Q3 2023 SkyWest Inc Earnings Call
Ladies and gentlemen, thank you for standing by.
My name is Brent and I will be your conference operator today.
This time I would like to welcome everyone to the Skywest, Inc. Third quarter 2023 results call.
All 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 withdraw your question.
Press Star followed by the number one on your telephone keypad.
It is now my pleasure to turn today's call over to Rob Simmons Chief Financial Officer, Sir. Please go ahead.
Thanks to everyone for joining us on the call today as Brent 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 and 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.
Assume no obligation to update any forward looking statement, whether as a result of new information future events or otherwise.
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 2022 Form 10-K, and other reports and filings with the Securities and Exchange Commission and now I will turn the call over to chip.
Thank you, Rob and Eric Good afternoon, everyone and thank you for joining us on the call today.
I want to start by saying how devastated we are by the horrific taxon attacks on Israel and the escalating conflict in the Middle East It has put millions of minutes and lives at risk.
While we do not operate in these areas. The Skywest team is made up of thousands of people from different backgrounds countries and cultures and together we mourn the loss of innocent lives were working where we can to provide opportunities to aid in the humanitarian response and look forward to an end to the violence in the region.
Today's Sky West reported net income of 23 million or <unk> 55 per diluted share and announced new flying contracts with United for 19, New E 175 aircraft over the next three years.
Also during the third quarter, we purchased one 2 million shares for $50 million under our previously communicated share repurchase plan and have acquired 19% of total shares outstanding you for today.
The quarter's results.
Our results demonstrate that the Skywest playbook continues to work as intended this playbook is focused on our team our fleet our partnerships and our strong balance sheet, we continue to one execute our multiyear fleet transition.
Let's focus on dual class and maintain an efficient and flexible fleet.
To enhance our partnerships and ensure we continue to deliver on our partners' needs three maintain a healthy and strong balance sheet that continues to help create opportunities benefiting our people our partners and our shareholders.
Skywest teams continued to deliver exceptional performance.
Up in the airline achieved top three D O T on time carrier status now for several months out of the year.
So far this year Skywest has delivered a record of more than 200, 4100% completion days when adjusted for weather. The most in a single year in our history.
This is an outstanding achievement, but even more so when you realize that we report performance at more than 240 airports nationwide. This feet doesn't happen without extensive planning and resource allocation to manage through challenges as well as exceptional teamwork.
Our people do a tremendous job I don't want to thank them for their commitment and reliability and great service.
Pilot availability and specifically captain availability has been an ongoing challenge here and across the industry and we continue efforts to stabilize our crew balance.
We recognize the pilots have more options than ever before and appreciate that they are recognizing the value proposition at skywest both for those who.
For those who choose to make a career here and those who want to transition to one of our major partners.
We're fortunate to have positive working relationship with our labor Representatives that enables us to move quickly on behalf of our teams.
This unique relationship continues to benefit our people and helps us consistently deliver an outstanding product.
Captain attrition has continued to stabilize two this quarter nutrition was again slightly lower than plan, we're still prioritizing upgrades, while feeling new higher pilot classes and it will take some time to regain our crew balance and restore production and full utilization of our fleet. However.
However.
Our existing fleet can accommodate.
It can accommodate large future growth without additional capex spend and with the captain situation beginning to stabilize we feel good about adding another 19 170 fives over the next three years.
I wanted to shift gears to Sky West charter or Swc, which has continued to successfully complete on demand charter flying since it began operations earlier this year demand for these charters is extremely strong and we are encouraged by Swc's business, while commuter authority at the department of Transportation has languished for NN.
No regulatory reason, we still believe Swc is the best possible answer for small community Air service.
Regardless of the status of that application. We're pleased with strong demand for Swc's product and are very optimistic optimistic about its future. In fact charter demand is stronger than we originally anticipated with the Swc fleet now at 13 aircraft. We did not anticipate this level of flying within our original <unk>.
<unk> operating under commuter authority.
Swc is certainly exceeding expectations, even without commuter authority.
