Skywest Inc 10-Q for FY2023 Q3

Skywest Inc (SKYW)

10-Q 2023-10-27 For: 2023-09-30

Added on April 09, 2026

About this 10-Q

Skywest Inc filed this 10-Q on October 27, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $766.17M; down 2.9% from $789.44M a year earlier
Diluted EPS: $0.55; down 42.7% from $0.96 a year earlier

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Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock, No Par Value	SKYW	The Nasdaq Global Select Market


Large accelerated filer ⌧		Accelerated filer ◻

Non-accelerated filer ◻		Smaller reporting company ☐

Emerging growth company ☐





Class		Outstanding at October 20, 2023
Common stock, no par value		40,943,682


PART I	FINANCIAL INFORMATION:
	Item 1.	Financial Statements	3
		Consolidated Balance Sheets	3
		Consolidated Statements of Comprehensive Income	5
		Consolidated Statements of Stockholders Equity	6
		Condensed Consolidated Statements of Cash Flows	8
		Notes to Condensed Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
	Item 4.	Controls and Procedures	39

PART II	OTHER INFORMATION:
	Item 1.	Legal Proceedings	40
	Item 1A.	Risk Factors	40
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 6.	Exhibits	41
		Signature	42

Exhibit 31.1	Certification of Chief Executive Officer
Exhibit 31.2	Certification of Chief Financial Officer
Exhibit 32.1	Certification of Chief Executive Officer
Exhibit 32.2	Certification of Chief Financial Officer


	September 30,		December 31,
	2023		2022
CURRENT ASSETS:
Cash and cash equivalents	$	125,330	$	102,984
Marketable securities		694,171		944,231
Receivables, net		118,844		100,523
Inventories, net		127,129		123,209
Other current assets		96,522		100,334
Total current assets		1,161,996		1,371,281

PROPERTY AND EQUIPMENT:
Aircraft and rotable spares		8,254,591		8,143,614
Deposits on aircraft		79,459		23,931
Buildings and ground equipment		285,924		265,019
Total property and equipment, gross		8,619,974		8,432,564
Less-accumulated depreciation and amortization		(3,121,549)		(2,884,084)
Total property and equipment, net		5,498,425		5,548,480

OTHER ASSETS:
Operating lease right-of-use assets		85,746		151,928
Long-term receivables and other assets		312,951		342,864
Total other assets		398,697		494,792
Total assets	$	7,059,118	$	7,414,553


☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Incorporated under the laws of Utah		87-0292166
		(I.R.S. Employer ID No.)


	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
OPERATING REVENUES:
Flying agreements	$	741,898	$	763,514	$	2,106,130	$	2,245,351
Lease, airport services and other		24,273		25,929		77,515		78,329
Total operating revenues		766,171		789,443		2,183,645		2,323,680
OPERATING EXPENSES:
Salaries, wages and benefits		333,017		307,727		990,659		896,347
Aircraft maintenance, materials and repairs		178,465		183,182		483,182		506,478
Depreciation and amortization		96,560		97,433		287,878		297,427
Aircraft fuel		23,330		28,179		62,573		85,089
Airport-related expenses		18,398		17,501		53,648		54,196
Aircraft rentals		2,099		16,089		24,055		48,109
Other operating expenses		65,011		63,756		205,203		219,808
Total operating expenses		716,880		713,867		2,107,198		2,107,454
OPERATING INCOME		49,291		75,576		76,447		216,226
OTHER INCOME (EXPENSE):
Interest income		11,234		6,348		31,761		9,332
Interest expense		(32,543)		(33,283)		(99,881)		(92,308)
Other income (loss), net		(3,631)		8,112		7,544		21,011
Total other expense, net		(24,940)		(18,823)		(60,576)		(61,965)
INCOME BEFORE INCOME TAXES		24,351		56,753		15,871		154,261
PROVISION (BENEFIT) FOR INCOME TAXES		873		8,381		(955)		34,204
NET INCOME	$	23,478	$	48,372	$	16,826	$	120,057

BASIC EARNINGS PER SHARE	$	0.56	$	0.96	$	0.37	$	2.38
DILUTED EARNINGS PER SHARE	$	0.55	$	0.96	$	0.37	$	2.37
Weighted average common shares:
Basic		41,826		50,593		45,018		50,531
Diluted		42,580		50,636		45,540		50,636

