SKYWEST INC 10-Q

Item 1. Financial Statements ​ SKYWEST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) ​ ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ 2024 2023 CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 177,609 ​ $ 148,277 Marketable securities ​ 658,433 ​ 686,946 Receivables, net ​ 111,199 ​ 82,854 Inventories, net ​ 136,480 ​ 127,114 Other current assets ​ 50,496 ​ 86,705 Total current assets ​ 1,134,217 ​ 1,131,896 ​ ​ ​ ​ ​ ​ ​ PROPERTY AND EQUIPMENT: ​ ​ ​ ​ ​ ​ Aircraft and rotable spares ​ 8,462,449 ​ 8,323,107 Deposits on aircraft ​ 71,457 ​ 77,282 Buildings and ground equipment ​ 343,870 ​ 282,398 Total property and equipment, gross ​ 8,877,776 ​ 8,682,787 Less-accumulated depreciation and amortization ​ ( 3,460,508 ) ​ ( 3,199,820 ) Total property and equipment, net ​ 5,417,268 ​ 5,482,967 ​ ​ ​ ​ ​ ​ ​ OTHER ASSETS: ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets ​ ​ 85,303 ​ ​ 86,727 Long-term receivables and other assets ​ 319,812 ​ 324,703 Total other assets ​ 405,115 ​ 411,430 Total assets ​ $ 6,956,600 ​ $ 7,026,293 ​ See accompanying notes to condensed consolidated financial statements. ​ 3 Table of Contents SKYWEST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ 2024 2023 CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ Current maturities of long-term debt ​ $ 496,789 ​ $ 443,869 Accounts payable ​ 460,276 ​ 470,251 Accrued salaries, wages and benefits ​ 211,149 ​ 194,881 Current maturities of operating lease liabilities ​ 18,496 ​ 19,335 Taxes other than income taxes ​ 26,660 ​ 26,077 Other current liabilities ​ 100,804 ​ 99,879 Total current liabilities ​ 1,314,174 ​ 1,254,292 ​ ​ ​ ​ ​ ​ ​ LONG-TERM DEBT, net of current maturities ​ 2,196,548 ​ 2,562,183 ​ ​ ​ ​ ​ ​ ​ DEFERRED INCOME TAXES PAYABLE ​ 751,983 ​ 687,600 ​ ​ ​ ​ ​ ​ ​ NONCURRENT OPERATING LEASE LIABILITIES ​ 66,807 ​ 67,392 ​ ​ ​ ​ ​ ​ ​ OTHER LONG-TERM LIABILITIES ​ 315,591 ​ 341,324 ​ ​ ​ ​ ​ ​ ​ COMMITMENTS AND CONTINGENCIES (Note 7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ STOCKHOLDERS’ EQUITY: ​ ​ ​ ​ ​ ​ Preferred stock, 5,000,000 shares authorized; none issued ​ — ​ — Common stock, no par value, 120,000,000 shares authorized; 83,601,235 and 82,840,372 shares issued as of September 30, 2024, and December 31, 2023, respectively ​ 772,320 ​ 754,362 Retained earnings ​ 2,496,796 ​ 2,271,211 Treasury stock, at cost, 43,262,997 and 42,615,347 shares as of September 30, 2024, and December 31, 2023, respectively ​ ( 957,994 ) ​ ( 912,396 ) Accumulated other comprehensive income ​ ​ 375 ​ ​ 325 Total stockholders’ equity ​ 2,311,497 ​ 2,113,502 Total liabilities and stockholders’ equity ​ $ 6,956,600 ​ $ 7,026,293 ​ See accompanying notes to condensed consolidated financial statements. ​ 4 Table of Contents SKYWEST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Dollars and Shares in Thousands, Except per Share Amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Nine months ended ​ ​ September 30, ​ September 30, ​ 2024 2023 2024 2023 OPERATING REVENUES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Flying agreements ​ $ 883,494 ​ $ 741,898 ​ $ 2,499,953 ​ $ 2,106,130 Lease, airport services and other ​ 29,292 ​ 24,273 ​ 83,565 ​ 77,515 Total operating revenues ​ 912,786 ​ 766,171 ​ 2,583,518 ​ 2,183,645 OPERATING EXPENSES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Salaries, wages and benefits ​ 377,435 ​ 333,017 ​ 1,083,439 ​ 990,659 Aircraft maintenance, materials and repairs ​ 181,652 ​ 178,465 ​ 510,334 ​ 483,182 Depreciation and amortization ​ 96,662 ​ 96,560 ​ 289,346 ​ 287,878 Aircraft fuel ​ 22,724 ​ 23,330 ​ 65,216 ​ 62,573 Airport-related expenses ​ 22,642 ​ 18,398 ​ 61,065 ​ 53,648 Aircraft rentals ​ 1,339 ​ 2,099 ​ 3,925 ​ 24,055 Other operating expenses ​ 78,897 ​ 65,011 ​ 219,612 ​ 205,203 Total operating expenses ​ 781,351 ​ 716,880 ​ 2,232,937 ​ 2,107,198 OPERATING INCOME ​ 131,435 ​ 49,291 ​ 350,581 ​ 76,447 OTHER INCOME (EXPENSE): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ 12,460 ​ 11,234 ​ 36,126 ​ 31,761 Interest expense ​ ( 27,808 ) ​ ( 32,543 ) ​ ( 86,603 ) ​ ( 99,881 ) Other income (loss), net ​ 109 ​ ( 3,631 ) ​ ( 1,567 ) ​ 7,544 Total other expense, net ​ ( 15,239 ) ​ ( 24,940 ) ​ ( 52,044 ) ​ ( 60,576 ) INCOME BEFORE INCOME TAXES ​ 116,196 ​ 24,351 ​ 298,537 ​ 15,871 PROVISION (BENEFIT) FOR INCOME TAXES ​ 26,487 ​ 873 ​ 72,952 ​ ( 955 ) NET INCOME ​ $ 89,709 ​ $ 23,478 ​ $ 225,585 ​ $ 16,826 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ BASIC EARNINGS PER SHARE ​ $ 2.23 ​ $ 0.56 ​ $ 5.61 ​ $ 0.37 DILUTED EARNINGS PER SHARE ​ $ 2.16 ​ $ 0.55 ​ $ 5.44 ​ $ 0.37 Weighted average common shares: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 40,253 ​ ​ 41,826 ​ ​ 40,244 ​ ​ 45,018 Diluted ​ 41,561 ​ ​ 42,580 ​ ​ 41,495 ​ ​ 45,540 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ COMPREHENSIVE INCOME: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 89,709 ​ $ 23,478 ​ $ 225,585 ​ $ 16,826 Net unrealized appreciation on marketable securities, net of taxes ​ 883 ​ 624 ​ 50 ​ 3,618 TOTAL COMPREHENSIVE INCOME ​ $ 90,592 ​ $ 24,102 ​ $ 225,635 ​ $ 20,444 ​ See accompanying notes to condensed consolidated financial statements ​ 5 Table of Contents SKYWEST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (UNAUDITED) (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Common Stock ​ Retained ​ Treasury Stock ​ Comprehensive ​ ​ ​ ​ ​ Shares ​ Amount ​ Earnings ​ Shares ​ Amount ​ Income (Loss) ​ Total Balance at December 31, 2023 82,840 ​ $ 754,362 ​ $ 2,271,211 ( 42,615 ) ​ $ ( 912,396 ) ​ $ 325 ​ $ 2,113,502 Net income — ​ — ​ 60,298 — ​ — ​ — ​ ​ 60,298 Stock awards 269 ​ ​ — ​ — — ​ — ​ — ​ — Employee income tax paid on stock awards ​ — ​ ​ — ​ ​ — ​ ( 117 ) ​ ​ ( 6,930 ) ​ ​ — ​ ​ ( 6,930 ) Sale of common stock under employee stock purchase plan 29 ​ ​ 1,446 ​ — — ​ — ​ — ​ 1,446 Stock based compensation expense — ​ 5,510 ​ — — ​ — ​ — ​ ​ 5,510 Treasury stock purchases ​ — ​ — ​ — ( 136 ) ​ ( 8,750 ) ​ — ​ ​ ( 8,750 ) Net unrealized depreciation on marketable securities, net of tax of $ 56 ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 