SkyWest SKYW Q1 2026 Earnings Call Transcript

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Date

Thursday, April 23, 2026 at 4:30 p.m. ET

Call participants

• President & Chief Executive Officer — Russell A. Childs
• Chief Financial Officer — Robert J. Simmons
• Chief Commercial Officer — Wade Steele
• Chief Accounting Officer — Eric J. Woodward

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Takeaways

• GAAP net income -- $102 million, or $2.50 per diluted share, reflecting a 6% effective tax rate and a $0.29 per share discrete tax benefit in the quarter.
• Revenue -- $1.01 billion, up 7% year over year and down slightly from $1.02 billion sequentially from Q4 2025.
• Contract revenue -- $810 million, up from $803 million in Q4 2025 and $785 million year over year.
• Prorate and charter revenue -- $168 million, up $37 million year over year and $1 million sequentially.
• Leasing and other revenue -- $35 million, down sequentially from $54 million due to prior period maintenance services, but up from $32 million year over year.
• Deferred revenue recognized -- $24 million this quarter, up from $5 million sequentially and $13 million year over year; $241 million remains deferred for future periods.
• Cash and liquidity -- $627 million ending cash, down from $707 million last quarter, due to $116 million in debt repayments, $118 million in new debt issuance, $102 million in capital expenditures, and $75 million in share buybacks for 783,000 shares.
• Share repurchase authorization -- $138 million remains under the current program as of March 31, 2026.
• Free cash flow generation -- Nearly $1 billion generated over two years, deployed to de-levering, fleet growth, and buybacks.
• Debt -- $1 billion lower than at year-end 2022, despite financing 15 new E175s in that period.
• Capital expenditures -- Approximately $580 million in 2025, including purchases of new E175s, CRJ900 airframes, and support for CRJ550; 2026 CapEx expected to be about flat with 2025.
• EPS guidance -- Full-year 2026 GAAP EPS anticipated around $11, slightly down from prior color, primarily due to higher expected fuel costs; Q2 EPS directionally expected to rise slightly, Q3 stronger than Q2, and Q4 modestly down from Q3.
• Tax rate outlook -- Full-year 2026 effective tax rate expected at 23%-24%, with quarterly rates of approximately 27%-28% for the remainder of 2026.
• Block hours -- Q1 block hours increased 3% year over year; 2026 summer production now expected slightly lower than previously modeled; full-year block hour growth remains positive but below last quarter’s low- or mid-single-digit guidance.
• Fleet deliveries -- One E175 delivered this quarter; eight additional E175s expected in 2026; total E175 orders stand at 68, with 16 for Delta, eight for United, and 44 unassigned.
• CRJ450 program -- United has announced the CRJ450, a premium 41-seat variant of the CRJ200, entering service in fall 2026, expected to scale up to 100 aircraft including retrofits; conversion takes a few weeks per unit and costs are covered under partner rates.
• CRJ550 program -- Multiyear United agreement covers 50 aircraft; 29 in service as of March 31, with 21 more to enter service in 2026.
• Prorate agreements -- Prorate agreement with American active for six aircraft, expanding to up to nine by year-end 2026, supporting strong community engagement and demand.
• Maintenance cost structure -- 2026 maintenance expenses expected to align with 2025 as more aircraft exit long-term storage; timing of expense precedes re-entry into service.
• Deferred revenue balance -- $241 million to be recognized in future periods, increased by $24 million booked this quarter.
• No E175 contract expirations -- No major E175 contract expirations occur before late 2028, locking in revenue streams with mainline partners.
• Fleet flexibility -- Structure of new E175 order permits cancellation if partners are not secured; over 30 parked CRJ200s may be converted to CRJ450 for enhanced utilization.
• Essential Air Service exposure -- About 40 communities served via the federal Essential Air Service program, which management considers well managed and strategically important.

Summary

SkyWest (NASDAQ:SKYW) reported earnings per share of $2.50, aided by a discrete $0.29 tax benefit, and produced revenue growth of 7% year over year while maintaining disciplined capital deployment and fleet expansion. Cash declined due to elevated capital expenditures, new aircraft purchases, and share repurchases, but management highlighted nearly $1 billion in free cash flow generated over two years and a $1 billion reduction in debt since 2022. Strategic focus centered on launching the CRJ450 product, securing multiyear contract extensions with major partners, and advancing ongoing E175 deliveries, all of which position SkyWest to benefit from industry cycle shifts and preserve flexibility through 2028 and beyond.

