1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1998JULY 28, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SKYWEST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
UTAH 87-0292166
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
------------------------
BRADFORD R. RICH
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER
SKYWEST, INC.
444 SOUTH RIVER ROAD
ST. GEORGE, UTAH 84790
(435) 634-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND AGENT FOR SERVICE)
------------------------
COPIES TO:
RICHARDBRIAN G. BROWN,LLOYD, ESQ. JOHN J. KELLEY III, ESQ.
BRIAN G. LLOYD,BRYAN T. ALLEN, ESQ. KING & SPALDING
PARR WADDOUPS BROWN GEE & LOVELESS 191 PEACHTREE STREET
185 SOUTH STATE STREET, SUITE 1300 ATLANTA, GEORGIA 30303-1763
SALT LAKE CITY, UTAH 84111 (404) 572-4600
(801) 532-7840
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------Statement
as determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
=================================================================================================================- ------------------------------------------------------------------------------------------------------------------------------
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS PROPOSED MAXIMUM MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
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Common Stock, no par value.................. 1,610,000 $31.0625 $50,010,625 $14,753
=================================================================================================================value.... 3,007,250 $47.09 $141,622,680 $39,371
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(1) Includes 210,000392,250 shares which the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(c)457 for the purpose of calculating the
registration fee, based on the average of the high and low sales prices for
the Common Stock, as reported on the Nasdaq National Market, on January 14,
1998.fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)8(a),
MAY DETERMINE.
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2
THE INFORMATION CONTAINED HEREININ THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT. ANOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMESCOMMISSION IS EFFECTIVE. THIS
PROSPECTUS SHALLIS NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OFTHESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCHWHERE THE OFFER SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 21, 1998
1,400,000JULY 28, 2000
PROSPECTUS
2,615,000 SHARES
[LOGO]SKYWEST LOGO
COMMON STOCK
------------------------
All of the 1,400,000We are offering 2,500,000 shares of Common Stock (the "Common Stock")common stock of SkyWest, Inc. (the "Company") offered herebyand the
selling stockholders are being soldoffering 115,000 shares of common stock. We will not
receive any proceeds from the sale of common stock by the Company. The
Common Stockselling stockholders.
Our common stock is quoted on the Nasdaq National Market under the symbol
"SKYW." On January 20, 1998,July 27, 2000, the last saleclosing price of the Common Stockour common stock, as reported onby
the Nasdaq National Market, was $36.875$47.06 per share.
See "Price Range of Common Stock and
Dividends."
SEEYOU SHOULD CONSIDER THE RISKS WHICH WE HAVE DESCRIBED IN "RISK FACTORS" BEGINNING ON PAGE
7 FOR A DISCUSSION5 BEFORE DECIDING WHETHER TO INVEST IN SHARES OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THEOUR COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.STOCK.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)PER SHARE TOTAL
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Per Share.......................Public offering price....................................... $ $
$
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Total(3)........................ $ $ $
=============================================================================================================Underwriting discount and commission........................
Proceeds, before expenses, to us............................
Proceeds to the selling stockholders........................
(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters and other matters.
(2) Before deducting offering expenses payable by the Company estimated to be
$350,000.
(3) The Company has------------------------
We have granted the Underwritersunderwriters a 30-day option to purchase up to 210,000392,250
additional shares of Common Stockcommon stock solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Companypublic offering price will be
$ , $ andthe total underwriting discount will be $ , respectively. See "Underwriting."
------------------------
The Common Stock is offered severally byand the Underwriters named herein,
subjecttotal
proceeds to prior sale, when, as and if delivered and accepted by them, subject
to their right to reject orders, in whole or in part, and to certain other
conditions. It is expected that delivery of certificates representing the Common
Stockus will be made$ .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Raymond James & Associates, Inc., on behalf of the underwriters, expects to
deliver the shares to purchasers on or aboutbefore , 1998.
THE ROBINSON-HUMPHREY COMPANY SBC WARBURG DILLON READ2000.
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RAYMOND JAMES & ASSOCIATES, INC.
The date of this prospectus is , 19982000
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[THREE MAPS IDENTIFYING ROUTES SERVED BY[MAP DISPLAYING SKYWEST AIRLINES, INC.]
SkyWest Airlines, Inc. operatesROUTES]
We operate as theUnited Express(R) in Los Angeles, San Francisco,
Seattle/Tacoma and Portland and as The Delta Connection(R) in Salt Lake City
under code-sharing agreements with United Airlines and Los Angeles, as United Express(R) in Los Angeles and as the Continental
Connection(TM) in selected California markets, providingDelta Air Lines. We
provide scheduled air service to 4663 cities in 1213 western states and Canada.
On January 19, 1998, SkyWest
executed an agreement to operate asUnited(R) and United Express at United's San Francisco
hub, beginning June 1, 1998.Express(R) are trademarks of United Airlines, Inc.
Delta(R), Delta Connection(R) and The Delta Connection(R) are trademarks of
Delta Air Lines, Inc. All other trademarks and service marks appearing in this
prospectus are the property of their respective holders.
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CERTAIN PERSONS PARTICIPATING IN THISCONNECTION WITH AN UNDERWRITTEN OFFERING, MAYTHE SEC RULES PERMIT THE
UNDERWRITERS TO ENGAGE IN TRANSACTIONS THAT STABILIZE MAINTAINTHE PRICE OF OUR COMMON
STOCK. THESE TRANSACTIONS MAY INCLUDE PURCHASES FOR THE PURPOSE OF FIXING OR
OTHERWISE AFFECTMAINTAINING THE PRICE OF THE COMMON STOCK INCLUDING STABILIZING BIDS, SYNDICATE-COVERING TRANSACTIONS, SHORT-COVERING
TRANSACTIONS ANDAT A LEVEL THAT IS HIGHER THAN THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONSWOULD DICTATE IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103ABSENCE OF REGULATION M.
SEE "UNDERWRITING."
2SUCH TRANSACTIONS.
4
PROSPECTUS SUMMARY
The followingThis summary is qualifieddoes not contain all of the information that you should
consider before investing in its entirety byour common stock. You should read this summary,
together with the more detailed
informationentire prospectus, including Risk Factors, regarding our
company and financial data appearing elsewherethe common stock being sold in this Prospectusoffering. Unless otherwise
indicated, "we," "us," "our" and in the
documents and financial statements incorporated by reference herein. The
"Company" referssimilar terms refer to SkyWest, Inc. and itsour
subsidiaries, and "SkyWest" refers to SkyWest Airlines, Inc.
("SkyWest"), Scenic Airlines, Inc. ("Scenic") and National Parks Transportation,
Inc. ("NPT"). Unless otherwise noted, the information in this Prospectus does
not give effect to the exercise of the Underwriters' over-allotment option. The
Company's fiscal year ends on March 31. The term "fiscal 1997" refers to the
Company's fiscal year ended on March 31, 1997.
THE COMPANYour principal
operating subsidiary.
SKYWEST, INC.
We operate SkyWest, operates a regional airline offering scheduled passenger service
primarilywith approximately 1,000 daily departures to 63 cities in the13 western states and
Canada. All of our flights are operated as either United States. SkyWest has been aExpress or The Delta
Connection under code-sharing partner
with Delta Air Lines, Inc. ("Delta") and Continental Airlines, Inc.
("Continental") since 1987 and 1995, respectively. Effective October 1, 1997,
SkyWest expanded its operations through a code-sharing agreementarrangements with United Airlines Inc. ("United")or Delta Air
Lines. For the three months ended March 31, 2000, SkyWest was the largest
regional airline at the San Francisco International Airport (100% of regional
airline passengers), Salt Lake City International Airport (99% of regional
airline passengers) and Los Angeles International Airport (65% of regional
airline passengers). SkyWest offers a convenient schedule and frequent flights
designed to maximizeencourage connecting and local traffic. Operating primarily
from its hubs in Salt Lake City and Los Angeles,For 17 of the 63 airports
that SkyWest serves, 46 cities in 12
states and Canada with approximately 580 daily flights. In Salt Lake City and
Los Angeles, SkyWestit is the largest regional airline with market shares of
passengers enplaned of 99% and 33%, respectively.only scheduled commercial air service.
SkyWest operates as the Delta
Connection in Salt Lake City and Los Angeles, as United Express in Los Angeles
and as the Continental Connection in selected California markets. On January 19,
1998, SkyWest executed an addendum to its agreement with United, expanding
SkyWest's United Express operations to include approximately 168 daily flights
connecting twelve California markets with United's San Francisco hub beginning
June 1, 1998. To support operations at the San Francisco hub, SkyWest expects to
acquire 17 additional aircraft and spend approximately $12 million for related
ground and maintenance facilities, support equipment and spare parts inventory.
SkyWest operates one of the youngest fleets in the airline industry,
consisting of fifty 30-seat Embraer EMB-120 Brasilia turbo-prop aircraft
("Brasilias") with an average age of 4.4 years and ten 50-seat Canadair Regional
Jets ("CRJs") with an average age of 3.1 years. In December 1996, SkyWest
completed a strategic transition out of the 19-seat Fairchild Metroliner III
("Metroliner") turbo-prop aircraft, which reduced the number of aircraft types
operated by SkyWest from three to two. The transition enabled SkyWest to upgrade
to an all cabin-class fleet of larger aircraft with higher operating
efficiencies and greater passenger acceptance. "Cabin-class" aircraft offer
stand-up headroom, overhead and under-seat storage, lavatories and flight
attendant service.
The addition of United ashas been a code-sharing partner and the completion of
SkyWest's transition to an all cabin-class fleet, together with other factors,
contributed to the Company's achievement of record consolidated operating
revenues and net income for the nine months ended December 31, 1997.
Consolidated operating revenues increased 7.4% to $225.7 million from $210.0
million and net income increased 91.9% to $17.3 million from $9.0 million for
the nine months ended December 31,United since 1997 and 1996, respectively.
The key elements ofwith
Delta since 1987. SkyWest's business strategy are:
- Capitalize on Relationships with Code-Sharing Partners. Historically,
SkyWest's growth has been assisted by the development of code-sharing agreementsrelationships with
Delta, United and Continental. SkyWest views the recent addition of United
as a code-sharing partner as a significant opportunitymultiple major airlines enables us to further increase its
traffic and profitability by serving United's Los Angeles and San Francisco hubs
and to develop code-sharing relationships in other hubs served by United.
SkyWest works closely with its code-sharing partners to expand service to
existing markets, open new markets and schedule frequent, convenient and
profitable flights. SkyWest believes that the principal reason it has attracted
multiple code-sharing partners is its delivery of high-quality, reliable
service. SkyWest's competitive fares and ability to offer passengers
participation in the frequent flyer programs of Delta, United and Continental
are attractive incentives for passengers to fly on SkyWest. SkyWest also
believes that multiple code-sharing agreements with major carriers diversifies
operating risk by reducingreduce our reliance on a single major
carrier.
3
5airline partner and increase the stability of our operating results. For the
year ended March 31, 2000, 64% of SkyWest's operating revenues was derived from
United code-share service and 36% was derived from Delta code-share service.
Approximately 76% of SkyWest's current flights are structured as contract
flights. On contract flights, United or Delta controls scheduling, ticketing,
pricing and seat inventories, and SkyWest is compensated with a fixed fee for
each flight completed, an additional amount per passenger, and is eligible for
additional compensation if certain service quality levels are achieved.
Additionally, United and Delta, under contractual arrangements, have agreed to
reimburse SkyWest for the actual cost of fuel on all of SkyWest's contract
flights. On SkyWest-controlled flights, SkyWest controls scheduling, ticketing,
pricing and seat inventories, and shares revenues with United or Delta according
to prorate formulas for those SkyWest passengers connecting to a United- or
Delta-operated flight.
The following are the principal elements of our business strategy:
- Expand Fleet Size and Increase Utilization to Serve New and Existing
Markets. SkyWest seeks to expand and more efficiently utilize its Brasilia and
CRJ aircraft to serve existing and new,Focus on Markets in the Western United States. We believe the market for
air travel in the western United States offers attractive opportunities
for long-term profitable markets. SkyWest believes
that Brasiliasgrowth for SkyWest. Generally, western air
corridors are most efficiently used on shorterless congested than comparable routes in the eastern United
States; longer stage lengths make air travel more attractive than
alternate forms of travel; many western cities are experiencing
significant population and economic growth; and mild year-round weather
is common in many of the markets in which SkyWest operates.
- Build upon Relationships with Code-Sharing Partners. United is the
world's largest airline, and Delta is the world's fourth-largest airline.
SkyWest's significant recent growth in traffic and profitability are
partially attributable to provide
frequentthe success of its code-share relationships
with United and convenient service. For example, as SkyWest commenced service as
United Express in Los Angeles in October 1997, Brasilias were shifted from less
efficient, non-hub based routes to more efficient Los Angeles hub and spoke
routes connecting with SkyWest's code-sharing partners. SkyWest's expanded role
as United Express in San Francisco will requireDelta. At the addition of 17 Brasilias by
June 1, 1998. CRJs are utilized on longer routes to supplement existing service
by major carriers, to replace larger jets on routes where service is
discontinued by major carriers, to replace SkyWest's Brasilias as markets grow,
and to develop new markets. SkyWest believes its utilization of CRJs is among
the highest of all regional carriers operating CRJs.
- Increase Profitability. SkyWest focuses on increasing profitability
through maximizing revenues per available seat mile ("RASM") and minimizing
costs per available seat mile ("CASM"). Revenues are maximized by delivery of
reliable, on-time flights, excellent customer service, efficient utilization of
a revenue management system and the development of profitable code-sharing
relationships. SkyWest uses its recently acquired state-of-the-art revenue
management system to analyze markets and booking patterns and assist in
scheduling and seat inventory management to maximize revenues. The Company
believes SkyWest's development ofsame time, multiple code-sharing relationships has
resulted in increased revenues withoutagreements
reduce SkyWest's reliance on a proportionate increase in costs. A
Company-wide emphasis on cost management and more efficient utilization of
existing resources, together with the completed transition from three to two
aircraft types, has resulted in lower overhead and lower unit costs while
maintaining excellent customer service. CASM has declined in each fiscal year
since 1993 and decreased from 16.2c for the nine months ended December 31, 1996
to 15.8c for the nine months ended December 31, 1997. These reductions in CASM
have been achieved notwithstanding a decline in stage lengths as Brasilias have
been shifted to shorter hub and spoke routes to increase utilization.single major airline.
- Provide Excellent Customer Service. SkyWest believes its insistence onWe strive for excellent customer
service in every aspect of its operations (including
personnel, flight equipment, in-flight amenities, baggage handling and on-time
performance and flight completion ratios) has increased customer loyalty.
SkyWest also believes that excellent customer service is largely responsible for
its multiple code-sharing relationships as Delta, United and Continental seek to
build customer loyalty and preference by partnering with high-quality regional
carriers. SkyWest completed its transition to an all cabin-class fleet in
December 1996, in part to provide larger, more comfortable aircraft for its
passengers. SkyWest believes that, forour operations. For the nine monthsyear ended DecemberMarch 31,
1997,
its2000, our on-time performance ratio was 93.5% and our flight completion
ratio werewas 98.6%. All aircraft in our fleet offer "cabin class" service,
including a stand-up cabin, overhead and underseat storage, lavatories,
and in-flight snack and beverage service.
1
5
- Operate Limited Types of Aircraft. We operate two types of aircraft,
Embraer EMB-120 Brasilia turboprop aircraft ("Brasilia Turboprops") and
Canadair Regional Jets. By simplifying our fleet, we believe we gain
efficiencies in training, maintenance and flight operations.
- Emphasize Contract Flying. We believe our emphasis on fixed-fee contract
flying has reduced our exposure to fluctuations in fuel prices, fare
competition and passenger volumes. In the highestfuture, we anticipate that our
contract flying operations as a percentage of all regional airlines at 95.5%our total daily flights
will increase as additional United and 98.5%, respectively. SkyWest has achieved
these performance measures by operating one of the youngest fleets in the
airline industry and continuing its commitment to high quality maintenance.
ADDITIONAL BUSINESSES
The Company is also engaged in other transportation-related businesses
through two wholly-owned subsidiaries. Scenic provides air tours and general
aviation servicesDelta contract flights are added
to the Grand CanyonSkyWest system.
- Foster Our Employees' Best Efforts. With our anticipated growth in
capacity, it is important that we encourage the best efforts of our
employees and other scenic regionsminimize turnover in all positions. We have a number of
northern
Arizona, southern Utahspecial employee compensation programs that we believe differentiate
SkyWest as an attractive place to work and southern Nevada. Scenic operates 41build a career. We have never
had a work stoppage, and none of our employees is represented by a union.
SkyWest's aircraft including 18 specially modified VistaLiner sight-seeing airplanes. NPT provides
car rental servicesfleet consists of ninety-two 30-seat Brasilia
Turboprops, which, as of June 30, 2000, had an average age of 5.7 years, and
twelve 50-seat Canadair Regional Jets, which, as of June 30, 2000, had an
average age of 5.0 years. In order to accommodate our expanding operations, we
have placed a firm order to acquire an additional 54 Canadair Regional Jets over
the next four years, and a conditional order to acquire an additional 40
Canadair Regional Jets. If we acquire all such 94 aircraft, we will also be
eligible to exercise options to acquire an additional 155 Canadair Regional
Jets, 95 of which have been assigned scheduled delivery dates through a fleet2005, and
the balance of Avis vehicles located at six airports
served by SkyWest. During the nine months ended December 31, 1997, Scenic and
NPT generated combined revenues of $27.9 million, representing 12.4% of the
Company's consolidated revenues for the period.
