firm purchase commitment for four E175 aircraft from Embraer with anticipated delivery dates through 2025. The following table summarizes the Company’s commitments and obligations as noted for each of the next five years and thereafter (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Apr - Dec 2023 2024 2025 2026 2027 Thereafter Operating lease payments for aircraft and facility obligations ​ $ 133,333 ​ $ 14,586 ​ $ 22,180 ​ $ 16,517 ​ $ 13,436 ​ $ 12,293 ​ $ 54,321 Firm aircraft and spare engine commitments ​ 140,337 ​ ​ 53,170 ​ ​ 59,396 ​ ​ 27,771 ​ ​ — ​ ​ — ​ ​ — Interest commitments (1) ​ 537,120 ​ ​ 95,916 ​ ​ 113,943 ​ ​ 93,846 ​ ​ 74,283 ​ ​ 52,660 ​ ​ 106,472 Principal maturities on long-term debt ​ 3,326,765 ​ ​ 338,821 ​ ​ 446,277 ​ ​ 530,357 ​ ​ 507,226 ​ ​ 460,455 ​ ​ 1,043,629 Total commitments and obligations ​ $ 4,137,555 ​ $ 502,493 ​ $ 641,796 ​ $ 668,491 ​ $ 594,945 ​ $ 525,408 ​ $ 1,204,422 (1) At March 31, 2023, the Company’s long-term debt had fixed interest rates. 15 Table of Contents Guarantees In 2022, the Company agreed to guarantee $ 19.8 million of debt for a 14 CFR Part 135 air carrier. The debt is secured by the Part 135 air carrier’s aircraft and engines and has a five-year term. The purpose of the arrangement is to increase the potential number of commercial pilots in the Company’s hiring pipeline. In exchange for providing the guarantee, the Company received 6.5 % of the guaranteed amount as consideration, payable in common stock of the Part 135 air carrier, which will be recorded in “Other income, net” on the Company’s consolidated statements of comprehensive income over the term of the guarantee. The Company also recorded the estimated credit loss associated with the guarantee in “Other long-term liabilities” on the Company’s consolidated balance sheet based on publicly available historical default rates issued by a third party for companies with similar credit ratings, factoring the collateral and guarantee term. (7) Fair Value Measurements The Company holds certain assets that are required to be measured at fair value in accordance with GAAP. The Company determined the fair value of these assets based on the following three levels of inputs: ​ ​ ​ ​ ​ Level 1 ​ — ​ Quoted prices in active markets for identical assets or liabilities. Level 2 ​ — ​ Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities. Level 3 ​ — ​ Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, therefore requiring an entity to develop its own assumptions. ​ As of March 31, 2023, and December 31, 2022, the Company held certain assets that are required to be measured at fair value on a recurring basis. The Company’s assets measured at fair value on a recurring basis are summarized below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements as of March 31, 2023 ​ Total Level 1 Level 2 Level 3 Marketable Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bonds and bond funds ​ $ 616,525 ​ $ — ​ $ 616,525 ​ $ — Commercial paper ​ 244,810 ​ — ​ 244,810 ​ — ​ ​ $ 861,335 ​ $ — ​ $ 861,335 ​ $ — Investments in Other Companies ​ ​ 21,883 ​ ​ 7,240 ​ ​ — ​ ​ 14,643 Cash and Cash Equivalents ​ ​ 74,524 ​ ​ 74,524 ​ ​ — ​ ​ — Total Assets Measured at Fair Value ​ $ 957,742 ​ $ 81,764 ​ $ 861,335 ​ $ 14,643 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements as of December 31, 2022 ​ ​ Total ​ Level 1 ​ Level 2 ​ Level 3 Marketable Securities ​ ​ ​ ​ Bonds and bond funds ​ $ 624,254 ​ $ — ​ $ 624,254 ​ $ — Commercial paper ​ 319,977 ​ — ​ 319,977 ​ — ​ ​ $ 944,231 ​ $ — ​ $ 944,231 ​ $ — Investments in Other Companies ​ ​ 21,380 ​ ​ 7,200 ​ — ​ 14,180 Cash and Cash Equivalents ​ ​ 102,984 ​ ​ 102,984 ​ ​ — ​ ​ — Total Assets Measured at Fair Value ​ $ 1,068,595 ​ $ 110,184 ​ $ 944,231 ​ $ 14,180 ​ The Company’s “marketable securities” classified as Level 2 securities primarily utilize broker quotes in a non-active market for valuation of these securities. See Note 9 “Investments in Other Companies” regarding the Company’s investment in other companies, for the three months ended March 31, 2023. 