What changed in this filing

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Item 1. Business

2024-02-15 compared with 2023-02-16 · 63 added, 61 removed, 299 unchanged (29% of the section changed)

Through SkyWest Airlines, we offer scheduled passenger service to destinations in the United States, Canada and Mexico.

Substantially all of our flights are operated as United Express, Delta Connection, American Eagle or Alaska Airlines flights under code-share arrangements (commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its flights) with United, Delta, American or Alaska, respectively.

Substantially all of our flights are operated as United Express, Delta Connection, American Eagle or Alaska Airlines flights under code-share agreements with United, Delta, American or Alaska, respectively.

Code-share agreement are commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its flights.

As of December 31, 2023, we offered approximately 1,850 daily departures, of which approximately 740 were United Express flights, 580 were Delta Connection flights, 340 were American Eagle flights and 190 were Alaska Airlines flights.

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Our operations are conducted principally at airports that support our major airline partners’ route networks, including Chicago (O’Hare), Dallas, Denver, Detroit, Houston, Los Angeles, Minneapolis, Phoenix, Salt Lake City, San Francisco and Seattle.

We conduct our code-share operations with our major airline partners pursuant to various code-share agreements described under the heading “Code-Share Agreements” below.

SkyWest has been flying since 1972.

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As of December 31, 2023, our fleet consisted of aircraft manufactured by Embraer S.A.

(“Embraer”) and Bombardier Aerospace (“Bombardier”), including the E175 regional jet aircraft (“E175”), the Canadair CRJ900 regional jet aircraft (“CRJ900”), the Canadair CRJ700 regional jet aircraft (“CRJ700”) and the Canadair CRJ200 regional jet aircraft (“CRJ200”).

(“Embraer”) and MHI RJ Aviation ULC, formerly known as Bombardier Aerospace (“Bombardier”), including the E175 regional jet aircraft (“E175”), the Canadair CRJ900 regional jet aircraft (“CRJ900”), the Canadair CRJ700 regional jet aircraft (“CRJ700”) and the Canadair CRJ200 regional jet aircraft (“CRJ200”).

As of December 31, 2023, we had 603 total aircraft in our fleet, including 485 aircraft in scheduled service or under contract under our code-share agreements, summarized as follows:

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(1) As of December 31, 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.

supplemental spare aircraft supporting our code-share agreements that may be placed under future code-share or leasing arrangements, aircraft transitioning between code-share agreements with our major airline partners, aircraft held-for-sale or aircraft that are scheduled to be disassembled for use as spare parts.

Bombardier and Embraer are the primary manufacturers of regional jets operated in the United States and offer many of the amenities of larger commercial jet aircraft, including flight attendant service, a stand-up cabin, overhead and under seat storage, lavatories and in-flight snack and beverage service.

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Seat Configuration

We were incorporated in Utah in 1972.

Our principal executive offices are located at 444 South River Road, St.

George, Utah 84790, and our primary telephone number is (435) 634-3000.

We maintain an internet website at inc.skywest.com, which provides links to our annual, quarterly and current reports and any amendments to those reports filed with or furnished to the Securities and Exchange Commission (“SEC”).

We use our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Investors should monitor our website, in addition to following our press releases, SEC filings and public conferences calls and webcasts.

Information relating to our corporate governance is also included on our investor relations website.

The information on our website does not constitute part of this Report.

In addition, we provide electronic or paper copies of our SEC filings free of charge upon request.

We conduct our code-share operations with our major airline partners pursuant to the following agreements:

Major airline partner

“United Express Agreements” and “United Express Prorate Agreement”

“Delta Connection Agreement” and “Delta Connection Prorate Agreement”

“American Agreement”

“Alaska Agreement”

A summary of the terms for each of our code-share agreements is provided under the heading “Code-Share Agreements” below on page 7.

SkyWest Leasing

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As of December 31, 2023, SkyWest Leasing leased 35 CRJ700 aircraft, five CRJ900 aircraft and regional jet aircraft engines to third parties.