173 ) ​ ​ ( 173 ) Balance at March 31, 2024 ​ 83,138 ​ $ 761,318 ​ $ 2,331,509 ​ ( 42,868 ) ​ $ ( 928,076 ) ​ $ 152 ​ $ 2,164,903 Net income — ​ — ​ 75,578 — ​ — ​ — ​ ​ 75,578 Stock awards ​ 1 ​ — ​ — — ​ — ​ — ​ ​ — Stock based compensation expense ​ — ​ 4,812 ​ — — ​ — ​ — ​ ​ 4,812 Treasury stock purchases ​ — ​ — ​ — ( 177 ) ​ ( 13,453 ) ​ — ​ ​ ( 13,453 ) Net unrealized depreciation on marketable securities, net of tax of $ 212 ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 660 ) ​ ​ ( 660 ) Balance at June 30, 2024 83,139 ​ $ 766,130 ​ $ 2,407,087 ( 43,045 ) ​ $ ( 941,529 ) ​ $ ( 508 ) ​ $ 2,231,180 Net income — ​ — ​ 89,709 — ​ — ​ — ​ ​ 89,709 Sale of common stock under employee stock purchase plan 18 ​ ​ 1,418 ​ — — ​ — ​ — ​ 1,418 Issuance of common stock upon warrant exercise, net ​ 444 ​ ​ — ​ — — ​ — ​ — ​ — Stock based compensation expense ​ — ​ 4,772 ​ — — ​ — ​ — ​ ​ 4,772 Treasury stock purchases ​ — ​ — ​ — ( 218 ) ​ ( 16,465 ) ​ — ​ ​ ( 16,465 ) Net unrealized appreciation on marketable securities, net of tax of $ 283 ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 883 ​ ​ 883 Balance at September 30, 2024 83,601 ​ $ 772,320 ​ $ 2,496,796 ( 43,263 ) ​ $ ( 957,994 ) ​ $ 375 ​ $ 2,311,497 ​ See accompanying notes to condensed consolidated financial statements. ​ ​ 6 Table of Contents SKYWEST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (UNAUDITED) (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Common Stock ​ Retained ​ Treasury Stock ​ Comprehensive ​ ​ ​ ​ ​ Shares ​ Amount ​ Earnings ​ Shares ​ Amount ​ Loss ​ Total Balance at December 31, 2022 82,593 ​ $ 734,426 ​ $ 2,236,869 ( 31,994 ) ​ $ ( 619,862 ) ​ $ ( 3,802 ) ​ $ 2,347,631 Net loss — ​ — ​ ( 22,071 ) — ​ — ​ — ​ ​ ( 22,071 ) Stock awards 130 ​ ​ 57 ​ — — ​ — ​ — ​ 57 Employee income tax paid on stock awards ​ — ​ ​ — ​ ​ — ​ ( 32 ) ​ ​ ( 585 ) ​ ​ — ​ ​ ( 585 ) Sale of common stock under employee stock purchase plan 78 ​ ​ 1,218 ​ — — ​ — ​ — ​ 1,218 Stock based compensation expense — ​ 4,329 ​ — — ​ — ​ — ​ ​ 4,329 Treasury stock purchases ​ — ​ — ​ — ( 5,067 ) ​ ( 100,001 ) ​ — ​ ​ ( 100,001 ) Net unrealized appreciation on marketable securities, net of tax of $ 476 ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 1,480 ​ ​ 1,480 Balance at March 31, 2023 ​ 82,801 ​ $ 740,030 ​ $ 2,214,798 ​ ( 37,093 ) ​ $ ( 720,448 ) ​ $ ( 2,322 ) ​ $ 2,232,058 Net income — ​ — ​ 15,419 — ​ — ​ — ​ ​ 15,419 Stock based compensation expense ​ — ​ 4,246 ​ — — ​ — ​ — ​ ​ 4,246 Treasury stock purchases ​ — ​ — ​ — ( 3,335 ) ​ ( 95,998 ) ​ — ​ ​ ( 95,998 ) Net unrealized appreciation on marketable securities, net of tax of $ 488 ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 1,514 ​ ​ 1,514 Balance at June 30, 2023 82,801 ​ $ 744,276 ​ $ 2,230,217 ( 40,428 ) ​ $ ( 816,446 ) ​ $ ( 808 ) ​ $ 2,157,239 Net income — ​ — ​ 23,478 — ​ — ​ — ​ ​ 23,478 Sale of common stock under employee stock purchase plan 39 ​ ​ 1,536 ​ — — ​ — ​ — ​ 1,536 Stock based compensation expense ​ — ​ 4,321 ​ — — ​ — ​ — ​ ​ 4,321 Treasury stock purchases ​ — ​ — ​ — ( 1,192 ) ​ ( 50,500 ) ​ — ​ ​ ( 50,500 ) Net unrealized appreciation on marketable securities, net of tax of $ 201 ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 624 ​ ​ 624 Balance at September 30, 2023 82,840 ​ $ 750,133 ​ $ 2,253,695 ( 41,620 ) ​ $ ( 866,946 ) ​ $ ( 184 ) ​ $ 2,136,698 ​ See accompanying notes to condensed consolidated financial statements. ​ 7 Table of Contents ​ SKYWEST, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended ​ ​ September 30, ​ 2024 2023 NET CASH PROVIDED BY OPERATING ACTIVITIES ​ $ 506,565 ​ $ 511,907 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​ ​ ​ Purchases of marketable securities ​ ( 1,212,208 ) ​ ​ ( 982,331 ) Sales of marketable securities ​ 1,240,771 ​ ​ 1,236,009 Acquisition of property and equipment: ​ ​ ​ ​ ​ ​ Aircraft and rotable spare parts ​ ( 131,880 ) ​ ​ ( 151,600 ) Buildings and ground equipment ​ ( 21,685 ) ​ ​ ( 13,978 ) Proceeds from the sale of property and equipment ​ 4,117 ​ ​ 6,574 Deposits on aircraft ​ ​ — ​ ​ ( 55,528 ) Aircraft deposits applied towards acquired aircraft ​ ​ 5,825 ​ ​ — Decrease (increase) in other assets ​ ( 3,941 ) ​ ​ 21,857 NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ​ ( 119,001 ) ​ 61,003 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ ​ Proceeds from issuance of long-term debt ​ 23,059 ​ ​ 25,000 Principal payments on long-term debt ​ ( 338,221 ) ​ ​ ( 331,183 ) Payment of debt issuance cost ​ ​ ( 336 ) ​ ​ ( 108 ) Net proceeds from issuance of common stock ​ 2,864 ​ ​ 2,811 Employee income tax paid on vested equity awards ​ ​ ( 6,930 ) ​ ​ ( 585 ) Purchase of treasury stock and excise tax ​ ( 38,668 ) ​ ​ ( 246,499 ) NET CASH USED IN FINANCING ACTIVITIES ​ ( 358,232 ) ​ ( 550,564 ) ​ ​ ​ ​ ​ ​ ​ Increase in cash and cash equivalents ​ 29,332 ​ ​ 22,346 Cash and cash equivalents at beginning of period ​ 148,277 ​ ​ 102,984 CASH AND CASH EQUIVALENTS AT END OF PERIOD ​ $ 177,609 ​ $ 125,330 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ $ 15,979 ​ $ 16,614 Derecognition of right of use assets ​ $ — ​ $ ( 39,247 ) Derecognition of operating lease liabilities ​ $ — ​ $ 39,247 Cash paid during the period for: ​ ​ ​ ​ ​ ​ Interest, net of capitalized amounts ​ $ 87,072 ​ $ 98,196 Income taxes ​ $ 14,930 ​ $ 9,184 ​ See accompanying notes to condensed consolidated financial statements. ​ 8 Table of Contents SKYWEST, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ​ ( 1) Condensed Consolidated Financial Statements Basis of Presentation The condensed consolidated financial statements of SkyWest, Inc. (“SkyWest” or the “Company”), its operating subsidiary SkyWest Airlines, Inc. (“SkyWest Airlines”), its leasing subsidiary SkyWest Leasing, Inc. (“SkyWest Leasing”) and its charter service subsidiary SkyWest Charter, LLC (“SWC”) included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented. All adjustments are of a normal recurring nature, unless otherwise disclosed. 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 and nine months ended September 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. Actual results could differ materially from those estimates and assumptions. