SKYWEST INC 10-Q

ITEM 2:   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis presents factors that had a material effect on the results of operations of SkyWest, Inc. (“SkyWest” “we” or “us”) during the three- and nine-month periods ended September 30, 2023 and 2022. Also discussed is our financial condition as of September 30, 2023, and December 31, 2022. You should read this discussion in conjunction with our condensed consolidated financial statements for the three and nine months ended September 30, 2023, including the notes thereto, appearing elsewhere in this Report. This discussion and analysis contains forward-looking statements. Please refer to the section of this Report entitled “Cautionary Statement Concerning Forward-Looking Statements” for discussion of uncertainties, risks and assumptions associated with these statements. Cautionary Statement Concerning Forward-Looking Statements Certain of the statements contained in this Report should be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “hope,” “likely,” and “continue” and similar terms used in connection with statements regarding our outlook, anticipated operations, the revenue environment, our contractual relationships, and our anticipated financial performance. These statements include, but are not limited to, statements about the continued demand for our product, recovery from the COVID-19 pandemic, economic conditions and the captain shortage on SkyWest’s business, financial condition and results of operations, the scheduled aircraft deliveries for SkyWest in upcoming periods and the related execution of SkyWest’s fleet transition strategy and expected timing thereof, expected production levels in future periods and associated staffing challenges, pilot attrition trends, SkyWest’s coordination with United Airlines, Inc. (“United”), Delta Air Lines, Inc. (“Delta”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major airline partner” and together, “major airline partners”) to optimize the delivery of aircraft under previously announced agreements, the expected terms, timing and benefits related to SkyWest’s leasing and joint venture transactions, SkyWest’s plans to operate public charter service to underserved communities in the United States and the expected timing thereof, as well as SkyWest’s future financial and operating results, plans, objectives, expectations, estimates, intentions and outlook, and other statements that are not historical facts. All forward-looking statements included in this Report are made as of the date hereof and are based on information available to SkyWest as of such date. SkyWest assumes no obligation to update any forward-looking statements unless required by law. Readers should note that many factors could affect the future operating and financial results of SkyWest and could cause actual results to vary materially from those expressed in forward-looking statements set forth in this Report. These factors include, but are not limited to, uncertainty regarding recovery from the COVID-19 pandemic and other potential future outbreaks of infectious diseases or other health concerns, and the consequences of such outbreaks to the travel industry and our major partners in general and the financial condition and operating results of SkyWest in particular, the prospects of entering into agreements with existing or other carriers to fly new aircraft, ongoing negotiations between SkyWest and its major partners regarding their contractual obligations, uncertainties regarding operation of new aircraft, the ability to attract and retain qualified pilots, including captains, and related staffing challenges, the impact of regulatory issues such as pilot rest rules and qualification requirements, and the ability to obtain aircraft financing. Actual operational and financial results of SkyWest will likely also vary, and may vary materially, from those anticipated, estimated, projected or expected for a number of other reasons, including, in addition to those identified above: the challenges of competing successfully in a highly competitive and rapidly changing industry; developments associated with fluctuations in the economy and the demand for air travel, including related to recovery from the COVID-19 pandemic, inflationary pressures, and related decreases in customer demand and spending; the financial stability of SkyWest’s major airline partners and any potential impact of their financial condition on the operations of SkyWest; fluctuations in flight schedules, which are determined by the major airline partners for whom SkyWest conducts flight operations; variations in market and economic conditions; significant aircraft lease and debt commitments; estimated useful life of long-lived assets, residual aircraft values and related impairment charges; labor relations and costs and labor shortages; the impact of global instability; rapidly fluctuating fuel costs and potential fuel shortages; the impact of weather-related or other natural disasters on air travel and airline costs; aircraft deliveries; uncertainty regarding ongoing hostility between Russia and the Ukraine, as well as the Israeli-Palestinian military conflict, and the related impacts on macroeconomic conditions and on the international operations of any of our major 23 Table of Contents airline partners as a result of such conflict; recovery from the global COVID-19 pandemic and the outbreak of any other disease or similar public health threat that affects travel demand or travel behavior; as well as the other factors identified under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, under the heading “Risk Factors” in Part II, Item 1A of this Report, elsewhere in this Report, in our other filings with the Securities and Exchange Commission (the “SEC”) and other unanticipated factors. There may be other factors that may affect matters discussed in forward-looking statements set forth in this Report, which factors may also cause actual results to differ materially from those discussed. We assume no obligation to publicly update any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these statements other than as required by applicable law. Overview We have the largest regional airline operation in the United States through our operating subsidiary SkyWest Airlines, Inc. (“SkyWest Airlines”). As of September 30, 2023, we offered scheduled passenger and air freight service with approximately 2,030 total daily departures to destinations in the United States, Canada and Mexico. Our fleet of Embraer E175 regional jet aircraft (“E175”), Canadair CRJ900 regional jet aircraft (“CRJ900”) and Canadair CRJ700 regional jet aircraft (“CRJ700”) have a multiple-class seat configuration, whereas our Canadair CRJ200 regional jet aircraft (“CRJ200”) aircraft have a single-class seat configuration. During 2022, we formed SkyWest Charter, LLC (“SWC”), with the intent to offer on-demand charter service and public charter service to underserved communities in the United States. As of September 30, 2023, we had 607 total aircraft in our fleet, including 493 aircraft in scheduled service or under contract under our code-share agreements, summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ E175 CRJ900 CRJ700 CRJ200 Total United 90 ​ — ​ 19 ​ 89 ​ 198 Delta ​ 83 ​ 37 ​ 9 ​ 15 ​ 144 American 20 ​ — ​ 89 ​ — ​ 109 Alaska 42 ​ — ​ — ​ — ​ 42 Aircraft in scheduled service or under contract ​ 235 ​ 37 ​ 117 ​ 104 ​ 493 SWC ​ — ​ — ​ — ​ 13 ​ 13 Leased to