SkyWest Airlines 2004 Annual Report Download - page 25

Download and view the complete annual report

Please find page 25 of the 2004 SkyWest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 68

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68

23
Net Income. Net income decreased to $66.8 million, or $1.15 per diluted share, for the year ended December 31, 2003, compared
to $86.9 million, or $1.51 per diluted share, for the year ended December 31, 2002. Factors relating to the change in net income
are discussed below.
Passenger Revenues. Passenger revenues, which represented 99.3% of consolidated operating revenues for the year ended
December 31, 2003, increased 14.6% to $882.1 million for the year ended December 31, 2003, from $769.4 million or 99.4% of
consolidated operating revenues for the year ended December 31, 2002. Passenger revenues, excluding fuel costs, increased 9.1%
for the year ended December 31, 2003. The increase in passenger revenue excluding fuel was primarily due to a 34.9% increase
in ASMs, principally as a result of the Company increasing its operating aircraft to 185 aircraft as of December 31, 2003, from
149 aircraft as of December 31, 2002; however, this increase was partially offset by the economic efficiencies of flying new,
incremental regional jet aircraft. These efficiencies are passed on to the major partners through decreases in the rates
contemplated by their respective contracts. Twenty-eight additional CRJ200s were placed into service under the Company’s
United Express operations and 11 additional CRJ200s were placed in service under the Delta Connection operations during the
year ended December 31, 2003. Revenue per ASM decreased 15.2% to 15.1¢ from 17.8¢ for the year ended December 31, 2002,
primarily due to an increase in ASMs produced by CRJ200s and CRJ700s (resulting in lower revenue per ASM pursuant to the
terms of the Company’s agreements with Delta and United).
Passenger Load Factor. Passenger load factor increased to 71.9% for the year ended December 31, 2003, from 68.7% for the
year ended December 31, 2002. The increase in load factor was due primarily to the further development of the Company’s
relationships with United and Delta whereby SkyWest is supplementing mainline service in previously established and developed
markets. Additionally, the Company is experiencing higher passenger acceptance of its regional jet aircraft.
Total Airline Expenses Excluding Fuel. Total airline expenses for the year ended December 31, 2003, excluding fuel charges
(which are reimbursable by the Company’s major partners), increased approximately 14.2% from the same period of 2002. The
increase was primarily a result of a 34.9% increase in ASMs (which resulted principally from the expansion of SkyWest’s
regional jet fleet from 2002). Total operating expenses for the year ended December 31, 2003 increased at a lower rate than
ASMs due to the increased stage lengths flown by the Company’s regional jets and the cost reduction initiatives implemented by
the Company during the year ended December 31, 2003.
Operating and Interest Expenses. Operating and interest expenses increased 19.9% to $789.4 million for the year ended
December 31, 2003, compared to $658.5 million for the year ended December 31, 2002. The increase in total operating and
interest expenses was due principally to the growth in SkyWest’s regional jet fleet from 2002. As a percentage of consolidated
operating revenues, total operating and interest expenses increased to 88.9% for the year ended December 31, 2003, from 85.0%
for the year ended December 31, 2002. The increase in operating and interest expenses as a percentage of consolidated operating
revenues was primarily due to the reduction in the Company’s departure rates as operating revenues increased 14.7% year-over-
year, while total operating expenses and interest increased 19.9% from 2002. The increase in interest expense was also primarily
due to the increase in debt financing of the Company’s new regional jets. Airline operating and interest expense excluding fuel
charges, per ASM decreased 15.5% to 10.9¢ for the year ended December 31, 2003, from 12.9¢ for the year ended December 31,
2002. The primary reason for the decrease was the increased capacity of the Company’s regional jet aircraft, which are less
expensive to operate on a per-ASM basis than EMB120s.