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Accounting Standard Codification (“ASC”) Topic 280) – Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (ASC Topic 740) – Improvements to Income Tax Disclosures”, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures. (2) Operating Revenues The Company recognizes revenue under its flying agreements and under its lease, airport services and other service agreements when the service is provided under the applicable agreement. Under the Company’s fixed-fee arrangements (referred to as “capacity purchase” agreements) with United Airlines, Inc. (“United”), Delta Air Lines, Inc. (“Delta”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major airline partner”), the major airline partner generally pays the Company a fixed-fee for each departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time) incurred, and an 9 Table of Contents amount per aircraft in service each month, with additional incentives based on flight completion, on-time performance or other performance metrics. The major airline partner also directly pays for or reimburses the Company for certain direct expenses incurred under the capacity purchase agreement, such as fuel, airport landing fees and airport rents. Under the capacity purchase agreements, the Company’s performance obligation is met when each flight is completed, measured in completed block hours, and is reflected in flying agreements revenue. 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 nine months ended September 30, 2024 and 2023, capacity purchase agreements represented approximately 86.8 % and 87.2 % 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 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. The EAS contracts are generally two years in duration and the Company recognizes EAS revenue on a per-completed-flight basis pursuant to the terms of each contract. Under the Company’s charter operations, SWC, the Company negotiates a fare for the charter flight with the customer. The performance obligation is met and revenue is recognized upon completion of the flight. For the nine months ended September 30, 2024 and 2023, prorate flying agreements and SWC revenue represented approximately 13.2 % and 12.8 % of the Company’s flying agreements revenue, respectively. The following table represents the Company’s flying agreements revenue by type for the three and nine months ended September 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, ​ For the nine months ended September 30, ​ 2024 2023 ​ 2024 2023 Capacity purchase agreements flight operations revenue (non-lease component) ​ $ 624,342 ​ $ 511,929 ​ $ 1,763,629 ​ $ 1,479,987 Capacity purchase agreements fixed aircraft lease revenue ​ ​ 75,084 ​ ​ 73,794 ​ ​ 225,374 ​ ​ 222,316 Capacity purchase agreements variable aircraft lease revenue ​ 61,308 ​ 46,495 ​ 180,035 ​ 134,584 Prorate agreements and SWC revenue ​ 122,760 ​ 109,680 ​ 330,915 ​ 269,243 Flying agreements revenue ​ $ 883,494 ​ $ 741,898 ​ $ 2,499,953 ​ $ 2,106,130 ​ The Company allocates the total consideration received under its capacity purchase agreements between lease and non-lease components based on stand-alone selling prices. A portion of the Company’s compensation under its capacity purchase agreements relates to operating the aircraft, identified as the non-lease component of the capacity purchase agreement. The Company recognizes revenue attributed to the non-lease component received as fixed-fees for each departure, flight hour or block hour on an as-completed basis for each reporting period. The Company recognizes revenue attributed to the non-lease component received as fixed monthly payments per aircraft proportionate to the number of block hours completed during each reporting period, relative to the estimated number of block hours the Company anticipates completing over the remaining contract term. Accordingly, the Company’s revenue recognition will likely vary from the timing of cash receipts under the Company’s capacity purchase agreements. 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 nine months ended September 30, 2024, the Company recognized $ 24.5 million of previously deferred revenue associated with the non-lease fixed monthly payments under certain agreements and decreased unbilled revenue by $ 0.9 million under certain other agreements, 10 Table of Contents compared to deferring revenue of $ 111.9 million and decreasing unbilled revenue by $ 8.7 million during the nine months ended September 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. The consideration for aircraft ownership costs varies by agreement but is intended to cover either the Company’s aircraft principal and interest debt service costs, its aircraft depreciation and interest expense or its aircraft lease expense costs while the aircraft is under contract. The consideration received for the use of the aircraft under the Company’s capacity purchase agreements is accounted for as lease revenue, inasmuch as the agreements identify the “right of use” of a specific type and number of aircraft over a stated period of time. The lease revenue associated with the Company’s capacity purchase agreements is accounted for as an operating lease and is reflected as flying agreements revenue on the Company’s consolidated statements of comprehensive income. 