SkyWest Charter

In 2022, we formed a new subsidiary, SkyWest Charter, with the intent to offer public charter service to underserved communities in the United States and on-demand charter services using CRJ200 aircraft in a 30-seat configuration.

We anticipate SkyWest Charter will begin operations in 2023.

SkyWest Charter (SWC)

In 2022, we formed a new subsidiary, SWC, which had its first revenue generating flight in May 2023.

SWC offers on-demand charter service using CRJ200 aircraft in a 30-seat configuration.

As of December 31, 2023, SWC had 16 aircraft available for on-demand charter service.

Competition and Economic Conditions

The airline industry is highly competitive.

SkyWest competes principally with other regional airlines.

We compete principally with other regional airlines.

Our operations extend throughout most major geographic markets in the United States.

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(“Republic”).

Major airlines typically award code-share flying arrangements to regional airlines based primarily upon the following criteria:

Major airlines typically award code-share flying agreements to regional airlines based primarily upon the following criteria:

ability to fly contracted schedules, availability of labor resources, including pilots, low operating cost, financial resources, geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages and the overall image of the regional airline.

major airline partners’ scope limitations, we currently do not operate a regional aircraft configured with more than 76 seats.

The principal competitive factors for regional airline code-share arrangements include labor resources, code-share agreement terms, reliable flight operations, operating cost structure, ability to finance new aircraft, certification to operate certain aircraft types and geographical infrastructure supporting markets and routes served.

Additionally, each major airline may be limited in the number and type of regional aircraft it may use in its network due to agreements the major airline has with its own labor groups, commonly referred to in the industry as “scope limitations.” Given our major airline partners’ scope limitations, we currently do not operate a regional aircraft configured with more than 76 seats.

The principal competitive factors for regional airline code-share agreements include labor resources, code-share agreement terms, reliable flight operations, operating cost structure, ability to finance new aircraft, certification to operate certain aircraft types and geographical infrastructure supporting markets and routes served.

Our operations represent the largest regional airline operations in the United States.

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Additionally, attrition of our pilots or other workgroups may reduce our flying schedules and have a negative impact on our operations and financial condition.

Recovery from the COVID-19 Pandemic and Labor Impact

COVID-19 had a significant, negative impact on our business, revenue and financial results in 2020 with moderate improvement in 2021.

During 2022, passenger demand recovered;

however, indirect factors associated with the recovery from COVID-19, such as employee attrition, particularly captain attrition, workforce shortages and third-party labor shortages impacted our operations in 2022.

Regional Airline Pilot Constraints

As passenger demand in the airline industry recovered from the COVID-19 pandemic in 2020, the number of regional airline captains and first officers hired by major airlines and low-cost carriers significantly increased.

As a result, we experienced a high level of captain and first officer attrition beginning in 2021 that has continued through 2023.

Higher attrition rates have negatively impacted our ability to operate flight schedules requested by our major airline partners, which was the leading factor in our year-over-year decline in both flights completed and block hours incurred from 2021 to 2023.

Capacity and flight schedule impact.

We completed the following number of flights and related block hours in 2020, 2021 and 2022, demonstrating our ongoing flight schedule recovery toward pre-pandemic (2019) levels:

We completed the following number of flights and related block hours in 2023, 2022 and 2021:

For the year ended December 31,

The number of flights we completed and related block hours incurred in 2022 was 87.8% and 85.7% of 2019 levels, respectively, compared to 2021, when the number of flights we completed and related block hours incurred was 89.1% and 90.1% of 2019 levels.

In 2022, a significant increase in hiring of our pilots, particularly captains, by major airlines, low-cost carrier airlines and air freight companies negatively impacted our attrition rates and our ability to operate flight schedules requested by our major airline partners, in part leading to the year-over-year decline in both flights completed and block hours incurred.

At December 31, 2022, we had $1.1 billion in total available liquidity, consisting of $1.0 billion in cash, cash equivalents and marketable securities, and $70.1 million available for borrowings under SkyWest Airlines’ line of credit.