• No major E175 contract expirations until late 2028 provides multi-year revenue stability and operational planning visibility.
• SkyWest's structure for new E175 orders allows cancellation if partners are not secured, serving as a safeguard against demand uncertainty.
• Deferred revenue accumulated on the balance sheet reached $241 million, creating visibility into future revenue streams.
• The CRJ450 initiative with United is designed to capture underserved market opportunities and deepen partner ties, with transition costs absorbed in contract rates.
• The company’s Essential Air Service participation covers roughly 40 small communities, reinforcing SkyWest's exposure to federally subsidized routes.
• Management indicated only 10% of total flying for the remainder of 2026 is exposed to fuel cost fluctuations, with offsetting pricing anticipated in prorate contracts.
• Opportunistic share buybacks in the quarter totaled $75 million, with $138 million remaining under current authorization; approach to buybacks will remain flexible.
• Maintenance expense guidance underscores ongoing investment in fleet utilization and capacity, with aircraft reactivations intended to drive future block hour growth.

Industry glossary

• Block hours: The total number of hours from gate departure to arrival, used as a measure of airline production.
• Prorate agreement: Arrangement where an airline operates flights at its own commercial risk, sharing revenue based on passenger segments with major airline partners.
• CRJ450: Modified Bombardier CRJ200 aircraft retrofitted by SkyWest for United, offering 41 seats with a dual-class configuration and premium amenities.
• CRJ550: Modified Bombardier CRJ700 aircraft equipped with 50 seats and amenities typical of larger regional jets, specifically configured for United.
• Essential Air Service (EAS): A federal program that subsidizes flights to small, rural communities to ensure continued commercial air connectivity.

Full Conference Call Transcript

Operator: Thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the SkyWest, Inc. First Quarter 2026 Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Rob Simmons, Chief Financial Officer. You may begin.

Robert J. Simmons: Thanks, Abby, and thanks, everyone, for joining us on the call today. As Abby indicated, this is Rob Simmons, SkyWest’s Chief Financial Officer. On the call with me today are Russell A. Childs, President and Chief Executive Officer; Wade Steele, Chief Commercial Officer; and Eric J. 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 Russell A. Childs for some comments. Following Russell A. Childs, 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 J. Woodward: 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 now turn the call over to Russell A. Childs.

Russell A. Childs: Thank you, Rob and Eric. Good afternoon, everyone. Thank you for joining us on the call today. Today, SkyWest reported net income of $102 million or $2.50 per diluted share for 2026. This is slightly better than the same quarter last year and reflects increased production and fleet utilization. During the quarter, we received delivery of one E175, with eight more expected this year. We are also excited to share a prototype of the new CRJ450 product, a reimagined premium 41-seat CRJ200. This aircraft will include first class, overhead bins large enough for all roll-aboard luggage, and Starlink Wi-Fi.

SkyWest is very excited to launch this new product for United this fall, and we look forward to ultimately operating an all dual-class fleet. The first quarter is always difficult with winter weather. Our people rose to the challenge despite two back-to-back storms in March affecting several of our hubs. During the first quarter, the Department of Transportation shared their full-year 2025 on-time performance statistics with SkyWest Airlines placing third in on-time performance. That is outstanding, and I want to thank our people for working together to deliver such an exceptional product. The industry is extremely dynamic, and our model is built for durability.

With uncertainty impacting fuel costs and production, we still anticipate 2026 will be more profitable than 2025. SkyWest’s strategic business decisions have kept us strong and agile to the industry’s volatility, and the steps we have taken in the past several years have only enhanced the strength and stability of our model. Our ongoing investments in the diversity of our fleet ensure we are well positioned to adapt to market demands. We continue executing our fleet initiatives and advancing our unparalleled fleet flexibility. That flexibility has never been more important. And while our E175 flying agreements are further solidified, we continue to leverage our extensive CRJ assets.

The contract extensions we announced with United and Delta last quarter deliver ongoing revenue stability. And with our dual-class fleet, both CRJ and ERJ now under contract, we have no major E175 contract expirations until late 2028. We continue accepting delivery of new E175s and CRJ700s to CRJ550s for United and are proud to be launching the CRJ450 with United this fall. Additionally, we continue to reduce our debt; we now have $1 billion less debt than we did at the end of 2022. The free cash flow that we continue to generate is still being directed toward fleet growth initiatives, debt reduction, and share repurchase.

