SkyWest Airlines 2015 Annual Report Download - page 3

To our Shareholders:
We appreciate your investment and interest in SkyWest, Inc. In the second half of 2014, we
initiated a significant transition plan for SkyWest that centered on a multi-year improvement in our
fleet mix. Our focus included adding new aircraft to our fleet at improved economics, removing aircraft
that were operating under unprofitable flying agreements and improving our operational performance
and reliability.
During 2015, we made significant progress executing our transition plan. First, our dedicated
employees worked hard to provide best-in-class regional airline service to our passengers and to our
major airline partners. Our flight completion rates were consistently ranked at the top of our major
airline partners’ comparisons to our peer group. A safe and reliable operation is our number one
priority and we want to thank our 20,000 employees for a job well done.
Second, we placed 46 aircraft into service during 2015, including 25 new Embraer E175 aircraft
and 21 used 50-seat aircraft. It’s worth noting that we added aircraft to flying agreements with all four
of our major airline partners in 2015, which indicates the value we provide to each of our partners.
These aircraft additions were meaningful contributors to our improved financial results from 2014.
Third, we removed 103 unprofitable 30-seat and 50-seat aircraft from service during 2015. We
recognize that reducing total fleet size may be viewed negatively; however, in our case, these aircraft
were specific to unprofitable agreements, meaning the reductions had a positive impact on our financial
results.
It is no small task to add 46 aircraft and remove 103 aircraft over a 12-month period. It is a credit
to our tremendous employees who delivered a consistent, quality product notwithstanding significant
movement in our fleet. A few other accomplishments to highlight over the past year:
• We have commitments in place for an additional 54 E175 aircraft scheduled for delivery from
early 2016 through mid-2017.
• We were named on Forbes ‘‘America’s Best Employers 2015’’ list. Notably, SkyWest was the only
regional airline company on the list.
• We reached a three-year labor agreement with our pilots at SkyWest Airlines
• We reached a two-year labor agreement with our pilots at ExpressJet
As we look ahead, we expect 2016 will remain a year of transition. We anticipate additional
improvement to our fleet mix, with 37 E175 deliveries scheduled for 2016 and continued removal of
unprofitable aircraft from our system. Challenges include the availability of qualified new pilots,
fluctuating demand for the 50-seat aircraft from our major airline partners, and reaching agreements
with our labor groups with open contracts. We remain focused on executing a disciplined strategy that
provides both model stability and fleet flexibility.
From a liquidity perspective, the strength of our balance sheet continues to provide us with
financing leverage to grow our operations. We anticipate using a significant portion of our 2016 free
cash flow towards our investment in the E175 platform.
In total, SkyWest carriers operate roughly 35% of the regional flying in the United States, more
than double the volume of the next regional airline. This equates to approximately one in 12 passengers
in the United States flying on one of our operating carriers.
The airline industry, specifically the regional airline industry, continues to evolve at a rapid pace.
We’ve spent the last two years placing SkyWest ahead of the evolution by proactively addressing the
industry’s challenges, delivering consistent operational credibility and initiating disciplined execution of
our fleet strategy. Our commitment to these priorities continues to result in very high demand for our
products, and we remain focused on moving forward with discipline to profitably deliver best what our
major partners need.