SKYWEST INC Q4 FY2024 earnings call

• Acknowledged the tragic aircraft collision at Reagan National Airport and offered support. • Named one of Fortune's World's most Admired Companies for 2025. • Fourth quarter saw nearly 30,000 more flights than the same quarter prior, with 99.9% adjusted completion. • Reached a contract extension with American Airlines for 74 CRJ700s. • Expect to receive 16 new E-175s between this year and next, with 278 total by end of 2026. • Pilot staffing balance improving, with block hour production expected to be up ~12% in 2025 compared to 2024. • Invested in fleet and people, with aircraft and maintenance spend expected to increase in 2025.

Total Q4 revenue was $944 million. Contract revenue was $786 million, accounting for 83.26% of Q4 revenue. Proorate and charter revenue was $126 million, making up 13.35% of Q4 revenue. Leasing and other revenue was $32 million, representing 3.39% of Q4 revenue.

• Anticipates block hour production to be up about 12% in 2025 compared to 2024. • 2025 GAAP EPS could be in the $9 per share area if execution on opportunities is successful. • 2025 CapEx is expected to be approximately $600 million, including purchase of 8 new E-175s and related aircraft and engine support for CRJ550 opportunity.

• Challenges in third-party MRO network including labor and parts shortages. • Potential policy changes affecting Essential Air Service (EAS) flying, with monitoring ongoing.

Q: Maybe I can start off where we ended there just on the kind of ability to kind of bring back service to small communities. And I did notice SkyWest Charter had one more aircraft this quarter. I was curious just as you think about bringing back prorate, and is that more of a kind of post this summer or if you're expecting a lot of that prorate to come back this summer? And then just kind of specifically related to SkyWest Charter, I was curious if you've kind of reengaged with the FAA any differently on getting that commuter authority now that the kind of the administration has changed or if it's still too early?

A: Yeah. So as far as prorate, we have added a few markets in the fourth quarter, and there will be a couple in the first and second quarters. But the majority of what we're seeing is - the demand for the summer flying on a contract basis in our existing prorate is very, very strong for the summertime. And so we're looking more to Q3 at the end of Q3 and Q4 to add a lot of additional or other additional markets on the prorate side. Yeah. Savi, this is Chip. I'll answer the second half of your question. I think the term that you use being reengaged in this is an understatement. We certainly do see a very good opportunity relative to the 2.5-year challenges at SkyWest Charter to get commute authority. We certainly are extraordinarily sensitive to the events that happened last night and the priorities at the Department of Transportation, but we look forward with optimism to reengaging this incredibly important strategic opportunity that we have to better serve communities. And so yes, we are definitely reengaging in that process.

Q: On the contract extension with American, can you give us some color on how the terms of that extension may compare to the previous contract?

A: Yeah. This is Wade. So as we said, we extended up to 74 aircraft. The term goes through close to the end of the decade, and the economics are very similar to what we have today.

Q: Just touching on this EAS flying, and I know that you're focused on growing this service. Is there a risk that the Trump administration perhaps under Doge [ph] eliminates any certain markets under the EAS flying? Any insights on policy changes from your conversations with the Department of Transportation or any other government officials would be helpful.

A: Yeah. Look, I mean, I think we monitor this - this is Chip. We monitor this very carefully. Essential air service is something that has a lot of deep roots in a lot of locations throughout the United States. We understand what the direction of Doge is. And obviously, there's been some things this last week that we know that they're going to be very aggressive about it. I would also take you back to the confirmation hearings of the new Transportation Secretary. There was a lot of comments 6 or 7 times about his commitment to essential air service. There's a lot of political support for this program, not mostly because you deem it as wasteful spending, which is prevalent throughout the federal government, but mostly because of the investment and the circular nature of which it gives back to the economy in extraordinarily positive ways for these small communities. So look, our job is to make sure that we find the right tools and systems to serve these small communities. And we've been doing this for a long time and have faced a lot of challenges through various aspects of making sure small communities are served. And I think that we've got some good approaches and plans to make sure that we're successful for the long term in this.

Q: We continue to hear more about the larger U.S. airlines needing to grow into their pilot workforces given aircraft delivery delays the industry continues to face. In some cases, we're seeing headcount reductions in pilots. You had called out last year, I think like on the same call, you need 1,000 pilots to get back to '19 levels and then another 1,000 to meet demand. How many more pilots do you have today versus a year ago and in the pipeline? And then just based on what you're saying about demand, is it perhaps you still need another one? Like even if you have $1,200$ more pilots, do you still need another 1,000 just as demand continues to grow? Any color there would be helpful.

A: Yeah, Katie, this is Chip. I'm going to put a twist into probably what we said a year to 18 months ago because there's been some minor changes in how our aircraft are being flown, still very good for SkyWest. But we certainly have I think the major carriers have been very disciplined with our schedules to be a little bit more strategic and our utilization levels are slightly down compared to what it was, obviously, back in 2019. And I think that's worked out well for both of us. So with - we probably today have another 700 pilots than we did a year to 18 months ago for sure. We're not at the 2019 levels of pilots yet. But I think from our perspective, we've got a very disciplined approach. We've got some good slow consistent growth coming, which is at a better pace than what I think we were initially looking at, certainly, what Wade mentioned with aircraft coming out and being maintained and some supply challenges with that helps us. And so to be candid, we're on a very, very good pace of our growth. We like the way that it's come out. And I think it's stable, it's predictable and in a manner at which we have a very, very strong pipeline. But as of today, we are not hiring as many pilots as we anticipated we needed. And our attrition levels are extremely low. So from that perspective, I think for us, we're in a very, very good place with a good consistent growth plan that's going to enable us to do things on a very, very strong, consistent basis in the future.

Q: on the uptick in the block hour production for this year. Now that growth looks a little more stable than perhaps the pace at which you thought was going to come back a year or so ago, what would provide further upside to that now 12% increase in block hours? Like where around the edges could that move up? Is it more prorate flying? Is it incremental aircraft get added in the year? I'm not even sure if that's possible with Embraer aircraft or I don't know if that would be like new partner aircraft coming to your property away from someone else? Like what would drive further upside to that plus 12 that was plus 10 a quarter ago?

A: Yeah. No, it's a great question. This is Wade. So there's really a couple of things that I would say. Number one is fleet utilization could continue to drive that number up. That's probably the biggest thing. The second thing I would say is fleet availability.

Q: So it sounds like on the dual class, CRJ700s, 900s it's a rounding or what's not on a long-term contract at this point. I know you still have some more on the CRJ200 front and you walk through kind of your waterfall of preferences where they go to a partner or prorate or secondarily, they go to Charter. And then you also mentioned like the asset offtake agreement with Contour. If we get to that part of the waterfall, I guess, those would be straight sales. Is that how we should think about that? Outside of Contour, would the third choice also be to sell to another entity? And what's the market look like in terms of demand for CRJ200?

A: That's a good one though. So as far as the last part of the waterfall there, just getting rid of some of the assets, it is actually a combination with Contour. Generally, we sell the airframes and we lease the engines. The demand is still very strong out there. We're just very patient with our fleet.