SkyWest Airlines 2005 Annual Report Download - page 37

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Ground Handling and Other Revenue. Total ground handling revenue for the year ended December 31, 2005 increased
approximately 55.5% from the same period of 2004. The increase was primarily related to contracts with our major partners,
whereby, SkyWest performs the ground handling for other regional airlines.
Total Airline Expenses Excluding Fuel. Total airline expenses for the year ended December 31, 2005, excluding fuel charges
(which are substantially reimbursable by our major partners), increased approximately 55.2% from the same period of 2004. The
increase was primarily a result of a 68.5% increase in ASMs (which resulted principally from the acquisition of ASA). Total
operating expenses for the year ended December 31, 2005 increased at a lower rate than ASM growth, primarily due to the
increased operating efficiencies obtained from increased stage lengths flown by the regional jets.
Operating and Interest Expenses. Operating and interest expenses increased 74.5% to $1.80 billion for the year ended
December 31, 2005, compared to $1.03 billion for the year ended December 31, 2004. The increase in total operating and interest
expenses was due principally to the acquisition of ASA. As a percentage of consolidated operating revenues, total operating and
interest expenses increased to 91.5% for the year ended December 31, 2005, from 89.1% for the year ended December 31, 2004.
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.
The following tables set forth information regarding our operating expense components for the years ended December 31,
2005 and 2004. Operating expenses are expressed as a percentage of operating revenues. Individual expense components are also
expressed as cents per ASM.
Year ended December 31,
2005 2004
Amount
Percentage
of
Revenue
Cents
per
ASM Amount
Percentage
of
Revenue
Cents
Per
ASM
(in thousands) (in thousands)
Salaries, wages and employee benefits $ 434,218 22.1 3.4 $ 282,676 24.5 3.8
Aircraft costs 325,771 16.6 2.6 222,837 19.3 3.0
Maintenance 129,626 6.6 1.0 77,514 6.7 1.0
Fuel 590,776 30.1 4.6 252,556 21.8 3.3
Other airline expenses 263,248 13.4 2.1 175,686 15.2 2.3
Interest 53,331 2.7 0.4 18,239 1.6 0.2
Total airline expenses $1,796,970 14.1 $1,029,508 13.6
The cost per ASM of salaries, wages and employee benefits decreased to 3.4¢ for the year ended December 31, 2005,
compared to 3.8¢ for the year ended December 31, 2004. The average number of full-time equivalent employees increased 97.2%
to 13,304 for the year ended December 31, 2005 from 6,747 for the year ended December 31, 2004. The increase in number of
employees was due, in large part, to the acquisition of ASA and addition of personnel required for the new regional jet flying and
ground handling operations within our United Express operations.
The cost per ASM for aircraft costs, including aircraft rent and depreciation, decreased to 2.6¢ for the year ended December
31, 2005, from 3.0¢ for the year ended December 31, 2004. The decrease in cost per ASM was primarily due to the addition of
ASA’s regional jet fleet and the addition of thirty CRJ700s, which have a lower operating cost per ASM than our existing CRJ200
and turboprop fleets.
The cost per ASM for maintenance expense remained constant at 1.0¢ for the year ended December 31, 2005, and December
31, 2004. Under our United Express Agreement, specific amounts are included in the rates and charges for mature maintenance
on regional jet engines that we record as revenue. However, consistent with the change to a direct expense maintenance policy,
we record maintenance expense on our CRJ200 engines as it is incurred. As a result, during the year ended December 31, 2005,
we collected and recorded as revenue $25.2 million (pretax) under the United Express Agreement, with no material offset to
CRJ200 engine maintenance overhauls. Because the “Maintenance” line in the table set forth above does not include salaries,