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Item 2. Management’s Discussion and Analysis

2024-07-26 compared with 2024-04-26 · 239 added, 102 removed, 186 unchanged (65% of the section changed)

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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-month periods ended March 31, 2024 and 2023.

Also discussed is our financial condition as of March 31, 2024, and December 31, 2023.

You should read this discussion in conjunction with our condensed consolidated financial statements for the three months ended March 31, 2024, including the notes thereto, appearing elsewhere in this Report.

(“SkyWest” “we” or “us”) during the three- and six-month periods ended June 30, 2024 and 2023.

Also discussed is our financial condition as of June 30, 2024, and December 31, 2023.

You should read this discussion in conjunction with our condensed consolidated financial statements for the three and six months ended June 30, 2024, including the notes thereto, appearing elsewhere in this Report.

This discussion and analysis contains forward-looking statements.

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These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “forecast,” “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, the effect of economic conditions 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.

These statements include, but are not limited to, statements about the continued demand for our product, the effect of economic conditions on SkyWest’s business, financial condition and results of operations, the scheduled aircraft deliveries and fleet size 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.

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(“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 provision of assets to Contour Airlines, 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.

d/b/a Contour Airlines (“Contour”), 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.

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(“SkyWest Airlines”).

As of March 31, 2024, we offered scheduled passenger and air freight service with approximately 1,860 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.

As of June 30, 2024, we offered scheduled passenger and air freight service with approximately 2,130 total daily departures to destinations in the United States, Canada and Mexico.

During 2022, we formed SkyWest Charter, LLC (“SWC”), which offers on-demand charter services.

As of March 31, 2024, we had 601 total aircraft in our fleet, including 475 aircraft in scheduled service or under contract under our code-share agreements, summarized as follows:

As of June 30, 2024, we had 608 total aircraft in our fleet, including 475 aircraft in scheduled service or under contract pursuant to our code-share agreements, summarized as follows:

Aircraft in scheduled service or under contract

Leased to third parties

(1) As of March 31, 2024, other aircraft included:

(1) As of June 30, 2024, other aircraft included:

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 or aircraft that are scheduled to be disassembled for use as spare parts.

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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 March 31, 2023, to March 31, 2024, we made changes to our fleet, including the addition of two new E175 aircraft and three partner-financed E175 aircraft.

We anticipate our fleet will continue to evolve, as we are scheduled to add one new E175 aircraft with Delta in 2024, a total of 36 E175 aircraft with United from 2024 to 2026 (including 19 new aircraft financed by us and 17 aircraft financed by United) and one new E175 aircraft with Alaska in 2025.

From June 30, 2023, to June 30, 2024, we made changes to our fleet, including the addition of two new E175 aircraft and 11 partner-financed E175 aircraft.

We anticipate our fleet will continue to evolve, as we are scheduled to add one new E175 aircraft with Delta in the second half of 2024, 28 new E175 aircraft with United (13 in the second half of 2024, seven in 2025 and eight in 2026, of which 19 aircraft are financed by us and nine aircraft are financed by United) 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.

As of March 31, 2024, approximately 42.3% of our aircraft in scheduled service or under contract were operated for United, approximately 28.5% were operated for Delta, approximately 20.4% were operated for American and approximately 8.8% 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 “prorate” arrangements.

For the three months ended March 31, 2024, our capacity purchase revenue represented approximately 87.0% of our total flying agreement revenue and our prorate and SWC revenue, combined, represented approximately 13.0% of our total flying agreements revenue.

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.

As of June 30, 2024, approximately 43.6% of our aircraft in scheduled service or under contract were operated for United, approximately 28.4% were operated for Delta, approximately 19.2% were operated for American and approximately 8.8% were operated for Alaska.

For the six months ended June 30, 2024, our capacity purchase revenue represented approximately 87.1% of our total flying agreement revenue and our prorate and SWC revenue, combined, represented approximately 12.9% 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.

We control scheduling, pricing and seat inventories on certain prorate routes, and we share passenger fares with our major airline partners according to prorate formulas.

We are also responsible for the operating costs of the prorate flights, including fuel and airport costs.

First Quarter Summary

We had total operating revenues of $803.6 million for the three months ended March 31, 2024, a 16.2% increase compared to total operating revenues of $691.8 million for the three months ended March 31, 2023.

We had net income of $60.3 million, or $1.45 per diluted share, for the three months ended March 31, 2024, compared to net loss of $22.1 million, or $0.45 loss per share, for the three months ended March 31, 2023.

The significant items affecting our revenue and operating expenses during the three months ended March 31, 2024, are outlined below:

Second Quarter Summary

We had total operating revenues of $867.1 million for the three months ended June 30, 2024, a 19.5% increase compared to total operating revenues of $725.6 million for the three months ended June 30, 2023.

We had net income of $75.6 million, or $1.82 per diluted share, for the three months ended June 30, 2024, compared to net income of $15.4 million, or $0.35 per diluted share, for the three months ended June 30, 2023.