That said it is and it is and will remain a very small portion of our overall business with our primary focus remaining on our contract flying and major partner relationships.
As always we remain disciplined to ensure our assets are deployed efficiently and profitably.
Overall demand for each of our products remains exceptionally strong.
As we deliver on our business fundamentals, we remain laser focused on executing reliably for the long game and ensuring we are best positioned to respond to opportunities.
Rob will now take us through the financial data.
Yes.
Today, we reported third quarter GAAP net profit of $23 million or 55 earnings per share.
Q3 pretax income was $24 million, our weighted average share count for Q3 was $42 6 million and our effective tax rate was 4%, which reflected an $8 million benefit from the lapse of an uncertain tax position.
First let's talk about revenue total Q3 revenue of $766 million is up 6% sequentially from Q2, 2023 and down 3% from Q3 2022.
Q3 revenue breaks down with contract revenue up 2% from Q2 and down 5% from Q3 2022.
Pro rate revenue was $110 million in Q3 up 33% from Q2 and up 16% from Q3 2022.
Leasing and other revenue was down by less than $2 million sequentially and year over year.
These GAAP results include the effect of $57 million of revenue deferred this quarter compared to $60 million deferred in Q2 and $13 million that was released in Q3 2022.
As of the end of Q3, we have $305 million of cumulative deferred revenue that will be recognized in future periods.
As indicated last quarter, we expect to defer revenue of roughly $60 million in Q4, we anticipate we will begin to recognize previously deferred revenue in Q1 2024 and beyond.
Let me move to the balance sheet, we ended the quarter with cash of $820 million down $42 million from 862 last quarter.
The $42 million reduction in cash during the quarter included the accretive actions of number one repaying $110 million in that number to buying back one 2 million shares of Skywest stock in the open market for $50 million at an average <unk>.
Rice of $42 per share.
During the nine months ended September 2023, we have repurchased $9 6 million shares or approximately 19% of the outstanding shares of the company for $244 million at an average price of $25 per share.
And number three paying $36 million in aircraft deposits toward our order for 19, New E 175 aircraft, we announced today adds we continue to invest in our fleet transition.
Our capex during the third quarter was $32 million. We ended Q3 with debt of $3 1 billion down from $3 4 billion as of year end 2022.
These cash related numbers tell an important story about the quarter, but we continue to generate positive free cash flow from operations. Despite production constraints, our strong free cash flow also benefits from a lower investment in capex than in prior years, our balance sheet and solid.
Quiddity continue to be powerful tools to create shareholder value.
<unk> that have helped us repay over $330 million in debt and repurchased over $244 million in stock during the nine months ended September 32023.
Consistent with our policy and practice, we are not giving specific EPS guidance at this time, but let me give you a little color on Q4, and a preliminary outlook for 2024.
We expect Q4 to be modestly profitable on pre tax GAAP basis, including approximately $60 million of deferred revenue, but seasonally down from Q3 as per normal.
As Wade will discuss in a minute, we anticipate our Q4 or Q4 block hours to be flat to down slightly from Q3, primarily due to seasonal factors.
Many variables can impact our 2024 production outlook. We are currently planning for our 2024 block hours to approximate our 2023 block hours with pilot availability the gating factor.
As the GAAP noise from deferred revenue goes away in 2024, and including the benefit from our share repurchase activity. This year, our 2024 GAAP earnings per share could again return to the high $5 handle where we were pre COVID-19.
Our solid balance sheet reliable cash flow from operations and strong demand for our products provide a catalyst for improving our return on invested capital including the following.
As a result of our year to date purchase activity.
Our repurchase activity of $9 6 million shares as of September 32023, We had 41 2 million shares outstanding.
As of September 30, we had $136 million remaining under our current share repurchase authorization and we anticipate continuing to be opportunistic in repurchasing shares going forward.
Over the first three quarters of 2023, we executed on our balanced capital deployment by also repaying over $330 million of debt our debt net of cash continues to be lower than our pre pandemic levels of 2019.
