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Item 1. Financial Statements

2024-07-26 compared with 2024-04-26 · 152 added, 103 removed, 421 unchanged (38% of the section changed)

46 unchanged sentences

Common stock, no par value, 120,000,000 shares authorized;

83,137,744 and 82,840,372 shares issued as of March 31, 2024, and December 31, 2023, respectively

83,139,289 and 82,840,372 shares issued as of June 30, 2024, and December 31, 2023, respectively

Retained earnings

Treasury stock, at cost, 42,868,446 and 42,615,347 shares as of March 31, 2024, and December 31, 2023, respectively

Accumulated other comprehensive income

Treasury stock, at cost, 43,045,566 and 42,615,347 shares as of June 30, 2024, and December 31, 2023, respectively

Accumulated other comprehensive income (loss)

Total stockholders’ equity

6 unchanged sentences

Three months ended

Six months ended

OPERATING REVENUES:

11 unchanged sentences

Total operating expenses

OPERATING INCOME (LOSS)

OPERATING INCOME

OTHER INCOME (EXPENSE):

20 unchanged sentences

Comprehensive

Income (Loss)

Balance at December 31, 2023

Vested employee stock awards

Employee income tax paid on vested equity awards

Employee income tax paid on stock awards

Sale of common stock under employee stock purchase plan

3 unchanged sentences

Balance at March 31, 2024

Stock based compensation expense

Treasury stock purchases

Net unrealized depreciation on marketable securities, net of tax of $ 212

Balance at June 30, 2024

See accompanying notes to condensed consolidated financial statements.

SKYWEST, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(In Thousands)

Treasury Stock

1 unchanged sentence

Balance at December 31, 2022

Exercise of common stock options and vested employee stock awards

Employee income tax paid on vested equity awards

Employee income tax paid on stock awards

Sale of common stock under employee stock purchase plan

3 unchanged sentences

Balance at March 31, 2023

Stock based compensation expense

Treasury stock purchases

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

Balance at June 30, 2023

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(In Thousands)

Three months ended

Six months ended

NET CASH PROVIDED BY OPERATING ACTIVITIES

14 unchanged sentences

Employee income tax paid on vested equity awards

Purchase of treasury stock

Purchase of treasury stock and excise tax

NET CASH USED IN FINANCING ACTIVITIES

23 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

21 unchanged sentences

The transaction price for the capacity purchase agreements is determined from the fixed-fee consideration, incentive consideration and directly reimbursed expenses earned as flights are completed over the agreement term.

For the three months ended March 31, 2024 and 2023, capacity purchase agreements represented approximately 87.0 % and 88.4 % of the Company’s flying agreements revenue, respectively.

Under the Company’s “prorate” arrangements, the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a Company airline and the other portion of their trip on the major airline partner.

For the six months ended June 30, 2024 and 2023, capacity purchase agreements represented approximately 87.1 % and 88.3 % of the Company’s flying agreements revenue, respectively.

Under the Company’s “prorate” agreements, the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a Company airline and the other portion of their trip on the major airline partner.

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

The transaction price for the prorate agreements is determined from the proration formula derived from each passenger ticket amount on each completed flight over the agreement term.

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

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

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

2 unchanged sentences

The performance obligation is met and revenue is recognized upon completion of the flight.

For the three months ended March 31, 2024 and 2023, prorate flying agreements and SWC revenue represented approximately 13.0 % and 11.6 % of the Company’s flying agreements revenue, respectively.

The following table represents the Company’s flying agreements revenue by type for the three months ended March 31, 2024 and 2023 (in thousands):

For the three months ended March 31,

For the six months ended June 30, 2024 and 2023, prorate flying agreements and SWC revenue represented approximately 12.9 % and 11.7 % of the Company’s flying agreements revenue, respectively.

The following table represents the Company’s flying agreements revenue by type for the three and six months ended June 30, 2024 and 2023 (in thousands):

For the three months ended June 30,

For the six months ended June 30,

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

9 unchanged sentences

The Company refers to cash received under its capacity purchase agreements prior to recognizing revenue as “deferred revenue,” and the Company refers to revenue recognized prior to billing its major airline partners under its capacity purchase agreements as “unbilled revenue” for each reporting period.