COMPREHENSIVE INCOME:
Net income	$	23,478	$	48,372	$	16,826	$	120,057
Net unrealized appreciation (depreciation) on marketable securities, net of taxes		624		(2,624)		3,618		(4,569)
TOTAL COMPREHENSIVE INCOME	$	24,102	$	45,748	$	20,444	$	115,488


									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)
Exercise of common stock options and vested employee stock awards	130		57		—	—		—		—		57
Employee income tax paid on vested equity 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


	For the three months ended September 30,				For the nine months ended September 30,
	2023		2022		2023		2022
Capacity purchase agreements flight operations revenue (non-lease component)	$	511,929	$	534,781	$	1,479,987	$	1,589,128
Capacity purchase agreements fixed aircraft lease revenue		73,794		133,989		222,316		387,576
Capacity purchase agreements variable aircraft lease revenue		46,495		—		134,584		—
Prorate agreements revenue		109,680		94,744		269,243		268,647
Flying agreements revenue	$	741,898	$	763,514	$	2,106,130	$	2,245,351


United Express Agreements
Agreement	Aircraft type	Number of Aircraft	Term / Termination Dates
United Express Agreements (capacity purchase agreement)	• E175 • CRJ 700 • CRJ 200	90 19 70	• Individual aircraft have scheduled removal dates from 2024 to 2029
United Express Prorate Agreement (prorate agreement)	• CRJ 200	19*	• Terminable with 120-days’ notice
Total under United Express Agreements		198

Delta Connection Agreements
Agreement	Aircraft type	Number of Aircraft	Term / Termination Dates
Delta Connection Agreement (capacity purchase agreement)	• E175 • CRJ 900 • CRJ 700	83 35 5	• Individual aircraft have scheduled removal dates from 2024 to 2033

Delta Connection Prorate Agreement (prorate agreement)	• CRJ 900 • CRJ 700 • CRJ 200	2* 4* 15*	•Terminable with 30-days’ notice
Total under Delta Connection Agreements		144


American Capacity Purchase Agreement
Agreement	Aircraft type	Number of Aircraft	Term / Termination Dates
American Agreement (capacity purchase agreement)	• E175 • CRJ 700	20 89	• Individual aircraft have scheduled removal dates from 2024 to 2032
Total under American Agreement		109


October 2023 through December 2023	$	11,405
2024		45,535
2025		40,565
2026		34,998
2027		34,977
Thereafter		86,296
Total future minimum rental income under operating leases	$	253,776


	September 30,		December 31,
	2023		2022
CURRENT LIABILITIES:
Current maturities of long-term debt	$	443,186	$	438,502
Accounts payable		486,731		422,001
Accrued salaries, wages and benefits		189,510		186,285
Current maturities of operating lease liabilities		19,225		71,726
Taxes other than income taxes		24,736		20,480
Other current liabilities		42,282		33,549
Total current liabilities		1,205,670		1,172,543

LONG-TERM DEBT, net of current maturities		2,633,707		2,941,772

DEFERRED INCOME TAXES PAYABLE		681,575		687,060

NONCURRENT OPERATING LEASE LIABILITIES		66,520		88,622

OTHER LONG-TERM LIABILITIES		334,948		176,925

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; 82,840,372 and 82,592,830 shares issued as of September 30, 2023, and December 31, 2022, respectively		750,133		734,426
Retained earnings		2,253,695		2,236,869
Treasury stock, at cost, 41,619,716 and 31,994,416 shares as of September 30, 2023, and December 31, 2022, respectively		(866,946)		(619,862)
Accumulated other comprehensive loss		(184)		(3,802)
Total stockholders’ equity		2,136,698		2,347,631
Total liabilities and stockholders’ equity	$	7,059,118	$	7,414,553


	Nine months ended
	September 30,
	2023		2022
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	511,907	$	343,535

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities		(982,331)		(1,758,125)
Sales of marketable securities		1,236,009		1,390,198
Acquisition of property and equipment:
Aircraft and rotable spare parts		(151,600)		(522,683)
Buildings and ground equipment		(13,978)		(11,365)
Proceeds from the sale of property and equipment		6,574		8,494
Deposits on aircraft		(55,528)		(37,100)
Aircraft deposits applied towards acquired aircraft		—		115,085
Decrease (increase) in other assets		21,857		(49,073)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		61,003		(864,569)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		25,000		601,389
Principal payments on long-term debt		(331,183)		(299,785)
Payment of debt issuance cost		(108)		(1,949)
Net proceeds from issuance of common stock		2,811		2,958
Employee income tax paid on vested equity awards		(585)		(1,150)
Purchase of treasury stock		(246,499)		—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(550,564)		301,463

