Operator: Hello, everyone. Thank you for joining us, and welcome to the SkyWest Inc. Q3 2026 results call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Rob Simmons, Chief Financial Officer. Please go ahead.
Rob Simmons: Thanks, 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, SkyWest Airlines President and Chief Operating Officer, and Eric Woodward, Chief Accounting Officer. I would 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?
Eric Woodward: 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, 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 most recent Form 10-K and other reports and filings with the Securities and Exchange Commission. I will turn the call over to Chip.
Chip Childs: Thank you, Rob and Eric. Good afternoon, everyone, and thank you again for joining us on the call today. Today, SkyWest reported net income of $120 million, or $3.08 per diluted share for Q3 2026. The third quarter's results include increased block hours and were affected by higher fuel costs impacting our prorate business. During the quarter, our people delivered 99.9% adjusted completion on over 230,000 flights. We were consistently a top 3 on-time carrier on the DOT's consumer reports, and this is only possible with the teamwork of our more than 16,000 professionals. I again want to thank them for their great work through the quarter.
Chip Childs: We are consistently disciplined as we execute on our long-term business plans. In recent years, we have strategically positioned our company to withstand unexpected headwinds, like the fuel volatility we are experiencing. Specifically, we have, one, delevered our balance sheet. We have continued to reduce our debt, and we now have $1 billion less debt than we did at the end of 2022. Overall, our debt ratios and leverage metrics are among the best in the industry. Second, we have invested in the fleet and continue to do so. During the third quarter, we took delivery of 4 new E175 aircraft for United. From Q4 through the end of 2028, we will take delivery of at least 30 new E175s, putting us over 300 in our fleet.
Chip Childs: Our model allows us to continue investing strategically in both the new E175 fleet and conversions of our CRJ fleet, including the new CRJ-450, which will be placed into service later this year. With these transitions, we look forward to ultimately operating an all dual-class fleet. Third, we return capital to our shareholders through our stock repurchase program. The resilience of our model is based on improving the cash flow quality of our earnings and strategically deploying our capital, not just against production metrics, but against value creation. We believe we are in an important window to continue to invest in our fleet, including the new E175s in our order book under contract, as well as the 33 delivery slots beginning in 2027 for future opportunities. We are also positioned to continue to invest in CRJ-550 and 450 conversions, CRJ heavy maintenance, and pilot training.
Chip Childs: We believe the investments we are making today will deliver economic benefits in 2028. Our approach to capital deployment, as always, will reflect our view of the best long game strategy for our shareholders, our employees, and our partners. As the industry evaluates capacity in 2027 and beyond, we are in the best position to respond to market demands and our partners' needs in a dynamic environment. Overall, our disciplined strategic choices and continued execution have strengthened our model. We remain engaged with our partners on navigating the headwinds of our industry better than anyone else. Rob will now take us through the financial data.
Rob Simmons: Today, we reported a Q3 GAAP net income of $120 million, or $3.08 earnings per share. Q3 pre-tax income was $159 million, up 15% sequentially from Q2. Our weighted average share count for Q3 was 38.8 million, and our effective tax rate was 25%. Total Q3 revenue of $1.1 billion is up 6% from $1 billion in Q3 2025 on block hour demand from our partners and is up 1% sequentially from Q2 2026. Q3 revenue includes contract revenue of $866 million, prorate and charter revenue of $218 million, and leasing and other revenue was $33 million. These Q3 GAAP results include the effect of recognizing $23 million of previously deferred revenue this quarter, up from the $17 million re-recognized in Q3 2025 and down from $27 million recognized in Q2 2026.
Rob Simmons: As of the end of Q3, we have $190 million of cumulative deferred revenue that will be recognized in future periods. Our prorate fuel expense in Q3 was $66 million, up from $34 million in Q3 2025, and $61 million in Q2 2026. The year-over-year increase of $32 million was due to both a higher price per gallon, a $22 million negative impact, and incremental prorate production, a $10 million impact. The fuel price per gallon on our prorate flying was $4.56 in Q3, up from $3.04 in Q3 2025, and $4.45 in Q2 2026. In Q3, we revised the estimated useful life on our E175 fleet to 30 years based on demand for this aircraft and current industry practices. With this change, our Q3 depreciation expense was down $16 million, both from Q3 2025 and from Q2 2026.