The principalwhich have unspecified delivery dates.
Our executive offices of the Company are located at 444 South River Road, St. George, Utah
84790,84790. Our telephone number at that location is (435) 634-3000 and our web site
address is www.skywest.com. The information on our web site is not part of this
prospectus.
GROWTH OPPORTUNITIES
During the five fiscal years ended March 31, 2000, our total operating
revenues expanded at an annual growth rate of 20.8%, and we increased the number
of daily flights from approximately 550 in 1995 to approximately 1,000 in 2000.
All of our growth during the five-year period was internally generated. We have
not made any material business acquisitions. We believe that we are
well-positioned for continued growth for several reasons, including the
following:
- 54 New Canadair Regional Jets Under Contract. We have placed firm orders
for 54 additional Canadair Regional Jets to be delivered between
September 2000 and October 2003. We have contracts with Delta covering
our operation of 34 of such Canadair Regional Jets on a fixed-fee basis,
and we have contracts with United covering our operation of an additional
ten of such Canadair Regional Jets on a fixed-fee basis. The assignment
of the remaining ten Canadair Regional Jets that are under firm orders
will be determined upon United's completion of pending labor negotiations
and modification of contractual limitations on the number of regional
jets that may be operated by United code-sharing partners.
- 40 Additional Canadair Regional Jets Under a Conditional Order and
Additional Opportunities for Placement. We have placed a conditional
order (which currently expires in January 2001) to acquire an additional
40 Canadair Regional Jets with delivery dates scheduled between March
2002 and December 2004. Although we do not have agreements with United or
Delta with respect to the placement of such Canadair Regional Jets, we
believe that there are numerous opportunities for expansion of our
relationship with both carriers. These opportunities include:
- West Coast for United. United does not currently operate any regional
jets from the Los Angeles, San Francisco, Seattle/Tacoma or Portland
markets. We expect United to deploy most of the 20 Canadair Regional
Jets we have designated for United service, and possibly additional
Canadair Regional Jets, to medium and longer-distance, low-volume
markets from such airports.
2
6
- Denver for United. We do not currently operate out of Denver
International Airport, but were recently selected by United to commence
Denver operations in October 2000 with two Canadair Regional Jets. In
May 2000, United announced that it will build a new $100 million
regional aircraft terminal in Denver. Construction of the facility is
scheduled to begin in 2001, and the Company's telephoneterminal is expected to feature up
to 36 regional aircraft gates. We believe that United's Denver hub could
support up to 100 regional jets over the next several years. Because
SkyWest is the only United Express carrier located west of Denver, we
believe SkyWest is well-positioned to operate as United Express flying
westward out of Denver.
- Intermountain Flights for Delta. During 1999, Delta replaced its service
to six markets with our Canadair Regional Jets as part of its
rationalization process at Salt Lake City. Delta's rationalization
process involves an increase in the number is (435)
634-3000.
4
6of longer-haul east/west
Delta flights into Salt Lake City, and the transitioning of its regional
flights to SkyWest. With its smaller aircraft, SkyWest can often
substitute several flights for each Delta flight, providing increased
frequency of service at a lower overall cost. As such rationalization
continues, we believe that Delta could substitute our Canadair Regional
Jets for many of its flights between Salt Lake City and other cities.
Delta currently has no system-wide limitations on the number of regional
jets operated by its code-sharing partners.
THE OFFERING
Common Stock offered by the Company..................... 1,400,000 Shares
Common Stock to be outstanding after the offering....... 11,717,152 Shares(1)
Use of proceeds......................................... For expansion of operations, including the
acquisition of additional aircraft and
related spare parts, support equipment and
ground and maintenance facilities, and for
general corporate purposes.
Nasdaq National Market symbol........................... SKYW
The following information, which is based on 24,790,254 shares outstanding
as of June 30, 2000, assumes that the underwriters do not exercise their
over-allotment option to purchase 392,250 additional shares. Please see
"Underwriting" for more information concerning this option.
Common stock offered by SkyWest, Inc. ........ 2,500,000 shares
Common stock offered by the selling
stockholders.................................. 115,000 shares
Common stock outstanding after the
offering(1)................................... 27,290,254 shares
Use of proceeds............................... For expansion of our
operations, including the
acquisition of additional
aircraft and related spare
parts and support equipment,
and for general corporate
purposes. We will not receive
any of the proceeds from the
sale of shares of common stock
by the selling stockholders.
See "Use of Proceeds" for more
information concerning our
proposed use of proceeds.
Nasdaq National Market symbol................. "SKYW"
- ---------------
(1) Excludes 583,8651,615,966 shares of Common Stock reserved for issuanceissuable upon exercise of outstanding stock
options and 287,195 shareswith a weighted average exercise price of Common Stock available
for the future grant of stock options under the Company's stock option plans
at January 16, 1998 .$23.50 per share.
RISK FACTORS
See "Risk Factors" beginning on page 75 for a discussion of certain factors
that should be considered by prospective purchasers of the Common Stock offered
hereby.
FORWARD-LOOKING STATEMENTS
This Prospectus contains various forward-looking statements and information
that are based on management's belief, as well as assumptions made by and
information currently available to management. When used in this document, the
words "anticipate," "estimate," "project," "expect," and similar expressions are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected. Among the
key factors that may have a direct bearing on the Company's operating results
are the risks and uncertainties described under "Risk Factors," including, among
other things, changes in SkyWest's code-sharing relationships, fluctuations in
the economy and the demand for air travel, the degree and nature of competition
and SkyWest's ability to expand services in new and existing markets and to
maintain profit margins in the face of pricing pressures.
PROPRIETARY MARKS
Delta(R), Delta Connection(R) and The Delta Connection(R) are trademarks of
Delta Air Lines, Inc. United(R) and United Express(R)are trademarks of United
Airlines, Inc. Continental(R) and Continental Connection(TM) are trademarks of
Continental Airlines, Inc.
5our common stock.
3
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN
THREE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1996 1997 1998 1999 2000 1999 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND AIRLINE OPERATING DATA)
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1996 1997
--------- --------- --------- --------- --------- --------- ---------
CONSOLIDATED STATEMENTS OF INCOME
DATA:DATA(1):
Operating revenues(1).........revenues................. $ 146,800212,483 $ 182,908245,766 $ 218,075266,135 $ 245,520388,626 $ 278,110474,778 $ 210,039111,562 $ 225,683130,387
Operating income.............. 11,465 24,680 20,341 5,710(2) 15,417 13,941 26,703income................... 5,636 16,025 32,819 64,305 86,680 20,476 25,174
Net income.................... 6,704 14,396 13,701 4,366(2)income......................... 4,366 10,111 9,003 17,27721,944 41,835 57,104 13,581 16,547
Net income per common share(3):
Basic.......................share:
Basic............................ $ 0.850.21 $ 1.460.50 $ 1.231.06 $ 0.42(2)1.73 $ 1.002.32 $ 0.890.55 $ 1.70
Diluted..................... 0.83 1.43 1.22 0.42(2) 1.00 0.89 1.680.67
Diluted.......................... $ 0.21 $ 0.50 $ 1.04 $ 1.69 $ 2.29 $ 0.55 $ 0.65
Dividends declared per common
share............................ $ 0.13 $ 0.12 $ 0.10 $ 0.12 $ 0.13 $ 0.03 $ 0.04
OTHER FINANCIAL DATA:
EBITDAR(4)....................EBITDA(2).......................... $ 39,05724,827 $ 56,32538,388 $ 63,93257,360 $ 57,725(2)95,747 $ 75,419125,126 $ 59,43629,408 $ 73,12035,767
EBITDAR(2)......................... 53,094 70,378 91,061 143,721 179,399 42,629 49,691
Cash flow from (used by):
Operating activities............. 26,864 31,971 48,407 78,006 86,499 18,401 40,546
Investing activities............. (50,090) (11,627) (15,224) (181,480) (105,328) (41,741) (43,068)
Financing activities............. 20,339 (7,087) 68,803 15,939 (8,864) (2,894) 12,729
AIRLINE OPERATING DATA(5)DATA(3):
Passengers carried............ 1,523,384 1,730,993 2,073,885carried................. 2,340,366 2,656,602 1,986,371 2,228,7412,989,062 4,900,921 5,503,290 1,365,706 1,401,113
Revenue passenger miles (000)....................... 294,276 345,414 488,901(000s)..... 617,136 717,322 540,043 567,437745,386 1,015,872 1,196,680 290,590 319,830
Available seat miles (000).... 669,724 727,059 976,095(000s)........ 1,254,334 1,413,170 1,053,935 1,113,4861,463,975 1,844,123 2,165,380 525,104 565,409
Passenger load factor......... 43.9% 47.5% 50.1%factor.............. 49.2% 50.8% 51.2% 51.0%50.9% 55.1% 55.3% 55.3% 56.6%
Breakeven load factor......... 41.1% 41.2% 45.5%factor.............. 48.4% 47.9% 48.2% 45.2%45.0% 46.3% 45.5% 45.4% 45.9%
Yield per revenue passenger mile.............. 45.0c 43.9c 36.3cmile... 33.2c 33.3c 32.9c 34.2c34.8c 37.5c 39.0c 37.8c 40.1c
Revenue per available seat mile........................ 20.5c 21.6c 18.8cmile.... 16.9c 17.3c 17.3c 17.8c18.1c 21.0c 21.8c 21.1c 23.0c
Cost per available seat mile........................ 19.1c 18.8c 17.1cmile....... 16.6c 16.3c 16.2c 15.8c16.0c 17.6c 18.0c 17.4c 18.6c
Average passenger trip length...................... 193 200 236length
miles............................ 264 270 272 255249 207 217 213 228
Number of aircraft (end of period):
Embraer Brasilia............ 19 23 28 35 50 47 50
Canadair Regional Jet....... - 4 6Jet............ 10 10 10 1011 11 11 12
Embraer Brasilia Turboprop....... 35 50 50 88 92 89 92
Fairchild Metroliner III.... 31 28 26III......... 18 - 5 - -- -- -- -- -- --
------------ ---------- ---------- ---------- ---------- ---------- ----------
Total aircraft.......... 50 55 60aircraft................. 63 60 62 60 99 103 100 104
========== ========== ========== ========== ========== ========== ==========
AS OF DECEMBER 31, 1997
-----------------------JUNE 30, 2000
--------------------------
ACTUAL AS ACTUAL ADJUSTED(6)ADJUSTED(4)
-------- -------------------------
CONSOLIDATED BALANCE SHEET DATA:
Cash and marketable securities............................ $189,675 $
Working capital........................................... $ 68,730 $117,295160,692
Property and equipment, net............................... 140,297 140,297260,734
Total assets.............................................. 260,933 309,498515,260
Long-term debt, lessincluding current maturities................... 51,248 51,248maturities(5)........... 74,043
Stockholders' equity...................................... 142,541 191,106328,324
- ---------------
(1) Reflects the reclassification of non-airline commissionsconsolidated statements of income data to give
effect to the sale of Scenic Airlines, Inc., a subsidiary we sold in 1999,
which provided sight-seeing tours of the Grand Canyon area.
(2) EBITDA represents income before income taxes, interest expense, against
non-airline operating revenues.
(2) Includesdepreciation
and amortization. EBITDAR represents income before income taxes, interest
expense, depreciation, amortization and rental expense. EBITDA and EBITDAR
are widely accepted financial indicators of a company's ability to incur and
service debt. Neither EBITDA nor EBITDAR should, however, be considered in
isolation, as a substitute for net income or cash flow prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity. For the fiscal year ended March 31,
1996, EBITDA and EBITDAR data have not been reduced to reflect $6.2 million
of pre-tax fleet restructuring and transition expenses
related to the replacement of the Metroliner turbo-prop aircraft.expenses.
(3) Reflects restated net income per common share amounts as required by
Statement of Financial Accounting Standards No. 128.
(4) EBITDAR represents earnings before interest, income taxes, depreciation,
amortization and aircraft rents.
(5) Excludes the operations of Scenic Airlines, Inc., a subsidiary we sold in
1999, and NPT. For definitions of the airline
operating terms used in this table, see "Selected Consolidated Financial and
Operating Data."
(6)National Parks Transportation, Inc., a subsidiary we sold on July
21, 2000, which operates a rental car business serving small regional
airports.
(4) Adjusted to reflect the sale of the 1,400,0002,500,000 shares offeredwe are offering hereby at
an assumed price of $36.875$ per share and the application of the estimated net
proceeds therefrom.
See "Use(5) At June 30, 2000, 82 of Proceeds."
6the aircraft operated by SkyWest were financed
through operating leases. In addition to our indebtedness, we had $554.2
million of mandatory future payments under operating leases, primarily for
aircraft and ground facilities. At an 8% discount factor, the present value
of these obligations would be equal to approximately $365.5 million at June
30, 2000.
4
8
RISK FACTORS
In addition toBefore you invest in the common stock offered with this prospectus, you
should be aware that such investment involves a high degree of risk, including
those risks described below. You should consider carefully these risk factors,
together with all of the other information containedincluded in this Prospectus,prospectus, before
you decide to purchase any shares of our common stock. Additional risks and
uncertainties not presently known to us or that we currently do not deem
material may also impair our business operations. If any of the following factorsrisks we
describe below occur, or if any unforeseen risk develops, our operating results
may suffer, our financial condition may deteriorate, the trading price of our
common stock may decline and you may lose all or part of your investment.
This prospectus contains various "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements can be
identified by the use of the forward-looking words "anticipate," "estimate,"
"project," "likely," "believe," "intend," "expect," "hope" or similar words.
These statements discuss future expectations, contain projections regarding
future developments, operations or financial conditions, or state other
forward-looking information. When considering such forward-looking statements,
you should keep in mind the risks noted in this "Risk Factors" section and other
cautionary statements throughout this prospectus, any prospectus supplement, and
our periodic filings with the SEC that are incorporated by reference. You should
also keep in mind that all forward-looking statements are based on our existing
beliefs about present and future events outside of our control and on
assumptions that may prove to be considered carefullyincorrect. If one or more risks identified in
evaluating an investment in
the Company.
DEPENDENCEthis prospectus, a prospectus supplement, or any applicable filings
materializes, or any other underlying assumptions prove incorrect, our actual
results may vary materially from those anticipated, estimated, projected or
intended.
RISKS RELATED TO OUR OPERATIONS
WE ARE DEPENDENT ON OUR CODE-SHARING RELATIONSHIPS SkyWest is dependentWITH UNITED AND DELTA.
Termination of Relationship. We depend on relationships created by
code-sharing agreements with Delta, United and Continental (the "Code-Sharing Agreements")Delta for a substantial portion of itsour
business. Under SkyWest's Code-Sharing AgreementOur code-sharing agreement with Delta (the "Delta Agreement"), DeltaUnited terminates on May 31, 2008.
Nevertheless, the United code-sharing agreement is not prohibited from competing on routes
servedsubject to termination by
SkyWest.United upon 180 days' prior notice for any or no reason. The term of the Delta
Agreementcode-sharing agreement continues until April 2002,June 20, 2010, but is subject to
termination in various circumstances including 180 days' notice by either party
for any or no reason; provided, however, that Delta may
not terminate the Delta Agreement prior to April 1999, except for cause, as
defined in the Delta Agreement. The term of SkyWest's Code-Sharing Agreement
with United (the "United Express Agreement") is for five years ending in
September 2002 for Los Angeles operations and ten years ending in May 2008 for
San Francisco operations, subject to termination by United upon 180 days' prior
notice. United may, however, terminate the United Express Agreement for cause
upon 30 days' written notice.reason. Any material modification to, or termination of, the
Code-Sharing Agreements, any substantial decrease in the number of routes served
by SkyWestour code-
sharing agreements with United or SkyWest's code-sharing partners at hubs served by SkyWest or the
occurrence of any event adversely affecting either of Delta or United generally could have a material adverse effect on
our operations and the Company. See
"Business --price of our common stock.
Direct Operation of Regional Jets by Majors. Our code-sharing relationships
depend on major airlines like United and Delta electing to contract with us
instead of purchasing and operating their own regional jets. However, these
major airlines possess the resources to acquire and operate their own regional
jets instead of entering into contracts with us. For example, American Airlines
has acquired many regional jets. We have no guarantee that in the future our
code-sharing partners will choose to enter into contracts with us instead of
purchasing their own regional jets or entering into relationships with competing
regional airlines. They are not prohibited from doing so under our code-sharing
agreements. A decision by United or Delta to phase out contract-based
code-sharing relationships and instead acquire and operate their own regional
jets would have a material adverse effect on our business.
Passenger Volume and Strength of Code-Sharing Agreements."
ABILITY TO IMPLEMENT EXPANSION
The Company's principal growth strategy is to expand SkyWest's operations
to supportPartners. We are directly
affected by the operationsfinancial and operational strength of itsour code-sharing partners.
Such expansion, which
will likely consist of entry into new markets and development of existing
markets, will require additional aircraft and facilities forIf United and/or Delta were to experience a sustained downturn in passenger
ticketing, check-in and boarding and aircraft maintenance and storage,
additional rights to use gatesvolume or significantly reduce its ticket prices, our revenues would be
negatively affected. In addition, in the marketsevent of a decrease in the financial or
operational strength of one or both of our code-sharing partners, the respective
code-sharing partner may terminate its relationship with us with respect to be served by SkyWestsome
or all of the flights we fly under its code. Any such event would have an
adverse effect on our operations and additional personnel. In particular, SkyWest recently announced its intentionthe price of our common stock.
5
9
OUR BUSINESS SUCCESS DEPENDS ON OUR PERFORMANCE IN A FEW HUB CITIES AND
ROUTES.
