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SKYWEST INC

SKYWEST INCSKYWEarnings & Financial Report

Nasdaq · transport

SkyWest, Inc. is the holding company for SkyWest Airlines, a North American regional airline, as well as an aircraft leasing company. It is headquartered in St. George, Utah, United States.

What changed in SKYWEST INC's 10-K — 2022 vs 2023

Top changes in SKYWEST INC's 2023 10-K

326 paragraphs added · 305 removed · 250 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

60 edited+13 added−8 removed61 unchanged
In exchange for such services, the major airline pays the regional airline either fixed fees to operate the flight, termed “capacity purchase agreement,” “capacity purchase contract,” “flying contract,” “fixed-fee arrangement,” or a “fixed-fee contract,” or the regional airline receives a percentage of applicable passenger ticket revenues on designated flights operated by the regional airline, termed “prorate agreement” or “revenue-sharing” arrangement, as described in more detail below.
In exchange for such services, the major airline pays the regional airline either fixed fees to operate the flight, termed “capacity purchase agreement,” “flying contract,” “fixed-fee arrangement,” or a “fixed-fee contract,” or the regional airline receives a percentage of applicable passenger ticket revenues on designated flights operated by the regional airline, termed “prorate agreement” as described in more detail below.
Major airlines typically award code-share flying arrangements to regional airlines based primarily upon the following criteria: ability to fly contracted schedules, availability of labor resources, including pilots, low operating cost, financial resources, geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages and the overall image of the regional airline.
Major airlines typically award code-share flying agreements to regional airlines based primarily upon the following criteria: ability to fly contracted schedules, availability of labor resources, including pilots, low operating cost, financial resources, geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages and the overall image of the regional airline.
The principal competitive factors for regional airline code-share arrangements include labor resources, code-share agreement terms, reliable flight operations, operating cost structure, ability to finance new aircraft, certification to operate certain aircraft types and geographical infrastructure supporting markets and routes served. Our operations represent the largest regional airline operations in the United States.
The principal competitive factors for regional airline code-share agreements include labor resources, code-share agreement terms, reliable flight operations, operating cost structure, ability to finance new aircraft, certification to operate certain aircraft types and geographical infrastructure supporting markets and routes served. Our operations represent the largest regional airline operations in the United States.
Bankruptcy Code, if bankruptcy proceedings are commenced against either party and certain specified conditions are not satisfied. Delta Connection Agreements We and Delta are parties to a Delta Connection Agreement (the "Delta Connection Agreement"), pursuant to which we provide contract flight services for Delta. The Delta Connection Agreement has a latest scheduled termination date of 2033.
Bankruptcy Code, if bankruptcy proceedings are commenced against either party and certain specified conditions are not satisfied. Delta Connection Agreements We and Delta are parties to a Delta Connection Agreement (the "Delta Connection Agreement"), pursuant to which we provide contract flight services for Delta. The Delta Connection Agreement has a latest scheduled termination date of 2034.
We respect every individual's quality of life and are committed to promoting dignity and trust in all we do. We strive to be the partner of choice and employer of choice. Health & Safety Safety is the primary focus and foundation of our culture with our first guiding principle being Health and Safety First.
We respect every individual's quality of life and are committed to promoting integrity and trust in all we do. We strive to be the partner of choice and employer of choice. Health & Safety Safety is the primary focus and foundation of our culture with our first guiding principle being Health and Safety First.
Additionally, each major airline may be limited in the number and type of regional aircraft it may use in its network due to agreements the major airline has with its own labor groups, commonly referred to in the industry as “scope limitations.” Given our 5 Table of Contents major airline partners’ scope limitations, we currently do not operate a regional aircraft configured with more than 76 seats.
Additionally, each major airline may be limited in the number and type of regional aircraft it may use in its network due to agreements the major airline has with its own labor groups, commonly referred to in the industry as “scope limitations.” Given our major airline partners’ scope limitations, we currently do not operate a regional aircraft configured with more than 76 seats.
(“Southwest”), JetBlue Airways Corporation (“JetBlue”), Spirit Airlines, Inc. (“Spirit”), Allegiant Travel Company (“Allegiant”) and Frontier Group Holdings, Inc. (“Frontier”), generally have lower cost structures than major airlines, which permits them to offer flights to and from many of the 6 Table of Contents same markets as the major airlines, but at lower prices.
(“Southwest”), JetBlue Airways Corporation (“JetBlue”), Spirit Airlines, Inc. (“Spirit”), Allegiant Travel Company (“Allegiant”) and Frontier Group Holdings, Inc. (“Frontier”), generally have lower cost structures than major airlines, which permits them to offer flights to and from many of the same markets as the major airlines, but at lower prices.
Participants benefit from the SkyWest Pilot Pathway Program through certain starting seniority at SkyWest, final interview privileges and access to pilot mentors. The Pilot Pathway Program allows students to remain at their campus to complete their flight training until they meet SkyWest's Airline Transport Pilot standards and achieve their required minimum hours of flight time.
Participants benefit from the SkyWest Pilot Pathway Program through certain starting seniority at SkyWest, final interview privileges and access to pilot mentors. The Pilot Pathway Program allows students to remain at their campus to complete their flight training until they meet SkyWest's Airline Transport Pilot standards and achieve their required minimum 11 Table of Contents hours of flight time.
Our recruiting focus generally targets key aviation technical roles, especially pilots and mechanics. We seek qualified individuals through publishing positions on both internal and external career websites, supporting professional development leads, investment in targeted advertising, social media outreach, employee referrals and relationships with community-based organizations and educational institutions. 11 Table of Contents School Partnerships and Development.
Our recruiting focus generally targets key aviation technical roles, especially pilots and mechanics. We seek qualified individuals through publishing positions on both internal and external career websites, supporting professional development leads, investment in targeted advertising, social media outreach, employee referrals and relationships with community-based organizations and educational institutions. School Partnerships and Development.
During 2022, we produced approximately 5.5 million metric tons of CO 2 e from fuel burned, using industry emissions factors, on flights we operated under our code-share agreements.
During 2023, we produced approximately 5.0 million metric tons of CO 2 e from fuel burned, using industry emissions factors, on flights we operated under our code-share agreements.
As of December 31, 2022, approximately 39% and 31% of our workforce were women and people of color, respectively. We believe every employee brings unique education, skills and life experiences to SkyWest that supplement our ability to achieve our commitment to excellence and to our customers and passengers.
As of December 31, 2023, approximately 44% and 31% of our workforce were women and people of color, respectively. We believe every employee brings unique education, skills and life experiences to SkyWest that supplement our ability to achieve our commitment to excellence and to our customers and passengers.
The U.S. Congress and the President have the authority to prevent “self-help” by enacting legislation that, among other things, imposes a settlement on the parties. SkyWest Airlines respects all employees’ legal rights, including the rights to free association and collective bargaining. This includes the right to decide whether to be represented by a union.
The U.S. Congress and the President have the authority to prevent “self-help” by enacting legislation that, among other things, imposes a settlement on the parties. We respect all employees’ legal rights, including the rights to free association and collective bargaining. This includes the right to decide whether to be represented by a union.
During the year ended December 31, 2022, our major airline partners purchased the majority of the fuel for our aircraft flying under their respective capacity purchase agreements directly from their fuel vendors or reimbursed us for the fuel costs we incurred under the capacity purchase agreements.
During the year ended December 31, 2023, our major airline partners purchased the majority of the fuel for our aircraft flying under their respective capacity purchase agreements directly from their fuel vendors or, when applicable, reimbursed us for the fuel costs we incurred under the capacity purchase agreements.
In a prorate arrangement, the regional airline may realize increased profits as ticket prices and passenger loads increase or fuel prices decrease and, correspondingly, the regional airline may realize decreased profits as ticket prices and passenger loads decrease or fuel prices increase. We have code-share agreements with United, Delta, American and Alaska.
In a prorate arrangement, the regional airline may realize increased profits as ticket prices and passengers carried increase or fuel prices decrease and, correspondingly, the regional airline may realize decreased profits as ticket prices and passengers carried decrease or fuel prices increase. We have code-share agreements with United, Delta, American and Alaska.
United Express Agreements We and United are parties to two United Express agreements: a United Express agreement to operate certain CRJ200 aircraft and CRJ700 aircraft, and a United Express agreement to operate E175 aircraft (collectively, the “United Express Agreements”). The United Express Agreements have a latest scheduled termination date in 2029.
United Express Agreements We and United are parties to two United Express agreements: a United Express agreement to operate certain CRJ200 aircraft and CRJ700 aircraft, and a United Express agreement to operate E175 aircraft (collectively, the “United Express Agreements”). 8 Table of Contents The United Express Agreements have a latest scheduled termination date in 2029.
Additionally, a significant portion of our capacity purchase arrangements is based on completing flights and we typically have more scheduled flights during the summer months. We generally experience a significantly higher number of weather cancellations during the winter months, which negatively impacts our revenue during such months.
Additionally, a significant portion of our capacity purchase arrangements is based on completing flights and we typically have more scheduled flights during the summer months. We generally experience a significantly higher number of weather cancellations during the winter months, which negatively impacts our revenue during such months. Additional Information We were incorporated in Utah in 1972.
We are coordinating with our major airline partners to optimize the timing of upcoming fleet deliveries and the delivery timing referenced below is subject to change. ● Capacity purchase agreement with Delta for a total of three new E175 aircraft.
We are coordinating with our major airline partners to optimize the timing of upcoming fleet deliveries and the delivery timing referenced below is subject to change. ● Capacity purchase agreement with United for 19 new E175 aircraft.
Each of our major airline partners may pursue alternative strategies and goals to reduce carbon emissions on flights we operate under our code-share agreements that may impact the rate at which we are able to reduce our carbon emissions, if at all.
Each of our major airline partners may pursue alternative strategies and goals to reduce carbon emissions on flights we operate under our code-share agreements that may impact the rate at which we are able to reduce our carbon emissions, if at all. We anticipate our major airline partners will take responsibility for carbon emissions incurred on our contract flights.
Two new E175 aircraft are currently scheduled for delivery in 2023 and one new E175 aircraft is scheduled for delivery in 2024. We anticipate financing the aircraft through debt. ● Capacity purchase agreement with Alaska for one new E175 aircraft. The delivery date for the new E175 aircraft is currently scheduled for 2025. We anticipate financing the aircraft through debt.
The delivery date for the new E175 aircraft is currently scheduled for 2024. We anticipate financing the aircraft through debt. ● Capacity purchase agreement with Alaska for one new E175 aircraft. The delivery date for the new E175 aircraft is currently scheduled for 2025. We anticipate financing the aircraft through debt.
During 2022, we experienced significant turnover of our pilots, specifically our captains. As we work to train and promote our first officers to captains, we anticipate incurring continued elevated training costs in 2023. Diversity & Inclusion Our approach is to hire the best qualified individuals, regardless of race, religion, gender, national origin, disability, sexual orientation or similar classifications.
As we work to train and promote our first officers to captains, we anticipate incurring continued elevated training costs in 2024. Diversity & Inclusion Our approach is to hire the best qualified individuals, regardless of race, religion, gender, national origin, disability, sexual orientation or similar classifications.
During the year ended December 31, 2022, approximately 88% of our flying agreements revenue related to capacity purchase agreement flights, 7 Table of Contents where United, Delta, American and Alaska controlled scheduling, ticketing, pricing, and seat inventories.
During the year ended December 31, 2023, approximately 87% of our flying agreements revenue related to capacity purchase agreement flights, where United, Delta, American and Alaska controlled scheduling, ticketing, pricing, and seat inventories.
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 under the agreement between 2024 and 2029 · The average remaining term of the aircraft under contract is 3.5 years United Express Prorate Agreement (prorate agreement) ​ · CRJ 200 ​ 41* ​ · Terminable with 120-day notice Total under United Express Agreements ​ ​ ​ 220 ​ ​ Delta Connection Agreements Agreement Aircraft type Number of Aircraft Term / Termination Dates Delta Connection Agreement (capacity purchase agreement) ​ · E175 · CRJ 900 · CRJ 700 ​ 84 41 5 ​ · Individual aircraft have scheduled removal dates from 2023 to 2033 · The average remaining term of the aircraft under contract is 5.6 years Delta Connection Prorate Agreement (prorate agreement) ​ · CRJ 200 ​ 25* ​ · Terminable with 30-day notice Total under Delta Connection Agreements ​ ​ ​ 155 ​ ​ American Capacity Purchase Agreement Agreement Aircraft type Number of Aircraft Term / Termination Dates American Agreement (capacity purchase agreement) ​ · E175 · CRJ 700 ​ 20 80 ​ · Individual aircraft have scheduled removal dates from 2023 to 2032 · The average remaining term of the aircraft under contract is 4.3 years Total under American Agreement ​ ​ ​ 100 ​ ​ Alaska Capacity Purchase Agreement Agreement Aircraft type Number of Aircraft Term / Termination Dates Alaska Agreement (capacity purchase agreement) ​ · E175 ​ 42 ​ · Individual aircraft have scheduled removal dates from 2030 to 2034 · The average remaining term of the aircraft under contract is 8.8 years * Our prorate agreements are based on specific routes, not a specific aircraft count.
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 under the agreement between 2024 and 2029 · The average remaining term of the aircraft under contract is 2.7 years United Express Prorate Agreement (prorate agreement) ​ · CRJ 200 ​ 19* ​ · Terminable with 120-day notice Total under United Express Agreements ​ ​ ​ 198 ​ ​ 7 Table of Contents Delta Connection Agreements 3 Agreement Aircraft type Number of Aircraft Term / Termination Dates Delta Connection Agreement (capacity purchase agreement) ​ · E175 · CRJ 900 · CRJ 700 ​ 85 35 5 ​ · Individual aircraft have scheduled removal dates from 2024 to 2034 · The average remaining term of the aircraft under contract is 4.8 years Delta Connection Prorate Agreement (prorate agreement) ​ · CRJ 900 · CRJ 700 ​ 6* 4* ​ · Terminable with 30-day notice Total under Delta Connection Agreements ​ ​ ​ 135 ​ ​ ​ American Capacity Purchase Agreement Agreement Aircraft type Number of Aircraft Term / Termination Dates American Agreement (capacity purchase agreement) ​ · E175 · CRJ 700 ​ 20 90 ​ · Individual aircraft have scheduled removal dates from 2024 to 2032 · The average remaining term of the aircraft under contract is 3.1 years Total under American Agreement ​ ​ ​ 110 ​ ​ ​ Alaska Capacity Purchase Agreement Agreement Aircraft type Number of Aircraft Term / Termination Dates Alaska Agreement (capacity purchase agreement) ​ · E175 ​ 42 ​ · Individual aircraft have scheduled removal dates from 2030 to 2034 · The average remaining term of the aircraft under contract is 7.5 years * Our prorate agreements are based on specific routes, not a specific aircraft count.
Our employees receive several compensation benefits, including but not limited to: ● Competitive wages and incentives based on our operating performance goals, ● Multiple insurance options including health care, disability coverage and life insurance coverage, ● Access to a 401(k) plan with matching contributions and an employee stock purchase plan, ● Employee assistance programs that provide confidential counseling or psychiatric care, ● A variety of resources that promote scheduling flexibility with paid time away from work, and ● Space-available travel privilege programs for employees and eligible family members through our major airline partner programs. 12 Table of Contents Employee Reporting Our Code of Conduct contains general guidelines for conducting business in an ethical manner.
Our employees receive several compensation benefits, including but not limited to: ● Competitive wages and incentives based on our operating performance goals, ● Multiple insurance options including health care, disability coverage and life insurance coverage, ● Access to a 401(k) plan with matching contributions and an employee stock purchase plan, ● Employee assistance programs that provide confidential counseling or psychiatric care, ● Free access to financial advisors for personal finance guidance and education, ● A variety of resources that promote scheduling flexibility with paid time away from work, and ● Space-available travel privilege programs for employees and eligible family members through our major airline partner programs.
The remainder of our flying agreements revenue during the year ended December 31, 2022, related to prorate flights for United or Delta, where we have more control over scheduling, pricing and seat inventories, and shared passenger fares with United or Delta according to prorate formulas.
The remainder of our flying agreements revenue during the year ended December 31, 2023, related to prorate flights for United or Delta, where we controlled scheduling, pricing and seat inventories on certain prorate routes, and shared passenger fares with United or Delta according to prorate formulas and SWC flights.
The FAA requires operating, airworthiness and other certificates; approval of personnel who may engage in flight, maintenance or operating activities; record-keeping procedures in accordance with FAA requirements; and FAA approval of flight training and retraining programs.
Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA requires operating, airworthiness and other certificates; approval of personnel who may engage in flight, maintenance or operating activities; record-keeping procedures in accordance with FAA requirements; and FAA approval of flight training and retraining programs.
The number of aircraft listed above for each prorate agreement approximates the number of aircraft we use to serve the prorate routes. 8 Table of Contents In addition to the aircraft operating under the respective arrangements outlined above, SkyWest Airlines has agreed with its major airline partners to place additional aircraft under a capacity purchase arrangement as summarized below.