During the three months ended March 31, 2024, the Company recognized $ 0.7 million of previously deferred revenue associated with the non-lease fixed monthly payments under certain agreements and decreased unbilled revenue by $ 0.3 million under certain other agreements, compared to deferring revenue of $ 39.3 million and decreasing unbilled revenue by $ 3.3 million during the three months ended March 31, 2023.

During the six months ended June 30, 2024, the Company recognized $ 6.0 million of previously deferred revenue associated with the non-lease fixed monthly payments under certain agreements and decreased unbilled revenue by $ 0.6 million under certain other agreements, compared to

deferring revenue of $ 77.4 million and decreasing unbilled revenue by $ 6.0 million during the six months ended June 30, 2023.

A portion of the Company’s compensation under its capacity purchase agreements is designed to reimburse the Company for certain aircraft ownership costs.

3 unchanged sentences

The Company recognizes fixed monthly lease payments as lease revenue using the straight-line basis over the capacity purchase agreement term and variable lease payments in the period when the block hours are completed.

The Company recognized $ 0.5 million of previously deferred lease revenue during the three months ended March 31, 2024, whereas the Company deferred recognizing lease revenue of $ 20.6 million during the three months ended March 31, 2023, under the straight-line basis.

The Company recognized $ 1.0 million of previously deferred lease revenue during the six months ended June 30, 2024, whereas the Company deferred recognizing lease revenue of $ 40.0 million during the six months ended June 30, 2023, under the straight-line basis.

The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statement of comprehensive income because the use of the aircraft is not a separate activity of the total service provided under the capacity purchase agreements.

The Company’s total deferred revenue balance as of March 31, 2024 was $ 373.4 million, including $ 58.0 million in other current liabilities and $ 315.4 million in other long-term liabilities.

The Company’s unbilled revenue balance was $ 7.0 million as of March 31, 2024, including $ 1.1 million in other current assets and $ 5.9 million in other long-term assets.

The Company’s total deferred revenue balance as of June 30, 2024 was $ 367.6 million, including $ 64.2 million in other current liabilities and $ 303.4 million in other long-term liabilities.

The Company’s unbilled revenue balance was $ 6.7 million as of June 30, 2024, including $ 1.1 million in other current assets and $ 5.6 million in other long-term assets.

The Company’s total deferred revenue balance was $ 374.6 million as of December 31, 2023, including $ 61.0 million in other current liabilities and $ 313.6 million in other long-term liabilities.

5 unchanged sentences

At the end of each period during the term of an agreement, the Company calculates the incentives achieved during that period and recognizes revenue attributable to that agreement accordingly, subject to the variable constraint guidance under ASC Topic 606.

As of March 31, 2024, the Company had 475 aircraft in scheduled service or under contract pursuant to code-share agreements.

As of June 30, 2024, the Company had 475 aircraft in scheduled service or under contract pursuant to code-share agreements.

The following table summarizes the significant provisions of each code-share agreement the Company has with each major airline partner through SkyWest Airlines:

32 unchanged sentences

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

In addition to the contractual arrangements described above, as of March 31, 2024, SkyWest Airlines reached agreements to place the following E175 aircraft under a capacity purchase agreement with the respective major airline partners:

In addition to the contractual arrangements described above, as of June 30, 2024, SkyWest Airlines reached agreements to place the following E175 aircraft under a capacity purchase agreement with the respective major airline partners:

Q3 and Q4 2024

Delta Air Lines

1 unchanged sentence

Alaska Airlines

(1) 17 of the E175 deliveries scheduled for 2024 are partner-financed so the aircraft will be provided by the major airline partner for SkyWest to operate.

(1) Nine of the E175 deliveries scheduled for the second half of 2024 are partner-financed, meaning the major airline partner will provide the aircraft for SkyWest Airlines to operate.

Final delivery and in-service dates for aircraft to be placed under contract may be adjusted based on various factors.

When an aircraft is scheduled to be removed from a capacity purchase arrangement, the Company may, as practical under the circumstances, negotiate an extension with the respective major airline partner, negotiate the placement of the aircraft with another major airline partner, return the aircraft to the major airline partner when the aircraft is provided by the major airline partner, place owned aircraft for sale or pursue other uses for the aircraft.

When an aircraft is scheduled to be removed from a capacity purchase agreement, the Company may, as practical under the circumstances, negotiate an extension with the respective major airline partner, negotiate the placement of the aircraft with another major airline partner, return the aircraft to the major airline partner when the aircraft is provided by the major airline partner, place owned aircraft for sale or pursue other uses for the aircraft.

