Q1 2025 SkyWest Inc Earnings Call
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Speaker Change: On the call with me today are chip Childs, President and Chief Executive Officer, Wade Steel Chief Commercial Officer, Eric Woodward, Chief Accounting Officer.
Speaker Change: 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.
Speaker Change: Following Wade we will have the customary Q&A session with our sell side analysts Eric.
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.
Eric: We 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.
Eric: Some of the factors that may cause such differences are included in our most recent Form 10-K, and other reports and filings with the Securities and Exchange Commission and now I will turn the call over to chip.
Chip: Thank you Robin Eric Good afternoon, everyone. Thank you for joining us on the call today, today's Skywest reported net income of $101 million or $2 42 per diluted share for the first quarter of 2025.
Speaker Change: These results reflect a slight increase in production for the first quarter compared to Q4.
Speaker Change: The winter quarters are typically the most challenging however, together our people completed over 30000 more flights in the same quarter last year and delivered 99, 9% adjusted completion.
Speaker Change: This quarter's year over year increase in number of departures continues to reflect the improved stability of our staffing we expect our solid operating leverage to continue to deliver well with increased production trends translating into positive returns for our stakeholders I want to thank our team of nearly 15000 aviation professionals.
Speaker Change: For their continued teamwork and dedication to excellence.
Speaker Change: Though the current macroeconomic uncertainties have translated into some overall industry outlook softening demand for our product is strong and Skywest continues to lead our segment of the industry.
Speaker Change: We remain disciplined and steady as we execute on our growth opportunities to one restore restore or bring new service to underserved communities to redeploy and fully utilize our existing fleet and three prepare to receive our upcoming deliveries of 16, New E 175 over the next two years.
Speaker Change: <unk>.
Speaker Change: During the quarter, we were pleased to complete an agreement extending more dual class aircraft under our Delta partnership, placing nearly all <unk> 700 aircraft under long term agreements. Additionally, as we receive another 16 E 170 fives over the next couple of years.
Speaker Change: We will have 278 by the end of 2026, we continue to see strong demand for our dual class flat flying and look forward to continuing to deploy additional C. R. J $5 50 for our partners.
Wade: Wade will speak more about that in a minute.
Wade: As we've continued to invest in our overall fleet, we expect our series a fleet to produce accretively well into the next decade, our dual class aircraft generated 87% of our block hour production during the first quarter and the ongoing strong demand and delivery book continues.
Wade: To position us for increased regional market share.
Wade: As we discussed last quarter. We believe we are now in a place where our pilot staffing hiring and production are well matched with very with a very robust pipeline.
Wade: We are fully confident the measures we have put into place over the past few years will ensure staffing has stabilized over the long term and we continue to expect block hour production to be up about 12%, 13% this year compared to 2024.
Wade: We were pleased during the first quarter to receive the department of Transportation's tentative approval for Skywest charter or Swc's part $3 80 scheduled service authorization.
Wade: While our plans are to maintain swc the small portion of our overall business. We look forward to the Dot's final approval and to serve community that cannot support part 121 operations, but are seeking a higher standard of safety and service.
Wade: The competitive landscape continues to change and skywest disciplined strategic decisions or advancing our market share through continued fleet acquisitions and flying agreements without taking on unnecessary complicated risk.
Wade: We remain focused on our long term strategy with smart investments in our people and clean as we redeploy and restore utilization and execute on our growth pathways.
Wade: We have spent several years strengthening our balance sheet and fleet flexibility and reinvesting in our future growth.
Wade: We remain very confident that the steps we've taken have is exceptionally position. Despite the macroeconomic uncertainty overall are well positioned fleet operation and our strong partnerships and demand we remain optimistic about the year ahead, we continue to play the long game and to invest in our fleet and future and ensure we are in the best part.
Wade: Both situations to respond to market demand.
Rob: Rob will now take us through the financial data.
Rob: Thanks Chip today, we reported our first quarter GAAP net income of $101 million or $2 42 earnings per share.
Rob: Q1 pretax income was $121 million, our weighted average share count for Q1 was $41 $6 million and our effective tax rate was 17%.
Rob: Our Q1 EPS included <unk> 24 per share in discrete income tax deductions, which are not expected to recur the rest of the year.