The number of aircraft listed above for each prorate agreement approximates the number of aircraft the Company uses to serve the prorate routes. In addition to the aircraft operating under the respective arrangements outlined above, we have agreed with our major airline partners to place additional aircraft under capacity purchase arrangements as summarized below.
Under these fixed-fee agreements (commonly referred to as “capacity purchase agreements”), our major airline partners generally pay us fixed rates for operating the aircraft primarily based on the number of completed flights, flight time and the number of aircraft under contract. The major airline partners either directly pay for or reimburse us for specified direct operating expenses, including fuel expenses.
We generally provide regional flying to our major airline partners under long-term, fixed-fee, code-share agreements. Under these fixed-fee agreements (commonly referred to as “capacity purchase agreements”), our major airline partners generally pay us fixed rates for operating the aircraft primarily based on the number of completed flights, flight time and the number of aircraft under contract.
In exchange, the regional airline provides a designated number of low-capacity (usually between 50 and 76 seats) flights between larger airports served by the major airline and surrounding cities, usually in lower-volume markets. The financial arrangements between the regional airlines and their code-share partners usually involve either capacity purchase arrangements or prorate arrangements as explained below: ● Capacity Purchase Arrangements.
In exchange, the regional airline provides a designated number of low-capacity (usually between 50 and 76 seats) flights between larger airports served by the major airline and surrounding cities, usually in lower-volume markets.
The number of aircraft under our capacity purchase arrangements and our prorate arrangements as of December 31, 2022 is reflected in the summary below. The following summaries of our code-share agreements with our major airline partners do not purport to be complete and are qualified in their entirety by reference to the applicable agreement.
The following summaries of our code-share agreements with our major airline partners do not purport to be complete and are qualified in their entirety by reference to the applicable agreement.
As of December 31, 2022, we had 625 total aircraft in our fleet, including 517 aircraft in scheduled service or under contract under our code-share agreements, summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ E175 CRJ900 CRJ700 CRJ200 Total United 90 ​ — ​ 19 ​ 111 ​ 220 Delta ​ 84 ​ 41 ​ 5 ​ 25 ​ 155 American 20 ​ — ​ 80 ​ — ​ 100 Alaska 42 ​ — ​ — ​ — ​ 42 Aircraft in scheduled service or under contract ​ 236 ​ 41 ​ 104 ​ 136 ​ 517 Leased to third parties — ​ 5 ​ 35 ​ — ​ 40 Other* — ​ 3 ​ 28 ​ 37 ​ 68 Total Fleet 236 ​ 49 ​ 167 ​ 173 ​ 625 *As of December 31, 2022, other aircraft included: supplemental spare aircraft supporting our code-share agreements that may be used in future code-share or leasing arrangements, aircraft transitioning between code-share agreements with our major airline partners, aircraft held for sale or aircraft that are scheduled to be disassembled for use as spare parts.
As of December 31, 2023, we had 603 total aircraft in our fleet, including 485 aircraft in scheduled service or under contract under our code-share agreements, summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ E175 CRJ900 CRJ700 CRJ200 Total United 90 ​ — ​ 19 ​ 89 ​ 198 Delta ​ 85 ​ 41 ​ 9 ​ — ​ 135 American 20 ​ — ​ 90 ​ — ​ 110 Alaska 42 ​ — ​ — ​ — ​ 42 Aircraft in scheduled service or under contract ​ 237 ​ 41 ​ 118 ​ 89 ​ 485 SWC ​ — ​ — ​ — ​ 16 ​ 16 Leased to third parties — ​ 5 ​ 35 ​ — ​ 40 Other (1) — ​ 3 ​ 14 ​ 45 ​ 62 Total Fleet 237 ​ 49 ​ 167 ​ 150 ​ 603 (1) As of December 31, 2023, 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, aircraft held-for-sale or aircraft that are scheduled to be disassembled for use as spare parts.
Bankruptcy Code, if either party makes a general assignment for the benefit of creditors or becomes insolvent; or 9 Table of Contents ● subject to limitations imposed by the U.S. Bankruptcy Code, if bankruptcy proceedings are commenced against either party and certain specified conditions are not satisfied.
Bankruptcy Code, if either party makes a general assignment for the benefit of creditors or becomes insolvent; or ● subject to limitations imposed by the U.S.
Human Capital Resources Employee Profile As of December 31, 2022, we employed 13,582 total employees, consisting of 4,704 pilots, 4,118 flight attendants, 1,837 airport operations personnel, 1,333 maintenance technicians, 839 other maintenance personnel, 171 dispatchers and 580 operational support and administrative personnel. Our total employees at December 31, 2022, included 1,730 part-time employees.
Human Capital Resources Employee Profile As of December 31, 2023, we employed 13,121 total employees, consisting of 4,410 pilots, 4,135 flight attendants, 1,633 airport operations personnel, 1,328 maintenance technicians, 821 other maintenance personnel, 170 dispatchers and 624 operational support and administrative personnel. Our total employees at December 31, 2023, included 1,651 part-time employees.
We anticipate our major airline partners will take responsibility for carbon emissions incurred on our contract flights. 13 Table of Contents Our board of directors has oversight of our environment-related performance. Through software and training, we heavily monitor and manage our fuel trends and fuel consumption which leads to better fuel management and reductions in emissions.
Our board of directors has oversight of our environment-related performance. Through software and training, we heavily monitor and manage our fuel trends and fuel consumption which leads to better fuel management and reductions in emissions.
The aircraft compensation structure varies by agreement but is intended to cover either our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease expense costs while the aircraft is under contract.
The aircraft compensation structure varies by agreement but is intended to cover either our aircraft principal and interest debt service costs or our aircraft depreciation and interest expense while the aircraft is under contract. The number of aircraft under our capacity purchase arrangements and our prorate arrangements as of December 31, 2023 is reflected in the summary below.
Approximately 89.6% of these employees were represented by in-house labor associations that have entered into collective bargaining agreements regarding employee compensation and work rules. None of these employees are currently represented by an outside union. Outside union organizing efforts among our employees do occur from time to time and may continue in the future.
None of these employees are currently represented by an outside union. Outside union organizing efforts among our employees do occur from time to time and may continue in the future.
(“PSA”) and Piedmont Airlines (“Piedmont”) (Envoy, PSA and Piedmont are owned by American); Horizon Air Industries, Inc. (“Horizon”) (owned by Alaska Air Group, Inc.); GoJet Airlines, LLC (“GoJet”); Mesa Air Group, Inc. (“Mesa”); and Republic Airways Holdings Inc. (“Republic”).
Our primary competitors include Air Wisconsin Airlines Corporation (“Air Wisconsin”); Endeavor Air, Inc. (“Endeavor”) (owned by Delta); Envoy Air Inc. (“Envoy”), PSA Airlines, Inc. (“PSA”) and Piedmont Airlines (“Piedmont”) (Envoy, PSA and Piedmont are owned by American); Horizon Air Industries, Inc. (“Horizon”) (owned by Alaska Air Group, Inc.); GoJet Airlines, LLC (“GoJet”); Mesa Air Group, Inc.
Under the RLA, a collective bargaining agreement between an airline and a labor representative does not expire, but instead becomes amendable as of a stated date. If either party wishes to modify the terms of any such agreement, it must notify the other party in the manner prescribed by the RLA and/or described in the agreement.
If either party wishes to modify the terms of any such agreement, it must notify the other party in the manner prescribed by the RLA and/or described in the agreement.
We have worked aggressively to reduce our reliance on paper manuals, further eliminating unnecessary waste while increasing efficiencies. We have entered into a strategic partnership with Eve UAM, LLC (“Eve UAM”), an Embraer company, to develop a network of deployment for Eve UAM’s electric vertical takeoff and landing (“eVTOL”) aircraft.
We have entered into a strategic partnership with Eve UAM, LLC (“Eve UAM”), an Embraer company, to develop a network of deployment for Eve UAM’s electric vertical takeoff and landing (“eVTOL”) aircraft. This partnership includes the option for SkyWest to purchase up to 100 eVTOL aircraft.
Substantially all of our flights are operated as United Express, Delta Connection, American Eagle or Alaska Airlines flights under code-share arrangements (commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its flights) with United, Delta, American or Alaska, respectively.
Code-share agreement are commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its flights. As of December 31, 2023, we offered approximately 1,850 daily departures, of which approximately 740 were United Express flights, 580 were Delta Connection flights, 340 were American Eagle flights and 190 were Alaska Airlines flights.
A general grievance may also be filed even if an employee has already utilized their chain of command or chooses to remain anonymous. Reports can be filed using a toll-free ethics and grievance hotline or by using on online reporting system on SkyWest’s intranet. Government Regulation All interstate air carriers, including SkyWest, are subject to regulation by the U.S.
Reports can be filed using a toll-free ethics and grievance hotline or by using on online reporting system on SkyWest’s intranet. 12 Table of Contents Government Regulation All interstate air carriers, including SkyWest, are subject to regulation by the U.S. Department of Transportation (the “DOT”), the U.S. Federal Aviation Administration (the “FAA”) and other governmental agencies.
This partnership includes the option for SkyWest to purchase up to 100 eVTOL aircraft. Eve UAM anticipates its four-passenger eVTOL aircraft will be certified and available for service after 2025. Safety and Security We are committed to the safety and security of our passengers and employees.
Eve UAM anticipates its four-passenger eVTOL aircraft will be certified and available for service after 2026. Safety and Security We are committed to the safety and security of our passengers and employees. We have taken many steps, both voluntarily and as mandated by governmental authorities, to increase the safety and security of our operations.
We are evaluating opportunities to increase the number of electric powered ground equipment, including tugs and pushbacks used at airports where we provide ramp services. We participate with our major airline partners in recycling programs, and we have implemented recycling initiatives in our facilities to reduce the amount of paper, plastic and other recyclables going to landfills.
We are evaluating opportunities to increase the number of electric powered ground equipment, including tugs and pushbacks used at airports where we provide ramp services.
Training and Aircraft Maintenance SkyWest provides substantially all training to our crew members and maintenance personnel at our training facilities. Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at our maintenance facilities. We also use third-party vendors for certain airframe and engine maintenance work.
Bankruptcy Code, if bankruptcy proceedings are commenced against either party and certain specified conditions are not satisfied. 9 Table of Contents Training and Aircraft Maintenance We provide substantially all training to our crew members and maintenance personnel at our training facilities. Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at our maintenance facilities.
As of December 31, 2022, our fleet consisted of aircraft manufactured by Embraer S.A. (“Embraer”) and Bombardier Aerospace (“Bombardier”), including the E175 regional jet aircraft (“E175”), the Canadair CRJ900 regional jet aircraft (“CRJ900”), the Canadair CRJ700 regional jet aircraft (“CRJ700”) and the Canadair CRJ200 regional jet aircraft (“CRJ200”).
(“Embraer”) and MHI RJ Aviation ULC, formerly known as Bombardier Aerospace (“Bombardier”), including the E175 regional jet aircraft (“E175”), the Canadair CRJ900 regional jet aircraft (“CRJ900”), the Canadair CRJ700 regional jet aircraft (“CRJ700”) and the Canadair CRJ200 regional jet aircraft (“CRJ200”).
Our training programs include full-motion flight simulators for pilots, on-the-job training for technicians, and cabin trainers for flight attendants. We also reinforce our guiding principles, including but not limited to, health and safety, excellent service and quality, and respect and teamwork through our training and development programs, as well as through our employee appreciation and recognition programs.
We also reinforce our guiding principles, including but not limited to, health and safety, personal and corporate integrity, excellent service and quality, and respect and teamwork through our training and development programs, as well as through our employee appreciation and recognition programs. During 2022 and 2023, we experienced significant turnover of our pilots, specifically our captains and experienced first officers.
We are committed to a working environment that is safe and supports open and honest communication. We have established a reporting system for any SkyWest employee to report a violation of Company policy including harassment, discrimination, drug and alcohol use, questionable financial practice, or a breach involving safety or security.
We have established a reporting system for any SkyWest employee to report a violation of Company policy including harassment, discrimination, drug and alcohol use, questionable financial practice, or a breach involving safety or security. A general grievance may also be filed even if an employee has already utilized their chain of command or chooses to remain anonymous.
Our operations are conducted principally at airports that support our major airline partners’ route networks, including Chicago (O’Hare), Dallas, Denver, Detroit, Houston, Los Angeles, Minneapolis, Phoenix, Salt Lake City, San Francisco and Seattle. SkyWest has been flying since 1972. During our long operating history, we have developed an industry-leading reputation for providing quality regional airline service.
The major airline partners either directly pay for or reimburse us for specified direct operating expenses, including fuel expenses. Our operations are conducted principally at airports that support our major airline partners’ route networks, including Chicago (O’Hare), Dallas, Denver, Detroit, Houston, Los Angeles, Minneapolis, Phoenix, Salt Lake City, San Francisco and Seattle.
The SkyWest Leasing segment’s total assets and capital expenditures include the acquired E175 aircraft, and aircraft and engines leased to third parties. As of December 31, 2022, SkyWest Leasing leased 35 CRJ700 aircraft, five CRJ900 aircraft and regional jet aircraft engines to third parties.
The SkyWest Leasing segment additionally includes the revenue and expense from leasing aircraft and engines to third parties. The SkyWest Leasing segment’s total assets and capital expenditures include the acquired E175 aircraft, and aircraft and engines leased to third parties.
ITEM 1. BUSINESS General Through SkyWest Airlines, we offer scheduled passenger service to destinations in the United States, Canada and Mexico.
ITEM 1. BUSINESS General Through SkyWest Airlines, we offer scheduled passenger service to destinations in the United States, Canada and Mexico. Substantially all of our flights are operated as United Express, Delta Connection, American Eagle or Alaska Airlines flights under code-share agreements with United, Delta, American or Alaska, respectively.
In 2022, a significant increase in hiring of our pilots, particularly captains, by major airlines, low-cost carrier airlines and air freight companies negatively impacted our attrition rates and our ability to operate flight schedules requested by our major airline partners, in part leading to the year-over-year decline in both flights completed and block hours incurred.
Higher attrition rates have negatively impacted our ability to operate flight schedules requested by our major airline partners, which was the leading factor in our year-over-year decline in both flights completed and block hours incurred from 2021 to 2023. Capacity and flight schedule impact.
We use our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should monitor our website, in addition to following our press releases, SEC filings and public conferences calls and webcasts. Information relating to our corporate governance is also included on our investor relations website.
Investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. Information relating to our corporate governance is also included on our investor relations website. The information in or accessible through the SEC and our website are not incorporated into, and are not considered part of, this filing.
As of December 31, 2022, all our employees are employed by SkyWest Airlines, or to a limited extent, by SkyWest Charter, in preparation of the anticipated launch of SkyWest Charter operations in 2023. Certain SkyWest Airlines employees also provide administrative support to the SkyWest Leasing segment.
As of December 31, 2023, all our employees are employed by SkyWest Airlines or to a limited extent, by SWC. Certain SkyWest Airlines employees also provide administrative support to the SkyWest Leasing segment. Approximately 89.0% of these employees were represented by in-house labor associations that have entered into collective bargaining agreements regarding employee compensation and work rules.
SkyWest Leasing SkyWest Leasing is a reportable segment that includes revenue associated with our financing of new aircraft with debt under our capacity purchase agreements, currently consisting of our E175 aircraft, and the depreciation and interest expense of our E175 aircraft. The SkyWest Leasing segment additionally includes the revenue and expense from leasing aircraft and engines to third parties.
As of December 31, 2023, our fleet seat configuration by aircraft type is summarized as follows: ​ ​ 4 Table of Contents Manufacturer ​ Aircraft Type ​ Seat Configuration Embraer E175s ​ 70-76 Bombardier CRJ900s ​ 70-76 Bombardier CRJ700s ​ 65-70 Bombardier CRJ200s ​ 30-50 SkyWest Leasing SkyWest Leasing is a reportable segment that includes revenue associated with our financing of new aircraft with debt under our capacity purchase agreements, currently consisting of our E175 aircraft, and the depreciation and interest expense of our E175 aircraft.
In September 2022, we entered into a collective bargaining agreement with our pilots, increasing the pay rates for pilots. 10 Table of Contents Our relations with labor are governed by the Railway Labor Act (the “RLA”), the federal law governing labor relations between air carriers and their employees.
Our relations with labor are governed by the Railway Labor Act (the “RLA”), the federal law governing labor relations between air carriers and their employees. Under the RLA, a collective bargaining agreement between an airline and a labor representative does not expire, but instead becomes amendable as of a stated date.
Our principal executive offices are located at 444 South River Road, St. George, Utah 84790, and our primary telephone number is (435) 634-3000. We maintain an internet website at inc.skywest.com, which provides links to our annual, quarterly and current reports and any amendments to those reports filed with or furnished to the Securities and Exchange Commission (“SEC”).
Our principal executive offices are located at 444 South River Road, St. George, Utah 84790, and our primary telephone number is (435) 634-3000.
Additionally, attrition of our pilots or other workgroups may reduce our flying schedules and have a negative impact on our operations and financial condition. Recovery from the COVID-19 Pandemic and Labor Impact COVID-19 had a significant, negative impact on our business, revenue and financial results in 2020 with moderate improvement in 2021.