Other uses for the aircraft may include placing the aircraft in a prorate agreement, leasing the aircraft to a third party or disassembling aircraft components such as the engines and parts to be used as spare inventory.

1 unchanged sentence

The following table

represents the Company’s lease, airport services and other revenues for the three months ended March 31, 2024 and 2023 (in thousands):

For the three months ended March 31,

represents the Company’s lease, airport services and other revenues for the three and six months ended June 30, 2024 and 2023 (in thousands):

For the three months ended June 30,

For the six months ended June 30,

Operating lease revenue

1 unchanged sentence

Lease, airport services and other

The following table summarizes future minimum rental income under operating leases primarily related to leased aircraft and engines that had remaining non-cancelable lease terms as of March 31, 2024 (in thousands):

April 2024 through December 2024

July 2024 through December 2024

Total future minimum rental income under operating leases

Of the Company’s $ 5.5 billion of net property and equipment as of March 31, 2024, $ 210.4 million of regional jet aircraft and spare engines were leased to third parties under operating leases.

Of the Company’s $ 5.4 billion of net property and equipment as of June 30, 2024, $ 207.6 million of regional jet aircraft and spare engines were leased to third parties under operating leases.

The Company’s mitigation strategy for the residual asset risks of these assets includes leasing aircraft and engine types that can be operated by the Company in the event of a default.

5 unchanged sentences

The Company monitors publicly available credit ratings for entities for which the Company has a significant receivable balance.

As of March 31, 2024, the Company had gross receivables of $ 89.5 million in current assets and gross receivables of $ 203.9 million in other long-term assets.

As of June 30, 2024, the Company had gross receivables of $ 106.9 million in current assets and gross receivables of $ 206.0 million in other long-term assets.

The Company has established credit loss reserves based on publicly available historic default rates issued by a third party for companies with similar credit ratings, factoring in the term of the respective accounts receivable, notes receivable or guarantees.

During the three months ended March 31, 2024, there were no significant changes in the outstanding accounts receivable, notes receivable, guarantees or credit ratings of the entities.

During the six months ended June 30, 2024, there were no significant changes in the outstanding accounts receivable, notes receivable, guarantees or credit ratings of the entities.

The following table summarizes the changes in allowance for credit losses:

3 unchanged sentences

Write-offs charged against allowance

Balance at March 31, 2024

Balance at June 30, 2024

(3) Stock-Based Compensation

During the three months ended March 31, 2024, the Company granted 50,577 restricted stock units and 118,021 performance shares to certain employees of the Company under the SkyWest, Inc.

During the six months ended June 30, 2024, the Company granted 50,577 restricted stock units and 118,021 performance shares to certain employees of the Company under the SkyWest, Inc.

2019 Long-Term Incentive Plan.

3 unchanged sentences

The weighted average fair value of these restricted stock units and performance shares on their date of grant was $ 59.57 per share .

During the three months ended March 31, 2024, the Company did not grant any options to purchase shares of common stock to employees.

Additionally, during the three months ended March 31, 2024, the Company granted 12,634 fully vested shares of common stock and 2,632 fully vested restricted stock units to the Company’s directors at a grant date fair value of $ 59.57 .

Additionally, during the six months ended June 30, 2024, the Company granted 14,179 fully vested shares of common stock and 2,632 fully vested restricted stock units to the Company’s directors at a weighted average grant date fair value of $ 61.13 .

During the six months ended June 30, 2024, the Company did no t grant any options to purchase shares of common stock to employees.

The Company accounts for forfeitures of restricted stock units and performance shares when forfeitures occur.

1 unchanged sentence

Stock-based compensation expense for the performance shares is based on the Company’s anticipated outcome of achieving the performance metrics.

During the three months ended March 31, 2024 and 2023, the Company recorded pre-tax stock-based compensation expense of $ 5.5 million and $ 4.3 million, respectively.

During the six months ended June 30, 2024 and 2023, the Company recorded pre-tax stock-based compensation expense of $ 10.3 million and $ 8.6 million, respectively.

( 4) Stock Repurchase

1 unchanged sentence

Under the May 2023 repurchase program, the Company’s Board of Directors authorized up to $ 250.0 million for the repurchase of the Company’s common stock, superseding a prior Board authorization.

At March 31, 2024, $ 82.2 million remains available under the May 2023 authorization.