The significant items affecting our revenue and operating expenses during the three months ended June 30, 2024, are outlined below:

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 491 as of March 31, 2023 to 475 as of March 31, 2024;

and the number of block hours increased from 276,241 for the three months ended March 31, 2023 to 289,801 for the three months ended March 31, 2024, or by 4.9%, due to an increase in scheduled daily utilization of our aircraft.

Our capacity purchase revenue increased $90.7 million, or 15.5%, from the three months ended March 31, 2023 to the three months ended March 31, 2024, primarily as a result of an increase in completed block hours for the comparable periods and recognizing previously deferred revenue for the three months ended March 31, 2024, compared to deferring revenue for the three months ended March 31, 2023.

As a result of a higher number of passengers carried on our prorate routes and an increase in the number of prorate and charter flights operated year-over-year, our prorate and SWC revenue increased $23.7 million, or 30.7%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

The number of aircraft we have in scheduled service or under contract pursuant to our code-share agreements decreased from 492 as of June 30, 2023 to 475 as of June 30, 2024;

and the number of block hours increased from 282,617 for the three months ended June 30, 2023 to 317,462 for the three months ended June 30, 2024, or by 12.3%, due to an increase in scheduled daily utilization of our aircraft.

Our capacity purchase revenue increased $112.9 million, or 18.3%, from the three months ended June 30, 2023 to the three months ended June 30, 2024, primarily as a result of an increase in completed block hours for the comparable periods and recognizing previously deferred revenue for the three months ended June 30, 2024, compared to deferring revenue for the three months ended June 30, 2023.

As a result of a higher number of passengers carried on our prorate routes and an increase in the number of prorate and charter flights operated year-over-year, our prorate and SWC revenue increased $24.8 million, or 30.2%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

Operating Expenses

Our total operating expenses increased $7.6 million, or 1.1%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

The increase in operating expenses was primarily due to an increase in our direct operating expenses associated with the increase in the number of flights we operated, partially offset by lower aircraft rent expense from early lease buyouts we executed during 2023.

Departures increased from 160,623 for the three months ended March 31, 2023 to 169,432 for the three months ended March 31, 2024, or by 5.5%.

Our total operating expenses increased $53.7 million, or 7.7%, for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

The increase in operating expenses was primarily due to an increase in our direct operating expenses associated with the increase in the number of flights we operated.

Departures increased from 173,837 for the three months ended June 30, 2023 to 189,325 for the three months ended June 30, 2024, or by 8.9%.

Additional details regarding the increase in our operating expenses are described in the section of this Report entitled “Results of Operations.”

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Aircraft in Service or Under Contract

March 31, 2024

June 30, 2024

December 31, 2023

March 31, 2023

June 30, 2023

Critical Accounting Policies and Estimates

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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 three months ended March 31, 2024.

There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2024.

Recent Accounting Pronounceme nts

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Results of Operations

Three Months Ended March 31, 2024 and 2023

Three Months Ended June 30, 2024 and 2023

Operational Statistics

The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below.

The increase in block hours, departures and passengers carried during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to an increase in the number of available captains during the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

For the three months ended March 31,

The increase in block hours, departures and passengers carried during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily due to an increase in the number of available captains during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, which allowed for a higher scheduled utilization of our aircraft.

For the three months ended June 30,

Block hours by aircraft type:

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The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):

For the three months ended March 31,

For the three months ended June 30,

Flying agreements

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We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands):

For the three months ended March 31,

For the three months ended June 30,

Capacity purchase agreements flight operations revenue

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Flying agreements revenue

The increase in “Capacity purchase agreements flight operations revenue” of $75.2 million, or 16.0%, was primarily due to a 4.9% increase in block hour production and a decrease in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

The increase in “Capacity purchase agreements flight operations revenue” of $96.0 million, or 19.2%, was primarily due to a 12.3% increase in block hour production and a decrease in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Under our capacity purchase agreements, we are paid a fixed amount per month per aircraft over the contract term.

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Beginning January 1, 2024, certain scheduled fixed monthly payments under our capacity purchase agreements transitioned to variable payments, which are calculated at a rate per block hour.

Based on the number of completed block hours during the three months ended March 31, 2024, we recognized $0.4 million of previously deferred revenue, net of unbilled revenue, related to the non-lease fixed monthly payments we received associated with our flight operations revenues.

For the three months ended March 31, 2023, we deferred recognizing $42.6 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues.

Based on the number of completed block hours during the three months ended June 30, 2024, we recognized $5.0 million of previously deferred revenue, net of unbilled revenue, related to the non-lease fixed monthly payments we received associated with our flight operations revenues.

For the three months ended June 30, 2023, we deferred recognizing $40.7 million of 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.

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

W e recognized $0.5 million of previously deferred lease revenue during the three months ended March 31, 2024, using the straight-line basis for fixed monthly lease payments, whereas we deferred recognizing lease revenue on $20.6 million during the three months ended March 31, 2023.

W e recognized $0.5 million of previously deferred lease revenue during the three months ended June 30, 2024, using the straight-line basis for fixed monthly lease payments, whereas we deferred recognizing lease revenue on $19.5 million during the three months ended June 30, 2023.

