Q1 2022 SkyWest Inc Earnings Call
Ladies and gentlemen, thank you for standing by my name is Brent and I will be your conference operator today.
At this time I would like to welcome everyone to the Skywest incorporated first quarter 2022 earnings conference call.
Lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question at that time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press Star one. Thank you. It's now my pleasure to turn the call over to Mr. Robert Symons, Chief Financial Officer, Sir. Please go ahead.
Okay.
Thanks to everyone for joining us on the call today as the operator indicated this is Rob Simmons Skywest Chief Financial Officer.
On the call with me today are chip Childs, President and Chief Executive Officer, Wade Steel Chief Commercial Officer, Eric Woodward, Chief Accounting Officer.
I'd like to start today by asking Eric to read the Safe Harbor, then I will turn the time over to chip for some comments following chip I will take us through the financial results then Wade will discuss the fleet and related flying arrangements. Following Wade we will have the customary Q&A session with our sell side analysts.
Eric.
Today's discussion contains forward looking statements that represent our current beliefs expectations and assumptions regarding future events and are subject to risks and uncertainties. We assume no obligation to update any forward looking statement.
Actual results will likely vary and may vary materially from those anticipated estimated or projected for a number of reasons.
Some of the factors that may cause such differences are included in our 2021 and Form 10-K , and other reports and filings with the Securities and Exchange Commission.
And now I'll turn the call over to chip.
Thank you, Rob and Eric Good afternoon, everyone. Thank you for joining us on the call today.
Demand for Skywest product during the first quarter remain exceptionally high with our main constraint being the crude imbalance we discussed last quarter.
Following our efforts to stabilize after the stabilized after the industry wide challenges of omicron at the beginning of the year. The first quarter results were slightly better than we anticipated we reported pre tax income of 25 million and net income of 18 million.
Improvement was in part due to stronger March production and maintenance costs and better than anticipated.
We expect to place 46, new <unk> hundred 70 fives into service within the next 12 months.
Is it 240 <unk> hundred 70 fives in service by early next year.
Our refining that it's been in progress for the last several years continues to be a priority as we execute on our long term strategy.
During the first quarter, 78% of our block hours were flung utilizing our dual class fleet.
While demand is solid we're facing headwinds as the pandemic transitions to endemic Skywest is fortunate to maintain a robust hiring pipeline and strategy for all work groups.
And you have new higher pilot classes filled through the summer we have long been preparing for an increase in mainline pilot retirements. However, the 6000 early retirement is taken at the majors during COVID-19 and the steep demand recovery has resulted in a new much higher demand for experienced skywest pilots, particularly captains. This.
Demand has created an imbalance of pilots here and across the regional industry.
Of course pilot attrition was anticipated and planned for in our models and strategies. However, rapid increase in captain attrition was not with the return to travel and the new industry wide demand has resulted in skywest pads being the most sought after in the industry.
As we discussed briefly last quarter, we've taken a number of steps to address this imbalance first and foremost we continue working with our major partners to manage and reduce schedules.
To ensure we're able to deliver a solid and reliable product. We have worked with our pilot group to implement upgrade and captain retention incentives. We're also offering our pilots sustainable career pathways, including guaranteed pilot programs for our captains altogether. These programs provide more stability opportunity and options than ever.
Any other regional care can provide.
Overall these disciplined strategy to work with both our partners and our pilot group have already begun producing results, but given the timing required for training and upgrades. This imbalance will likely constrain production into late 2023 to early 2024.
We will make continued improvements and investments in our captains and working together with our people to ensure we remain the best positioned to manage this imbalance aggressively.
With 46, New E 170, fives going into service by early next year, we continue to play the long game, we've embedded flexibility within our prorate model to allow for the flex up and down of our pro rate flying and are utilizing that flexibility going forward to significantly reduce pro rate.
So that we can continue to deliver the highest reliability across our operation.
We made the very difficult decision to file a 90 day termination notice with the department of transportation for 29 communities as we work through our staffing in balance. We're also evaluating various other options to ensure these markets maintain connectivity to the broader national transportation infrastructure.
With an investment with an existing investment in southern Airways, we expect to explore more ways, including other part 135 options to help maintain a strong and reliable air services. So many small and medium sized markets rely on.
We're honored to be one of Forbes best large employers for the second year running in 2022. The past couple of years have been incredibly challenging for all of our teams and our ability to work together with our people is the reason for our success.