third parties — ​ 5 ​ 35 ​ — ​ 40 Other (1) — ​ 7 ​ 15 ​ 39 ​ 61 Total Fleet 235 ​ 49 ​ 167 ​ 156 ​ 607 (1) As of September 30, 2023, other aircraft included: supplemental spare aircraft supporting our code-share agreements that may be used in future code-share or leasing arrangements, aircraft transitioning between code-share agreements with our major airline partners, aircraft held-for-sale or aircraft that are scheduled to be disassembled for use as spare parts. Our business model is based on providing scheduled regional airline service under code-share agreements (commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its flights) with our major airline partners. Our success is principally centered on our ability to meet the needs of our major airline partners by providing a reliable and safe operation at attractive economics. From September 30, 2022, to September 30, 2023, we made changes to our fleet, including the addition of four new E175 aircraft. We anticipate our fleet will continue to evolve, as we are scheduled to add a total of three new E175 aircraft with Delta in 2023 and 2024, a total of 19 new E175 aircraft with United from 2024 to 2026 and one new E175 aircraft with Alaska in 2025. Timing of these anticipated deliveries may be subject to change as we are coordinating with our major airline partners in response to labor availability or other factors. Our primary objective in the fleet changes is to improve our profitability by adding new E175 aircraft and used CRJ aircraft to capacity purchase agreements, and potentially removing older aircraft from service that typically require higher maintenance costs. 24 Table of Contents As of September 30, 2023, approximately 40.2% of our aircraft in scheduled service or under contract were operated for United, approximately 29.2% were operated for Delta, approximately 22.1% were operated for American and approximately 8.5% were operated for Alaska. Historically, multiple contractual relationships with major airlines have enabled us to reduce our reliance on any single major airline code and to enhance and stabilize operating results through a mix of fixed-fee arrangements (referred to as “capacity purchase” agreements) and revenue-sharing arrangements (referred to as “prorate” agreements). For the nine months ended September 30, 2023, capacity purchase revenue and prorate revenue represented approximately 87.2% and 12.8%, respectively, of our total flying agreements revenue. On capacity purchase routes, the major airline partner controls scheduling, ticketing, pricing and seat inventories and we are compensated by the major airline partner at contracted rates based on completed block hours (measured from takeoff to landing, including taxi time), flight departures, the number of aircraft under contract and other operating measures. On prorate routes, we have more control over scheduling, pricing and seat inventories, and we share passenger fares with our major airline partners according to prorate formulas. Our prorate revenue and profitability may fluctuate based on ticket prices and passenger loads, and we are responsible for the operating costs of the prorate flights, including fuel and airport costs. Third Quarter Summary We had total operating revenues of $766.2 million for the three months ended September 30, 2023, a 2.9% decrease compared to total operating revenues of $789.4 million for the three months ended September 30, 2022. We had net income of $23.5 million, or $0.55 per diluted share, for the three months ended September 30, 2023, compared to net income of $48.4 million, or $0.96 per diluted share, for the three months ended September 30, 2022. The significant items affecting our revenue and operating expenses during the three months ended September 30, 2023, are outlined below: Revenue The number of aircraft we have in scheduled service or under contract pursuant to our code-share agreements and the number of block hours we incur on our flights are primary drivers of our flying agreements revenue under our capacity purchase agreements. The number of flights we operate and the corresponding number of passengers we carry are the primary drivers of our revenue under our prorate flying agreements. The number of aircraft we have in scheduled service or under contract under code-share agreements decreased from 530 as of September 30, 2022 to 493 as of September 30, 2023; and the number of block hours decreased from 323,742 for the three months ended September 30, 2022 to 290,830 for the three months ended September 30, 2023, or by 10.2%, due to a reduction in scheduled daily utilization of our aircraft primarily caused by pilot availability constraints. Our capacity purchase revenue decreased $36.6 million, or 5.5%, from the three months ended September 30, 2022 to the three months ended September 30, 2023, primarily as a result of a reduction in completed block hours for the comparable periods and amendments to certain capacity purchase agreements since September 30, 2022 that resulted in deferring the recognition of revenue on fixed monthly payments we received during the three months ended September 30, 2023. As a result of higher passenger fares under our prorate agreements, our prorate revenue increased $14.9 million, or 15.8%, for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. Operating Expenses Our total operating expenses increased $3.0 million, or 0.4%, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The increase in operating expenses was primarily due to an increase in salaries, wages and benefits for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, partially offset by a decrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft since September 30, 2022 and lower operating costs as a result of lower production. Departures decreased from 194,683 for the three months ended September 30, 2022 to 180,069 for the three months ended September 30, 2023, or by 7.5%. Additional details regarding the increase in our operating expenses are described in the section of this Report entitled “Results of Operations.” 25 Table of Contents Fleet Activity The following table summarizes our fleet scheduled for service or under contract as of: ​ ​ ​ ​ ​ ​ ​ Aircraft in Service or Under Contract September 30, 2023 December 31, 2022 September 30, 2022 E175s 235 236 232 CRJ900s 37 41 44 CRJ700s 117 104 114 CRJ200s 104 136 140 Total 493 517 530 Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note 1 to our consolidated financial statements for the year ended December 31, 2022, and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are presented in our Annual Report on Form 10-K for the year ended December 31, 2022. Critical accounting policies are those policies that are most important to the preparation of our consolidated financial statements and require management’s subjective and complex judgments due to the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to revenue recognition, long-lived assets, and income tax. The application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results will likely differ, and may differ materially, from such estimates. There have been no significant changes in our critical accounting estimates during the nine months ended September 30, 2023. Results of Operations Three Months Ended September 30, 2023 and 2022 Operational Statistics The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below. The decrease in block hours, departures and passengers carried during