SKYWEST INC (SKYW) FY 2024 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis presents factors that had a material effect on our results of operations during the years ended December 31, 2024 and 2023. Also discussed is our financial condition as of December 31, 2024 and 2023. You should read this discussion in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this Report or incorporated herein by reference. This discussion and analysis contains forward-looking statements. Please refer to the sections of this Report entitled “Cautionary Statement Concerning Forward-Looking Statements” and “Item 1A. Risk Factors” for discussion of some of the uncertainties, risks and assumptions associated with these statements.

This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Overview

We have the largest regional airline operation in the United States. As of December 31, 2024, we offered scheduled passenger and air freight service with approximately 2,190 total daily departures to destinations in the United States, Canada and Mexico. Our fleet of E175, CRJ900, CRJ700 and CRJ550 have a multiple-class seat configuration, whereas our CRJ200 have a single-class seat configuration. During 2022, we formed SWC, which offers on-demand charter services using CRJ200 aircraft in a 30-seat configuration. As of December 31, 2024, we had 624 total aircraft in our fleet, including 492 aircraft in scheduled service or under contract pursuant to our code-share agreements, summarized as follows:

Our business model is based on providing scheduled regional airline service under code-share agreements (commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its flights) with our major airline partners. Our success is principally centered on our ability to meet the needs of our major airline partners by providing a reliable and safe operation at attractive economics. During the year

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ended December 31, 2024, we made changes to our fleet, including the addition of five new E175 aircraft and 20 partner-financed E175 aircraft.

We anticipate our fleet will continue to evolve, as we are scheduled to add a total of 15 new E175 aircraft with United from 2025 to 2026 and one new E175 aircraft with Alaska in 2025. We also have multiple agreements with United to place 30 used CRJ550 aircraft into service throughout 2025 and 2026. Timing of placing these additional aircraft into service, including delivery timing on acquired aircraft, may be subject to change as we are coordinating with our major airline partners in response to labor availability or other factors. Our primary objective in the fleet changes is to improve our profitability by adding new E175 aircraft and used CRJ700, CRJ550, CRJ900 and E175 aircraft, commonly referred to as “dual-class CRJ aircraft,” to capacity purchase agreements or prorate agreements, and potentially removing older aircraft from service that typically require higher maintenance costs.

For the year ended December 31, 2024, approximately 43.9% of our aircraft in scheduled service or under contract were operated for United, approximately 29.1% were operated for Delta, approximately 18.5% were operated for American and approximately 8.5% were operated for Alaska.

Historically, multiple contractual relationships with major airlines have enabled us to reduce our reliance on any single major airline code and to enhance and stabilize operating results through a mix of our capacity purchase agreements and our prorate flying agreements. For the year ended December 31, 2024, our capacity purchase revenue represented approximately 86.6% of our total flying agreements revenue and our prorate and SWC revenue, combined, represented approximately 13.4% of our total flying agreements revenue. On capacity purchase routes, the major airline partner controls scheduling, ticketing, pricing and seat inventories and we are compensated by the major airline partner at contracted rates based on completed block hours (measured from takeoff to landing, including taxi time), flight departures, the number of aircraft under contract and other operating measures. We control scheduling, pricing and seat inventories on certain prorate routes, and we share passenger fares with our major airline partners according to prorate formulas. We are also responsible for the operating costs of the prorate flights, including fuel and airport costs.

Financial Highlights

We had total operating revenues of $3.5 billion for the year ended December 31, 2024, a 20.2% increase compared to total operating revenues of $2.9 billion for the year ended December 31, 2023. We had net income of $323.0 million, or $7.77 per diluted share, for the year ended December 31, 2024, compared to net income of $34.3 million, or $0.77 per diluted share, for the year ended December 31, 2023. The significant items affecting our revenue and operating expenses during the year ended December 31, 2024, are outlined below:

Revenue

The number of aircraft we have in scheduled service or under contract pursuant to our code-share agreements and the number of block hours we incur on our flights are primary drivers of our flying agreements revenue under our capacity purchase agreements. The number of flights we operate and the corresponding number of passengers we carry are the primary drivers of our revenue under our prorate flying agreements. The number of aircraft we have in scheduled service or under contract pursuant to our code-share agreements increased from 485 as of December 31, 2023, to 492 as of December 31, 2024, or by 1.4%; and the number of block hours increased from 1.14 million in 2023 to 1.29 million in 2024, or by 13.3%, due to an increase in scheduled daily utilization of our aircraft driven by an increase in the number of available captains.