The deferred revenue balance applicable to each contract will be recorded as revenue over the term of each respective contract.

For clarity, in total we recognized $0.9 million of previously deferred revenue, net of unbilled revenue, during the three months ended March 31, 2024, compared to deferring revenue, net of unbilled revenue, of $63.2 million during the three months ended March 31, 2023.

Our total deferred revenue balance, net of unbilled revenue, was $366.4 million as of March 31, 2024, compared to total deferred revenue, net of unbilled revenue, of $367.3 million as of December 31, 2023.

The increase in prorate agreements and SWC revenue of $23.7 million, or 30.7%, was primarily due to an increase in prorate passengers and passenger revenue we received on routes we operated under our prorate agreements during the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Additionally, a portion of the increase is attributed to SWC revenue during the three months ended March 31, 2024, as SWC began operations in May 2023.

The decrease in lease, airport services and other revenues of $2.7 million, or 9.5%, was primarily due to a decrease in airport service revenue driven by a decrease in the number of locations where we were contracted to provide airport customer service during the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

For clarity, in total we recognized $5.5 million of previously deferred revenue, net of unbilled revenue, during the three months ended June 30, 2024, compared to deferring revenue, net of unbilled revenue, of $60.2 million during the three months ended June 30, 2023.

Our total deferred revenue balance, net of unbilled revenue, was $360.9 million as of June 30, 2024, compared to total deferred revenue, net of unbilled revenue, of $367.3 million as of December 31, 2023.

The increase in prorate agreements and SWC revenue of $24.8 million, or 30.2%, was primarily due to an increase in prorate passengers and passenger revenue we received on routes we operated under our prorate agreements during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Additionally, a portion of the increase is attributed to SWC revenue during the three months ended June 30, 2024, as SWC began operations in May 2023.

The increase in lease, airport services and other revenues of $3.7 million, or 14.7%, was primarily due to an increase in lease rates for leases to third parties during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

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 March 31,

For the three months ended June 30,

Salaries, wages and benefits

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Salaries, wages and benefits.

The $15.8 million, or 4.7%, increase in salaries, wages and benefits was primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, and from pay increases to several labor groups since March 31, 2023.

The $32.6 million, or 10.1%, increase in salaries, wages and benefits was primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Aircraft maintenance, materials and repairs.

The $3.2 million, or 2.2%, increase in aircraft maintenance expense was primarily due to higher flight volume, which increased maintenance activity, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023 .

The $20.8 million, or 12.8%, increase in aircraft maintenance expense was primarily due to higher flight volume, which increased maintenance activity, for the three months ended June 30, 2024, compared to the three months ended June 30, 2023 .

Depreciation and amortization.

The $1.7 million, or 1.8%, increase in depreciation and amortization expense was primarily due to an increase in depreciation expense due to the acquisition of two new E175 aircraft and spare engines since March 31, 2023.

The $0.4 million, or 0.4%, decrease in depreciation and amortization expense was primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since June 30, 2023, offset by an increase in depreciation expense due to the acquisition of two new E175 aircraft and spare engines since June 30, 2023.

Aircraft fuel.

The $0.2 million, or 1.0%, increase in fuel cost was primarily due to an increase in the number of flights we operated under our prorate arrangements and SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $4.01 for the three months ended March 31, 2023, to $3.51 for the three months ended March 31, 2024.

The $3.0 million, or 16.7%, increase in fuel cost was primarily due to an increase in the number of flights we operated under our prorate agreements and SWC and the corresponding increase in gallons of fuel we purchased combined with an increase in our average fuel cost per gallon from $3.30 for the three months ended June 30, 2023, to $3.32 for the three months ended June 30, 2024.

We purchase and incur expense for all fuel on flights operated under our prorate agreements and SWC.

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The following table summarizes the gallons of fuel we purchased under our prorate agreements and SWC, for the periods indicated:

For the three months ended March 31,

For the three months ended June 30,

(in thousands)

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For clarity, our employee airport customer service labor costs are reflected in salaries, wages and benefits and customer service labor costs we outsource to third parties are included in airport-related expenses.

The $2.6 million, or 14.2%, increase in airport-related expenses for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to an increase in subcontracted airport services and landing fees as a result of an increase in the number of flights we operated under our prorate agreements.

The $0.6 million, or 3.4%, increase in airport-related expenses for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily due to an increase in subcontracted airport services and landing fees as a result of an increase in the number of flights we operated under our prorate agreements.

Aircraft rentals.

The $18.3 million, or 93.5%, decrease in aircraft rentals was primarily related to a decrease in our leased aircraft since the three months ended March 31, 2023.

The $1.1 million, or 46.0%, decrease in aircraft rentals was primarily related to a decrease in our leased aircraft since the three months ended June 30, 2023.

During 2023, we acquired 26 CRJ700 aircraft, eight CRJ200 aircraft and one CRJ900 aircraft under early lease buyouts.