the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was primarily due to labor constraints, including the number of available captains during the three months ended September 30, 2023, compared to the three months ended September 30, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, Block hours by aircraft type: 2023 2022 % Change E175s 171,615 ​ 169,679 ​ 1.1 % CRJ900s ​ 18,979 ​ 25,134 ​ (24.5) % CRJ700s ​ 56,117 ​ 62,540 ​ (10.3) % CRJ200s 44,119 ​ 66,389 ​ (33.5) % Total block hours ​ 290,830 ​ 323,742 ​ (10.2) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Departures 180,069 ​ 194,683 ​ (7.5) % Passengers carried 10,208,005 ​ 10,715,415 ​ (4.7) % Passenger load factor 85.1 % 84.6 % 0.5 pts Average passenger trip length (miles) 446 ​ 488 ​ (8.6) % 26 Table of Contents Operating Revenues The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, ​ 2023 2022 $ Change % Change Flying agreements ​ $ 741,898 ​ $ 763,514 ​ $ (21,616) ​ (2.8) % Lease, airport services and other ​ 24,273 ​ 25,929 ​ (1,656) ​ (6.4) % Total operating revenues ​ $ 766,171 ​ $ 789,443 ​ $ (23,272) (2.9) % Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity purchase agreements and prorate agreements with our major airline partners. Lease, airport services and other revenues consist of revenue earned from leasing aircraft and spare engines to third parties, separate from our capacity purchase agreements, and providing airport counter, gate and ramp services. We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, ​ 2023 2022 $ Change % Change Capacity purchase agreements flight operations revenue $ 511,929 $ 534,781 $ (22,852) (4.3) % Capacity purchase agreements aircraft lease revenue ​ ​ 120,289 ​ ​ 133,989 ​ ​ (13,700) ​ (10.2) % Prorate agreements revenue ​ 109,680 ​ 94,744 ​ 14,936 15.8 % Flying agreements revenue $ 741,898 $ 763,514 $ (21,616) (2.8) % The decrease in “Capacity purchase agreements revenue: flight operations” of $22.9 million, or 4.3%, was primarily due to an increase in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. Under our capacity purchase agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the fixed amount per aircraft as revenue proportionately to the number of block hours we complete for each reporting period. Under our capacity purchase agreements, the performance obligation of each completed flight is measured in block hours incurred for each completed flight. Based on the number of completed block hours during the three months ended September 30, 2023, we deferred recognizing $37.2 million of revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues. For the three months ended September 30, 2022, we recognized $13.3 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues. The timing of our revenue recognition related to the fixed payments associated with our flight operations will be adjusted over the remaining contract term for each capacity purchase agreement based on the number of block hours we complete each reporting period relative to the number of block hours we anticipate completing over the remaining contract term of each capacity purchase agreement. The decrease in “Capacity purchase agreements revenue: flight operations” from deferred revenue was offset by block hour rate increases in certain capacity purchase agreements since September 30, 2022. The decrease in “Capacity purchase agreements aircraft lease revenue” of $13.7 million, or 10.2%, was primarily due to an increase in deferred revenue for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, offset by lease revenue from the four additional E175 aircraft placed under contract since September 30, 2022. Under our capacity purchase agreements, a portion of the consideration we are paid is designed as reimbursement for certain aircraft ownership costs and is considered lease revenue. Recent amendments to our capacity purchase agreements with certain major airline partners reduced certain future contractual fixed monthly payments and increased future contractual variable payments. As a result of these amendments, which decreased the future scheduled fixed monthly lease payments, we deferred recognizing lease revenue on $19.3 million of the allocated fixed monthly lease payments received during the three months ended September 30, 2023, under the straight-line method. The deferred revenue balance applicable to each contract will be recorded as revenue over the term of each respective contract. Our total deferred revenue balance, net of unbilled revenue, was $304.7 million as of September 30, 2023. 27 Table of Contents The increase in prorate agreements revenue of $14.9 million, or 15.8%, was primarily due to an increase in government essential air service subsidies we received on certain prorate routes and an increase in passenger fares offset by the decrease in the number of flights we operated under our prorate agreements, resulting in fewer prorate passengers. We operated fewer flights under our prorate agreements during the three months ended September 30, 2023, compared to the three months ended September 30, 2022 due to labor constraints, including the number of available captains. The decrease in lease, airport services and other revenues of $1.7 million, or 6.4%, was primarily due to a decrease in airport service revenue driven by a decrease in the number of flights operated at locations where we were contracted to provide airport customer service during the three months ended September 30, 2023, compared to the three months ended September 30, 2022. Operating Expenses Individual expense components attributable to our operations are set forth in the following table (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, ​ ​ 2023 ​ 2022 ​ $ Change ​ % Change Salaries, wages and benefits ​ $ 333,017 ​ $ 307,727 ​ $ 25,290 ​ 8.2 % Aircraft maintenance, materials and repairs ​ 178,465 ​ 183,182 ​ (4,717) (2.6) % Depreciation and amortization ​ 96,560 ​ 97,433 ​ (873) (0.9) % Aircraft fuel ​ 23,330 ​ 28,179 ​ (4,849) (17.2) % Airport-related expenses ​ 18,398 ​ 17,501 ​ 897 5.1 % Aircraft rentals ​ 2,099 ​ 16,089 ​ (13,990) (87.0) % Other operating expenses ​ 65,011 ​ 63,756 ​ 1,255 2.0 % Total operating expenses ​ $ 716,880 ​ $ 713,867 ​ $ 3,013 0.4 % Salaries, wages and benefits. The $25.3 million, or 8.2%, increase in salaries, wages and benefits was due to an increase in employee compensation, including higher pilot pay scales, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022 . Aircraft maintenance, materials and repairs. The $4.7 million, or 2.6%, decrease in aircraft maintenance expense was primarily due to lower production, which decreased the maintenance activity directly associated with our flight volume, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022 . Depreciation and amortization. The $0.9 million, or 0.9%, decrease in depreciation and amortization expense was primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since September 30, 2022. This reduction in depreciation on our CRJ fleet was partially offset by an increase in depreciation expense due to the acquisition of four new E175 aircraft and spare engines since September 30, 2022. Aircraft fuel. The $4.8 million, or 17.2%, decrease in fuel cost was primarily due to a decrease in the number of flights we operated under our prorate arrangements and the corresponding decrease in gallons of fuel we purchased, combined with a decrease in our average fuel cost per gallon from $4.39 for the three months ended September 30, 2022, to $3.83 for the three months ended September 30, 2023. We purchase and incur expense for all fuel on flights operated under our prorate agreements. All fuel costs incurred under our capacity purchase agreements are either purchased directly by our major airline partner, or if purchased by us, we record the direct reimbursement as a reduction to our fuel expense. The following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, (in thousands) 2023 2022 % Change Fuel gallons purchased ​ ​ 6,097 ​ ​ 6,422 ​ (5.1) % Fuel expense ​ $ 23,330 ​ $ 28,179 (17.2) % Airport-related expenses. Airport-related expenses include airport-related customer service costs such as outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees 28 Table of Contents and station rents. The $0.9 million, or 5.1%, increase in airport-related expenses for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was primarily due to an increase in station rents and associated costs. Aircraft rentals. The $14.0 million, or 87.0%, decrease in aircraft rentals was primarily related to a decrease in our leased aircraft since the three months ended September 30, 2022 as a result of our acquisition of 26 CRJ700 aircraft, eight CRJ200 aircraft and one CRJ900 aircraft under early lease buyouts during 2023. Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability insurance, simulator costs, crew per diem and crew hotel costs. The $1.3 million, or 2.0%, increase was primarily related to an increase in crew hotel rates and training costs during the three months ended September 30, 2023, compared to the three months ended September 30, 2022. Summary of interest expense, interest income, other income (loss), net and provision for income taxes Interest Expense. The $0.7 million, or 2.2%, decrease in interest expense was primarily related to a decrease in outstanding debt from $3.4 billion at September 30, 2022 to $3.1 billion at September 30, 2023, partially offset by higher fixed interest rates on debt issued since September 30, 2022. Interest income. Interest income increased $4.9 million, from $6.3 million for the three months ended September 30, 2022, to $11.2 million for the three months ended September 30, 2023. The increase in interest income was primarily related to an increase in average interest rates attributed to our marketable securities for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. Other income (loss), net. Other income (loss), net decreased $11.7 million during the three months ended September 30, 2023, compared to the three months ended September 30, 2022. Other income (loss), net primarily consists of the realized and unrealized gains on our investments in other companies, income related to our investment in a joint venture with a third party and gains or losses on the sale of assets. The decrease in other income (loss), net was primarily a result of a decrease in unrealized gains on our investments in other companies, partially offset by gains from the sale of assets for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. ​ Provision for income taxes. For the three months ended September 30, 2023 and 2022, our effective income tax rates were 3.6% and 14.8%, respectively, which included the statutory federal income tax rate of 21% and other reconciling income tax items, including state income taxes and the impact of non-deductible expenses. The decrease in the effective tax rate primarily related to lower pre-tax income for the three months ended September 30, 2023, compared to the three months ended September 30, 2022 and a partial release of the valuation allowance on state net operating losses anticipated to be utilized prior to expiration for the three months ended September 30, 2023, compared the three months ended September 30, 2022. Net income. Primarily due to the factors described above, we generated net income of $23.5 million, or $0.55 per diluted share, for the three months ended September 30, 2023, compared to net income of $48.4 million, or $0.96 per diluted share, for the three months ended September 30, 2022. Nine Months Ended September 30, 2023 and 2022 Operational Statistics The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below. The decrease in block hours, departures and passengers carried during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily due to labor constraints, including a smaller number of available captains during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. 29 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the nine months ended September 30, Block hours by aircraft type: 2023 2022 % Change E175s 500,782 ​ 481,080 ​ 4.1 % CRJ900s ​ 59,390 ​ 78,468 ​ (24.3) % CRJ700s ​ 158,239 ​ 202,538 ​ (21.9) % CRJ200s 131,278 ​ 207,402 ​ (36.7) % Total block hours ​ 849,689 ​ 969,488 ​ (12.4) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Departures 514,529 ​ 570,572 ​ (9.8) % Passengers carried 28,671,654 ​ 30,627,250 ​ (6.4) % Passenger load factor 83.7 % 82.9 % 0.8 pts Average passenger trip length (miles) 456 ​ 498 ​ (8.4) % Operating Revenues The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the nine months ended September 30, ​ 2023 2022 $ Change % Change Flying agreements ​ $ 2,106,130 ​ $ 2,245,351 ​ $ (139,221) ​ (6.2) % Lease, airport services and other ​ 77,515 ​ 78,329 ​ (814) ​ (1.0) % Total operating revenues ​ $ 2,183,645 ​ $ 2,323,680 ​ $ (140,035) (6.0) % Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity purchase agreements and prorate agreements with our major airline partners. Lease, airport services and other revenues consist of revenue earned from leasing aircraft and spare engines to third parties separate from our capacity purchase agreements and providing airport counter, gate and ramp services. We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the nine months ended September 30, ​ ​ 2023 ​ 2022 ​ $ Change ​ % Change Capacity purchase agreements flight operations revenue $ 1,479,987 $ 1,589,128 $ (109,141) (6.9) % Capacity purchase agreements aircraft lease revenue ​ 356,900 ​ 387,576 ​ (30,676) (7.9) % Prorate agreements revenue ​ 269,243 ​ ​ 268,647 ​ ​ 596 0.2 % Flying agreements revenue ​ $ 2,106,130 ​ $ 2,245,351 ​ $ (139,221) (6.2) % The decrease in “Capacity purchase agreements revenue: flight operations” of $109.1 million, or 6.9%, was primarily due to an increase in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Under our capacity purchase agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the fixed amount per aircraft as revenue proportionately to the number of block hours we complete for each reporting period. Under our capacity purchase agreements, the performance obligation of each completed flight is measured in block hours incurred for each completed flight. Based on the number of completed block hours during the nine months ended September 30, 2023, we deferred recognizing $120.6 million of revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues. For the nine months ended September 30, 2022, we recognized $40.2 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues. The timing of our revenue recognition related to the fixed payments associated with our flight operations will be adjusted over the remaining contract term for each capacity purchase agreement based on the number of block hours we complete each reporting period relative to the number of block hours we anticipate completing over the remaining contract term of each capacity purchase agreement. The decrease in “Capacity purchase agreements revenue: flight operations” from deferred revenue was offset by block hour rate increases in certain capacity purchase agreements since September 30, 2022. 