Our financial success is directly tied to expand its operations to include service as a United Express carrier at United'sthe amount of air traffic flowing
through Los Angeles (34% of our flights), Salt Lake City (25% of our flights)
and San Francisco hub, which, if implemented, would require(21% of our flights). Any decrease in demand for regional
flights in any of these cities, any natural disaster significantly affecting air
travel to or from one of these cities or any political decision (such as the
acquisitionimposition of 17
additional Brasilias, the acquisitionregulations or taxes adverse to regional airlines) in any of additional maintenance facilities, the
employment of more than 475 additional employees (consisting of approximately
200 pilots and flight attendants, 50 maintenance personnel and 225 customer
service personnel)these
cities may have a material adverse effect on our business operations and the
integrationprice of those aircraft, facilities and
employees into SkyWest's existing operations.our common stock. There can be no assurance that SkyWest can profitably integrate this growth. The Company presently estimateswe will maintain our
current market share in these cities, that the cost of acquiring the additional grounddemand for air travel in these
cities will not diminish or that governing laws and maintenance facilities,
support equipment and spare parts inventory required for the San Francisco
expansionregulations in these cities
will be approximately $12 million. There is no assurance that the
Company will be ablefavorable to obtain the financing or the facilities, aircraft, gates
and personnel required in connection with its proposed expansion on a timely
basis. The failure to obtain such financing or such aircraft, facilities, gates
or personnel could adversely affect the Company's financial condition and
results of operations. Due to the limited market for purchase of Brasilia
aircraft and facilities, among other factors, there can be no assurance that the
Company's current estimates of the costs associated with its proposed expansion
will be accurate. Any material deviation in the actual costs from the Company's
current estimates could adversely affect the Company's financial condition or
results of operations. In addition, part of the Company's growth strategy is to
expand its code-sharing relationships into other hubs served by United. There
can be no assurance, however, that such opportunities will arise or that the
Company will be able to execute profitably such expansion. SkyWest is also
likely to face intense competition from regional airlines currently serving the
markets into which SkyWest desires to expand. Accordingly, there can be no
assurance that the Company will be able to implement its growth strategy or that
implementation of its growth strategy will enhance its operations and
profitability. See "Business -- Business Strategy."
7
9
DEPENDENCE ONus.
WE FLY AND DEPEND UPON A LIMITED NUMBER OF AIRCRAFT TYPES
SkyWest'sTYPES.
Our fleet consists of 50 Brasilias92 Brasilia Turboprops and ten CRJs.12 Canadair Regional Jets.
During the three
monthsfiscal year ended DecemberMarch 31, 1997, 56%2000, 71% of SkyWest'sour available seat miles
(calculated by multiplying passenger seats available by miles flown) were
generated by BrasiliasBrasilia Turboprops and 44%29% were generated by CRJs. The Company'sCanadair Regional
Jets. Our operations could be materially adversely affected by, among other
factors, (i)factors:
- the failure or inability of Embraer-Empresa Brasileira de Aeronautica
S.A. (in(the manufacturer of the case of
Brasilias)Brasilia Turboprops) or Bombardier, Inc.
(in(the manufacturer of the case of CRJs)Canadair Regional Jets) to provide additionalsufficient
aircraft, parts or related support services on a timely basis,
(ii)- the interruption of fleet service as a result of unscheduled or
unanticipated maintenance requirements (iii)for these aircraft,
- the issuance of Federal Aviation Administration
("FAA")FAA directives restricting or prohibiting the use of
a particular aircraft type in the
fleetBrasilia Turboprops or (iv)Canadair Regional Jets, or
- the adverse public perception of an aircraft type as a result of an
accident or other adverse publicity.
See "Business -- Flight Equipment."
FUEL COSTSThe risks associated with operating a limited number of aircraft types will
increase since we have decided to exclusively acquire Canadair Regional Jets in
our next 94 planned aircraft acquisitions.
NEGATIVE PERCEPTION OF SMALLER AIRCRAFT MAY ADVERSELY AFFECT OUR OPERATIONS
AND AVAILABILITY
OneBUSINESS.
Many air travelers may perceive smaller, regional aircraft, like our
Brasilia Turboprops and Canadair Regional Jets, as unsafe, unstable or
uncomfortable in comparison to the larger aircraft primarily used by major
airline companies. The public's refusal to fly in the types of the Company's principal cost components is fuel. At SkyWest's
current rate of consumption, for every one cent increase inaircraft that we
operate could cause us to lose our code-sharing agreements and could adversely
affect our operations and the price of fuel,
SkyWest's annual operating expenses increaseour common stock.
THE LIMITED SIZE OF OUR FLEET MAY BE A DISADVANTAGE.
We have substantially fewer aircraft and operate on substantially fewer
routes than many of our current or potential competitors. Our ability to compete
effectively with larger carriers may be materially and adversely affected by approximately $350,000. Both the
costour
size. If aircraft were removed from scheduled service for repairs or other
reasons (other than for routine maintenance), any resulting interruption in
service could materially and the availability of fuel are subject to many economicadversely affect our operations and political
factors and events occurring throughout the world. The Company has no agreement
with any fuel supplier assuring the availability or price of fuel, nor has the
Company entered into any hedging transactions to assure the price of
fuel.
SkyWest'sour common stock.
WE ARE AT RISK OF LOSSES STEMMING FROM AN ACCIDENT INVOLVING ONE OF OUR
AIRCRAFT.
For various reasons, one or more of our aircraft may crash, causing death
or injury to individual air travelers and destroying the aircraft. Because of
the limited number of aircraft that we operate and because of our relatively
smaller size, any accident involving one of our aircraft would have a
significant
6
10
adverse effect on our business operations. Many factors can contribute to the
occurrence of an accident, including:
- pilot error,
- air traffic or ground control error,
- terrorism or other acts of sabotage,
- manufacturing or similar product defects,
- mechanical or maintenance error, and
- adverse weather conditions.
If one of our aircraft were to crash or be involved in an accident, we
would be exposed to significant tort liability. Passengers, or their estates,
may seek to recover damages for death or injury. Accidents could also result in
unforeseen mechanical and maintenance costs. In addition, any accident involving
an aircraft that we operate could create a public perception that our aircraft
are not safe, which could result in air travelers being reluctant to fly on our
aircraft.
DELTA HAS RIGHTS UNDER AN OPTION AGREEMENT THAT SIGNIFICANTLY IMPACT OUR
COMPANY.
Under the terms of a Stock Option Agreement we have executed with Delta,
Delta acquired shares of our common stock, which currently represent 12.5% of
the outstanding common stock (without giving effect to the issuance of
additional shares to be sold in this offering). In addition, Delta has the right
to be offered a percentage of our common stock each time we sell voting
securities in order to maintain its percentage ownership of our common stock and
the right to have us register shares of common stock on Delta's behalf. Delta
also has the right to have management nominate a Delta designee to serve on our
board of directors. Delta's rights under the Delta Stock Option Agreement may
permit Delta to influence our management and policies, and Delta's ownership of
shares of common stock may give it the ability to passaffect the outcome of matters
submitted to a vote of our stockholders.
UNITED HAS A RIGHT OF FIRST REFUSAL WITH RESPECT TO ANY SALE OF OUR
BUSINESS.
Under our code-sharing agreement with United, if we desire to merge with
another company, sell or otherwise transfer our assets to a third party, or
issue capital stock exceeding 5% of our outstanding capital stock (30% if the
stock is issued in a public offering) to such third party, we are required to
give United notice of the proposed transaction, offer to complete such
transaction with United instead of such third party, negotiate with United in
good faith terms and conditions on increased fuel costswhich we could complete such transaction with
United and offer United any terms and conditions we offer to such third party.
If we are unable to agree with United, we may enter into negotiations with other
parties, but we may not enter into any agreement on terms more favorable to any
such third party than those we offered to United. The existence of this right of
first refusal may adversely affect our ability to negotiate or consummate the
sale of all or part of our business to a company other than United and may
adversely affect the terms of a sale to any company, including United.
THE BRAZILIAN GOVERNMENT MAY FAIL TO HONOR ITS AGREEMENT TO PAY US
SUBSIDIES.
In connection with the acquisition of substantially all of our Brasilia
Turboprops, we were granted a contractual right to receive subsidy payments
through fare increases maythe export support program sponsored by the Federative Republic of
Brazil. The amount of these subsidies, which are offered by the Brazilian
government as an economic incentive to purchasers of the Brazilian-based Embraer
aircraft and are currently payable through January 2006, fluctuates based upon
the number and age of the Brasilia aircraft eligible for subsidy payments.
During the fiscal year ended March 31, 2000, the subsidy represented
approximately $6 million in annual credits against our interest expense and
aircraft rental expense related to Brasilia Turboprops. The subsidies would be
limited by several factors, including, without limitation,jeopardized if the Brazilian government failed to meet its obligations under the
export support program. From time to time, the Brazilian government has
7
11
experienced economic and
competitive conditions. Accordingly,conditions that have impaired its creditworthiness. There
can be no assurance that a default will not occur under the future cost and availabilityBrazilian export
support program. Any termination or significant interruption of fuel to
the Company cannot be predicted and substantial fuel cost increases, the
unavailability of adequate supplies or increases in federal fuel taxesBrazilian
subsidy payments could have a material adverse effectaffect on the Company'sour financial condition
and results
of operations.
See "Business -- CompetitionOUR FLEET EXPANSION PROGRAM WILL REQUIRE A SIGNIFICANT INCREASE IN OUR
LEVERAGE.
The airline business is very capital intensive and, Economic Conditions."
OPERATING LEVERAGE
As is characteristic ofas a result, many
airline companies are highly leveraged. During the airline industry, the Company is subject to a
high degree of operating leverage. The revenues generated from a particular
flight vary directly with the number of passengers carried and the fare
structure of the flight. However, since fixed costs comprise a high proportion
of the operating costs of each flight, the expenses of each flight do not vary
proportionately with the number of passengers carried. Accordingly, any
sustained decrease in the number of passengers carried or increase in operating
costs that is not offset by higher fares could have a material adverse effect on
the Company's financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
FINANCIAL LEVERAGE
As of Decemberfiscal year ended March 31,
1997, the Company had outstanding $59.7 million in
long-term debt, requiring2000, our mandatory debt service payments totaled $9.6 million and our mandatory
lease payments totaled $59.1 million. Our current growth strategy involves the
acquisition of $12.2 million in fiscal 1998,94 more Canadair Regional Jets between September 2000 and
future minimum payments under long term operatingDecember 2004. We estimate that the price of each new Canadair Regional Jet will
be approximately $22 million. We expect to lease or otherwise acquire on credit
all, or substantially all, such 94 Canadair Regional Jets, which leases of $457.4 million,
requiring rental payments of $42.9 million in fiscal 1998. The Company's
long-termor debt
credit will significantly increase our mandatory debt and operating leases require significant periodic cash payments
and therelease payments.
There can be no assurance that the Company'sour operations will generate sufficient cash
flow to make such payments. If we default under our loan or lease agreements,
the lender/lessor has available extensive remedies, including, without
limitation, repossession of the respective aircraft or exertion of control over
how we allocate our revenues. Even if we are able to timely service our debt,
the size of our long-term debt and lease obligations could negatively affect our
operations and the price of our common stock in many ways, including:
- increasing the cost, or limiting the availability of, additional
financing for working capital, capital acquisitions or other purposes,
and
- limiting the ways in which we can use our cash flow, much of which may
have to be used to satisfy debt and lease obligations.
OUR OPERATING REVENUES AND/OR PROFITS COULD DECREASE OR CEASE TO EXIST.
There is no guarantee that we will generate profits in the future. Many
factors will impact our ability to generate a profit, including:
- the strength of the U.S. economy,
- fluctuations in ticket prices and demand for air travel,
- the price and supply of labor,
- government regulation,
- our ability to satisfy customers and business partners such as United and
Delta,
- supply and cost of aircraft fuel, and
- competition in the airline industry.
We could experience operating losses in the future based on unexpected
conditions that arise in these and other areas. There is no assurance that our
growth plans and overall business strategy will be successful. Failure to
produce profits, or a reduction in the level of profits, would have a material
adverse effect on our operations and the price of our common stock.
WE ARE DEPENDENT UPON KEY PERSONNEL.
Our success depends in part on our ability to retain our key executive
officers and directors. Jerry C. Atkin is our current chief executive officer.
His decision-making skills and leadership have been vital to our operations to
date. He has signed an employment agreement with us; however, even the existence
of such agreement does not guarantee that he will remain employed by us. The
Company's financial leveragedeparture of Mr. Atkin could have a significant material adverse effect on our
operations and the price of our common stock.
8
12
UNIONIZATION OF OUR EMPLOYEES MAY ADVERSELY AFFECT OUR PROFITABILITY.
Our employees are not currently represented by any union. We are aware,
however, that collective bargaining group organization efforts among our
employees occur from time to time and expect that such efforts will continue in
the future. During August 1999, the question of whether or not to join the Air
Line Pilots Association was submitted to our pilots, who voted against joining
the union by a narrow margin. Under governing rules, our pilots may impair itsagain vote
on this issue as early as August 2000. If unionizing efforts are successful, we
may be subjected to risks of work interruption or stoppage and/or incur
additional administrative expenses associated with union representation of our
employees. We recognize that such efforts will likely continue in the future and
may ultimately result in some or all of our employees being represented by a
union. In connection with our proposed expansion, we anticipate hiring between
2,300 and 3,000 new employees, many of whom may be represented by a union in
their current employment and who may, therefore, influence efforts to organize
into a collective bargaining group.
RISKS ASSOCIATED WITH OUR EXPANSION PLANS
SUBSTANTIAL RISKS ACCOMPANY OUR CURRENT GROWTH PLANS.
We have contracted to add a substantial number of aircraft over the next
few years. Substantial risks accompany our growth plans. Some factors that may
impact our growth plans include:
- demand for regional air transportation,
- the likelihood of continued business relations with our current
code-sharing partners,
- the condition of the United States economy generally, particularly the
economy in California and other western states,
- our ability to hire and retain enough flight crews and mechanics for our
aircraft,
- our ability to acquire enough new Canadair Regional Jets and other
aircraft, and
- our ability to obtain the financing necessary to pay for expansion at
acceptable rates.
Many of these factors are beyond our control. If we are incorrect in our
assessment of the profitability and feasibility of our growth plans, or if
circumstances change in a way that was unforeseen to us, we may not be able to
grow as planned or growth may have an adverse effect on operations and the price
of our common stock.
WE MAY NOT BE ABLE TO IMPLEMENT OUR EXPANSION PLANS.
We have agreed with both United and Delta to increase the number of flight
segments we operate on their behalf. Our expansion plans over the next five
years include the acquisition of at least 94 Canadair Regional Jets and related
additional ground and maintenance facilities and support equipment, the
employment of more than 2,500 additional employees and the integration of those
aircraft, facilities and employees into our existing operations.
There is no assurance that we will be able to obtain the facilities,
aircraft, gates and personnel required for our proposed expansion on a timely
basis. The failure to obtain such aircraft, facilities, gates or personnel could
adversely affect our financial condition and results of operations. Due to the
limited supply of Canadair Regional Jets and airport facilities, among other
factors, there can be no assurance that our current estimates of the cost of obtainingour
proposed expansion will be accurate. Any material deviation from our current
estimates could adversely affect our financial condition and results of
operations.
WE MAY EXPERIENCE DIFFICULTY FINDING AND RETAINING EMPLOYEES.
Our business is labor-intensive; we require large numbers of pilots, flight
attendants, mechanics and other personnel. As of June 30, 2000, we employed
3,593 full-time equivalent employees, including 1,487 pilots and flight
attendants, 1,425 customer service personnel, 443 mechanics and other
maintenance
9
13
personnel and 238 administration and support personnel. We anticipate that our
expansion plans will require us to find, hire and train approximately 2,500 new
employees, including 1,035 pilots and flight attendants, 990 customer service
personnel, 310 mechanics and other maintenance personnel and 165 administration
and support personnel.
There is no assurance that we will be able to locate, hire and retain the
qualified employees that we need in order to carry out our expansion plans.
Current labor market conditions generally favor employees. Companies are finding
it difficult to hire and retain qualified employees, and wages and salaries are
generally increasing. If we are unable to hire and retain qualified employees at
a reasonable cost, we may be unable to complete our expansion plans, which would
adversely affect our operations and the price of our common stock.
UNITED'S CONTRACT WITH ITS PILOTS MAY INHIBIT EXPANSION OF OUR RELATIONSHIP
WITH UNITED.
Our expansion plans depend primarily on our ability to increase the number
of flights we operate for United and Delta. Employees at major airlines
generally oppose efforts by their companies to outsource flights to regional
airlines because of their perception that such outsourcing leads to layoffs at
the major airline, and lower wages and salaries. A "scope" clause in United's
current collective bargaining agreement with its pilots prevents United from
using (directly or indirectly) more than 65 regional jets in its operations.
Currently, United uses approximately 30 regional jets. We hope to use the
majority of the aircraft we intend to acquire over the next five years in United
Express service. This can be achieved only if United's current limit of 65
regional jets is changed as part of the new United labor contract currently
under negotiation. There can be no assurance that United will succeed in
expanding the scope clause. Furthermore, United's recently announced plans to
merge with U.S. Airways may prevent them from addressing the scope clause issue
in a timely manner. United's failure to timely modify its regional jet scope
clause in order to permit the full implementation of our and United's expansion
plans could have a material adverse effect on our operations and the price of
our common stock.
THERE IS A RISK OF NONDELIVERY OF AIRCRAFT WE INTEND TO ACQUIRE.