Rob: At a normalized tax rate of 25% Q1, EPS would have been $2 18 per share.
Rob: First let's talk about revenue total Q1 revenue of $948 million was up slightly from $944 million in Q4, 'twenty four and up 18% from $804 million in Q1 24.
Q1 revenue breaks down with contract revenue at $785 million flat from Q4, 'twenty four and up 16% from Q1 'twenty four.
Rob: Pro rate and charter revenue was $131 million in Q1 up 3% from Q4, 2024 and up 29% from Q1 2024.
Rob: Leasing and other revenue was $32 million in Q1 up 3% from Q4, 'twenty four and up 28% from Q1 24.
Rob: These Q1 GAAP results include the effect of recognizing $13 million of previously deferred revenue this quarter down from the $20 million recognized in Q4 2024.
Rob: As of the end of Q1, we had $309 million of accumulative differed revenue that will be recognized in future periods, we anticipate recognizing approximately $10 million to $20 million of previously deferred revenue per quarter over the remainder of 2025.
Rob: Subject to production levels.
Rob: Let me move to the balance sheet, we ended the quarter with cash of $751 million down from $802 million last quarter and $821 million at Q1 2020 for the.
Rob: The decrease in cash during the quarter included the accretive actions of one <unk>.
Rob: Repaying $114 million in debt to buy.
Rob: Buying back 141000 shares of Skywest stock in Q1 for $14 million with the volatility in the equity markets in Q1, we opportunistically repurchased three times the shares that we bought in the fourth quarter.
Rob: As of March 31, we had $34 million remaining under our current share repurchase authorization.
Rob: And three investing $73 million in capex, including the purchase of four <unk> $5 50 aircraft spare engines and other fixed assets we.
Rob: We ended Q1 with debt of $2 6 billion down.
Rob: Down from $2 7 billion as of 12 31 2024.
Rob: Cash flow is an important component of our shareholder value creation calculus.
Rob: We generated approximately $500 million in free cash flow in 2024 and deployed it primarily to Delever and derisk the balance sheet to the benefit of our partners our employees and our shareholders, we generated over $140 million in free cash flow in Q1.
Rob: 2025.
Rob: Our strong balance sheet, and well grounded liquidity are powerful tools as we pursue a variety of growth opportunities, including acquiring and financing 16 additional E 170 fives.
Rob: By the end of 2026, repaying unexpected over $400 million in debt in 2025, and continuing to execute opportunistically on our share repurchase program.
Rob: As we remain focused on improving our return on invested capital we'd like to highlight the following both our debt net of cash and leverage ratios continue at favorable levels at their lowest point in over a decade.
Rob: We continue to anticipate that our total 2025 capital expenditures funding our growth initiatives will be approximately $575 million to $600 million, including the purchase of eight new <unk> hundred 70, fives and aircraft engine supporting our CRT.
Rob: <unk> 550 opportunity.
Rob: Total capex in 2024 was $311 million.
Rob: Consistent with our policy and practice, we're not giving any specific EPS guidance at this time, but let me give you a little additional color on 2025.
Rob: As Wade will discuss in a minute, we now anticipate our 2025 block hours to be up approximately 12% to 13% over 2012 before.
Wade: The improved outlook and our 2025 block hours is driven primarily by improving fleet utilization and availability and ongoing strong demand for our production.
Wade: We now expect our 2025 GAAP EPS could be in the low to mid $9 per share area, including the discrete income tax benefit in Q1, if we are successful in executing on the opportunities in front of us.
Wade: We continue to expect to deliver solid operating leverage with 12% to 13% year over year production growth translating into 18% to 19% increase in earnings per share in 2025.
Wade: For modeling purposes, we still expect our 2025 depreciation expense will be slightly down from 2024, and our maintenance expense in 2025 should still be a little over $200 million per quarter.
Wade: We also anticipate our effective tax tax rate will be approximately 26% for the remaining three quarters of 2025.
Wade: We are optimistic about our growth possibilities going into 'twenty, five 'twenty six including the three focus areas.
Wade: One growth in underserved communities driven partially by the deployment of over 30 additional <unk> $5 50 aircraft.
Wade: Improved aircraft utilization and availability on our <unk> and CRE J fleets and third placing 16, new <unk> hundred 70 fives into service in 2025 and 2026 we.
