SkyWest Airlines 2008 Annual Report Download - page 3

To our Shareholders
For many years we have been able to report to our shareholders the continued significant progress
and growth of SkyWest, Inc. In spite of the economic difficulties our industry and the world faced
during 2008, we have been able to increase stockholders’ equity and improve our balance sheet through
generating additional cash and reducing debt. As we forecasted, in late 2007, we didn’t acquire the
large number of aircraft on an annual basis in 2008 as we had historically been accustomed to.
For the year ended December 31, 2008, we produced $3.5 billion in total operating revenues and
generated $112.9 million in net income or $1.93 per diluted share. That was no small achievement
considering that many carriers in our industry experienced losses for the year.
As of December 31, 2008, our total combined fleet was 442 aircraft consisting of 374 regional jets,
56 EMB-120 turboprop aircraft and 12 ATR72 turboprop aircraft. During 2008, we acquired four
CRJ200’s, two CRJ700’s and three CRJ900’s, all of which are regional jets. With this combined fleet we
generated 22 billion available seat miles (‘‘ASMs’’) for 2008, however it resulted in a 4.1% reduction in
ASM’s, compared to 2007. This reduction in ASMs was directly attributable to the difficulties
experienced by our major partners and resulted in a 4.3% reduction in the scheduled block hours that
we fly on their behalf. Additionally, we amended our agreement with Midwest Airlines, Inc. to remove
nine CRJ200 aircraft from operations that we had been flying under the Midwest Connection program.
During 2008, we also continued the execution of a previously announced transition plan whereby
we began to take delivery of 22 regional jet aircraft, four CRJ900’s and 18 CRJ700’s which we intend
to use to replace 23 aging EMB120 turboprop aircraft. In conjunction with this plan, we took delivery
of three CRJ900’s, during 2008, with most of the firm- ordered aircraft scheduled to be delivered
during 2009. The last five aircraft are scheduled for delivery early in 2010. At the same time these
aircraft continue to deliver in 2009, we intend to transition out of the remaining 15 EMB120 turboprop
aircraft. It is our expectation that we will complete the entire transition in early 2010. Also, late in
2008, we reached an agreement with Delta Air Lines and were awarded 10 additional CRJ900 regional
jet aircraft which are scheduled for delivery in early 2009. It is currently anticipated that all 10 aircraft
will be operated by Atlantic Southeast Airlines, Inc. under a capacity purchase agreement.
Another positive development during the year was the consummation of a share purchase
agreement with Trip Linhas Aereas, (‘‘TRIP’’) a regional airline headquartered in Campinas, Brazil.
TRIP currently operates a fleet of 20 turboprop aircraft consisting of (12) ATR42 and (8) ATR72’s.
TRIP has also placed an order for five ERJ175 regional jets that are scheduled to begin delivering in
March of 2009. Additionally, they are acquiring new ATR72 aircraft in order to expand their business
and take advantage of the growing Brazilian economy. Our agreement allows for an investment of up
to $30 million, to be paid in tranches over the next two years, based on TRIP meeting certain defined
financial objectives. As of year end, we had invested $5 million in TRIP resulting in an ownership of
about 7% of the company.
As of December 31, 2008, our total cash and marketable securities balance was $705.2 million
which was an increase of $44.8 million over the previous year end. We achieved this increase in our
cash balances even after investing $102.6 million in repurchases of our common stock. During 2008, we
repurchased 5.4 million shares at an average cost of $19.16. We are currently authorized to repurchase
up to an additional 4.6 million shares as part of a Board- authorized stock repurchase program. Our
long-term debt was $1.68 billion as of December 31, 2008, compared to $1.73 billion as of
December 31, 2007. We believe our balance sheet and liquidity position are strong and will allow us to
deploy our capital in opportunistic ways.
We also believe our strength is reflected in the high-quality service we provide through our
relationships with United Airlines and Delta Air Lines. We operate 163 aircraft in United Express
operations that constitutes 53% of the entire United Express program and we operate 258 aircraft in
Delta Connection operations which constitutes 35% of the entire Delta Connection program. As these
percentages indicate, our major partners have validated their reliance on our ability to deliver what we
say we will deliver. We do that day after day. During 2008, we carried 33.5 million passengers on behalf