The under utilization of our fleet in place today can accommodate 14% E. R. J future block hour growth and 35% C. R. J future growth in block hours before the incremental capital investment in the 170 Fives announced today Wade will give us.
More color around this in a minute.
We continue to expect our 2023 capital expenditures to be approximately $300 million lower than 2022.
And as announced today, we continue to deliver fleet solutions for our partners with 19, New <unk> hundred 70, fives being added for United.
We now expect to take delivery of 23, new <unk> hundred 75 aircrafts, starting next quarter through 2026.
We believe that our strong cash position and the actions we are taking now to prepare the way over the next couple of years for incremental utilization of our fleet to work through the pilot shortage affecting the industry and to preserve the optionality of monetizing strong demand opportunities over time.
We will position us well to drive total shareholder returns Wade.
Wade.
Thank you Rob today, we announced a new flying agreement to acquire 19, new <unk> hundred 70, fives and place them under a long term contract with United These new <unk> hundred 70 fives, all replaced 19 <unk> seven hundreds we anticipate four of the E 170 fives will be.
Delivered in the fourth quarter of 2024, seven and 2025 and eight in 2026. These 19 are in addition to the remaining four E 170 fives, we have on order, we anticipate taking two in the fourth quarter of this year.
One and 2024 and the last E 175 in 2025 at the end of 2026 R. E 175 fleet total will be 258.
This order will continue to solidify skywest as the largest embraer operator in the world the debt remaining on the 19th <unk> seven hundreds will be repaid by the time they come out of contract with United We expect.
We expect working to place the seven hundreds under flying agreements and believe they will be extremely extremely valuable to our partners as they move to replace single class 50 C product with dual class aircraft.
These aircraft are some of the newest nextgen <unk> seven hundreds in the world.
Let me review our production the third quarter block hours increased by approximately 3% as compared to the second quarter of 2023 based on the current schedules. We have from our major partners for Q4, we anticipate that our fourth quarter block hours will be consistent with the third quarter.
With regard to staffing we have seen an improving trend in our captain attrition and anticipate that our 2024 block hours will be flat as compared to 2023 I would also remind you that we can add approximately 14 more 14% more block hours to our E. R. J.
Before adding any aircraft.
This number is over 35% for our C. R. J fleets and makes each additional block hour accretive to the model our partners remain very engaged in supporting our efforts to restore production.
Let me give a brief update about the status of the Swc, our new charter business Swc began operating on demand revenue charters beginning in April and we have been investing in training and hiring of employees. Since that time, we are pleased with the swc's progress and the sport.
Charter bookings for this fall and winter have been significantly higher than we originally anticipated we anticipate swc could create a positive contribution to our earnings beginning in November as far as our prorate business. The demand remains extremely strong just like the rest of the industry.
We have seen very strong yields and great community support we will continue to work with the communities on the best way to continue our surface. We have spent the last several years, reducing and enhancing fleet and financing flexibility to ensure we're well positioned.
This flexibility will continue to be a differentiator for us and we are committed to continuing our work with each of our major partners to provide creative solutions to the continued exceptional demand for our products.
Okay, operator, we're ready for Q&A now.
Alright at this time I would like to remind everyone in order to last quick question Press Star followed by the number one on your telephone keypad.
Your first question comes from Michael Lindenberg with Deutsche Bank. Your line is open.
Oh, Hey, just a couple here.
You gave us Rob you gave us capex for this year, you said it was $300 million lower than.
This year lower than 2022 with the.
19, <unk> hundred 70 fives.
And how should we think about your what your Capex was before and what the new number is for say 'twenty four 'twenty five.
Yeah, Hi, Mike Yeah for 'twenty, four we expect to bring in a total of about five new E 175. So.
Including the Capex from those five next year I would expect capex in 'twenty four to be flat to slightly up from 23.
Okay.
That's helpful.
And again in 'twenty five.
And in 'twenty five Mike that the number of deliveries is eight.
Okay. Okay.
Okay, and then when we think about the the CR J seven hundreds.
You said that they wouldn't replace.
As dual class.
Yes, 50 seats crts.