Wade: We believe that our strong balance sheet operating leverage free cash flow and liquidity and the actions, we will be taking to deploy our capital against a variety of accretive opportunities will position us well to drive total shareholder returns Wade.
Wade: Thank you Rob last year, we announced a new multi year flying agreement for a total of 40 C. R. J <unk> with United including 11 aircraft that we committed to purchase from United as of March 31, We had purchased all 11 aircraft in April <unk>.
<unk> exercised its option to add 10 additional <unk> to this agreement, bringing the total to 50.
Wade: Of those 50, <unk> 39 will be modified from our existing <unk> 700 fleet.
Wade: We were operating 12, <unk> $5 <unk> as of March 31, and expect to operate 30 by the end of this year.
Wade: With the last 20 entering service during 2026 I want to point out that this agreement represents net growth aircraft along with the additional new <unk> hundred 70 fives, arriving by the end of 2026. We are excited about our continued strong partnership with <unk>.
Wade: I did also.
Wade: Also last year, we reached an extension of our multiyear flying agreement with American that would allow for skywest to operate a total of 74 <unk> seven hundreds under revenue agreements. This new agreement will allow for these aircraft to fly for American through most of this decade.
Wade: Youll recall that we successfully launched our first Delta <unk> $5 50 last July and we anticipate transitioning 15 <unk> to our Delta fleet by mid year. During Q1, we signed an extension with Delta on 16, <unk> seven hundreds and nine hundreds.
Wade: This new Delta extension, and United <unk>, 550 agreements along with our <unk> 700 agreement with American, bringing that bringing the number of unassigned dual class <unk> seven hundreds and nine hundreds down to low single digits. We expect these few aircraft will be assigned to one of our <unk>.
Wade: Major partners soon.
Wade: We have 16, new <unk> hundred 70 Fives currently on order 15 for United and one for Alaska, We anticipate delivery of eight this year and eight in 2026, we do expect to see delivery delays from Embraer. This year and we now anticipate that the majority of our <unk>.
Wade: 1025 deliveries will be in the second half of the year at the end of 2026. Our E 175 fleet total will be 278, continuing to enhance skywest position as the largest embraer operator in the world.
Wade: Let me review our production.
Wade: Q1 completed block hours were slightly up compared to Q4 2024 based on our current Q2 schedules from our major partners, we anticipate a 5% increase in Q2 as compared to Q1.
Wade: For the full year, we anticipate a 12% to 13% increase in 2025 compared to 2024 approaching our 2019 levels.
Wade: We expect block hour seasonality to return to the model as utilization improves during the strong summer months, we still have approximately 25 park dual class C. R. J aircraft that will be returned to service. The majority of these aircraft are currently under flying agreements.
Wade: And we will be operating in 2025 and 2026 as.
Wade: As we shared last quarter, we continue experiencing challenges and our third party MRO network, including labor and parts challenges, we expect maintenance expense to average slightly over $200 million at quarter. During 2025, as we bring aircraft out of long term storage and <unk>.
Wade: Service the current fleet as production continues to increase as you would expect that maintenance expense will happen before the aircraft goes back into service our partners remain very engaged in supporting our efforts to restore production.
Wade: We also reached an agreement with another regional carrier to purchase 29 used <unk> 900 airframes for $28 million, we expect to utilize many of these airframe for parts to mitigate any supply chain challenges, we may face over the next few years.
Wade: We do anticipate operating six of these aircraft in the future as of March 31, we had closed on three of these aircrafts as far as our prorate business demand remains extremely strong with great community support we are seeing opportunities to return Skywest service to several communities.
Wade: As we restore <unk> production.
Wade: We will continue to work with the communities we serve on the best way to expand our service as we increase our prorate business, we will see more seasonality reintroduced into our model.
Wade: As typical with all Airlines Q2, and Q3 are stronger our strong revenue quarters in Q1, and Q4 are softer we feel good about our ongoing efforts to reduce risk and enhance fleet and financing flexibility and remain committed to continue our work with each of our major partners.
Wade: <unk> strong solutions to the continued demand for our products.
Wade: Okay, operator, we're now ready for Q&A.
Wade: Thank you at this time, we will now begin the Q&A session. If you have dialed in and we would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question simply press Star one again.