Rob Simmons: Notwithstanding the puts and takes on our revenue and operating expenses this quarter, our Q3 pre-tax income was up $21 million sequentially from Q2 2026. Now let's discuss the balance sheet. We ended the quarter with cash of $569 million, down from $601 million last quarter. The ending cash balance for the quarter included the effects from repaying $119 million in debt, issuing $187 million of new debt financing ongoing fleet deliveries, investing $163 million in CapEx, including the purchase of four E175s and buying back shares of SkyWest stock in Q3, consistent with prior periods. As of 30 September, we had $238 million remaining under our current share repurchase authorization. Cash flow continues to be the key driver of our value creation strategy. We generated over $700 million of EBITDA during the first three quarters of 2026, despite the headwind from prorate fuel cost.
Rob Simmons: Since the end of 2025, we've invested over $400 million in CapEx for fleet and related assets. Consistent with our practice, let me first update you on some color on 2026. For the full year 2026, we expect to see block hour production up approximately 5% from 2025, consistent with last quarter's outlook. We anticipate our GAAP EPS for 2026 will be in the $10.60 area, including the effect of ongoing fuel price volatility and crew training costs, up from our 2025 GAAP EPS of $10.35. Last quarter, we shared that our 2026 EPS estimates in the area of $11 assumed average jet fuel of $3.65 a gallon for the H2 2026 on 28 million gallons of jet fuel needed in the H2 for our prorate business.
Rob Simmons: Our Q3 actuals included fuel cost of $4.56 a gallon on 14.5 million gallons, a - $13 million, or $0.26 of EPS on our Q3 results. Our updated 2026 area of $10.60 EPS color assumes fuel cost of $4.90 a gallon on 14 million gallons in Q4. For other modeling purposes, we anticipate our depreciation expense in Q4 to be $80 million, up from $76 million in Q3. We also anticipate our effective tax rate for Q4 will be approximately 27%, translating to approximately 22% for the full year 2026, and we anticipate our total CapEx in 2026 will be approximately $725 million. For 2027, we expect block hour production to be up modestly in the 1% to 2% area from 2026, with EPS similar to 2026. Let me provide some additional color on our outlook for 2027.
Rob Simmons: We anticipate recognizing approximately $70 million of previously deferred revenue in 2027, down from roughly $100 million anticipated for 2026. For comparability purposes, this estimated $30 million reduction represents a headwind of approximately $0.60 EPS in 2027 compared to 2026. I'd like to underscore this is a non-cash variance and deferred revenue estimates are subject to change based on various factors such as contract amendments and aircraft utilization. Recognizing less previously deferred revenue year-over-year is likely to be a modest non-cash revenue and non-cash EPS headwind over the next several years. Although our 2027 GAAP EPS outlook may be similar to 2026, the estimated non-cash GAAP headwinds of deferred revenue and higher depreciation in 2027 imply that they are being offset by other cash earnings, such as the new E175s and other fleet initiatives, improving the cash flow quality of our 2027 earnings.
Rob Simmons: We are assuming an average price per gallon of $4.30 on 60 million gallons in 2027 for our prorate business, essentially a flat price per gallon on average in 2027 over 2026. A hypothetical dollar of average fuel price reduction in 2027 from the $4.30 per gallon we are using in our 2027 color translates to a $1.20 of incremental EPS. Our depreciation expense for 2027 is anticipated to be $350 million, up from roughly $338 million expected for 2026, reflecting the 18 new E175 deliveries in 2027 and the timing of other CapEx. We are estimating our effective tax rate for 2027 to range from 25% to 27%, up from 22% anticipated for 2026. With respect to CapEx, we estimate our total 2027 CapEx to be in the area of $825 million, up from approximately $725 million in 2026.
Rob Simmons: Our anticipated 2027 CapEx includes approximately $525 million for 18 new E175 aircraft, which we anticipate financing through debt, approximately $200 million for recurring maintenance related items, and the remaining $100 million for CRJ fleet initiatives such as reconfigurations and spare engine opportunities. The year-over-year increase in CapEx is driven primarily by the delivery of 13 E175s in 2026, compared to 18 E175s expected in 2027. Wade?