Our capacity purchase revenue increased $502.4 million, or 20.5%, from 2023 to 2024, primarily as a result of an increase in completed block hours for the comparable period and recognizing previously deferred revenue for the year ended December 31, 2024, compared to deferring the recognition of revenue on fixed monthly payments we received during the year ended December 31, 2023. As a result of a higher number of passengers carried on our prorate routes and an increase in the number of prorate and charter flights operated year-over-year, our prorate and SWC revenue increased $76.0 million, or 19.9%, in 2024, as compared to 2023.

Operating Expenses

Our total operating expenses increased $201.9 million, or 7.1%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase in operating expenses was primarily due to an increase in

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our direct operating expenses associated with the increase in the number of flights we operated for the year ended December 31, 2024, compared to the year ended December 31, 2023. Departures increased from 691,962 for the year ended December 31, 2023 to 766,742 for the year ended December 31, 2024, or by 10.8%, and our total block hours increased 13.3% in 2024, as compared to 2023. Additional details regarding the increase in our operating expenses are described in the section of this Report entitled “Results of Operations.”

Fleet Activity

The following table summarizes our fleet scheduled for service or under contract as of 2024:

During 2024, we took delivery of five new E175 aircraft and placed the aircraft into service under capacity purchase agreements and we placed 20 partner-financed E175 aircraft into service under a capacity purchase agreement. We placed 23 SkyWest owned CRJ550 aircraft into service under a capacity purchase agreement or prorate agreement, while removing 22 CRJ700 aircraft from flying agreements. We also removed 14 CRJ200 aircraft from service during 2024. We are evaluating alternative uses for the CRJ200 aircraft removed from service.

Results of Operations

2024 Compared to 2023

Operational Statistics

The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below. The increase in block hours, departures and passengers carried during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to an increase in the number of available captains during 2024, compared to 2023, which allowed for a higher scheduled utilization of our aircraft.

Operating Revenues

The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):

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Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity purchase agreements and prorate agreements with our major airline partners and on-demand charter flights. Lease, airport services and other revenues consist of revenue earned from leasing aircraft and spare engines to third parties separate from our capacity purchase agreements and providing airport counter, gate and ramp services.

We disaggregate our flying agreements revenue into the following categories (dollar amounts in thousands):

The increase in “Capacity purchase agreements flight operations revenue” of $438.9 million, or 22.2%, was primarily due to a 13.3% increase in block hour production and a decrease in deferred revenue related to fixed monthly payments for flight operations received under our capacity purchase agreements for the year ended December 31, 2024, compared to the year ended December 31, 2023. Under our capacity purchase agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the total projected fixed monthly payments per aircraft as revenue proportionately to the number of block hours we complete for each reporting period, relative to the estimated number of block hours we anticipate completing over the remaining contract term. Under our capacity purchase agreements, the performance obligation of each completed flight is measured in block hours incurred for each completed flight. Beginning January 1, 2024, certain scheduled fixed monthly payments under our capacity purchase agreements transitioned to variable payments, which was the primary driver in recognizing previously deferred revenue during the year ended December 31, 2024, whereas we deferred recognizing revenue associated with the fixed monthly payments for the year ended December 31, 2023. Based on the number of completed block hours during the year ended December 31, 2024, we recognized $43.4 million of previously deferred revenue, net of unbilled revenue, related to the non-lease fixed monthly payments we received associated with our flight operations revenues. For the year ended December 31, 2023, we deferred recognizing $164.0 million of revenue, net of unbilled revenue, related to the non-lease fixed monthly payments received associated with our flight operations revenues. The timing of our revenue recognition related to the fixed payments associated with our flight operations will be adjusted over the remaining contract term for each capacity purchase agreement based on the number of block hours we complete each reporting period relative to the number of block hours we anticipate completing over the remaining contract term of each capacity purchase agreement.