But are those C or G 700 is going to get converted from 70 theatres to 50 theaters.
<unk> hundred 50 is that is that the future role of those airplanes and will you be flying them.
Okay.
Mike This is Wade so as I said in my script, there's lots of opportunities for those airplanes. Both in what you just articulated theres also.
You know American scope, very well and they have a 65 seat.
C R J 700.
That has a lot of demand for it as well so both of those.
Opportunities are out there for us and we would anticipate flying those.
In the near future.
Okay. That's great and then just last Rob on the year.
GAAP EPS for next year, if I heard you right I think you said $5 was the release.
Per quarter or is it just the reverse is it roughly $60 million of.
Revenue that gets released.
For each quarter or is it is it a different number.
I want to make sure Mike.
Pacing is right.
Yes, sure. So yes, what we first of all let me just clarify what I've said about GAAP EPS next year was something in the high Fives high $5 earnings per share for 2024.
And that that would include.
Something between 40 and $50 million of deferred revenue reversals for the entire year, so something like $10 million to $15 million reversal per quarter. So.
Not a not a huge number for next year.
And does it beyond 'twenty four doesn't pick up actually or is it.
Does it get released at that rate until you run through the entire 300 million plus.
Yeah, what I would say is it's going to be approximately that 'twenty four right for the next the next couple of years in all likelihood it depends on a number of factors including.
Our overall production, but 'twenty.
25 should look quite a bit like 'twenty four.
Okay. Thank.
Thank you.
Your next question comes from the line of.
Saw the system with Raymond James Your line is open.
Hey, good afternoon, just curious on the <unk> hundred 70 fives United.
United does that replace.
Any of the aircraft that Youre flying for United today, or how does that work.
Yes, Avi. This is Wade we have 19 <unk> seven hundreds that are flying for United today, and as the new 170 fives come in they will replace those airplanes and as we said we anticipate that we would still.
Work with our other all of our major partners in placing the 700 elsewhere to replace potentially single class 50 seat airplanes.
Got it.
That comment is that makes sense, then what Mike was asking this war.
Thank you and just on the pilot side I Wonder if you can provide a little bit more color. It seems like what we're hearing everywhere as much slower growth next year some of that.
Low cost carriers might not even been doing extra hiring so are you seeing that today and just any kind of updated thoughts on.
On how the candidates.
Building up the captain.
Supply that will progress over the next year.
Yes, Savi. This is chip Thats a great question I think your sort of your industry take from the last.
10 days is sort of something that we've sensed over the past month or so.
I think that when you look at the environment. We continue to say that there is further stabilization of captains in pilots relative to what we're seeing.
And in our models and I think when you take a look at some of the events that are going on relative to capacity relative to the number of pilots that.
All the major carriers already have I think most of them have more pilots than they did before the pandemic.
There is a lot of factors that come into play when we try to predict what our models are going to produce all of those are causing us to be more positive.
All the time, we think that we're going to have and build some relatively good momentum in the back half of 2024 into 2025 with this but as you know and as you've paid attention in the last couple of years, it's still a very dynamic model that we are very keen to pay attention to and do what we can too.
Make sure we continue to stabilize and get our production back up where we think it should be.
I'll get back in the queue.
Your next question comes from the line of Helane Becker with TD Cowen Your line is open.
Thanks, very much operator, hi team thanks for the time.
So I'm just wondering about swc because it seems like this is a good avenue for growth and.
You mentioned I think chip, maybe you mentioned that you don't understand why the FAA is in approving this in a more speedy fashion, but alright American and southwest kind of complaining about this whole.
Developing sector of the business.
Yes, Helane. This is chip I am looking for a question in there, but I will try to add some commentary on all of it.
You will look I think I think question.
Yep.
I'll try to I'll try to address that.
What you are trying to I think ask is what.
So theres a lot of opportunity with Skywest charter, we're very optimistic about some of the things that have happened within the college world. Some things that are happening within certain markets of what Swc is operating and one thing to be aware of I think that makes us most optimistic about this.
Is the fact that we're entering into some of these different markets.