Wade: I called upon to ask your question and our listening via loud speaker on your device. Please speak up your headset and ensure that your phone is not on mute and asking your questions. Thank you. Your first question comes from the line of Catherine O'brien with Goldman Sachs. Please go ahead.
Catherine O'brien: Good afternoon, everyone. Thanks, so much for your time.
Catherine O'brien: I believe it's next year, that's the first <unk> hundred 70 fives come to the end of their initial contract and the associated debt is paid off when do you start having conversations about extending those contracts are there any early indications that bolster your confidence does aircraft will stay in place with their respective airline partners.
Catherine O'brien: Yes, Kathy this is.
Catherine O'brien: Wade.
Catherine O'brien: We constantly have communications with all of our major partners about fleet fleet renewal.
Catherine O'brien: Continuing to fly the aircraft aircraft are great airplanes have been very well maintained.
Catherine O'brien: Believe theyre doing a very nice job with with our major partners and so we are optimistic that we will continue to fly those for the major partners that they are flying for today.
Catherine O'brien: Got it thanks.
Rob: Maybe one for Rob.
Rob: You stepped up share purchases from fourth quarter as you noted Opportunistically you just given.
Rob: Price movement can you walk us through what the guardrails are pacing future purchases on my math you can complete your remaining authorization. This year and then some and still see leverage down from 2024, what are the metrics youre looking to.
Speaker Change: Yes, Katy Great question, I think that the way that we look at it as in a broader context of overall <unk>.
Rob: <unk> deployment and I think that.
Rob: Obviously, our favorite use of capital is to grow are continuing to grow our business to creatively, but we've got many different ways that we can grow this business and do that but.
Rob: When our stock.
Rob: Represents favorable investment we're pleased that we have the free cash flow and the liquidity to be able to take advantage of those moments as we have.
Rob: Buying back about 22% of our company since the beginning of 2023 so.
Rob: As you noted we're sort of getting to the end of an authorization, but we have conversation about how we wanted to deploy capital with our board every quarter and those will continue to be good discussions.
Rob: Got it maybe if I could just sneak one more in.
Rob: Can you give us an update on the CRE J 200 fleet I think last quarter you had just over 140 of those aircraft not on contracts that you are looking to either fly under new CPA.
Rob: Charter business or maybe even the sow.
Rob: What's been the progress on that front.
Rob: Other than other than like the small handful of dual class crts are those the only idle aircraft cautiously. Thanks, so much for the time.
Rob: Yes, that's a great question. This is wade so last quarter, we did talk about having 140 of those that we do own that have no debt and very little book value associated with those we do have.
Rob: A lot of those still under contract.
Rob: With with a major partner, we do fly those in pro rate at Skywest as well. So there is a big chunk of those somewhere in the range of <unk>.
Rob: <unk> today that are flying at Skywest Airlines, we also as we talked about last quarter, we do deploy those assets in skywest charter as well and so they are being used within skywest charter very productively and then we have had success in selling some to selling <unk>.
Rob: Leasing the engines too.
Rob: To third parties as well and so the asset is still good demand from our perspective, we are still using it.
Rob: Anticipate using it for several more years so.
Rob: The <unk> 200 is still something that we're still very optimistic about.
Rob: Yes.
Speaker Change: Your next question comes from the line of <unk> with Raymond James. Please go ahead.
Speaker Change: Hey, good afternoon, everyone.
Speaker Change: Thanks Chip you mentioned really strong demand clearly, taking a block colors here a little bit mark.
Speaker Change: The points that I was curious if your partners have talked to you I know this is kind of beyond.
Speaker Change: And kind of that four month period that maybe schedules that being said, but have your partners talk to you about kind of that post summer.
Speaker Change: And how that might look.
Chip: Well Savi. This is chip real quick I think I think you have to kind of look a little bit from the starting point with all of that I mean still understand and we've talked about at the last couple of years, we're still we're still <unk>.
Chip: Driving our way through a pilot shortage and in all honesty small community strong demand that we have not yet got back too so I.
Chip: I think the dynamics of what our model is and the niche of what our model is is a little dip.
Chip: Different from a domestic perspective, I mean for your answer we're always having ongoing conversations about the current climate beyond.