Our steadfast commitment to maintaining a strong balance sheet and liquidity benefits our employees, our partners, and our shareholders. All of this work sets us up well for 2027 and places us in a solid position of long-term strength. SkyWest continues to lead our industry in service and in the value of our diverse assets. We remain disciplined and steady as we execute on our growth by delivering on significant prorate demand, investing in and fully utilizing our existing fleet, and preparing to receive our deliveries in the coming years for a total of nearly 300 E175 by 2028. SkyWest is built to perform through the industry’s cycles.

Disciplined strategic choices and continued execution in recent years have strengthened our model, and we remain well positioned to adapt quickly and to respond to market demands better than anyone else in the industry. Rob will now take us through the financial information.

Robert J. Simmons: Today, we reported a first-quarter GAAP net income of $102 million, or $2.50 earnings per share. Q1 pretax income was $108 million. Our weighted average share count for Q1 was 40.7 million, and our effective tax rate was 6%. This GAAP EPS included a $0.29 impact from this unusually low effective tax rate from a discrete benefit in the quarter compared to the Q1 rate last year. Let us start with revenue. Total Q1 revenue of $101.01 billion is down slightly from $1.02 billion in Q4 2025, and up 7% from $948 million in Q1 2025. Q1 revenue includes contract revenue of $810 million, up from $803 million in Q4 2025, and up from $785 million in Q1 2025.

Prorate and charter revenue was $168 million in Q1, up $1 million from Q4 2025 and up $37 million from Q1 2025. Leasing and other revenue was $35 million in Q1, down from $54 million and up from $32 million in Q1 2025. The sequential decrease in leasing and other revenue from Q4 related to discrete maintenance services provided to third parties in Q4 that was not expected to repeat in Q1. Additionally, these Q1 GAAP results include the effect of $24 million of previously deferred revenue this quarter, up from the $5 million recognized in Q4 2025, and $13 million recognized in Q1 2025.

As of the end of Q1, we have $241 million of cumulative deferred revenue that will be recognized in future periods. Now let us discuss the balance sheet. We ended the quarter with cash of $627 million, down from $707 million last quarter and down from $751 million at Q1 2025. The ending cash balance for the quarter included the effects from repaying $116 million in debt, issuing $118 million of new debt, investing $102 million in CapEx, including the purchase of one E175, and buying back 783 thousand shares of SkyWest stock in Q1 for $75 million. As of March 31, we had $138 million remaining under our current share repurchase authorization.

Cash flow is obviously an important driver of our capital deployment strategy. Over the last two years, we generated nearly $1 billion in free cash flow and deployed it primarily to delever and de-risk the balance sheet to the benefit of our partners, our employees, and our shareholders. We expect to continue to deploy our ongoing generation of free cash flow by investing in our fleet, including financing the addition of 28 new E175s by 2028, reducing our debt, and executing opportunistically on our share repurchase program as you saw us do in Q1. As we remain focused on improving our return on invested capital, we would like to highlight the following.

Both our debt net of cash and leverage ratios continue at favorable levels and are at their lowest point in over a decade. Our total debt level is $1 billion lower today than it was in 2022, in spite of acquiring and debt financing 15 E175s during that time. The total 2025 capital expenditures funding our growth initiatives was approximately $580 million, including the purchase of seven new E175s, CRJ900 airframes, and aircraft and engines supporting our CRJ550 opportunity. We expect to take nine new E175s during 2026 and anticipate our total CapEx in 2026 will be about flat with 2025, including two incremental 175 deliveries.

Consistent with our practice, let me update you on some commentary on 2026 that we gave last quarter. For 2026, we now expect to see block hour production slightly lower this summer than we modeled last quarter. We continue to work with our partners on production schedules over the rest of 2026. Wade will talk more about this in a minute. We also anticipate our GAAP EPS for 2026 will be in the $11 area, slightly down from the color we gave last quarter, reflecting our expectation of ongoing elevated fuel costs.

Although the future cost of fuel is obviously uncertain, we are exposed to fuel costs only on roughly 10% of our flying, or 40 million gallons needed in our prorate business over the remainder of the year. We also believe, however, that higher fuel costs will come with some favorable prorate pricing offsets in that business, along with ongoing strength in our core model. In terms of how to think of quarterly EPS modeling for the rest of 2026, there are several potential puts and takes over the remaining quarters, including seasonality, fuel cost, production, and so on, that have various levels of uncertainty.