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 $ 1.5 million of previously deferred lease revenue during the nine months ended September 30, 2024, whereas the Company deferred recognizing lease revenue of $ 59.3 million during the nine months ended September 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 September 30, 2024 was $ 348.6 million, including $ 59.6 million in other current liabilities and $ 289.0 million in other long-term liabilities. The Company’s unbilled revenue balance was $ 6.4 million as of September 30, 2024, including $ 1.1 million in other current assets and $ 5.3 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. The Company’s unbilled revenue balance was $ 7.3 million as of December 31, 2023, including $ 1.2 million in other current assets and $ 6.1 million in other long-term assets. The Company’s capacity purchase and prorate agreements include weekly provisional cash payments from the respective major airline partner based on a projected level of flying each month. The Company and each major airline partner subsequently reconcile these payments to the actual completed flight activity on a monthly or quarterly basis. In several of the Company’s agreements, the Company is eligible to receive incentive compensation upon the achievement of certain performance criteria. The incentives are defined in the agreements and are measured and determined on a monthly, quarterly or semi-annual basis. 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 September 30, 2024, the Company had 484 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: ​ ​ ​ ​ ​ ​ ​ ​ United Express Agreements Agreement Aircraft type Number of Aircraft Term / Termination Dates United Express Agreements (capacity purchase agreement) ​ • E175 • CRJ700 • CRJ200 ​ 110 19 61 ​ Individual aircraft have scheduled expiration dates from 2024 to 2029 ​ United Express Prorate Agreement ​ • CRJ200 ​ 20 * ​ Terminable with 120-days’ notice Total under United Express Agreements ​ ​ ​ 210 ​ ​ 11 Table of Contents Delta Connection Agreements Agreement Aircraft type Number of Aircraft Term / Termination Dates Delta Connection Agreement (capacity purchase agreement) ​ • E175 • CRJ900 • CRJ700 ​ ​ 86 35 5 ​ Individual aircraft have scheduled expiration dates from 2025 to 2034 ​ ​ ​ ​ ​ ​ ​ Delta Connection Prorate Agreement ​ ​ • CRJ900 • CRJ700** ​ 1 * 14 * ​ Terminable with 30-days’ notice Total under Delta Connection Agreements ​ ​ ​ 141 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ American Capacity Purchase Agreement Agreement Aircraft type Number of Aircraft Term / Termination Dates American Agreement (capacity purchase agreement) ​ • E175 • CRJ700 ​ 20 71 ​ Individual aircraft have scheduled expiration dates from 2025 to 2032 Total under American Agreement ​ ​ ​ 91 ​ ​ ​ ​ Alaska Capacity Purchase Agreement Agreement Aircraft type Number of Aircraft Term / Termination Dates Alaska Agreement (capacity purchase agreement) ​ • E175 ​ 42 ​ Individual aircraft have scheduled expiration dates from 2030 to 2034 * The Company’s prorate agreements are based on specific routes, not a specific aircraft count. The number of aircraft listed above for each prorate agreement approximates the number of aircraft the Company uses to serve the prorate routes. ** Includes CRJ550 aircraft, a 50 -seat configuration of the CRJ700 aircraft. In addition to the contractual arrangements described above, as of September 30, 2024, SkyWest Airlines reached agreements to place the following E175 aircraft under a capacity purchase agreement with the respective major airline partners: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Q4 2024 2025 2026 ​ Total United Airlines 4 7 8 ​ 19 Alaska Airlines — 1 — ​ 1 Total 4 8 8 ​ 20 ​ The Company also entered into multiple agreements with United in September and October 2024 to place a total of 40 used CRJ550s under multi-year contracts. Pursuant to these agreements, the Company is in the process of acquiring 11 used CRJ550s and will convert 29 of its CRJ700s to CRJ550s. The aircraft are anticipated to be placed into service between the fourth quarter of 2024 and the end of 2026. One of such CRJ550 aircraft was acquired during the three months ended September 30, 2024. Final delivery and in-service dates for aircraft to be placed under contract are subject to change and may be adjusted based on various factors. When an aircraft is scheduled for expiration 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. Lease, airport services and other revenues primarily consist of revenue generated from aircraft and spare engines leased to third parties and from airport customer service agreements, such as gate and ramp agent services at 12 Table of Contents various airports where the Company has been contracted by third parties to provide such services. The following table represents the Company’s lease, airport services and other revenues for the three and nine months ended September 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, ​ For the nine months ended September 30, ​ 2024 2023 ​ 2024 2023 Operating lease revenue ​ $ 22,134 ​ $ 16,091 ​ $ 60,918 ​ $ 49,442 Airport customer service and other revenue ​ ​ 7,158 ​ ​ 8,182 ​ ​ 22,647 ​ ​ 28,073 Lease, airport services and other ​ $ 29,292 ​ $ 24,273 ​ $ 83,565 ​ $ 77,515 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 September 30, 2024 (in thousands): ​ ​ ​ ​ October 2024 through December 2024 $ 11,711 2025 ​ 42,248 2026 ​ 36,641 2027 ​ 36,626 2028 ​ 35,739 Thereafter ​ 54,543 Total future minimum rental income under operating leases ​ $ 217,508 ​ Of the Company’s $ 5.4 billion of net property and equipment as of September 30, 2024, $ 202.4 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. Additionally, the operating leases typically have specified lease return condition requirements paid by the lessee to the Company and the Company typically maintains inspection rights under the leases. The transaction price for airport customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of flights handled by the Company over the agreement term. The Company’s operating revenues could be impacted by several factors, including changes to the Company’s code-share agreements with its major airline partners, changes in flight schedules, contract modifications resulting from contract renegotiations, the Company’s ability to earn incentive payments contemplated under the Company’s code-share agreements and resolution of unresolved items with the Company’s major airline partners. Other ancillary revenues commonly associated with airlines, such as baggage fee revenue, ticket change fee revenue and the marketing component of the sale of mileage credits, are retained by the Company’s major airline partners on flights that the Company operates under its code-share agreements. Allowance for Credit Losses The Company monitors publicly available credit ratings for entities for which the Company has a significant receivable balance. As of September 30, 2024, the Company had gross receivables of $ 112.9 million in current assets and gross receivables of $ 202.4 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 nine months ended September 30, 2024, there were no significant changes in the outstanding accounts receivable, notes receivable, guarantees or credit ratings of the entities. 