Want to thank our nearly 15000 employees for their dedication and teamwork.
While demand for our product has never been stronger the.
The current staffing imbalanced and ongoing re fleeting doesn't allow us to monetize that demand in the short term while the environment is similar to what we discussed a couple of months ago, We've made progress in finding new ways to improve our outlook.
We expect 2022 production to be reduced by about 5% from 2021 production.
Slightly better than we previously thought we.
We expect the second quarter will be better than the first quarter with the second half of the year lower than the first half due to the crew imbalance.
There are three components in the environment today that give us great confidence in skywest as an investment.
First there is undoubtedly massive demand for regional flying as people migrated away from urban areas to small and medium sized communities. During the pandemic. These communities have an even greater need for connection to global networks.
Second our strong pilot pipeline and our ability to attract train and retain captains is far greater than our competitors and we will continue to get better.
And third Skywest asset value is unparalleled in the market our disciplined approach over the last decade in acquiring profitable assets at strong economics will enhance our ability to meet our objectives. In this new economy. Although we expect the recovery will remain choppy as we worked through some headwinds over the next couple of years.
We remain aggressive and deliberate in the steps, we're taking now to ensure we are well positioned for 2024 and beyond raw.
Rob will now take us through the financial data.
Today, we reported first quarter GAAP net income of $17 $7 million or 35 cents diluted earnings per share.
Q1 pretax income was $24 8 million our diluted share count for Q1 was 57 million shares and our effective tax rate in Q1 was 28%.
First let's talk about revenue total Q1 revenue of $735 million is down 5% sequentially from Q4, 'twenty, one and up 38% from Q1 2021.
Q1 revenue breaks down with contract revenue down 2% from Q4, 2021 and up 42% from Q1 <unk>.
Pro rate revenue was $79 million in Q1 down 28% from Q4, 'twenty, one and up 15% from Q1 2021.
Leasing and other revenue is up 7% sequentially and 16% year over year.
These GAAP results include the effect of a release of $11 million of deferred revenue this quarter compared to $23 million released in Q4 and $21 million that was deferred during Q1 2021.
As of the end of Q1, we have $84 million of cumulative deferred revenue that will be recognized in future periods as discussed last quarter, the timing and amount of future deferrals or reversals into revenue depends on the shape and cadence of the recovery of our flying all deferred revenue will be rich.
Burst into revenue by the end of the various contract periods.
Let me move to the balance sheet, we ended the quarter with cash of $856 million essentially flat from $860 million last quarter. Our capex. During the first quarter was $114 million for four new <unk> hundred 75 aircraft and other.
Fixed assets.
Total 2022, Capex is expected to be approximately $800 million, including the purchase of 28, New <unk> hundred 75 aircraft compared to $556 million in 2021.
We ended Q1 with debt of $3 $2 billion up slightly from $3 $1 billion as of year end 2021.
Just a reminder, that the only government that we have on our balance sheet is a total of $201 million in PSP 10 year unsecured no amortization low coupon loans.
Let me say a couple of things about liquidity as of March 31, 2020 to our cash position of $856 million included the effect this quarter of having repaid an incremental $94 million of debt before adding $83 million of debt financing for <unk>.
<unk> <unk> hundred 70, fives and $103 million in engine financing. We also have over $1 billion of unpledged collateral that could be deployed for additional liquidity if ever needed.
As at the end of Q1 2022, our debt net of cash balance is lower than it was pre COVID-19 at the end of 2019.
Additional flexibility comes from the fact that including partner owned aircraft over 50% of our fleet in service now has no financing obligation.
Especially in volatile times like this and consistent with our policy and practice, we are not in a position to give any specific EPS guidance at this time, but let me give you a little color first at this time, we expect 2022 to be better than we thought last quarter lag.
Quarter, we thought that 2022 could show breakeven profitability, we now expect to be profitable. This year Q1 results were slightly better than expected for a variety of reasons referenced earlier by chip, including optimizing our schedules by aircraft type and strong demand.
We monetized opportunistically.
The Q2 schedules currently in place would indicate that Q2 earnings and production will likely be better than Q1. The second half of 2022 however will likely be worse than the first half of 'twenty two with the second half of 2022, approximately breakeven to slightly profit.
<unk> because of projected captain nutrition, we don't expect to have this pilot imbalance challenge mitigated until the back half of 2023.