30 Table of Contents The decrease in “Capacity purchase agreements aircraft lease revenue” of $30.7 million, or 7.9%, was primarily due to an increase in deferred revenue for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, offset by lease revenue from the four additional E175 aircraft placed under contract since September 30, 2022. Under our capacity purchase agreements, a portion of the consideration we are paid is designed as reimbursement for certain aircraft ownership costs and is considered lease revenue. Recent amendments to our capacity purchase agreements with certain major airline partners reduced certain future contractual fixed monthly payments and increased future contractual variable payments. As a result of these amendments, which decreased the future scheduled fixed monthly lease payments, we deferred recognizing lease revenue on $59.3 million of the allocated fixed monthly lease payments received during the nine months ended September 30, 2023, under the straight-line method. The deferred revenue balance applicable to each contract will be recorded as revenue over the term of each respective contract. Our total deferred revenue balance, net of unbilled revenue, was $304.7 million as of September 30, 2023. The increase in prorate agreements revenue of $0.6 million, or 0.2%, was primarily due to an increase in government essential air service subsidies we received on certain prorate routes and an increase in passenger fares offset by the decrease in the number of flights we operated under our prorate agreements, resulting in fewer prorate passengers. Due to labor constraints, including the number of available captains, we operated fewer flights under our prorate agreements during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The decrease in lease, airport services and other revenues of $0.8 million, or 1.0%, was primarily due to a decrease in airport service revenue driven by a decrease in the number of flights operated at locations where we were contracted to provide airport customer service during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Operating Expenses Individual expense components attributable to our operations are set forth in the following table (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the nine months ended September 30, ​ ​ 2023 ​ 2022 ​ $ Change ​ % Change Salaries, wages and benefits ​ $ 990,659 ​ $ 896,347 ​ $ 94,312 ​ 10.5 % Aircraft maintenance, materials and repairs ​ 483,182 ​ 506,478 ​ (23,296) (4.6) % Depreciation and amortization ​ 287,878 ​ 297,427 ​ (9,549) (3.2) % Aircraft fuel ​ 62,573 ​ 85,089 ​ (22,516) (26.5) % Airport-related expenses ​ 53,648 ​ 54,196 ​ (548) (1.0) % Aircraft rentals ​ 24,055 ​ 48,109 ​ (24,054) (50.0) % Other operating expenses ​ 205,203 ​ 219,808 ​ (14,605) (6.6) % Total operating expenses ​ $ 2,107,198 ​ $ 2,107,454 ​ $ (256) (0.0) % Salaries, wages and benefits. The $94.3 million, or 10.5%, increase in salaries, wages and benefits was due to an increase in employee compensation, including higher pilot pay scales, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 . Aircraft maintenance, materials and repairs. The $23.3 million, or 4.6%, decrease in aircraft maintenance expense was primarily due to lower production, which decreased the maintenance activity directly associated with our flight volume, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 . Depreciation and amortization. The $9.5 million, or 3.2%, decrease in depreciation and amortization expense was primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since September 30, 2022. This reduction in depreciation on our CRJ fleet was partially offset by an increase in depreciation expense due to the acquisition of four new E175 aircraft and spare engines since September 30, 2022. Aircraft fuel. The $22.5 million, or 26.5%, decrease in fuel cost was primarily due to a decrease in the number of flights we operated under our prorate arrangements and the corresponding decrease in gallons of fuel we purchased, 31 Table of Contents combined with a decrease in our average fuel cost per gallon from $4.13 for the nine months ended September 30, 2022, to $3.71 for the nine months ended September 30, 2023. We purchase and incur expense for all fuel on flights operated under our prorate agreements. All fuel costs incurred under our capacity purchase agreements are either purchased directly by our major airline partner, or if purchased by us, we record the direct reimbursement as a reduction to our fuel expense. The following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the nine months ended September 30, (in thousands) 2023 2022 % Change Fuel gallons purchased ​ ​ 16,863 ​ ​ 20,618 ​ (18.2) % Fuel expense ​ $ 62,573 ​ $ 85,089 (26.5) % Airport-related expenses. Airport-related expenses include airport-related customer service costs such as outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees and station rents. The $0.5 million, or 1.0%, decrease in airport-related expenses for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily due to a decrease in subcontracted airport services and landing fees as a result of a decrease in the number of flights we operated under our prorate arrangements. Aircraft rentals. The $24.1 million, or 50.0%, decrease in aircraft rentals was primarily related to a decrease in our leased aircraft since the nine months ended September 30, 2022. During 2023, we acquired 26 CRJ700 aircraft, eight CRJ200 aircraft and one CRJ900 aircraft under early lease buyouts for $142.4 million, of which $102.4 million was capitalized as fixed assets and $40.0 million was applied towards previously recorded lease liabilities. Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability insurance, simulator costs, crew per diem and crew hotel costs. The $14.6 million, or 6.6%, decrease was primarily related to a decrease in other operating costs as a result of the lower number of flights we operated during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, such as crew per diem and crew hotel costs. Summary of interest expense, interest income, other income (loss), net and provision for income taxes Interest Expense. The $7.6 million, or 8.2%, increase in interest expense was primarily related to higher fixed interest rates on debt issued since September 30, 2022. Interest income. Interest income increased $22.4 million, from $9.3 million for the nine months ended September 30, 2022, to $31.7 million for the nine months ended September 30, 2023. The increase in interest income was primarily related to an increase in average interest rates attributed to our marketable securities for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Other income (loss), net. Other income (loss), net decreased $13.5 million during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Other income (loss), net primarily consists of the unrealized gains on our investments in other companies, income related to our investment in a joint venture with a third party and gains or losses on the sale of assets. The decrease in other income (loss), net was primarily a result of a decrease in unrealized gains on our investments in other companies for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. ​ Provision (benefit) for income taxes. For the nine months ended September 30, 2023 and 2022, our effective income tax rates were (6.0)% and 22.2%, respectively, which included the statutory federal income tax rate of 21% and other reconciling income tax items, including state income taxes, the impact of non-deductible expenses and a discrete tax expense on employee equity transactions. The decrease in the effective tax rate primarily related to lower pre-tax earnings and a partial release of the valuation allowance on state net operating losses anticipated to be utilized prior to expiration loss for the nine months ended September 30, 2023, compared to pre-tax income for the nine months ended September 30, 2022 and partially offset by the impact of non-deductible expense on lower pre-tax earnings for the nine months ended September 30, 2023, compared the nine months ended September 30, 2022. 