At December 31, 2023, we had $906.0 million in total available liquidity, consisting of $835.2 million in cash, cash equivalents and marketable securities, and $70.8 million available for borrowing under our line of credit.

Industry Overview

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(“Spirit”), Allegiant Travel Company (“Allegiant”) and Frontier Group Holdings, Inc.

(“Frontier”), generally have lower cost structures than major airlines, which permits them to offer flights to and from many of the

same markets as the major airlines, but at lower prices.

(“Frontier”), generally have lower cost structures than major airlines, which permits them to offer flights to and from many of the same markets as the major airlines, but at lower prices.

Low-cost carriers typically operate using a point-to-point network strategy, rather than a hub-and-spoke network.

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Rather, regional airlines typically enter into agreements with one or more major airlines, pursuant to which the regional airline agrees to use its smaller, lower-cost aircraft to carry passengers booked and ticketed by the major airline between a hub of the major airline and a smaller outlying city.

In exchange for such services, the major airline pays the regional airline either fixed fees to operate the flight, termed “capacity purchase agreement,” “capacity purchase contract,” “flying contract,” “fixed-fee arrangement,” or a “fixed-fee contract,” or the regional airline receives a percentage of applicable passenger ticket revenues on designated flights operated by the regional airline, termed “prorate agreement” or “revenue-sharing” arrangement, as described in more detail below.

In exchange for such services, the major airline pays the regional airline either fixed fees to operate the flight, termed “capacity purchase agreement,” “flying contract,” “fixed-fee arrangement,” or a “fixed-fee contract,” or the regional airline receives a percentage of applicable passenger ticket revenues on designated flights operated by the regional airline, termed “prorate agreement” as described in more detail below.

Code-Share Agreements

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In exchange, the regional airline provides a designated number of low-capacity (usually between 50 and 76 seats) flights between larger airports served by the major airline and surrounding cities, usually in lower-volume markets.

The financial arrangements between the regional airlines and their code-share partners usually involve either capacity purchase arrangements or prorate arrangements as explained below:

The financial arrangements between the

regional airlines and their code-share partners usually involve either capacity purchase arrangements or prorate arrangements as explained below:

● Capacity Purchase Arrangements.

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Substantially all costs associated with the regional airline flight are borne by the regional airline.

In a prorate arrangement, the regional airline may realize increased profits as ticket prices and passenger loads increase or fuel prices decrease and, correspondingly, the regional airline may realize decreased profits as ticket prices and passenger loads decrease or fuel prices increase.

In a prorate arrangement, the regional airline may realize increased profits as ticket prices and passengers carried increase or fuel prices decrease and, correspondingly, the regional airline may realize decreased profits as ticket prices and passengers carried decrease or fuel prices increase.

We have code-share agreements with United, Delta, American and Alaska.

During the year ended December 31, 2022, approximately 88% of our flying agreements revenue related to capacity purchase agreement flights,

where United, Delta, American and Alaska controlled scheduling, ticketing, pricing, and seat inventories.

The remainder of our flying agreements revenue during the year ended December 31, 2022, related to prorate flights for United or Delta, where we have more control over scheduling, pricing and seat inventories, and shared passenger fares with United or Delta according to prorate formulas.

During the year ended December 31, 2023, approximately 87% of our flying agreements revenue related to capacity purchase agreement flights, where United, Delta, American and Alaska controlled scheduling, ticketing, pricing, and seat inventories.

The remainder of our flying agreements revenue during the year ended December 31, 2023, related to prorate flights for United or Delta, where we controlled scheduling, pricing and seat inventories on certain prorate routes, and shared passenger fares with United or Delta according to prorate formulas and SWC flights.

The routes placed under our prorate arrangements typically include flight service between one of our partners’ hub cities and a city not served under our capacity purchase arrangements.

Under our capacity purchase arrangements, 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.