But to keep it simple, on a GAAP EPS basis, we anticipate directionally that Q2 could be up slightly from Q1 GAAP results of $2.50. Q3, seasonally the strongest quarter of the year, could be up over Q2, and Q4 could be down modestly from Q3. For other modeling purposes, we anticipate our maintenance activity in 2026 will continue approximately at 2025 levels as we invest in bringing more aircraft back into service. We also anticipate our effective tax rate will be approximately 23% to 24% for the full year 2026, flat to slightly down from 2025, including the unusually low rate of 6% in Q1.

This is expected to translate to an effective tax rate of approximately 27% to 28% for the remaining quarters of 2026. We are optimistic about our ongoing growth possibilities in 2026 and 2027, including the following three focus areas. First, growth in our ability to increase service to underserved communities, driven partially by the redeployment of approximately 20 dual-class CRJ aircraft expected for scheduled service later this year and strong utilization of the existing fleet. Second, good demand for our prorate product. And third, placing nine new E175s into service for United and Alaska by 2026 and sixteen new E175s for Delta in 2027 and 2028.

We are also very pleased with the success of our CRJ550 and CRJ450 initiatives, and I will hand the mic to Wade, who will talk more about that next. We believe that we are positioned to drive long-term shareholder returns by deploying our strong balance sheet and free cash flow generation against a variety of accretive opportunities. Wade?

Wade Steele: During the quarter, United announced the launch of the CRJ450, a reimagined CRJ200 featuring 41 seats. This aircraft will offer seven first-class seats and 34 economy seats, including Economy Plus. With a large luggage closet and no overhead bins in the first-class cabin, passengers will enjoy a premium experience. We are also excited to introduce Starlink connectivity onboard the CRJ450. Operations with United will begin this fall. Last year, we announced an extension covering 40 CRJ200s with United, and we are committed to retrofitting these aircraft into CRJ450s. We also plan to retrofit our prorate fleet and anticipate that our total CRJ450 fleet will reach approximately 100 aircraft.

Turning to our E175 fleet, last quarter, we secured multiyear extensions for 40 E175s with United and 13 with Delta, further solidifying our partnerships through the end of the decade. We now have no contract expirations on E175s until 2028. During the quarter, we took delivery of a new E175 for Alaska and currently have 68 E175s on firm order with Embraer, including 16 for Delta and eight for United. We expect to receive eight additional E175s this year. Of the 68 aircraft on order, 24 are allocated to major partners, with 44 remaining unassigned, allowing flexibility in our long-term fleet strategy.

Delivery slots are secured from 2027 to 2032, and the structure of the order allows us to terminate if we do not secure partners. Following the completion of the Delta deliveries expected in 2028, our E175 fleet will total nearly 300 aircraft, reinforcing SkyWest’s status as the world’s largest E175 operator. We recently acquired five E170s and reached an agreement with United to operate these as we expedite the conversion of our CRJ700s to CRJ550s. As previously discussed, we have a multiyear agreement to fly 50 CRJ550s with United. As of March 31, 29 CRJ550s are in service, and we expect the remaining 21 to enter service this year.

We have also initiated a prorate agreement with American, currently operating six aircraft under this arrangement, with up to nine expected by year-end 2026. We look forward to expanding our relationship with American. Reviewing our production, Q1 2026 block hours increased 3% compared to Q1 2025. For 2026, we anticipate production slightly lower this summer than we modeled last quarter. This year, we expect to take delivery of nine new E175s, place 23 CRJ550s into service, capitalize on strong prorate demand, and increase fleet utilization. These gains are partially offset by the gradual return of approximately 19 Delta-owned CRJ900s to Delta over the next couple of years, at a slower pace than previously anticipated. Our revenue seasonality has normalized.

With improved utilization during the strong summer months, we still have approximately 10 dual-class CRJ aircraft currently undergoing heavy maintenance after transitioning from long-term storage. These aircraft are set to return to service in 2026 under existing flying agreements. Additionally, there are over 30 parked CRJ200s that could potentially transition to the CRJ450 and further enhance our fleet flexibility. We have continued to face challenges in our third-party MRO network, including labor and part shortages. We expect maintenance expenses in 2026 to remain consistent with 2025 as we bring aircraft out of long-term storage and support growing production. As expected, maintenance expenses are incurred before aircraft return to service.

Demand for our prorate business remains extremely strong, supported by great community engagement. We are seeing opportunities to restore SkyWest service to several communities, and we will continue to work with airports to expand our reach. 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.

Operator: Okay. We will now open the call for questions. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Again, it is 1 to join the queue. Our first question comes from the line of Catherine O’Brien with Goldman Sachs. Your line is open.