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Other operating expenses primarily consist of property taxes, hull and liability insurance, simulator costs, crew per diem and crew hotel costs.

The $2.3 million, or 3.5%, increase was primarily related to an increase in other operating costs as a result of the higher number of flights we operated during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, such as crew per diem and crew hotel costs.

The $1.8 million, or 2.4%, decrease was primarily related to the timing of training events and other non-direct operating expenses for the three months ended June 30, 2023, compared to the three months ended June 30, 2024, offset by an increase in other operating costs as a result of the higher number of flights we operated during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, such as crew per diem and crew hotel costs.

Summary of interest expense, interest income, other income (loss), net and provision for income taxes

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The $4.8 million, or 14.1%, decrease in interest expense was primarily related to a decrease in outstanding debt.

At March 31, 2024 we had $2.9 billion of outstanding debt, compared to $3.3 billion at March 31, 2023.

At June 30, 2024 we had $2.8 billion of outstanding debt, compared to $3.2 billion at June 30, 2023.

Interest income.

Interest income increased $1.6 million, from $10.0 million for the three months ended March 31, 2023, to $11.6 million for the three months ended March 31, 2024.

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 March 31, 2024, compared to the three months ended March 31, 2023.

Interest income increased $1.5 million, from $10.5 million for the three months ended June 30, 2023, to $12.0 million for the three months ended June 30, 2024.

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 June 30, 2024, compared to the three months ended June 30, 2023.

Other income (loss), net.

Other income (loss), net decreased $3.3 million during the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Other income (loss), net primarily consists of the unrealized gains on our investments in other companies, income related to our equity method investments and gains or losses on the sale of assets.

The decrease in other income (loss), net was primarily a result of a decrease in the fair value of our investments in other companies for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Other income (loss), net decreased $9.5 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Other income (loss), net primarily consists of the unrealized and realized gains and losses on our investments in other companies, income or loss related to our equity method investments and gains or losses on the sale of assets.

The decrease in other income (loss), net was primarily a result of a decrease in the fair value of our investments in other companies for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Provision (benefit) for income taxes.

For the three months ended March 31, 2024 and 2023, our effective income tax rates were 24.8% and 15.5%, 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 benefit or expense on employee equity transactions.

The increase in the effective tax rate primarily related to the impact of non-deductible expenses relative to the pre-tax earnings for the three months ended March 31, 2024, compared to pre-tax loss for the three months ended March 31, 2023, and the impact of a discrete tax benefit from excess tax deductions generated from employee equity transactions that occurred during the three months ended March 31, 2024, compared to a discrete tax expense from excess tax deductions generated from employee equity transactions that occurred during the three months ended March 31, 2023.

Primarily due to the factors described above, we generated net income of $60.3 million, or $1.45 per diluted share, for the three months ended March 31, 2024, compared to a net loss of $22.1 million, or $0.45 loss per share, for the three months ended March 31, 2023.

For the three months ended June 30, 2024 and 2023, our effective income tax rates were 26.0% and 12.6%, 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 increase in the effective tax rate primarily related to the impact of non-deductible expenses relative to the pre-tax earnings for the three months ended June 30, 2024, compared to pre-tax loss for the three months ended June 30, 2023 .

Primarily due to the factors described above, we generated net income of $75.6 million, or $1.82 per diluted share, for the three months ended June 30, 2024, compared to net income of $15.4 million, or $0.35 per diluted share, for the three months ended June 30, 2023.

Six Months Ended June 30, 2024 and 2023

Operational Statistics

The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below.

The increase in block hours, departures and passengers carried during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to an increase in the number of available captains during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

For the six months ended June 30,

Block hours by aircraft type:

Total block hours

Passengers carried

Passenger load factor

Average passenger trip length (miles)

Operating Revenues

The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):

For the six months ended June 30,

Flying agreements

Lease, airport services and other

Total operating revenues

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 and on-demand charter flights.

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 six months ended June 30,

Capacity purchase agreements flight operations revenue

Capacity purchase agreements aircraft lease revenue

Prorate agreements and SWC revenue

Flying agreements revenue

The increase in “Capacity purchase agreements flight operations revenue” of $171.2 million, or 17.7%, was primarily due to a 8.7% increase in block hour production and a decrease in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

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 related to operating the 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.

Beginning January 1, 2024, certain scheduled fixed monthly payments under our capacity purchase agreements transitioned to variable payments, which are calculated at a rate per block hour.

Based on the number of completed block hours during the six months ended June 30, 2024, we recognized $5.4 million of previously deferred revenue, net of unbilled revenue, related to the non-lease fixed monthly payments we received associated with our flight operations revenues.

For the six months ended June 30, 2023, we deferred recognizing $83.4 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues.

The increase in “Capacity purchase agreements aircraft lease revenue” of $32.4 million, or 13.7%, was primarily due to an increase in variable lease revenue as a result of certain scheduled fixed monthly lease payments that transitioned beginning January 1, 2024 to variable payments under our capacity purchase agreements.

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, including fixed monthly payments and variable payments.