Wade Steel: Thank you, Rob. During the quarter, we took delivery of 4 new E175 aircraft for United. We currently have 63 future E175s on firm order with Embraer, including 16 for Delta, 11 for American, and 2 for United. We expect delivery of 7 more new E175s during the Q4 and 18 aircraft during 2027. As an update on the firm order of 63 aircraft, 30 are allocated to major partners and 33 aircraft are not yet assigned. This order locks in delivery slots starting in 2027 through 2032. However, the order is structured with good flexibility to defer or terminate the aircraft in the event we don't arrange for a partner to take them. Our long-term fleet plan has positioned us well, and re-fleeting continues to be an important part of that strategy.
Wade Steel: With last quarter's announced agreement with American, our E175 fleet total is scheduled to reach 300 by the end of 2027, continuing to enhance SkyWest's position as the largest E175 operator in the world. We are also looking forward to deploying the CRJ-450 later this year for United. We anticipate operating the first aircraft before year-end. We expect to have 40 CRJ-450s under contract with United, and we plan to retrofit our prorate CRJ-200s. We are optimistic the opportunity for the CRJ-450 may reach a total of 100 aircraft. As previously announced, we have a multi-year agreement to fly 50 CRJ-550s with United. As of 30 September, 42 CRJ-550s were in service, and we expect the remaining 8 to enter service by the middle of 2027. Let me review our production. Our block hours increased 1% from Q2 to Q3 2026.
Wade Steel: We also expect a slight decrease in our Q4 block hours as compared to Q3 due to normal seasonality. For 2027, we anticipate that our block hours will be up 1% to 2% compared to 2026. Next year, we expect to take delivery of 18 new E175s, place 8 CRJ-550s into service, and capitalize on prorate demand. These gains are partially offset by the gradual return of the remainder of the Delta-owned CRJ-900s. We expect all Delta-owned CRJ-900s to be returned by the middle of 2027. We will also have several CRJ-200s out of service during 2027 as they convert to CRJ-450s. Once we get through the return of Delta's CRJ-900s by mid-2027, the production characteristics and cash earnings from executing on our E175 delivery book and prorate will start reading through better in our results.
Wade Steel: The full impact of our 18 new E175s coming next year won't show up in our results until 2028. As we convert aircraft and replace some aircraft with new deliveries, we have extensive optionality for value creation, including prorate flying, leasing aircraft or engines, or utilizing aircraft for parts as we navigate supply chain constraints. As we've discussed, we continue to face challenges in our third-party MRO network, including labor and parts shortages. We expect maintenance expense in 2027 to slightly increase from 2026 due to the modest increase in block hours. Demand for our prorate business remains strong, supported by great community engagement. During the first 9 months of 2026, we added 16 aircraft to our prorate agreements to support the growing demand. We still see opportunities to restore SkyWest service to several small communities and will continue working with airports to expand our reach.
Wade Steel: As discussed last quarter, growth in our prorate business contributes to a more seasonal model. We remain confident in our ongoing efforts to reduce risk and enhance fleet flexibility, and we are committed to collaborating with our major partners to deliver innovative solutions that meet the continued demand for our products.
Rob Simmons: Okay, operator, we're ready for the Q&A now.
Operator: We will now begin the Q&A session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Thomas Fitzgerald with TD Cowen. Your line is now open. Please go ahead.
Thomas Fitzgerald: Hi, everyone. Thanks very much for the time. Maybe just to unpack the block hour growth in 2027. Are those E175s back-weighted, just given the magnitude of those and then the kind of drop-off in growth versus this year? Any color in that would be really helpful.
Wade Steel: Hey, Tom. Yeah, this is Wade. The 175, we have deliveries throughout the year, but the majority of the Delta ones are towards the end of the year for sure. We will not see all of the benefit of that block hours until, really until 2028 as we get into this. There are still good opportunities out there for us, but a lot of this is going to support 2028, what we have going on.
Thomas Fitzgerald: Okay. Then just as a quick follow-up. Is most of the improvement in cash earnings next year, is that pretty much just a mix from the new E175s? Is there any from the CRJ-450 conversions, and anything else? I just want to make sure I am kind of following all the moving pieces on next year. Thanks again for the time.