13 Table of Contents The following table summarizes the changes in allowance for credit losses: ​ ​ ​ ​ ​ Allowance for Credit Losses Balance at December 31, 2023 ​ $ 18,699 Adjustments to credit loss reserves ​ ( 1,379 ) Write-offs charged against allowance ​ — Balance at September 30, 2024 ​ $ 17,320 ​ ​ (3) Capital Transactions Stock-Based Compensation During the nine months ended September 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. Both the restricted stock units and performance shares have a three-year vesting period, during which the recipient must remain employed with the Company. The number of performance shares awardable from the 2024 grants can range from 0 % to 200 % of the original amount granted depending on the Company’s performance over three one-year measurement periods against the pre-established targets. Upon vesting, each restricted stock unit and performance share will be replaced with one share of common stock. The weighted average fair value of these restricted stock units and performance shares on their date of grant was $ 59.57 per share. Additionally, during the nine months ended September 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 nine months ended September 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. The estimated fair value of the restricted stock units and performance shares is amortized over the applicable vesting periods. Stock-based compensation expense for the performance shares is based on the Company’s anticipated outcome of achieving the performance metrics. During the nine months ended September 30, 2024 and 2023, the Company recorded pre-tax stock-based compensation expense of $ 15.1 million and $ 12.9 million, respectively. Warrants In 2020 and 2021, the Company issued to U.S. Department of the Treasury (“U.S. Treasury”) warrants to purchase shares of the Company’s common stock pursuant to the three Payroll Support Program Agreements and a loan agreement with U.S. Treasury. The warrants have a five-year term from the date of issuance. The weighted average grant-date fair value of these warrants was estimated using the Black-Scholes option pricing model. The current holder of the warrants exercised 706,909 warrants in August 2024. The Company settled the exercise through a net share issuance of 443,756 shares of common stock to the holder. As of September 30, 2024, the Company had an aggregate of 78,317 warrants issued and outstanding, each with an exercise price of $ 57.47 , under the Payroll Support Program Agreements. ( 4) Stock Repurchase The Company’s Board of Directors adopted a stock repurchase program in May 2023, which authorizes the Company to repurchase shares of the Company’s common stock in the public market or in private transactions, from time to time, at prevailing prices. 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 September 30, 2024, $ 52.5 million remains available under the May 2023 authorization. During the nine months ended September 30, 2024, the Company repurchased 0.5 million shares of common stock for $ 38.4 million at a weighted average price per share of $ 72.30 . The Company also recorded $ 0.3 million of excise tax related to the stock repurchases as Treasury Stock in the Company’s Stockholders Equity for the nine months ended September 30, 2024. During the nine months ended September 30, 2023, the Company repurchased 9.6 million shares of common stock for $ 244.1 million at a weighted average price per share of $ 25.44 and recorded $ 2.4 million of excise tax related to the stock repurchases as Treasury Stock in the Company’s Stockholders Equity. 14 Table of Contents (5) Net Income Per Common Share Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common share. Securities that could potentially dilute Basic EPS in the future, and which were excluded from the calculation of Diluted EPS because inclusion of such share would be anti-dilutive, are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2024 ​ 2023 2024 ​ 2023 Treasury Warrants (1) ​ ​ — ​ ​ 78 ​ ​ — ​ ​ 355 Employee Stock Awards ​ ​ — ​ ​ — ​ ​ — ​ ​ 20 Total antidilutive securities ​ — ​ 78 ​ — ​ 375 (1) Warrants originally issued to U.S. 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. Treasury. ​ Additionally, during the nine months ended September 30, 2024 and 2023, 336,000 and 422,000 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 nine months ended September 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 ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2024 ​ 2023 2024 ​ 2023 Numerator: ​ ​ ​ ​ ​ Net income ​ $ 89,709 ​ $ 23,478 ​ $ 225,585 ​ $ 16,826 Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share weighted average shares ​ 40,253 ​ 41,826 ​ 40,244 ​ 45,018 Dilutive effect of employee stock awards and warrants ​ 1,308 ​ 754 ​ 1,251 ​ 522 Diluted earnings per share weighted average shares ​ 41,561 ​ 42,580 ​ 41,495 ​ 45,540 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share ​ $ 2.23 ​ $ 0.56 ​ $ 5.61 ​ $ 0.37 Diluted earnings per share ​ $ 2.16 ​ $ 0.55 ​ $ 5.44 ​ $ 0.37 ​ ​ (6) Segment Reporting The Company’s two reportable segments consist of (1) the operations of SkyWest Airlines and SWC (collectively, “SkyWest Airlines and SWC”) and (2) SkyWest Leasing activities. The Company’s chief operating decision maker analyzes the profitability of operating new aircraft financed through the issuance of debt, including the Company’s E175 fleet, separately from the profitability of the Company’s capital deployed for ownership and financing of such aircraft. The SkyWest Airlines and SWC segment includes revenue earned under the applicable capacity purchase agreements attributed to operating such aircraft and the respective operating costs. The SkyWest Airlines and SWC segment also includes revenue and operating expenses attributed to 15 Table of Contents other flying agreements and airport services agreements. The SkyWest Leasing segment includes applicable revenue earned under the applicable capacity purchase agreements attributed to the ownership of new aircraft acquired through the issuance of debt and the respective depreciation and interest expense of such aircraft. The SkyWest Leasing segment also includes the activity of leasing regional jet aircraft and spare engines to third parties and other activities. The SkyWest Leasing segment’s total assets and capital expenditures include new aircraft acquired through the issuance of debt and assets leased to third parties. 