During the three months ended March 31, 2024, the Company repurchased 136,261 shares of common stock for $ 8.7 million at a weighted average price per share of $ 64.21 .

During the three months ended March 31, 2023, the Company repurchased 5.1 million shares of common stock for $ 100.0 million at a weighted average price per share of $ 19.74 .

At June 30, 2024, $ 68.8 million remains available under the May 2023 authorization.

During the six months ended June 30, 2024, the Company repurchased 313,381 shares of common stock for $ 22.1 million at a weighted average price per share of $ 70.44 .

The Company also recorded $ 0.1 million of excise tax related to the stock repurchases as Treasury Stock in the Company’s Stockholders Equity for the six months ended June 30, 2024.

During the six months ended June 30, 2023, the Company repurchased 8.4 million shares of common stock for $ 194.1 million at a weighted average price per share of $ 23.10 and recorded $ 1.9 million of excise tax related to the stock repurchases as Treasury Stock in the Company’s Stockholders Equity.

(5) Net Income Per Common Share

4 unchanged sentences

Three Months Ended

Six Months Ended

Treasury Warrants (1)

1 unchanged sentence

Total antidilutive securities

(1) Warrants originally issued to U.S.

Department of the Treasury (“U.S.

Treasury”) warrants to purchase shares of SkyWest common stock issued pursuant to the three Payroll Support Program Agreements and a loan agreement with the U.S.

Additionally, during the three months ended March 31, 2024 and 2023, 452,000 and 538,000 performance shares (at target performance) were excluded from the computation of Diluted EPS because the Company had not achieved the minimum target thresholds for these shares for the three months ended March 31, 2024 and 2023, respectively.

Treasury”) to purchase shares of SkyWest common stock issued pursuant to the three Payroll Support Program Agreements and a loan agreement with the U.S.

Additionally, during the six months ended June 30, 2024 and 2023, 400,000 and 538,000 performance shares (at target performance) were excluded from the computation of Diluted EPS because the Company had not achieved the minimum target thresholds for these shares for the six months ended June 30, 2024 and 2023, respectively.

The calculation of the weighted average number of shares of common stock outstanding for Basic EPS and Diluted EPS are as follows for the periods indicated (in thousands, except per share data):

Three Months Ended

Six Months Ended

Net income (loss)

13 unchanged sentences

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

The following represents the Company’s segment data for the three-month periods ended March 31, 2024 and 2023 (in thousands):

Three months ended March 31, 2024

The following represents the Company’s segment data for the three-month periods ended June 30, 2024 and 2023 (in thousands):

Three months ended June 30, 2024

SkyWest Airlines

4 unchanged sentences

Segment profit (2)

Total assets (as of March 31, 2024)

Total assets (as of June 30, 2024)

Capital expenditures (including non-cash)

Three months ended March 31, 2023

Three months ended June 30, 2023

SkyWest Airlines

4 unchanged sentences

Segment profit (loss) (2)

Total assets (as of March 31, 2023)

Total assets (as of June 30, 2023)

Capital expenditures (including non-cash)

1 unchanged sentence

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

The following represents the Company’s segment data for the six-month periods ended June 30, 2024 and 2023 (in thousands):

Six months ended June 30, 2024

SkyWest Airlines

Operating revenues (1)

Operating expense

Depreciation and amortization expense

Interest expense

Segment profit (2)

Total assets (as of June 30, 2024)

Capital expenditures (including non-cash)

Six months ended June 30, 2023

SkyWest Airlines

Operating revenues (1)

Operating expense

Depreciation and amortization expense

Interest expense

Segment profit (loss) (2)

Total assets (as of June 30, 2023)

Capital expenditures (including non-cash)

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

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

(7) Leases, Commitments, Guarantees and Contingencies

2 unchanged sentences

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

As of March 31, 2024, excluding aircraft financed by the Company’s major airline partners that the Company operates for them under contract, the Company leased eight aircraft under long-term lease agreements with remaining terms ranging from five to six years .

As of June 30, 2024, excluding aircraft financed by the Company’s major airline partners that the Company operates for them under contract, the Company leased eight aircraft under long-term lease agreements with remaining terms ranging from five to six years .

Airport facilities

3 unchanged sentences

The Company’s operating leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable factors are excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting guidance.