32 Table of Contents Net income. Primarily due to the factors described above, we generated net income of $16.8 million, or $0.37 per diluted share, for the nine months ended September 30, 2023, compared to net income of $120.1 million, or $2.37 per diluted share, for the nine months ended September 30, 2022. Our Business Segments Three Months Ended September 30, 2023 and 2022 For the three months ended September 30, 2023, we had two reporting segments, which were the basis of our internal financial reporting: (1) SkyWest Airlines and SWC (collectively, “SkyWest Airlines and SWC”) and (2) SkyWest Leasing. Our segment disclosure relates to components of our business for which separate financial information is available to, and regularly evaluated by, our chief operating decision maker. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, ​ ​ (dollar amounts in thousands) ​ 2023 2022 $ Change % Change Operating Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ 626,780 ​ $ 651,494 ​ $ (24,714) (3.8) % SkyWest Leasing ​ 139,391 ​ 137,949 ​ 1,442 1.0 % Total Operating Revenues ​ $ 766,171 ​ $ 789,443 ​ $ (23,272) (2.9) % Operating Expenses and Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ 657,049 ​ $ 653,533 ​ $ 3,516 0.5 % SkyWest Leasing ​ 92,374 ​ 93,617 ​ (1,243) (1.3) % Total Operating Expenses and Interest Expense (1) ​ $ 749,423 ​ $ 747,150 ​ $ 2,273 0.3 % Segment profit (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ (30,269) ​ $ (2,039) ​ $ (28,230) 1,384.5 % SkyWest Leasing ​ 47,017 ​ 44,332 ​ 2,685 6.1 % Total Segment Profit ​ $ 16,748 ​ $ 42,293 ​ $ (25,545) (60.4) % Interest Income ​ 11,234 ​ 6,348 ​ 4,886 77.0 % Other Income (Loss), net ​ (3,631) ​ 8,112 ​ (11,743) (144.8) % Consolidated Income Before Taxes ​ $ 24,351 ​ $ 56,753 ​ $ (32,402) (57.1) % (1) We include interest expense in our segment profit (loss) given our interest expense is primarily attributed to debt associated with financing aircraft under our capacity purchase agreements, and revenue earned under our capacity purchase agreements is intended to compensate us for our aircraft ownership costs, including interest expense. SkyWest Airlines and SWC Segment Loss. SkyWest Airlines and SWC segment loss was $30.3 million for the three months ended September 30, 2023, compared to segment loss of $2.0 million for the three months ended September 30, 2022. SkyWest Airlines and SWC block hour production decreased to 290,830, or 10.2%, for the three months ended September 30, 2023, from 323,742 for the three months ended September 30, 2022, primarily due to labor constraints, including the number of available captains. Significant items contributing to the SkyWest Airlines and SWC segment loss for the three months ended September 30, 2023 are set forth below. SkyWest Airlines and SWC operating revenues decreased $24.7 million, or 3.8%, from the three months ended September 30, 2022, to the three months ended September 30, 2023. SkyWest Airlines recognizes revenue attributed to flight operations received as fixed monthly payments per aircraft proportionate to the number of block hours completed during each reporting period, relative to the estimated number of block hours we anticipate completing over the remaining contract term. During the three months ended September 30, 2023, SkyWest Airlines deferred recognizing $37.2 million of revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues, compared to recognizing $13.3 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the three months ended September 30, 2022. The decrease in SkyWest Airlines and SWC operating revenues related to deferred 33 Table of Contents revenue was offset by block hour rate increases in certain capacity purchase agreements since September 30, 2022 and an increase in prorate revenue for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. SkyWest Airlines and SWC operating expenses and interest expense increased $3.5 million, or 0.5%, from the three months ended September 30, 2022, to the three months ended September 30, 2023, due to the following primary factors: ● SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $25.4 million, or 8.3%, primarily due to increased employee compensation, including higher pilot pay scales, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022. ● SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense decreased by $3.8 million, or 2.1%, primarily due to lower block hour production, which decreased the maintenance activity directly associated with our flight volume, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. ● SkyWest Airlines and SWC’s depreciation and amortization expense decreased by $6.5 million, or 14.8%, primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since September 30, 2022. ● SkyWest Airlines and SWC’s fuel expense decreased $4.8 million, or 17.2%, due to a decrease in the number of flights we operated under our prorate arrangements and the corresponding decrease in gallons of fuel we purchased, combined with a decrease in our average fuel cost per gallon from $4.39 for the three months ended September 30, 2022, to $3.83 for the three months ended September 30, 2023 . ● SkyWest Airlines and SWC’s remaining airline expenses decreased $6.8 million, or 7.0%, primarily related to a decrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft in 2023, offset by an increase in other operating costs as a result of increases in crew hotel rates and training costs during the three months ended September 30, 2023, compared to the three months ended September 30, 2022 . SkyWest Leasing Segment Profit. SkyWest Leasing profit increased $2.7 million, or 6.1%, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022 . The increase in SkyWest Leasing profit was primarily due to additional lease revenue from the four E175 aircraft placed under contract since September 30, 2022, offset by an increase in deferred revenue. Recent amendments to our capacity purchase agreements with certain major airline partners reduced certain future contractual fixed monthly payments and increased future contractual variable payments. As a result of these amendments, which decreased the future scheduled fixed monthly lease payments, the SkyWest Leasing segment deferred recognizing lease revenue on $19.3 million of the allocated fixed monthly lease payments received during the three months ended September 30, 2023, under the straight-line method. Nine Months Ended September 30, 2023 and 2022 For the nine months ended September 30, 2023, we had two reporting segments, which were the basis of our internal financial reporting: (1) SkyWest Airlines and SWC and (2) SkyWest Leasing. Our segment disclosure relates to components of our business for which separate financial information is available to, and regularly evaluated by, our chief operating decision maker. 