SkyWest Airlines 2010 Annual Report Download - page 55

Aircraft maintenance, materials and repairs. Maintenance costs increased $51.4 million, or 11.8%,
during the year ended December 31, 2010, compared to the year ended December 31, 2009. The
following table summarizes the amount of engine overhauls and engine overhaul reimbursements
included in our aircraft maintenance expense for the periods indicated (dollar amounts in thousands).
For the year ended December 31,
2010 2009 $ Change % Change
Aircraft maintenance, materials and repairs ............ $487,466 $436,039 $51,427 11.8%
Less: Engine overhaul reimbursed from major partners .... 106,241 112,556 (6,315) (5.6)%
Less: CRJ 200 engine overhauls reimbursed at fixed hourly
rate ....................................... 75,706 34,176 41,530 121.5%
Aircraft maintenance excluding reimbursed engine
overhauls and CRJ 200 engine overhauls reimbursed at
fixed hourly rate .............................. $305,519 $289,307 $16,212 5.6%
Aircraft maintenance expense excluding reimbursed engine overhauls and CRJ 200 engine
overhauls reimbursed at fixed hourly rates, increased $16.2 million, or 5.6%, during the year ended
December 31, 2010, compared to the year ended December 31, 2009. The increase in maintenance
excluding engine overhaul costs was principally due to the completion of the ExpressJet Merger.
Under the SkyWest Airlines and Atlantic Southeast United Express Agreements, we recognize
revenue in our consolidated statement of income at a fixed hourly rate for mature engine maintenance
on regional jet engines and we recognize engine maintenance expense on our CRJ200 regional jet
engines in our consolidated statement of income on an as-incurred basis as maintenance expense.
During the year ended December 31, 2010, our CRJ200 engine expense under our SkyWest Airlines
and Atlantic Southeast United Express Agreements and our AirTran code-share agreement increased
$41.5 million compared to the year ended December 31, 2009. The increase in CRJ 200 engine
overhauls reimbursed at a fixed hourly rate was principally due to scheduled engine maintenance
events. We anticipate the average number of scheduled engine maintenance events experienced during
the year ended December 31, 2010 will likely continue each quarter through 2011 and the first quarter
of 2012.
Under our Delta Connection Agreements we are reimbursed for engine overhaul costs by Delta at
the time the maintenance event occurs. Under our Continental CPA, we are also reimbursed for actual
engine cost by Continental at the time the expense is incurred. Such reimbursements are reflected as
passenger revenue in our consolidated statement of income.
Aircraft rentals. Aircraft rentals increased $11.1 million, or 3.7%, during the year ended
December 31, 2010, compared to the year ended December 31, 2009. The increase was primarily due to
the following two factors: First, during the year ended December 31, 2010, we obtained leases for four
CRJ900s and subleased the aircraft to Air Mekong. Second, we completed the ExpressJet Merger on
November 12, 2010. ExpressJet incurred approximately $3.6 million in aircraft rental expense since the
completion of the ExpressJet Merger.
Depreciation and amortization. Depreciation and amortization expense increased $15.0 million, or
6.7%, during the year ended December 31, 2010, compared to the year ended December 31, 2009. The
increase in depreciation expense was primarily due to SkyWest Airlines taking incremental delivery of
18 new CRJ700s since April 1, 2009. These aircraft were financed through long-term debt.
Station rentals and landing fees. Station rentals and landing fees expense increased $13.2 million,
or 11.4%, during the year ended December 31, 2010, compared to the year ended December 31, 2009.
The increase in station rentals and landing fees expense was primarily due to the acquisition of
ExpressJet on November 12, 2010 and related additional station rent.
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