16 Table of Contents The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during the three months ended March 31, 2023. The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period. As of March 31, 2023, and December 31, 2022, the Company classified $ 861.3 million and $ 944.2 million of marketable securities, respectively, as short-term because it had the intent to maintain a liquid portfolio and the ability to redeem the securities within one year . As of March 31, 2023, and December 31, 2022, the cost of the Company’s marketable securities was $ 864.4 million and $ 949.3 million, respectively. As of March 31, 2023, the Company had $ 56.7 million included in “Other current assets” on the Company’s consolidated balance sheet in respect of 14 CRJ700 aircraft held for sale. The fair values were based upon observable and unobservable inputs, including a third-party valuation, market trends and conditions of the airframes and engines, considered Level 3 within the fair value hierarchy. The assumptions used to determine the fair value of the assets held for sale are subject to inherent uncertainty and could produce a wide range of outcomes, which the Company will continue to monitor in future periods as new information becomes available. The Company did not record a gain or loss associated with its assets held for sale during the three months ended March 31, 2023. (8) Long-term Debt Long-term debt consisted of the following as of March 31, 2023, and December 31, 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ ​ December 31, 2022 Current portion of long-term debt $ 447,179 ​ $ 442,360 Current portion of unamortized debt issue cost, net ​ ( 3,851 ) ​ ​ ( 3,858 ) Current portion of long-term debt, net of debt issue costs $ 443,328 ​ $ 438,502 ​ ​ ​ ​ ​ ​ Long-term debt, net of current maturities $ 2,879,586 ​ $ 2,966,951 Long-term portion of unamortized debt issue cost, net ​ ( 24,062 ) ​ ​ ( 25,179 ) Long-term debt, net of current maturities and debt issue costs $ 2,855,524 ​ $ 2,941,772 ​ ​ ​ ​ ​ ​ Total long-term debt (including current portion) $ 3,326,765 ​ $ 3,409,311 Total unamortized debt issue cost, net ​ ( 27,913 ) ​ ​ ( 29,037 ) Total long-term debt, net of debt issue costs $ 3,298,852 ​ $ 3,380,274 ​ As of March 31, 2023, the Company had $ 3.3 billion of total long-term debt, which consisted of $ 3.1 billion of debt used to finance aircraft and spare engines and $ 200.6 million of unsecured debt payable to U.S. Treasury. The average effective interest rate on the Company’s debt was approximately 4.0 % at March 31, 2023. During the three months ended March 31, 2023, the Company executed a promissory note for $ 25.0 million. The promissory note has an eight -year term, is due in monthly installments, has a fixed annual interest rate of 5.6 % and is secured by spare engines. As of March 31, 2023 and December 31, 2022, the Company had $ 59.6 million and $ 59.2 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions. As of March 31, 2023, SkyWest Airlines had a $ 100.0 million line of credit. The line of credit includes minimum liquidity and profitability covenants and is secured by certain assets. As of March 31, 2023, SkyWest Airlines had no amounts outstanding under the facility. However, at March 31, 2023, SkyWest Airlines had $ 29.9 million in letters of credit issued under the facility, which reduced the amount available under the facility to $ 70.1 million. The line of credit expires March 25, 2025 and has a variable interest rate of 3.5 % plus the one month SOFR rate. The Company’s debt agreements are not traded on an active market and are recorded at carrying value on the Company’s consolidated balance sheet. The fair value of the Company’s long-term debt is estimated based on current rates offered to the Company for similar debt. Debt is primarily classified as Level 2 within the fair value hierarchy. The 17 Table of Contents carrying value and fair value of the Company’s long-term debt as of March 31, 2023 and December 31, 2022, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ December 31, 2022 Carrying value ​ $ 3,326,765 ​ $ 3,409,311 Fair value ​ $ 3,195,693 ​ $ 3,264,704 ​ ( 9) Investments in Other Companies Equity Method Investment During 2019, the Company created a joint venture with Regional One, Inc. (“Regional One”) and has invested a total of $ 26.6 million for a 75 % ownership interest in Aero Engines, LLC. (“Aero Engines”). The primary purpose of Aero Engines is to lease engines to third parties. Aero Engines requires unanimous approval from the Company and Regional One for its engine purchases, dispositions, lease agreements with third parties and all other material transactions. The Company determined Aero Engines is a variable interest entity as the Company has a 75 % ownership interest in Aero Engines and all material decisions require unanimous approval from the Company and Regional One, resulting in disproportionate ownership rights relative to voting rights. As unanimous approval is required for all Aero