As of March 31, 2024, the Company’s right-of-use assets were $ 85.9 million, the Company’s current maturities of operating lease liabilities were $ 19.7 million, and the Company’s noncurrent lease liabilities were $ 66.2 million.

During the three months ended March 31, 2024, the Company paid $ 5.7 million under operating leases reflected as a reduction from operating cash flows.

The table below presents lease related terms and discount rates as of March 31, 2024:

As of June 30, 2024, the Company’s right-of-use assets were $ 82.4 million, the Company’s current maturities of operating lease liabilities were $ 18.8 million, and the Company’s noncurrent lease liabilities were $ 63.6 million.

During the six months ended June 30, 2024, the Company paid $ 10.7 million under operating leases reflected as a reduction from operating cash flows.

The table below presents lease related terms and discount rates as of June 30, 2024:

Weighted-average remaining lease term for operating leases

Weighted-average discount rate for operating leases

The Company’s lease costs for the three months ended March 31, 2024 and 2023 included the following components (in thousands):

For the three months ended March 31,

The Company’s lease costs for the three and six months ended June 30, 2024 and 2023 included the following components (in thousands):

For the three months ended June 30,

For the six months ended June 30,

Operating lease cost

2 unchanged sentences

Total lease cost

As of March 31, 2024, the Company leased aircraft, airport facilities, office space and other property and equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property.

As of June 30, 2024, the Company leased aircraft, airport facilities, office space and other property and equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property.

The Company expects that, in the normal course of business, such operating leases that expire will be renewed or replaced by other leases.

The following table summarizes future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms as of March 31, 2024 (in thousands):

April 2024 through December 2024

The following table summarizes future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms as of June 30, 2024 (in thousands):

July 2024 through December 2024

Total future minimum operating lease payments

As of March 31, 2024, the Company had a firm purchase commitment for 21 E175 aircraft from Embraer with anticipated delivery dates through 2026.

As of June 30, 2024, the Company had a firm purchase commitment for 21 E175 aircraft from Embraer with anticipated delivery dates through 2026.

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

Apr - Dec 2024

Jul- Dec 2024

Operating lease payments for aircraft and facility obligations

3 unchanged sentences

Total commitments and obligations

(1) At March 31, 2024, the Company’s long-term debt had fixed interest rates.

(1) At June 30, 2024, the Company’s long-term debt had fixed interest rates.

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

1 unchanged sentence

In exchange for providing the guarantee, the Company received 6.5 % of the guaranteed amount as consideration, payable in the estimated value of common stock of the Part 135 air carrier, all of which was sold in 2023.

The balance of the debt under the guarantee was $ 16.1 million as of March 31, 2024.

The balance of the debt under the guarantee was $ 14.7 million as of June 30, 2024.

In 2023, the Company agreed to guarantee up to $ 12.0 million of debt for an aviation school.

The debt is secured by the school’s aircraft and engines and has a five-year term.

In exchange for providing the guarantee, the

Company receives 2.0 % annually of the guaranteed amount as consideration in cash.

The balance of the debt under the guarantee was $ 7.2 million as of March 31, 2024.

In exchange for providing the guarantee, the Company receives 2.0 % of the guaranteed amount annually as consideration in cash.

The balance of the debt under the guarantee was $ 11.5 million as of June 30, 2024.

The purpose of these guarantees is to help reduce the financing costs of aircraft for the third-parties in an effort to increase the potential number of commercial pilots in the Company’s hiring pipeline.

6 unchanged sentences

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

or other inputs that are observable

or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities.

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, therefore requiring an entity to develop its own assumptions.

As of March 31, 2024, and December 31, 2023, the Company held certain assets that are required to be measured at fair value on a recurring basis.

As of June 30, 2024, and December 31, 2023, the Company held certain assets that are required to be measured at fair value on a recurring basis.

Assets measured at fair value on a recurring basis are summarized below (in thousands):

Fair Value Measurements as of March 31, 2024

Fair Value Measurements as of June 30, 2024

Marketable Securities

12 unchanged sentences

The Company’s “Marketable Securities” classified as Level 2 securities primarily utilize broker quotes in a non-active market for valuation of these securities.

See Note 11 “Investments in Other Companies” regarding the Company’s investments in other companies, for the three months ended March 31, 2024.

The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during the three months ended March 31, 2024.

See Note 11 “Investments in Other Companies” regarding the Company’s investments in other companies, for the six months ended June 30, 2024.