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 September 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, 2024 ​ ​ SkyWest Airlines ​ SkyWest ​ ​ ​ and SWC Leasing Consolidated Operating revenues (1) ​ $ 758,425 ​ $ 154,361 ​ $ 912,786 Operating expense ​ 712,650 ​ 68,701 ​ 781,351 Depreciation and amortization expense ​ 37,105 ​ 59,557 ​ 96,662 Interest expense ​ 2,864 ​ 24,944 ​ 27,808 Segment profit (2) ​ 42,911 ​ 60,716 ​ 103,627 Total assets (as of September 30, 2024) ​ 2,673,084 ​ 4,283,516 ​ 6,956,600 Capital expenditures (including non-cash) ​ 59,331 ​ 24,956 ​ 84,287 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, 2023 ​ ​ SkyWest Airlines ​ SkyWest ​ ​ ​ and SWC Leasing Consolidated Operating revenues (1) ​ $ 626,780 ​ $ 139,391 ​ $ 766,171 Operating expense ​ 652,599 ​ 64,281 ​ 716,880 Depreciation and amortization expense ​ 37,320 ​ 59,240 ​ 96,560 Interest expense ​ 4,450 ​ 28,093 ​ 32,543 Segment profit (loss) (2) ​ ( 30,269 ) ​ 47,017 ​ 16,748 Total assets (as of September 30, 2023) ​ 2,557,850 ​ 4,501,268 ​ 7,059,118 Capital expenditures (including non-cash) ​ 33,436 ​ 14,816 ​ 48,252 (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. The following represents the Company’s segment data for the nine-month periods ended September 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, 2024 ​ ​ SkyWest Airlines ​ SkyWest ​ ​ ​ and SWC Leasing Consolidated Operating revenues (1) ​ $ 2,117,018 ​ $ 466,500 ​ $ 2,583,518 Operating expense ​ 2,032,115 ​ 200,822 ​ 2,232,937 Depreciation and amortization expense ​ 110,217 ​ 179,129 ​ 289,346 Interest expense ​ 9,595 ​ 77,008 ​ 86,603 Segment profit (2) ​ 75,308 ​ 188,670 ​ 263,978 Total assets (as of September 30, 2024) ​ 2,673,084 ​ 4,283,516 ​ 6,956,600 Capital expenditures (including non-cash) ​ 144,588 ​ 24,956 ​ 169,544 ​ 16 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, 2023 ​ ​ SkyWest Airlines ​ SkyWest ​ ​ ​ and SWC Leasing Consolidated Operating revenues (1) ​ $ 1,781,429 ​ $ 402,216 ​ $ 2,183,645 Operating expense ​ 1,910,481 ​ 196,717 ​ 2,107,198 Depreciation and amortization expense ​ 113,544 ​ 174,334 ​ 287,878 Interest expense ​ 13,207 ​ 86,674 ​ 99,881 Segment profit (loss) (2) ​ ( 142,259 ) ​ 118,825 ​ ( 23,434 ) Total assets (as of September 30, 2023) ​ 2,557,850 ​ 4,501,268 ​ 7,059,118 Capital expenditures (including non-cash) ​ 80,156 ​ 102,036 ​ 182,192 (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 The Company leases property and equipment under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company used its incremental borrowing rate to discount the lease payments based on information available at lease commencement. Aircraft As of September 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 The Company has operating leases for facility space including airport terminals, office space, cargo warehouses and maintenance facilities. The Company generally leases this space from government agencies that control the use of the various airports. The remaining lease terms for facility space vary from one month to 32 years. 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. Leases As of September 30, 2024, the Company’s right-of-use assets were $ 85.3 million, the Company’s current maturities of operating lease liabilities were $ 18.5 million, and the Company’s noncurrent lease liabilities were $ 66.8 million. During the nine months ended September 30, 2024, the Company paid $ 16.7 million under operating leases reflected as a reduction from operating cash flows. The table below presents lease related terms and discount rates as of September 30, 2024: ​ ​ ​ ​ ​ Weighted-average remaining lease term for operating leases 11.4 years Weighted-average discount rate for operating leases 6.3 % ​ 17 Table of Contents The Company’s lease costs for the three and nine months ended September 30, 2024 and 2023 included the following components (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, ​ For the nine months ended September 30, ​ 2024 2023 2024 2023 Operating lease cost ​ $ 6,583 ​ $ 7,959 ​ $ 20,500 ​ $ 40,764 Variable and short-term lease cost ​ 453 ​ 868 ​ 2,029 ​ 2,205 Sublease income ​ ​ ( 1,268 ) ​ ​ ( 1,350 ) ​ ​ ( 3,782 ) ​ ​ ( 4,051 ) Total lease cost ​ $ 5,768 ​ $ 7,477 $ 18,747 ​ $ 38,918 ​ As of September 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 September 30, 2024 (in thousands): ​ ​ ​ ​ ​ October 2024 through December 2024 $ 5,272 2025 ​ 18,356 2026 ​ 16,545 2027 ​ 14,002 2028 ​ 11,012 Thereafter ​ 62,392 Total future minimum operating lease payments ​ $ 127,579 ​ As of September 30, 2024, the Company had a firm purchase commitment for 20 E175 aircraft from Embraer with anticipated delivery dates through 2026. Additionally, the Company has a purchase agreement to acquire 11 used CRJ550 aircraft with anticipated closing dates into 2025. One of such CRJ550 aircraft was acquired during the three months ended September 30, 2024. The following table summarizes the Company’s commitments and obligations as noted for each of the next five years and thereafter (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Oct- Dec 2024 2025 2026 2027 2028 Thereafter Operating lease payments for aircraft and facility obligations ​ $ 127,579 ​ $ 5,272 ​ $ 18,356 ​ $ 16,545 ​ $ 