SkyWest Airlines 2004 Annual Report Download - page 26

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The following tables set forth information regarding the Company’s operating expense components for the years ended December
31, 2003 and 2002. Operating expenses are expressed as a percentage of operating revenues. Individual expense components are
also expressed as cents per ASM.
Year ended
December 31,
2003 2002
Amount
Percentage
of
Revenue
Cents
per
ASM Amount
Percentage
of
Revenue
Cents
Per
ASM
(in thousands) (in thousands)
Salaries, wages and employee benefits $ 225,545 25.4 3.8 $ 200,715 25.9 4.6
Aircraft costs 199,355 22.4 3.4 160,853 20.8 3.7
Maintenance 54,151 6.1 0.9 54,041 7.0 1.2
Fuel 149,429 16.8 2.5 97,899 12.6 2.2
Other airline expenses 151,066 17.0 2.6 142,822 18.4 3.3
US Government assistance - 0.0 0.0 (1,438) (0.2) 0.0
Interest 9,891 1.1 0.2 3,611 0.5 0.1
Total airline expenses $ 789,437 13.4 $ 658,503 15.1
The cost per ASM of salaries, wages and employee benefits decreased to 3.8¢ for the year ended December 31, 2003, compared
to 4.6¢ for the year ended December 31, 2002. The decrease was primarily the result of the increase in stage lengths flown by
regional jets. The average number of full-time equivalent employees increased 3.5% to 5,257 for the year ended December 31,
2003 from 5,079 for the year ended December 31, 2002. The increase in number of employees was due, in large part, to the
addition of personnel required for the new 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 3.4¢ for the year ended December 31,
2003, from 3.7¢ for the year ended December 31, 2002. The decrease in costs per ASM was primarily due to the increase in the
number of CRJ200s that were added to SkyWest’s fleet during the year ended December 31, 2003, resulting in an increase in
stage lengths year-over-year.
The cost per ASM for maintenance expense decreased to 0.9¢ for the year ended December 31, 2003, compared to 1.2¢ for the
year ended December 31, 2002. The decrease in cost per ASM was primarily attributable to the increase in stage lengths flown
by CRJ200s, a higher mix of new aircraft with SkyWest’s fleet and the timing of certain maintenance-related 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. As a result, during the year ended December 31, 2003, the Company
collected and recorded as revenue $15.9 million (pretax) under the United Express Agreement, with no corresponding offset for
CRJ200 engine maintenance overhauls since none were incurred. Because the “Maintenance” line in the table set forth above
does not include salaries, wages and employee benefits associated with the Company’s maintenance operations (those costs are
stated separately in the table), the maintenance expense line in the above table differs from the maintenance line in the Company’s
Condensed Consolidated Statements of Income set forth in Item 8 below.
The cost per ASM for fuel increased to 2.5¢ for the year ended December 31, 2003, from 2.2¢ for the year ended December 31,
2002. This was primarily due to the average price of fuel increasing to $1.12 per gallon during the year ended December 31,
2003, from $0.97 per gallon for the year ended December 31, 2002.
The cost per ASM for other expenses, primarily consisting of landing fees, station rentals, computer reservation system fees and
hull and liability insurance, decreased 21.2% to 2.6¢ for the year ended December 31, 2003, from 3.3¢ for the year ended
December 31, 2002. The decrease was primarily related to the Company’s elimination of certain reservation and distribution costs
which were previously associated with the United Express Agreement, along with the increase in stage lengths flown by the
Company’s regional jets.