That have created a lot of demand since the pandemic and they have not had good service providers operating in these types of of circle. So from our perspective I mentioned it earlier that as you know skywest is used to being a very strong top performer in the overall Avi.
Asian industry and as we start to penetrate into some of these other markets and models. We're finding a very strong welcome mat that people are very interested in what we have to do with this with this entity now from the perspective of the <unk> I.
I think we kind of know why they are not approving what we want for commuter authority.
There's a lot of unnatural behavior relative to what theyre doing and from our perspective as we continue to monitor how this process works, we're not going away, we're going to continue to fight for what we believe the communities deserve and so look I think from that perspective I want to also make sure that we understand we were hopeful.
That swc would probably deploy about 20 to 25 aircraft in small community service with the with the commuter authority that's a V.
Very small it's a very small fleet actually.
We're up to 13 or more with actual on demand service within charter. So look there's a lot of good opportunities we see with this but when you look at the Big picture. This is still extremely small relative to Skywest, Inc, and our overall fleet with Skywest Airlines and what we're trying to do I mean, we're still we're still deploying in.
That plan to deploy 19 E 175, Skywest Airlines. So it's part of the picture that we're seeing where we can actually.
Be motivated with our expertise with our impeccable safety record and our procedures that we have that are absolutely proven and the best in the industry to carry our product forward a different different models in different places. So that's kind of that's kind of where we are with swc.
Yes.
That's really helpful. Thank you very much.
Your next question comes from Catherine O'brien with Goldman Sachs. Your line is open.
Hi, good afternoon, gentlemen, thanks for the time.
So first congratulations on the United deal that's exciting.
With those additional aircraft. Thank you called out the 275 fleet is going to increase to 23 aircraft.
Now in 2026 senior.
Senior CRD 900, internet speeds get a bit smaller over the last year.
How should we think about net growth of the total fleet between that your 175 growth and any changes you anticipate with CRD side RJ side.
And that you expect those 19 carriages coming out.
Somewhere else, so I guess like any changes above and beyond that is there already.
Yes. So this is this is wade yeah, great question as we said we have 19, while we have 23 170 fives coming.
Four of them were already on order theyre coming in 'twenty four 'twenty five 'twenty six on top of that and this is our focus or our current E. RJ fleet is still underutilized by 14% right. So we still have the opportunity to grow back that utilization or see our Jay.
Fleet is more closer to something like 35% underutilized, so theres still plenty of opportunities there to grow back that utilization, we have enough shells on our <unk> side at the moment and we're always in discussions with our major partners about potential fleet needs in the future and what they need so between.
What we have on order our existing fleet in our discussions we definitely have a lot of.
Opportunities in the future to continue to grow in and use our dual class fleet, how we anticipate too.
Got it so you would expect like sure Jay probably.
Understanding theres tremendous capacity that Chris utilization.
That side of the business, but you would expect like shell count to be fairly stable over the next couple of years alright.
Yeah, Yeah, no we have our shell count we anticipate being very stable. We've got a lot of <unk> 900, and a lot of <unk> seven hundreds that that we can deploy in the future. So got it.
And then maybe another one on Swc that being a positive contribution to earnings in November on better than expected demand I know obviously.
Things have changed with some of the delays in the commuter authority.
It sounds like that that.
Beyond demand charter that's a that's a happy.
New piece of news there for you guys. What was your initial expectation of one swc will be a positive to the bottom line and I guess, how should we think about the size that contribution going forward. Thanks, so much.
Yes. Katy. This is this is chip just real quick on it I think that initially we anticipated that we would probably be.
Well into 2024 before we would have a positive contribution from Swc I mean, clearly our plans originally.
As we were looking at commuter authority, we knew it would be a measured.
I don't want to say, it's slow, but a measured and predictable processes, we were starting to <unk>.
Pick up more small communities through the to the.
Through the process at that takes.
And now we have massive demand from colleges and other entities that want on demand service absolutely right now so thats why the timeline is but certainly picked up now I think from our perspective since we're still in the infancy of how we're trying to build up the demand will probably hold off.