Additionally, attrition of our pilots or other workgroups may reduce our flying schedules and have a negative impact on our operations and financial condition. 5 Table of Contents Regional Airline Pilot Constraints As passenger demand in the airline industry recovered from the COVID-19 pandemic in 2020, the number of regional airline captains and first officers hired by major airlines and low-cost carriers significantly increased.
The information on our website does not constitute part of this Report. In addition, we provide electronic or paper copies of our SEC filings free of charge upon request.
Further, our references to the URLs for these websites are intended to be inactive textual references only. In addition, we provide electronic or paper copies of our SEC filings free of charge upon request.
Liquidity At December 31, 2022, we had $1.1 billion in total available liquidity, consisting of $1.0 billion in cash, cash equivalents and marketable securities, and $70.1 million available for borrowings under SkyWest Airlines’ line of credit.
We completed the following number of flights and related block hours in 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2023 2022 ​ 2021 Departures ​ ​ 691,962 ​ 739,388 ​ 749,943 Block hours ​ ​ 1,140,443 ​ 1,254,392 ​ 1,319,628 Liquidity At December 31, 2023, we had $906.0 million in total available liquidity, consisting of $835.2 million in cash, cash equivalents and marketable securities, and $70.8 million available for borrowing under our line of credit.
Our employees are covered by the RLA. Under the RLA, employees have the right to decide whether they wish to be represented by a union. They also have the right to reject union representation. Culture At SkyWest our people are our most valued assets, and the success of our business is dependent on having an engaged and effective workforce.
We have also worked with our other operational workgroups to secure significant increases in each of their pay scales and bonuses, including a 35% increase in starting pay for SkyWest flight attendants in 2023. Culture At SkyWest our people are our most valued assets, and the success of our business is dependent on having a collaborative, engaged and effective workforce.
SkyWest competes principally with other regional airlines. Our operations extend throughout most major geographic markets in the United States. Our competition includes, therefore, nearly every other domestic regional airline. Our primary competitors include Air Wisconsin Airlines Corporation (“Air Wisconsin”); Endeavor Air, Inc. (“Endeavor”) (owned by Delta); Envoy Air Inc. (“Envoy”), PSA Airlines, Inc.
As of December 31, 2023, SWC had 16 aircraft available for on-demand charter service. Competition and Economic Conditions The airline industry is highly competitive. We compete principally with other regional airlines. Our operations extend throughout most major geographic markets in the United States. Our competition includes, therefore, nearly every other domestic regional airline.
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As of December 31, 2022, we offered approximately 1,620 daily departures, of which approximately 600 were United Express flights, 530 were Delta Connection flights, 330 were American Eagle flights and 160 were Alaska Airlines flights. We generally provide regional flying to our major airline partners under long-term, fixed-fee, code-share agreements.
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We conduct our code-share operations with our major airline partners pursuant to various code-share agreements described under the heading “Code-Share Agreements” below. Fleet SkyWest has been flying since 1972. During our long operating history, we have developed an industry-leading reputation for providing quality regional airline service. As of December 31, 2023, our fleet consisted of aircraft manufactured by Embraer S.A.
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As of December 31, 2022, our fleet seat configuration by aircraft type is summarized as follows: ​ ​ 4 Table of Contents Manufacturer ​ Aircraft Type ​ Seat Configuration Embraer E175s ​ 70-76 Bombardier CRJ900s ​ 70-76 Bombardier CRJ700s ​ 65-70 Bombardier CRJ200s ​ 50 We were incorporated in Utah in 1972.
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As of December 31, 2023, SkyWest Leasing leased 35 CRJ700 aircraft, five CRJ900 aircraft and regional jet aircraft engines to third parties. SkyWest Charter (SWC) In 2022, we formed a new subsidiary, SWC, which had its first revenue generating flight in May 2023. SWC offers on-demand charter service using CRJ200 aircraft in a 30-seat configuration.
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We conduct our code-share operations with our major airline partners pursuant to the following agreements: Major airline partner Agreement United ​ “United Express Agreements” and “United Express Prorate Agreement” Delta ​ “Delta Connection Agreement” and “Delta Connection Prorate Agreement” American ​ “American Agreement” Alaska ​ “Alaska Agreement” A summary of the terms for each of our code-share agreements is provided under the heading “Code-Share Agreements” below on page 7.
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As a result, we experienced a high level of captain and first officer attrition beginning in 2021 that has continued through 2023.
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SkyWest Charter In 2022, we formed a new subsidiary, SkyWest Charter, with the intent to offer public charter service to underserved communities in the United States and on-demand charter services using CRJ200 aircraft in a 30-seat configuration. We anticipate SkyWest Charter will begin operations in 2023. Competition and Economic Conditions The airline industry is highly competitive.
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The financial arrangements between the 6 Table of Contents regional airlines and their code-share partners usually involve either capacity purchase arrangements or prorate arrangements as explained below: ● Capacity Purchase Arrangements.
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During 2022, passenger demand recovered; however, indirect factors associated with the recovery from COVID-19, such as employee attrition, particularly captain attrition, workforce shortages and third-party labor shortages impacted our operations in 2022. Capacity and flight schedule impact.
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Four new E175 aircraft are currently scheduled for delivery in 2024, seven new E175 aircraft are scheduled for delivery in 2025 and eight new E175 aircraft are scheduled for delivery in 2026. We anticipate financing the aircraft through debt. ● Capacity purchase agreement with Delta for one new E175 aircraft.
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We completed the following number of flights and related block hours in 2020, 2021 and 2022, demonstrating our ongoing flight schedule recovery toward pre-pandemic (2019) levels: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 2021 ​ 2020 ​ 2019 Departures ​ ​ 739,388 ​ 749,943 ​ 585,257 ​ 842,098 Block hours ​ ​ 1,254,392 ​ 1,319,628 ​ 973,338 ​ 1,464,405 The number of flights we completed and related block hours incurred in 2022 was 87.8% and 85.7% of 2019 levels, respectively, compared to 2021, when the number of flights we completed and related block hours incurred was 89.1% and 90.1% of 2019 levels.
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We also use third-party vendors for certain airframe and engine maintenance work.
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Department of Transportation (the “DOT”), the U.S. Federal Aviation Administration (the “FAA”) and other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service.
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Under the RLA, employees have the right to decide whether they wish to be represented by a union. They also have the right to reject union representation. In September 2022, we entered into a collective bargaining agreement with our pilots, increasing the pay rates for pilots.
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We have taken many steps, both voluntarily and as mandated by governmental authorities, to increase the safety and security of our operations.
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Additionally, during the years ended December 31, 2023 and December 31, 2022, we amended our capacity purchase agreements with our major airline partners which resulted in higher compensation as a result of our increased 10 Table of Contents labor costs.
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Our training programs include full-motion flight simulators for pilots, on-the-job training for technicians, and cabin trainers for flight attendants.
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Employee Reporting Our Code of Conduct contains general guidelines for conducting business in an ethical manner. We are committed to a working environment that is safe and supports open and honest communication.
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We participate with our major airline partners in recycling programs, and we have implemented recycling initiatives in our 13 Table of Contents facilities to reduce the amount of paper, plastic and other recyclables going to landfills. We have worked aggressively to reduce our reliance on paper manuals, further eliminating unnecessary waste while increasing efficiencies.
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Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are available free of charge on our website at inc.skywest.com , as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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We may not be able to enter into substitute code-share arrangements, and any such arrangements we might secure may not be as favorable to us as our current agreements.
We may not be able to enter into substitute code-share agreements, and any such arrangements we might secure may not be as favorable to us as our current agreements.
If any of the risks we describe below occur, or if any unforeseen risk develops, our operating results may suffer, our financial condition may deteriorate, the trading price of our common stock may decline and investors could lose all or part of their investment in us. 14 Table of Contents Risks That May Disrupt Our Operations We have experienced, and may continue to experience, difficulty in recruiting, retaining, and upgrading qualified pilots.
If any of the risks we describe below occur, or if any unforeseen risk develops, our operating results may suffer, our financial condition may deteriorate, the trading price of our common stock may decline and investors could lose all or part of their investment in us. 14 Table of Contents Risks That May Disrupt Our Operations We have experienced, and may continue to experience, difficulty in retaining and upgrading qualified pilots.
Our high level of fixed obligations could impact our ability to obtain additional financing to support additional expansion plans or divert cash flows from operations and expansion plans to service the fixed obligations. Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning or leasing the aircraft on a monthly basis.
Our high level of fixed obligations could impact our ability to obtain additional financing to support additional expansion plans or divert cash flows from operations and expansion plans to service the fixed obligations. Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning the aircraft on a monthly basis.
Our operations and financial condition are affected by many changing economic and other conditions beyond our control, including, among others: ● disruptions in the credit markets, which may impact availability of price competitive financing; ● actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, inflation, higher interest rates, public health emergencies (including the COVID-19 pandemic and related variants), wars (including the ongoing conflict between Russia and the Ukraine), terrorist attacks or political instability; ● impact on workforce availability and economic uncertainty resulting from the COVID-19 recovery; ● potential resurgence of COVID-19 or future public health threats similar to COVID-19 could negatively impact demand and the industry; ● changes in consumer preferences, perceptions, spending patterns or demographic trends; 15 Table of Contents ● changes in the competitive environment due to industry consolidation, new airlines entering the market, our major airline partners operating smaller sized aircraft that may reduce the demand for regional aircraft and other factors; ● actual or potential disruptions to U.S. air traffic control systems; ● interference on aviation equipment from the deployment of 5G wireless telecommunications systems; ● price of jet fuel and oil that may negatively impact the number of flights we are scheduled to operate by our major airline partners under our capacity purchase agreements and may negatively impact the profitability of our prorate agreements; ● outbreaks of diseases and other illnesses that affect travel behavior; and ● weather and natural disasters.
Our operations and financial condition are affected by many changing economic and other conditions beyond our control, including, among others: ● disruptions in the credit markets, which may impact availability of price competitive financing; ● actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, inflation, higher interest rates, public health emergencies (including the COVID-19 pandemic and related variants), wars (including the ongoing conflict between Russia and the Ukraine and Israel and Palestine), terrorist attacks or political instability; ● impact on workforce availability and economic uncertainty; ● potential resurgence of COVID-19 or future public health threats similar to COVID-19 could negatively impact demand and the industry; ● changes in consumer preferences, perceptions, spending patterns or demographic trends; ● changes in the competitive environment due to industry consolidation, new airlines entering the market, our major airline partners operating smaller sized aircraft that may reduce the demand for regional aircraft and other factors; 15 Table of Contents ● actual or potential disruptions to U.S. air traffic control systems; ● interference on aviation equipment from the deployment of 5G wireless telecommunications systems; ● price of jet fuel and oil that may negatively impact the number of flights we are scheduled to operate by our major airline partners under our capacity purchase agreements and may negatively impact the profitability of our prorate agreements; ● outbreaks of diseases and other illnesses that affect travel behavior; and ● weather and natural disasters.
However, we cannot provide assurance that our labor costs going forward will remain competitive because of changes in supply and demand for labor in the regional industry. We compete against other airlines and businesses for labor in many highly skilled positions.
However, we cannot provide assurance that our labor costs going forward will remain competitive because of changes in supply and demand for labor in the regional airline industry. We compete against other airlines and businesses for labor in many highly skilled positions.
Pursuant to our capacity purchase arrangements, our major airline partners have agreed to bear the economic risk of fuel price fluctuations on our contracted flights. However, we bear the economic risk of fuel price fluctuations on our prorate operations and expect to bear the economic risk of fuel price fluctuations on our charter operations.
Pursuant to our capacity purchase arrangements, our major airline partners have agreed to bear the economic risk of fuel price fluctuations on our contracted flights. However, we bear the economic risk of fuel price fluctuations on our prorate and charter operations.
The aircraft compensation structure varies by agreement but is intended to cover either our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease expense costs while the aircraft is under contract.
The aircraft compensation structure varies by agreement but is intended to cover either our aircraft principal and interest debt service costs or our aircraft depreciation and interest expense while the aircraft is under contract.
Even if we meet all required debt, lease and purchase obligations, the size of these long-term obligations could negatively affect our financial condition and results of operations in many ways, including: ● increasing the cost, or limiting the availability of, additional financing for working capital, acquisitions or other purposes; ● limiting the ways in which we can use our cash flow, much of which may have to be used to satisfy debt and lease obligations; and ● adversely affecting our ability to respond to changing business or economic conditions or continue our growth strategy.
Even if we meet all required debt, lease and purchase obligations, 23 Table of Contents the size of these long-term obligations could negatively affect our financial condition and results of operations in many ways, including: ● increasing the cost, or limiting the availability of, additional financing for working capital, acquisitions or other purposes; ● limiting the ways in which we can use our cash flow, much of which may have to be used to satisfy debt and lease obligations; and ● adversely affecting our ability to respond to changing business or economic conditions or continue our growth strategy.
If a legal proceeding is resolved against us, it could result in significant compensatory damages or injunctive relief that could materially adversely affect our financial condition, results of operations and cash flows. 26 Table of Contents The adoption of new tax legislation or changes to existing tax laws and regulations could adversely affect our financial condition or results of operations.
If a legal proceeding is resolved against us, it could result in significant compensatory damages or injunctive relief that could materially adversely affect our financial condition, results of operations and cash flows. 27 Table of Contents The adoption of new tax legislation or changes to existing tax laws and regulations could adversely affect our financial condition or results of operations.
The inability to remain competitive on the various factors valued by our major airline partners could adversely affect our operating results and financial condition. Risks Related to Our Operating Costs and Personnel Increases in labor costs, including pilot costs, flight attendant costs, maintenance costs and overhead costs may result in lower operating margins under our capacity purchase contracts.
The inability to remain competitive on the various factors valued by our major airline partners could adversely affect our operating results and financial condition. Risks Related to Our Operating Costs and Personnel Increases in labor costs, including pilot costs, flight attendant costs, maintenance costs and overhead costs may result in lower operating margins under our capacity purchase agreements.
Additionally, under our capacity purchase contracts with United, Delta, American and Alaska, a portion of our compensation is based upon pre-determined rates typically applied to production statistics (such as departures, block hours, flight hours and number of aircraft in service each month).
Additionally, under our capacity purchase agreements with United, Delta, American and Alaska, a portion of our compensation is based upon pre-determined rates typically applied to production statistics (such as departures, block hours, flight hours and number of aircraft in service each month).
This strategic venture involves significant risks, including: ● we may not realize a satisfactory return on our investment; ● the joint venture may divert management’s attention from our core business; ● our joint venture partner could have investment goals that are not consistent with our investment objectives, including the timing, terms and strategies for any investments; and ● our joint venture partner might fail to fund their share of required capital contributions or fail to fulfill their other obligations.
This strategic venture involves significant risks, including: ● we may not realize a satisfactory return on our investment; ● the joint venture may divert management’s attention from our core business; ● our joint venture partner could have investment goals that are not consistent with our investment objectives, including the timing, terms and strategies for any investments; and 24 Table of Contents ● our joint venture partner might fail to fund their share of required capital contributions or fail to fulfill their other obligations.
The market price of our common stock may fluctuate significantly for a variety of reasons, including: general market, political and other economic conditions; new regulatory pronouncements or changes in regulatory guidelines; announcements concerning the airline industry, our major airline partners or competitors; the market’s reaction to our quarterly or annual earnings or those of other companies in the airline industry; failure to meet financial analysts’ performance expectations or changes in recommendations by financial analysts for our common stock or the stock of other airlines; significant sales of our common stock, and other risks described in these “Risk Factors.” In recent periods, the stock market has experienced extreme declines and volatility, significantly impacting the market price of securities issued by many companies, including us and other companies in our industry.
The market price of our common stock may fluctuate significantly for a variety of reasons, including: general market, political and other economic conditions; labor availability, including regional airline pilots; new regulatory pronouncements or changes in regulatory guidelines; announcements concerning the airline industry, our major airline partners or competitors; the market’s reaction to our quarterly or annual earnings or those of other companies in the airline industry; failure to meet financial analysts’ performance expectations or changes in recommendations by financial analysts for our common stock or the stock of other airlines; significant sales of our common stock, and other risks described in these “Risk Factors.” In recent periods, the stock market has experienced extreme declines and volatility, significantly impacting the market price of securities issued by many companies, including us and other companies in our industry.
We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and regulations to which we are subject. A decision by the FAA to ground, or require time-consuming inspections of or maintenance on, all or any of our aircraft for any reason may have a material adverse effect on our operations.
We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and regulations to which we are subject. A decision by the FAA to ground, or 17 Table of Contents require time-consuming inspections of or maintenance on, all or any of our aircraft for any reason may have a material adverse effect on our operations.
If Treasury exercises its option to purchase shares of our common stock under warrants previously issued to Treasury, such exercise will be dilutive to our shareholders. As of December 31, 2022, Treasury has not exercised any of the warrants issued.
If Treasury exercises its option to purchase shares of our common stock under warrants previously issued to Treasury, such exercise will be dilutive to our shareholders. As of December 31, 2023, Treasury has not exercised any of the warrants issued.
