SkyWest Airlines 2014 Annual Report Download - page 54

quarter of 2015. The special item additionally consisted of impairment charges to write-down certain
ERJ145 long-lived assets, including spare engines and capitalized aircraft improvements, to their
estimated fair value and accrued obligations on leased aircraft and related costs of $12.9 million. The
special item associated with the ERJ145 aircraft was triggered by our execution of an amended and
restated contract with United in November 2014. The amended and restated contract provides for
accelerated lease termination dates of certain ERJ145 aircraft and advances the termination date of the
ExpressJet United ERJ Agreement to operate the ERJ145s from the year 2020 to 2017. The special
item also includes the write-down of assets associated with the disposition of our paint facility located
in Saltillo, Mexico of $4.8 million. We sold the Saltillo paint facility during the year ended
December 31, 2014.
Station rentals and landing fees. Station rentals and landing fees expense decreased $63.7 million,
or 55.5%, during the year ended December 31, 2014, compared to the year ended December 31, 2013.
The decrease in station rentals and landing fees expense was primarily due to our major partners
paying for an increased amount of station rents and landing fees directly to the applicable airports
related to our contract flying arrangements.
Other operating expenses. Other operating expenses, primarily consisting of property taxes, hull
and liability insurance, crew simulator training and crew hotel costs, increased $24.5 million, or 10.2%,
during the year ended December 31, 2014, compared to the year ended December 31, 2013. The
increase in other operating expenses was primarily due to additional crew lodging expenses attributable
to the requirements of the Improvement Act. The increase was also attributable to additional other
operating expense items associated with incremental pro-rate operations in 2014.
Total airline expenses. Total airline expenses (consisting of total operating and interest expenses)
increased $65.3 million, or 2.0%, during the year ended December 31, 2014, compared to the year
ended December 31, 2013. Under our contract flying arrangements, we are reimbursed by our major
airline partners for our actual fuel costs and engine overhaul costs under our Directly-Reimbursed
Engine Contracts. We record such reimbursements as revenue. The following table summarizes the
amount of fuel and engine overhaul expenses which are included in our total airline expenses for the
periods indicated (dollar amounts in thousands).
For the year ended December 31,
2014 2013 $ Change % Change
Total airline expense .......................... $3,278,594 $3,213,272 65,322 2.0%
Less: Fuel expense ............................ 193,247 193,513 (266) (0.1)%
Less: Engine overhauls Directly-Reimbursed Engine
Contracts ................................. 130,505 123,024 7,481 6.1%
Less: CRJ200 engine overhauls reimbursed at fixed
hourly rate ................................ 25,223 39,388 (14,165) (36.0)%
Total airline expense excluding fuel and engine
overhauls and CRJ200 engine overhauls reimbursed at
fixed hourly rate ............................ 2,929,619 2,857,347 72,272 2.5%
Excluding fuel and engine overhaul costs and CRJ200 engine overhauls reimbursed at fixed hourly
rates, our total airline expenses increased $72.3 million, or 2.5%, during the year ended December 31,
2014, compared to the year ended December 31, 2013. The increase in total airline expenses, excluding
fuel and engine overhauls, was primarily due to the special items recorded during 2014 of $74.8 million,
and an increase in salaries, wages and benefits and other operating expenses of $71.3 million, offset by
a reduction in station rents and landing fees of $63.7 million, as further explained above.
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