Catherine Maureen O'Brien: Hey. Good afternoon, everyone. Thanks for the time. So we have had a couple of capacity cutdowns in some of your partners this earnings season, and you just shared that your summer schedule is lower than you originally expected. Do you think those mainline carrier cuts are now fully reflected in your schedule? How far in advance are you typically warned about any potential schedule changes?

Wade Steele: Yeah, Catherine, this is Wade. As I said on our call, we do expect our block hours to be slightly less than what we talked about last quarter. Our schedules—we have good schedules through the summertime for sure. We think those schedules will hold, and we anticipate a strong fall as well. So we do expect a little bit less than what we talked about last quarter, but we have pretty good visibility to what is going to happen over the next quarter for sure.

Catherine Maureen O'Brien: And I apologize if I missed it. Did you give us—usually, you will give us some type of sequential compare on the block hours for the one quarter out versus the current quarter or year over year. Did you share that guidance?

Wade Steele: We did not, but it will be seasonally high. If you compare it to Q1 2026, Q2 will be seasonally higher than what we just did in Q1.

Catherine Maureen O'Brien: And maybe just—this might be another one for you, Wade. But last quarter, you spoke about having 60 CRJ200s going through maintenance to return to service. I think there were 20 of those that are already under contract. We now know you are going to be converting a number of those into CRJ450s to put into service with United starting as early as this fall. Can you help us understand what portion of those 60 CRJs you already had in maintenance were slated to become CRJ450s, and are there any incremental shells left from that pool still looking for homes that could potentially be incremental 2026 block hours?

Wade Steele: Yeah, that is a great question. As I talked a little bit in my script, there are still about 30 CRJ200s that are parked, and we are working with our major partners to bring those back. As we look at it, if we do bring them back now, it would be late in 2026 and rolling into 2027. We are still working on those. We are optimistic that we will be able to find a home for those, so we are working through that right now.

Operator: Great. Thanks so much for the time. Our next question comes from the line of Savi Syth with Raymond James. Your line is open.

Savanthi Nipunika Prelis-Syth: Hey. Good afternoon, everyone. Just building on Katie’s questions on the CRJ450, what is the conversion time around that and how are the cost and the CapEx handled in terms of what you spend versus what your partner might cover?

Wade Steele: Yeah, Savi, this is Wade. That is a great question. We anticipate starting to transition these in the fall. The transition time will be a couple of weeks to convert from a CRJ200 to a CRJ450. We anticipate doing a couple of lines at a time. All of the economics are included in the rates with our major partner, and so they will be included in the economics that we receive from the partner.

Savanthi Nipunika Prelis-Syth: Got it. And, Wade, just to clarify—I think you mentioned this, but I am not sure. I know the E175 by year-end ’28 wording went from “nearly 300” to “more than 300.” Is that a reflection that the rest before year-end ’28 have been extended, or what was the reason for that wording change?

Wade Steele: No. We still anticipate around 300 airplanes. We continue to take delivery of those. We have eight more for United and 16 more for Delta, and so it is still right around that 300 number. It is pretty consistent with last quarter. We did take a delivery for Alaska in Q1, but we are continuing to work to place the remainder of those airplanes, and we are having very interesting conversations.

Savanthi Nipunika Prelis-Syth: Got it. And just lastly, I am not sure if I missed it, but did you say what the prorate revenue was this quarter?

Wade Steele: We did not, but it is $168 million—our prorate and SkyWest Charter business.

Operator: Perfect. Thank you. Our next question comes from the line of Mike Linenberg with Deutsche Bank. Your line is open.

Michael Linenberg: Yes. Hey, Chip, I know you talked about these airplanes—these CRJ450s—being great airplanes for these underserved communities. What is the status on—I know out of Chicago, you are going to launch a whole bunch of service to a lot of underserved cities. What is the status on that? And are you going to have to—because of the FAA order—are you going to have to withdraw that service?

Russell A. Childs: Mike, that is a great question. From our perspective, nothing has necessarily changed in our intent. The cities Wade mentioned in the script all take a long time to get to the timeframe where they are open to go back to. I can tell you that sometimes it is up to even a year process. So the timing of most of what you are talking about does not necessarily perfectly correlate to some of the things happening in Chicago for the remainder of 2026. And some of the cities—if it does not work in Chicago—the bids could go to one of our other hubs. It does not change the interest of us going back to these communities.

