What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 152 added, 98 removed, 394 unchanged (39% of the section changed)

46 unchanged sentences

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

82,800,633 and 82,592,830 shares issued as of June 30, 2023, and December 31, 2022, respectively

Retained earnings

Treasury stock, at cost, 37,093,074 and 31,994,416 shares as of March 31, 2023, and December 31, 2022, respectively

Treasury stock, at cost, 40,427,758 and 31,994,416 shares as of June 30, 2023, and December 31, 2022, respectively

Accumulated other comprehensive loss

4 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

Three months ended

Six months ended

OPERATING REVENUES:

7 unchanged sentences

Aircraft fuel

Aircraft rentals

Airport-related expenses

Aircraft rentals

Other operating expenses

Total operating expenses

OPERATING INCOME (LOSS)

OPERATING INCOME

OTHER INCOME (EXPENSE):

11 unchanged sentences

Net income (loss)

Net unrealized appreciation on marketable securities, net of taxes

Net unrealized appreciation (depreciation) on marketable securities, net of taxes

TOTAL COMPREHENSIVE INCOME (LOSS)

15 unchanged sentences

Balance at March 31, 2023

Stock based compensation expense

Treasury stock purchases

Net unrealized appreciation on marketable securities, net of tax of $ 488

Balance at June 30, 2023

See accompanying notes to condensed consolidated financial statements.

SKYWEST, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(In Thousands)

Treasury Stock

Comprehensive

Balance at December 31, 2021

4 unchanged sentences

Balance at March 31, 2022

Stock based compensation expense

Net unrealized depreciation on marketable securities, net of tax of $ 628

Balance at June 30, 2022

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(In Thousands)

Three months ended

Six months ended

NET CASH PROVIDED BY OPERATING ACTIVITIES

1 unchanged sentence

Purchases of marketable securities

( 1,254,213 )

Sales of marketable securities

15 unchanged sentences

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

Decrease in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

14 unchanged sentences

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.

(“SkyWest” or the “Company”), its operating subsidiary SkyWest Airlines, Inc.

(“SkyWest Airlines”), its leasing subsidiary SkyWest Leasing, Inc.

(“SkyWest Leasing”) and its charter service subsidiary SkyWest Charter, LLC (“SWC”) included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The Company formed SWC in 2022, with the intent to offer on-demand charter service and public charter service to underserved communities in the United States.

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.

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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.

Due in part to the uncertain rate of recovery from workforce shortages, in addition to other factors, the results of operations for the three and six months ended June 30, 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.

1 unchanged sentence

(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.

The Company recognizes revenue under its flying agreements and airport services and other service agreements when the service is provided under the applicable agreement.

The Company recognizes revenue under its lease agreements ratably over the applicable lease term.

Under the Company’s fixed-fee arrangements (referred to as “capacity purchase” agreements) with United Airlines, Inc.

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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.

For both the six months ended June 30, 2023 and 2022, capacity purchase agreements represented approximately 88.3 % of the Company’s flying agreements revenue.

Under the Company’s prorate arrangements (also referred to as “prorate” or “revenue-sharing” agreements), the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a Company airline and the other portion of their trip on the major airline partner.

Under the Company’s prorate flying agreements, the performance obligation is met and revenue is recognized when each flight is completed based upon the portion of the prorate passenger fare the Company determines that it will receive for each completed flight.

1 unchanged sentence

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,

Certain routes under the Company’s prorate arrangements are subsidized by the U.S.

Department of Transportation under the Essential Air Service (“EAS”) program, a program created to ensure small communities in the United States maintain a minimum level of scheduled air service.

The EAS contracts are generally two years in duration and the Company recognizes EAS revenue on a per-completed-flight basis pursuant to the terms of each contract.

For both the six months ended June 30, 2023 and 2022, prorate flying agreements represented approximately 11.7 % of the Company’s flying agreements revenue.

The following table represents the Company’s flying agreements revenue by type for the three and six months ended June 30, 2023 and 2022 (in thousands):

For the three months ended June 30,

For the six months ended June 30,

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

9 unchanged sentences

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.

Additionally, as a result of these capacity purchase agreement amendments executed in 2022, during the six months ended June 30, 2023, the Company deferred recognizing lease revenue on $ 40.0 million of the allocated fixed monthly lease payments received during the six months ended June 30, 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.

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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.

During the six months ended June 30, 2023, the Company deferred $ 77.4 million of fixed monthly payments under certain agreements and decreased unbilled revenue by $ 6.0 million under certain other agreements, compared to recognizing $ 17.6 million of previously deferred revenue and $ 9.3 million of unbilled revenue during the six months ended June 30, 2022.

The Company’s total deferred revenue balance as of June 30, 2023 was $ 262.1 million, including $ 7.3 million in other current liabilities and $ 254.8 million in other long-term liabilities.

The Company’s unbilled revenue balance was $ 13.9 million as of June 30, 2023, including $ 7.2 million in other current assets and $ 6.7 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 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.

As of March 31, 2023, the Company had 491 aircraft in scheduled service or under contract pursuant to code-share agreements.