And evaluated and give you some more information when we meet on the fourth quarter results, maybe give some more color on what our expectation contributions are going to be there, but so far we're optimistic but it's still a bit early and we'll know a lot more in the next three months and get back to you on some more specifics then.
Totally fair, maybe if I can just.
Let me ask one last one in just on the leasing business means that revenues.
Flattish.
We hear a lot about scarce availability of new tech narrow bodies driving pretty attractive lease rates in that area of the market are you seeing is it just that the supply and demand dynamics are different on the aircraft and engines that you were looking at that business or has like the objective change and you think that you want to hold onto those and following on your own.
Would just love an update on <unk>.
But the trend line is there going forward. Thanks, so much.
Yes, Kate this is this is where the demand has been really strong we've actually between both.
Leasing and selling some assets we've had very strong demand in both our.
And all types of our engine. So it is it is flat on that line item. Some of the decrease is actually related more to kind of our ground handling business in that.
The leasing is definitely.
We see the pipeline out there and what we have in the future kind of lined up as definitely some increase going forward.
We definitely see the supply chain challenges.
And there's lots of people in the market that are that are reaching out for for.
Engines really at this point for help so theres still some upside to that we are working through that with them right now, but yes, we see good demand over the next couple of years for sure.
Thanks, so much for the time.
Your next question comes from the line of Duane.
Turning words with Evercore ISI your line is open.
Hey, thanks.
Just maybe just to revisit some of the same so first on staffing.
And you're kind of increased confidence.
What do you what are you seeing is this a function of things that you have implemented.
On the retention side or do you suspect that there is.
To be less competitive bidding at the moment from the from the mainline carriers is this a function of maybe adjustments to capacity plans out into early 2024.
Yes, I would I would Duane. Thanks for your question. This is chip I would take it to probably three separate things one you're right. We've done a lot of things.
Internally to try to make sure that we are the premier reads.
Regional carrier for pilots to stay and build a long term career and we have seen some interesting.
Things relative to attrition with captains with what we've done over the past.
18 months, so that's been a very positive impact probably the most positive impact that we've seen in the last 12 months and now looking to the future when you start talking about.
Overcapacity, we evaluate.
To be candid just the sheer numbers that the major carriers have hired and what they have today I mean, I think you can look at publicly filed documents and see most of the major carriers have more pilots today than they did back pre pandemic and now we're having conversations about capacity. So that's an industry event.
<unk> that we have sort of seen a trend over the past two to three months, which we expect is going to be.
Even stronger over I think.
In the next coming months, that's the big one.
The third one is the overcapacity because I think I mean, it's not to say that we're still not out of the pilot supply problem because there still is a lot of time and.
Cycles, we have to produce to produce captains.
Sure.
All of the schools that we work with our Cadet program has never been stronger than it is today, we are getting very very positive responses on first officers, but now we are at that point when all of these things align and we just have to continue to produce captains to produce more productivity to produce captains, which is what I think from now.
Now for the next 12 months is going to be key for us to do.
Okay, Great and then on the United Agreement, maybe you could just talk a little bit about.
Is it is it a function of.
The demand appeared or your ability to <unk>.
Service that demand appeared so if we think about like the pipeline.
Incremental business, where you'd be going out into the market and acquiring new aircraft whats the rate limiter on that is it is it just sort of coming to the right terms.
With the legacy or is it your confidence and your ability to go execute that business.
Yes. This is wade so it's we've been working with United on this deal for a while right in United has been extremely supportive of us to continue to get a very good.
Good complete 175 fleet in their large dual class scope with them and so we've been working with them for a while on this that the legacy was very supportive. They wanted this this product in there. They can see that we were improving that our demand is coming back that we're able to fulfill these contra.
And so I think between the confidence that United had than what we had in our abilities. We worked with them and we came to an agreement on this with Embraer air and United and.
We do have this these deliveries over the next three years right. The end of 'twenty four 'twenty five 'twenty six it will give us time to to get our overall fleet utilization backward it needs to be as well so.