W e recognized $1.0 million of previously deferred lease revenue during the three and six months ended June 30, 2024, using the straight-line basis for fixed monthly lease payments, whereas we deferred recognizing lease revenue on $40.0 million during the six months ended June 30, 2023.

The deferred revenue balance applicable to each contract will be recorded as revenue over the term of each respective contract.

For clarity, in total we recognized $6.4 million of previously deferred revenue, net of unbilled revenue, during the six months ended June 30, 2024, compared to deferring revenue, net of unbilled revenue, of $123.4 million during the six months ended June 30, 2023.

The increase in prorate agreements and SWC revenue of $48.6 million, or 30.5%, was primarily due to an increase in prorate passengers and passenger revenue we received on routes we operated under our prorate agreements during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Additionally, a portion of the increase is attributed to SWC revenue during the three months ended June 30, 2024, as SWC began operations in May 2023.

The increase in lease, airport services and other revenues of $1.0 million, or 1.9%, was primarily due to an increase in lease rates for leases to third parties during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Operating Expenses

Individual expense components attributable to our operations are set forth in the following table (dollar amounts in thousands):

For the six months ended June 30,

Salaries, wages and benefits

Aircraft maintenance, materials and repairs

Depreciation and amortization

Aircraft fuel

Airport-related expenses

Aircraft rentals

Other operating expenses

Total operating expenses

Salaries, wages and benefits.

The $48.4 million, or 7.4%, increase in salaries, wages and benefits was primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Aircraft maintenance, materials and repairs.

The $24.0 million, or 7.9%, increase in aircraft maintenance expense was primarily due to higher flight volume, which increased maintenance activity, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023 .

Depreciation and amortization.

The $1.4 million, or 0.7%, increase in depreciation and amortization expense was primarily due to an increase in depreciation expense due to the acquisition of two new E175 aircraft and spare engines since June 30, 2023.

Aircraft fuel.

The $3.2 million, or 8.3%, increase in fuel cost was primarily due to an increase in the number of flights we operated under our prorate agreements and SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $3.65 for the six months ended June 30, 2023, to $3.42 for the six months ended June 30, 2024.

We purchase and incur expense for all fuel on flights operated under our prorate agreements and SWC.

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 and SWC, for the periods indicated:

For the six months ended June 30,

(in thousands)

Fuel gallons purchased

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 $3.2 million, or 9.0%, increase in airport-related expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to an increase in subcontracted airport services and landing fees as a result of an increase in the number of flights we operated under our prorate agreements.

Aircraft rentals.

The $19.4 million, or 88.2%, decrease in aircraft rentals was primarily related to a decrease in our leased aircraft since the six months ended June 30, 2023.

During 2023, we acquired 26 CRJ700 aircraft, eight CRJ200 aircraft and one CRJ900 aircraft under early lease buyouts.

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 $0.5 million, or 0.4%, increase was primarily related to an increase in other operating costs as a result of the higher number of flights we operated during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, such as crew per diem and crew hotel costs, offset by the timing of training events and other non-direct operating expenses for the six months ended June 30, 2023, compared to the six months ended June 30, 2024.

Summary of interest expense, interest income, other income (loss), net and provision for income taxes

Interest Expense.

The $8.5 million, or 12.7%, decrease in interest expense was primarily related to a decrease in outstanding debt.

At June 30, 2024 we had $2.8 billion of outstanding debt, compared to $3.2 billion at June 30, 2023.

Interest income.

Interest income increased $3.1 million, from $20.5 million for the six months ended June 30, 2023, to $23.6 million for the six months ended June 30, 2024.

The increase in interest income was primarily related to an increase in average interest rates attributed to our marketable securities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Other income (loss), net.

Other income (loss), net decreased $12.9 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

The decrease in other income (loss), net was primarily a result of a decrease in the fair value of our investments in other companies for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Provision (benefit) for income taxes.

For the six months ended June 30, 2024 and 2023, our effective income tax rates were 25.5% and 21.6%, 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 benefit or expense on employee equity transactions.

The increase in the effective tax rate primarily related to the impact of non-deductible expenses relative to the pre-tax earnings for the six months ended June 30, 2024, compared to pre-tax loss for the six months ended June 30, 2023, and the impact of a discrete tax benefit from excess tax deductions

generated from employee equity transactions that occurred during the six months ended June 30, 2024, compared to a discrete tax expense from excess tax deductions generated from employee equity transactions that occurred during the six months ended June 30, 2023.

Primarily due to the factors described above, we generated net income of $135.9 million, or $3.28 per diluted share, for the six months ended June 30, 2024, compared to a net loss of $6.7 million, or $0.14 loss per share, for the six months ended June 30, 2023.

Our Business Segments

Three Months Ended March 31, 2024 and 2023

For the three months ended March 31, 2024, we had two reporting segments, which were the basis of our internal financial reporting:

Three Months Ended June 30, 2024 and 2023

For the three months ended June 30, 2024, we had two reportable segments, which were the basis of our internal financial reporting:

(1) the operations of SkyWest Airlines and SWC and (2) SkyWest Leasing activities.