Chip: The next four months or whatever is going to happen with the current macroeconomic situation. Nothing is nothing has taken our eye off the long term still because the long term still needs planning as of today.
Chip: Some of the things that could impact us for the summer time, we still look to have a very strong.
Chip: Robust schedule for the summer time.
Chip: And some of the most that we've had and so from that perspective, you do see some of the things that we've talked about in previous quarters about.
Chip: D urbanization in the United States, where we fly.
Chip: The small communities that we still have to get back access to which we have a lot of opportunities to do that we're working on now.
Chip: The conversation relative to our business model is I would say, it's still dynamic with our partners, but we're still in a catch up mode.
Chip: With pretty much all of them some more than others. So overall for the entire model.
Chip: Pretty strong and solid as is as of now.
Chip: Appreciate that and then.
Chip: Notice.
Chip: Cai with charter.
It shows nine CRE, Jason Scott with charter I think last time it was 18.
Chip: Is that just kind of seasonally something came down there or.
Chip:
Chip: What's the kind of the latest view on Scott with charter for this year.
Wade: Yes, Savi this is wade.
Wade: That's right. So we had 18 flying at the end of last quarter and as as you know the demand for Skywest charter at the moment.
Wade: The demand during the winter months is very very strong and the demand at Skywest Airlines is extremely strong in the summertime and so in order to fulfill all of our demand that we have at an entity level. We felt like we needed to move a few of those back to skywest to continued to fulfill all of demand at Skywest Airlines.
Wade: Long term, we do anticipate those airplanes going back.
Wade: But for the short term in order to fulfill all the demand that we have at Skywest Airlines, we needed to move those over.
Wade: Okay.
Wade: Maybe I can ask you.
Wade: You did see.
Wade: Rate stepping up from fourth quarter, which is a little bit unusual was that just more charter business was that just strength in demand area. I was curious why that was stepping up.
Wade: Yes, so on the on the pro rate side, the increase year over year is definitely due to increase of markets that we've that we've added now we've had the opportunity to add several new markets year over year.
Wade: And so as we said the small community Air service. The demand is extremely strong a lot of these small communities are looking for.
Wade: Good reliable.
Wade: The Air service and so we've been able to fulfill that and we will continue to look to do that over the next several years.
Wade: Yes, Q over Q is up to which is unusual I always just what I thought.
Wade: Yes, and Thats also just capacity increases.
Wade: Okay seems like stronger alright, thank you.
Speaker Change: Your next question comes from the line of Mike Lindenberg with Deutsche Bank. Please go ahead.
Wade: Hey.
Mike Lindenberg: Wanted to follow up on the Doj approval process for Skywest charter.
Mike Lindenberg: It seems like it was a few months ago that they came back in.
Mike Lindenberg: It was a fairly comprehensive endorsement of what you were trying to do it was a two week show cause it seems like that was a few months ago that usually you have your two weeks and then we get a response is that did I Miss something or we still are we still waiting for a response.
Jeff: No Mike It's Jeff that's a great question, we did get show cause order, which typically says youre basically.
Jeff: Would suggest that the one foot line on the go line and you've just got a little bit further to go you can imagine in our view, we would have hoped to have gotten the final approval by now.
Jeff: But as you can imagine things in D C or a little.
Jeff: Chaotic right now and so we attribute it to a little bit of that now once you get that yes.
Jeff: Once we get the approval I mean, like we've already talked about with some of the fleet going back and forth with Skywest I think thats very good for us to smooth out the seasonality.
Jeff: <unk> that we have with charter and again to get them fully deployed with small community service in certain areas that we want to do this and it does take a little bit to get them up and going so look we've been patient for three years, we still think that there is a tremendous value to the Skywest Inc family with this model.
Jeff: We will continue to be patient and pursue this we think it's coming sooner okay.
Okay, and then as we think about the sizing of charter.
Savi: Savi mentioned it was 18 airplanes it went to nine.
Savi: That list of cities, who filed on your behalf.
Savi: Support of charter, it's a long list, there's a lot of cities that either have no service over the last almost all their service.
Savi: But as we think about sizing and how big that could get how many airplanes could that be I mean, it seemed like it's a lot more than 18 airplanes.