Increase (decrease) in cash and cash equivalents		22,346		(219,571)
Cash and cash equivalents at beginning of period		102,984		258,421
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	125,330	$	38,850

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing and financing activities:
Acquisition of property and equipment	$	16,614	$	15,801
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	$	98,196	$	92,230
Income taxes	$	9,184	$	356


	Allowance for Credit Losses
Balance at December 31, 2022	$	37,385
Adjustments to credit loss reserves		(1,789)
Write-offs charged against allowance		(3,570)
Balance at September 30, 2023	$	32,026


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
PSP1 and Treasury Loan Warrants ⁽¹⁾		—		582		194		388
PSP2 Warrants ⁽²⁾		—		125		83		125
PSP3 Warrants ⁽³⁾		78		78		78		78
Employee Stock Awards		—		308		20		124
Total antidilutive securities		78		1,093		375		715


	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


	Three months ended September 30, 2022
	SkyWest Airlines		SkyWest
	and SWC		Leasing		Consolidated
Operating revenues ⁽¹⁾	$	651,494	$	137,949	$	789,443
Operating expense		649,466		64,401		713,867
Depreciation and amortization expense		43,787		53,646		97,433
Interest expense		4,067		29,216		33,283
Segment profit (loss) ⁽²⁾		(2,039)		44,332		42,293
Total assets (as of September 30, 2022)		2,973,223		4,480,981		7,454,204
Capital expenditures (including non-cash)		12,419		208,667		221,086


	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


	Nine months ended September 30, 2022
	SkyWest Airlines		SkyWest
	and SWC		Leasing		Consolidated
Operating revenues ⁽¹⁾	$	1,918,746	$	404,934	$	2,323,680
Operating expense		1,906,739		200,715		2,107,454
Depreciation and amortization expense		136,463		160,964		297,427
Interest expense		8,506		83,802		92,308
Segment profit ⁽²⁾		3,501		120,417		123,918
Total assets (as of September 30, 2022)		2,973,223		4,480,981		7,454,204
Capital expenditures (including non-cash)		65,125		484,724		549,849



Weighted-average remaining lease term for operating leases	10 years
Weighted-average discount rate for operating leases	6.1%


October 2023 through December 2023	$	5,044
2024		19,553
2025		16,240
2026		13,511
2027		12,316
Thereafter		54,367
Total future minimum operating lease payments	$	121,031


	Total		Oct - Dec 2023		2024		2025		2026		2027		Thereafter
Operating lease payments for aircraft and facility obligations	$	121,031	$	5,044	$	19,553	$	16,240	$	13,511	$	12,316	$	54,367
Firm aircraft and spare engine commitments		676,802		66,170		143,513		230,709		236,410		—		—
Interest commitments ⁽¹⁾		489,412		29,818		116,197		96,080		76,496		54,848		115,973
Principal maturities on long-term debt		3,102,315		116,693		444,128		529,014		507,787		461,378		1,043,315
Total commitments and obligations	$	4,389,560	$	217,725	$	723,391	$	872,043	$	834,204	$	528,542	$	1,213,655


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.


	Fair Value Measurements as of September 30, 2023
	Total		Level 1		Level 2		Level 3
Marketable Securities
Bonds and bond funds	$	633,538	$	—	$	633,538	$	—
Commercial paper		60,633		—		60,633		—
	$	694,171	$	—	$	694,171	$	—
Investments in Other Companies		18,465		4,380		—		14,085
Cash and Cash Equivalents		125,330		125,330		—		—
Total Assets Measured at Fair Value	$	837,966	$	129,710	$	694,171	$	14,085


	Fair Value Measurements as of December 31, 2022
	Total		Level 1		Level 2		Level 3
Marketable Securities
Bonds and bond funds	$	624,254	$	—	$	624,254	$	—
Commercial paper		319,977		—		319,977		—
	$	944,231	$	—	$	944,231	$	—
Investments in Other Companies		21,380		7,200		—		14,180
Cash and Cash Equivalents		102,984		102,984		—		—
Total Assets Measured at Fair Value	$	1,068,595	$	110,184	$	944,231	$	14,180


