SkyWest Airlines 2014 Annual Report Download - page 45

reporting periods. The table below summarizes how we are compensated by our major partners under
our flying contracts for engine expense and the method we use to recognize the corresponding expense.
Flying Contract Compensation of Engine Expense Expense Recognition
SkyWest Delta Connection ............. Directly-Reimbursed Engine Contracts Direct Expense Method
ExpressJet Delta Connection ........... Directly-Reimbursed Engine Contracts Direct Expense Method
SkyWest United Express (CRJ200) ....... Fixed-Rate Engine Contracts Direct Expense Method
SkyWest United Express (CRJ700) ....... Fixed-Rate Engine Contracts Power by the Hour Agreement
SkyWest United Express (E175) ......... Fixed-Rate Engine Contracts Power by the Hour Agreement
SkyWest United Express (EMB120) ....... Fixed-Rate Engine Contracts Deferral Method
ExpressJet United (CRJ200) ............ Fixed-Rate Engine Contracts Direct Expense Method
ExpressJet United (ERJ145) ............ Directly-Reimbursed Engine Contracts Power by the Hour Agreement
Alaska Agreement (CRJ700s) ........... Fixed-Rate Engine Contracts Power by the Hour Agreement
SkyWest American Agreement (CRJ200) . . . Fixed-Rate Engine Contracts Direct Expense Method
ExpressJet American Agreement (CRJ200) . . Fixed-Rate Engine Contracts Direct Expense Method
US Airways Agreement (CRJ200 / CRJ900) . Fixed-Rate Engine Contracts Direct Expense Method
Historically, multiple contractual relationships with major airlines have enabled us to reduce our
reliance on any single major airline code and to enhance and stabilize operating results through a mix
of fixed-fee flying arrangements and our pro-rate flying arrangements. For the year ended
December 31, 2014, contract flying revenue and pro-rate revenue represented approximately 88% and
12%, respectively, of our total passenger revenues. On contract routes, the major airline partner
controls scheduling, ticketing, pricing and seat inventories and we are compensated by the major airline
partner at contracted rates based on completed block hours, flight departures and other operating
measures.
Financial Highlights
We had total operating revenues of $3.2 billion for the year ended December 31, 2014, a 1.8%
decrease, compared to total operating revenues of $3.3 billion for the year ended December 31, 2013.
We had a net loss of $24.2 million, or $(0.47) per diluted share, for the year ended December 31, 2014,
compared to $59.0 million, or $1.12 per diluted share, for the year ended December 31, 2013.
The significant items affecting our financial performance during the year ended December 31, 2014
are outlined below:
Revenue
Under our fixed-fee arrangements, certain expenses are subject to direct reimbursement from our
major partners and we record such reimbursements as passenger revenue (referred to as pass through
costs). These pass-through costs include fuel, landing fees, station rents and engine maintenance
expenses under certain fixed-fee contracts. Excluding the pass-through expenses for fuel, landing fees
and engine maintenance and the associated direct reimbursement from our major partners, our
passenger revenues increased from $2,570 million for the year ended December 31, 2013 to
$2,583 million for the year ended December 31, 2014, a $13 million increase. This increase during the
2014 year was primarily due to the addition of the E175 aircraft, certain contract renewals and
modifications at improved rates and increased volume of departures on routes subject to government
subsidies. Block hours incurred on completed flights is a significant driver of our revenue under our
fixed-fee arrangements. During the three months ended March 31, 2014, we experienced unusual
weather-related disruptions and cancelled approximately 15,800 more flights compared to the three
months ended March 31, 2013, or a 144% increase in weather-cancelled flights. The decrease in block
hour production from 2013 to 2014 was significantly concentrated in the ExpressJet ERJ145 aircraft
type, which has a lower revenue per block hour than our other flying contracts, as the aircraft lease
payments are paid directly by the major airline partner and we do not record revenue for expenses paid
directly to vendors by our major partners.
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