As of June 30, 2023, the Company had 492 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:

34 unchanged sentences

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.

In addition to the contractual arrangements described above, as of June 30, 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.

SkyWest Airlines also 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.

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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,

The following table represents the Company’s lease, airport services and other revenues for the three and six months ended June 30, 2023 and 2022 (in thousands):

For the three months ended June 30,

For the six months ended June 30,

Operating lease revenue

1 unchanged sentence

Lease, airport services and other

The following table summarizes future minimum rental income under operating leases primarily related to leased aircraft and engines that had remaining non-cancelable lease terms as of March 31, 2023 (in thousands):

April 2023 through December 2023

July 2023 through December 2023

Total future minimum rental income under operating leases

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.

Of the Company’s $ 5.5 billion of net property and equipment as of June 30, 2023, $ 211.8 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.

5 unchanged sentences

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.

As of June 30, 2023, the Company had gross receivables of $ 123.1 million in current assets and gross receivables of $ 201.7 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.

During the six months ended June 30, 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.

4 unchanged sentences

Write-offs charged against allowance

Balance at March 31, 2023

Balance at June 30, 2023

(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.

During the six months ended June 30, 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.

3 unchanged sentences

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 .

During the six months ended June 30, 2023, the Company did not grant any options to purchase shares of common stock to employees.

Additionally, during the six months ended June 30, 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.

1 unchanged sentence

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.

During the six months ended June 30, 2023 and 2022, the Company recorded pre-tax stock-based compensation expense of $ 8.6 million and $ 7.4 million, respectively.

( 4) Stock Repurchase

The Company’s Board of Directors has adopted stock repurchase programs in both February 2019 and May 2023, which authorize the Company to repurchase shares of the Company’s common stock in the public market or in private transactions, from time to time, at prevailing prices.

The Company’s February 2019 stock repurchase program authorized the repurchase of up to $ 250.0 million of the Company’s common stock.

In May 2023, the Company’s Board of Directors authorized the repurchase of up to $ 250.0 million of the Company’s common stock, superseding the February 2019 authorization.

At June 30, 2023, $ 185.9 million remains available under the May 2023 authorization.

During the six months ended June 30, 2023, the Company repurchased 8.4 million shares of common stock for $ 194.1 million at a weighted average price per share of $ 23.10 .

The Company also recorded $ 1.9 million of excise tax related to the stock repurchases as Treasury Stock in the Company’s Stockholders Equity for the six months ended June 30, 2023.

The Company did not have any stock repurchases during the six months ended June 30, 2022.

(5) Net Income (Loss) Per Common Share

4 unchanged sentences

Three Months Ended

Six Months Ended

PSP1 and Treasury Loan Warrants (1)

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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.

Additionally, during the six months ended June 30, 2023 and 2022, 538,000 and 350,000 performance shares (at target performance) were excluded from the computation of Diluted EPS because the Company had not achieved the minimum target thresholds for the three and six months ended June 30, 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

Six Months Ended

Net income (loss)

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(6) Segment Reporting

The Company’s two reporting segments consist of the operations of SkyWest Airlines and SkyWest Leasing activities.

The Company’s two reporting segments consist of the operations of (1) SkyWest Airlines and SWC (collectively, “SkyWest Airlines and SWC”) and (2) 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 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 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.

2 unchanged sentences

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

The following represents the Company’s segment data for the three-month periods ended March 31, 2023 and 2022 (in thousands):

Three months ended March 31, 2023

The following represents the Company’s segment data for the three-month periods ended June 30, 2023 and 2022 (in thousands):

Three months ended June 30, 2023

SkyWest Airlines

Operating revenues (1)

3 unchanged sentences

Segment profit (loss) (2)

Total assets (as of March 31, 2023)

Total assets (as of June 30, 2023)

Capital expenditures (including non-cash)

Three months ended March 31, 2022

Three months ended June 30, 2022

SkyWest Airlines

Operating revenues (1)

2 unchanged sentences

Interest expense

Segment profit (2)

Total assets (as of June 30, 2022)

Capital expenditures (including non-cash)

(1) Prorate revenue and airport customer service revenue are primarily reflected in the SkyWest Airlines and SWC segment.

(2) Segment profit (loss) is equal to operating income less interest expense.

The following represents the Company’s segment data for the six-month periods ended June 30, 2023 and 2022 (in thousands):

Six months ended June 30, 2023

SkyWest Airlines

Operating revenues (1)

Operating expense

Depreciation and amortization expense

Interest expense

Segment profit (loss) (2)

Total assets (as of March 31, 2022)

Total assets (as of June 30, 2023)

Capital expenditures (including non-cash)

(1) Prorate revenue and airport customer service revenue are primarily reflected in the SkyWest Airlines segment.

Six months ended June 30, 2022

SkyWest Airlines

Operating revenues (1)

Operating expense

Depreciation and amortization expense

Interest expense

Segment profit (2)

Total assets (as of June 30, 2022)

Capital expenditures (including non-cash)

(1) Prorate revenue and airport customer service revenue are primarily reflected in the SkyWest Airlines and SWC segment.