Those disagreements may result in litigation, arbitration, settlement negotiations or other proceedings. Furthermore, there can be no assurance that any or all of those proceedings, if commenced, would be resolved in our favor. An unfavorable result in any such proceeding could have adverse financial consequences or require us to modify our operations.
Those disagreements may result in litigation, arbitration, 20 Table of Contents settlement negotiations or other proceedings. Furthermore, there can be no assurance that any or all of those proceedings, if commenced, would be resolved in our favor. An unfavorable result in any such proceeding could have adverse financial consequences or require us to modify our operations.
A significant interruption or disruption in service at one of our hubs, due to adverse weather, system malfunctions, airport construction, security closures or otherwise, could result 16 Table of Contents in the cancellation or delay of a significant portion of our flights and, as a result, could have a severe adverse impact on our operations and financial performance.
A significant interruption or disruption in service at one of our hubs, due to adverse weather, system malfunctions, airport construction, security closures or otherwise, could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a severe adverse impact on our operations and financial performance.
If additional terrorist attacks are launched against the airline industry, there will be lasting consequences of such attacks, which may include loss of life, property damage, increased security and insurance costs, increased concerns about future terrorist attacks, increased government regulation and airport delays due to heightened 17 Table of Contents security.
If additional terrorist attacks are launched against the airline industry, there will be lasting consequences of such attacks, which may include loss of life, property damage, increased security and insurance costs, increased concerns about future terrorist attacks, increased government regulation and airport delays due to heightened security.
In the event any of our major airline partners defaults under a 22 Table of Contents capacity purchase agreement or we are unable to extend the flying contract terms on aircraft with ongoing financial obligations, our financial position and financial results could be materially adversely affected.
In the event any of our major airline partners defaults under a capacity purchase agreement or we are unable to extend the flying contract terms on aircraft with ongoing financial obligations, our financial position and financial results could be materially adversely affected.
Additional terrorist attacks and the fear of such attacks could negatively impact the airline industry, and result in further decreased passenger traffic and yields, increased flight delays or cancellations associated with new government mandates, as well as increased security, fuel and other costs.
Additionally, terrorist attacks and the fear of such attacks could negatively impact the airline industry, and result in decreased passenger traffic and yields, increased flight delays or cancellations associated with new government mandates, as well as increased security, fuel and other costs.
Compliance with laws, regulations, and other programs intended to reduce emissions or otherwise protect the environment may require us to reduce our emissions, secure carbon offset credits or otherwise pay for emissions, or make capital investments to modify certain aspects of our operations to reduce emissions.
Compliance with laws, regulations and other programs 25 Table of Contents intended to reduce emissions or otherwise protect the environment may require us to reduce our emissions, secure carbon offset credits or otherwise pay for emissions or make capital investments to modify certain aspects of our operations to reduce emissions.
We compete with other regional airlines on various factors including, but not limited to, labor resources, including pilots and mechanics; low operating costs; financial resources, including the ability to finance aircraft at competitive terms; geographical infrastructure; and overall customer service levels relating to on-time arrival and flight completion percentages.
The airline industry is highly competitive. We compete with other regional airlines on various factors including, but not limited to, labor resources, including pilots and mechanics; low operating costs; financial resources, including the ability to finance aircraft at competitive terms; geographical infrastructure; and overall customer service levels relating to on-time arrival and flight completion percentages.
During 2022, we produced approximately 5.5 million metric tons of CO 2 e primarily from jet fuel emissions, using industry emissions factors for jet fuel gallons consumed on flights we operated under our code-share agreements.
During 2023, we produced approximately 5.0 million metric tons of CO 2 e primarily from jet fuel emissions, using industry emissions factors for jet fuel gallons consumed on flights we operated under our code-share agreements.
Our business is labor intensive, requiring large numbers of pilots, flight attendants, mechanics and other personnel. Labor costs constitute a significant percentage of our total operating costs. Increases in our labor costs could 20 Table of Contents result in a material reduction in our earnings.
Our business is labor intensive, requiring large numbers of pilots, flight attendants, mechanics and other personnel. Labor costs constitute a significant percentage of our total operating costs. Increases in our labor costs could result in a material reduction in our earnings.
Our growth may be limited with our major airline partners' flight systems. Additional growth opportunities within our major airline partners’ flight systems are limited by various factors, including a limited number of regional aircraft each major airline partner can operate in its regional network due to its own labor agreements or scope limitations.
Our growth may be limited with our major airline partners' flight systems. Additional growth opportunities within our major airline partners’ flight systems are limited by various factors, including a limited number of regional aircraft each major airline partner can operate in its regional network due to scope 19 Table of Contents limitations in its own labor agreements.
Risks Related to Dividends, Share Repurchases and Our Common Stock We cannot assure we will resume dividend payments and/or stock repurchases in the future. Historically, we have paid dividends and repurchased shares of our common stock in varying amounts.
Risks Related to Dividends, Share Repurchases and Our Common Stock We cannot assure that we will resume dividend payments in the future and we cannot assure that we will continue stock repurchases in the future. Historically, we have paid dividends and repurchased shares of our common stock in varying amounts.
As of December 31, 2022, we had approximately $5.5 billion of property and equipment and related assets, net of accumulated depreciation.
As of December 31, 2023, we had approximately $5.5 billion of property and equipment and related assets, net of accumulated depreciation.
Additionally, timing and availability of new aircraft deliveries could be delayed beyond our control. We have a significant amount of contractual long-term debt obligations. As of December 31, 2022, we had a total of approximately $3.4 billion in total long-term debt obligations.
Additionally, timing and availability of new aircraft deliveries could be delayed beyond our control. We have a significant amount of contractual long-term debt obligations. As of December 31, 2023, we had a total of approximately $3.0 billion in total long-term debt obligations.
If our code-share relationship with United or Delta were terminated, we would be significantly impacted and likely would not have an immediate source of revenue or earnings to offset such loss.
If our code-share relationship with United or 18 Table of Contents Delta were terminated, our operations would be significantly impacted and we would not likely have an immediate source of revenue or earnings to offset such loss.
Further, in September 2022, we increased pay rates for our pilots; however, there is no assurance the higher pay rates will have a significant impact on recruiting, retaining, and upgrading our pilots, which could negatively impact our operations.
Further, in September 2022, we increased pay rates for our pilots; however, there is no assurance our current pay rates will have a significant impact on retaining and upgrading our pilots, which could negatively impact our operations.
The primary operating costs intended to be compensated by the pre-determined rates include labor costs, including crew training costs, certain aircraft maintenance expenses, and overhead costs.
The primary operating costs intended to be compensated by the pre-determined rates include our labor and training costs, certain aircraft maintenance expenses and overhead costs.
Any changes in enacted tax laws, rules or regulatory or judicial interpretations; any adverse outcome in connection with tax audits in any jurisdiction; or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and results of operations.
Any changes in enacted tax laws, rules or regulatory or judicial interpretations; any adverse outcome in connection with tax audits in any jurisdiction; or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None
For example, during the year ended December 31, 2022 and 2021, our salary, wage and benefit costs constituted approximately 42.9% and 40.5% of our total operating costs, respectively. In September 2022, we entered into a collective bargaining agreement with our pilots, increasing the pay rates for pilots.
For example, during the year ended December 31, 2023 and 2022, our salary, wage and benefit costs constituted approximately 46.7% and 42.9% of our total operating costs, respectively. In September 2022, we entered into a collective bargaining agreement with our pilots, increasing the pay rates for pilots.
Our prorate revenue in 2022 was negatively impacted by captain attrition to other airlines, and there is no assurance our prorate revenue will return to pre-pandemic levels in 2023 or thereafter.
Our prorate revenue in 2023 continued to be negatively impacted by captain attrition to other airlines, and there is no assurance our prorate revenue will return to pre-pandemic levels in 2024 or thereafter.
Our operations rely on recruiting and training qualified pilots. FAA regulations regarding personnel certification and qualifications, and potential future changes in FAA regulations, could limit the number of qualified new entrants that we could hire.
Our operations rely on recruiting and training qualified pilots. FAA regulations regarding personnel certification and qualifications have limited, and along with potential future changes in FAA regulations, could continue to limit, the number of qualified new entrants that we could hire.
We entered into a partnership with a third party to develop demand for electric-powered aircraft that involves significant uncertainty and risk. We have entered into a strategic partnership with Eve UAM, an Embraer company, to develop a network of deployment for Eve UAM’s eVTOL aircraft.
We entered into a partnership with a third party to develop demand for electric-powered aircraft that involves significant uncertainty and risk. We have entered into a strategic partnership with Eve Holding, Inc. (“Eve”, formerly EVE UAM, LLC, an Embraer company), to develop a network of deployment for Eve’s eVTOL aircraft.
As of December 31, 2022, we have firm purchase commitments for four E175 aircraft and spare engines totaling $140.3 million. Over the next several years, if we continue to add new aircraft to our fleet, we anticipate using significant amounts of capital to acquire these aircraft.
As of December 31, 2023, we have firm purchase commitments for 21 E175 aircraft and spare engines totaling $610.9 million. Over the next several years, if we continue to add new aircraft to our fleet, we anticipate using significant amounts of capital to acquire these aircraft.
Information technology security breaches, hardware or software failures, or other information technology disruptions may negatively impact our operations or reputation. The performance and reliability of our technology are critical to our ability to compete effectively.
Cybersecurity incidents, hardware or software failures or other information technology disruptions may negatively impact our operations, reputation and financial condition. The performance and reliability of our technology are critical to our ability to compete effectively.
As of December 31, 2022, 375 out of our total 517 aircraft in scheduled service were operating under a capacity purchase arrangement or a prorate agreement with either United or Delta.
As of December 31, 2023, 333 out of our total 485 aircraft in scheduled service were operating under a capacity purchase arrangement or a prorate agreement with either United or Delta.
Volatility in our common stock price may prevent holders from selling shares at or above the prices paid for them. During the year ended December 31, 2022, our common stock closing price varied between a high of $41.83 and a low of $14.87.
Our common stock price may fluctuate significantly. Volatility in our common stock price may prevent holders from selling shares at or above the prices paid for them. During the year ended December 31, 2023, our common stock closing price varied between a high of $52.87 and a low of $16.43.
Any internal technological error or failure or large-scale external interruption in the technological infrastructure we depend on, such as U.S. air traffic control systems, power, telecommunications or the internet, may disrupt our internal network. Any individual failure or repeated failure of technology could impact our ability to conduct our business and result in increased costs.
Any internal technological error, failure or large-scale external interruption in the information systems, networks, hardware, software and technological infrastructure we depend on, such as U.S. air traffic control systems, power, telecommunications or the internet (collectively, “IT Systems”), may disrupt our internal network, impact our ability to conduct our business and result in increased costs.
Dependence on foreign imports of crude oil, limited refining capacity and the possibility of changes in government policy on jet fuel production, transportation and marketing make it difficult to predict the future availability of jet fuel.
We may experience an increase in fuel prices in our prorate operations. Dependence on foreign imports of crude oil, limited refining capacity and the possibility of changes in government policy on jet fuel production, transportation and marketing make it difficult to predict the future availability of jet fuel.
Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that our operations are less safe or reliable than other airlines and could affect our relationships with our major airline partners. We may experience disruption in service with key third-party service providers.
Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that our operations are less safe or reliable than other airlines and could affect our relationships with our major airline partners.
In response to the COVID-19 pandemic, several major airlines offered their employees early retirement programs in 2020 and publicly announced their intention to hire significant levels of pilots in the near term. As a result, we are experiencing elevated levels of pilot attrition, particularly attrition of our captains.
In response to the COVID-19 pandemic, several major airlines offered their employees early retirement programs in 2020 and may continue to hire significant levels of pilots in the near term. As a result, we have experienced elevated levels of pilot attrition, particularly attrition of our captains, which may continue in the future.
Our major airline partners may experience events that negatively impact their financial strength or operations, which may also negatively impact our operations. Our business model relies significantly on our major airline partners, and we may be negatively affected by their financial and operating strength.
Our business model relies significantly on our major airline partners, and we may be negatively affected by their financial and operating strength.
Additionally, resuming our share repurchase program and any 25 Table of Contents future dividends may reduce our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. Our common stock price may fluctuate significantly.
Repurchases of our common stock pursuant to our share repurchase program and any future dividends could affect our stock price and increase its volatility. Additionally, our share repurchase program and any future dividends 26 Table of Contents may reduce our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions.
Our major airline partners are not prohibited from doing so under our code-share agreements. A decision by any of our major airline partners to phase out code-share relationships and instead acquire and operate their own regional jets or regional airline could have a material adverse effect on our financial results.
A decision by any of our major airline partners to phase out code-share relationships and instead acquire and operate their own regional jets or regional airline, or award more flying contracts to another regional airline, could have a material adverse effect on our financial results.
To support this effort, SkyWest and Eve plan to dedicate a team to focus on vehicle design, vertiport specifications, and the certification roadmap for eVTOL operations.
To support this effort, SkyWest may provide assistance to Eve on vehicle design, vertiport specifications and the certification roadmap for eVTOL operations.
In addition, given the negative effects the COVID-19 pandemic has had and may continue to have on our business, including demand fluctuations, labor shortages or other effects, we may seek material amounts of additional financial liquidity in the short-term, which may include drawing down on SkyWest Airlines’ line of credit, the issuance of secured debt securities and/or the entry into other debt facilities, among other items.
In addition, we may seek material amounts of additional financial liquidity in the short-term, which may include drawing down on SkyWest Airlines’ line of credit, the issuance of secured debt securities and/or the entry into other debt facilities, among other items.
If our employees were to unionize or be deemed to be represented by one or more national unions, negotiations with these unions could divert management’s attention and disrupt operations, which may result in increased operating expenses and may negatively impact our financial results.
If our employees were to unionize or be deemed to be represented by one or more national unions, negotiations with these unions could divert management’s attention and disrupt operations, which may result in low employee morale and inefficient work rules and may limit our ability to adjust to market compensation in a timely manner and negatively impact our financial results.
We may have difficulty replacing management or other key personnel who cease to be employed by us and, therefore, the loss of the services of any of these individuals could harm our business. We do not maintain key-person insurance on any of our executive officers.
Our business depends upon the efforts of our chief executive officer, Russell A. Childs, and our other key management and operating personnel. We may have difficulty replacing management or other key personnel who cease to be employed by us and, therefore, the loss of the services of any of these individuals could harm our business.
As of December 31, 2022, we operated 41 CRJ200s under a prorate agreement with United and 25 CRJ200s under a prorate agreement with Delta. Our operating and financial results with respect to these prorate arrangements can be negatively affected by the price of jet fuel in the event we are unable to increase our passenger fares.
Our operating and financial results with respect to these prorate arrangements and charter services can be negatively affected by the price of jet fuel in the event we are unable to increase our passenger fares.
As we have worked to upgrade our first officers to captain, our attrition levels have exceeded our upgrade and replacement levels, and we have experienced a shortage of captains, resulting in a reduction of our flight schedules with our major airline partners that will likely continue in 2023 and may continue into 2024.
As we have worked to upgrade our first officers to captains, our attrition levels exceeded our upgrade and replacement levels during 2023. Our shortage of captains resulted in a reduction of our flight schedules with our major airline partners in 2023 compared to 2022.
Increased labor costs, pilot and other labor availability, labor disputes and unionization of our workforces may adversely affect our ability to conduct our business and reduce our profitability. Our business is labor intensive, requiring large numbers of pilots, flight attendants, maintenance technicians and other personnel.
Increased labor costs, pilot and other labor availability, labor disputes and unionization of our workforces may adversely affect our ability to conduct our business and reduce our profitability.
The effect of any, or some combination, of the foregoing risks could affect our partnership with Eve and future benefits may not materialize. In 2022, we acquired 1,000,000 shares of common stock of Eve Holding, Inc.
The effect of any, or some combination, of the foregoing risks could affect our partnership with Eve and future benefits may not materialize.
The future payment of dividends and the number of shares of common stock we may repurchase will depend upon our financial condition and results of operations and other factors deemed relevant by our board of directors.
The future payment of dividends will depend upon our financial condition, alternative uses of the Company’s cash and results of operations and other factors deemed relevant by our board of directors.
Our long-term debt obligations include $3.05 billion related to the acquisition of aircraft, $155.1 million of long-term debt secured by spared engines, and $200.6 million related to borrowings under the Payroll Support Program Agreements with U.S. Department of the Treasury (“Treasury”).
Our long-term debt obligations included $2.8 billion of debt used to finance aircraft and spare engines and $200.6 million related to borrowings under the Payroll Support Program Agreements with U.S. Department of the Treasury (“Treasury”).
An impairment on any of our aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policy and assumptions could result in a material negative impact to our financial results. Additionally, in 2022, we committed to a plan to sell 14 CRJ700 aircraft, resulting in a non-cash impairment of $51.4 million.
An impairment on any of our aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policy and assumptions could result in a material negative impact to our financial results. Future decisions to sell aircraft could potentially result in write-downs for aircraft held-for sale.