		September 30, 2023		December 31, 2022
Current portion of long-term debt	$	446,924	$	442,360
Current portion of unamortized debt issue cost, net		(3,738)		(3,858)
Current portion of long-term debt, net of debt issue costs	$	443,186	$	438,502

Long-term debt, net of current maturities	$	2,655,391	$	2,966,951
Long-term portion of unamortized debt issue cost, net		(21,684)		(25,179)
Long-term debt, net of current maturities and debt issue costs	$	2,633,707	$	2,941,772

Total long-term debt (including current portion)	$	3,102,315	$	3,409,311
Total unamortized debt issue cost, net		(25,422)		(29,037)
Total long-term debt, net of debt issue costs	$	3,076,893	$	3,380,274


	September 30, 2023		December 31, 2022
Carrying value	$	3,102,315	$	3,409,311
Fair value	$	2,940,851	$	3,264,704


Eve Level 3 Investments:
Balance at December 31, 2022	$	14,180
Purchases		—
Realized loss on forfeiture of put options		(649)
Unrealized gains		554
Balance at September 30, 2023	$	14,085


	E175	CRJ900	CRJ700	CRJ200	Total
United	90	—	19	89	198
Delta	83	37	9	15	144
American	20	—	89	—	109
Alaska	42	—	—	—	42
Aircraft in scheduled service or under contract	235	37	117	104	493
SWC	—	—	—	13	13
Leased to third parties	—	5	35	—	40
Other ⁽¹⁾	—	7	15	39	61
Total Fleet	235	49	167	156	607


Aircraft in Service or Under Contract	September 30, 2023	December 31, 2022	September 30, 2022
E175s	235	236	232
CRJ900s	37	41	44
CRJ700s	117	104	114
CRJ200s	104	136	140
Total	493	517	530


	For the three months ended September 30,
Block hours by aircraft type:	2023		2022		% Change
E175s	171,615		169,679		1.1	%
CRJ900s	18,979		25,134		(24.5)	%
CRJ700s	56,117		62,540		(10.3)	%
CRJ200s	44,119		66,389		(33.5)	%
Total block hours	290,830		323,742		(10.2)	%


Departures	180,069		194,683		(7.5)	%
Passengers carried	10,208,005		10,715,415		(4.7)	%
Passenger load factor	85.1	%	84.6	%	0.5	pts
Average passenger trip length (miles)	446		488		(8.6)	%


	For the three months ended September 30,
(in thousands)	2023		2022		% Change
Fuel gallons purchased		6,097		6,422	(5.1)	%
Fuel expense	$	23,330	$	28,179	(17.2)	%


	For the three months ended September 30,
	(dollar amounts in thousands)
	2023		2022		$ Change		% Change
Operating Revenues:
SkyWest Airlines and SWC	$	626,780	$	651,494	$	(24,714)	(3.8)	%
SkyWest Leasing		139,391		137,949		1,442	1.0	%
Total Operating Revenues	$	766,171	$	789,443	$	(23,272)	(2.9)	%
Operating Expenses and Interest Expense:
SkyWest Airlines and SWC	$	657,049	$	653,533	$	3,516	0.5	%
SkyWest Leasing		92,374		93,617		(1,243)	(1.3)	%
Total Operating Expenses and Interest Expense ⁽¹⁾	$	749,423	$	747,150	$	2,273	0.3	%
Segment profit (loss):
SkyWest Airlines and SWC	$	(30,269)	$	(2,039)	$	(28,230)	1,384.5	%
SkyWest Leasing		47,017		44,332		2,685	6.1	%
Total Segment Profit	$	16,748	$	42,293	$	(25,545)	(60.4)	%
Interest Income		11,234		6,348		4,886	77.0	%
Other Income (Loss), net		(3,631)		8,112		(11,743)	(144.8)	%
Consolidated Income Before Taxes	$	24,351	$	56,753	$	(32,402)	(57.1)	%


	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program⁽¹⁾	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (in Thousands)
July 1, 2023 - July 31, 2023	363,957	$	41.21	363,957	$	170,922
August 1, 2023 - August 31, 2023	477,258	$	41.91	477,258	$	150,922
September 1, 2023 - September 30, 2023	350,743	$	42.77	350,743	$	135,922
Total	1,191,958	$	41.95	1,191,958	$	135,922


31.1		Certification of Chief Executive Officer
31.2		Certification of Chief Financial Officer
32.1		Certification of Chief Executive Officer
32.2		Certification of Chief Financial Officer
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)