Rob Simmons: Yeah. Thanks, Tom. As we talked about, we will be receiving nice cash earnings next year that will be offsetting some of the non-cash headwinds that we have got with deferred revenue and depreciation. So, the fact that our color is for flat EPS year-over-year sort of does not include the improvement in the cash flow quality of earnings, given how we are making up for the non-cash headwinds.
Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is now open. Please go ahead.
Duane Pfennigwerth: Hey, thank you, and I appreciate the early thoughts on 2027. I wonder if you can give some perspective on the magnitude of the headwind from prorate year-over-year, maybe versus Q2. Fuel obviously is a bit higher, but do you feel like you are catching up on the revenue side of the house? Is that headwind actually diminishing as you look forward?
Wade Steel: Hey, Duane, this is Wade. Yes. As we talked about in our script, we have had a very nice year in growth and prorate. We have added 16 airplanes to the fleet for prorate. Just like our major partners, we are seeing very nice yield increases. We are seeing still very good demand from the ticket sales and all of that. So we are seeing that. We will not offset 100% of the fuel increase, but we are making consistent progress that our major partners are.
Duane Pfennigwerth: Thanks. I mean,
Rob Simmons: And one of the
Duane Pfennigwerth: Go ahead. You probably won't bite on this, but your margins are so consistent historically. If I just look at year-over-year pre-tax margins, they are getting closer year-on-year here in Q3. Some of that might be the depreciation change, but it feels like it is a pretty obvious margin tailwind in 2027, and it feels like you have kind of given a who knows, but it feels like you have given a pretty conservative fuel outlook for next year.
Rob Simmons: Well, I would just say, this is Rob, that as we mentioned with similar year-over-year EPS results, that also assumes similar fuel costs, and that a dollar difference on that fuel cost next year translates to $1.20 of EPS potentially at some point. We are not sure when we get to harvest that, but presumably that is out there at some point. So that will have an impact on that as well.
Duane Pfennigwerth: Thanks, Rob. I guess just to stay on that point. Maybe the EBIT headwind or the pre-tax headwind from prorate in 2026, are you assuming that is flat, that does not change in 2027? So are you assuming any revenue or unit revenue progress on prorate or basically flat unit revenues, but flat fuel and a similar contribution?
Chip Childs: Yeah. Duane, this is Chip. I think where you're going in the direction that you're asking the question is pretty spot on. I think we're going to stay, at this point, consistent with what our partners have said, consistent with that strategy. We're going to be, I think, conservative in our approach during 2027 relative to what we think yields are going to do, as well as what fuel costs are going to do. I think that that's a prudent thing to do from a disclosure perspective and a predictive perspective, but most importantly, also a strategic perspective as well. I think we probably came in Q1 and Q2, I think the world thought that some of these energy costs might be temporary and go away.
Chip Childs: We saw a little bit of that during the year, but I think from our perspective now, it's important for us to not make any predictions about what oil is going to do, but make sure we give you a clear model, and what you're saying about consistency with 2026 is pretty spot on.
Duane Pfennigwerth: Okay. Very clear. Thank you.
Operator: Your next question comes from the line of Mike Linenberg with Deutsche Bank. Your line is now open. Please go ahead.
Mike Linenberg: Oh, yeah. Given just the fuel price, presumably the prorate business is not nearly as profitable. Maybe even some of those routes are loss-making. I know you talked about adding 16 aircraft to prorate this year, and so driving good growth. But for next year, is the plan to add more airplanes to prorate? If you could just answer that and kind of give me a sense of maybe not providing margins, but how much more profitable your fixed fee business is relative to your prorate, given the fuel price. Thanks.
Wade Steel: Yeah. As we said in the script, we added 16 airplanes. Next year, we're looking at markets, we're working with communities. The demand continues to be there and strong from our communities.
Wade Steel: We're going to be extremely patient and disciplined in what we add into our models going forward. We need to make sure these markets are accretive and add value to the company. So we'll be very patient with that. If we need to wait a while, we'll wait, right? We're fine waiting. That's why we talk about this fleet flexibility. This is exactly what it is.
Wade Steel: We can just wait and be patient for that. We're only going to add stuff that's accretive to the company.
Mike Linenberg: Okay.