Second we expect block hour production in 2022 to be down less than we thought last quarter compared to 2021 production, while still being limited by the pilot staffing imbalance.
Last quarter, we estimated that 2022 block hours would be down 10% to 15% compared to 2021, we now believe that number could be closer to 5% down for 2022.
We continue to expect to focus on growing our ear J fleet and pulling down some of our CRA fleet.
Third we won't see the full year impact of the 47 accretive new E 175, aircrafts going into service in 2022 and early 'twenty three until 2024.
Fourth we will continue to focus on liquidity and expect to end 2022 with a strong cash balance in spite of a strong delivery pipeline of 28 accretive new E 170 fives. This year, we believe that the actions we are taking now to invest in the growth of our ear J fleet worked through the <unk>.
Islet imbalance affecting the industry and preserve the optionality of monetizing strong demand opportunities overtime will position us strongly in the regional sector.
<unk>.
Thank you, Rob I'll provide a fleet and production status update as well as an update on our pro rate and leasing businesses. We continue a strong delivery scheduled this year as we've discussed in recent quarters. We previously announced an agreement with Delta for 16, New <unk> hundred 70 fives to replace 16.
Older Skywest owned C. RJ nine hundreds we anticipate these E 170, fives will be placed into service beginning in the middle of this year through the first part of 2023.
After we received these aircrafts.
We will have 87, <unk> hundred 70, fives under long term contracts with Delta under our American contract. We have 20, New E 175 scheduled for service throughout this year. We have received 18 of those aircraft during the third and fourth quarter of 2021 and will receive two in the middle of this.
Year, we have an agreement with Alaska to add 11 E 175 to our contract we expect to place 10 of those aircraft into service this year and one more during the first half of 2023 for a total of 43 aircraft under long term contracts with Alaska.
Clearly demand for our E 175 product remains very strong following delivery of those currently on order or E. 175 fleet will be 240 aircraft. Let me review our current production based on the current schedules we have from our major partners for the second quarter of 2022, we.
Eight that our block hours and revenue will be up slightly from the first quarter as we look to Q3, we anticipate that our second half block hours will be down from the first half of this year, Let me talk a little about our pro rate business. As we've discussed we are experiencing a crew and <unk>.
Balance that is impacting our ability to fully meet the strong demand for our product and we have intentionally built flexibility into our prorate model to flex up and down with our operating resources as a result of this imbalance during the first quarter. We filed a 90 day notice with the D O T did discontinue.
Can you service to 29% Central Air Service communities. This was a very difficult decision and one we would have preferred not to make we have been serving most of these communities for several years. We continue working through this challenge and remain committed.
Two helping find a good solution for these communities. Additionally, as chip said, we own part of Southern Airways, a part 135 Airlines and we expect to explore ways to work with additional airlines flying under part 135 towards a viable solution for these communities shifting gears to our leasing biz.
We currently have 39 <unk> seven hundreds at 900 under long term leases with third parties. This line of business has very good cash flow and strong margin characteristics demand for our engine leasing business is returning and we anticipate placing several engines under long term leases this year.
We have a strong delivery scheduled this year and we'll continue working efficiently to allocate our resources as we optimize our fleet mix. We have spent the last several years, reducing risk and enhancing fleet and financing flexibility to ensure we're well positioned this flexibility will continue to be a differ.
<unk> for us and we are committed to continuing our work with each of our major partners to provide creative solutions.
Okay, operator, we're ready for our Q&A.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad will pause for a moment to compile our Q&A roster.
Okay.
Your first question comes from the line of solving assists with Raymond James Your line is open.
Hey, good afternoon, everyone.
Just going off of the block hour outlook looking better is that because you know your pilot hiring turned out our pilot train.
And things turned out better than when you were sitting kind of three months ago or a few months ago or less.
Is there some other reason that the production was better and along those lines I was wondering if you could just give an update on kind of where since earlier. This year attrition rates are getting better or worse there.
How are you thinking about it from that perspective.
Hey, Savi. This is Wade I'll I'll answer the block hour question, you know as we as we kind of went through this quarter and did lots of.
Allocations of block hours, and how we're going to do some flying we were able to optimize it.
Based on some fleet mix changes that we anticipated. We've also found some a little bit of stabilization in some of our some of our models and so it's been helpful for us to be able to predict our block hours a little bit more accurately.