(2) Segment profit (loss) is equal to operating income less interest expense.

3 unchanged sentences

The Company used its incremental borrowing rate to discount the lease payments based on information available at lease commencement.

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 .

During the six months ended June 30, 2023, the Company acquired 32 CRJ aircraft under an early lease buyout arrangement with the lessor for $ 125.5 million.

As of June 30, 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 seven years .

Airport facilities

3 unchanged sentences

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.

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.

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:

As of June 30, 2023, the Company’s right-of-use assets were $ 92.8 million, the Company’s current maturities of operating lease liabilities were $ 18.7 million, and the Company’s noncurrent lease liabilities were $ 73.9 million.

During the six months ended June 30, 2023, the Company paid $ 17.9 million under operating leases reflected as a reduction from operating cash flows.

The table below presents lease related terms and discount rates as of June 30, 2023:

Weighted-average remaining lease term for operating leases

Weighted-average discount rate for operating leases

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,

The Company’s lease costs for the three and six months ended June 30, 2023 and 2022 included the following components (in thousands):

For the three months ended June 30,

For the six months ended June 30,

Operating lease cost

2 unchanged sentences

Total lease cost

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.

As of June 30, 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

The following table summarizes future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms as of June 30, 2023 (in thousands):

July 2023 through December 2023

Total future minimum operating lease payments

As of March 31, 2023, the Company had a firm purchase commitment for four E175 aircraft from Embraer with anticipated delivery dates through 2025.

As of June 30, 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):

Apr - Dec 2023

Jul - Dec 2023

Operating lease payments for aircraft and facility obligations

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Total commitments and obligations

(1) At March 31, 2023, the Company’s long-term debt had fixed interest rates.

(1) At June 30, 2023, the Company’s long-term debt had fixed interest rates.

In 2022, the Company agreed to guarantee $ 19.8 million of debt for a 14 CFR Part 135 air carrier.

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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.

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.

(8) Fair Value Measurements

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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.

As of June 30, 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

Fair Value Measurements as of June 30, 2023

Marketable Securities

12 unchanged sentences

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.

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.

See Note 10 “Investments in Other Companies” regarding the Company’s investment in other companies, for the six months ended June 30, 2023.

The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during the six months ended June 30, 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.

As of June 30, 2023, and December 31, 2022, the Company classified $ 747.9 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 June 30, 2023, and December 31, 2022, the cost of the Company’s marketable securities was $ 749.0 million and $ 949.3 million, respectively.

As of June 30, 2023, the Company had $ 56.7 million in held-for-sale assets included in “Other current assets” on the Company’s consolidated balance sheet related to 14 CRJ700 aircraft.

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.

The Company did not record a gain or loss associated with its assets held for sale during the six months ended June 30, 2023.

(9) Long-term Debt

Long-term debt consisted of the following as of March 31, 2023, and December 31, 2021 (in thousands):

March 31, 2023

Long-term debt consisted of the following as of June 30, 2023, and December 31, 2022 (in thousands):

June 30, 2023

December 31, 2022

8 unchanged sentences

Total long-term debt, net of debt issue costs

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.

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.

As of June 30, 2023, the Company had $ 3.2 billion of total long-term debt, which consisted of $ 3.0 billion of debt used to finance aircraft and spare engines and $ 200.6 million of unsecured debt payable to U.S.

The average effective interest rate on the Company’s debt was approximately 4.1 % at June 30, 2023.

During six months ended June 30, 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.

As of June 30, 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 June 30, 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.

As of June 30, 2023, SkyWest Airlines had no amounts outstanding under the facility.

However, at June 30, 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.

2 unchanged sentences

Debt is primarily classified as Level 2 within the fair value hierarchy.

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

The carrying value and fair value of the Company’s long-term debt as of June 30, 2023 and December 31, 2022, were as follows (in thousands):

June 30, 2023

December 31, 2022

3 unchanged sentences

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.

and, as of June 30, 2023, has invested a total of $ 26.6 million for an 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.

Aero Engines had no debt outstanding as of June 30, 2023.

As of June 30, 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 six months ended June 30, 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

13 unchanged sentences

Unrealized gains

Balance at March 31, 2023

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.

Balance at June 30, 2023

The Company recognized unrealized gains of $ 7.9 million in “Other income, net” on the Company’s consolidated statements of comprehensive income for the six months ended June 30, 2023, related to the Eve Investments.

As of June 30, 2023, the fair value of the Eve Investments was $ 29.3 million and was recorded in “Other Assets” on the Company’s consolidated balance sheet.

(11) 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.

The Company’s effective tax rate for the six months ended June 30, 2023 was 21.6 %.

The Company’s effective tax rate for the six months ended June 30, 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 six months ended June 30, 2023, partially offset by the provision for state income taxes.

The Company’s effective tax rate for the six months ended June 30, 2022 was 26.5 %.

The Company’s effective tax rate for the six months ended June 30, 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 six months ended June 30, 2022.

(12) 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.

As of June 30, 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.

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-Q

Item 1. Financial Statements