Chip Childs: Yeah, Mike, this is Chip. I would also add to Wade's comments that the demand, look, the model is still doing well.
Chip Childs: To clarify, we are not concerned about the prorate model.
Mike Linenberg: Yep.
Chip Childs: I think from our perspective, I think that certainly when you anticipate that we are in a situation where energy costs are going to be extended instead of temporary, it is the times when I think this is where we really take care of our partners, our people, and shareholders, and approach it from a patient view. Although the demand is still very, very strong. One thing that we are seeing in small communities, the demand is not going away. How we execute on that demand looks a little different than it did six months ago or eight months ago, and we are still in a fantastic position with our fleet, and we are going to be disciplined and patient as we execute.
Mike Linenberg: Okay. Rob, you highlighted the trigger to change depreciation. Can you tell us what was it before and what did you go to?
Rob Simmons: Yeah. For the E175 fleet, Mike, we were at 22 years, and we extended that to 30 years, consistent with other practices in the industry. It also had to do with some successful contract extensions that we recently got done, as you probably remember. The fact that there is no alternative to the E175 regional aircraft at this point. Our experience with the CRJ fleet and how long we have been able to operate those and expect to continue to do that, and just the fact that demand for this airplane remains very strong.
Mike Linenberg: Just so I know, the 22 years, was that down to a certain residual value? What was that? And the 30, what residual? Are you going to 15% or 0%? I am trying to see how much the rate of depreciation has actually come down.
Rob Simmons: Yeah. The residual assumed came down as well.
Mike Linenberg: Okay. All right. I guess just one quick last one since I have you. On the smaller shells or the aircraft with less seats, typically in a high fuel price environment, airlines typically want to fly less of that. I guess since a lot of your smaller shells are on prorate, and so I guess you are bearing the cost, you are probably not getting pushback from your partners. Is that the way to think about it?
Chip Childs: No. Mike, this is Chip. I think that is not an assumption that you should make that the partners are pushing back.
Chip Childs: I think particularly one is extremely excited about the smaller aircraft, and if you see the LOPA and some of the things we are doing to the 450, it is going to be a great product. As you can imagine in the economy that we are living in now, relative to what our partners have said relative to premium revenue, putting first-class seats on a CRJ-200 in a very good LOPA with an outstanding interior is a very valuable aircraft.
Mike Linenberg: Yeah.
Chip Childs: From a fuel perspective, it is also a lot lighter than it is with 50 passengers in it. To a certain extent, the way that these assets are extremely valuable and debt-free, and we have some flexibility. Maintenance is obviously a little bit higher than on the ERJ product. But the economics of this, particularly the smallest aircraft, seem to be able to work out well even with these fuel costs. From that perspective, again, this is why we outlined that we are going to an all dual-class seat because we are matching what you are hearing throughout the economy right now.
Mike Linenberg: Chip, these airplanes, these investments, these are 10 or 15-year investments, right? I realize the CRJ-200s are fairly old, but it seems like if you maintain them well enough, this is something that you could be flying for another 10 to 15 years. Maybe that is the best way to think about it. Rather than focusing on where the fuel price is today, but that this is a long-term investment.
Chip Childs: Yeah, I think you have summarized it very well, Mike. I think that this is a long-term investment in a high energy cost environment that causes some patience. Again, SkyWest has had an exceptional record. Our people have done a phenomenal job maintaining these airplanes from the get-go.
Chip Childs: How they have done that has enabled us to do some things today that maybe a lot of other regional carriers are not able to do. Our people are great. They have got a great strategy with this. The partners are outstanding in working through this, and I think we are very excited about the long-term product that we are going to have with these airplanes.
Mike Linenberg: Okay, great. All right. Thanks for taking my questions.
Operator: Your next question comes from the line of Savanthi Syth with Raymond James. Your line is now open. Please go ahead.
Savanthi Syth: Hey, good afternoon. Just maybe a quick follow-up on Mike Linenberg's question, just with the kind of reevaluation of the useful life for the E175, did the valuation on that change at all in the sense that is the kind of unpledged assets around $1.5 billion still, or where is that today?