During the year ended December 31, 2022, the revenue we recognized was $29.3 million less than the fixed monthly cash payments received, 18 Table of Contents primarily due to the capacity purchase agreement amendments we executed during the 2022 year. We currently anticipate we will continue to defer recognition of revenue for certain fixed monthly cash payments throughout 2023.
During the year ended December 31, 2023, the revenue we recognized was $242.5 million less than the fixed monthly cash payments received, primarily due to the capacity purchase agreement amendments we executed during the 2022 year.
Our business model depends on major airlines electing to contract with us instead of operating their own regional jets. Some regional airlines are owned by a major airline. We have no guarantee that in the future our major airline partners will choose to enter into contracts with us instead of operating their own regional jets or acquiring a regional airline.
Our business model depends on major airlines electing to contract with us instead of operating their own aircraft or regional jets. Some regional airlines are owned by a major airline.
Our prorate arrangements with our major airline partners may not return to pre-pandemic revenue levels and are terminable upon notice of 120 days or less.
If our major airline partners were to make changes such as these in their strategy and operations, our operations and financial results could be adversely impacted. Our prorate arrangements with our major airline partners may not return to pre-pandemic revenue levels and are terminable upon notice of 120 days or less.
During the year ended December 31, 2022, approximately 91.8% of our code-share operating costs were reimbursable at pre-determined rates and 8.2% of our code-share operating costs were directly reimbursed costs, often referred to as pass-through costs. Additionally, our aircraft maintenance costs may increase annually as our fleet ages at a higher rate than our pre-determined rates allow.
During the year ended December 31, 2023, approximately 91.9% of our code-share operating costs were reimbursable at pre-determined rates and 8.1% of our code-share operating costs were directly reimbursed costs, often 21 Table of Contents referred to as pass-through costs.
Certain legislative bodies and regulatory authorities are increasingly focused on climate change and have taken actions to implement additional laws, regulations, and programs intended to protect the environment. For example, the federal government, as well as several state and local governments, have implemented legislative and regulatory proposals and voluntary measures intended to reduce greenhouse gas emissions.
For example, the federal government, as well as several state and local governments, have implemented legislative and regulatory proposals and voluntary measures intended to reduce greenhouse gas emissions.
When SkyWest Charter begins operations, which is currently expected to occur in 2023, there will be significant risks, including that SkyWest Charter may divert management’s attention or the Company’s resources from our core business and strategies and that the objectives of SkyWest Charter may not materialize or may take longer to materialize than anticipated.
As we grow operations, there may be significant risks, including that SWC may divert management’s attention or the Company’s resources from our core business and strategies and that the objectives of SWC may not materialize or may take longer to materialize than anticipated. The airline industry is highly competitive, which could adversely affect our operating results and financial condition.
We may continue to reduce the volume of flying under our prorate arrangements in the future based on several factors including, but not limited to, passenger demand on prorate routes and labor availability. 19 Table of Contents Our prorate flying agreements with our major airline partners permit each major airline partner to terminate the agreement in its discretion by giving us notice of 120 days or less.
We may continue to reduce the volume of flying under our prorate arrangements in the future based on several factors including, but not limited to, passenger demand on prorate routes and labor availability.
Also, on an individual aircraft basis, various in-depth maintenance procedures are typically scheduled to occur at multi-year intervals, which can result in maintenance expense fluctuations year-to-year. If our operating costs for labor, aircraft maintenance and overhead costs exceed the compensation earned from our pre-determined rates under our capacity purchase arrangements, our financial position and operating results will be negatively affected.
If our operating costs for labor, aircraft maintenance and overhead costs exceed the compensation earned from our pre-determined rates under our capacity purchase arrangements, our financial position and operating results will be negatively affected.
Nearly all of our flights either originate from or fly into one of these hubs. Our revenues depend primarily on our completion of flights and secondarily on service factors such as timeliness of departure and arrival. Any interruptions or disruptions could, therefore, severely and adversely affect us.
We currently operate primarily through hubs supporting our major airline partners’ route networks across the United States. Nearly all of our flights either originate from or fly into one of these hubs. Our revenues depend primarily on our completion of flights and secondarily on service factors such as timeliness of departure and arrival.
Interruptions or disruptions in service at one of our hub airports, due to weather, system malfunctions or for any other reason, could have a material adverse impact on our operations. We currently operate primarily through hubs supporting our major airline partners’ route networks across the United States.
Any or all of the foregoing could adversely affect our business, results of operations and financial condition. Interruptions or disruptions in service at one of our hub airports, due to weather, system malfunctions or for any other reason, could have a material adverse impact on our operations.
The purpose of the arrangement is to increase the potential number of commercial pilots in the Company’s hiring pipeline. In the event of default, if we are unable to sell the collateral, or the fair value is less than the required payment, it could negatively impact our financial condition and financial results.
In the event of default, if we are unable to sell the collateral, or the fair value is less than the required payment, it could negatively impact our financial condition and financial results. Additionally, there is no guarantee that the relationship with the entities will have a favorable effect on our ability to recruit pilots.
We have guaranteed the indebtedness of third parties that may default on their debt and require us to pay. In 2022, we 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.
We do not maintain key-person insurance on any of our executive officers. 22 Table of Contents We have guaranteed the indebtedness of third parties that may default on their debt and require us to pay. In 2022, we agreed to guarantee debt for a 14 CFR Part 135 air carrier.
Terrorist activities or warnings have dramatically impacted the airline industry and will likely continue to do so. The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the airline industry in general, including our operations. The primary effects experienced by the airline industry include a substantial loss of passenger traffic and revenue.
If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected. Terrorist activities or warnings have dramatically impacted the airline industry and will likely continue to do so. The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the airline industry in general, including our operations.
The Company acquired the shares of common stock, warrant and put option (collectively, the “Eve Investments”) for $10.0 million. At December 31, 2022, the fair value of our Eve Investments was $21.4 million and 24 Table of Contents reductions in the trading market price of Eve’s common stock will likely negatively impact our financial condition and net income.
The Company also holds a put option from an Eve shareholder for 399,589 shares of common stock of Eve payable in aircraft parts credits. At December 31, 2023, the fair value of our investments in Eve was $15.4 million and future reductions in the trading market price of Eve’s common stock will likely negatively impact our net income.
(“Eve”) and a warrant giving us 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.
As of December 31, 2023, we held 399,589 shares of common stock of Eve and a warrant giving us the right to acquire 1,500,000 shares of common stock of Eve at an exercise price of $0.01 per share.
In 2020, we issued warrants to purchase 370,720 shares of our common stock with an exercise price of $28.38 per share to Treasury as consideration for payroll support payments we received under the CARES Act payroll support program.
We issued warrants to purchase shares of our common stock to Treasury for relief we received under three Payroll Support Program Agreements and a Loan Agreement with Treasury. During 2020 and 2021, we issued warrants to Treasury as consideration for payments received under the three Payroll Support Program Agreements and a loan agreement with Treasury.
Due, in part, to the dynamic nature of the airline industry, major airlines may also make other strategic changes, such as changing or consolidating hub locations. If our major airline partners were to make changes such as these in their strategy and operations, our operations and financial results could be adversely impacted.
Due, in part, to the dynamic nature of the airline industry, major airlines may also make other strategic changes, such as changing or consolidating hub locations or operating mainline aircraft on routes previously served using regional aircraft.
Our technological systems and related data may be vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues.
Our IT Systems (including those provided by third parties) and information about our employees and other individuals and proprietary information belonging to our business such as trade secrets (“Confidential Information”) are vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications or IT System failures, computer viruses, hackers and other security issues.
Future decisions to sell aircraft could potentially result in write-downs for aircraft held-for sale. 23 Table of Contents We lease aircraft and engines to third parties and the lessee may default under the lease terms, which could negatively affect our financial condition, cash flow and results of operations.
We lease aircraft and engines to third parties and the lessee may default under the lease terms, which could negatively affect our financial condition, cash flow and results of operations. We leased five CRJ900 aircraft, 35 CRJ700 aircraft, and engines used on CRJ aircraft to third parties as of December 31, 2023.
In 2021, we issued warrants to purchase 124,773 shares of our common stock with an exercise price of $40.41 per share to Treasury as consideration for payroll support payments we received under the 2021 Appropriations Act.
The warrants we issued to Treasury include: warrants to purchase 582,136 shares of our common stock with an exercise price of $28.38 per share, warrants to purchase 124,773 shares of our common stock with an exercise price of $40.41 per share and warrants to purchase 78,317 shares of our common stock with an exercise price of $57.47 per share.
Moreover, we cannot predict the outcome of any future negotiations relating to union representation or collective bargaining agreements. Agreements reached in union-involved collective bargaining may increase our operating expenses and negatively impact our financial results. 21 Table of Contents We may experience an increase in fuel prices in our prorate operations.
Moreover, we cannot predict the outcome of any future negotiations relating to union representation or collective bargaining agreements. A national union soliciting to represent our employees may represent employees at mainline carriers or other regional airlines and may have conflicting interests with those of our employees or SkyWest. Agreements reached in union-involved collective bargaining may negatively impact our financial results.
Based on our current captain and first officer availability, our block hour production in 2023 will likely be lower than our block hour production in 2022. Operating at reduced flying schedules results in operating inefficiencies that negatively impacts our financial results.
There is no assurance that our block hour production in 2024 will exceed our block hour production in 2023. Operating at reduced flying schedules results in operating inefficiencies which negatively impacts our financial results.

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Item 2. Properties

Properties — owned and leased real estate

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PROPERTIES Flight Equipment As of December 31, 2022, our fleet used by our SkyWest Airlines segment under our code-share agreements consisted of the following types of owned and leased aircraft: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Number of ​ Scheduled Average ​ ​ ​ Owned ​ Leased ​ Passenger ​ Flight ​ Cruising ​ Average Aircraft Type ​ Aircraft ​ Aircraft ​ Capacity ​ Range (miles) ​ Speed (mph) ​ Age (years) E175s 205 ​ 31 70-76 2,100 530 4.9 CRJ900s 16 ​ 25 70-76 1,500 530 12.0 CRJ700s 77 ​ 27 65-70 1,600 530 17.3 CRJ200s 130 ​ 6 50 1,500 530 20.2 Several factors may impact our fleet size throughout 2023 and thereafter, including, but not limited to, contract expirations that are not renewed, labor shortages, reductions in our prorate fleet, lease expirations that are not extended and growth opportunities.
PROPERTIES Flight Equipment As of December 31, 2023, our fleet used by our SkyWest Airlines segment under our code-share agreements consisted of the following types of owned and leased aircraft: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Number of ​ Scheduled Average ​ ​ ​ Owned ​ Leased ​ Passenger ​ Flight ​ Cruising ​ Average Aircraft Type ​ Aircraft ​ Aircraft ​ Capacity ​ Range (miles) ​ Speed (mph) ​ Age (years) E175s 207 ​ 30 70-76 2,100 530 5.8 CRJ900s 17 ​ 24 70-76 1,500 530 13.0 CRJ700s 116 ​ 2 65-70 1,600 530 18.3 CRJ200s 89 ​ — 50 1,500 530 20.9 Several factors may impact our fleet size throughout 2024 and thereafter, including, but not limited to, contract expirations that are not renewed, labor shortages, reductions in our prorate fleet, lease expirations that are not extended and growth opportunities.
Our actual future fleet size and/or mix of aircraft types and future aircraft scheduled utilization will likely vary, and may vary materially, from our current fleet size and/or mix and aircraft utilization. Ground Facilities We lease many of the buildings and associated land that we occupy.
Our actual future fleet size and/or mix of aircraft types and future aircraft scheduled utilization will likely vary, and may vary materially, from our current fleet size and/or mix and aircraft utilization.
We lease maintenance, training and office facilities in Salt Lake City, Utah, and we lease additional maintenance facilities in Boise, Idaho; Fresno, California; Tucson, Arizona; Chicago, Illinois; Detroit, Michigan; Nashville, Tennessee; South Bend, Indiana; and Fort Wayne, 27 Table of Contents Indiana.
Most of these leases are for facilities at airports with various government agencies that control the use of the airport. We lease maintenance, training and office facilities in Salt Lake City, Utah, and we lease additional maintenance facilities in Boise, Idaho; Fresno, California; Tucson, Arizona; Chicago, Illinois; Detroit, Michigan; Nashville, Tennessee; South Bend, Indiana; and Fort Wayne, Indiana.
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Most of these leases are for facilities at airports with various government agencies that control the use of the airport.
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The number of 29 Table of Contents leased aircraft in the table above includes aircraft we lease from our major airline partners for a de minimis monthly cost under a capacity purchase agreement. Ground Facilities We lease many of the buildings and associated land that we occupy.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS We are subject to certain legal actions which we consider routine to our business activities. As of December 31, 2022, our 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 our financial position, liquidity or results of operations.
ITEM 3. LEGAL PROCEEDINGS We are subject to certain legal actions which we consider routine to our business activities. As of December 31, 2023, our 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 our financial position, liquidity or results of operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The following graph compares the cumulative total shareholder return on our common stock over the five-year period ended December 31, 2022, with the cumulative total return during such period of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Stock Market Transportation Index. The following graph assumes an initial investment of $100.00 with dividends reinvested.
The following graph compares the cumulative total shareholder return on our common stock over the five-year period ended December 31, 2023, with the cumulative total return during such period of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Stock Market Transportation Index. The following graph assumes an initial investment of $100.00 with dividends reinvested.
Securities held of record do not include shares held in securities position listings. The transfer agent for our common stock is Zions First National Bank, Salt Lake City, Utah. Dividends The Company did not declare dividends for the years ended December 31, 2021 and 2022.
Securities held of record do not include shares held in securities position listings. The transfer agent for our common stock is Zions First National Bank, Salt Lake City, Utah. Dividends We did not declare dividends for the years ended December 31, 2022 and 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol “SKYW.” As of February 10, 2023, there were approximately 3,917 stockholders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol “SKYW.” As of February 9, 2024, there were approximately 3,786 stockholders of record of our common stock.
Issuer Purchases of Equity Securities Our Board of Directors has adopted a stock repurchase program which authorizes the Company to repurchase shares of our common stock in the public market or in private transactions, from time to time, at prevailing prices.
Issuer Purchases of Equity Securities Our Board of Directors has adopted a stock repurchase program which authorizes us to repurchase shares of our common stock in the public market or in private transactions, from time to time, at prevailing prices. Our stock repurchase program adopted in May 2023 authorized the repurchase of up to $250.0 million of our common stock.
Pursuant to the terms of our agreements with Treasury, the Company was restricted from paying dividends through September 30, 2022. There can be no assurance that we will pay dividends in the future.
Pursuant to the terms of our three Payroll Support Program Agreements with Treasury, we were restricted from paying dividends through September 30, 2022. Although we are no longer restricted from paying dividends under our agreements with Treasury, we cannot assure we will pay dividends in the future.
The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance. 28 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ INDEXED RETURNS ​ ​ Base ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ​ Years Ending Company Name / Index ​ 2017 ​ 2018 ​ 2019 ​ 2020 ​ 2021 ​ 2022 SkyWest, Inc . 100 84.50 ​ 123.72 ​ 77.43 75.49 31.71 ​ NASDAQ Composite 100 97.16 ​ 132.81 ​ 192.47 235.15 158.65 ​ NASDAQ Transportation Index ​ 100 ​ 90.96 ​ 114.55 ​ 149.90 ​ 189.54 ​ 160.39 ​ ​ ​ ITEM 6. [Reserved ]
The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price performance. ​ 31 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ INDEXED RETURNS ​ ​ Base ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ​ Years Ending Company Name / Index ​ 2018 ​ 2019 ​ 2020 ​ 2021 ​ 2022 ​ 2023 SkyWest, Inc . 100 146.41 ​ 91.64 ​ 89.34 37.53 118.66 ​ NASDAQ Composite 100 136.69 ​ 198.10 ​ 242.03 163.28 236.17 ​ NASDAQ Transportation Index ​ 100 ​ 125.94 ​ 164.80 ​ 208.39 ​ 176.34 ​ 211.72 ​ ​ ​ ITEM 6. [Reserved ]
Our stock repurchase program was authorized in 2019 for the repurchase of up to $250.0 million of our common stock. As of December 31, 2022, we had repurchased 1,966,353 shares of our common stock for $110.4 million under this authorization. No shares of common stock were repurchased under our repurchase program during the twelve months ended December 31, 2022.
During the year ended December 31, 2023, we also repurchased 6,340,256 shares of our common stock for $130.0 million under our February 2019 repurchase program that was superseded by the May 2023 program.
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We may resume stock repurchases under our 2019 program now that the restrictions under our agreements with Treasury have lapsed.
Added
The following table summarizes the repurchases under our stock repurchase program during the three months ended December 31, 2023: 30 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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) October 1, 2023 - October 31, 2023 ​ 372,691 ​ $ 40.25 ​ 372,691 ​ $ 120,922 November 1, 2023 - November 30, 2023 ​ 332,433 ​ $ 45.12 ​ 332,433 ​ $ 105,922 December 1, 2023 - December 31, 2023 ​ 290,507 ​ $ 51.63 ​ 290,507 ​ $ 90,922 Total ​ 995,631 ​ $ 45.20 ​ 995,631 ​ $ 90,922 (1) In May 2023, our Board of Directors approved a stock purchase program, which superseded our prior repurchase program and authorized us to repurchase up to $250.0 million of our common stock.