We anticipate adding at least 94 Canadair Regional Jets to our fleet over
the next five years. This almost doubles our current fleet. A number of factors
may limit or preclude our planned expansion, including:
- breach by Bombardier, Inc. of our firm order contracts for the delivery
of 54 Canadair Regional Jets or our conditional order for 40 additional
Canadair Regional Jets,
- a fire, strike or other event which affects the ability of Bombardier,
Inc. to completely or timely fulfill its contractual obligations, and
- our ability to obtain necessary financing may make the Company more vulnerableor to fulfill our contractual
obligations related to the cyclical and seasonal
natureacquisition of the airline industry, may restrictCanadair Regional Jets.
Any disruption or change in the Company's ability to exploit
new business opportunitiesdelivery schedule of such Canadair Regional
Jets would affect our overall operations and may limitcould have a material adverse
impact on our operating results and the Company's flexibility in responding
to changing business conditions. See "Management's Discussion and Analysisprice of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
COMPETITIONour common stock.
RISKS ASSOCIATED WITH THE AIRLINE INDUSTRY
OUR INDUSTRY IS HIGHLY COMPETITIVE.
The airline industry is highly competitive. FederalWe not only compete with other
regional airlines, some of which are owned by or operated as code-sharing
partners of major airlines, but we also face competition from low-fare airlines
and major airlines on many of our routes. Southwest Airlines, a national
low-fare airline, serves the Salt Lake City International Airport, which results
in significant price competition at the Salt Lake City hub. Competition in the
California and Pacific Northwest markets, which we service from
10
14
our hubs in Los Angeles, San Francisco, Seattle/Tacoma and Portland is
particularly intense, with a large number of carriers in these markets.
Certain of our competitors are larger and have significantly greater
financial and other resources than we do. Moreover, federal deregulation of the
airline
industry allows competitors to rapidly enter a marketour markets and to quickly discount
and restructure fares. The airline industry is particularly susceptible to price
discounting because airlines incur only nominal costs to provide service to
passengers occupying otherwise unsold seats. The introductionIncreased fare competition could
adversely affect our operations and the price of deeply discounted faresour common stock.
ADVERSE WEATHER MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES.
On SkyWest-controlled routes, our revenues depend upon the number of
passengers we carry on each flight, the fare paid by competing carrierseach passenger and our
proration of such fare. On contract flights, our revenues depend primarily on
routes
8
10
servedour completion of the flight and secondarily on service factors such as
timeliness of departure and arrival. During periods of fog, low temperatures,
storms or other adverse weather, our flights may be canceled or significantly
delayed. Because our revenues are dependent upon successful and timely
completion of each scheduled flight, any sustained period of adverse weather at
one or more of the airports we serve would have a material adverse effect on our
operations and the price of our common stock.
AVAILABILITY AND COST OF FUEL IMPACTS OUR OPERATIONS.
One of our principal cost components is fuel. Fuel prices have increased
significantly during the last year, from $0.73 per gallon as of June 30, 1999 to
$1.05 per gallon as of June 30, 2000. At our current rate of consumption, for
every one cent increase in the price of fuel, our annual operating income would
decrease by SkyWest or connectedapproximately $192,000, after giving effect to oneour fuel
reimbursement arrangements related to United and Delta contract flights. In
addition, an increase in the price of SkyWest's hubs orfuel may lead to higher airfares, which
would tend to decrease the introductionpassenger load of service into competitors' hubs couldour code-sharing partners. In the
long run, such decrease will have an adverse impact uponeffect on the Company's
financial condition or results of operations.
SkyWest not only competes with other regional airlines, some of which are
owned by or are operated as code-sharing partners of major airlines, but also
faces competition from major airline carriers on certain routes. Competition in
the southern California markets, which are serviced by SkyWest from its Los
Angeles hub, is particularly intense with a large number of competing carriers.
Manyflights
such partner will ask us to provide and the revenues associated with such
flights.
Both the cost and the availability of SkyWest's competitorsfuel are largersubject to many economic and
political factors and events occurring throughout the world. We have significantly greater
financialno
agreement with any fuel supplier assuring the availability or price of fuel. Our
ability to pass on increased fuel costs through fare increases on SkyWest-
controlled flights may be limited by several factors, including, without
limitation, economic and other resources than SkyWest. There cancompetitive conditions. The future cost and
availability of fuel to us cannot be no assurance that
additional carriers will not offer competing services on SkyWest's existingpredicted, and substantial fuel cost
increases or future routes. See "Business -- Competition and Economic Conditions."
GENERAL ECONOMIC CONDITIONS, CYCLICALITY AND SEASONALITY
Generally, the airline industry is highly sensitive to economic conditions,
in large part due to the discretionary natureunavailability of a substantial percentageadequate supplies of both business and leisure travel. In the past many airlines, including SkyWest,
have reported decreased earnings or substantial losses resulting from periods of
economic recession, heavy fare discounting and other factors. Economic downturns
combined with competitive pressures have contributed to a number of bankruptcies
and liquidations among major and regional carriers. Negative economic conditionsfuel may have a material
adverse effect on regional airlines, including SkyWest.
Historically, the Company has experienced lower revenue and earnings during
the second halfour results of its fiscal year. SkyWest's earnings have declined on a
seasonal basis due to several factors including decreased business travel during
the holiday season and inclement weather. In addition, a large percentage of
Scenic's passengers are tourists visiting the Las Vegas and Grand Canyon areas
during the summer months. See "Business -- Competition and Economic Conditions."
REGULATION
The Company is subject to regulation by the U.S. Department of
Transportation (the "DOT"), the FAA and certain other governmental agencies.
Regulations promulgated by the DOT relate primarily to economic aspects of air
service. The FAA principally regulates flight operations and safety matters
relating to air service. In addition the Company is subject to certain other
federal and state laws relating to protection of the environment, radio
communications, labor relations, equal employment opportunity and other matters.
The DOT and the FAA, as well as other governmental agencies regulating the
Company, enforce their regulations through, among other mechanisms, (i)
certifications, which are necessary for the Company's continued operations, and
(ii) administrative proceedings, which can result in civil or criminal penalties
or revocation of operating authority.
The FAA can also issue maintenance directives and other mandatory orders
relating to, among other things, inspection of aircraft, installation of new
safety-related items and the mandatory removal and replacement of aircraft parts
that the FAA believes might present a safety hazard. Such directives or orders
could increase significantly the cost of airline operations.
The Company incursTHE AIRLINE INDUSTRY IS HEAVILY REGULATED.
We incur substantial costs in maintaining itsour current certifications and
otherwise complying with the laws, rules and regulations to which it iswe are
subject. Although the Company has all certifications it believes to
be necessary for its continued operation and believes that it is in compliance
with all requirements currently necessary to maintain in good standing such
certifications, itWe cannot predict whether itwe will be able to comply with all present
and future laws, rules, regulations and certification requirements or that the
cost of continued compliance will not have a material adverse effect on the Company. See "Business -- Regulation."
BRAZILIAN DEFAULT RISK
In connection with SkyWest's acquisition of substantially all of its
Brasilia aircraft, the Company has obtained the rightus.
We are subject to receive subsidy
payments through an export support program sponsoredregulation by the Federative RepublicFAA, which has the authority to issue
mandatory orders relating to, among other things, the grounding of Brazil. The amountaircraft,
inspection of these subsidies, which are offeredaircraft, installation of new safety-related items and removal and
replacement of aircraft parts that have failed or may fail in the future. A
decision by the Brazilian
government as an economic incentiveFAA to purchasersground, or require time-consuming inspections of or
maintenance on, all or any of our Brasilia Turboprops or Canadair Regional Jets,
for any reason, may have a material adverse effect on our operations and the
Brazilian-made Embraer
aircraftprice of our common stock.
In addition to state and are currently payable through
9
11
December 2006, fluctuates based upon the numberfederal regulation, airports and age of the Brasilia aircraft
eligible for subsidy payments. The subsidies currently represent approximately
$6 million in annual credits against the Company's interestmunicipalities
enact rules and aircraft rental
expense related to Brasilia purchases. The subsidies would be jeopardized if the
Brazilian government failed to meet its obligations under the export support
program.regulations that affect our operations. From time to time,
various airports throughout the Brazilian government has experienced economic
conditionscountry have considered limiting the use of
smaller aircraft, such as Brasilia Turboprops and Canadair Regional Jets, at
such airports. The
11
15
imposition of any limits on the use of Brasilia Turboprops or Canadair Regional
Jets at any airport at which have impaired the creditworthiness of such governmental
obligations. Any termination or significant interruption of the Brazilian
subsidy payments, which could occur for a number of reasons including the
failure of the Brazilian government to meet its obligations under its export
support program,we operate could have a material adverse effect on
the Company's financial
condition or results of operations. There can be no assurance that a default
will not occur under the Brazilian export support program.
VOLATILITY OF STOCK PRICE
The Common Stock is quoted on the Nasdaq National Market,our operations and its trading
price has fluctuated over a broad range. See "Price Range of Common Stock and
Dividends." The tradingthe price of our common stock.
RISKS RELATED TO OUR COMMON STOCK
WE CAN ISSUE ADDITIONAL SHARES WITHOUT STOCKHOLDER APPROVAL.
Our Restated Articles of Incorporation authorize the Common Stock could continueissuance of up to
fluctuate
widely in response40,000,000 shares of common stock (and we are requesting stockholder approval to
variations in quarterly operating and financial results,
announcementsincrease the authorized number of shares of common stock to 120,000,000). All
such shares may be issued without any action or approval by the Company or its competitors, industry trends, legislative or
regulatory changes, general economic conditions or other events or factors.our stockholders. In
addition, in recent yearswe have a stock option plan under which, at June 30, 2000, 458,500
shares were reserved for issuance, and an employee stock purchase plan under
which 600,974 shares are reserved for issuance, both of which may dilute the
ownership interests of our stockholders. The issuance of any additional shares
of common stock market has experienced extreme price and
volume fluctuations. This volatility has had a significant effect onwould further dilute the market
pricespercentage ownership of securities issued by many companies.existing
stockholders.
DISTRIBUTION OF DIVIDENDS MAY DECREASE OR CEASE.
Historically, the Company haswe have paid dividends in varying amounts on its
Common Stock. See "Price Range of Common Stock and Dividends."our common
stock. The future payment and amount of cash dividends will depend upon the Company'sour
financial condition and results of operations, loan covenants and other factors
deemed relevant by the Company's Boardour board of Directors.directors. There can be no assurance that the
Companywe
will continue its policyour practice of paying dividends on the Common Stockcommon stock or that the Companywe
will have the financial resources to pay such dividends.
LABOR RELATIONS
From time to time, the Company, which does not currently have any employees
represented by labor unions, becomes aware of collective bargaining
organizational efforts among its employees. The Company recognizes that such
efforts will likely continue in the future and may ultimately result in some or
all of its employees being represented by a union. If such efforts are
successful, the Company may be subjected to risks of work interruption or
stoppage and incur additional expenses associated with union representation of
its employees. In connection with SkyWest's proposed expansion to northern
California, it anticipates that it will hire at least 475 additional employees,
many of whom may be represented by a union in their current employment.
DELTA OPTION AGREEMENT
Under the terms of a Stock Option Agreement executed by the Company and
Delta concurrently with the Delta Agreement (the "Delta Option Agreement"),
Delta acquired shares of Common Stock, which currently represent approximately
15.1% of the outstanding Common Stock (13.3% after giving effect to the issuance
of the shares offered hereby), certain preemptive rights and registration rights
with respect to the Common Stock owned by Delta and certain rights to
representation on the Company's Board of Directors. Delta's rights under the
Delta Option Agreement may permit Delta to influence the management and policies
of the Company, and Delta's ownership of shares of Common Stock may give it the
ability to affect the outcome of matters submitted to a vote of the Company's
shareholders. See "Description of Capital Stock -- Common Stock" and "-- Board
of Directors."
10
12
ANTI-TAKEOVER PROVISIONS AFFECT THE ABILITY OF OTHERS TO GAIN CONTROL OF
OUR COMPANY.
Certain provisions of the Company'sour Restated Articles of Incorporation and Bylaws,
including provisions authorizing the issuance of Preferred Stockshares of preferred stock from
time to time without stockholder approval, may have the effect of delaying or
preventing a change in control of the Company and may adversely affect the voting and other
rights of the holders of Common Stock.common stock, even in circumstances where such a change
in control would be viewed as desirable by most investors. In addition, the
provisions of the Utah Control Shares Acquisition Act may discourage persons or
entities interested in acquiring a significant interest in or control of the
Company. See "Description of Capital Stock."our
company.
12
16
USE OF PROCEEDS
The net proceeds to be received by the Companywe will receive from the sale of the 1,400,0002,500,000 shares of
Common Stockcommon stock offered hereby,by us, assuming a public offering price of $ per share
and after deducting estimated underwriting discounts and offering expenses, are
estimated to be approximately $48.6 million$ ($55.9 million if the Underwriters'underwriters' over-allotment
option is exercised in full).
The CompanyWe currently intendsintend to use the net proceeds of the offering forto fund
expansion of our operations, including the acquisition of additional aircraft
and related spare parts and support equipment, and ground facilities, and for other general corporate
purposes. Based upon circumstances existing immediately priorWith respect to eachthe acquisition of aircraft, acquisition, managementwe will determine on a
case-by-case basis whether to purchase suchan aircraft with a portion of the net
proceeds from the offering or to finance the acquisition of suchthe aircraft through
long-term loans or lease arrangements. The
Company believesWe believe that the expenses of obtaining
suchthe loans or leases may be reduced, and the availability of suchthe loans or leases
may be facilitated, by the increase in stockholders' equity resulting from thisthe
offering.
In connection with
SkyWest's planned expansionPending the use of our net proceeds as the United Express carrier at United's San
Francisco hub, the Company estimates that the cost of acquiring the additional
ground and maintenance facilities, support equipment and spare parts inventory
required for the planned expansion will be approximately $12 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Pending specific use,described above, the net proceeds
will be invested in short-term, investment grade, interest-bearing securities.
11
13We will not receive any proceeds from the sale of common stock by the
selling stockholders.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common StockOur common stock is quoted on the Nasdaq National Market under the symbol
"SKYW." The following table sets forth, for the periods indicated, the high and
low closing sale prices per share for the Common Stock,our common stock, as reported by the
Nasdaq National Market, and the cash dividends declared by the Company.we have declared.
CASH
DIVIDENDS
HIGH LOW DECLARED
------ ------ ---------
FISCAL 1996:YEAR ENDED MARCH 31, 1999:
First Quarter......................................... $29.75 $17.69 $0.03
Second Quarter........................................ 34.00 15.00 0.03
Third Quarter......................................... 32.69 16.06 0.03
Fourth Quarter........................................ 38.00 25.13 0.03
FISCAL YEAR ENDED MARCH 31, 2000:
First Quarter......................................... $30.25 $21.50 $0.03
Second Quarter........................................ 27.63 20.13 0.03
Third Quarter......................................... 29.00 21.44 0.03
Fourth Quarter........................................ 39.13 27.50 0.04
FISCAL YEAR ENDING MARCH 31, 2001:
First Quarter......................................... $46.50 $33.88 $0.04
Second Quarter ended June 30, 1995................... $23.50 $14.13 $0.17
Quarter ended September 30, 1995.............. 25.38 17.00 --
Quarter ended December 31, 1995............... 19.75 12.88 0.08
Quarter ended March 31, 1996.................. 14.75 12.38 --
FISCAL 1997:
Quarter ended June 30, 1996................... $20.75 $12.88 $0.08
Quarter ended September 30, 1996.............. 18.38 14.00 0.05
Quarter ended December 31, 1996............... 15.88 12.38 0.05
Quarter ending March 31, 1997................. 14.75 11.75 0.05
FISCAL 1998:
Quarter ended June 30, 1997................... $17.38 $12.00 $0.05
Quarter ended September 30, 1997.............. 21.00 15.25 0.05
Quarter ended December 31, 1997............... 30.13 19.75 0.05
Quarter ending March 31, 1998 (through January
20, 1998).................................. 37.00 28.25July 27, 2000)................ 49.38 37.38 --
The closing sale price of the Common Stock, as reported by the Nasdaq
National Market,our common stock on January 20, 1998July 27, 2000, was $36.875 per share.$47.06. As
of January 16,
1998, the number ofJune 30, 2000, there were 24,790,254 shares of Common Stockcommon stock outstanding, was 10,317,152 shares, held
by approximately 1,1001,000 stockholders of record, which does not include shares
held in securities position listings.
The Company hasWe have historically paid cash dividends on its Common Stock.our common stock. In August 1996, the Companyfiscal
1997, we revised itsour dividend policy from paying a regular annual dividend,
supplemented by special quarterly dividends paid from time to time, to a policy of paying
a regular quarterly cash dividend of $0.05 per
share.dividend. The future payment and amount of cash
dividends will depend upon the
Company'sour financial condition and results of operations,
applicable loan covenants and other factors deemed relevant by the Company's Boardour board of
Directors.
12directors.
13
1417
CAPITALIZATION
The following table sets forth the unauditedour capitalization of the Company
at December 31, 1997,June 30, 2000, and as
adjusted to give effect to the sale of the 1,400,0002,500,000 shares of Common Stockcommon stock
offered herebyby us at an assumed offering price of $36.875$ per share and the
application of the estimated net proceeds therefrom.
Seetherefrom, as described under "Use of
Proceeds." The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements, including the Notes thereto, appearing
elsewhere in this Prospectusprospectus or incorporated herein by reference.