Savi. This is Jeff to your second question relative to attrition I would only.
We don't talk about it but I would say that we're basically flat ever since we.
<unk> talked about it last quarter each of the months are running relatively consistently we anticipate this summer will be a bit lighter and then it will pick up again strong in the fall. So that's just some general direction aware of where we are all of that being said, we continue to be able to.
Outpace it through our pipeline and so.
You know at this point the imbalance continues to be something that we are aggressive about addressing but it's a lot of it is mathematics about making sure we get enough flight time for the <unk> to become captains.
Okay.
Can I follow up on that Jeff.
Is the do you need to kind of invest in the training footprint to make it larger or and or are you getting enough kind of ethylene in the door and it really isn't that just a timing issue and you have to spend time to then.
Bill that captain pipeline.
Yes, Savi. The major thing is time, if you go back to when we were not doing a lot of flying I mean. This this is this is pandemic generated.
Combined with just massive demand at the major carriers and like I said, the 6000 retirements all of that is creating a bit of a perfect storm, but the major component of this is going to be time to make sure that we can get the time and experience for these first officers to upgrade we do have a strong complement of first.
Officers that could upgrade to captain.
We're working on some programs to enhance.
How we take care of our captains. There is I will say it will be a good day to be a captain at Skywest as we continue to work through that for the rest of this year and we bought a lot of opportunities to move the dial here, but we need to continue to be extremely aggressive in our approach.
Just one follow up to that.
So im just kind.
Kind of cross go higher on that is that a path.
Our partners sharing in that cost or is that something that you know.
In the near term you can see that in the expense and over time, those kind of contracts get negotiated that will eventually be a pass through.
I I would suggest that as demand is strong.
We are certainly not going to have immediate recovery for some of the things we would like to do with captains that is going to be some short term pain in nature, but we have a strong strategy of how we will manage the contracts.
And our partners are very engaged in this process as well and so we're going to do it for long term sustainability and look to the long game as we usually do back to your previous question also I wanted to also emphasize this is not a training.
Capacity problem, we have.
Relative to what our outlook is we're not going to be constrained in any of the sims or facilities.
<unk> facilities or any of that nature. This is just mostly making sure we get the experience for the first officers to upgrade.
I'll get back in the queue. Thank you.
Again, if you would like to ask a question press star followed by the number one on your telephone keypad.
Your next question comes from Catherine O'brien, sorry.
Next question comes from again from Savi <unk> with Raymond James.
Alright.
And just.
And.
One third part 135 options is that something that you are kind of looking to just partner with.
And I guess I didn't realize that you had us taken kind of sell down areas, but just is that.
So you just partner with or is there an option too.
Can I bring in more part 131 35 flying within Skywest.
So fundamentally we are a 121 certificate, we do not have a 135 certificate. So we have we actually have been working with a lot of 135 operators.
And utilize them very strong within our existing pipeline.
As Wade mentioned when we unfortunately have to had to notify the department of transportation. The 29 cities that we needed to pull out of this.
These were profitable cities some of our strong profitability of these are great markets.
It's just impossible to serve those with the other contractual obligations that we had so to be candid. When we went through the process. Our emphasis is going to be to make sure. These communities are well served at the same level of.
Of safety and quality that we have because we have you know we've invested tens of millions of dollars in all of these cities and we hate leaving these markets. So to the extent that we've been working with some 135 operators to help backfill and have a smooth transition it continues to enhance some of our.
Existing thinking with C. R. J two hundreds and you know we have plenty of those that are not doing anything today and theres a lot of 135 operators that are certified to fly the <unk> hundred.
At this time, we don't anticipate supplying it with pilots, but there are some good opportunities with 135 operators to help utilize that asset and product to backfill some of the things that we've been doing.
As you know for several decades, we've been the leader with the <unk> hundred product. We've got great engine deals, they're paid for assets and there could be some opportunity here, but it's still it's still relatively early and we'll update you more probably next quarter on some of the things we can do here.
Okay.
And just taking a step back.
The industry has kind of gone through several shifts I think the last time was 2012 13 14 timeframe when the rules changed.
Do you see any kind of longer term kind of it.
Implications of what Youre seeing today. It does seem like it's it's kind of a near term issue as you mentioned as a result of the pandemic and we will kind of normalize at some point that business.
This is cause for the Navy does.
Partners thinking about consolidation more.