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Purchases are made at management’s discretion based on market conditions and financial resources. As of December 31, 2023, we had repurchased 4,249,161 shares of our common stock for $159.1 million and had $90.9 million remaining availability under the May 2023 stock repurchase program .

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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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 capacity purchase arrangements and our prorate flying arrangements.
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 our capacity purchase arrangements and our prorate flying arrangements.
Our chief operating decision maker analyzes the profitability of operating aircraft under our code-share agreements separately from the profitability of our financing new aircraft acquired through debt and cash placed under our capacity purchase agreements, currently consisting of our E175 fleet, and our return on such aircraft financing.
Our chief operating decision maker analyzes the profitability of operating aircraft under our code-share agreements separately from the profitability of financing new aircraft acquired through debt and cash placed under our capacity purchase agreements, currently consisting of our E175 fleet, and our return on such aircraft financing.
Corporate overhead expenses, primarily consisting of administrative labor costs, were allocated to the operating expenses of SkyWest Airlines and SkyWest Leasing. Overhead expenses allocated to SkyWest Leasing reflect our estimated labor expense incurred to support SkyWest Leasing activities.
Corporate overhead expenses, primarily consisting of administrative labor costs, were allocated to the operating expenses of SkyWest Airlines and SWC and SkyWest Leasing. Overhead expenses allocated to SkyWest Leasing reflect our estimated labor expense incurred to support SkyWest Leasing activities.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
On contract 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.
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.
The number of flights we operate and the corresponding number of passengers we carry are the primary drivers to our revenue under our prorate flying 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.
We purchase and incur expense for all fuel on flights operated under our prorate agreements. All fuel costs incurred under our capacity purchase contracts 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.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis presents factors that had a material effect on our results of operations during the years ended December 31, 2022 and 2021. Also discussed is our financial condition as of December 31, 2022 and 2021.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis presents factors that had a material effect on our results of operations during the years ended December 31, 2023 and 2022. Also discussed is our financial condition as of December 31, 2023 and 2022.
Risk Factors” for discussion of some of the uncertainties, risks and assumptions associated with these statements. This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Risk Factors” for discussion of some of the uncertainties, risks and assumptions associated with these statements. This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Our revenues could be impacted by several factors, such as our flight schedules, passenger fares we receive under our prorate agreements, terminations, extensions or other amendments to our code-share agreements, our estimates used to determine the amount of revenue we defer under our capacity purchase agreements, and our ability to earn incentive payments contemplated under applicable agreements.
Our revenues could be impacted by several factors, such as our flight schedules, passenger fares we receive under our prorate agreements, terminations, extensions or other amendments to our code-share agreements, our estimates 42 Table of Contents used to determine the amount of revenue we defer under our capacity purchase agreements, and our ability to earn incentive payments contemplated under applicable agreements.
The third party’s loans are secured by aircraft and engines. Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note 1 to our Consolidated Financial Statements included in Item 8 of this Report.
The third parties’ loans are secured by aircraft and engines. Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note 1 to our Consolidated Financial Statements included in Item 8 of this Report.
Our rates were finalized under our code-share agreements as of December 31, 2022. Long-Lived Assets As of December 31, 2022, we had approximately $5.5 billion of property and equipment and related assets net of accumulated depreciation.
Our rates were finalized under our code-share agreements as of December 31, 2023. Long-Lived Assets As of December 31, 2023, we had approximately $5.5 billion of property and equipment and related assets net of accumulated depreciation.
Given our available liquidity as of December 31, 2022, we 36 Table of Contents 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.
Given our available liquidity as of December 31, 2023, 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.
Accordingly, we re-evaluated the allocation of the total consideration between the lease 39 Table of Contents and non-lease components for the affected amended agreements, including the allocation of the consideration to the fixed and variable lease components.
Accordingly, we re-evaluated the allocation of the total consideration between the lease and non-lease components for the affected amended agreements, including the allocation of the consideration to the fixed and variable lease components.
As a result of these amendments, we deferred recognizing lease revenue on $22.1 million of the allocated fixed monthly lease payments received during the year ended December 31, 2022, under the straight-line method. Additionally, a portion of our compensation under our capacity purchase agreements relates to operating the aircraft, identified as the non-lease component of the capacity purchase agreement.
As a result of these amendments, we deferred recognizing lease revenue on $78.5 million of the allocated fixed monthly lease payments received during the year ended December 31, 2023, under the straight-line method. Additionally, a portion of our compensation under our capacity purchase agreements relates to operating the aircraft, identified as the non-lease component of the capacity purchase agreement.
The Company presented the $56.7 million of assets held for sale at the lower of their current carrying value or their fair market value less costs to sell and included the amount in “Other current assets” on the Company’s consolidated balance sheet. The fair values are based upon observable and unobservable inputs, including market trends and conditions.
We presented the $54.3 million of assets held for sale at the lower of their current carrying value or their fair market value less costs to sell and included the amount in “Other current assets” on the Company’s consolidated balance sheet. The fair values are based upon observable and unobservable inputs, including market trends and conditions.
Timing of these anticipated deliveries may be subject to change as we are coordinating with our major airline partners in response to the COVID-19 recovery, labor availability or other factors.
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.
Assuming a 6.1% 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 $160.3 million at December 31, 2022.
Assuming a 6.1% 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 $86.7 million at December 31, 2023.
On prorate routes, we have more control over scheduling, pricing and seat inventories, we share passenger fares with our major airline partners according to prorate formulas and we are responsible for the operating costs of the prorate flights, including fuel and airport costs.
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.
Due to labor constraints, including the number of available captains, we operated fewer aircraft under our prorate agreements during the year ended December 31, 2022, compared to the year ended December 31, 2021.
Due to labor constraints, including the number of available captains, we operated fewer flights under our prorate agreements during the year ended December 31, 2023, compared to the year ended December 31, 2022.
Overview We have the largest regional airline operation in the United States. As of December 31, 2022, we offered scheduled passenger and air freight service with approximately 1,620 total daily departures to destinations in the United 29 Table of Contents States, Canada, and Mexico.
Overview We have the largest regional airline operation in the United States. As of December 31, 2023, we offered scheduled passenger and air freight service with approximately 1,850 total daily departures to destinations in the United States, Canada and Mexico.
This reduction in depreciation on our CRJ200 fleet was partially offset by an increase in depreciation expense due to the acquisition of 25 new E175 aircraft and spare engines in 2022. Aircraft fuel.
This reduction in depreciation on our CRJ fleet was partially offset by an increase in depreciation expense due to the acquisition of two new E175 aircraft and spare engines in 2023. Aircraft fuel.
Purchase Commitments and Options We are coordinating with our major airline partners and aircraft manufacturers on the timing of upcoming fleet deliveries under previously announced deals. The anticipated future aircraft delivery dates are subject to change. As of December 31, 2022, we had a firm purchase commitment for four E175 aircraft from Embraer with scheduled delivery dates anticipated through 2025.
Purchase Commitments and Options We are coordinating with our major airline partners and aircraft manufacturers on the timing of upcoming fleet deliveries under previously announced deals. The anticipated future aircraft delivery dates are subject to change. As of December 31, 2023, we had a firm purchase commitment for 21 new E175 aircraft from Embraer with delivery dates anticipated into 2026.
Additionally, aircraft removed from SkyWest Airlines operations and held for sale are included in the SkyWest Leasing segment. The SkyWest Airlines segment includes all other revenue and operating expenses attributed to operating aircraft under our capacity purchase agreements and all revenue and operating expenses attributed to our prorate agreements and airport service agreements.
Additionally, aircraft removed from SkyWest Airlines operations and held for sale are included in the SkyWest Leasing segment. 37 Table of Contents The SkyWest Airlines and SWC segment includes all other revenue and operating expenses attributed to operating aircraft under our capacity purchase agreements and all revenue and operating expenses attributed to our prorate agreements, airport service agreements and charter flight services.
For the years ended December 31, 2022, and December 31, 2021, our income tax provision rates were 21.2% and 25.7%, respectively, which include 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.
For the years ended December 31, 2023, and December 31, 2022, our income tax provision rates were 14.8% and 21.2%, 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 significant items affecting our revenue and operating expenses during the year ended December 31, 2022, are outlined below: 30 Table of Contents Revenue The number of aircraft we have in scheduled service and the number of block hours we incur on our flights are primary drivers to our flying agreements revenue under our capacity purchase agreements.
The significant items affecting our revenue and operating expenses during the year ended December 31, 2023, are outlined below: Revenue 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.
Liquidity and Capital Resources As of December 31, 2022, we had $1.0 billion in cash, cash equivalents and marketable securities and $70.1 million available for borrowings under our line of credit.
Liquidity and Capital Resources As of December 31, 2023, we had $835.2 billion in cash, cash equivalents and marketable securities and $70.8 million available for borrowings under our line of credit.
Financial Highlights We had total operating revenues of $3.0 billion for the year ended December 31, 2022, a 10.7% increase compared to total operating revenues of $2.7 billion for the year ended December 31, 2021.
Financial Highlights We had total operating revenues of $2.9 billion for the year ended December 31, 2023, a 2.3% decrease compared to total operating revenues of $3.0 billion for the year ended December 31, 2022.
Other income (expense), net increased $24.1 million, compared to 2021. Other income (expense), net primarily consists of the unrealized gains on our investments in other companies, income related to our investment in a joint venture with a third party and gains or losses on the sale of assets.
Other income (loss), net. Other income (loss), net increased $2.3 million in 2023, compared to 2022. Other income (loss), net primarily consists of the realized and unrealized gains or losses on our investments in other companies, income related to our investment in a joint venture with a third party and gains or losses on the sale of assets.
We recognize 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 we anticipate completing over the remaining contract term. In 2022, we deferred $18.7 million of fixed monthly payments and recognized $11.5 million of unbilled revenue.
We recognize 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 we anticipate completing over the remaining contract term. In 2023, we deferred $151.4 million of fixed monthly payments and unbilled revenue decreased by $12.6 million.
As a result of these amendments, we deferred recognizing lease revenue on $22.1 million of the allocated fixed monthly lease payments received during the year ended December 31, 2022, under the straight-line method.
As a result of these amendments, which decreased the future scheduled fixed monthly lease payments, we deferred recognizing lease revenue on $78.5 million of the allocated fixed monthly lease payments received during the year ended December 31, 2023, under the straight-line method.
Guarantees We have guaranteed the obligations of SkyWest Airlines under the Delta Connection Agreement and the United Express Agreement for the E175 aircraft. In addition, we have guaranteed certain other obligations under aircraft financing and leasing agreements. We have guaranteed $19.8 million in promissory notes of a third party in event the third party defaults on its payments.
Guarantees We have guaranteed the obligations of SkyWest Airlines under the Delta Connection Agreement and the United Express Agreement for the E175 aircraft. In addition, we have guaranteed certain other obligations under our aircraft financing and leasing agreements. We have guaranteed $22.4 million in promissory notes of third parties in event the third parties default on their payments.
The number of aircraft we have in scheduled service or under contract under code-share agreements increased from 509 as of December 31, 2021, to 517 as of December 31, 2022; the number of block hours decreased from 1.32 million in 2010 to 1.25 million in 2022, or by 4.9%.
The number of aircraft we have in scheduled service or under contract under code-share agreements decreased from 517 as of December 31, 2022, to 485 as of December 31, 2023, or by 6.2%; the number of block hours decreased from 1.25 million in 2022 to 1.14 million in 2023, or by 9.1%.
We had net income of $73.0 million, or $1.44 per diluted share, for the year ended December 31, 2022, compared to net income of $111.9 million, or $2.20 per diluted share, for the year ended December 31, 2021.
We had net income of $34.3 million, or $0.77 per diluted share, for the year ended December 31, 2023, compared to net income of $73.0 million, or $1.44 per diluted share, for the year ended December 31, 2022.
A portion of the consideration received for the use of the aircraft is a fixed monthly payment per aircraft. During the year ended December 31, 2022, we amended our capacity purchase agreements with certain major airline partners that reduced certain future contractual fixed monthly payments and increased future contractual variable payments.
A portion of the consideration received for the use of the aircraft is a fixed monthly payment per aircraft. Recent amendments to our capacity purchase agreements with certain major airline partners reduced certain future contractual fixed monthly payments and increased future contractual variable payments.
Our total long-term debt, including current maturities increased from $3,109.2 million as of December 31, 2021, to $3,380.3 million as of December 31, 2022, or by $271.1 million, primarily due to debt issued to finance 25 new E175 aircraft and spare engines, partially offset by scheduled debt payments for the 2022 year.
Our total long-term debt, including current maturities decreased from $3.4 billion as of December 31, 2022, to $3.0 billion as of December 31, 2023, or by $0.4 billion, primarily due to scheduled debt payments for the 2023 year, partially offset by debt issued to finance two new E175 aircraft and spare engines.
The decrease in “Capacity purchase agreements aircraft lease revenue” of $5.0 million was primarily due to revenue deferred during the year ended December 31, 2022, offset by lease revenue from the 25 additional E175 aircraft placed under contract during the year ended December 31, 2022.
The decrease in “Capacity purchase agreements aircraft lease revenue” of $45.9 million, or 8.8%, was primarily due to an increase in deferred revenue for the year ended December 31, 2023, compared to the year ended December 31, 2022, partially offset by lease revenue from the two additional E175 aircraft placed under contract during the year ended December 31, 2023.
Based on current market conditions and discussions with prospective leasing organizations and financial institutions, we currently believe that we will be able to obtain financing for our committed acquisitions, as well as additional aircraft.
Based on current market conditions and discussions with prospective leasing organizations and financial institutions, we currently believe that we will be able to obtain financing for our committed acquisitions, as well as additional aircraft. We intend to finance the firm purchase commitment for 21 E175 aircraft with approximately 75-85% debt and the remaining balance with cash.
The $1.4 million, or 1.3%, increase in fuel cost was primarily due to an increase in our average fuel cost per gallon from $2.49 in 2021 to $4.14 in 2022, offset by a decrease in the number of flights we operated under our prorate arrangements and the corresponding decrease in gallons of fuel we purchased.
The $22.5 million, or 20.8%, decrease in fuel cost was primarily due to a decrease in the number of flights we operated under our prorate arrangements and the corresponding decrease in gallons of fuel we purchased, combined with a decrease in our average fuel cost per gallon from $4.14 in 2022 to $3.70 in 2023.
Our investing cash flows are typically impacted by various factors including our capital expenditures, such as the acquisition of aircraft and spare engines; deposit payments and refunds of previously made deposits on new aircraft; purchase and sales of marketable securities; proceeds from the sale of assets; and timing of cash payments and cash receipts attributed to our various long-term asset and long-term liability accounts. 37 Table of Contents The increase in our cash flow used in investing activities in 2022 compared 2021, was primarily due to an increase in cash used for purchases of marketable securities, net of sales of marketable securities, of $354.2 million, resulting from the transfer of cash into marketable securities accounts.
Our investing cash flows are typically impacted by various factors including our capital expenditures, such as the acquisition of aircraft and spare engines; deposit payments and refunds of previously made deposits on new aircraft; purchase and sales of marketable securities; proceeds from the sale of assets; and timing of cash payments and cash receipts attributed to our various long-term asset and long-term liability accounts.
As of December 31, 2022, we had 625 total aircraft in our fleet, including 517 aircraft in scheduled service or under contract under our code-share agreements, summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ E175 CRJ900 CRJ700 CRJ200 Total United 90 ​ — ​ 19 ​ 111 ​ 220 Delta ​ 84 ​ 41 ​ 5 ​ 25 ​ 155 American 20 ​ — ​ 80 ​ — ​ 100 Alaska 42 ​ — ​ — ​ — ​ 42 Aircraft in scheduled service or under contract ​ 236 ​ 41 ​ 104 ​ 136 ​ 517 Leased to third parties — ​ 5 ​ 35 ​ — ​ 40 Other* — ​ 3 ​ 28 ​ 37 ​ 68 Total Fleet 236 ​ 49 ​ 167 ​ 173 ​ 625 *As of December 31, 2022, other aircraft included: supplemental spare aircraft supporting our code-share agreements that may be used in future code-share or leasing arrangements, aircraft transitioning between code-share agreements with our major airline partners, aircraft held for sale, or aircraft that are scheduled to be disassembled for use as spare parts.
As of December 31, 2023, we had 603 total aircraft in our fleet, including 485 aircraft in scheduled service or under contract under our code-share agreements, summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ E175 CRJ900 CRJ700 CRJ200 Total United 90 ​ — ​ 19 ​ 89 ​ 198 Delta ​ 85 ​ 41 ​ 9 ​ — ​ 135 American 20 ​ — ​ 90 ​ — ​ 110 Alaska 42 ​ — ​ — ​ — ​ 42 Aircraft in scheduled service or under contract ​ 237 ​ 41 ​ 118 ​ 89 ​ 485 SWC ​ — ​ — ​ — ​ 16 ​ 16 Leased to third parties — ​ 5 ​ 35 ​ — ​ 40 Other (1) — ​ 3 ​ 14 ​ 45 ​ 62 Total Fleet 237 ​ 49 ​ 167 ​ 150 ​ 603 (1) As of December 31, 2023, 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, aircraft held-for-sale or aircraft that are scheduled to be disassembled for use as spare parts.