Rob Simmons: Yeah. Savanthi, Rob here. So, your question on unpledged assets continues to be very strong. It is over $1.5 billion, as we have said other places, and we would anticipate that we continue to have strong capital availability if we need it related to these unpledged assets that we have and continue to grow.
Savanthi Syth: That is helpful. Then just on the, I think Wade mentioned on the kind of the CRJ-200 transition next year, many will be out. Just curious what the experience so far has been on how long it has taken to do those 450 conversions, if it is kind of any different than the 550s. And curious just generally how much fewer aircraft you have flying because of the transition next year that maybe kind of goes away after next year or maybe in a couple of years once you have done that full transition.
Wade Steel: Hey, Savanthi. This is Wade. That is a great question. So on the CRJ-450, we are still in the process of converting the first two airplanes. We have them down right now. We are working with our OEM partners on the service bulletins to get those done. So obviously the first airplanes just take longer naturally just because you are working through the first-time issues, right? We will work through those. We have seen those before as we have done the 550. So we anticipate that the CRJ-450 and the 550 conversions will be very similar. It takes two to three weeks to do these conversions. We are also putting Wi-Fi on all of these airplanes. We are very excited about that. So we will have a very nice product at the end of it. We do anticipate pulling down three or four lines to do these conversions, right?
Wade Steel: There will be three or four lines down of less flying that we could have been doing if we did not have these going. It is an investment year that we are going to be doing in the fleet. In 2027, we will be converting a lot of airplanes. It will take some time, but it is a great investment, as we have talked about in the future for this fleet.
Savanthi Syth: Great. Anytime I might just squeeze one line, Wade. I noticed that one of the Delta aircraft shifted from 2027 to 2028. Was that just an Embraer delivery timing, or was there something more to that?
Wade Steel: The Delta delivery, it is just timing. It is just timing and just cleaning up some of the delivery schedules with Embraer. There was nothing significant there at all.
Savanthi Syth: Perfect. All right. Thank you.
Operator: Your next question comes from the line of John Godyn with Citi. Your line is now open. Please go ahead.
[Analyst] (Citi): Hey, guys. Thanks for taking my question. This is Max on for John. We saw a decline in load factor this quarter, year-over-year. Does this reflect any softening in the strong demand previously cited for the prorate business, or did you observe lower load factors on, like, the mainline partner routes. Or is this in line with some of the similar trends we have seen this EPS season trading loads for higher yields across the network.
Chip Childs: No, John, this is Chip. I am honestly not reading too much into that. Obviously, from the perspective of how we price and some of our partners may price relative to fuel, it may be pushing some of those loads down and around just slightly in a little bit. I would more be concerned about the total revenue and that type of stuff. I think when you have high fuel costs, revenue strategies are different for our partners relative that may have an impact on our load factor, but we are not. I mean, we are seeing, I will tell you, extremely full flights still. A lot of activity, lots of volume, all of the things that we have seen from an operational perspective. We are not seeing anything backing off from any of that type of stuff.
Chip Childs: Certainly I would point to some of the things that the partners are pricing and how they are managing our lift on their side. From our perspective, it is still extraordinarily high load factors and very busy.
[Analyst] (Citi): Great. Thank you. It's good color. Just kind of switching gears a little bit. You mentioned earlier you're well-positioned to invest in various avenues, given your liquidity position, including for the aircraft conversions, heavy maintenance, share repurchases, et cetera. I just wanted to double-click on this and dialogue on your high-level capital deployment strategy over the next few years and any areas of focus we can expect.
Chip Childs: Well, it's a great question. From a capital deployment strategy, I think we've been fairly consistent in that, and we'll continue to do much of the same. Our favorite investment is always investing in our fleet and the flexibility of our fleet. We've got a heavy delivery year coming up in 2027, taking 18 new E175s. So obviously from a capital standpoint, the chance for us to continue to invest in these accretive and cash flow generative E175s, it's our favorite thing to do. There's other investments that we'll be making in CapEx next year, where I think you'll start to see CapEx probably come down starting in 2028 a little bit. We'll continue to deploy capital much the same way we have, including all the fleet opportunities that are in front of us right now.
[Analyst] (Citi): Great. Thank you.
Operator: Your next question comes from the line of Katie O'Brien with Goldman Sachs. Your line is now open. Please go ahead.