The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during the six months ended June 30, 2024.

The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period.

As of March 31, 2024, and December 31, 2023, the Company classified $ 641.2 million and $ 686.9 million of marketable securities, respectively, as short-term because it had the intent to maintain a liquid portfolio and the ability to redeem the securities within one year .

At the time of sale, any realized appreciation or depreciation, calculated by the specific identification method, is recognized in other income and expense.

As of March 31, 2024, and December 31, 2023, the cost of the Company’s marketable securities was $ 641.0 million and $ 686.5 million, respectively.

As of June 30, 2024, and December 31, 2023, the Company classified $ 692.5 million and $ 686.9 million of marketable securities, respectively, as short-term because it had the intent to maintain a liquid portfolio and the ability to redeem the securities within one year .

At the time of sale, any realized appreciation or depreciation, calculated by the specific identification method, is recognized in other income (loss), net.

As of June 30, 2024, and December 31, 2023, the cost of the Company’s marketable securities was $ 693.2 million and $ 686.5 million, respectively.

(9) Assets Held for Sale

1 unchanged sentence

At December 31, 2023, the Company presented the $ 54.3 million of assets held for sale at their fair market value less costs to sell and included the amount in “Other current assets” on the Company’s consolidated balance sheet.

During the three months ended March 31, 2024, the Company changed its plan to sell the 14 CRJ700 aircraft and reclassified them as held for use assets in “Aircraft and rotable spares” on the Company’s consolidated balance sheet.

The Company remeasured the fair value of the held for use assets at the time of the reclassification and, as a result, for the three months ended March 31, 2024, the Company recorded a $ 4.2 million gain (pre-tax) as an offset to other operating expenses primarily due to the elimination of the estimated costs to sell the assets.

In March 2024, the Company changed its plan to sell the 14 CRJ700 aircraft and reclassified them as held for use assets in “Aircraft and rotable spares” on the Company’s consolidated balance sheet.

The Company remeasured the fair value of the held for use assets at the time of the reclassification and, as a result, for

the six months ended June 30, 2024, the Company recorded a $ 4.2 million gain (pre-tax) as an offset to other operating expenses primarily due to the elimination of the estimated costs to sell the assets.

(10) Long-term Debt

Long-term debt consisted of the following as of March 31, 2024, and December 31, 2023 (in thousands):

March 31, 2024

Long-term debt consisted of the following as of June 30, 2024, and December 31, 2023 (in thousands):

June 30, 2024

December 31, 2023

8 unchanged sentences

Total long-term debt, net of debt issue costs

As of March 31, 2024, the Company had $ 2.9 billion of total long-term debt, which consisted of $ 2.7 billion of debt used to finance aircraft and spare engines and $ 200.6 million of unsecured debt payable to U.S.

The average effective interest rate on the Company’s debt was approximately 4.1 % at March 31, 2024.

As of March 31, 2024 and December 31, 2023, the Company had $ 45.0 million and $ 49.1 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions.

As of March 31, 2024, SkyWest Airlines had a $ 100.0 million line of credit.

As of June 30, 2024, the Company had $ 2.8 billion of total long-term debt, which consisted of $ 2.6 billion of debt used to finance aircraft and spare engines and $ 200.6 million of unsecured debt payable to U.S.

The average effective interest rate on the Company’s debt was approximately 4.1 % at June 30, 2024.

As of June 30, 2024 and December 31, 2023, the Company had $ 45.0 million and $ 49.1 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions.

As of June 30, 2024, SkyWest Airlines had a $ 100.0 million line of credit.

The line of credit includes minimum liquidity and profitability covenants and is secured by certain assets.

As of March 31, 2024, SkyWest Airlines had no amounts outstanding under the facility.

However, at March 31, 2024, SkyWest Airlines had $ 24.9 million in letters of credit issued under the facility, which reduced the amount available under the facility to $ 75.1 million.

As of June 30, 2024, SkyWest Airlines had no amounts outstanding under the facility.

However, at June 30, 2024, SkyWest Airlines had $ 24.9 million in letters of credit issued under the facility, which reduced the amount available under the facility to $ 75.1 million.

The line of credit expires March 25, 2025 and has a variable interest rate of 3.5 % plus the one month SOFR rate.