Are there any kind of longer term implications and is there a chance that like how many how many 50 seat RJ is will be flying in 2024.
Coming out of coming out of this.
Well, there's a lot there's a lot of questions in there. So I'll try to I'll try to address as many as I, possibly can I think I think to the latter part of what you asked how many how many C. R. J two hundreds could be flying in 2024 remains to be.
Remains to be seen in our 135 operators certainly have a different level of flexibility then what we do.
Back to some of your earlier points, we're actually not looking to modify any law, particularly with 500 hours is a component that's out there. We think it's a terrible way to train pilots, but we don't think that the reality of.
What's happening in D. C is going to necessarily make a move in that area, but it also in certain.
That rule has probably put us where we are with captains because if we didn't have that room, we would probably have more captains and better train captains by now but at the same time I think that given the situation that we're in we're going to be aggressive in a multitude of other areas to address this.
And like I said earlier, the <unk> hundred with some potential 135 operators is one of those but theres a lot of 135 operators that don't buy this year Jay to hire they're going to be exceptional and servicing some of these existing cities. So I think it yet I mean, I think there's a lot to be remained to be seen with a single class aircraft in the near future.
Going back from my main point, though demand demand for small cities.
Is extraordinarily strong and probably is going to get stronger by 2024.
Thanks, Doug.
And then if I might just ask one last question on the maintenance side.
I think makes sense to come down it looks like maybe came down a little bit faster or was that a timing issue or are you seeing any kind of improvement on on how youre thinking about the maintenance rather than maybe some of it is just as you fly less as well that that's helpful.
Hey, Savi. This is wade so yes, we've been talking about our maintenance expense coming down.
For the last several.
Quarters.
And we've made we've made very large investments over the past couple of years in our fleet both in engines and airframes and we're starting to see the dividends of that we've also.
Part of what we've been doing we optimized we've been optimizing our engine or our maintenance expense to what we think will be flying in our fleet for the rest of the year and so yes, we will continue to see.
Maintenance of approximately at these levels throughout the rest of the year.
Thanks, Tom.
And then just I apologize one last question maybe for Rob.
Capex seems to have come down a little bit.
And the expectation that maybe I have that wrong any revised thoughts on kind of capital use.
This cash flow given that it might take longer here for for things to recover.
And no real change as savvy I mean, we've got these 28, new <unk> hundred 70 fives that are the bulk of the 800.
Plus million dollars of Capex that we expect due this year obviously.
Given the number of new deliveries, which were obviously very excited about.
Capex is a little heavier than normal this year, but for for great reasons.
Got it alright, thank you.
Your next question comes from the line of Katie O'brien with Goldman Sachs. Your line is open.
Hey, good afternoon, everyone, sorry about that I press as Asia and press Star, one again and accidentally put myself out of the queue.
But <unk> got quite a few here so I'll get started.
Pilot shortage major theme on every call. This season I guess first just a follow up to <unk> question can you just give us some more details on what exactly were you able to optimize.
In terms of like your aircraft allocation tool to reduce.
There is like it's been a 10 point improvement in your block hour production for this year that just feels pretty significant.
So I guess, that's the first one.
Yes. So Katie this is wade so the biggest thing we did was just looked at our training footprint and how we're how we're training folks what were doing with aircraft, we're putting them in making sure that it's the most efficient.
Training footprint that we can and we've made some very good progress during this quarter on an optimizing both our training footprint and where we are going to be what airplanes. We are going to be flying in and made some decisions to say these are the levels, we're going to be flying and it helped out on some other aircraft types and so a lot of it is just with the training footprint.
Which airplanes, we're going to be prioritizing and really getting our pilot professionals through the training.
Footprint as quickly as we can.
Okay got it.
And then I know theyre going to be a lot of puts and takes but given the trends youre seeing now on.
Attrition and Youre training for put and then an ability to build your pipeline. When do you think youll have the pilot.
Rough roughly to get back to 2019 block hour production or is there a chance you're going to be a smaller company on a fairly longer term basis.
So that's a great question. This is chip and I think that our perspective is to be prepared for a wide range of outcomes I think that when you look at what we're focused on.
We've kind of indicated in the script the way the math works under existing attrition models as well as what we have from a comfort level within the hiring pipeline.
And the data around first officer upgrades, particularly coming out of a pandemic.
The data is pointing that we can recover and get the pilots we need.
Starting.