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 March 31,

For the three months ended June 30,

(dollar amounts in thousands)

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Other Income (Loss), net

Consolidated Income Before Taxes

(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 Profit (Loss).

SkyWest Airlines and SWC segment profit was $30.4 million for the three months ended June 30, 2024, compared to a segment loss of $42.7 million for the three months ended June 30, 2023.

SkyWest Airlines and SWC block hour production increased to 317,462, or 12.3%, for the three months ended June 30, 2024, from 282,617 for the three months ended June 30, 2023, primarily due to improvements in the number of available captains, which allowed for a higher scheduled utilization of our aircraft.

Significant items contributing to the SkyWest Airlines and SWC segment profit for the three months ended June 30, 2024 are set forth below.

SkyWest Airlines and SWC operating revenues increased $125.3 million, or 21.4%, from the three months ended June 30, 2023, to the three months ended June 30, 2024.

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 June 30, 2024, SkyWest Airlines recognized $5.0 million of previously

deferred revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues, compared to deferring $40.7 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the three months ended June 30, 2023.

Additionally, the increase in SkyWest Airlines and SWC operating revenues was attributed to an increase in block hour production during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

SkyWest Airlines and SWC operating expenses and interest expense increased $52.2 million, or 8.3%, from the three months ended June 30, 2023, to the three months ended June 30, 2024, due to the following primary factors:

● SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $32.6 million, or 10.1%, primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

● SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense increased $17.4 million, or 11.0%, primarily due to higher flight volume, which increased the maintenance activity, for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

● SkyWest Airlines and SWC’s depreciation and amortization expense decreased by $1.0 million, or 2.5%, primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since June 30, 2023.

● SkyWest Airlines and SWC’s fuel expense increased $3.0 million, or 16.7%, due to an increase in the number of flights we operated under our prorate agreements and SWC and the corresponding increase in gallons of fuel we purchased combined with an increase in our average fuel cost per gallon from $3.30 for the three months ended June 30, 2023, to $3.32 for the three months ended June 30, 2024 .

● SkyWest Airlines and SWC’s remaining airline expense increased $0.2 million, or 0.2%, primarily related to an increase in other operating costs as a result of the higher number of flights we operated during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, such as crew per diem and crew hotel costs, offset by the timing of training events and other non-direct operating expenses for the three months ended June 30, 2023, compared to the three months ended June 30, 2024.

SkyWest Leasing Segment Profit.

SkyWest Leasing profit increased $19.4 million, or 47.5%, during the three months ended June 30, 2024, compared to the three months ended June 30, 2023 .

For the three months ended June 30, 2024, SkyWest Leasing recognized $0.5 million of previously deferred lease revenue, compared to deferring $19.5 million of lease revenue on the fixed monthly lease payments received for the three months ended June 30, 2023, under the straight-line basis.

Additionally, SkyWest Leasing profit increased due to additional lease revenue from the E175 aircraft placed under contract since June 30, 2023, and a decrease in interest expense as a result of a lower outstanding debt balance for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Six Months Ended June 30, 2024 and 2023

For the six months ended June 30, 2024, we had two reportable segments, which were the basis of our internal financial reporting:

(1) the operations of SkyWest Airlines and SWC and (2) SkyWest Leasing activities.

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 six months ended June 30,

(dollar amounts in thousands)

Operating Revenues:

SkyWest Airlines and SWC

SkyWest Leasing

Total Operating Revenues

Operating Expenses and Interest Expense:

SkyWest Airlines and SWC

SkyWest Leasing

Total Operating Expenses and Interest Expense (1)

Segment profit (loss):

SkyWest Airlines and SWC

SkyWest Leasing

Total Segment Profit (Loss)

Interest Income

Other Income (Loss), net

Consolidated Income (Loss) Before Taxes

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SkyWest Airlines and SWC Segment Profit (Loss).

SkyWest Airlines and SWC segment profit was $2.0 million for the three months ended March 31, 2024, compared to a segment loss of $69.3 million for the three months ended March 31, 2023.

SkyWest Airlines and SWC block hour production increased to 289,801, or 4.9%, for the three months ended March 31, 2024, from 276,241 for the three months ended March 31, 2023, primarily due to improvements in the number of available captains.

Significant items contributing to the SkyWest Airlines and SWC segment profit for the three months ended March 31, 2024 are set forth below.

SkyWest Airlines and SWC operating revenues increased $78.6 million, or 13.8%, from the three months ended March 31, 2023, to the three months ended March 31, 2024.

SkyWest Airlines and SWC segment profit was $32.4 million for the six months ended June 30, 2024, compared to a segment loss of $112.0 million for the six months ended June 30, 2023.

SkyWest Airlines and SWC block hour production increased to 607,263, or 8.7%, for the six months ended June 30, 2024, from 558,859 for the six months ended June 30, 2023, primarily due to improvements in the number of available captains, which allowed for a higher scheduled utilization of our aircraft.