Catie O'Brien: Hey, good afternoon, guys. Maybe just coming back to the potential on CRJ550 and 450 conversions. How many of your CRJ200 and CRJ700 are currently off contract or will come off contract in the next 12 months? On the demand part of this equation, do current conversations with your partners point to the possibility of all that potential capacity maybe winding up in CPA or prorate flying in those new configs? I know you have given that number on maybe up to 100 CRJ450s, but just would love to get the holistic picture across both supply and demand.
Wade Steel: That is a great question. We will start with the CRJ200 and CRJ450s. As I said in my script, we have an agreement with United to fly 40 CRJ450s for a multi-year contract. Those are all under contract now. We are bringing those into service right now. We will bring those into service during 2027 and 2028, and so this will build in those years. We are operating about 50 to 60 CRJ200s in prorate, and that number will be fairly consistent. As we said in our script, we have about 100. We will have about 100 of these CRJ450s under a long-term agreement with United. We still have about 20 to 25 parked beyond the 100 that are potentially out there that we can bring back as well.
Wade Steel: As far as the CRJ700s, once we take delivery of some of the E175s and some of the other fleet transitions that we are doing, we will have 20 of them that are not under contract. We have not put those block hours in our model at the moment. We do not have those allocated. We have very good opportunities to place those 700s in the future, whether it be in our leasing business or our prorate business or CPA. We will work with our major partners on that. We will be very patient as we work through this in the next couple of years as these airplanes kind of come out, as we take new deliveries. Just like we have always done, we will be patient, we will be disciplined with those airplanes, and we will find a very good home for those.
Catie O'Brien: Okay, great. Rob, I hope you will forgive me just for one more question on the depreciation change, but was the $16 million year-over-year change you referenced, was that the savings from the accounting change, or there is some other moving pieces there? What is the outlook for the impact of Q4? Was this change contemplated in your update to guidance last quarter? Not guidance, but color. The 2026 EPS would be in the $11 range. Just trying to get a sense of some of the moving pieces.
Rob Simmons: Yeah, Katie, the $16 million is the savings in Q3. As we said, we do expect depreciation to be up in both Q4 and up in 2027 for modeling purposes. But there was a $16 million savings during the quarter.
Catie O'Brien: And that carries forward, right? Will that run rate or it is a one-time or? Forgive me for the.
Rob Simmons: No.
Catie O'Brien: Maybe the wrong question.
Rob Simmons: Yeah. This change was effective for our E175 fleet, and so that remains intact for the foreseeable future.
Catie O'Brien: Okay, got it. Then maybe just one more if you will allow it, but on the 33 delivery slots with Embraer that are yet to be placed, how far in advance do you need to let Embraer know that you will be taking those aircraft? Then on the 30 that already are spoken for, are those using up the slots on the earlier side of that 2027 to 2032 window, such that the 33 other slots not yet claimed are kind of further out? Any color there would be helpful. Thanks so much for the time.
Wade Steel: Yeah, that is a great question. This is Wade. So on the 33 that are unallocated at the point, those are in the very, very back half of 2028. So in order to firm those up, it is a little more than a year that we need to work with Embraer on that. So as you know, we constantly work with our major partners on very good opportunities for those. So we have those. The 30 that are coming, as we said in my script, we have seven that are coming at the end of in the Q4 of this year. We have 18 next year. So those are all coming. But the unallocated ones are out there at the end of 2028. At this point, they start at the end of 2028 and go 2029 and 2030, so.
Catie O'Brien: Okay. Thanks so much for the time.
Operator: There are no further questions at this time. I will now turn the call back to Chip Childs for closing remarks.
Chip Childs: Thank you, Al. Again, we want to thank everybody in their interest in SkyWest and dialing in and listening to our Q3 results. We appreciate the things that we are trying to do. Again, I cannot go on without thanking the over 16,000 professionals that do a phenomenal job, the best in the industry every single day. We are grateful for the shareholders. We are grateful for the relationship we have with our partners as well, and we look forward to giving an update on our Q4 in 3 months from now. Thanks again.
Operator: This concludes today's call. You may now disconnect.
Operator: This event has now concluded. Thank you for joining SkyWest Incorporated Q3 2026 Results Call. The line will disconnect automatically.