Late 2023 and going into 2024 so.
At that point also Katy you can imagine that our fleet looks.
Entirely different in 2024 than it did in 2019, a lot more dual class aircraft a lot less single class aircrafts. So again I think the main element here is we're looking at a wide range of opportunities demand is driving us from a business perspective to take a look at our assets that are.
Particularly in this economy, well priced well financed.
And has given us some good flexibility to determine what we want to do.
Through some of these challenges.
Think that from our perspective, we're we're tooled and have the right things on our side to make sure that we can capitalize on some very good strong things.
As long as we're disciplined and aggressive by the time, we get to 2024.
Okay, that's great and Delaney does.
Sure.
A related one coming out from those thoughts yeah sure Chad.
I know you've given us some color on an earnings per share trajectory for this year.
We think theoretically.
About what it peaks to get back to 2019 margins.
Are the puts and takes do we need to wait.
And the 2023 to get closer back to block hour production R. R.
Given the fact that some of the hindrance is that your labor force is smaller.
Cost of the system and some other adjustments you've made in addition to deferred revenue recognition that and to your point like higher concentration more profitable do class aircraft like could we get back to 2019 margin before we get back between 19 block hour production.
Packed question, but would love your thoughts thanks.
Yeah.
Well, Hey, Katy this is Rob so I would say.
Just a reminder, that the biggest tailwind we've got right now again is the strong demand that we keep referencing so it's not a demand driven shortfall at this point, it's a constraint of resources. So.
Again, as we talked about.
The next few years, we're going to have sort of different cost structures from a labor standpoint.
There is no question about that.
But I think there are a lot of good things happening we are investing for the long term the airplanes that were putting into service over the next year or two are going to start reading through to our margin and our results starting in 2024. So I mean look I can't tell you.
Winter, if our margins will be back to 2019 levels, but I can tell you that there is a lot of good things that we're seeing out there and we're in a position to be able to invest for that long game.
In a way that maybe others aren't able to do.
Got it and then one more if I could.
We'd probably just.
Speaking to another one to chip's point in time, well priced assets can you give us an update on on where you see opportunities to grow our leasing business. If you do think there are growth opportunities I know you mentioned some incremental engine opportunity during the prepared remarks, but what is the potential pool of aircraft and engines Youre looking to lease over the next.
Year to look like I'm, just trying to think through like.
Aircrafts supply is also a bit tight right now there is more demand, but but then you've got maybe some offset on pilot availability driving decisions.
Decisions from a third party developer to do that so.
Any color there would be great. Thanks, so much.
Yes, Katy this is wade so theres a couple of.
New and interesting kind of opportunities as we've kind of started to explore.
Different opportunities out there a lot of these 135 carriers are definitely reaching out to us about our existing asset base right. As chip said, we have over 200 <unk> two hundreds that are extremely well priced they've been maintained by the best airline in the country for 25 years, we have the best engine agreed.
And so there has been very good demand from a lot of.
A lot of small are up there's a lot of small airlines associated with our <unk> platforms and I'll tell you. The engine interest in that fleet is also extremely strong right. We have a very good engine agreement with with with our with our OEM and a lot of these smaller airlines just.
Don't have the size and the buying power that we have associated with that fleet and so those are probably those are two very good opportunities right. There for US and then as you look at the the engines that are on the 700 to the nine hundreds there is a very large wave of engine events coming for the industry and the <unk>.
A couple of years in Skywest has invested heavily in those engines. During 2019. During 2020. During 2021, we made very large investments in those and we are very well prepared for that and we've had a lot of interest from other airlines and potentially helping them through their wave in their model.
Hopefully to.
Could avoid engine events by leasing from us and so there are some pretty good opportunities out there both on our <unk> 200, and then the engine associated with the <unk>.
7% to 900.
Really interesting thanks for all the time gentlemen.
Thanks Kenny.
There are no further questions at this time I would like to turn the call back over to Mr. Chip Childs.
Yes.
Thanks, Brent. Thank you all for joining us on the call today, we really appreciate your interest in Skywest I'll close by.
By saying that despite the headwinds we're facing demand again is strong and we have the resources and strategy to navigate the long game and again I want to thank our people for their great work and continued flexibility with that we'll end the call and we'll talk to you next quarter. Thank you.
Ladies and gentlemen, thank you for your participation. This concludes today's call you may now disconnect.
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Yes.
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