If there is a network problem between some of our partners in some of these locations, we have some flexibility that DOT is willing to work with to go to a different hub to make sure that we ensure that service. From that perspective, our intent is still to do what we do best, and that is to serve and develop these small communities like we have done for 53 years. There is still a very good market for that, and we will be flexible, as we mentioned in our script before, on how we do that with these communities and with our partners.

Michael Linenberg: Okay. Great. And just to Wade—I apologize if you said this number; I did get on late. Just the new block hour rate for the year, because I think you said you were planning to fly a little bit less this summer. What should we be modeling for block hours for the full year?

Wade Steele: Last quarter, we talked about low- or mid-single digits. It is slightly less than that from what we anticipate. We are still finalizing all of our block hours through the back end, but we still do expect to be up year over year; we are just working through that at the moment.

Michael Linenberg: Okay. And then in that regard, though, you are still up, and the reason for the reduction—is it because of the higher fuel prices and a cut to prorate, or is it Chicago? Is it both? How do we parse that out?

Wade Steele: It really has nothing to do with our prorate. We are still very optimistic with our prorate. The demand—just like our major partners talk about—the pricing is still there. The demand is still really strong. So we have not cut any of our prorate flying. There is a little bit in Chicago, like you talked about, and then some of our other CPAs just have some cleanups with utilization. Those are the main drivers.

Michael Linenberg: Okay. And then just my last point. If fuel prices stay high, in the past there was always this arbitrage between mainline and regional—in the sense that if the majors had to cut but wanted to maintain frequency and maintain the integrity of their hubs with the number of banks—that parking an inefficient 25-year-old A319 or A320, or maybe utilizing it less and backfilling it with one of your airplanes, was far more profitable for the full ecosystem. Does that still hold? And does that potentially create opportunities if—I do not know—the Strait of Hormuz remains closed for longer than what we thought?

Robert J. Simmons: Michael, that is a fantastic question. We evaluate that data—you can go back several decades and look at some of these events from 9/11 to the financial crisis to oil at $150 and COVID and all that stuff. The data is actually pretty clear. Each partner might look at it a little differently depending upon where their fleet is.

To the extent that we own the less seats and can be cost competitive, there is a very strong trend of network preservation and even predatorial initiatives that can happen with a smaller fleet in somewhat difficult times, particularly if you try to estimate how long this may last and what the net effect of this is, which we are not going to speculate on. To the extent that we have a good model and can take care of the right dynamics of the industry, we are pretty comfortable where we are and are going to be very fluid with the needs of what our partners want.

Russell A. Childs: Have we had any conversations along those lines? Our conversations with our partners—our conversations are a little bit more, I would not say dynamic, maybe even simplistic. We continue to have conversations about the network supply that we provide, the economics at which we do it, and what long-term initiatives are. The good news you have seen throughout the script is all of our conversations are sort of wait and see. Depending upon how this plays out, we are extremely well prepared for however turn this takes. Outside of the global issue you talked about, our relationships with our partners are extremely good, and our fleet flexibility gives us an enormous amount of ability to help meet their demand.

We talk more about fleet flexibility, performance, and all that kind of stuff that really helps drive more of that conversation. If this goes on for a very long time and things get worse, there is no doubt that we will have conversations with them for sure.

Michael Linenberg: Great. Thanks, Chip. Thanks, everyone.

Wade Steele: Thanks, Mike.

Operator: Our next question comes from the line of Tom Fitzgerald with TD Cowen. Your line is open.

Thomas John Fitzgerald: Hi, everyone. Thanks very much for the time. I am just kind of curious on unit cost and how you are thinking about—to the extent that you are making cuts in the rest of the year—how much you can variabilize and how we should think about maybe unit labor costs moving around from here?

Wade Steele: There are a lot of our costs where we do have some flexibility, especially when you look at direct labor costs. We have some levers on training and hiring—some of those things we can definitely make more variable. On the maintenance side, a lot of our maintenance costs are variable based on the number of cycles or hours that we do fly. There is a nice chunk of maintenance costs that are also variable. Our revenue models reflect that, and so do our cost models.

Thomas John Fitzgerald: Okay. That is really helpful. And then just an accounting question on the discrete tax benefit. Should we think about it stacking on top of the benefit from 1Q ’25—so the $0.29 plus the $0.24? Or was that just a one-off, so it goes from $2.50 GAAP to $2.21? I just want to make sure I was following that correctly.

Robert J. Simmons: Yeah, Tom, you have got it. It is typically a Q1 thing. I would just again point out that for the full year, the 2026 tax rate is basically flat to maybe slightly down from where we were last year. The quarters are just spread out a little bit.