Engines’ material activities. Aero Engines has no primary beneficiary. The Company accounts for its investment in Aero Engines under the equity method. The Company’s exposure in its investment in Aero Engines primarily consists of the Company’s portion of income or loss from Aero Engines’ engine lease agreements with third parties and the Company’s ownership percentage in Aero Engines’ engines book value. Aero Engines had no debt outstanding as of March 31, 2023. As of March 31, 2023, the Company’s investment balance in Aero Engines was $ 24.9 million and has been recorded in “Other Assets” on the Company’s consolidated balance sheet. The Company’s portion of loss generated by Aero Engines for the three months ended March 31, 2023, was $ 0.1 million, which is recorded in “Other income, net” on the Company’s consolidated statements of comprehensive income. Fair Value Method Investments In 2021, the Company entered into a strategic partnership with Eve UAM, LLC (“Eve UAM”), to develop a network of deployment for Eve UAM’s electric vertical takeoff and landing (“eVTOL”) aircraft. In 2022, the Company acquired 1,000,000 shares of common stock of Eve Holding, Inc. (“Eve”) and a warrant giving the Company the right to acquire 1,500,000 shares of common stock of Eve at an exercise price of $ 0.01 per share. The Company also received a put option from an Eve shareholder for the 1,000,000 shares of common stock of Eve payable in aircraft parts credits. The intent of the put option is to reduce the Company’s investment risk in Eve. The warrant expires in May 2032, and the put option expires in December 2031. The Company acquired the shares of common stock, warrant and put option (collectively the “Eve Investments”) for $ 10.0 million. The Company evaluated the Eve Investments under Accounting Standard Codification (“ASC”) Topic 321, “Investments – Equity Securities” and ASC Topic 815, “Derivatives and Hedging,” and recorded the Eve Investments based on their pro rata share of the consideration paid using the fair value of the Eve Investments on the acquisition date, with subsequent changes in the fair value reported in earnings. The shares of common stock of Eve are classified as Level 1 within the fair value hierarchy as Eve stock is actively traded on the New York Stock Exchange, and the value is determined using quoted market prices for the equity security. The warrant and put option are classified as Level 3 within the fair value hierarchy, and the Company used the Black Scholes Option Pricing Model to determine the estimated fair market value of the warrant and put option, including an expected volatility of 50 % , which is a significant unobservable input that was derived from historical volatility of comparable companies. 18 Table of Contents The table below shows the reconciliation of the Level 3 warrant and put option Eve Investments (in thousands): ​ ​ ​ ​ ​ Level 3 Investments: ​ ​ Balance at December 31, 2022 $ 14,180 Purchases ​ — Unrealized gains ​ 463 Balance at March 31, 2023 ​ $ 14,643 ​ The Company recognized unrealized gains of $ 0.5 million in “Other income, net” on the Company’s consolidated statements of comprehensive income for the three months ended March 31, 2023, related to the Eve Investments. As of March 31, 2023, the fair value of the Eve Investments was $ 21.9 million and was recorded in “Other Assets” on the Company’s consolidated balance sheet. (10) Income Taxes The Company’s effective tax rate for the three months ended March 31, 2023 was 15.5 %. The Company’s effective tax rate for the three months ended March 31, 2023 varied from the federal statutory rate of 21.0 % primarily due to the impact of non-deductible expenses and a discrete tax expense on employee equity transactions that occurred during the three months ended March 31, 2023, partially offset by the provision for state income taxes. The Company’s effective tax rate for the three months ended March 31, 2022 was 28.4 %. The Company’s effective tax rate for the three months ended March 31, 2022 varied from the federal statutory rate of 21.0 % primarily due to the provision for state income taxes, the impact of non-deductible expenses and a discrete tax expense on employee equity transactions that occurred during the three months ended March 31, 2022. (11) Legal Matters The Company is subject to certain legal actions which it considers routine to its business activities. As of March 31, 2023, the Company’s management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of operations. ​ 19 Table of Contents