2 unchanged sentences

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

carrying value and fair value of the Company’s long-term debt as of March 31, 2024 and December 31, 2023, were as follows (in thousands):

March 31, 2024

The carrying value and fair value of the Company’s long-term debt as of June 30, 2024 and December 31, 2023, were as follows (in thousands):

June 30, 2024

December 31, 2023

3 unchanged sentences

During 2019, the Company created a joint venture with Regional One, Inc.

and, as of March 31, 2024, has invested a total of $ 26.6 million for an ownership interest in Aero Engines, LLC.

and, as of June 30, 2024, has invested a total of $ 26.6 million for an ownership interest in Aero Engines, LLC.

(“Aero Engines”).

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The Company’s exposure in its investment in Aero Engines primarily consists of the Company’s portion of income or loss from Aero Engines’ engine lease agreements with third parties and the Company’s ownership percentage in Aero Engines’ engines book value.

Aero Engines had no debt outstanding as of March 31, 2024.

As of March 31, 2024, the Company’s investment balance in Aero Engines was $ 25.3 million and has been recorded in “Other Assets” on the Company’s consolidated balance sheet.

The Company’s portion of income generated by Aero Engines for the three months ended March 31, 2024, was $ 0.2 million, which is recorded in “Other income (loss), net” on the Company’s consolidated statements of comprehensive income.

Aero Engines had no debt outstanding as of June 30, 2024.

As of June 30, 2024, the Company’s investment balance in Aero Engines was $ 22.6 million and has been recorded in “Other

Assets” on the Company’s consolidated balance sheet.

The Company’s portion of income generated by Aero Engines for the six months ended June 30, 2024, was $ 0.9 million, which is recorded in “Other income (loss), net” on the Company’s consolidated statements of comprehensive income.

In December 2023, the Company invested $ 9.9 million for a 9.9 % ownership interest in Corporate Flight Management, Inc.

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In January 2024, the Company invested an additional $ 15.1 million in Contour.

The Company has a 25 % ownership interest in Contour at March 31, 2024 and holds one of five seats, or 20 % , on Contour’s board of directors.

The Company has a 25 % ownership interest in Contour at June 30, 2024 and holds one of five seats, or 20 % , on Contour’s board of directors.

The Contour arrangement also includes an asset provisioning agreement under which the Company will provide CRJ airframes, engines and rotable parts to Contour.

The Company accounts for its investment in Contour under the equity method where the investment is reported at cost and adjusted each period for the Company’s share of Contour’s income or loss, recorded on a one quarter lag.

Accordingly, for the three months ended March 31, 2024, the Company recorded a loss of less than $ 0.1 million, its portion of loss generated by Contour during the fourth quarter of 2023, which was recorded in “Other income (loss), net” on the Company’s consolidated statements of comprehensive income.

As of March 31, 2024, the Company’s investment balance in Contour of $ 25.0 million was recorded in “Other Assets” on the Company’s consolidated balance sheet.

At March 31, 2024, the Company had $ 14.0 million in notes receivable from Contour related to the sale of aircraft under the asset provisioning agreement.

For the six months ended June 30, 2024, the Company recorded a loss of $ 0.3 million, its portion of loss generated by Contour, which was recorded in “Other income (loss), net” on the Company’s consolidated statements of comprehensive income.

As of June 30, 2024, the Company’s investment balance in Contour of $ 24.7 million was recorded in “Other Assets” on the Company’s consolidated balance sheet.

At June 30, 2024, the Company had $ 12.7 million in notes receivable from Contour related to the sale of aircraft under the asset provisioning agreement.

The notes are secured by aircraft and collectible within four years .

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The Company also received a put option from an Eve shareholder for the 1,000,000 shares of common stock of Eve payable in aircraft parts credits.

The intent of the put option is to reduce the Company’s investment risk in Eve, and the put option expires in December 2031.

The intent of the put option was to reduce the Company’s investment risk in Eve, and the put option expires in December 2031.

The Company is restricted from selling the shares underlying the warrant until May 2025, and the warrant expires in May 2032.

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The Company evaluated the Eve Investments under ASC Topic 321, “Investments – Equity Securities” and ASC Topic 815, “Derivatives and Hedging,” and recorded the Eve Investments based on their pro rata share of the consideration paid using the fair value of the Eve Investments on the acquisition date, with subsequent changes in the fair value report ed in earnings.

During the year ended December 31, 2023, the Company sold 600,411 shares of common stock of Eve, which concurrently forfeited the 600,411 shares subject to the put option from the Eve shareholder.