The aircraft compensation structure varies by agreement but is intended to cover either our aircraft principal and interest debt service costs or our aircraft depreciation and interest expense while the aircraft is under contract.

The number of aircraft under our capacity purchase arrangements and our prorate arrangements as of December 31, 2023 is reflected in the summary below.

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* Our prorate agreements are based on specific routes, not a specific aircraft count.

The number of aircraft listed above for each prorate agreement approximates the number of aircraft we use to serve the prorate routes.

In addition to the aircraft operating under the respective arrangements outlined above, SkyWest Airlines has agreed with its major airline partners to place additional aircraft under a capacity purchase arrangement as summarized below.

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 aircraft operating under the respective arrangements outlined above, we have agreed with our major airline partners to place additional aircraft under capacity purchase arrangements as summarized below.

We are coordinating with our major airline partners to optimize the timing of upcoming fleet deliveries and the delivery timing referenced below is subject to change.

● Capacity purchase agreement with Delta for a total of three new E175 aircraft.

Two new E175 aircraft are currently scheduled for delivery in 2023 and one new E175 aircraft is scheduled for delivery in 2024.

● Capacity purchase agreement with United for 19 new E175 aircraft.

Four new E175 aircraft are currently scheduled for delivery in 2024, seven new E175 aircraft are scheduled for delivery in 2025 and eight new E175 aircraft are scheduled for delivery in 2026.

We anticipate financing the aircraft through debt.

● Capacity purchase agreement with Delta for one new E175 aircraft.

The delivery date for the new E175 aircraft is currently scheduled for 2024.

We anticipate financing the aircraft through debt.

● Capacity purchase agreement with Alaska for one new E175 aircraft.

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Delta Connection Agreements

We and Delta are parties to a Delta Connection Agreement (the "Delta Connection Agreement"), pursuant to which we provide contract flight services for Delta.

The Delta Connection Agreement has a latest scheduled termination date of 2034.

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Training and Aircraft Maintenance

SkyWest provides substantially all training to our crew members and maintenance personnel at our training facilities.

We provide substantially all training to our crew members and maintenance personnel at our training facilities.

Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at our maintenance facilities.

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Under our prorate agreements with United and Delta, we are responsible for the costs to operate the flights, including fuel costs, and therefore we are exposed to fuel price fluctuations for flights operated under our prorate agreements.

During the year ended December 31, 2022, our major airline partners purchased the majority of the fuel for our aircraft flying under their respective capacity purchase agreements directly from their fuel vendors or reimbursed us for the fuel costs we incurred under the capacity purchase agreements.

During the year ended December 31, 2023, our major airline partners purchased the majority of the fuel for our aircraft flying under their respective capacity purchase agreements directly from their fuel vendors or, when applicable, reimbursed us for the fuel costs we incurred under the capacity purchase agreements.

Historically, we have not experienced sustained material problems with the availability of fuel and believe we will be able to obtain fuel in quantities sufficient to meet our existing and anticipated future requirements at competitive prices.

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Our total employees at December 31, 2023, included 1,651 part-time employees.

As of December 31, 2022, all our employees are employed by SkyWest Airlines, or to a limited extent, by SkyWest Charter, in preparation of the anticipated launch of SkyWest Charter operations in 2023.

As of December 31, 2023, all our employees are employed by SkyWest Airlines or to a limited extent, by SWC.

Certain SkyWest Airlines employees also provide administrative support to the SkyWest Leasing segment.

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SkyWest Airlines has never experienced a work stoppage due to a strike or other labor dispute, and we consider our relationships with our employees to be good.

In September 2022, we entered into a collective bargaining agreement with our pilots, increasing the pay rates for pilots.

Our relations with labor are governed by the Railway Labor Act (the “RLA”), the federal law governing labor relations between air carriers and their employees.

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Congress and the President have the authority to prevent “self-help” by enacting legislation that, among other things, imposes a settlement on the parties.

SkyWest Airlines respects all employees’ legal rights, including the rights to free association and collective bargaining.