14,002 ​ $ 11,012 ​ $ 62,392 Firm aircraft and spare engine commitments ​ 610,752 ​ ​ 135,217 ​ ​ 239,125 ​ ​ 236,410 ​ ​ — ​ ​ — ​ ​ — Interest commitments (1) ​ 389,176 ​ ​ 26,093 ​ ​ 98,184 ​ ​ 78,324 ​ ​ 56,382 ​ ​ 40,955 ​ ​ 89,238 Principal maturities on long-term debt ​ 2,714,421 ​ ​ 114,907 ​ ​ 534,315 ​ ​ 512,046 ​ ​ 465,695 ​ ​ 294,352 ​ ​ 793,106 Total commitments and obligations ​ $ 3,841,928 ​ $ 281,489 ​ $ 889,980 ​ $ 843,325 ​ $ 536,079 ​ $ 346,319 ​ $ 944,736 (1) At September 30, 2024, the Company’s long-term debt had fixed interest rates. In addition to the table above, in September 2024, the Company entered into a master equipment purchase agreement with another airline to acquire certain airframes and engines from the airline and lease the assets back to the airline under a five -year term. At September 30, 2024, the Company had not acquired any airframes or engines under the master equipment purchase agreement. The Company estimates the purchase obligation will be between $ 90.0 million and $ 100.0 million and anticipates closing on individual airframes and engines between the fourth quarter of 2024 and the end of 2025. 18 Table of Contents Guarantees In 2022, the Company agreed to guarantee $ 19.8 million of debt for a 14 CFR Part 135 air carrier. The debt is secured by the Part 135 air carrier’s aircraft and engines and has a five-year term. 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 $ 14.4 million as of September 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 % of the guaranteed amount annually as consideration in cash. The balance of the debt under the guarantee was $ 11.2 million as of September 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. The Company also recorded the estimated credit loss associated with the guarantees based on publicly available historical default rates issued by a third party for companies with similar credit ratings, factoring the collateral and guarantee term. (8) Fair Value Measurements The Company holds certain assets that are required to be measured at fair value in accordance with GAAP. The Company determined the fair value of these assets based on the following three levels of inputs: ​ ​ ​ ​ ​ Level 1 ​ — ​ Quoted prices in active markets for identical assets or liabilities. Level 2 ​ — ​ Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; 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. Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities. Level 3 ​ — ​ 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 September 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 September 30, 2024 ​ Total Level 1 Level 2 Level 3 Marketable Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bonds and bond funds ​ $ 578,812 ​ $ — ​ $ 578,812 ​ $ — Commercial paper ​ 79,621 ​ — ​ 79,621 ​ — ​ ​ ​ 658,433 ​ ​ — ​ ​ 658,433 ​ ​ — Investments in Other Companies ​ ​ 4,860 ​ ​ — ​ ​ — ​ ​ 4,860 Cash and Cash Equivalents ​ ​ 177,609 ​ ​ 177,609 ​ ​ — ​ ​ — Total Assets Measured at Fair Value ​ $ 840,902 ​ $ 177,609 ​ $ 658,433 ​ $ 4,860 ​ 19 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements as of December 31, 2023 ​ ​ Total ​ Level 1 ​ Level 2 ​ Level 3 Marketable Securities ​ ​ ​ ​ Bonds and bond funds ​ $ 677,074 ​ $ — ​ $ 677,074 ​ $ — Commercial paper ​ 9,872 ​ — ​ 9,872 ​ — ​ ​ ​ 686,946 ​ ​ — ​ ​ 686,946 ​ ​ — Investments in Other Companies ​ ​ 15,402 ​ ​ 2,925 ​ — ​ 12,477 Cash and Cash Equivalents ​ ​ 148,277 ​ ​ 148,277 ​ ​ — ​ ​ — Total Assets Measured at Fair Value ​ $ 850,625 ​ $ 151,202 ​ $ 686,946 ​ $ 12,477 ​ 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 nine months ended September 30, 2024. The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during the nine months ended September 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 September 30, 2024, and December 31, 2023, the Company classified $ 658.4 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 September 30, 2024, and December 31, 2023, the cost of the Company’s marketable securities was $ 657.9 million and $ 686.5 million, respectively. (9) Assets Held for Sale In 2022, the Company committed to a formal plan to sell 14 CRJ700 aircraft and determined the aircraft met the criteria to be classified as assets held for sale. 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. 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 nine months ended September 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 September 30, 2024, and December 31, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ ​ December 31, 2023 Current portion of long-term debt $ 500,279 ​ $ 447,534 Current portion of unamortized debt issue cost, net ​ ( 3,490 ) ​ ​ ( 3,665 ) Current portion of long-term debt, net of debt issue costs $ 496,789 ​ $ 443,869 ​ ​ ​ ​ ​ ​ Long-term debt, net of current maturities $ 2,214,142 ​ $ 2,582,776 Long-term portion of unamortized debt issue cost, net ​ ( 17,594 ) ​ ​ ( 20,593 ) Long-term debt, net of current maturities and debt issue costs $ 2,196,548 ​ $ 2,562,183 ​ ​ ​ ​ ​ ​ Total long-term debt (including current portion) $ 2,714,421 ​ $ 3,030,310 Total unamortized debt issue cost, net ​ ( 21,084 ) ​ ​ ( 24,258 ) Total long-term debt, net of debt issue costs $ 2,693,337 ​ $ 3,006,052 ​ 20 Table of Contents As of September 30, 2024, the Company had $ 2.7 billion of total long-term debt, which consisted of $ 2.5 billion of debt used to finance aircraft and spare engines and $ 200.6 million of unsecured debt payable to U.S. Treasury. The average effective interest rate on the Company’s debt was approximately 4.1 % at September 30, 2024. As of September 30, 2024 and December 31, 2023, the Company had $ 47.1 million and $ 49.1 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions. As of September 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 September 30, 2024, SkyWest Airlines had no amounts outstanding under the facility. However, at September 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. The Company’s debt agreements are not traded on an active market and are recorded at carrying value on the Company’s consolidated balance sheet. The fair value