Savi: Yes, I would say that it could be we don't get too far ahead of ourselves because we've probably got a little bit of PTSD from from.
Savi: Three years of trying to get through the process, which is which has a long and arduous no one has ever gone through this.
Savi: I think from our perspective, everybody knows the kind of company Skywest is they know we're going to do it right.
Savi: Really going to enhance safety throughout the industry and so you have all of those factors that are coming into this and for us to sit down and actually pencil. It out some of those things will go will go towards Skywest airlines, but some of the more applicable ones will go to Skywest charter and then it enables us to do some other things.
Savi: With charters that.
Savi: From our perspective could provide some some very good value to the comprehend to other communities. So we haven't gotten too far ahead of ourselves until we get past the one foot line over the goal line and then we'll probably give some more guidance when we get there okay fair enough and if I could just squeeze one more in the last that I saw on the number of airplanes that you had leased out to third.
Savi: Third parties and in the last I saw it was like 40 airplanes I don't know where that number is today at the end of the March quarter, but as you think about going forward.
Savi: Is there an opportunity for us as those airplanes come off from their leases that it makes sense to put them in the skywest business with one of your partners or does it makes sense to continue to have a decent pretty healthy lease portfolio because of the diversification that it offers you skywest plus.
Savi: In fact that the margins are probably pretty good on that business as well how do you. How do you think about that your lease book.
Savi: Yes. So Mike. This is this is wade so as far as the number that we have it's very consistent with what you are saying its right at the 40% Mark somehow these leases. They do go out for several more years, but the nice part about our lease portfolio is we can operate every one of those airplane.
Savi: Whether they are $5 <unk> or nine hundreds we can and we do evaluate that look at that I'll tell you that and the margins are good and that they are fine, but the other business. That's that's been very good for US is also the engine leasing business right, there's very high demand for the engine leasing.
Savi: And because of some of the assets that we've had we've had a lot of success in that because of the size and scope and what we're able to bring and so the demand has been very strong on both engine and aircraft leasing so.
Lee: Alright, Thanks, Lee Thanks, everyone.
Speaker Change: Your next question comes from the line of delayed incentive work with Evercore ISI. Please go ahead.
Lee: Okay.
Hey, Thanks, good afternoon.
Lee: Just wondering if youre seeing any changes.
Lee: And how your customers are scheduling.
Lee: Given the theme of stronger peaks and weaker off peaks I assume that regional lift is one of the tools in the toolbox.
Lee: For your customers to get more tactical.
Lee: With their scheduling.
Lee: Maybe on some level down gauging regional could actually help in these off peak period. So.
Lee: Basically the premise of the question is any any changes in how you're asked how you're being asked to fly and how you're being scheduled given this peak versus off peak dynamic.
Chip: Yes, Duane this is chip that's a fantastic question and what I think is good for us to address for a couple of reasons one.
Lee: No.
Lee: This has happened so quickly from the perspective of the summer schedules our partners have gone out and said look theyre softening demand domestically.
Lee: From our perspective, we're still seeing strong schedules were going to have tremendous visit.
Visibility in the yield Thats also always what our partners are but to the extent that you can look back at history, typically economic downturns, even going back to 911 going back to the financial crisis as well as Covid, typically where kind of the lowest common denominator relative to the aircraft sides that we have so they do strategically.
Lee: And have the ability to deploy this level of aircraft or are these levels of aircraft in different ways.
Lee: With the scheduled have been published so long youre, just going to have to be stuck with some of the schedules that they've got but if this thing continues to.
Lee: Stay on pace, it where it's at today, we probably will see some difference of schedules and how and where they fly ash and frequency and that type of stuff. We just don't have that visibility in the schedules that we're working with over the next six months today. So.
Lee: And no conversation about okay. It's time to do a massive pivot so from that perspective, nothing yet, but it's good to know typically what happens in economic softening in downturn relative to regional fleets and what we've seen in the past so.
Lee: That's helpful and then just as you.
Lee: Ratchet your utilization incrementally higher at least at least for this year.
Lee: Can you just walk us through how you how you get there does it does it start with.
Lee: Lower observed attrition in your workforce and then you go back to your customers in and commit to that or or does it start with and ask from one of your main line customers and then you go you go back in and solve for that.