For the year ended December 31, 2022, approximately 42.6% of our aircraft in scheduled service or under contract were operated for United, approximately 30.0% were operated for Delta, approximately 19.3% were operated for American and approximately 8.1% were operated for Alaska.
For the year ended December 31, 2023, approximately 40.8% of our aircraft in scheduled service or under contract were operated for United, approximately 27.8% were operated for Delta, approximately 22.7% were operated for American and approximately 8.7% were operated for Alaska.
Our total of cash, cash equivalents and marketable securities increased from $860.4 million as of December 31, 2021, to $1.0 billion as of December 31, 2022, or by $186.8 million.
Our total of cash, cash equivalents and marketable securities decreased from $1.0 billion as of December 31, 2022, to $835.2 million as of December 31, 2023, or by $212.0 million.
The decrease in block hours and departures during the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to labor constraints, including the number of available captains in 2022. 31 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, Block hours by aircraft type: 2022 2021 % Change E175s 635,039 ​ 613,465 ​ 3.5 % CRJ900s ​ 101,662 ​ 116,576 ​ (12.8) % CRJ700s ​ 261,036 ​ 289,902 ​ (10.0) % CRJ200s 256,655 ​ 299,685 ​ (14.4) % Total block hours ​ 1,254,392 ​ 1,319,628 ​ (4.9) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Departures 739,388 ​ 749,943 ​ (1.4) % Passengers carried 40,064,689 ​ 36,608,918 ​ 9.4 % Passenger load factor 83.4 % 74.6 % 8.8 pts Average passenger trip length (miles) 493 ​ 532 ​ (7.3) % Operating Revenues The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2021 $ Change % Change Flying agreements ​ $ 2,899,837 ​ $ 2,615,076 ​ $ 284,761 ​ 10.9 % Lease, airport services and other ​ 105,088 ​ 98,415 ​ 6,673 ​ 6.8 % Total operating revenues ​ $ 3,004,925 ​ $ 2,713,491 ​ $ 291,434 10.7 % 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.
The decrease in block hours and departures during the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to labor constraints, including a smaller number of available captains in 2023, compared to 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, Block hours by aircraft type: 2023 2022 % Change E175s 677,886 ​ 635,039 ​ 6.7 % CRJ900s ​ 76,588 ​ 101,662 ​ (24.7) % CRJ700s ​ 218,059 ​ 261,036 ​ (16.5) % CRJ200s 167,910 ​ 256,655 ​ (34.6) % Total block hours ​ 1,140,443 ​ 1,254,392 ​ (9.1) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Departures 691,962 ​ 739,388 ​ (6.4) % Passengers carried 38,597,309 ​ 40,064,689 ​ (3.7) % Passenger load factor 83.6 % 83.4 % 0.2 pts Average passenger trip length (miles) 453 ​ 493 ​ (8.1) % Operating Revenues The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2023 2022 $ Change % Change Flying agreements ​ $ 2,834,397 ​ $ 2,899,837 ​ $ (65,440) ​ (2.3) % Lease, airport services and other ​ 101,035 ​ 105,088 ​ (4,053) ​ (3.9) % Total operating revenues ​ $ 2,935,432 ​ $ 3,004,925 ​ $ (69,493) (2.3) % 34 Table of Contents 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 SWC flights.
Additional details regarding the increase in our operating expenses are described in the section of this Report entitled “Results of Operations.” Fleet Activity The following table summarizes our fleet activity for 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Aircraft in Service or Under Contract December 31, 2021 Additions Removals ​ December 31, 2022 E175s 211 25 — ​ 236 CRJ900s 44 — (3) ​ 41 CRJ700s 114 — (10) ​ 104 CRJ200s 140 — (4) ​ 136 Total 509 25 (17) ​ 517 During 2022, we took delivery of 25 new E175 aircraft and placed the aircraft into service or under contract under capacity purchase agreements.
Additional details regarding the increase in our operating expenses are described in the section of this Report entitled “Results of Operations.” Fleet Activity The following table summarizes our fleet activity for 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Aircraft in Service or Under Contract December 31, 2022 Additions Removals ​ December 31, 2023 E175s 236 ​ 2 ​ (1) ​ 237 CRJ900s 41 ​ 6 ​ (6) ​ 41 CRJ700s 104 ​ 14 ​ — ​ 118 CRJ200s 136 ​ — ​ (47) ​ 89 Total 517 22 (54) ​ 485 During 2023, we took delivery of two new E175 aircraft and placed the aircraft into service under a capacity purchase agreement, and we returned one leased E175 to the major airline partner that financed the aircraft.
Primarily due to the factors described above, we generated net income of $73.0 million, or $1.44 per diluted share, for the year ended December 31, 2022, compared to net income of $111.9 million, or $2.20 per diluted share, for the year ended December 31, 2021. 34 Table of Contents Our Business Segments 2022 compared to 2021 : For the years ended December 31, 2022 and 2021, our reporting segments included SkyWest Airlines and SkyWest Leasing.
Primarily due to the factors described above, we generated net income of $34.3 million, or $0.77 per diluted share, for the year ended December 31, 2023, compared to net income of $73.0 million, or $1.44 per diluted share, for the year ended December 31, 2022.
Cash Flows provided by (used in) Financing Activities Our cash flows provided by financing activities was $269.1 million in 2022, compared to cash used in financing activities of $90.6 million in 2021.
Cash Flows provided by (used in) Financing Activities Our cash flows used in financing activities was $667.8 million for the year ended December 31, 2023, compared to cash provided by financing activities of $269.1 million for the year ended December 31, 2022.
Our success is principally centered on our ability to meet the needs of our major airline partners through providing a reliable and safe operation at attractive economics. During the 2022 calendar year, we made changes to our fleet count under our flying agreements, including the addition of 25 new E175 aircraft.
Our success is principally centered on our ability to meet the needs of our major airline partners through providing a reliable and safe operation at attractive economics.
We removed 10 CRJ700 aircraft, three CRJ900 aircraft and four CRJ200 aircraft from service during 2022. We are evaluating alternative uses for the aircraft removed from service. Results of Operations 2022 Compared to 2021 Operational Statistics The following table sets forth our major operational statistics and the associated percentages of change for the periods identified below.
Results of Operations 2023 Compared to 2022 Operational Statistics The following table sets forth our major operational statistics and the associated percentages of change for the periods identified below.
During the year ended December 31, 2022, we amended our capacity purchase agreements with certain major airline partners that reduced certain future contractual fixed monthly payments and increased future contractual variable payments.
Amendments executed to our capacity purchase agreements in the fourth quarter of 2022 and the first quarter of 2023 with certain major airline partners reduced certain future contractual fixed monthly payments and increased future contractual variable payments.
As we operate our aircraft under code-share agreements with our major airline partners, changes in anticipated demand by our major airline partners for regional aircraft may impact our estimated useful lives and residual values for our aircraft, spare engines and other long-lived assets. 40 Table of Contents Income Tax Deferred income taxes are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
As we operate our aircraft under code-share agreements with our major airline partners, changes in anticipated demand by our major airline partners for regional aircraft may impact our estimated useful lives and residual values for our aircraft, spare engines and other long-lived assets.
For the year ended December 31, 2022, contract flying revenue and prorate revenue represented approximately 88.0% and 12.0%, respectively, of our total flying agreements revenue.
For the year ended December 31, 2023, our capacity purchase revenue represented approximately 86.5% of our total flying agreements revenue and our prorate and SWC revenue, combined, represented approximately 13.5% of our total flying agreements revenue.
SkyWest Leasing operating expenses and interest expense increased $43.1 million, or 11.7%, from 2021 to 2022 primarily due to a non-cash impairment charge of $51.4 million related to 14 CRJ700 aircraft that were held for sale in 2022. During 2022, the Company committed to a formal plan to sell 14 CRJ700 aircraft.
SkyWest Leasing operating expenses and interest expense decreased $34.7 million, or 8.4%, from 2022 to 2023 primarily due to a non-cash impairment charge in 2022 of $51.4 million related to 14 CRJ700 aircraft that were classified as held for sale in 2022, partially offset by an increase in depreciation expense as a result of a full year of depreciation on the 25 E175 aircraft acquired in 2022.
The following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, (in thousands) 2022 2021 % Change Fuel gallons purchased ​ ​ 26,218 ​ ​ 43,059 ​ (39.1) % Fuel expense ​ $ 108,456 ​ $ 107,057 1.3 % 33 Table of Contents Aircraft rentals.
The following table summarizes the gallons of fuel we purchased under our prorate agreements and SWC, for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, (in thousands) 2023 2022 % Change Fuel gallons purchased ​ ​ 23,198 ​ ​ 26,218 ​ (11.5) % Fuel expense ​ $ 85,913 ​ $ 108,456 (20.8) % Airport-related expenses .
For the year ended December 31, 2022, the decrease in our effective tax rate primarily related to the lapse of a previously recorded uncertain tax position liability of $7.3 million that was recognized as a benefit in 2022, partially offset by a $1.7 million valuation allowance on state net operating losses anticipated to expire prior to utilization recorded in 2022.
For the year ended December 31, 2023, the decrease in our effective tax rate primarily related to a benefit of $7.6 million for the release of a previously recorded uncertain tax position liability and a $1.1 million benefit for the release of valuation allowance against certain deferred tax assets associated with state net operating losses with a limited carry forward period.
SkyWest Leasing Segment Profit. SkyWest Leasing profit decreased $51.6 million, or 34.1%, during 2022, compared to 2021. SkyWest Leasing revenue decreased $8.5 million, or 1.6%, primarily due to deferring lease revenue, offset by lease revenue from the 25 additional E175 aircraft placed under contract during the year ended December 31, 2022, compared to December 31, 2021.
SkyWest Leasing revenue increased $30.7 million, or 6.0%, primarily due to the full year of lease revenue from the 25 E175 aircraft placed under contract in 2022, partially offset by an increase in deferred lease revenue for the year ended December 31, 2023, compared to the year ended December 30, 2022.
Excluding aircraft financed by our major airline partners that we operate for them under contract, we had 43 aircraft under lease with remaining terms ranging from one year to eight years as of December 31, 2022. Future minimum lease payments due under all long-term operating leases were approximately $202.9 million at December 31, 2022.
Aircraft Lease and Facility Obligations We also have long-term lease obligations, primarily relating to our aircraft fleet and airport facilities. 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 to seven years as of December 31, 2023.
The following table sets forth our segment data for the years ended December 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ (dollar amounts in thousands) ​ 2022 2021 $ Change % Change Operating Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines ​ $ 2,492,318 ​ $ 2,192,432 ​ $ 299,886 13.7 % SkyWest Leasing ​ 512,607 ​ 521,059 ​ (8,452) (1.6) % Total Operating Revenues ​ $ 3,004,925 ​ $ 2,713,491 ​ $ 291,434 10.7 % Operating Expenses and Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines ​ $ 2,537,881 ​ $ 2,190,884 ​ $ 346,997 15.8 % SkyWest Leasing ​ 412,965 ​ 369,862 ​ 43,103 11.7 % Total Operating Expenses and Interest Expense (1) ​ $ 2,950,846 ​ $ 2,560,746 ​ $ 390,100 15.2 % Segment profit (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines ​ $ (45,563) ​ $ 1,548 ​ $ (47,111) (3,043.3) % SkyWest Leasing ​ 99,642 ​ 151,197 ​ (51,555) (34.1) % Total Segment Profit ​ $ 54,079 ​ $ 152,745 ​ $ (98,666) (64.6) % Interest Income ​ 17,605 ​ 1,114 ​ 16,491 1,480.3 % Other Income (Expense), net ​ 20,899 ​ (3,249) ​ 24,148 (743.2) % Consolidated Income Before Taxes ​ $ 92,583 ​ $ 150,610 ​ $ (58,027) (38.5) % (1) We include interest expense in our segment profit 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.
The following table sets forth our segment data for the years ended December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ (dollar amounts in thousands) ​ 2023 2022 $ Change % Change Operating Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ 2,392,174 ​ $ 2,492,318 ​ $ (100,144) (4.0) % SkyWest Leasing ​ 543,258 ​ 512,607 ​ 30,651 6.0 % Total Operating Revenues ​ $ 2,935,432 ​ $ 3,004,925 ​ $ (69,493) (2.3) % Operating Expenses and Interest Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ 2,583,999 ​ $ 2,537,881 ​ $ 46,118 1.8 % SkyWest Leasing ​ 378,294 ​ 412,965 ​ (34,671) (8.4) % Total Operating Expenses and Interest Expense (1) ​ $ 2,962,293 ​ $ 2,950,846 ​ $ 11,447 0.4 % Segment profit (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SkyWest Airlines and SWC ​ $ (191,825) ​ $ (45,563) ​ $ (146,262) 321.0 % SkyWest Leasing ​ 164,964 ​ 99,642 ​ 65,322 65.6 % Total Segment Profit (Loss) ​ $ (26,861) ​ $ 54,079 ​ $ (80,940) (149.7) % Interest Income ​ 43,928 ​ 17,605 ​ 26,323 149.5 % Other Income, net ​ 23,242 ​ 20,899 ​ 2,343 11.2 % Consolidated Income Before Taxes ​ $ 40,309 ​ $ 92,583 ​ $ (52,274) (56.5) % (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.
As a result of these amendments, we deferred recognizing lease revenue on $22.1 million of the allocated fixed monthly lease payments received during the year ended December 31, 2022, under the straight-line method. 32 Table of Contents The decrease in prorate agreements revenue of $60.3 million was primarily due to the decrease in the number of prorate passengers and passenger revenue we received on routes we operated under our prorate agreements during 2022, compared to 2021.
As a result of these amendments, which decreased the future scheduled fixed monthly lease payments, the SkyWest Leasing segment deferred recognizing lease revenue on $78.5 million of the allocated fixed monthly lease payments received during the year ended December 31, 2023, compared to deferring $22.1 million of lease revenue during the year ended December 31, 2022, under the straight-line method.
The increase in lease, airport services and other revenues of $6.7 million was primarily due an increase in the number of flights operated at locations where we were contracted to provide airport customer service during 2022 compared to 2021.
Additionally, with revenue of $6.4 million for the year ended December 31, 2023, SWC was not a significant contributor to our increase in prorate agreements and SWC revenue in 2023 compared to 2022. 35 Table of Contents The decrease in lease, airport services and other revenues of $4.1 million, or 3.9%, was primarily due to a decrease in airport service revenue driven by a decrease in the number of flights operated at locations where we were contracted to provide airport customer service during 2023 compared to 2022.
Operating Expenses Individual expense components attributable to our operations are set forth in the following table (dollar amounts in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2021 ​ $ Change ​ % Change Salaries, wages and benefits ​ $ 1,211,551 ​ $ 986,664 ​ $ 224,887 ​ 22.8 % Aircraft maintenance, materials and repairs ​ 644,157 ​ 817,803 ​ (173,646) (21.2) % Depreciation and amortization ​ 394,552 ​ 440,198 ​ (45,646) (10.4) % Aircraft fuel ​ 108,456 ​ 107,057 ​ 1,399 1.3 % Aircraft rentals ​ 75,353 ​ 63,357 ​ 11,996 18.9 % Airport-related expenses ​ 71,549 ​ 104,690 ​ (33,141) (31.7) % Special items ​ — ​ 84,592 ​ (84,592) 100.0 % Payroll support grant ​ ​ — ​ ​ (422,669) ​ ​ 422,669 ​ (100.0) % Other operating expenses ​ 318,145 ​ 255,932 ​ 62,213 24.3 % Total operating expenses ​ $ 2,823,763 ​ $ 2,437,624 ​ $ 386,139 15.8 % ​ Salaries, wages and benefits.
Operating Expenses Individual expense components attributable to our operations are set forth in the following table (dollar amounts in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2023 ​ 2022 ​ $ Change ​ % Change Salaries, wages and benefits ​ $ 1,322,615 ​ $ 1,211,551 ​ $ 111,064 ​ 9.2 % Aircraft maintenance, materials and repairs ​ 673,453 ​ 644,157 ​ 29,296 4.5 % Depreciation and amortization ​ 383,115 ​ 394,552 ​ (11,437) (2.9) % Aircraft fuel ​ 85,913 ​ 108,456 ​ (22,543) (20.8) % Airport-related expenses ​ 72,640 ​ 71,549 ​ 1,091 1.5 % Aircraft rentals ​ 25,507 ​ 75,353 ​ (49,846) (66.1) % Other operating expenses ​ 268,120 ​ 318,145 ​ (50,025) (15.7) % Total operating expenses ​ $ 2,831,363 ​ $ 2,823,763 ​ $ 7,600 0.3 % ​ Salaries, wages and benefits.
