SkyWest Airlines 2014 Annual Report Download - page 53

Other aircraft maintenance, materials and repairs, increased $3.1 million, or 0.6%, during the year
ended December 31, 2014, compared to the year ended December 31, 2013. The increase in aircraft
maintenance expense excluding engine overhaul costs was primarily due to an increase in the number
of scheduled maintenance events and aircraft parts replacement primarily due to the timing of major
maintenance events and general aging of our EMB120, CRJ and ERJ fleet.
We recognize engine maintenance expense on our CRJ200 engines on an as-incurred basis as
maintenance expense. Under our Fixed-Rate Engine Contracts, we recognize revenue at fixed hourly
rates for mature engine maintenance on regional jet engines. Accordingly, the timing of engine
maintenance events associated with aircraft under the Fixed-Rate Engine Contracts can have a
significant impact on our financial results. During the year ended December 31, 2014, our CRJ200
engine expense under our Fixed-Rate Engine Contracts decreased $14.2 million compared to the year
ended December 31, 2013. The decrease in CRJ200 engine overhauls reimbursed under our Fixed-Rate
Engine Contracts was principally due to fewer scheduled engine maintenance events.
Under our Directly-Reimbursed Engine Contracts, we are reimbursed for engine overhaul costs by
our applicable major partner at the time the maintenance event occurs. Such reimbursements are
reflected as passenger revenue in the same amount and during the same period we recognized the
expense in our consolidated statements of comprehensive income.
Aircraft rentals. Aircraft rentals decreased $20.0 million, or 6.2%, during the year ended
December 31, 2014, compared to the year ended December 31, 2013. The decrease was primarily due
to a reduction in leased aircraft in our fleet and lower aircraft lease renewal rates since 2013.
Depreciation and amortization. Depreciation and amortization expense increased $14.6 million, or
6.0%, during the year ended December 31, 2014, compared to the year ended December 31, 2013. The
increase in depreciation and amortization expense was primarily due to the purchase of 20 E175
aircraft and related long lived assets in 2014, combined with acquisition of used aircraft and spare
engines in 2014.
Fuel. Fuel costs decreased $0.3 million, or 0.1%, during the year ended December 31, 2014,
compared to the year ended December 31, 2013. The decrease in fuel cost was primarily due to the
decrease in the average fuel cost per gallon in 2014 compared to 2013, offset by the increased volume
of fuel used in our expanded pro-rate flying operations during 2014 year compared to 2013. The
average fuel cost per gallon was $3.33 and $3.60 for the years ended December 31, 2014 and 2013,
respectively. The following table summarizes the gallons of fuel we purchased directly and our fuel
expense, for the periods indicated:
For the year ended December,
(in thousands, except per gallon amounts) 2014 2013 % Change
Fuel gallons purchased ..................... 57,959 53,825 7.7%
Fuel expense ............................. $193,247 $193,513 (0.1)%
Ground handling service. Ground handling service expense decreased $5.2 million, or 4.0%, during
the year ended December 31, 2014, compared to the year ended December 31, 2013. The decrease in
ground handling service expense was primarily due to a reduction in outsourced customer service and
ramp functions at airport locations serving our pro-rate operations.
Special items. Special items for the year ended December 31, 2014 included impairment charges
to write-down owned EMB120 aircraft, including capitalized engine overhaul costs, and related
long-lived assets to their estimated fair value and accrued obligations on leased aircraft and related
costs of $57.1 million. The special item associated with the EMB120 aircraft was triggered by our
decision in November 2014 to remove the EMB120 aircraft from service by the end of the second
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