The increase in “Capacity purchase agreements aircraft lease revenue” of $63.5 million, or 13.3%, was primarily due to a transition from certain scheduled fixed monthly lease payments to variable lease payments under our capacity purchase agreements beginning January 1, 2024. Under our capacity purchase agreements, a portion of the consideration we are paid is designed as reimbursement for certain aircraft ownership costs and is considered lease revenue, including fixed monthly payments and variable payments. We recognize the fixed monthly lease payments as lease revenue using the straight-line basis over the capacity purchase agreement term and variable lease payments are recognized in the period when the block hours are completed. We recognized $1.5 million of previously deferred lease revenue during the year ended December 31, 2024, using the straight-line basis for fixed monthly lease payments, whereas we deferred recognizing $78.5 million during the year ended December 31, 2023.

The deferred revenue balance applicable to each contract will be recorded as revenue over the term of each respective contract. For clarity, under our “Capacity purchase agreements flight operations revenue” and “Capacity purchase agreements aircraft lease revenue” combined, we recognized $44.9 million of previously deferred revenue, net of unbilled revenue, during the year ended December 31, 2024, compared to deferring revenue, net of unbilled revenue, of $242.5 million during the year ended December 31, 2023. Our total deferred revenue balance, associated with our “Capacity purchase agreements flight operations revenue” and our “Capacity purchase agreements aircraft lease revenue,” net of unbilled revenue, was $322.4 million as of December 31, 2024, compared to total deferred revenue, net of unbilled revenue of $367.3 million as of December 31, 2023.

The increase in prorate agreements and SWC revenue of $76.0 million, or 19.9%, was primarily due to an increase in prorate passengers and passenger revenue we received on routes we operated under our prorate agreements during the year ended December 31, 2024, compared to the year ended December 31, 2023. Additionally, a portion of

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the increase was attributed to an increase in SWC revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, as SWC began operations in 2023.

The increase in lease, airport services and other revenues of $14.1 million, or 13.9%, was primarily due to an increase in the number of leased assets and lease rates for leases to third parties during 2024 compared to 2023.

Operating Expenses

Individual expense components attributable to our operations are set forth in the following table (dollar amounts in thousands):

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Salaries, wages and benefits. The $141.3 million, or 10.7%, increase in salaries, wages and benefits was due to an increase in direct labor costs that resulted from the higher number of flights we operated during the year ended December 31, 2024, compared to the year ended December 31, 2023.

Aircraft maintenance, materials and repairs. The $39.2 million, or 5.8%, increase in aircraft maintenance expense was primarily due to higher flight volume, which increased our maintenance activity and related expenses, for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Depreciation and amortization. The $0.8 million, or 0.2%, increase in depreciation and amortization expense was primarily due to an increase in depreciation expense related to the acquisition of five new E175 aircraft and spare engines since December 31, 2023, significantly offset by lower depreciation on our older CRJ fleet that reached our previously estimated useful life estimates during the 2024 year.

Aircraft fuel. The $1.5 million, or 1.7%, increase in fuel cost was primarily due to an increase in the number of flights we operated under our prorate agreements and under SWC and the corresponding increase in gallons of fuel we purchased, offset by a decrease in our average fuel cost per gallon from $3.70 in 2023 to $3.19 in 2024. We purchase and incur expense for all fuel on flights operated under our prorate agreements and SWC. All fuel costs incurred under our capacity purchase agreements are either purchased directly by our major airline partner, or if purchased by us, we record the direct reimbursement as a reduction to our fuel expense. The following table summarizes the gallons of fuel we purchased under our prorate agreements and SWC, for the periods indicated:

Airport-related expenses. Airport-related expenses include airport-related customer service costs such as outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees and station rents. For clarity, our employee airport customer service labor costs are reflected in salaries, wages and benefits and customer service labor costs we outsource to third parties are included in airport-related expenses. The $13.2 million, or 18.2%, increase in airport-related expenses for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to an increase in subcontracted airport services, weather related aircraft deicing costs and landing fees as a result of an increase in the number of flights we operated under our prorate agreements.