It was just a great three way agreement that we did I would even add GE into that as well. So all of our major partners that we had and this one was very good and it was a good transaction for us.
Thanks, I guess just should we expect more of these over time is kind of the question is is this a one off I mean, it's great to see it.
Is this a one off or do you think there could be more of these over the coming quarters.
Yes, Duane is a chip man I hope there is a lot more of these over the coming quarters, but I think that you got I think for US we are realistic about the current environment I think.
I think that when you talk about us getting 19 170 fives.
This is a fantastic deal given the timing of the things we're facing in the World I will tell you theres a lot of headwinds to having more of these though first and foremost interest rates are extremely high relative to aircraft financing.
We still have as we talked just earlier in your other question you still have the development of captains.
We think ordering more aircraft helps with that they think we think it helps recruiting we think it helps retention, but to the extent that you've got some challenges in making sure that we get the right pricing of aircraft and get them financed the right way the beauty of it is as we think at Skywest, we are by far the most competitive in the industry of being a.
To be creative to do more of these more than anybody else. So while I can't promise that theres going to be a lot of these coming.
Can say that this is a very direct part of our strategy and we're significantly better positioned than anybody else given what we can do with our balance sheet. The most amazing professionals in the industry and our creativity I hope theres more of these in the future, but theres a lot of headwind at the same time.
Thank you.
Your next question comes from line of Salvi <unk> with Raymond James Your line is open.
Hey, thanks for the follow up.
Can I ask on the pro rate side, how many kind of Eric.
Aircrafts.
On the pro rate side and is that now mostly.
Doug the larger RJ, sir or kind of just the mix there.
Yes, Savi. This is wade yeah, we have somewhere in the range of.
25 to 30 airplanes in the pro rate side.
You have probably seen publicly our delta fleet has transitioned to a dual class fleet, primarily on that starting the first part of October and so that has transitioned the rest of it still is in a single class 50 seat airplanes. So.
Got it.
And then just on the charted a quick follow up.
Seasonality like on the charter side is is it a bit more counter seasonal also kind of nice.
Sure.
I'm curious.
Yes, I think honestly Savi. This is chip, we're kind of still learning ourselves.
I knew know his head from.
From now through the spring is extremely busy and we're hearing I mean.
To a certain extent, we're like okay. This is basketball.
And is that primarily isn't it primarily as basketball, we start to look at what happens after spring and summer.
And there is also other sports baseball and other ones, where there's a lot of other things that happened with this so we're new to this and to a certain extent like I said before the industry is new to an entrant that can do this reliably and predictably because thats. The number one shocking thing for us getting into this space is how bad the.
<unk> has to be to be candid that may be unfair, but just to be honest.
We can deliver a product that a lot of people haven't seen before in this space that having been said.
It is a bit seasonal that we see today, we're looking at what things can happen next summer to keep this seasonality.
Strong throughout the summer, but obviously, we're going to as we said before we're going to continue to pursue commuter authority and when you get to that level of seasonality on that side of the business. It could offset very nicely. So that's kind of the process that we're going to take with them.
Does that still look 100 pilot type operation or does that need to growth.
No that would need to grow.
If we are sitting here, we typically assume we need about 10 pilots per aircraft. We have the needs of 13, plus today and like we said there is a fair amount of small community service, we could do on top of that so we will continue to need to grow the pilot.
Element of that business model, which to be candid has some very very attractive prospects. We have some amazing pilot joining and we have a long list of pilots would love to be involved with it.
That's great. Thank you.
There are no further questions at this time I will now turn the call over to Mr. Chip Childs for closing remarks.
Thank you again, everybody for your interest.
We appreciate the amazing work that our people have done this last quarter I can't speak highly enough of what our performance does with the opportunity in turn provides for our people and shareholders and all of our stakeholders quite candidly we're grateful for the.
Sensitiveness that everyone is moving forward in the world, we're living in today and keeping safety the most.
Most paramount priority that we have and we continue to have what we hope is a very good.
Well executed and safe holiday season, and we will return back and report on the fourth quarter in three months. Thanks again for your interest.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
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