DECEMBER 31, 1997JUNE 30, 2000
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
Current portion of long-term debt(1)........................ $ 8,42912,836 $
8,429
======== ===============
Long-term debt(1)...........................................debt, net of current portion(1)................... $ 51,24861,207 $
51,248
-------- ---------------
Stockholders' equity:
Preferred Stock,stock, no par value; 5,000,000 shares
authorized,authorized; none outstanding........................... -- --
Common Stock,stock, no par value; 40,000,000 shares authorized,
10,300,953authorized;
27,739,454 shares outstanding; 11,700,953issued; 30,239,454 shares outstanding,issued, as
adjusted(2)............................ 71,107 119,672............................................ 166,198
Retained earnings......................................... 71,434 71,434183,887
Treasury stock; 2,949,200 shares.......................... (20,285)
Net unrealized depreciation on available-for-sale
securities............................................. (1,476)
-------- ---------------
Total stockholders' equity............................. 142,541 191,106328,324
-------- ---------------
Total capitalization................................... $193,789 $242,354$389,531 $
======== ===============
- ---------------
(1) As of December 31, 1997, SkyWestJune 30, 2000, we had financed 4482 of itsour aircraft and certain of itsour
airport and maintenance facilities through operating leases. In addition to
our indebtedness, we had $554.2 million of mandatory future payments under
operating leases, primarily for aircraft and ground facilities. At an 8%
discount factor, the present value of these obligations would be equal to
approximately $365.5 million at June 30, 2000. See Note 4 of the Company's Notes to
our Consolidated Financial Statements incorporated herein by reference.
(2) Excludes 600,0641,615,966 shares issuable upon exercise of outstanding stock
options we have granted by the Company at a weighted average exercise price of $17.15$23.50 per
share and 287,195 shares available for the future grantas of shares of Common
Stock upon the exercise of stock options under the Company's stock option
plans. See Note 5 of the Company's Notes to Consolidated Financial
Statements incorporated herein by reference.
13June 30, 2000.
14
1518
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth our selected consolidated financial and airline operating
data with respect to the Company for the periods indicated. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company'sour Consolidated Financial Statements, including
the Notes thereto, appearing elsewhere in this Prospectusprospectus or incorporated by
reference herein. See
"Incorporation of Certain Information by Reference." The selected consolidated financial data as of and for each of
the fiscal years ended March 31, 19931996 through 1997March 31, 2000 have been derived
from theour Consolidated Financial Statements, of the
Company, which statements have been audited
by Arthur Andersen LLP, independent public accountants. The airline operating
data set forth below is unaudited. The selected consolidated financial data as
of and for the ninethree months ended December 31, 1996June 30, 1999 and 19972000 have been derived from
theour unaudited Consolidated Financial Statements of the Company which, in theour opinion,
of management, reflect
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the information contained therein. Data for the ninethree months
ended December 31, 1997June 30, 2000 are not necessarily indicative of results to be expected for
the fiscal year ending March 31, 1998. The Other2001. This table should be read in conjunction
with our Consolidated Financial DataStatements and Airline Operating Data set forth below are unaudited.Notes thereto and other
information incorporated herein by reference.
NINETHREE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
----------------------------------------------------------------- -------------------------
1993 1994 1995JUNE 30,
-------------------------------------------------------------- ------------------------
1996 1997 1996 19971998 1999 2000 1999 2000
---------- ---------- ----------- ----------- ----------- ----------- --------------------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF INCOME
DATA(1):
Operating revenues:
Passenger..................... $ 132,430 $ 151,699 $ 177,588Passenger...................... $ 205,034 $ 239,222 $ 177,768259,314 $ 193,783
Freight....................... 2,573 3,099 3,802 4,291 4,174 3,120 3,099
Public service381,409 $ 466,733 $ 109,713 $ 128,403
Freight and other...... 2,067 2,411 2,401 2,159 1,243 980 852
Nonairline.................... 9,730 25,699 34,284 34,036 33,471 28,171 27,949
---------- ---------- ----------- ----------- ----------- ----------- -----------
Total operating
revenues............... 146,800 182,908 218,075 245,520 278,110 210,039 225,683
---------- ---------- ----------- ----------- ----------- ----------- -----------
Operating expenses:
Flying operations............. 51,421 52,256 68,135 85,117 101,689 75,536 78,550
Aircraft, traffic and
passenger service........... 22,230 22,621 28,218 32,522 37,044 27,234 28,464
Maintenance................... 21,804 21,853 25,530 28,713 29,149 21,594 21,721
Promotion and sales........... 15,072 16,527 20,369 25,965 29,606 22,155 20,307
Depreciation and
amortization................ 7,478 8,967 11,896 15,392 18,481 13,644 14,169
General and administrative.... 8,954 12,306 11,605 11,962 12,577 9,320 11,006
Fleet restructuring and
transition.................. -- -- -- 6,247 -- -- --
Nonairline.................... 8,376 23,698 31,981 33,892 34,147 26,615 24,763
---------- ---------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses............... 135,335 158,228 197,734 239,810 262,693 196,098 198,980
---------- ---------- ----------- ----------- ----------- ----------- -----------
Operating income................ 11,465 24,680 20,341 5,710 15,417 13,941 26,703
---------- ---------- ----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest expense.............. (1,410) (1,978) (1,100) (2,163) (2,431) (1,507) (2,037)
Interest income............... 445 1,069 2,826 2,707 2,481 1,853 2,681
Gain on sales of property and
equipment................... 43 74 173 556 1,113 339 541
---------- ---------- ----------- ----------- ----------- ----------- -----------
Total other income
(expense).............. (922) (835) 1,899 1,100 1,163 685 1,185
---------- ---------- ----------- ----------- ----------- ----------- -----------
Income before provision for
income taxes.................. 10,543 23,845 22,240 6,810 16,580 14,626 27,888
Provision for income taxes...... 3,839 9,449 8,539 2,444 6,469 5,623 10,611
---------- ---------- ----------- ----------- ----------- ----------- -----------
Net income........................ $ 6,704 $ 14,396 $ 13,701 $ 4,366 $ 10,111 $ 9,003 $ 17,277
========== ========== =========== =========== =========== =========== ===========
Net income per common share(2):
Basic........................... $ 0.85 $ 1.46 $ 1.23 $ 0.42 $ 1.00 $ 0.89 $ 1.70
Diluted......................... 0.83 1.43 1.22 0.42 1.00 0.89 1.68
Weighted average common shares
outstanding(2):
Basic........................... 7,927 9,883 11,112 10,284 10,085 10,073 10,179
Diluted......................... 8,061 10,063 11,214 10,368 10,124 10,104 10,297
14
16
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1996 1997other.............. 7,449 6,544 6,821 7,217 8,045 1,849 1,984
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS INTotal operating revenues..... 212,483 245,766 266,135 388,626 474,778 111,562 130,387
Operating expenses:
Flying operations.............. 85,117 101,689 103,636 137,231 176,159 39,584 49,338
Aircraft, traffic and passenger
service...................... 32,522 37,044 38,957 58,826 65,822 16,010 17,517
Maintenance.................... 28,713 29,149 29,299 51,370 60,400 14,409 15,118
Promotion and sales............ 25,965 29,606 25,505 29,432 27,698 7,692 6,954
Depreciation and
amortization................. 15,392 18,481 19,305 23,237 28,463 6,487 7,827
General and administrative..... 11,962 12,577 14,992 22,460 27,601 6,387 8,012
Fleet restructuring and
transition................... 6,247 -- -- -- -- -- --
Other.......................... 929 1,195 1,622 1,765 1,955 517 447
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses..... 206,847 229,741 233,316 324,321 388,098 91,086 105,213
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income................. 5,636 16,025 32,819 64,305 86,680 20,476 25,174
---------- ---------- ---------- ---------- ---------- ---------- ----------
Other income (expense):
Interest expense............... (2,160) (2,431) (1,639) (2,376) (2,726) (563) (579)
Interest income................ 2,500 2,328 4,090 7,553 8,575 2,084 2,450
Gain on sales of property and
equipment.................... 556 936 (45) 419 309 90 80
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total other income........... 896 833 2,406 5,596 6,158 1,611 1,951
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before provision for
income taxes................... 6,532 16,858 35,225 69,901 92,838 22,087 27,125
Provision for income taxes....... 2,341 6,572 13,565 27,223 35,734 8,506 10,578
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations..................... 4,191 10,286 21,660 42,628 57,104 13,581 16,547
---------- ---------- ---------- ---------- ---------- ---------- ----------
Discontinued operations:
Income (loss) from operations
of Scenic Airlines........... 175 (175) 284 (168) -- -- --
Loss on disposition of Scenic
Airlines..................... -- -- -- (625) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total income (loss) from
discontinued operations.... 175 (175) 284 (793) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income....................... $ 4,366 $ 10,111 $ 21,944 $ 41,835 $ 57,104 $ 13,581 $ 16,547
========== ========== ========== ========== ========== ========== ==========
Net income per common share:
Basic.......................... $ 0.21 $ 0.50 $ 1.06 $ 1.73 $ 2.32 $ 0.55 $ 0.67
========== ========== ========== ========== ========== ========== ==========
Diluted........................ $ 0.21 $ 0.50 $ 1.04 $ 1.69 $ 2.29 $ 0.55 $ 0.65
========== ========== ========== ========== ========== ========== ==========
Dividends declared per common
share.......................... $ 0.13 $ 0.12 $ 0.10 $ 0.12 $ 0.13 $ 0.03 $ 0.04
========== ========== ========== ========== ========== ========== ==========
Weighted average common shares
outstanding:
Basic.......................... 20,568 20,170 20,799 24,199 24,563 24,488 24,761
========== ========== ========== ========== ========== ========== ==========
Diluted........................ 20,736 20,248 21,168 24,787 24,961 24,707 25,276
========== ========== ========== ========== ========== ========== ==========
15
19
THREE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, JUNE 30,
-------------------------------------------------------------- ------------------------
1996 1997 1998 1999 2000 1999 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT AIRLINE OPERATING DATA)
OTHER FINANCIAL DATA:
EBITDAR(3)...........................EBITDA(2)........................ $ 39,05724,827 $ 56,32538,388 $ 63,93257,360 $ 57,72595,747 $ 75,419125,126 $ 59,43629,408 $ 73,12035,767
EBITDAR(2)....................... 53,094 70,378 91,061 143,721 179,399 42,629 49,691
Cash flow from (used by):
Operating activities........... 26,864 31,971 48,407 78,006 86,499 18,401 40,546
Investing activities........... (50,090) (11,627) (15,224) (181,480) (105,328) (41,741) (43,068)
Financing activities........... 20,339 (7,087) 68,803 15,939 (8,864) (2,894) 12,729
AIRLINE OPERATING DATA(4)DATA(3):
Passengers carried................... 1,523,384 1,730,993 2,073,885carried............... 2,340,366 2,656,602 1,986,371 2,228,7412,989,062 4,900,921 5,503,290 1,365,706 1,401,113
Revenue passenger miles
(000)(5)..... 294,276 345,414 488,901(000s)(4)...................... 617,136 717,322 540,043 567,437745,386 1,015,872 1,196,680 290,590 319,830
Available seat miles (000)(6)........ 669,724 727,059 976,095(000s)(5)... 1,254,334 1,413,170 1,053,935 1,113,4861,463,975 1,844,123 2,165,380 525,104 565,409
Passenger load factor(7)............. 43.9% 47.5% 50.1%factor(6)......... 49.2% 50.8% 51.2% 51.0%50.9% 55.1% 55.3% 55.3% 56.6%
Breakeven load factor(8)............. 41.1% 41.2% 45.5%factor(7)......... 48.4% 47.9% 48.2% 45.2%45.0% 46.3% 45.5% 45.4% 45.9%
Yield per revenue passenger
mile(9)............................ 45.0c 43.9c 36.3cmile(8)........................ 33.2c 33.3c 32.9c 34.2c34.8c 37.5c 39.0c 37.8c 40.1c
Revenue per available seat
mile(10)........................... 20.5c 21.6c 18.8cmile(9)........................ 16.9c 17.3c 17.3c 17.8c18.1c 21.0c 21.8c 21.1c 23.0c
Cost per available seat
mile(11)..... 19.1c 18.8c 17.1cmile(10)....................... 16.6c 16.3c 16.2c 15.8c16.6c 17.6c 18.0c 17.4c 18.6c
Average passenger trip length........ 193 200 236length
(miles)........................ 264 270 272 255249 207 217 213 228
Number of aircraft (end of
period)(12):
Embraer Brasilia................... 19 23 28 35 50 47 50
Canadair Regional Jet.............. - 4 6Jet.......... 10 10 10 1011 11 11 12
Embraer Brasilia Turboprop..... 35 50 50 88 92 89 92
Fairchild Metroliner III........... 31 28 26III....... 18 - 5 - -- -- -- -- -- --
------------ ---------- ---------- ---------- ---------- ---------- ----------
Total aircraft................ 50 55 60aircraft............. 63 60 62 60 99 103 100 104
========== ========== ========== ========== ========== ========== ==========
AS OF MARCH 31,
---------------------------------------------------- AS OF JUNE 30,
1996 1997 1998 1999 2000 2000
-------- -------- -------- -------- -------- --------------
CONSOLIDATED BALANCE SHEET DATA:
Cash and marketable securities..................... $ 43,626 $ 55,756 $154,399 $161,817 $171,348 $189,675
Working capital...................... $ 12,334 $ 66,615 $ 46,039 $capital.................................... 32,818 $ 45,273 $ 40,670 $ 68,73045,278 143,109 142,358 154,179 160,692
Property and equipment, net.......... 56,458 89,962 110,241net........................ 145,071 137,743 142,129 140,297133,470 198,924 233,959 260,734
Total assets......................... 86,945 184,017 188,182 227,550 232,898 232,680 260,933assets....................................... 226,996 231,934 318,914 417,660 470,183 515,260
Long-term debt, lessincluding current maturities......................... 18,391 26,647 29,553maturities(11)... 59,972 53,736 47,337 48,907 51,24857,809 70,327 60,758 74,043
Stockholders' equity................. 42,766 122,788 117,684equity............................... 115,800 124,552 123,753 142,541211,133 256,256 312,220 328,324
- ---------------
(1) Reflects the reclassification of nonairline commissionsconsolidated statements of income data to
give effect to the sale of Scenic Airlines, Inc., a subsidiary we sold in
1999, which provided sight-seeing tours of the Grand Canyon area.
(2) EBITDA represents income before income taxes, interest expense,
against
non-airline operating revenues.
(2) Reflects restated net income per common share amountsdepreciation and weighted average
common shares outstanding as required by Statement of Financial Accounting
Standards No. 128.
(3)amortization. EBITDAR represents earningsincome before interest, income
taxes, interest expense, depreciation, amortization and aircraft rents.rental expense.
EBITDA and EBITDAR is aare widely accepted financial indicatorindicators of a company's
ability to incur and service debt. However,Neither EBITDA nor EBITDAR should,
nothowever, be considered in isolation, as a substitute for net income or cash
flow data prepared in accordance with generally accepted accounting principles
or as a measure of a company's profitability or liquidity. (4)For the fiscal
year ended March 31, 1996, EBITDA and EBITDAR data have not been reduced to
reflect $6.2 million of fleet restructuring and transition expenses.
(3) Excludes the operations of Scenic Airlines, Inc. and NPT.
(5)National Parks
Transportation, Inc., a subsidiary we sold on July 21, 2000, which operates
a rental car business serving small regional airports.
(4) Revenue passengers multiplied by miles flown.
(6)(5) Passenger seats available multiplied by miles flown.
(7)(6) Revenue passenger miles divided by available seat miles.
(8)(7) Passenger load factor at which total airline operating revenues equals
total airline operating expenses, including interest expense. Calculated by
dividing airline operating expenses andplus interest expense by airline
operating revenues and multiplying the result by passenger load factor.
(9)(8) Passenger revenues divided by revenue passenger miles flown.
(10) Airline(9) Total airline operating revenues divided by available seat miles.
(11)(10) Airline operating expenses andplus interest expense divided by available seat
miles.
(12) Of(11) At June 30, 2000, 82 of the 60 aircraft operated by SkyWest at December 31, 1997, 44 were financed
through operating leases. 15In addition to our indebtedness, we had $554.2
million of mandatory future payments under operating leases, primarily for
aircraft and ground facilities. At an 8% discount factor, the present value
of these obligations would be equal to approximately $365.5 million at June
30, 2000.
16
1720
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company, through SkyWest operates a regional airline offering scheduled passenger service
with approximately 5801,000 daily departures to 4663 cities in 1213 western states and
Canada. Total operating revenues and passengers carried have grown consistently
from fiscal 19931995 through fiscal 1997,2000, at compound annual growth rates of approximately
17%20.8% and 15%21.6%, respectively. All of our growth has been internally generated
without any material acquisitions. In fiscal 1993,1995, SkyWest generated
approximately 670976 million available seat miles ("ASMs") with itsand had a fleet of thirty-onetwenty-six
19-seat Fairchild Metroliners, twenty-eight 30-seat Brasilia Turboprops and nineteen 30-seat Brasiliassix
Canadair Regional Jets at fiscal year end. As a result of the introduction of the 50-seat CRJs beginningadditional aircraft
acquisitions, SkyWest generated approximately 2.2 billion available seat miles
in fiscal 1994, the expansion2000 with a fleet of the92 Brasilia fleetTurboprops and the strategic11 Canadair Regional
Jets at fiscal year end. The transition out of the Fairchild Metroliner
aircraft, as ofcompleted in December 1996, SkyWest generated approximately 1.4
billion ASMs in fiscal 1997 with a fleet of 50 Brasilias and 10 CRJs at fiscal
year end. This transition out of the Metroliner aircraft enabled SkyWest to upgrade its aircraft to
an all cabin-classcabin class fleet of BrasiliasBrasilia Turboprops and CRJs,Canadair Regional Jets,
which offer increased passenger acceptance and capacity and higher operating
efficiencies.