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Aircraft rentals. The $20.3 million, or 79.4%, decrease in aircraft rentals was primarily related to early lease buyouts we executed during 2023. During 2023, we acquired 26 CRJ700 aircraft, eight CRJ200 aircraft and one CRJ900 aircraft under early lease buyouts.

Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability insurance, simulator costs, crew per diem, crew hotel costs and credit loss reserves. The $26.2 million, or 9.8%, increase in other operating expenses was primarily related to an increase in other operating costs, such as crew per diem and crew hotel costs, as a result of the higher number of flights we operated during 2024, compared to 2023.

Summary of interest expense, interest income, other income (expense) and provision for income taxes:

Interest Expense. The $16.6 million, or 12.7%, decrease in interest expense was primarily related to a decrease in outstanding debt from $3.0 billion at December 31, 2023 to $2.7 billion at December 31, 2024. Our average effective interest rate for 2024 and 2023 was 4.2% and 4.1%, respectively.

Interest income. Interest income increased $4.0 million, from $43.9 million during the year ended December 31, 2023 to $47.9 million during the year ended December 31, 2024. Our interest income increased primarily from an increase in average interest rates attributed to our marketable securities for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Other income, net. Other income, net decreased $19.4 million in 2024, compared to 2023. Other income, net primarily consists of the realized and unrealized gains or losses on our investments in other companies, income or loss related to our equity method investments and gains or losses on the sale of assets. The decrease in other income, net was primarily due to a decrease in gains from the sale of assets and a decrease in unrealized gains on our investments in other companies for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Provision for income taxes. For the years ended December 31, 2024, and December 31, 2023, our effective income tax rates were 25.3% and 14.8%, respectively, which included the statutory federal income tax rate of 21% and other reconciling income tax items, including state income taxes and the impact of non-deductible expenses. For the year ended December 31, 2023, the lower effective tax rate was primarily related to a benefit of $7.6 million for the release of a previously recorded uncertain tax position liability. Our income tax provision rate may fluctuate each reporting period based on various factors including, but not limited to, the amount of our non-deductible operating expenses, relative to our income before income taxes.

Net Income. Primarily due to the factors described above, we generated net income of $323.0 million, or $7.77 per diluted share, for the year ended December 31, 2024, compared to net income of $34.3 million, or $0.77 per diluted share, for the year ended December 31, 2023.

Our Business Segments 2024 compared to 2023:

Our reporting segments consist of (1) the operations of SkyWest Airlines and SWC, which had its first revenue generating flight in 2023, (collectively, “SkyWest Airlines and SWC”) and (2) SkyWest Leasing activities.

Our chief operating decision maker analyzes the profitability of operating aircraft under our code-share agreements separately from the profitability of financing new aircraft acquired through debt and cash placed under our capacity purchase agreements, currently consisting of our E175 fleet, and our return on such aircraft financing. The SkyWest Airlines and SWC segment includes revenue earned under the applicable capacity purchase agreements attributed to operating such aircraft and the respective operating costs, and revenue and operating expenses attributed to other flying or airport services agreements and charter flight services. The SkyWest Leasing segment includes applicable revenue earned under the applicable capacity purchase agreements attributed to the ownership of new aircraft acquired through the issuance of debt and the respective depreciation and interest expense of such aircraft. The SkyWest Leasing segment also includes the activity of acquiring and leasing used regional jet aircraft and spare engines to third parties and other activities. The SkyWest Leasing segment’s total assets and capital expenditures include new aircraft acquired through the issuance of debt and our aircraft and engines leased to third parties. Additionally, aircraft removed from SkyWest Airlines operations and held for sale are included in the SkyWest Leasing segment.

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Corporate overhead expenses, primarily consisting of administrative labor costs, were allocated to the operating expenses of SkyWest Airlines and SWC and SkyWest Leasing. Overhead expenses allocated to SkyWest Leasing reflect our estimated labor expense incurred to support SkyWest Leasing activities.

The following table sets forth our SkyWest Airlines and SWC segment data for the years ended December 31, 2024 and 2023 (in thousands):

SkyWest Airlines and SWC Segment Profit (Loss). SkyWest Airlines and SWC segment profit was $138.9 million for the year ended December 31, 2024, compared to a segment loss of $165.2 million for the year ended December 31, 2023.