34 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the nine months ended September 30, ​ ​ (dollar amounts in thousands) ​ 2023 2022 $ Change % Change Operating Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ 1,781,429 ​ $ 1,918,746 ​ $ (137,317) (7.2) % SkyWest Leasing ​ 402,216 ​ 404,934 ​ (2,718) (0.7) % Total Operating Revenues ​ $ 2,183,645 ​ $ 2,323,680 ​ $ (140,035) (6.0) % Operating Expenses and Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ 1,923,688 ​ $ 1,915,245 ​ $ 8,443 0.4 % SkyWest Leasing ​ 283,391 ​ 284,517 ​ (1,126) (0.4) % Total Operating Expenses and Interest Expense (1) ​ $ 2,207,079 ​ $ 2,199,762 ​ $ 7,317 0.3 % Segment profit (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ (142,259) ​ $ 3,501 ​ $ (145,760) (4,163.4) % SkyWest Leasing ​ 118,825 ​ 120,417 ​ (1,592) (1.3) % Total Segment Profit (Loss) ​ $ (23,434) ​ $ 123,918 ​ $ (147,352) (118.9) % Interest Income ​ 31,761 ​ 9,332 ​ 22,429 240.3 % Other Income, net ​ 7,544 ​ 21,011 ​ (13,467) (64.1) % Consolidated Income Before Taxes ​ $ 15,871 ​ $ 154,261 ​ $ (138,390) (89.7) % (1) We include interest expense in our segment profit (loss) given our interest expense is primarily attributed to debt associated with financing aircraft under our capacity purchase agreements, and revenue earned under our capacity purchase agreements is intended to compensate us for our aircraft ownership costs, including interest expense. SkyWest Airlines and SWC Segment Loss. SkyWest Airlines and SWC segment loss was $142.3 million for the nine months ended September 30, 2023, compared to segment profit of $3.5 million for the nine months ended September 30, 2022. SkyWest Airlines and SWC block hour production decreased to 849,689, or 12.4%, for the nine months ended September 30, 2023, from 969,488 for the nine months ended September 30, 2022, primarily due to labor constraints, including the number of available captains. Significant items contributing to the SkyWest Airlines and SWC segment loss for the nine months ended September 30, 2023 are set forth below. SkyWest Airlines and SWC operating revenues decreased $137.3 million, or 7.2%, from the nine months ended September 30, 2022, to the nine months ended September 30, 2023. SkyWest Airlines recognizes revenue attributed to flight operations received as fixed monthly payments per aircraft proportionate to the number of block hours completed during each reporting period, relative to the estimated number of block hours we anticipate completing over the remaining contract term. During the nine months ended September 30, 2023, SkyWest Airlines deferred recognizing $120.6 million of revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues, compared to recognizing $40.2 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the nine months ended September 30, 2022. Additionally, the decrease in SkyWest Airlines and SWC operating revenues was also attributed to a decrease in block hour production during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The decrease in revenue was partially offset by block hour rate increases in certain capacity purchase agreements since September 30, 2022. SkyWest Airlines and SWC operating expenses and interest expense increased $8.4 million, or 0.4%, from the nine months ended September 30, 2022, to the nine months ended September 30, 2023, due to the following primary factors: ● SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $94.4 million, or 10.6%, primarily due to increased employee compensation, including higher pilot pay scales, during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. 35 Table of Contents ● SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense decreased by $22.8 million, or 4.6%, primarily due to lower block hour production, which decreased the maintenance activity directly associated with our flight volume, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. ● SkyWest Airlines and SWC’s depreciation and amortization expense decreased by $22.9 million, or 16.8%, primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since September 30, 2022. ● SkyWest Airlines and SWC’s fuel expense decreased $22.5 million, or 26.5%, due to a decrease in the number of flights we operated under our prorate arrangements and the corresponding decrease in gallons of fuel we purchased, combined with a decrease in our average fuel cost per gallon from $4.13 for the nine months ended September 30, 2022, to $3.71 for the nine months ended September 30, 2023 . ● SkyWest Airlines and SWC’s remaining airline expense decreased $17.8 million, or 5.8%, primarily related to a decrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft in 2023. SkyWest Leasing Segment Profit. SkyWest Leasing profit decreased $1.6 million, or 1.3%, during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 . Recent amendments to our capacity purchase agreements with certain major airline partners reduced certain future contractual fixed monthly payments and increased future contractual variable payments. As a result of these amendments, which decreased the future scheduled fixed monthly lease payments, the SkyWest Leasing segment deferred recognizing lease revenue on $59.3 million of the allocated fixed monthly lease payments received during the nine months ended September 30, 2023, under the straight-line method. The decrease in SkyWest Leasing profit attributed to deferred revenue was partially offset by additional lease revenue from the E175 aircraft placed under contract since September 30, 2022. Liquidity and Capital Resources As of September 30, 2023, we had $819.5 million in cash and cash equivalents and marketable securities. As of September 30, 2023, we had $70.1 million available for borrowings under our line of credit. Given our available liquidity as of September 30, 2023, we believe the working capital currently available to us will be sufficient to meet our present financial requirements, including planned capital expenditures, scheduled lease payments and debt service obligations for at least the next 12 months. Our total cash and marketable securities decreased from $1.0 billion as of December 31, 2022 to $819.5 million as of September 30, 2023, or by $227.7 million. At September 30, 2023, our total capital mix was 44.8% equity and 55.2% long-term debt, compared to 44.4% equity and 55.6% long-term debt at December 31, 2022. During the nine months ended September 30, 2023, we repurchased 9.6 million shares of our common stock for $244.1 million under share repurchase programs authorized by our Board of Directors. As of September 30, 2023, and December 31, 2022, we had $50.8 million and $59.2 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions. We had no restricted cash as of September 30, 2023, and December 31, 2022. Sources and Uses of Cash Cash Position and Liquidity. The following table provides a summary of the net cash provided by (used in) our operating, investing and financing activities for the nine months ended September 30, 2023 and 2022, and our total cash and marketable securities positions as of September 30, 2023, and December 31, 2022 (in thousands): 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the nine months ended September 30, ​ 2023 2022 $ Change % Change Net cash provided by operating activities ​ $ 511,907 ​ $ 343,535 ​ $ 168,372 ​ 49.0 % Net