of the Company’s long-term debt is estimated based on current rates offered to the Company for similar debt. Debt is primarily classified as Level 2 within the fair value hierarchy. The carrying value and fair value of the Company’s long-term debt as of September 30, 2024 and December 31, 2023, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ December 31, 2023 Carrying value ​ $ 2,714,421 ​ $ 3,030,310 Fair value ​ $ 2,660,160 ​ $ 2,918,012 ​ ( 11) Investments in Other Companies Equity Method Investments During 2019, the Company created a joint venture with Regional One, Inc. and, as of September 30, 2024, has invested a total of $ 26.6 million for an ownership interest in Aero Engines, LLC. (“Aero Engines”). The primary purpose of Aero Engines is to lease engines to third parties. The Company accounts for its investment in Aero Engines under the equity method. The Company’s exposure in its investment in Aero Engines primarily consists of the Company’s portion of income or loss from Aero Engines’ engine lease agreements with third parties and the Company’s ownership percentage in Aero Engines’ engines book value. Aero Engines had no debt outstanding as of September 30, 2024. As of September 30, 2024, the Company’s investment balance in Aero Engines was $ 23.2 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 nine months ended September 30, 2024, was $ 1.5 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. d/b/a C ontour Airlines (“Contour”), a 14 CFR Part 135 air carrier. In January 2024, the Company invested an additional $ 15.1 million in Contour. The Company has a 25 % ownership interest in Contour at September 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. For the nine months ended September 30, 2024, the Company recorded a loss of $ 0.6 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 September 30, 2024, the Company’s investment balance in Contour of $ 24.4 million was recorded in “Other Assets” on the Company’s consolidated balance sheet. At September 30, 2024, the Company had $ 12.2 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 . The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. 21 Table of Contents Fair Value Method Investments In 2021, the Company entered into a strategic partnership with Eve UAM, LLC (“Eve UAM”), to develop a network of deployment for Eve UAM’s electric vertical takeoff and landing (“eVTOL”) aircraft. In 2022, the Company acquired 1,000,000 shares of common stock of Eve Holding, Inc. (“Eve”) and a warrant giving the Company the right to acquire 1,500,000 shares of common stock of Eve at an exercise price of $ 0.01 per share. 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 was to reduce the Company’s investment risk in Eve. The Company is restricted from selling the shares underlying the warrant until May 2025, and the warrant expires in May 2032. The Company acquired the shares of common stock, warrant and put option (collectively the “Eve Investments”) for $ 10.0 million. 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 600,411 shares subject to the put option from the Eve shareholder. During the nine months ended September 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 September 30, 2024, the Company’s only remaining investment in Eve was the warrant to acquire 1,500,000 shares of common stock of Eve. The shares of common stock of Eve were classified as Level 1 within the fair value hierarchy as Eve common 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 (prior to the exercise of the put option) were classified as Level 3 within the fair value hierarchy (“Eve Level 3 Investments”). The Company used the Black Scholes Option Pricing Model to determine the estimated fair market value of the Eve Level 3 Investments . The table below shows the reconciliation of the Eve Level 3 Investments (in thousands): ​ ​ ​ ​ ​ Eve Level 3 Investments: ​ ​ Balance at December 31, 2023 $ 12,477 Purchases ​ — Exercise of put option for aircraft parts credits ​ ​ ( 3,996 ) Realized gain on exercise of put option ​ ​ 3,446 Unrealized loss ​ ( 7,067 ) Balance at September 30, 2024 ​ $ 4,860 ​ During the nine months ended September 30, 2024, the Company recorded a net loss of $ 6.6 million in “Other income (loss) , net” on the Company’s consolidated statements of comprehensive income, including 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 $ 8.6 million related to the Eve Investments. As of September 30, 2024, the fair value of the Eve Investments, which only consisted of the warrant, was $ 4.9 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 nine months ended September 30, 2024 was 24.4 %. The Company’s effective tax rate for the nine months ended September 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. This was partially offset by a discrete tax benefit from excess tax deductions generated from employee equity transactions that occurred during the nine months ended September 30, 2024, a discrete tax benefit from the release of previously recorded uncertain tax position liability and a discrete tax benefit from a release of the valuation allowance on state net operating losses anticipated to be utilized prior to expiration. The Company’s effective tax rate for the nine months ended September 30, 2023 was ( 6.0 )%. The Company’s effective tax rate for the nine months ended September 30, 2023 varied from the federal statutory rate of 21.0 % p rimarily due to a benefit from the release of $ 7.6 million of a previously recorded uncertain tax position liability and a benefit from a partial release of the valuation allowance on state net operating losses anticipated to be utilized prior to 22 Table of Contents expiration. These benefits were partially offset by the provision for state income taxes, the impact of non-deductible expenses and a discrete tax expense on employee equity transactions that occurred during the nine months ended September 30, 2023. (13) Legal Matters The Company is subject to certain legal actions which it considers routine to its business activities. As of September 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. 23 Table of Contents