The shares of common stock of Eve are classified as Level 1 within the fair value hierarchy as Eve stock is actively traded on the New York Stock Exchange, and the value is determined using quoted market prices for the equity security.

The warrant and put option are classified as Level 3 within the fair value hierarchy (“Eve Level 3 Investments”), and the Company used the Black Scholes Option Pricing Model to determine the estimated fair market value of the Eve Level 3 Investments , including an expected volatility of 52 % , which is a significant unobservable input that was derived from historical volatility of comparable companies.

During the year ended December 31, 2023, the Company sold 600,411 shares of common stock of Eve, which concurrently forfeited 600,411 shares subject to the put option from the Eve shareholder.

During the three months ended June 30, 2024, the Company exercised the remainder of the put option and received aircraft parts credits in exchange for the 399,589 shares of common stock.

At June 30, 2024, the Company’s only remaining investment in Eve was the warrant to acquire 1.5 million shares of Eve common stock.

The shares of common stock of Eve were classified as Level 1 within the fair value hierarchy as Eve stock is actively traded on the New York Stock Exchange, and the value is determined using quoted market prices for the equity security.

The warrant and put option were classified as Level 3 within the fair value hierarchy (“Eve Level 3 Investments”), and the Company used the Black Scholes Option Pricing Model to determine the estimated fair market value of the Eve Level 3 Investments , including an expected volatility of 52 % , which is a significant unobservable input that was derived from historical volatility of comparable companies.

The table below shows the reconciliation of the Eve Level 3 Investments (in thousands):

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Balance at December 31, 2023

Exercise of put option for aircraft parts credits

Realized gain on exercise of put option

Unrealized loss

Balance at March 31, 2024

The Company recognized unrealized losses of $ 3.5 million in “ Other income (loss) , net ” on the Company’s consolidated statements of comprehensive income for the three months ended March 31, 2024, related to the Eve Investments.

As of March 31, 2024, the fair value of the Eve Investments was $ 11.9 million and was recorded in “Other Assets” on the Company’s consolidated balance sheet.

Balance at June 30, 2024

The Company recognized a realized gain of $ 3.4 million from the exercise of the put option, a realized loss of $ 1.4 million from the forfeited shares of Eve common stock and unrealized losses of $ 7.4 million related to the Eve Investments that were recognized in “Other income (loss) , net” on the Company’s consolidated statements of comprehensive income for the six months ended June 30, 2024.

As of June 30, 2024, the fair value of the Eve Investments, which only consisted of the warrant, was $ 6.1 million and was recorded in “Other Assets” on the Company’s consolidated balance sheet.

(12) Income Taxes

The Company’s effective tax rate for the three months ended March 31, 2024 was 24.8 %.

The Company’s effective tax rate for the three months ended March 31, 2024 varied from the federal statutory rate of 21.0 % primarily due to the provision for state income taxes and the impact of non-deductible expenses, partially offset by a discrete tax benefit from excess tax deductions generated from employee equity transactions that occurred during the three months ended March 31, 2024.

The Company’s effective tax rate for the three months ended March 31, 2023 was 15.5 %.

The Company’s effective tax rate for the three months ended March 31, 2023 varied from the federal statutory rate of 21.0 % primarily due to the impact of non-deductible expenses and a discrete tax expense on employee equity transactions that occurred during the three months ended March 31, 2023, partially offset by the provision for state income taxes.

The Company’s effective tax rate for the six months ended June 30, 2024 was 25.5 %.

The Company’s effective tax rate for the six months ended June 30, 2024 varied from the federal statutory rate of 21.0 % primarily due to the provision for state income taxes and the impact of non-deductible expenses, partially offset by a discrete tax benefit from excess tax deductions generated from employee equity transactions that occurred during the six months ended June 30, 2024.

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

The Company’s effective tax rate for the six months ended June 30, 2023 varied from the federal statutory rate of 21.0 % primarily due to the impact of non-deductible expenses and a discrete tax expense on employee equity transactions that occurred during the six months ended June 30, 2023, partially offset by the provision for state income taxes.

(13) Legal Matters

The Company is subject to certain legal actions which it considers routine to its business activities.

As of March 31, 2024, the Company’s management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of operations.

As of June 30, 2024, the Company’s management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of operations.

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

What changed 10-Q

Item 1. Financial Statements