cash provided by (used in) investing activities ​ 61,003 ​ (864,569) ​ 925,572 (107.1) % Net cash provided by (used in) financing activities ​ (550,564) ​ 301,463 ​ (852,027) (282.6) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ ​ ​ ​ 2023 ​ 2022 ​ $ Change ​ % Change Cash and cash equivalents ​ $ 125,330 ​ $ 102,984 ​ $ 22,346 21.7 % Marketable securities ​ 694,171 ​ 944,231 ​ (250,060) (26.5) % Total ​ $ 819,501 ​ $ 1,047,215 ​ $ (227,714) (21.7) % Cash Flows provided by Operating Activities Our cash flows provided by operating activities was $511.9 million for the nine months ended September 30, 2023, compared to $343.5 million for the nine months ended September 30, 2022. Our operating cash flows are typically impacted by various factors including our net income, adjusted for non-cash expenses and gains such as depreciation expense, stock-based compensation expense and gains or losses on the disposal of assets; and timing of cash payments and cash receipts attributed to our various current asset and liability accounts, such as accounts receivable, inventory, accounts payable, accrued liabilities, deferred revenue and unbilled revenue. The increase in our cash flow from operations for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily due to the timing of cash payments on our current liability accounts and cash received in excess of revenue recognized for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, offset by a decrease in net income for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Cash Flows provided by (used in) Investing Activities Our cash flows provided by investing activities was $61.0 million for the nine months ended September 30, 2023, compared to cash flows used in investing activities of $864.6 million for the nine months ended September 30, 2022. Our investing cash flows are typically impacted by various factors including our capital expenditures, such as the acquisition of aircraft and spare engines; deposit payments and refunds of previously made deposits on new aircraft; purchase and sales of marketable securities; proceeds from the sale of assets; and timing of cash payments and cash receipts attributed to our various long-term asset and long-term liability accounts. For the nine months ended September 30, 2023, cash provided by the sale of marketable securities, net of purchases of marketable securities, was $253.7 million, an increase of $621.6 million from cash used for the purchase of marketable securities, net of sales of marketable securities of $367.9 million, for the nine months ended September 30, 2022 . Additionally, cash used for the acquisition of property and equipment, net of aircraft deposits applied towards acquired aircraft, decreased $253.4 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily due to the purchase of 21 new E175 aircraft during the nine months ended September 30, 2022. Cash Flows provided by (used in) Financing Activities Our cash flows used in financing activities was $550.6 million for the nine months ended September 30, 2023, compared to cash provided by financing activities of $301.5 million for the nine months ended September 30, 2022. Our financing cash flows are typically impacted by various factors including proceeds from issuance of debt, principal payments on debt obligations, repurchases of our common stock and payment of cash dividends. The $852.0 million increase in cash used for financing activities for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily due to a decrease of $576.4 million in proceeds 37 Table of Contents from the issuance of long-term debt, an increase of $31.4 million in principal payments on long-term debt and $246.5 million of cash used to purchase treasury stock during the nine months ended September 30, 2023. Significant Commitments and Obligations General See Note 7, "Leases, Commitments and Contingencies," to the condensed consolidated financial statements for our commitments and obligations for each of the next five years and thereafter. Purchase Commitments and Options As of September 30, 2023, we had a firm purchase commitment for 23 new E175 aircraft from Embraer with delivery dates anticipated into 2026. At the time of each aircraft acquisition, we evaluate the financing alternatives available to us, and select one or more of these methods to fund the acquisition. In recent years, we have issued long-term debt to finance our new aircraft. At present, we intend to fund our aircraft purchase commitments through cash on hand and debt financing. Based on current market conditions and discussions with prospective leasing organizations and financial institutions, we currently believe that we will be able to obtain financing for our committed acquisitions, as well as additional aircraft. We intend to finance the firm purchase commitment for 23 E175 aircraft with approximately 75-85% debt and the remaining balance with cash. Aircraft Lease and Facility Obligations We also have significant long-term lease obligations, primarily relating to our maintenance and other facilities. Excluding aircraft financed by our major airline partners that we operate for them under contract, we had eight aircraft under lease with remaining terms ranging from six year to seven years as of September 30, 2023. Future minimum lease payments due under all long-term operating leases were approximately $121.0 million at September 30, 2023. Assuming a 6.1% discount rate, which is the average incremental borrowing rate we anticipate we would have incurred on debt obtained over a similar term to acquire these assets, the present value of these lease obligations would have been equal to approximately $85.7 million at September 30, 2023. Long-term Debt Obligations As of September 30, 2023, we had $3.1 billion of long-term debt, which consisted of $2.9 billion of debt used to finance aircraft and spare engines and $200.6 million of unsecured debt payable to U.S. Department of the Treasury. The average effective interest rate on our debt was approximately 4.1% at September 30, 2023. Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning or leasing the aircraft on a monthly basis. The aircraft compensation structure varies by agreement, but is intended to cover either our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease expense costs while the aircraft is under contract. Guarantees We have guaranteed the obligations of SkyWest Airlines under the United Express Agreement and the Delta Connection Agreement for the E175 aircraft. In addition, we have guaranteed certain other obligations under SkyWest Airlines’ aircraft financing and leasing agreements. We have guaranteed $19.8 million in promissory notes of a third party in the event the third party defaults on its payments. The promissory notes are secured by the third party’s aircraft and engines. Seasonality Our results of operations for any interim period are not necessarily indicative of those for an entire year, because the airline industry is subject to seasonal fluctuations and general economic conditions. Our operations are 38 Table of Contents somewhat favorably affected by increased travel on our prorate routes, historically occurring during the summer months, and unfavorably affected by decreased travel during the months of November through February and by inclement weather, which may occasionally or frequently, depending on the severity of the inclement weather in any given winter, result in cancelled flights during the winter months.