SkyWest Airlines and SWC block hour production increased 13.3%, from 1,140,443 for the year ended December 31, 2023 to 1,292,040 for the year ended December 31, 2024, primarily due to an increase in the number of available captains, which allowed for a higher scheduled utilization of our aircraft. Significant items contributing to the SkyWest Airlines and SWC segment profit for the year ended December 31, 2024 are set forth below.

SkyWest Airlines and SWC operating revenues increased $513.2 million, or 21.5%, from 2024 to 2023. SkyWest Airlines recognizes revenue attributed to flight operations received as fixed monthly payments per aircraft proportionate to the number of block hours completed during each reporting period, relative to the estimated number of block hours we anticipate completing over the remaining contract term. During the year ended December 31, 2024, SkyWest Airlines recognized $43.4 million of previously deferred revenue, net of unbilled revenue, related to fixed monthly payments we received associated with our flight operations revenues, compared to deferring $164.0 million of revenue, net of unbilled revenue, related to fixed monthly payments received associated with our flight operations revenues during the year ended December 31, 2023. Additionally, the increase in SkyWest Airlines and SWC operating revenues was attributed to an increase in block hour production during the year ended December 31, 2024, compared to the year ended December 31, 2023.

SkyWest Airlines and SWC’s salaries, wages and benefits expense increased $141.3 million, or 10.7%, primarily due to an increase in direct labor costs that resulted from the higher number of flights we operated during the year ended December 31, 2024, compared to the year ended December 31, 2023.

SkyWest Airlines and SWC’s aircraft maintenance, materials and repairs expense increased $27.4 million, or 4.2%, primarily due to higher flight volume, which increased the maintenance activity and related expenses, for the year ended December 31, 2024, compared to the year ended December 31, 2023.

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SkyWest Airlines and SWC’s depreciation and amortization expense decreased $4.2 million, or 2.8%, primarily due to lower depreciation on our older CRJ fleet that reached our previously estimated useful life estimates during the 2024 year.

SkyWest Airlines and SWC’s interest expense decreased $4.1 million, or 24.3%, primarily due a decrease in outstanding debt from December 31, 2023 to December 31, 2024.

SkyWest Airlines and SWC’s other segment items increased $48.7 million, or 11.8%, primarily related to an increase in other operating costs, such as crew per diem and crew hotel costs, as a result of the higher number of flights we operated during the year ended December 31, 2024, compared to the year ended December 31, 2023, offset by a decrease in aircraft rent expense due to the early lease buyouts of 35 CRJ aircraft in 2023.

The following table sets forth our SkyWest Leasing segment data for the years ended December 31, 2024 and 2023 (in thousands):

SkyWest Leasing Segment Profit. SkyWest Leasing profit increased $87.7 million, or 42.7%, during 2024, compared to 2023. For the year ended December 31, 2024, SkyWest Leasing recognized $1.5 million of previously deferred lease revenue, compared to deferring $78.5 million of lease revenue on the fixed monthly lease payments received for the year ended December 31, 2023, under the straight-line basis. Additionally, SkyWest Leasing profit increased due to additional lease revenue from the E175 aircraft placed under contract since December 31, 2023, a decrease in interest expense as a result of a lower outstanding debt balance for the year ended December 31, 2024, compared to the year ended December 31, 2023, and a gain related to reclassifying assets held for sale as held and used during the year ended December 31, 2024.

Liquidity and Capital Resources

As of December 31, 2024, we had $801.6 million in cash, cash equivalents and marketable securities and $75.1 million available for borrowings under our line of credit. Given our available liquidity as of December 31, 2024, we believe the working capital currently available to us will be sufficient to meet our present financial requirements, including planned capital expenditures, scheduled lease payments and debt service obligations for at least the next 12 months.

Our total of cash, cash equivalents and marketable securities decreased from $835.2 million as of December 31, 2023, to $801.6 million as of December 31, 2024, or by $33.6 million. Our total long-term debt, including current maturities decreased from $3.0 billion as of December 31, 2023, to $2.7 billion as of December 31, 2024, or by $0.3 billion, primarily due to scheduled debt payments for the 2024 year, partially offset by debt issued to finance five new E175 aircraft. Additionally, we used $43.3 million to repurchase 0.6 million shares of our common stock during the year ended December 31, 2024. At December 31, 2024, our total capital mix (measured as a ratio of total stockholder equity

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and total long-term debt, including current maturities) was 47.4% equity and 52.6% total long-term debt, compared to 41.3% equity and 58.7% total long-term debt at December 31, 2023.

