SkyWest Airlines 2009 Annual Report Download - page 3

To our Shareholders
I am pleased to report that for the year ended December 31, 2009, SkyWest, Inc., generated net
income of $83.7 million, or $1.47 in fully diluted earnings per share. Total revenues for the year were
$2.6 billion. The net income result can be added to our long history of reporting profits, but I feel
particularly pleased to be able to report our earnings when many in the airline industry continue to
report losses.
As I reflect on the year, it truly was one with significant headwinds. Despite those headwinds, we
experienced successes that allowed us to grow in an industry that is experiencing little growth. Many
carriers actually reduced their capacity by reducing the number of flights offered. Some of the successes
we experienced during the year were:
• Completed a funding transaction for $129 million with United Airlines that resulted in a
material extension of our contract flying for 40 CRJ200 aircraft through our SkyWest Airlines
subsidiary
• Diversified the operations of our Atlantic Southeast Airlines (‘‘ASA’’) subsidiary by completing
an arrangement for ASA to operate 14 CRJ200 aircraft for United Airlines
• Added 25 additional CRJ900 and CRJ700 regional jet aircraft
• Continued our stock repurchase program by acquiring $18 million of our outstanding shares
• Continued to generate positive cash flows and increased cash and securities to $732.4 million
• Completed a marketing agreement with AirTran Airways, Inc. for the operation of five CRJ200
regional jet aircraft
Some of the challenges we experienced during the year were:
• Reductions in our block hour production primarily due to reduced utilization for our Delta
Connection operations
• Unplanned expenditures in our labor and maintenance costs
• Early termination of our Midwest Airlines Services Agreement
During the year, we acquired 25 new regional jets. These additional aircraft helped offset the
impact of the utilization reductions noted above and our total system block hours were within one
percent of last year’s production. Early in the year we had cost overruns in our crew labor and aircraft
and engine maintenance costs; however, as the year progressed, we managed those costs so that by year
end we achieved results much closer to our planned expenditures. We terminated the Midwest Airlines
Services Agreement as a result of economic difficulties suffered by Midwest Airlines, but we collected
$4.0 million as a part of the early termination and we were able to redeploy the ten aircraft formerly
used in that operation into other productive flying.
One of the most significant successes of the year was providing a $129 million funding transaction
to United Airlines and the resulting benefit we achieved. We basically extended certain portions of the
United Express Agreement which were set to expire in 2011 and 2013. The new extension period
coincides with the expiration dates of the regional jet aircraft used to provide this flying and will now
expire between 2017 and 2024. This resulted in approximately 4,000 additional aircraft months of
contract flying with United Airlines or an extension average of 8.3 years. ASA’s agreement with United
Airlines to operate 14 CRJ200 regional jet aircraft is for a period of five years. Additionally, we believe
we were responsive to our partner’s need in providing an additional source of funding that will assist
them in their long-term sustainability. This created a win for both parties and will serve to further
strengthen our relationship and opportunities with United Airlines.
As noted in our 2008 report to shareholders, we have invested in Trip Linhas Aereas (‘‘TRIP’’), a
regional airline headquartered in Campinas, Brazil. TRIP continued to deploy its growth strategy
during 2009 and increased its fleet to 27 aircraft compared to 20 aircraft at December 31, 2008. During