Significant items contributing to the SkyWest Airlines and SWC segment profit for the six months ended June 30, 2024 are set forth below.

SkyWest Airlines and SWC operating revenues increased $203.9 million, or 17.7%, from the six months ended June 30, 2023, to the six months ended June 30, 2024.

During the three months ended March 31, 2024, SkyWest Airlines recognized $0.4 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues, compared to deferring $42.6 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the three months ended March 31, 2023.

Additionally, the increase in SkyWest Airlines and SWC operating revenues was attributed to an increase in block hour production during the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

SkyWest Airlines and SWC operating expenses and interest expense increased $7.4 million, or 1.2%, from the three months ended March 31, 2023, to the three months ended March 31, 2024, due to the following primary factors:

● SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $15.8 million, or 4.7%, primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

● SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense increased $3.3 million, or 2.4%, primarily due to higher flight volume, which increased the maintenance activity, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

● SkyWest Airlines and SWC’s depreciation and amortization expense decreased by $2.1 million, or 5.6%, primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since March 31, 2023.

● SkyWest Airlines and SWC’s fuel expense increased $0.2 million, or 1.0%, due to an increase in the number of flights we operated under our prorate arrangements and SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $4.01 for the three months ended March 31, 2023, to $3.51 for the three months ended March 31, 2024 .

● SkyWest Airlines and SWC’s remaining airline expense decreased $9.8 million, or 9.2%, primarily related to a decrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft in 2023.

During the six months ended June 30, 2024, SkyWest Airlines recognized $5.4 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues, compared to deferring $83.4 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the six months ended June 30, 2023.

Additionally, the increase in SkyWest Airlines and SWC operating revenues was attributed to an increase in block hour production during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

SkyWest Airlines and SWC operating expenses and interest expense increased $59.6 million, or 4.7%, from the six months ended June 30, 2023, to the six months ended June 30, 2024, due to the following primary factors:

● SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $48.4 million, or 7.4%, primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

● SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense increased $20.7 million, or 7.0%, primarily due to higher flight volume, which increased the maintenance activity, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

● SkyWest Airlines and SWC’s depreciation and amortization expense decreased by $3.1 million, or 4.1%, primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since June 30, 2023.

● SkyWest Airlines and SWC’s fuel expense increased $3.2 million, or 8.3%, due to an increase in the number of flights we operated under our prorate agreements and SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $3.65 for the six months ended June 30, 2023, to $3.42 for the six months ended June 30, 2024 .

● SkyWest Airlines and SWC’s remaining airline expense decreased $9.6 million, or 4.8%, 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 the higher number of flights we operated during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, such as crew per diem and crew hotel costs.

SkyWest Leasing Segment Profit.

SkyWest Leasing profit increased $36.8 million, or 118.7%, during the three months ended March 31, 2024, compared to the three months ended March 31, 2023 .

For the three months ended March 31, 2023, SkyWest Leasing deferred recognizing lease revenue under the straight-line basis on $20.6 million of the fixed monthly lease payments received, compared to recognizing $0.5 million of previously deferred lease revenue for the three months ended March 31, 2024.

Additionally, SkyWest Leasing profit increased due to additional lease revenue from the E175 aircraft placed under contract since March 31, 2023, a decrease in interest expense as a result of a lower outstanding debt balance for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, and a gain related to reclassifying assets held for sale as held and used during the three months ended March 31, 2024.

SkyWest Leasing profit increased $56.1 million, or 78.2%, during the six months ended June 30, 2024, compared to the six months ended June 30, 2023 .

For the six months ended June 30, 2024, SkyWest Leasing recognized $1.0 million of previously deferred lease revenue, compared to deferring $40.0 million of lease revenue on the fixed monthly lease payments received for the six months ended June 30, 2023, under the straight-line basis.

Additionally, SkyWest Leasing profit increased due to additional lease revenue from the E175 aircraft placed under contract since June 30, 2023, a decrease in interest expense as a result of a lower outstanding debt balance for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and a gain related to reclassifying assets held for sale as held and used during the six months ended June 30, 2024.

Liquidity and Capital Resources

As of March 31, 2024, we had $821.2 million in cash and cash equivalents and marketable securities.

As of March 31, 2024, we had $75.1 million available for borrowings under our line of credit.

Given our available liquidity as of March 31, 2024, 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 $835.2 million as of December 31, 2023 to $821.2 million as of March 31, 2024, or by $14.1 million.

At March 31, 2024, our total capital mix was 47.5% equity and 52.5% long-term debt, compared to 45.2% equity and 54.8% long-term debt at December 31, 2023.

During the three months ended March 31, 2024, we repurchased 136,261 shares of our common stock for $8.7 million under share repurchase programs authorized by our Board of Directors.

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

We had no restricted cash as of March 31, 2024, and December 31, 2023.

As of June 30, 2024, we had $834.3 million in cash and cash equivalents and marketable securities.

As of June 30, 2024, we had $75.1 million available for borrowings under our line of credit.

