SkyWest Airlines 2004 Annual Report Download - page 23

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Operating and Interest Expenses. Operating and interest expenses increased 30.4% to $1.03 billion for the year ended December
31, 2004, compared to $789.4 million for the year ended December 31, 2003. The increase in total operating and interest
expenses was due principally to the growth in SkyWest’s regional jet fleet from 2003. As a percentage of consolidated operating
revenues, total operating and interest expenses increased to 89.1% for the year ended December 31, 2004, from 88.9% for the
year ended December 31, 2003. The increase in operating and interest expenses as a percentage of consolidated operating
revenues was primarily due to significant increases in fuel costs year-over-year.
Operating revenues increased 30.2% for the year ended December 31, 2004, compared to the year ended December 31, 2003,
while total operating and interest expenses increased 30.4% over the same period. The increase in total operating revenues was
primarily due to the growth in SkyWest’s regional jet fleet from 2003. Airline operating and interest expenses, excluding fuel
charges, per ASM decreased 5.5% to 10.3¢ for the year ended December 31, 2004, from 10.9¢ for the year ended December 31,
2003. The primary reason for the decrease was the increased capacity of the Company’s regional jet aircraft and the increase in
stage lengths flown by the Company’s regional jet aircraft.
The following tables set forth information regarding the Company’s operating expense components for the years ended December
31, 2004 and 2003. Operating expenses are expressed as a percentage of operating revenues. Individual expense components are
also expressed as cents per ASM.
Year ended December 31,
2004 2003
Amount
Percentage
of
Revenue
Cents
per
ASM Amount
Percentage
of
Revenue
Cents
Per
ASM
(in thousands) (in thousands)
Salaries, wages and employee benefits $ 282,676 24.5 3.8 $225,545 25.4 3.8
Aircraft costs 222,837 19.3 3.0 199,355 22.4 3.4
Maintenance 77,514 6.7 1.0 54,151 6.1 0.9
Fuel 252,556 21.8 3.3 149,429 16.8 2.5
Other airline expenses 175,686 15.2 2.3 151,066 17.0 2.6
Interest 18,239 1.6 0.2 9,891 1.1 0.2
Total airline expenses $1,029,508 13.6 $789,437 13.4
The cost per ASM of salaries, wages and employee benefits remained constant at 3.8¢ for the year ended December 31, 2004 and
December 31, 2003. The average number of full-time equivalent employees increased 28.3% to 6,747 for the year ended
December 31, 2004 from 5,257 for the year ended December 31, 2003. The increase in number of employees was due, in large
part, to the addition of personnel required for the new regional jet flying and ground handling operations within the Company’s
United Express operations.
The cost per ASM for aircraft costs, including aircraft rent and depreciation, decreased to 3.0¢ for the year ended December 31,
2004, from 3.4¢ for the year ended December 31, 2003. The decrease in cost per ASM was primarily due to the addition of
twelve CRJ700s, which have a lower operating cost per ASM than the Company’s existing aircraft. Additionally, the decrease
was due, in part, to the Company changing the estimate on depreciable lives of rotable spares from five years to ten years
effective January 2004. This change in estimate increased the Company’s pretax income by $11,455,000 for the year ended
December 31, 2004. The impact of this change on costs per ASM for the year ended December 31, 2004 was 0.002¢ and the
remaining decrease was primarily due to the increase in the number of regional jets that were added to SkyWest’s fleet during
2004.
The cost per ASM for maintenance expense increased to 1.0¢ for the year ended December 31, 2004, from 0.9¢ the year ended
December 31, 2003. The increase in cost per ASM was primarily due to the timing of certain maintenance events. Under the
Company’s United Express Agreement, specific amounts are included in the rates and charges for mature maintenance on
regional jet engines that the Company records as revenue. However, consistent with the change to a direct expense maintenance