This transition resulted in one-time pre-tax fleet restructuring
and transition expenses of $6.2 million, or $0.38 per share, in fiscal 1996.
In fiscal 1997, the Company2000, we generated net income of $10.1$57.1 million, compared to $4.4$41.8
million in fiscal 1996. The Company's profitability has continued to
improve1999 and $21.9 million in fiscal 1998 with1998. During fiscal 1999, we
sold the operations of Scenic Airlines, Inc., and recorded a net income forloss of
$625,000 on the nine months ended December 31,
1997 increasing 91.9% to $17.3 million from $9.0 millionsale. The amount has been reflected as discontinued operations
in the prior year
period.accompanying consolidated financial statements. The improvement since
fiscal 19961998 reflects, among other factors, the addition of United as a
code-sharing partner in October 1997.
The percentage of our available seat miles operated under fixed-fee
contracts has increased from 25% in fiscal 1998 to 65% in fiscal 2000. The shift
to fixed-fee contract flying has reduced SkyWest's exposure to fluctuations in
fuel prices, fare competition and the completionpassenger volumes. We anticipate that our
contract flying operations will increase as a percentage of SkyWest's
transition to an all cabin-class fleet.
SkyWest has been a code-sharing partner withour total daily
flights as additional United and Delta and Continental since
1987 and 1995, respectively. SkyWest recently expanded its code-sharing
relationships to include United effective October 1, 1997. SkyWest operates as
the Delta Connection in Salt Lake City and Los Angeles, as United Express in Los
Angeles and as the Continental Connection in selected California markets.
SkyWest has executed an addendumroutes are added to the United Express Agreement, expanding
SkyWest's operations to serve as the United Express carrier in San Francisco
beginning June 1, 1998. SkyWest believessystem;
however, we anticipate that its success in attracting multiple
code-sharing relationships is attributable to its delivery of high quality
customer servicemargins associated with an all cabin-class fleet.
Multiple code-sharing relationships have enabled SkyWest to reduce reliance
on any single major airline code and to enhance and stabilize operating results
through a mix of SkyWest-controlled flying and United Express contract flying.
On the majority of flights currently operated by SkyWest (74% during the quarter
ended December 31, 1997), SkyWest controls scheduling, ticketing, pricing and
seat inventories and receives a prorated portion of passenger fares. On United
Express contract routes United controls scheduling, ticketing, pricing and seat
inventories with SkyWest receiving from United negotiated minimum payments per
flight departure and incentives related to passenger volumes and levels of
customer service. Forwill be less
than the quarter ended December 31, 1997, 69% of the Company's
capacity wasmargins we have historically generated in the Delta and Continental codes and 31% in the United
code, while 74% wason mature SkyWest-controlled
flying and 26% was contract flying. As a
result of SkyWest's planned San Francisco expansion, management expects that the
percentages of SkyWest capacity in the United code and in contract flying will
increase.
The Company hasroutes.
We have continued to emphasize cost management and better utilization of
existing resources. During the period from fiscal 1993 through
fiscal 1997,2000, SkyWest experienced only a 2.3% increase
in cost per ASM decreased from 19.1cavailable seat mile in spite of a 45% increase in the average cost
of fuel during the year. Fuel costs are currently 12.5% of total airline
operating expenses. Cost per available seat mile was 18.0c for fiscal 2000
compared to 16.3c. For the nine months
ended December 31, 1997, cost per ASM decreased further to 15.8c. This reduction
was due primarily to the introduction of the CRJs, which offer lower unit
operating costs on longer stage lengths. In addition, the transition to an
all-Brasilia turbo-prop fleet has resulted in fewer flight interruptions and
lower maintenance costs. Furthermore, increased employee productivity has
enabled the Company to grow with few additional employees, except17.6c for flight
crews to operate the larger Embraer and CRJ aircraft.
16fiscal 1999.
17
1821
RESULTS OF OPERATIONS
The following table sets forth information regarding the Company'sour operating expense
components. Airline operating expenses are expressed as a percentage of total
airline operating revenues. Nonairline expenses are expressed as a percentage of
total nonairline revenues. Total operating expenses and interest are expressed
as a percentage of total consolidated revenues. Individual expense components
are also expressed as cents per available seat mile.
FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------------------------------------------
1995 1996 19971998 1999 2000
--------------------------- --------------------------- ---------------------------
PERCENT CENTS PERCENT CENTS PERCENT CENTS
OF PER OF PER OF PER
AMOUNT REVENUES ASM AMOUNT REVENUES ASM AMOUNT REVENUES ASM
-------- -------- ----- -------- -------- ----- -------- -------- -----
(DOLLARS IN THOUSANDS)
Salaries, wages and
employee benefits......................benefits......... $ 49,684 27.0% 5.1c $ 56,005 26.5% 4.5c $ 60,759 24.8% 4.3c67,591 25.5% 4.6c $101,243 26.2% 5.5c $122,617 25.9% 5.7c
Aircraft expenses.............. 35,355 19.2costs............. 52,357 19.8 3.6 43,009 20.3 3.4 49,822 20.4 3.5
Maintenance.................... 18,350 10.0 1.9 20,779 9.8 1.7 20,929 8.670,561 18.2 3.8 82,102 17.4 3.8
Maintenance................ 20,535 7.8 1.4 Fuel........................... 16,62536,563 9.5 2.0 42,611 9.0 1.7 23,084 10.9 1.8 30,713 12.62.0
Fuel....................... 28,510 10.8 2.0 29,477 7.6 1.6 48,424 10.2 2.2
Other.......................... 45,742 24.9 4.7 56,794 26.9 4.5 66,323 27.0 4.7
Interest....................... 1,086Other airline expenses..... 62,701 23.7 4.3 84,712 21.9 4.6 90,389 19.1 4.2
Interest................... 1,639 0.6 0.1 2,160 1.0 0.2 2,431 1.0 0.2
Fleet restructuring and
transition expenses........... -- -- -- 6,247 3.0 0.5 -- -- --2,376 0.6 0.1 2,726 0.6 0.1
-------- ------ ---- -------- ------ ---- -------- ------- ----
Total airline expenses and
interest...................... 166,842 90.7 17.1c 208,078 98.4 16.6c 230,977 94.4 16.3cexpenses..... 233,333 88.3 16.0c 324,932 84.0 17.6c 388,869 82.2 18.0c
==== ==== ====
Nonairline expenses and
interest...................... 31,992 93.3 33,895 99.6 34,147 102.0Other...................... 1,622 93.6 1,765 94.1 1,955 93.8
-------- -------- --------
Total operating expenses
and interest...................... $198,834 91.2% $241,973 98.6% $265,124 95.3%interest.............. $234,955 88.3% $326,697 84.1% $390,824 82.3%
======== ======== ========
NINETHREE MONTHS ENDED DECEMBER 31,
---------------------------------------------------------
1996 1997
---------------------------JUNE 30,
--------------------------------------------------------
1999 2000
-------------------------- ---------------------------
PERCENT CENTS PERCENT CENTS
OF PER OF PER
AMOUNT REVENUES ASM AMOUNT REVENUES ASM
--------------- -------- ----- -------- -------- -----
Salaries, wages and
employee benefits......................benefits......... $28,708 25.9% 5.5c $ 45,144 24.8% 4.3c $ 49,866 25.2% 4.5c33,088 25.5% 5.8c
Aircraft expenses.............. 36,781 20.2 3.5 39,127 19.8 3.5
Maintenance.................... 15,481 8.5 1.5 15,163 7.7 1.4
Fuel........................... 22,640 12.4 2.1 22,176 11.2costs............. 19,546 17.6 3.7 21,589 16.6 3.8
Maintenance................ 10,251 9.2 2.0 Other.......................... 49,438 27.2 4.7 47,884 24.2 4.3
Interest....................... 1,507 0.810,307 7.9 1.8
Fuel....................... 9,122 8.2 1.7 15,029 11.6 2.7
Other airline expenses..... 22,943 20.7 4.4 24,753 19.1 4.4
Interest................... 563 0.5 0.1 1,354 0.7579 0.4 0.1
Fleet restructuring and
transition expenses........... -- -- -- -- -- --
-------- --------- ---- ---- -------- ------ ----
Total airline expenses and
interest...................... 170,991 94.0 16.2c 175,570 88.8 15.8cexpenses..... 91,133 82.1 17.4c 105,345 81.1 18.6c
==== ====
Nonairline expenses and
interest...................... 26,615 94.5 25,447 91.0
--------Other...................... 518 89.2 448 95.8
------- --------
Total operating expenses
and interest...................... $197,606 94.1% $201,017 89.1%
========interest.............. $91,651 82.2% $105,793 81.1%
======= ========
NINETHREE MONTHS ENDED DECEMBER 31, 1997JUNE 30, 2000 COMPARED TO NINETHREE MONTHS ENDED DECEMBER 31,
1996JUNE 30, 1999
For the ninethree months ended December 31, 1997, SkyWest enplaned a record
numberJune 30, 2000, we continued to develop our
code-sharing relationships with our code-sharing partners and took delivery of
passengers and the Company reported record consolidated netfirst of 55 Canadair Regional Jets on order. Net income of
$17.3increased to $16.5
million, or $1.68$0.65 per diluted net income per share, compared to net income of
$9.0 million, or $0.89 per share, for the ninethree months ended December 31, 1996.June 30, 2000,
compared to $13.6 million, or $0.55 per diluted share, for the three months
ended June 30, 1999. Consolidated operating revenues increased 7.4%16.9% to a record $225.7$130.4
million for the ninethree months ended December 31, 1997, compared to $210.0June 30, 2000, from $111.6 million for the
comparable period in 1996.three months ended June 30, 1999.
Passenger revenues, which represented 85.9%98.5% of total consolidated operating
revenues, increased 9.0%17.0% to $193.8$128.4 million for the ninethree months ended December
31, 1997, compared to $177.8June 30,
2000 from $109.7 million, or 84.6%98.3% of total consolidated operating revenues, for the
ninethree months ended December 31, 1996.June 30, 1999. The increase resultedwas due primarily fromto a 5.1%10.1%
increase in RPMs as well asrevenue passenger miles and a 4.0%6.1% increase in yield per RPM. SkyWest entered into a new code-sharing relationship with United and began
operating as United Expressrevenue
passenger mile. The increase in Los Angeles beginning October 1, 1997. This
operation has resulted in both increased RPMs and increased yield per RPM. The
increased yield per RPM also resulted from an increaserevenue passenger mile was principally
the result of competitors eliminating and reducing scheduled service in SkyWest's portion of
prorated fares with Delta in certainthe San
Francisco and Los Angeles markets. Additionally, SkyWest acquiredimplemented selected
fare increases during the 2000 fiscal year which have remained intact. Fuel
surcharges have also been added to fares to mitigate the increase in fuel
prices. On SkyWest-controlled flights, SkyWest also continues its efforts to
maximize revenue by use of a new state-of-the-artsophisticated revenue management and control system
which utilizes historical booking data and trends to optimize revenue. The combination ofTogether
these factors was principally responsibleincreased revenue per available seat mile 9.0% to 23.0c for anthe
three months ended June 30, 2000 from 21.1c for the three months ended June 30,
1999.
Passenger load factor increased to 56.6% for the three months ended June
30, 2000 from 55.3% for the three months ended June 30, 1999. The increase in
revenue per ASMload factor was due primarily to 17.8cthe further development of code-sharing
relationships with United and Delta whereby SkyWest is experiencing high load
factors in many markets. The increase was also due, in part, to refinements in
SkyWest's flight schedules and continued operational improvements.
Total operating expenses and interest increased 15.4% to $105.8 million for
the ninethree months ended December 31, 1997,June 30, 2000 compared to 17.3c$91.6 million for the same
period of 1996.
Management has continued its efforts to reduce airline operating costs per
ASM and asthree
months ended June 30, 1999. As a percentage of airlineconsolidated operating revenues. For the nine months ended
December 31, 1997,revenues,
total airlineoperating expenses and interest decreased to 81.1% for the three months
ended June 30, 2000, from 82.2% for the comparable period of fiscal 2000. For
the three months ended June 30, 2000, total airline operating expenses and
interest (excluding nonairline expenses) were
88.8%18
22
81.1% of airline operating revenues, compared to 94.0%82.1% for the ninethree months
ended December 31,
1996.June 30, 1999. The improved margin was largely the result of increased
passenger enplanements, growth in yield per revenue passenger mile and operating
revenues which outpaced the increase in operating expenses.
Airline operating costs per available seat mile (including interest
expense) increased 6.9% to 18.6c for the three months ended June 30, 2000 from
17.4c for the three months ended June 30, 1999. The increase was primarily due
to increased fuel costs and higher employee incentive payments based on
increased profitability. Factors relating to the change in operating expenses
are discussed below.
Salaries, wages and employee benefits increaseddecreased as a percentage of airline
operating revenues to 25.2%25.5% for the ninethree months ended December 31, 1997,June 30, 2000, from 24.8%25.9%
for the ninethree months ended December 31, 1996.June 30, 1999. The decrease was principally the
result of airline operating revenues increasing 17.1% period over period, and
salaries, wages and employee benefits increasing only 15.2% period over period.
The average number of full-time equivalent employees for the ninethree months ended
December 31, 1997,June 30, 2000 was 1,9163,500, compared to 1,8473,180 for the ninethree months ended December 31, 1996.June 30,
1999, an increase of 10.1%. The increase in number of personnel was due, in
large part, to hiring flight attendants and customer
servicethe addition of personnel to support increased operations.required for SkyWest's expansion.
Salaries, wages and employee benefits per ASMavailable seat mile increased slightly to 4.5c5.8c
for the ninethree months ended December
31, 1997,June 30, 2000, compared to 4.3c5.5c for the ninethree months
ended December 31, 1996, due
primarily toJune 30, 1999, principally as a result of additional employees and higher
employee incentive payments based on increased employee incentives and profit sharing.
17
19profitability.
Aircraft expenses,costs, including aircraft rent and depreciation, decreased as a
percentage of airline operating revenues to 19.8%16.6% for the ninethree months ended
December 31, 1997,June 30, 2000, from 20.2%17.6% for the ninethree months ended December 31, 1996.June 30, 1999. The decrease
was due primarily to airline operating revenues increasing 17.1% period over
period and aircraft costs increasing only 10.5% period over period. Aircraft
costs per ASM were consistent at 3.5cavailable seat mile increased slightly to 3.8c for the ninethree months
ended December 31, 1997 and 1996.June 30, 2000 from 3.7c for the three months ended June 30, 1999.
Maintenance expense decreased as a percentage of airline operating revenues
to 7.7%7.9% for the ninethree months ended December 31, 1997, from 8.5%June 30, 2000, compared to 9.2% for the ninethree
months ended December 31, 1996. ThisJune 30, 1999. The decrease resultedwas due primarily from the
acquisitionto airline operating
revenues increasing 17.1% period over period and utilization of 15 new Brasilia aircraft, which are more
efficient than Metroliner aircraft.maintenance expense increasing
only 0.5% period over period. Maintenance expense per ASMavailable seat mile
decreased slightly to 1.4c1.8c for the ninethree months ended December 31, 1997,June 30, 2000, from 1.5c2.0c for the
ninethree months ended December 31, 1996.June 30, 1999.
Fuel expenses decreasedcosts increased as a percentage of airline operating revenues to 11.2%11.6%
for the ninethree months ended December 31, 1997,June 30, 2000, from 12.4%8.2% for the ninethree months ended
December 31, 1996,June 30, 1999. The increase was due primarily to a decrease43.8% increase in the average
fuel price per gallon to $0.85$1.05 from $0.94.$0.73. Fuel costs per ASM decreasedavailable seat mile
increased to 2.0c2.7c for the ninethree months ended December 31, 1997,June 30, 2000, from 2.1c1.7c for the
ninethree months ended December 31, 1996.June 30, 1999.
Other expenses, primarily consisting primarily of commissions, landing fees, station
rentals, computer reservation system fees and hull and liability insurance,
decreased as a percentage of airline operating revenues to 24.2%19.1% for the ninethree
months ended December 31, 1997,June 30, 2000, from 27.2%20.7% for the ninethree months ended December
31, 1996. The decrease is due primarily to SkyWest not incurring certain
commissions on contract-related passenger revenues.
Nonairline revenues, generated from the operations of Scenic and NPT,
decreased 0.8% to $27.9 million for the nine months ended December 31, 1997 from
$28.2 million for the nine months ended December 31, 1996. Nonairline expenses
and interest decreased 4.4% to $25.4 million for the nine months ended December
31, 1997, compared to $26.6 million for the nine months ended December 31, 1996.June 30, 1999.
The decrease was primarily due to implementationthe result of cost control measuresSkyWest not incurring commissions on
United Express passenger related revenues. Other expenses per available seat
mile were 4.4c for both periods ended June 30, 2000 and the restructuring of the financing of flight equipment and facilities.1999.
FISCAL 19972000 COMPARED TO FISCAL 19961999
During fiscal 2000, SkyWest continued to develop its code-sharing
relationships with its code-sharing partners and took delivery of the last five
Brasilia Turboprops ordered. SkyWest experienced growth in available seat miles,
revenue passenger miles, passengers carried and load factors. In fiscal 2000,
net income increased 36.5% to $57.1 million, or $2.29 per diluted share,
compared to $41.8 million, or $1.69 per diluted share, in fiscal 1999.