As of December 31, 2024 and 2023, we had $47.1 million and $49.1 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions. We had no restricted cash as of December 31, 2024 and 2023.

Sources and Uses of Cash

Cash Position and Liquidity. The following table provides a summary of the net cash provided by (used in) our operating, investing and financing activities for the years ended December 31, 2024 and 2023, and our total cash and marketable securities positions as of December 31, 2024 and December 31, 2023 (in thousands).

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Cash Flows provided by Operating Activities

Our cash flows provided by operating activities was $692.5 million for the year ended December 31, 2024, compared to $736.3 million for the year ended December 31, 2023. Our operating cash flows are typically impacted by various factors including our net income, adjusted for non-cash expenses and gains such as depreciation expense, asset impairment charges, stock-based compensation expense and gains or losses on the disposal of assets; and timing of cash payments and cash receipts attributed to our various current asset and liability accounts, such as accounts receivable, inventory, accounts payable, accrued liabilities, deferred revenue and unbilled revenue.

The decrease in our cash flow from operations for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to the timing of cash payments on our current liability accounts, timing of cash receipts on our accounts receivables and a decrease in cash received in excess of revenue recognized for the year ended December 31, 2024, compared to the year ended December 31, 2023, offset by an increase in net income, adjusted for non-cash items and deferred income taxes, for the year ended December 31, 2024, compared to the year ended December 31, 2023.

Cash Flows used in Investing Activities

Our cash flows used in investing activities was $228.6 million for the year ended December 31, 2024, compared to $23.2 million for the year ended December 31, 2023. Our investing cash flows are typically impacted by various factors including our capital expenditures, such as the acquisition of aircraft and spare engines; deposit payments; purchase and sales of marketable securities; proceeds from the sale of assets; and timing of cash payments and cash receipts attributed to our various long-term asset and long-term liability accounts.

Excluding the purchase and sale of marketable securities, which results in the transfer of dollars between our investments in marketable securities and our cash accounts, our cash used in investing activities increased from $284.6 million for the year ended December 31, 2023, to $341.2 million for the year ended December 31, 2024. The increase in cash used in investing activities, excluding the transfer of dollars between our investments in marketable securities and our cash accounts, was primarily due to an increase of $59.4 million used in the acquisition of property and equipment for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the acquisition of five new E175 aircraft in 2024. Additionally, there was an increase in our cash used to acquire other long-term assets,

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including our investment in Contour, for the year ended December 31, 2024, offset by a decrease of $47.5 million in aircraft deposits in 2024, compared to 2023.

Cash Flows used in Financing Activities

Our cash flows used in financing activities was $384.8 million for the year ended December 31, 2024, compared to cash used in financing activities of $667.8 million for the year ended December 31, 2023. Our financing cash flows are typically impacted by various factors including proceeds from issuance of debt, principal payments on debt obligations, repurchases of our common stock and payment of cash dividends.

The $283.1 million decrease in cash used in financing activities for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to a decrease of $248.6 million in cash used to purchase treasury stock and an increase of $46.5 million in proceeds from the issuance of long-term debt, offset by an increase of $5.3 million in principal payments on long-term debt and an increase of $6.3 million for employee income taxes paid on vested equity awards during the year ended December 31, 2024, compared to the year ended December 31, 2023.

Significant Commitments and Obligations

General

The following table summarizes our commitments and obligations as noted for each of the next five years and thereafter (in thousands):

In addition to the table above, in 2024, we entered into a master equipment purchase agreement with another airline to acquire certain airframes and engines and lease the assets back to the airline under a five-year term. At December 31, 2024, we estimate the remaining financing obligation under the agreement will be between $60.0 million and $70.0 million and anticipate closing on the remaining financings during 2025.