Given our available liquidity as of June 30, 2024, 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 $835.2 million as of December 31, 2023 to $834.3 million as of June 30, 2024, or by $1.0 million.

At June 30, 2024, our total capital mix was 49.4% equity and 50.6% long-term debt, compared to 45.2% equity and 54.8% long-term debt at December 31, 2023.

During the six months ended June 30, 2024, we repurchased 313,381 shares of our common stock for $22.1 million under share repurchase programs authorized by our Board of Directors.

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

We had no restricted cash as of June 30, 2024, and December 31, 2023.

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 three months ended March 31, 2024 and 2023, and our total cash and marketable securities positions as of March 31, 2024, and December 31, 2023 (in thousands):

For the three months ended March 31,

The following table provides a summary of the net cash provided by (used in) our operating, investing and financing activities for the six months ended June 30, 2024 and 2023, and our total cash and marketable securities positions as of June 30, 2024, and December 31, 2023 (in thousands):

For the six months ended June 30,

Net cash provided by operating activities

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Cash Flows provided by Operating Activities

Our cash flows provided by operating activities was $157.6 million for the three months ended March 31, 2024, compared to $150.2 million for the three months ended March 31, 2023.

Our cash flows provided by operating activities was $323.0 million for the six months ended June 30, 2024, compared to $333.0 million for the six months ended June 30, 2023.

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 three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to the increase in net income, adjusted for non-cash items, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, offset by the timing of cash payments on our current liability accounts for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

The decrease in our cash flow from operations for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to the timing of cash payments on our current liability accounts and a decrease in cash received in excess of revenue recognized for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, offset by the increase in net income, adjusted for non-cash items, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Cash Flows provided by (used in) Investing Activities

Our cash flows used in investing activities was $0.6 million for the three months ended March 31, 2024, compared to cash flows provided by investing activities of $3.0 million for the three months ended March 31, 2023.

Our cash flows used in investing activities was $76.0 million for the six months ended June 30, 2024, compared to cash flows provided by investing activities of $70.0 million for the six months ended June 30, 2023.

Our investing cash flows are typically impacted by various factors including our capital expenditures, such as the acquisition of aircraft and spare engines;

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and timing of cash payments and cash receipts attributed to our various long-term asset and long-term liability accounts.

The increase in our cash used in investing activities for the three months ended March 31, 2024, was primarily due to cash used to acquire other long-term assets , including our investment in Contour, and a decrease in cash provided by the sale of marketable securities, net of purchases of marketable securities, of $38.8 million from the three months ended March 31, 2023 .

C ash used for the acquisition of property and equipment decreased $65.5 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to the early lease buyouts we executed during the three months ended March 31, 2023.

Excluding the purchase and sale of marketable securities, which results in the transfer of dollars between our investments in marketable securities and our cash accounts, our cash used in investing activities decreased from $129.3 million for the six months ended June 30, 2024, to $69.6 million for the six months ended June 30, 2023.

The decrease in cash used in investing activities was primarily due to a decrease of $75.7 million in the acquisition of property and equipment for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due to the early lease buyouts we executed during the six months ended June 30, 2023.

This was offset by an increase in our cash used to acquire other long-term assets , including our investment in Contour, fo r the six months ended June 30, 2024.

Cash Flows provided by (used in) Financing Activities

Our cash flows used in financing activities was $125.4 million for the three months ended March 31, 2024, compared to cash used in financing activities of $181.7 million for the three months ended March 31, 2023.

Our cash flows used in financing activities was $253.5 million for the six months ended June 30, 2024, compared to cash used in financing activities of $391.6 million for the six months ended June 30, 2023.

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 $56.3 million decrease in cash used for financing activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to a decrease of $91.3 million in cash used to purchase treasury stock, offset by a decrease of $25.0 million in proceeds from the issuance of long-term debt during the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

The $138.1 million decrease in cash used for financing activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to a decrease of $173.8 million in cash used to purchase treasury stock, offset by a decrease of $25.0 million in proceeds from the issuance of long-term debt during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Significant Commitments and Obligations

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Purchase Commitments and Options

As of March 31, 2024, we had a firm purchase commitment for 21 new E175 aircraft from Embraer with delivery dates anticipated into 2026.

As of June 30, 2024, we had a firm purchase commitment for 21 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.

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We also have long-term lease obligations, primarily relating to our facilities, aircraft and engines.

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 five years to six years as of March 31, 2024.

Future minimum lease payments due under all long-term operating leases were approximately $128.2 million at March 31, 2024.

Assuming a 6.2% 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 $85.9 million at March 31, 2024.

Future minimum lease payments due under all long-term operating leases were approximately $123.4 million at June 30, 2024.

Long-term Debt Obligations

As of March 31, 2024, we had $2.9 billion of 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.

As of June 30, 2024, we had $2.8 billion of 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.

Department of the Treasury.

The average effective interest rate on our debt was approximately 4.1% at March 31, 2024.

The average effective interest rate on our debt was approximately 4.1% at June 30, 2024.

Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning or leasing the aircraft on a monthly basis.

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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 2. Management’s Discussion and Analysis