Consolidated operating revenues increased 13.3%22.2% to a record $278.1$474.8 million in
fiscal 19972000 compared to $245.5$388.6 million in fiscal 1996. SkyWest also
experienced continued growth in passenger enplanements, RPMs and ASMs during
fiscal 1997 compared to fiscal 1996. Consolidated net income increased to $10.1
million, or $1.00 diluted net income per share, in fiscal 1997, compared to net
income of $4.4 million, or $0.42 per share, in fiscal 1996. The fiscal 1996
results include pre-tax fleet restructuring and transition expenses of $6.2
million, or $0.38 per share, resulting from a fleet rationalization plan related
to a restructuring of SkyWest's turbo-prop fleet.1999.
Passenger revenues, which represented 86.0%98.3% of total operating revenues,
increased 16.7%22.4% to $239.2$466.7 million in fiscal 1997 from $205.02000 compared to $381.4 million, or
98.1% of total operating revenues, in fiscal
1996.19
23
1999. The increase was primarily due to a 16.2% increase in RPMs, while yield
per RPM remained relatively constant at 33.3c in fiscal 1997 compared to 33.2c
in fiscal 1996. The increase in RPMs was due to a 20.3%17.8% increase in ASMs
generated by CRJs, which were used to provide service from Salt Lake City to
destinations such as San Francisco, California, Pasco, Washington and Colorado
Springs, Colorado. Additionally, SkyWest acquired 15 new Brasilia aircraft to
replace the 18 remaining Metroliner aircraft as their leases expired or were
terminated as part of the fleet rationalization program. These aircraft fleet
additions and changes resulted in a 12.7% increase in ASMs. The growth in RPMs
exceeded the growth in ASMs and resulted in arevenue passenger load factor of 50.8% in
fiscal 1997 compared to 49.2% in fiscal 1996. As a result of the increased
passenger load factormiles and a
0.3%4.0% increase in yield per RPM,revenue passenger mile. The increase in yield per
revenue passenger mile was principally the result of competitors eliminating or
reducing scheduled service in the San Francisco and Los Angeles markets.
Additionally, SkyWest implemented selected fare increases during the 2000 fiscal
year, which have remained intact. Fuel surcharges were also added to fares to
mitigate the increase in fuel prices during the last half of the year. With
respect to SkyWest-controlled flying, SkyWest also continued its efforts to
maximize revenue by use of a sophisticated revenue management and control system
which utilizes historical booking data and trends to optimize revenue. Together,
these factors increased revenue per ASM
increased 2.4%available seat mile 3.8% to 17.3c21.8c in fiscal
1997 from 16.9c2000 compared to 21.0c in fiscal 1996.
Total1999.
During fiscal 2000, total airline operating revenues increased 22.2% and
total airline operating expenses increased only 19.7%. As a result, total
airline operating expenses and interest were 94.4%82.2% of total airline operating
revenues in fiscal 19972000 compared to 98.4%84.0% in fiscal 1996. Exclusive of
the one-time charge related to the fleet restructuring and transition from
Metroliner to Brasilia aircraft recorded in fiscal 1996, total airline operating
expenses and interest, as a percentage of airline operating revenues, decreased
to 94.4% in fiscal 1997 from 95.4% in fiscal 1996. This percentage decrease was
due to a 16.7% growth rate in passenger revenues compared to a 14.4%
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20
increase in operating expenses and interest. The 14.4% increase in operating
expenses and interest was exclusive of the one-time fleet restructuring and
transition expense recorded in fiscal 1996. Airline operating costs per ASM
decreased to 16.3c in fiscal 1997 from 16.6c in fiscal 1996. Exclusive of the
one-time fleet restructuring and transition expense, airline operating costs per
ASM would have been 16.1c for fiscal 1996. The slight increase in cost per ASM
in fiscal 1997 was primarily due to increased fuel costs.1999.
Salaries, wages and employee benefits decreased as a percentage of airline
operating revenues to 24.8%25.9% in fiscal 19972000 from 26.5%26.2% in fiscal 1996.1999. The
decrease was primarily due tothe result of airline operating revenues increasing at a faster
rate than22.2% year over
year and salaries, wages and employee related expenses.benefits increasing only 21.1% year over
year. The average number of employees was 1,8523,302 for fiscal 19972000 compared to
1,7533,092 for fiscal 1996.1999, an increase of 6.8%. The increase was primarily due to the addition
of flight attendantspersonnel required for new Brasilia aircraft.SkyWest's expansion. Salaries, wages and employee
benefits per ASM decreasedavailable seat mile increased to 4.3c5.7c in fiscal 19972000 from 4.5c5.5c in
fiscal 1996.1999.
Aircraft expenses,costs, including aircraft rent and depreciation, increased
slightlydecreased as a
percentage of airline operating revenues to 20.4%17.4% in fiscal 19972000 from 20.3%18.2% in
fiscal 1996, as a result of the fleet transition1999. The decrease was due to Brasilia
aircraft.airline operating revenues increasing 22.2%
year over year and aircraft costs increasing only 16.4% year over year. Aircraft
expensescosts per ASMavailable seat mile were 3.5c in3.8c for both fiscal 1997, as compared to
3.4c in fiscal 1996.2000 and 1999.
Maintenance expense decreased slightly as a percentage of airline operating
revenues to 8.6%9.0% in fiscal 19972000 from 9.8%9.5% in fiscal 1996.1999. The decrease was due
to airline operating revenues increasing 22.2% year over year and maintenance
expenses increasing only 16.5% year over year. Maintenance cost per ASM decreased to 1.4c inavailable
seat mile was 2.0c for both fiscal 1997 from 1.7c in fiscal 1996 due to the
efficiency of additional new Brasilia aircraft.2000 and 1999.
Fuel expensescosts increased as a percentage of airline operating revenues to 12.6%10.2%
in fiscal 1997 compared to 10.9%2000 from 7.6% in fiscal 1996.1999. The increase was primarily due to an 18.8% increase in
the average cost of fuel price per gallon to $0.9593.0c in fiscal 19972000 from $0.8064.0c in fiscal
1996.1999. As a result, fuel costs per ASMavailable seat mile increased to 2.2c in
fiscal 19972000 from 1.8c1.6c in fiscal 1996.1999.
Other expenses, which consist primarily of commissions, landing fees,
station rents, computer reservation systems and hull and liability insurance,
decreased as a percentage of airline operating revenues to 19.1% in fiscal 2000
compared to 21.9% in fiscal 1999. The decrease was primarily the result of
SkyWest not incurring commissions on United Express related passenger revenues.
As a result, cost per available seat mile decreased to 4.2c in fiscal 2000 from
4.6c in fiscal 1999.
FISCAL 1999 COMPARED TO FISCAL 1998
During fiscal 1999, SkyWest dramatically expanded its code-sharing
relationships with United and added a record number of aircraft to the fleet.
SkyWest experienced high growth factors in available seat miles, revenue
passenger miles, passengers carried and load factors. In fiscal 1999, net income
increased 90.6% to $41.8 million, or $1.69 per diluted share, compared to $21.9
million, or $1.04 per diluted share in fiscal 1998. Consolidated operating
revenues increased 46.0% to $388.6 million in fiscal 1999 compared to $266.1
million in fiscal 1998.
Passenger revenues, which represented 98.1% of total operating revenues,
increased 47.1% to $381.4 million in fiscal 1999, compared to $259.3 million or
97.4% of total operating revenues in fiscal 1998. The increase was due to a
36.3% increase in revenue passenger miles and a 7.8% increase in yield per
revenue passenger mile. Effective April 23, 1998, SkyWest expanded its
code-sharing relationship with United, as United Express, and began operating
flights to and from Seattle/Tacoma and Portland.
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SkyWest also expanded its United Express operations at Los Angeles at the same
time. Effective June 1, 1998, SkyWest further expanded its United Express
operations and began operating flights to and from San Francisco. The increase
in yield per revenue passenger mile was also the result of improved revenue
management resulting from schedule refinements and fleet rationalization.
SkyWest also continued it efforts to maximize revenue by use of a sophisticated
revenue management and control system which utilizes historical booking data and
trends to optimize revenue. Together, these factors increased revenue per
available seat mile 16.0% to 21.0c in fiscal 1999 compared to 18.1c in fiscal
1998.
During fiscal 1999, total airline operating revenues increased 46.3% and
total airline operating expenses increased only 39.0%. As a result, total
airline operating expenses and interest were 84.0% of total airline operating
revenues in fiscal 1999 compared to 88.4% in fiscal 1998.
Salaries, wages and employee benefits increased as a percentage of airline
operating revenues to 27.0%26.2% in fiscal 19971999 from 25.5% in fiscal 1998. The
increase was primarily the result of incentive payments to employees, which are
based on SkyWest's profitability. The average number of employees was 3,092 for
fiscal 1999 compared to 26.9% in1,915 for fiscal 1996.1998, an increase of 61.5%. The large
increase was due primarily to rate
increases in customer reservation systems booking fees. In addition, SkyWest
experienced rate increases in landing fees and general passenger handling
charges. Interest expense as a percentage of airline operating revenues was 1.0%
in fiscal 1997 and fiscal 1996.
Nonairline revenues decreased 1.7% to $33.5 million in fiscal 1997 compared
to $34.0 million in fiscal 1996. The decrease was due to decreased passenger
enplanements in fiscal 1997. Nonairline expenses increased 0.8% to $34.1 million
for fiscal 1997 compared to $33.9 million for fiscal 1996. The slight increase
was due primarily to increased fuel costs.
FISCAL 1996 COMPARED TO FISCAL 1995
SkyWest experienced continued growth in RPMs, ASMs, and passenger
enplanements during fiscal 1996 compared to fiscal 1995. Consolidated operating
revenues increased 12.6% to a record $245.5 million in fiscal 1996 compared to
$218.1 million in fiscal 1995. Consolidated net income decreased to $4.4
million, or $0.42 diluted net income per share, in fiscal 1996, compared to net
income of $13.7 million, or $1.22 per share, in fiscal 1995. The fiscal 1996
results included a pre-tax fleet restructuring and transition expense of $6.2
million, or $0.38 per share, resulting from a fleet rationalization plan that
related to a restructuring of SkyWest's turbo-prop fleet. The $6.2 million fleet
restructuring and transition expense primarily represented crew-related costs
associated with the discontinuance of Metroliner aircraft operations as well as
accelerated maintenance costs associated with the early termination of
Metroliner leases. The amount consisted of $2.4 million of costs incurred in
fiscal 1996 and an accrual for $3.8 million of fiscal 1997 restructuring costs.
The fleet rationalization plan resulted in an all Brasilia turbo-prop fleet and
was completed by December 1996.
Passenger revenues, which represented 83.5% of total operating revenues,
increased 15.5% to $205.0 million in fiscal 1996 from $177.6 million in fiscal
1995. The increase was due to a 26.2% increase in RPMs offset by an 8.5%
decrease in yield per RPM to 33.2c in fiscal 1996 from 36.3c in fiscal 1995. The
increase in RPMs was due to the addition of four new CRJs and seven new
Brasilias, which replaced eight Metroliners as leases expired or were terminated
as part of the fleet rationalization program. These aircraft fleet additions and
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changes resulted in a 28.5% increase in ASMs. The growth in ASMs exceeded the
growth in RPMs and resulted in a decrease in passenger load factor to 49.2% in
fiscal 1996 from 50.1% in fiscal 1995. Although the passenger load factor was
only down 0.9 points and in spite of a strong trend of growth in demand
exceeding growth in capacity during the fourth quarter, passenger enplanements
did not meet management's expectation during the first nine months due to the
following factors: (i) growing reluctance of airline passengers to book flights
on Metroliner aircraft which do not have cabin-class amenities, (ii) the
schedule restructuring by Delta at the Los Angeles hub, which significantly
reduced daily departures commencing in May 1995, thereby reducingpersonnel required for SkyWest's
connection opportunities, (iii) the impact of indirect competition from low-fare
carriers and (iv) a continuing reluctance of travel agents to book passengers on
the Delta system after Delta instigated commission caps in the spring of 1995 as
well as commission overrides being offered by SkyWest's competitors.
Yield per revenue passenger mile decreased 8.5% to 33.2c in fiscal 1996
compared to 36.3c in fiscal 1995. The decrease was due to an 11.9% increase in
the average passenger trip length resulting from growing regional jet
operations. The 8.5% decrease in yield coupled with a lower passenger load
factor resulted in a decrease in revenue per ASM to 16.9c in fiscal 1996
compared to 18.8c in fiscal 1995.
Total airline operating expenses and interest were 98.4% of airline
operating revenues in fiscal 1996 compared to 90.7% in fiscal 1995. This
percentage increase was due to passenger enplanements not meeting expectations
which resulted in passenger revenues falling short of internal plans as well as
the airline incurring one-time fleet restructuring and transition expenses.
Exclusive of one-time fleet restructuring and transition expenses, total airline
operating expenses increased 21.0% for fiscal 1996 over fiscal 1995, while ASMs
increased 28.5%. Due to the continuing fleet rationalization program, management
has continued to reduce airline operating costs per ASM. Airline operating costs
per ASM decreased to 16.6c in fiscal 1996 from 17.1c in fiscal 1995. Exclusive
of the one-time fleet restructuring and transition expenses, airline operating
costs per ASM would have been 16.1c for fiscal 1996.
Salaries, wages and employee benefits decreased as a percentage of airline
operating revenues to 26.5% in fiscal 1996 from 27.0% in fiscal 1995. The
decrease was primarily due to lower employee incentive payments resulting from
the decrease in profitability for fiscal 1996 compared to fiscal 1995. The
average number of full-time equivalent employees was 1,753 for 1996 compared to
1,760 for fiscal 1995.expansion. Salaries, wages and employee benefits per ASM decreasedavailable seat mile
increased to 4.5c5.5c in fiscal 19961999 from 5.1c4.6c in fiscal 1995.1998.
Aircraft expenses,costs, including aircraft rent and depreciation, increased as a
percentage of airline operating revenues to 20.3% in fiscal 1996 from 19.2% in
fiscal 1995. This percentage increased as a result of the utilization of
additional Brasilia and CRJ aircraft as well as passenger traffic falling short
of management's expectations, resulting in lower operating revenues. Aircraft
costs per ASM decreased slightly to 3.5c in fiscal 1996 from 3.6c in fiscal
1995.
Maintenance expense decreased
slightly as a percentage of airline operating revenues to 9.8%18.2% in fiscal 19961999
from 10.0%19.8% in fiscal 1995. Maintenance cost1998. The decrease was due to airline operating revenues
increasing at 46.3% year over year and aircraft costs increasing only 34.8% year
over year. Aircraft costs per ASM decreased to 1.6cavailable seat mile were 3.8c in fiscal 1996 from 1.9c1999
compared to 3.6c in fiscal 1995, primarily due to
the1998.
Maintenance expense increased ASMs generated from operations.
Fuel expenses increasedslightly as a percentage of airline operating
revenues to 10.9%9.5% in fiscal 1996 compared to 9.0%1999 from 7.8% in fiscal 1995.1998. The increase was primarily
due
to an increaseinitial heavy maintenance charges to bring the acquired used Brasilia
Turboprops up to SkyWest's maintenance standards. Maintenance cost per available
seat mile was 2.0c in fiscal 1999, compared to 1.4c in fiscal 1998.
Fuel costs decreased as a percentage of airline operating revenues to 7.6%
in fiscal 1999 from 10.8% in fiscal 1998. The decrease was due primarily to a
decrease in the average cost of fuel price per gallon to $0.8064.0c in fiscal 19961999 from
$0.7481.0c in fiscal 1995.1998. As a result, fuel costs per ASM increased slightlyavailable seat mile decreased
to 1.8c1.6c in fiscal 19961999 from 1.7c2.0c in fiscal 1995.1998.
Other expenses, which consist primarily of commissions, landing fees,
station rents, computer reservation systems and hull and liability insurance,
increaseddecreased as a percentage of airline operating revenues to 26.9%21.9 % in fiscal 19961999
compared to 24.9%23.7 % in fiscal 1995.1998. The increasedecrease was primarily the result of
SkyWest not incurring commissions on United Express related passenger revenues.
However, due to significant
rate increasesa 17% decrease in customer reservation systems booking fees. In addition,
SkyWest experienced rate increases in landing fees and generalthe average passenger handling charges. Interest expensetrip length, cost per
available seat mile increased as a percentage of airline
operating revenues to 1.0%4.6c in fiscal 19961999 from 0.6%4.3c in fiscal 1995.1998.
LIQUIDITY AND CAPITAL RESOURCES
We had working capital of $160.7 million and a current ratio of 2.8:1 at
June 30, 2000, compared to working capital of $154.2 million and a current ratio
of 2.9:1 at March 31, 2000. During the three months ended June 30, 2000 the
principal sources of funds were $40.5 million generated from operations,
$778,000 of proceeds from the sale of property and equipment and $433,000 from
the issuance of common stock upon exercise of stock options. During the three
months ended June 30, 2000 we invested $28.8 million in flight equipment, $8.1
million in available-for-sale securities, $3.8 million in aircraft deposits,
$2.4 million in buildings and ground equipment and other, $875,000 in rental
vehicles, reduced long-term debt by $2.5 million, and paid cash dividends of
$989,000. These factors resulted in an increase of $10.2 million in cash and
cash equivalents.
Our position in available-for-sale securities, consisting primarily of
investment grade bonds, bond funds and commercial paper, increased to $154.9
million at June 30, 2000, compared to $146.8 million at March 31, 2000. At June
30, 2000, our ratio of long-term debt to stockholders' equity was 16%, compared
to 13% at March 31, 2000.