Purchase Commitments and Options

We are coordinating with our major airline partners and aircraft manufacturers on the timing of upcoming fleet deliveries under previously announced deals. The anticipated future aircraft delivery dates are subject to change. As of December 31, 2024, we had a firm purchase commitment for 16 new E175 aircraft from Embraer with delivery dates anticipated into 2026.  We also have a firm purchase commitment to purchase four used CRJ550 aircraft with anticipated delivery dates in 2025.

At the time of each aircraft acquisition, we evaluate the financing alternatives available to us, and select one or more of these methods to fund the acquisition. In recent years, we have issued long-term debt to finance our new aircraft. At present, we intend to fund our aircraft purchase commitments through a combination of cash on hand and debt financing. Based on current market conditions and discussions with prospective leasing organizations and financial institutions, we currently believe that we will be able to obtain financing for our committed acquisitions, as well as additional aircraft. We intend to finance the firm purchase commitment for 16 E175 aircraft with approximately 75-85%

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debt and the remaining balance with cash. We intend to fund the purchase of the four used CRJ550 aircraft through cash on hand.

Aircraft Lease and Facility Obligations

We also have long-term lease obligations, primarily relating to our facilities, aircraft and engines. Excluding aircraft financed by our major airline partners that we operate for them under contract, we had eight aircraft under lease with remaining terms ranging from four to six years as of December 31, 2024. These eight leased aircraft are subleased to a third party. Future minimum lease payments due under all long-term operating leases were approximately $129.3 million at December 31, 2024. Assuming a 6.2% discount rate, which is the average incremental borrowing rate we anticipate we would have incurred on debt obtained over a similar term to acquire these assets, the present value of these lease obligations would have been equal to approximately $87.7 million at December 31, 2024.

Long-term Debt Obligations

As of December 31, 2024, we had $2.7 billion of long-term debt, which consisted of $2.5 billion of debt used to finance aircraft and spare engines and $200.6 million of unsecured debt payable to Treasury. The average effective interest rate on our debt obligations was approximately 4.2% at December 31, 2024.

Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning the aircraft on a monthly basis. The aircraft compensation structure varies by agreement but is intended to cover either our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease expense costs while the aircraft is under contract.

Guarantees

We have guaranteed the obligations of SkyWest Airlines under the Delta Connection Agreement and the United Express Agreement for the E175 aircraft. In addition, we have guaranteed certain other obligations under our aircraft financing and leasing agreements.

We have guaranteed $24.7 million in promissory notes of third parties in event the third parties default on their payments. The third parties’ loans are secured by aircraft and engines.

Critical Accounting Policies and Estimates

Our significant accounting policies are summarized in Note 1 to our Consolidated Financial Statements included in Item 8 of this Report. Critical accounting policies are those policies that are most important to the preparation of our consolidated financial statements and require management’s subjective and complex judgments due to the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to revenue recognition, long-lived assets and income tax as discussed below. The application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results will likely differ, and could differ materially, from such estimates.

Revenue Recognition

Flying agreements and airport customer service and other revenues are recognized when service is provided. Under our capacity purchase and prorate flying agreements with our major airline partners, our performance obligation is determined on a per completed flight basis. Under our capacity purchase agreements, the performance obligation of each completed flight is measured using block hours incurred for each completed flight, which factors the duration of each flight. Under our airport customer service agreements, our performance obligation is measured on a per departure basis for each flight we provide customer service.

A portion of our compensation under our capacity purchase agreements is designed to reimburse us for the use of the aircraft we provide under such agreements. This compensation is deemed to be lease revenue, because the agreements identify the “right of use” or a specific type and number of aircraft over the agreement term. We allocate the total consideration received under our capacity purchase agreements between the lease and non-lease components based on stand-alone selling prices. A portion of the consideration received for the use of the aircraft is a fixed monthly payment per aircraft. We recognize the fixed monthly lease payments as lease revenue using the straight-line basis over

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the capacity purchase agreement term and variable lease payments in the period when the block hours are completed. We recognized $1.5 million of previously deferred lease revenue during the year ended December 31, 2024, under the straight-line basis.