Speaker Change: Yes, Duane that's a great question. So so it really starts with the demand from our major partners at this point.
Lee: We have told all of our major partners they can schedule.
Speaker Change: How they want at this point.
Speaker Change: The staffing at Skywest is very good at this moment and we're bringing a lot of airplanes out of long term storage and so we give them the number of airplanes. They can schedule and they can schedule. It how they see fit and so we are seeing very good utilization for the summer months as chip saw said.
And the demand appears to be very strong for our products still.
Speaker Change: Okay appreciate the thoughts.
Mike Lindenberg: Thanks Duane.
Speaker Change: Your next question comes from the line of Tom Fitzgerald with TD Kelvin. Please go ahead.
Mike Lindenberg: Yes.
Tom Fitzgerald: Hi, Thanks, so much for the time and congrats on the nice quarter.
Speaker Change: Or is there just given that you changed up some of the contracts during the pilot crisis is there any risk.
Speaker Change: The higher variable element of your CPA revenue that we should be thinking about.
Speaker Change: No. That's a good question, we have worked with each of our partners on on optimizing our contracts as you said during COVID-19 all of them still have the fundamentals of minimum utilization how they schedule as they have to work with us on our schedules to make sure we are comfortable with them.
Speaker Change: And so the basic fundamentals are still very strong in the in the contracts.
Speaker Change: Okay. That's really helpful. That's great to hear most of mine have been answered, but I was just curious just given some of the headlines on the reverse merger between your second biggest independent competitor.
Speaker Change: And one of the smaller regional Airlines I'm, just wondering how you and the board are thinking about consolidation in the regional industry and M&A among your capital allocation toolkit. Thanks again for the time.
Speaker Change: Yes.
Speaker Change: It's a great question and from our perspective the situation.
Speaker Change: You've discussed has been out there for a while.
Speaker Change: We've been a part of those conversations at some time or the other.
Speaker Change: We did we were able to do some things.
Speaker Change: Even some things that we mentioned today that gives us some opportunities within that situation, but it doesn't take.
Speaker Change: You have to go back in history, probably 10 to 12 years and see when we used to be in a scenario, where we would like to go out and buy and merge competitors and that did not end up well for us in fact, it almost destroyed our company. So we don't have the right.
Speaker Change: Culture and environment to do that type of stuff anymore, and we've said that on this call I mean, we're very much an organic growth oriented company.
Speaker Change: Given the dynamics of who we are and what we do and the way we do it that just doesn't align that we could go out and do any of those acquisitions and I think we've said this on calls in the past.
Speaker Change: What they are right opportunity as I think I think we're very comfortable with what the acquisition between Republican Mesa is we think that consolidation in our space is good.
Speaker Change: We think that as we continue to go forward in the future there likely will be a bit more one way or the other but from our perspective, our preference is just to find ways to.
Speaker Change: Acquire assets.
Speaker Change: Liver, a fantastic product for our partners and be strategic with them in ways that nobody else can be I mean, I think we've been clear with them that we can do acquisition type of stuff given given the DNA that we have but we are very comfortable with doing capital.
Speaker Change: Enhancements to Derisk any elements of their business that they have that's the real difference between US is I think that as we continue to have a future with these <unk>.
Speaker Change: <unk> Fantastic partners, we want to be more than just a carrier that flies from point a to point b, we want to be a carrier that sits down with them and enhances what their risks are with their problems are and find ways to leverage what is a fantastic operation and amazing culture with the best professionals as well as the best balance sheet.
Speaker Change: And creativity and be able to help them in ways that we can in the future and we're very very comfortable with that given what we have in the marketplace and what we can continue to grow it.
Speaker Change: Yes.
Speaker Change: And it seems that we have no further questions I would now like to turn the conference back over to Mr. Keith Childs for closing remarks.
Speaker Change: Yeah. Thanks, John I appreciate it we appreciate everybody's interest in the call today, obviously, it's a very dynamic world we're living in today.
Speaker Change: We're comfortable with the investments and the discipline that we've had in the past to make it through.
Speaker Change: These are dynamic.
Economic environment, and we're looking forward to not only just protect what we have but be opportunistic and ways to deploy our capital and so we will update you on that progress again in three months. Thanks again.
Speaker Change: This concludes the conference call. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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