Thomas John Fitzgerald: Okay. Then a question—more of a broader risk. To the extent one of your partners were to be able to operate their own regional subsidiary, how do you think about managing through the pricing risk? You have a very unique fleet and attractive assets, and you have been proven to be good stewards and adapt quickly. How are you thinking about the competitive landscape and maybe longer-term pricing power?

Wade Steele: That is a great question. Obviously, our major partners—many have wholly owned subsidiaries. We have been able to work with them very closely, and we are fine competing with them as well. SkyWest has a very competitive structure. We are very nimble. A lot of how we do business is unique. We have great relationships with our labor group, which makes it such that we bring a very unique proposition to each of our partners. We will continue to work with them. We are aware of what could possibly happen in the industry, and we are happy to work with our major partners.

Operator: Our next question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is open.

Duane Thomas Pfennigwerth: Hey. Thank you. With this slight change in utilization, I wonder—are your pilot hiring plans changing at all? Are you dialing that down? And if so, is there an opportunity to maybe better match the new production with your staffing in the second half? Or is it just too early to make that call?

Robert J. Simmons: Duane, that is a great question. To be candid, we are very sophisticated and very attentive in how we manage that. Part of our labor cost increase this year compared to last year has been more attrition and more hiring and training costs that we have had in ’26 than ’25. It is going to be very dependent upon what our partners are doing with their hiring. That is the number one driver. We have seen some slowdown in some hiring, particularly since the first quarter and even April. Major carriers are getting ready for the summer schedule and hiring, but that is tapering off.

Some of the most sophisticated analysis we do is managing flight attendants and pilots and mechanics given the production timeline. We are seeing very good things throughout the rest of the year—stuff that is very easily managed. As of today, the overall model—we are proceeding full steam ahead with the deliveries we have and with the demand that is out there for our product. We also can pivot relatively quickly and do that evaluation relative to what may happen, and we will be prepared to do that. We are seeing a very stable process and environment for pilot hiring today. The pipeline is extremely full. There are a lot of employees that want to work at SkyWest at all levels.

We continue to monitor that, especially during times like this when you could have some variables go one way or the other within the next couple of months.

Duane Thomas Pfennigwerth: Maybe just to put a finer point on it—the investment that you were planning to make this year to support the growth, it sounds like that investment has not changed. Is that fair?

Wade Steele: That is absolutely correct. Yes.

Duane Thomas Pfennigwerth: And then just for my follow-up on the buyback—the pacing of the buyback—it stepped up in the first quarter. How do you think about that pacing going forward, accelerating it or dialing it back? What are the circumstances where you might maintain this? Thank you for taking the questions.

Robert J. Simmons: Thanks, Duane. The buyback for the quarter of $75 million was again something that falls well within what we have always said—that we like to be opportunistic about the way that we do that—and we were very comfortable buying a little more stock this quarter at the price we were able to get given the volatility. Going forward, we will continue to do the same thing. We will continue to be opportunistic, and we will continue to have a balanced approach to how we deploy our capital across our fleet, strengthening our balance sheet, and share repurchase.

Operator: Our next question comes from the line of John with Citigroup.

Analyst: First, I would like to get your perspective on Essential Air Service. The proposed budget came out not long ago, and there were some jitters about Essential Air Service. I know that can happen regularly and it does not normally get cut, but I would love to get your perspective on things or historical perspective and how you think about planning for what the budget is requesting.

Robert J. Simmons: That is a great question, and we appreciate it. In 53 years of SkyWest’s history, this has been something that has been discussed a lot. From the perspective of small community service, we are the very best at it. From the perspective of Essential Air Service, we are the best steward of the program. We have seen—certainly with the captain shortage—a lot of abuse from other carriers within this program that has caused people to ask about the validity and strength of what the program actually does. I can assure you that this is a program that is very well managed by the Department of Transportation.

We take it very seriously, and our initiative is to make sure that it is efficient and works well not just for the communities, but also for the federal government as well. We take that very seriously and think that we are a very strong steward of this program. We have a tremendous amount of studies and economics that show these dollars massively support a very strong tax base and development of a tax base within these small communities, and we can have our folks share some of those studies with you. We are very comfortable about how we handle the program.

We take it very seriously, making sure we do it the right way and serve the communities the right way, and think that it has a good future moving forward. We are happy to help work in ways that can evolve it if need be, but the program is fantastic and delivers a very strong economic tax base wherever we do it.