We respect all employees’ legal rights, including the rights to free association and collective bargaining.

This includes the right to decide whether to be represented by a union.

Our employees are covered by the RLA.

Under the RLA, employees have the right to decide whether they wish to be represented by a union.

They also have the right to reject union representation.

At SkyWest our people are our most valued assets, and the success of our business is dependent on having an engaged and effective workforce.

We respect every individual's quality of life and are committed to promoting dignity and trust in all we do.

In September 2022, we entered into a collective bargaining agreement with our pilots, increasing the pay rates for pilots.

Additionally, during the years ended December 31, 2023 and December 31, 2022, we amended our capacity purchase agreements with our major airline partners which resulted in higher compensation as a result of our increased

We have also worked with our other operational workgroups to secure significant increases in each of their pay scales and bonuses, including a 35% increase in starting pay for SkyWest flight attendants in 2023.

At SkyWest our people are our most valued assets, and the success of our business is dependent on having a collaborative, engaged and effective workforce.

We respect every individual's quality of life and are committed to promoting integrity and trust in all we do.

We strive to be the partner of choice and employer of choice.

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Participants benefit from the SkyWest Pilot Pathway Program through certain starting seniority at SkyWest, final interview privileges and access to pilot mentors.

The Pilot Pathway Program allows students to remain at their campus to complete their flight training until they meet SkyWest's Airline Transport Pilot standards and achieve their required minimum hours of flight time.

The Pilot Pathway Program allows students to remain at their campus to complete their flight training until they meet SkyWest's Airline Transport Pilot standards and achieve their required minimum

hours of flight time.

Each participant may also participate in SkyWest recruiting events and outreach programs on their way to fulfilling commercial pilot jobs.

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Our training programs include full-motion flight simulators for pilots, on-the-job training for technicians, and cabin trainers for flight attendants.

We also reinforce our guiding principles, including but not limited to, health and safety, excellent service and quality, and respect and teamwork through our training and development programs, as well as through our employee appreciation and recognition programs.

During 2022, we experienced significant turnover of our pilots, specifically our captains.

We also reinforce our guiding principles, including but not limited to, health and safety, personal and corporate integrity, excellent service and quality, and respect and teamwork through our training and development programs, as well as through our employee appreciation and recognition programs.

During 2022 and 2023, we experienced significant turnover of our pilots, specifically our captains and experienced first officers.

As we work to train and promote our first officers to captains, we anticipate incurring continued elevated training costs in 2024.

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● Employee assistance programs that provide confidential counseling or psychiatric care,

● Free access to financial advisors for personal finance guidance and education,

● A variety of resources that promote scheduling flexibility with paid time away from work, and

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We are evaluating opportunities to increase the number of electric powered ground equipment, including tugs and pushbacks used at airports where we provide ramp services.

We participate with our major airline partners in recycling programs, and we have implemented recycling initiatives in our facilities to reduce the amount of paper, plastic and other recyclables going to landfills.

We participate with our major airline partners in recycling programs, and we have implemented recycling initiatives in our

facilities to reduce the amount of paper, plastic and other recyclables going to landfills.

We have worked aggressively to reduce our reliance on paper manuals, further eliminating unnecessary waste while increasing efficiencies.

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We generally experience a significantly higher number of weather cancellations during the winter months, which negatively impacts our revenue during such months.

Additional Information

We were incorporated in Utah in 1972.

Our principal executive offices are located at 444 South River Road, St.

George, Utah 84790, and our primary telephone number is (435) 634-3000.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are available free of charge on our website at inc.skywest.com , as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).

The SEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.

We use our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

Information relating to our corporate governance is also included on our investor relations website.

The information in or accessible through the SEC and our website are not incorporated into, and are not considered part of, this filing.

Further, our references to the URLs for these websites are intended to be inactive textual references only.

In addition, we provide electronic or paper copies of our SEC filings free of charge upon request.

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

What changed 10-K

Item 1. Business