Additionally, a portion of our compensation under our capacity purchase agreements relates to operating the aircraft, identified as the non-lease component of the capacity purchase agreement. We recognize revenue attributed to the non-lease component received as fixed monthly payments per aircraft proportionate to the number of block hours completed during each reporting period, relative to the estimated number of block hours we anticipate completing over the remaining contract term. In 2024, we recognized $35.5 million of previously deferred fixed monthly payments and unbilled revenue increased $7.9 million. The amount of deferred revenue and unbilled revenue from fixed monthly payments we recognize will increase or decrease in future reporting periods depending on the number of block hours we complete during such reporting period and our then-current forecast of block hours we anticipate completing over the remaining contract term based on information available to us as that time.

Our revenues could be impacted by several factors, such as our flight schedules, passenger fares we receive under our prorate agreements, terminations, extensions or other amendments to our code-share agreements, our estimates used to determine the amount of revenue we defer under our capacity purchase agreements, and our ability to earn incentive payments contemplated under applicable agreements. In the event contracted rates are not finalized at a quarterly or annual financial statement date, we record that period’s revenues based on the lower of the prior period’s approved rates or our estimate of rates that will be implemented upon completion of negotiations. Also, in the event we have a reimbursement dispute with a major airline partner at a quarterly or annual financial statement date, we evaluate the dispute under established revenue recognition criteria and, provided the revenue recognition criteria have been met, we recognize revenue for that period based on our estimate of the resolution of the dispute. Our rates were finalized under our code-share agreements as of December 31, 2024.

Long-Lived Assets

As of December 31, 2024, we had approximately $5.6 billion of property and equipment and related assets net of accumulated depreciation. In accounting for these long-lived assets, we make estimates about the expected useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long-lived assets, a significant change in the condition of the long-lived assets and operating cash flow losses associated with the use of the long-lived assets. When considering whether or not impairment of long-lived assets exists, we group similar assets together at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and compare the undiscounted cash flows for each asset group to the net carrying amount of the assets supporting the asset group. Asset groupings are done at the fleet type or contract level.

During 2023, we recorded a non-cash impairment loss of $2.3 million related to a change in the estimate of fair value for 14 CRJ700 aircraft that were classified as held for sale in 2022. We presented the $54.3 million of assets held for sale at the lower of their current carrying value or their fair market value less costs to sell and included the amount in “Other current assets” on the Company’s consolidated balance sheet. In March 2024, we decided not to sell the 14 CRJ700 aircraft based on improved pilot availability and reclassified the aircraft as held for use assets in “Aircraft and rotable spares” on the Company’s consolidated balance sheet. We remeasured the fair value of the held for use assets at the time of the reclassification and, as a result, we recorded a $4.2 million gain (pre-tax) for the year ended December 31, 2024, as an offset to “Other Operating Expenses” in our consolidated statement of income, primarily due to the elimination of the estimated costs to sell the assets. The fair values were based upon observable and unobservable inputs, including market trends and conditions. The gain of $4.2 million is included in “Other operating expenses” on the Company’s consolidated statements of comprehensive income and in the SkyWest Leasing segment for the year ended December 31, 2024. The impairment of $2.3 million is included in “Other operating expenses” on the Company’s consolidated statements of comprehensive income and in the SkyWest Leasing segment for the year ended December 31, 2023.

Factors that may impact our estimates used for depreciation include anticipated useful lives of each aircraft type and estimated residual values of each aircraft. As we operate our aircraft under code-share agreements with our major

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airline partners, changes in anticipated demand by our major airline partners for regional aircraft may impact our estimated useful lives and residual values for our aircraft, spare engines and other long-lived assets.

Income Tax

Deferred income taxes are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Estimating our tax liabilities involves judgments related to uncertainties in the application of complex tax regulations. We make certain estimates and judgments to determine tax expense for financial statement purposes as we evaluate the effect of tax credits, tax benefits and deductions, some of which result from differences in the timing of recognition of revenue or expense for tax and financial statement purposes. Changes to these estimates may result in significant changes to our tax provision in future periods. Each fiscal quarter we re-evaluate our tax provision and reconsider our estimates and assumptions related to specific tax assets and liabilities, making adjustments as circumstances change.

Recent Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements included in Item 8 of this Report for a description of recent accounting pronouncements.