Analyst: Got it. And can you remind us of your exposure to the program—just help us think through SkyWest’s exposure?

Wade Steele: That is a great question. We serve currently about 40 different communities. We work with these communities over the long term, and as Russell said, we take the responsibility very seriously and will continue to serve those markets.

Analyst: Got it. If I could ask a completely different topic—consolidation has been a theme in the industry in the news the last few months and very recently. Maybe use this opportunity to remind us what opportunities and risks consolidation could present. On the opportunity side, I could see a situation where if capacity is cut under certain scenarios, that might be an opportunity for you or for some of the airlines who are your major customers. On the other hand, I could see a situation where certain pairings might impact your business negatively. Maybe remind us historically how consolidation has affected you, how you think about it, and if there are any protections in contracts worth thinking through?

Russell A. Childs: That is a great question. Let me start by saying we have no interest in acquiring anybody, so you can take us off the table from that. We fundamentally believe for our purposes that organic growth is best for our shareholders as well as our employees, which is why we never really consider those things. We do have several offers for us to be involved in this stuff; we are not interested in it for sure at this time. To the extent that our partners participate in it, we are probably in a position where we should not have any comment on that.

But I will give you some feedback relative to what has happened—we have a history with the Continental-United combination and those types of things. To the extent that there are opportunities for us to support any of our partners that go through that or want to go through that, we tend to become a very dynamic participant and stakeholder in those things. It has in the past worked out pretty well for us, but that does not mean it would work out well for us in the future. It does make for an interesting conversation we have with our partners. Again, we continue to beat the drum of financial stability and fleet flexibility.

If anything ever starts to get any type of legs, then I would remember just what our capacities are in those situations, and obviously top priority is taking care of our partners.

Operator: Our next question comes from the line of Catherine O’Brien with Goldman Sachs. Your line is open.

Catherine Maureen O'Brien: Just two quick ones, if I may. When you introduced the mid-$11 EPS guidance last quarter, were you incorporating the $0.29 tax benefit in 1Q or not? I am trying to get a sense of the quantum of the change in your outlook driven by block hours. If that is mid-$11 back in January plus $0.29, and then less the block hour hit to get to the $11 range—just trying to understand what the block hours thing is in there.

Robert J. Simmons: Yeah, Katie, this is Rob. No. I would tell you that the change in our color—our EPS color—had nothing to do with tax rate. Year over year, we would expect that the full year ’26 is going to be very similar to ’25, maybe flat to slightly down. The unusual benefit in the first quarter was just deduction timing differences that are generated from various comp models that we have. But overall, the tax rate for the year is flat and had nothing to do with our color guide. The guide in our color was almost entirely related to prorate fuel.

That is why we tried to be helpful by giving you that we have 40 million gallons that are exposed to fuel price over the next three quarters. We wanted to be as helpful as we could for your models.

Catherine Maureen O'Brien: That is very clear. Thanks for that. And then just a final question. If your partners were to cut your schedule this summer, could you pivot aircraft into charter operations? I know you said there is more demand than you can fill. Or are there logistical challenges to moving planes and people back and forth? If it is possible, how do the margins on charter flying compare to scheduled service?

Russell A. Childs: Thanks. This is Chip. Real quick on that dynamic—look, we treat both of those certificates completely separately. It is not like you could, in a very fluid basis, go back and forth. I would also reiterate we are clearly not seeing anything that would warrant that. It would take a pretty big lift of an issue for us before we started to do something dramatic like that. Plus, the timing—our charter operation does very well in the winter months with college sports, and it is very slow in the summer months. Some of that timing does not necessarily work out.

Overall, the margin on a charter flight is certainly better than what a normal commercial flight is, but you have the seasonality and all the other stuff that weighs against that significantly when the airplane is not flying. We are very comfortable with what the summer schedules are today. I think there is some expectation out there that this could last longer than anticipated, which is also driving those schedules, and we will continue to monitor the situation very carefully.

Operator: With no further questions, we will conclude our question-and-answer session. I will now turn the call back over to Russell A. Childs for closing remarks.

Russell A. Childs: Thank you, Abby. And again, thanks, everybody, for joining us on the call today. I think the quarter was very good for us, particularly under the circumstances. I really appreciate how amazing our 15 thousand professionals have been this last quarter. Together, we have built a model that is built for interesting times, with stability and flexibility in the coming months. We look forward to our second-quarter call in about three months from now. Thank you.

Operator: Ladies and gentlemen, this concludes today’s call, and we thank you for your participation. You may now disconnect.

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