Additionally, during the 2022 calendar year, we increased the number of CRJ700 aircraft we leased to third parties from 34 to 35 aircraft. We anticipate our fleet will continue to evolve, as we are scheduled to add a total of three new E175 aircraft with Delta in 2023 and 2024 and one new E175 aircraft with Alaska in 2025.
During the year ended December 31, 2023, we made changes to the number of aircraft we operated under the various code-share agreements with our major airline partners, including the addition of two new E175 aircraft. 32 Table of Contents 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 19 new E175 aircraft with United from 2024 to 2026 and one new E175 aircraft with Alaska in 2025.
In 2022, we increased the pay rates to various workgroups, including our pilots, that resulted in an increase to our salaries, wages and benefits for the year ended December 31, 2022, compared to the year ended December 31, 2021. Aircraft maintenance, materials and repairs.
The $111.1 million, or 9.2%, increase in salaries, wages and benefits was due to an increase in employee compensation, including higher pilot pay scales, for the year ended December 31, 2023, compared to the year ended December 31, 2022. Aircraft maintenance, materials and repairs.
Factors that may impact our estimates used for depreciation include anticipated useful lives of each aircraft type and estimated residual values of each aircraft.
The impairment of $2.3 million is included in “Other operating expenses” on the Company’s consolidated statements of comprehensive income and in the SkyWest Leasing segment for the year ended December 31, 2023. Factors that may impact our estimates used for depreciation include anticipated useful lives of each aircraft type and estimated residual values of each aircraft.
We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2022 ​ 2021 ​ $ Change ​ % Change Capacity purchase agreements flight operations revenue $ 2,028,308 $ 1,678,219 $ 350,089 20.9 % Capacity purchase agreements aircraft lease revenue ​ 522,193 ​ 527,173 ​ (4,980) (0.9) % Prorate agreements revenue ​ 349,336 ​ ​ 409,684 ​ ​ (60,348) (14.7) % Flying agreements revenue ​ $ 2,899,837 ​ $ 2,615,076 ​ $ 284,761 10.9 % The increase in “Capacity purchase agreements flight operations revenue” of $350.1 million was primarily due to an increase in the number of E175 aircraft we operated under our contracts with our major airline partners during the year ended December 31, 2022, compared to the year ended December 31, 2021, and rate increases since December 31, 2021.
We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2023 ​ 2022 ​ $ Change ​ % Change Capacity purchase agreements flight operations revenue $ 1,976,743 $ 2,028,308 $ (51,565) (2.5) % Capacity purchase agreements aircraft lease revenue ​ 476,265 ​ 522,193 ​ (45,928) (8.8) % Prorate agreements and SWC revenue ​ 381,389 ​ ​ 349,336 ​ ​ 32,053 9.2 % Flying agreements revenue ​ $ 2,834,397 ​ $ 2,899,837 ​ $ (65,440) (2.3) % The decrease in “Capacity purchase agreements flight operations revenue” of $51.6 million, or 2.5%, was primarily due to an increase in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the year ended December 31, 2023, compared to the year ended December 31, 2022.
At December 31, 2022, our total capital mix was 44.4% equity and 55.6% long-term debt, compared to 45.5% equity and 54.5% long-term debt at December 31, 2021. As of December 31, 2022 and 2021, we had $59.2 million and $61.4 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions.
Additionally, we used $289.1 million to repurchase 10.6 million shares of our common stock during the year ended December 31, 2023. At December 31, 2023, our total capital mix was 45.2% equity and 54.8% long-term debt, compared to 44.4% equity and 55.6% long-term debt at December 31, 2022.
The following table provides a summary of the net cash provided by (used in) our operating, investing and financing activities for the years ended December 31, 2022 and 2021, and our total cash and marketable securities position as of December 31, 2022 and December 31, 2021 (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2021 $ Change % Change Net cash provided by operating activities ​ $ 480,376 ​ $ 831,820 ​ $ (351,444) ​ (42.3) % Net cash used in investing activities ​ (904,894) ​ (698,522) ​ (206,372) 29.5 % Net cash provided by (used in) financing activities ​ 269,081 ​ (90,600) ​ 359,681 (397.0) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ ​ ​ ​ 2022 ​ 2021 ​ $ Change ​ % Change Cash and cash equivalents ​ $ 102,984 ​ $ 258,421 ​ $ (155,437) (60.1) % Marketable securities ​ 944,231 ​ 601,989 ​ 342,242 56.9 % Total ​ $ 1,047,215 ​ $ 860,410 ​ $ 186,805 21.7 % ​ Cash Flows provided by Operating Activities Our cash flows provided by operating activities was $480.4 million in 2022, compared to $831.8 million in 2021.
The following table provides a summary of the net cash provided by (used in) our operating, investing and financing activities for the years ended December 31, 2023 and 2022, and our total cash and marketable securities positions as of December 31, 2023 and December 31, 2022 (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2023 2022 $ Change % Change Net cash provided by operating activities ​ $ 736,334 ​ $ 480,376 ​ $ 255,958 ​ 53.3 % Net cash used in investing activities ​ (23,228) ​ (904,894) ​ 881,666 (97.4) % Net cash provided by (used in) financing activities ​ (667,813) ​ 269,081 ​ (936,894) (348.2) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ ​ ​ ​ 2023 ​ 2022 ​ $ Change ​ % Change Cash and cash equivalents ​ $ 148,277 ​ $ 102,984 ​ $ 45,293 44.0 % Marketable securities ​ 686,946 ​ 944,231 ​ (257,285) (27.2) % Total ​ $ 835,223 ​ $ 1,047,215 ​ $ (211,992) (20.2) % ​ Cash Flows provided by Operating Activities Our cash flows provided by operating activities was $736.3 million for the year ended December 31, 2023, compared to $480.4 million for the year ended December 31, 2022.
We also had $200.6 million of long-term debt obligations under the Payroll Support Program Agreements and $155.1 million of long-term debt secured by spare engines. Under our capacity purchase arrangements, our major airline partners compensate us for our costs of owning or leasing the aircraft on a monthly basis.
The average effective interest rate on our debt obligations was approximately 4.1% at December 31, 2023. 41 Table of Contents Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning or leasing the aircraft on a monthly basis.
The $173.6 million, or 21.2%, decrease in aircraft maintenance expense was primarily due to reliability improvement costs incurred on a portion of SkyWest Airlines’ CRJ700 and CRJ200 fleets, such as engine maintenance expense, during the year ended December 31, 2021.
The $29.3 million, or 4.5%, increase in aircraft maintenance expense was primarily due to an increase in direct maintenance costs, including the replacement of time-limited engine components, incurred on a portion of SkyWest Airlines’ CRJ700 fleet intended to extend the operational performance and reliability of these older aircraft, for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Our average effective interest rate for 2022 and 2021 was 4.0% and 3.8%, respectively. Interest income. Interest income increased $16.5 million, from $1.1 million during the year ended December 31, 2021, to $17.6 million during the year ended December 31, 2022.
Interest income. Interest income increased $26.3 million, from $17.6 million during the year ended December 31, 2022, to $43.9 million during the year ended December 31, 2023. Our interest income increased primarily from an increase in average interest rates attributed to our marketable securities for the year ended December 31, 2023, compared to the year ended December 31, 2022.
SkyWest Airlines’ block hour production decreased to 1,254,392, or 4.9%, for 2022 from 1,319,628 for 2021, primarily due to reduced flight schedules as a result of labor constraints, including the number of available captains.
Additionally, the decrease in SkyWest Airlines and SWC operating revenues was also attributed to a decrease in block hour production from 1,254,392 for the year ended December 31, 2022, to 1,140,443 for the year ended December 31, 2022, primarily due to labor constraints, including the number of available captains.
The $33.1 million, or 31.7%, decrease in airport-related expenses for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to a decrease in subcontracted airport services, landing fees and deicing events as a result of a decrease in the number of flights we operated under our prorate arrangements. Special items .
The $1.1 million, or 1.5%, increase in airport-related expenses for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to an increase in subcontracted airport services. Aircraft rentals.
We had no restricted cash as of December 31, 2022 and 2021. Sources and Uses of Cash Cash Position and Liquidity.
As of December 31, 2023 and 2022, we had $49.1 million and $59.2 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions. We had no restricted cash as of December 31, 2023 and 2022. 39 Table of Contents Sources and Uses of Cash Cash Position and Liquidity.
SkyWest Airlines Segment Profit (Loss). SkyWest Airlines segment profit decreased $47.1 million during 2022, compared to 2021, from $1.5 million segment profit for the year ended December 31, 2021 to $45.6 million segment loss for the year ended December 31, 2022.
SkyWest Airlines and SWC Segment Loss. SkyWest Airlines and SWC segment loss was $191.8 million for the year ended December 31, 2023, compared to a segment loss of $45.6 million for the year ended December 31, 2022. Significant items contributing to the SkyWest Airlines and SWC segment loss are set forth below.
During the year ended December 31, 2022, we amended our capacity purchase agreements with certain major airline partners that reduced certain future contractual fixed monthly payments and increased future contractual variable payments.
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. Recent amendments to our capacity purchase agreements with certain major airline partners reduced certain future contractual fixed monthly payments and increased future contractual variable payments.
As a result of the maintenance work completed in 2021, our maintenance events were lower for the year ended December 31, 2022, compared to the year ended December 31, 2021. Depreciation and amortization. The $45.6 million, or 10.4%, decrease in depreciation and amortization expense was primarily due to certain CRJ200 aircraft that became fully depreciated after December 31, 2021.
Depreciation and amortization. The $11.4 million, or 2.9%, decrease in depreciation and amortization expense was primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since December 31, 2022.
As a result of the maintenance work completed in 2021, our maintenance events were lower for the year ended December 31, 2022, compared to the year ended December 31, 2021. ● SkyWest Airlines’ depreciation and amortization expense decreased by $27.8 million, or 13.2%, primarily due to certain CRJ200 aircraft and engines that became fully depreciated during 2022. ● SkyWest Airlines’ fuel expense increased $1.4 million, or 1.3%, due to an increase in our average fuel cost per gallon from $2.49 in 2021 to $4.14 in 2022, offset by a decrease in the number of flights we operated under our prorate arrangements and the corresponding decrease in gallons of fuel we purchased. ● SkyWest Airlines recognized $422.7 million in payroll support grant proceeds as a reduction to our operating expenses in 2021.
SkyWest Airlines and SWC’s operating expenses and interest expense increased $46.1 million, or 1.8%, from 2022 to 2023 due to the following primary factors: 38 Table of Contents ● SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $111.9 million, or 9.3%, primarily due to increased e mployee compensation, including higher pilot pay scales, during the year ended December 31, 2023, compared to the year ended December 31, 2022. ● SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense increased by $32.7 million, or 5.2%, primarily due to an increase in direct maintenance costs, including the replacement of time-limited engine components, incurred on a portion of SkyWest Airlines’ CRJ700 fleet intended to extend the operational performance and reliability of these older aircraft, for the year ended December 31, 2023, compared to the year ended December 31, 2022. ● SkyWest Airlines and SWC’s depreciation and amortization expense decreased by $33.2 million, or 18.2%, primarily due to certain CRJ aircraft and engines that were depreciated to their estimated residual value since December 31, 2022 . ● SkyWest Airlines and SWC’s fuel expense decreased $22.5 million, or 20.8%, d ue to a decrease in the number of flights we operated under our prorate arrangements and the corresponding decrease in gallons of fuel we purchased, combined with a decrease in our average fuel cost per gallon from $4.14 in 2022 to $3.70 in 2023. ● SkyWest Airlines and SWC’s remaining expenses decreased $42.8 million, or 10.3%, primarily related to a d ecrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft in 2023 .
Summary of interest expense, interest income, other income (expense) and provision for income taxes: Interest Expense. The $4.0 million increase in interest expense was primarily related an increase in long-term debt subsequent to December 31, 2021, as well as a higher average effective interest rate in 2022 as compared to 2021.
The $3.8 million, or 3.0%, increase in interest expense was primarily related to higher fixed interest rates on debt issued since December 31, 2022, partially offset by a decrease in outstanding debt from $3.4 billion at December 31, 2022 to $3.0 billion at December 31, 2023. Our average effective interest rate for 2023 and 2022 was 4.1% and 4.0%, respectively.
Asset groupings are done at the fleet type or contract level. During 2022, we committed to a formal plan to sell 14 CRJ700 aircraft. T he aircraft are expected to be disposed of via sale within the next 12 months. Accordingly, the Company determined the aircraft met the criteria to be classified as assets held for sale.
Asset groupings are done at the fleet type or contract level. During 2023, we recorded a non-cash impairment loss of $2.3 million related to a change in the estimate of fair value for 14 CRJ700 aircraft that were classified as held for sale in 2022.
The $62.2 million, or 24.3%, increase in other operating expenses was primarily related to an asset held for sale write-down of $51.4 million during the year ended December 31, 2022, and an increase in training expenses and simulator costs related to an increase in pilot hiring during 2022.
The increase in operating expenses was primarily due to an increase in salaries, wages and benefits for the year ended December 31, 2023, compared to the year ended December 31, 2022, partially offset by a decrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft in 2023 and lower other operating expenses primarily due to a held-for-sale impairment charge of $51.4 million in 2022, compared to $2.3 33 Table of Contents million in 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Pursuant to our contract flying arrangements, United, Delta, American and Alaska have agreed to bear the economic risk of fuel price fluctuations on our contracted flights. We bear the economic risk of fuel price fluctuations on our prorate operations.
Pursuant to our contract flying arrangements, United, Delta, American and Alaska have agreed to bear the economic risk of fuel price fluctuations on our contracted flights. We bear the economic risk of fuel price fluctuations on our prorate and SWC operations.
For illustrative purposes only, we have estimated the impact of the market risk of fuel fluctuations on our prorate operations using a hypothetical increase of 25% in the price per gallon we purchase.
For illustrative purposes only, we have estimated the impact of the market risk of fuel price fluctuations on our prorate and SWC operations using a hypothetical increase of 25% in the price per gallon we purchase.
We currently intend to finance the acquisition of aircraft through manufacturer financing or long-term borrowings. Changes in interest rates may impact the actual cost to us to acquire future aircraft.
We currently intend to finance the acquisition of aircraft through manufacturer financing or long-term borrowings. Changes in interest rates may impact our actual cost to acquire future aircraft.
As a result, our costs have become, and we expect they will continue to be, subject to significant inflationary pressures, and we may not be able to fully offset such higher costs through price increases under our capacity purchase agreements. Salaries, wages and benefits expense represented 42.9% of our total operating expense for year ended December 31, 2022.
As a result, our costs have become, and we expect they will continue to be, subject to significant inflationary pressures, and we may not be able to fully offset such higher costs through price increases under our capacity purchase agreements. Salaries, wages and benefits expense represented 46.7% of our total operating expense for year ended December 31, 2023.
Based on this hypothetical assumption, we would have incurred an additional $27.1 million, $26.8 million and $15.4 million in fuel expense for the years ended December 31, 2022, 2021 and 2020, respectively. Interest Rates As of December 31, 2022, our long-term debt had fixed interest rates.
Based on this hypothetical assumption, we would have incurred an additional $21.5 million, $27.1 million and $26.8 million in fuel expense for the years ended December 31, 2023, 2022 and 2021, respectively. Interest Rates As of December 31, 2023, our long-term debt had fixed interest rates.
For each of the years ended December 31, 2022, 2021 and 2020, approximately 12%, 16% and 13% of our total flying agreements revenue was derived from prorate arrangements. For the years ended December 31, 2022, 2021 and 2020, the average price per gallon of aircraft fuel was $4.14, $2.49 and $1.89, respectively.
For each of the years ended December 31, 2023, 2022 and 2021, approximately 13%, 12% and 16% of our total flying agreements revenue was derived from prorate agreements and SWC. For the years ended December 31, 2023, 2022 and 2021, the average price per gallon of aircraft fuel was $3.70, $4.14 and $2.49, respectively.
During the year ended December 31, 2022, we 41 Table of Contents amended our capacity purchase agreements with certain major airline partners that resulted in higher compensation for our increased pilot pay rates. Our inability or failure to offset a material increase in costs due to inflation and/or labor costs could harm our business, financial condition and operating results.
For illustrative purposes, a hypothetical increase of 25% to our salaries, wages and benefits during the year ended December 31, 2023, would have increased our operating expenses by approximately $330.7 million. Our inability or failure to offset a material increase in costs due to inflation and/or labor costs could harm our business, financial condition and operating results.
Removed
For illustrative purposes, a hypothetical increase of 25% in our salaries, wages and benefits during the year ended December 31, 2022, would have increased our operating expenses by approximately $302.9 million. In September 2022, we amended our collective bargaining agreement with our pilots, which was in effect for only a portion of the year ended December 31, 2022.
Removed
The amended collective bargaining agreement is anticipated to result in an increase to our pilot costs.
Removed
For illustrative purposes, under SkyWest Airlines’ amended collective bargaining agreement, the first-year pay rate for first officers increased from approximately $46/flight hour to $90/flight hour and the first-year CRJ and E175 captain pay rate increased from approximately $76/flight hour and $81/flight hour, respectively, to $140/flight hour for both CRJ and E175 captains.

Other SKYW 10-K year-over-year comparisons