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In May 2000, SkyWest took delivery of one new Canadair Regional Jet in
connection with SkyWest's expansion and financed the aircraft with long-term
debt. SkyWest has agreed to acquire 54 new Canadair Regional Jets at an
aggregate purchase price of approximately $1.2 billion. SkyWest also has options
to acquire an additional 75 Canadair Regional Jets, of which 55 are at fixed
prices (subject to cost escalations), have delivery schedules, are exercisable
in blocks of five aircraft and expire at varying dates between January 2002 and
February 2008. The increase20 remaining options are at fixed prices (subject to cost
escalations), do not have delivery schedules and do not carry an expiration
date. SkyWest has also entered into a conditional agreement for 40 additional
Canadair Regional Jets at an aggregate cost of $880 million. The conditional
agreement is subject to the final resolution of the scope clause negotiations
between United and their pilot union and expires on January 15, 2001. We have
also secured options on an additional 80 Canadair Regional Jets, of which 40 are
at fixed prices (subject to cost escalations), have delivery schedules, are
exercisable in blocks of five aircraft and expire at varying dates between July
2003 and June 2006. The 40 remaining options are at fixed prices (subject to
cost escalations), do not have delivery schedules and do not carry an expiration
date. Depending on the state of the aircraft financing market at the time of
delivery, we will determine whether to acquire the remaining Canadair Regional
Jets through third-party, long-term loans or operating lease arrangements.
We have significant long-term lease obligations primarily relating to our
aircraft fleet. These leases are classified as operating leases and therefore
are not reflected as liabilities in our consolidated balance sheets. At June 30,
2000, SkyWest leased 82 aircraft under leases with an average remaining term of
approximately 8.8 years. Future minimum lease payments due under all long-term
operating leases were approximately $554.2 million at June 30, 2000. At an 8%
discount factor, the present value of these obligations would be equal to
approximately $365.5 million at June 30, 2000.
Our total long-term debt of $74.0 million was dueincurred in connection with
the acquisition of Brasilia Turboprops and Canadair Regional Jets. Certain
amounts related to the Brasilia Turboprops are supported by continuing subsidy
payments through the export support program of the Federative Republic of
Brazil. The subsidy payments reduced the stated interest rates to an increaseaverage
effective rate of approximately 4.07% on $32.8 million of the long-term debt at
June 30, 2000. The continuing subsidy payments are at risk if the Federative
Republic of Brazil does not meet its obligations under the export support
program. While we have no reason to believe, based on information currently
available, that we will not continue to receive these subsidy payments from the
Federative Republic of Brazil in the future, there can be no assurance that such
a default will not occur. On the remaining Brasilia Turboprop long-term debt financings of
new Brasilia aircraft.
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Nonairline revenues decreased 0.7%$25.4 million, the average effective rate is 3.82% at June 30, 2000 and the
lender has assumed the risk of the subsidy payments. The average effective rate
on the debt related to $34.0the Canadair Regional Jets of $15.8 million was 7.66% at
June 30, 2000 and is not subject to subsidy payments.
We spent approximately $13.5 million for nonaircraft capital expenditures
during the three months ended June 30, 2000, consisting primarily of aircraft
engine overhauls, rotable spare parts, buildings and ground equipment and rental
vehicles.
We have available $10.0 million in fiscal 1996 from
$34.3 million in fiscal 1995. Nonairlinean unsecured bank line of credit with
interest payable at the bank's base rate less one-quarter percent, which was a
net income decreased to $0.4 million in
fiscal 1996 from $1.6 million in fiscal 1995. The decreases were primarily due
to the following factors: (i) a decrease in overall tourist trafficrate of 9.25% at June 30, 2000. We believe that, in the Grand
Canyon/Las Vegas market, (ii)absence of unusual
circumstances, the impact of low-fare competitionworking capital available to us will be sufficient to meet
our present requirements, including expansion, capital expenditures, lease
payments and (iii)
Scenic's difficulty in differentiating its premium touring packages from low
price transportation alternatives. Nonairline expenses increased 6.0% to $33.9
milliondebt service requirements for fiscal 1996 compared to $32.0 million for fiscal 1995. The increase
was primarily attributable to increased fuel costs.at least the next 12 months.
SEASONALITY
As is common in itsthe airline industry, the Company'sSkyWest's operations are favorably
affected by increased travel, historically occurring in the summer months, and
are unfavorably affected by decreased business travel during the months from
November through January and by inclement weather which occasionally results in
cancelled flights, principally during the winter months. However, the CompanySkyWest does
expect some mitigation of the historical seasonal trends due to an increase in
the portion of its operations in contract flying with United. Scenic's
business is also seasonal in nature. A large percentage of Scenic's passengers
are tourists visiting the Las Vegas and Grand Canyon areas during the summer
months.flying.
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QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain quarterly financial and operating
data for the periods indicated:
FISCAL 19971999 FISCAL 1998
------------------------------------------ -------------------------------2000
------------------------------------------------- ----------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
SEPT. 30, DEC. 31,
1996 1996 1996 1997 1997 1997 1997
-------- --------- -------- -------- -------- --------- --------1998 1998 1998 1999 1999
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating revenues...............revenues.............. $ 70,56981,959 $ 75,819101,229 $ 63,651102,255 $ 68,071103,183 $ 72,115 $ 80,302 $ 73,266111,562
Operating income (loss).......... 7,678 7,999 (1,736) 1,476 6,703 12,248 7,752income................ 13,502 17,708 15,276 17,819 20,476
Net income...................... 9,741 12,854 8,525 10,715 13,581
Net income (loss)................ 4,834 4,990 (821) 1,108 4,345 7,510 5,422
Net income (loss) per common share:
Basic.......................... $ 0.480.41 $ 0.500.53 $ (0.08)0.35 $ 0.110.44 $ 0.55
Diluted........................ $ 0.40 $ 0.52 $ 0.34 $ 0.43 $ 0.74 $ 0.53
Diluted........................ 0.48 0.49 (0.08) 0.11 0.43 0.73 0.520.55
Passengers carried.............. 1,017,312 1,321,955 1,322,740 1,238,914 1,365,706
Revenue passenger miles
(000s)... 179,647 188,161 172,235 177,279 189,040 195,752 182,645......................... 215,726 278,281 266,216 255,649 290,590
Available seat miles (000s)...... 344,454 358,437 351,044 359,235 372,901 377,448 363,137..... 393,755 473,025 495,063 482,279 525,104
Passenger load factor............ 52.2% 52.5% 49.1% 49.3% 50.7% 51.9% 50.3%factor........... 54.8% 58.8% 53.8% 53.0% 55.3%
Passenger breakeven load
factor......................... 45.9% 49.0% 45.9% 44.3% 45.4%
Yield per revenue passenger
mile........................... 33.2c 33.2c 32.3c 34.7c 32.5c 34.2c 35.8c37.3c 35.7c 37.7c 39.6c 37.8c
Revenue per available seat
mile........................... 17.7c 17.8c 16.2c 17.5c 16.9c 18.1c 18.3c20.7c 21.3c 20.6c 21.3c 21.1c
Cost per available seat mile..... 16.0c 16.2c 16.4c 16.7c 15.4c 15.8c 16.1cmile.... 17.3c 17.7c 17.5c 17.8c 17.4c
Average passenger trip
(miles)........................ 212 211 201 206 213
FISCAL
FISCAL 2000
------------------------------------ ----------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1999 1999 2000 2000
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating revenues.............. $ 122,737 $ 117,381 $ 123,098 $ 130,387
Operating income................ 24,661 20,180 21,363 25,174
Net income...................... 15,944 13,618 13,961 16,547
Net income per common share:
Basic.......................... $ 0.65 $ 0.55 $ 0.57 $ 0.67
Diluted........................ $ 0.64 $ 0.54 $ 0.55 $ 0.65
Passengers carried.............. 1,487,297 1,354,955 1,295,332 1,401,113
Revenue passenger miles
(000s)......................... 323,282 292,397 290,411 319,830
Available seat miles (000s)..... 550,629 542,050 547,597 565,409
Passenger load factor........... 58.7% 53.9% 53.0% 56.6%
Passenger breakeven load
factor......................... 47.3% 44.8% 44.1% 45.9%
Yield per revenue passenger
mile........................... 37.3c 39.5c 41.7c 40.1c
Revenue per available seat
mile........................... 22.2c 21.6c 22.4c 23.0c
Cost per available seat mile.... 17.9c 17.9c 18.7c 18.6c
Average passenger trip
(miles)........................ 217 216 224 228
LIQUIDITYQUANTITATIVE AND CAPITAL RESOURCES
The Company had working capitalQUALITATIVE DISCLOSURES ABOUT MARKET RISK
Aircraft Fuel
We are exposed to fluctuations in the price and availability of $68.7 millionaircraft
fuel that affect our earnings. Our financial statements reflect both the cost of
fuel we purchase for SkyWest-controlled flights, as well as fuel we purchase for
contract flights, which is subject to reimbursement by our code-sharing
partners. Currently, we have limited our exposure to fuel price increases with
respect to approximately 65% of available seat miles produced, due to
contractual arrangements with Delta and United. These major airlines reimburse
us for the actual cost of fuel on contracted flights. For illustrative purposes
only, we have estimated the impact of market risk using a current ratiohypothetical increase
in fuel price per gallon of 2.4:1 at December 31, 1997, compared10% for the three months ended June 30, 2000 and
1999. Based on this hypothetical assumption, and after considering the impact of
the contractual arrangements, we would have experienced an increase in fuel
expense of approximately $517,000 for the three months ended June 30, 2000 and
$323,000 for the three months ended June 30, 1999. We currently intend to working capital of $45.3 million and a
current ratio of 2.0:1 at March 31, 1997. During the first nine months of fiscal
1998, the Company invested $17.3 million in flight equipment, $7.5 million in
buildings, ground equipment and other fixed assets, reduced long-term debt by
$5.6 million and paiduse
cash dividends of $1.5 million. The principal sources of
cash during the first nine months of fiscal 1998 were $45.8 million providedgenerated by operating activities $11.5 millionto fund any adverse change in the price
of proceeds fromfuel.
Interest Rates
Our earnings are affected by changes in interest rates due to the amounts
of variable rate long-term debt and $7.3
million from the saleamount of marketablecash and securities propertyheld. The
interest rate applicable to variable rate notes may rise and equipment,increase the amount
of interest expense. We would also receive higher amounts of interest income on
our cash and securities held at the issuancetime; however, the market value of common stock resulting from exercisesour
available-for-sale securities would decline. At June 30, 2000, we had variable
rate notes representing 27% of employee stock options.
These factors resulted inour total long-term debt and 8% at June 30, 1999.
For illustrative purposes only, we have estimated the impact of market risk
using a $32.6 millionhypothetical increase in interest rates of one percentage point for both
our variable rate long-term debt and cash and cash equivalents
from $37.8 million as of March 31, 1997 to $70.4 million as of December 31,
1997.
SkyWest has options to acquire ten additional Brasilias and ten additional
CRJs at fixed prices (subject to cost escalation and delivery schedules). The
Brasilia options are exercisable through fiscal 1999 and the CRJ options are
exercisable at any time with no expiration.
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In connection with SkyWest's expansion into San Francisco, SkyWest expects
to acquiresecurities. Based on this
hypothetical assumption, we would have incurred an additional 17 Brasilias. Depending upon$31,000 in
interest expense and received $451,000 in additional interest income for the
outcomethree months ended June 30, 2000 and an additional $14,000 in interest expense
and received $393,000 in additional interest income for the three months ended
June 30, 1999. As a result of current
aircraft acquisition negotiations, SkyWest expects to acquire a combination of
new and used Brasilias. The deliveries are expected to be scheduled between
February and June 1998. The Company also anticipates that SkyWest will incur
costs of approximately $12.0 million associatedthis hypothetical assumption, we believe we could
fund interest rate increases on our variable rate long-term debt with the
acquisitionincreased amounts of additional ground and maintenance facilities, support equipment and spare parts
inventory relatedinterest income. We do not believe we have significant
exposure to the San Francisco expansion.
Depending in large part upon the outcome of current aircraft acquisition
negotiations, the mix of new and used Brasilia aircraft, as well as the state of
the aircraft financing market at the time, management will determine whether to
purchase these Brasilia aircraft with the net proceeds from this offering or
acquire the aircraft through third-party, long-term loans or lease arrangements.
SkyWest has significant long-term lease obligations primarily relating to
its aircraft fleet. These leases are classified as operating leases and
therefore are not reflected as liabilities in the Company's consolidated balance
sheets. At December 31, 1997, SkyWest leased 44 SkyWest aircraft and eight
Scenic aircraft under leases with an average remaining term of approximately 9.6
years. Future minimum lease payments due under all long-term operating leases
were approximately $457.4 million at December 31, 1997.
At December 31, 1997, the Company had outstanding long-term debt, including
current maturities, of approximately $59.7 million. Of the long-term debt, $48.8
million was incurred in connection with the acquisition of Brasilia aircraft and
is subject to subsidy payments through the export support program of the
Federative Republic of Brazil. Thechanging interest rates on $11.0 million of the $48.8
million ofour fixed-rate, long-term debt
are floating based on one month and three month LIBOR.
The subsidy payments reduced the stated interest rates on the $48.8 millioninstruments, which represented 73% of our total long-term debt to an average effective rateat June 30, 2000
and 92% of approximately 4.0% as of December
31, 1997. The debt is payable in either quarterly or semi-annual installments
through January 2006. The remaining $10.9 million ofour total long-term debt was incurred
to purchase ten VistaLiner aircraft operated by Scenic. These ten aircraft were
previously financed under long-term operating lease arrangements and were
purchased in October 1997.
The Company spent approximately $13.3 million for non-aircraft capital
expenditures during the nine months ended December 31, 1997, consisting
primarily of aircraft engine overhauls, aircraft modifications to be made
pursuant to industry-wide FAA directives, buildings and ground equipment and
rental vehicles.
The Company has available $5.0 million in an unsecured bank line of credit
with interest payable at the bank's base rate less one-quarter percent, which
was 8.25% at December 31, 1997. The Company believes that, in the absence of
unusual circumstances and taking into account the proceeds from this offering,
the working capital available to the Company will be sufficient to meet its
present requirements, including expansion, capital expenditure, lease payment
and debt service requirements for at least the next 12 months.
22June 30, 1999.
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BUSINESS
GENERAL
We operate SkyWest operatesAirlines, a regional airline offering scheduled
passenger service primarilywith approximately 1,000 daily departures to 63 cities in the13
western states and Canada. All of our flights are operated as either United
States.Express or The Delta Connection under code-sharing arrangements with United
Airlines or Delta Air Lines.
SkyWest has been a code-sharing partner with United since 1997 and with
Delta since 1987. SkyWest's development of code-sharing relationships with
multiple major airlines enables us to reduce our reliance on a single major
airline partner and Continental since 1987increase the stability of our operating results. For the
year ended March 31, 2000, 64% of SkyWest's operating revenues was derived from
United code-share service and 1995, respectively. Effective October
1, 1997, SkyWest expanded its operations through a code-sharing agreement with
United. SkyWest offers a convenient schedule36% was derived from Delta code-share service.
Approximately 76% of SkyWest's current flights are structured as contract
flights. On contract flights, United or Delta controls scheduling, ticketing,
pricing and frequent flights designed to
maximize connectingseat inventories, and local traffic. Operating primarily from its hubs in Salt
Lake City, Utah and Los Angeles, California, SkyWest serves 46 cities in 12
states and Canada with approximately 580 daily flights. In Salt Lake City and
Los Angeles, SkyWest is compensated with a fixed fee for
each flight completed, with eligibility for additional compensation if certain
service quality levels are achieved. Additionally, United and Delta, under
contractual arrangements, have agreed to reimburse SkyWest for the largest regional airline with marketactual cost
of fuel on all of SkyWest's contract flights. On SkyWest-controlled flights,
SkyWest controls scheduling, ticketing, pricing and seat inventories, and shares
of
passengers enplaned of 99% and 33%, respectively. SkyWest operates as the Delta
Connection in Salt Lake City and Los Angeles, as United Express in Los Angeles
and as the Continental Connection in selected California markets. On January 19,
1998, SkyWest executed an addendum to its agreementrevenues with United expandingor Delta according to a formula for those SkyWest
passengers connecting to a United- or Delta-operated flight.
SkyWest's United Express operations to include approximately 168 daily flights
connecting twelve California markets with United's San Francisco hub beginning
June 1, 1998. To support operations at the San Francisco hub, SkyWest expects to
acquire 17 additional aircraft and spend approximately $12 million for related
ground and maintenance facilities, support equipment and spare parts inventory.
SkyWest operates one of the youngest fleets in the airline industry,
consisting of fiftyfleet consists of:
- Ninety-two 30-seat BrasiliasBrasilia Turboprops, with an average age of 4.4 years5.7 years;
and
ten- Twelve 50-seat CRJsCanadair Regional Jets, with an average age of 3.15.0 years.
In December 1996, SkyWest
completedorder to accommodate our expanding operations, we have placed a strategic transition outfirm
order to acquire an additional 54 Canadair Regional Jets over the next four
years, and a conditional order to acquire an additional 40 Canadair Regional
Jets. We believe we will be able to place all 94 firm and conditional-order
aircraft into code-sharing service under fixed-fee contract-flying arrangements
with United, Delta or other major carriers. If we acquire all such 94 aircraft,
we will also be eligible to exercise options to acquire an additional 155
Canadair Regional Jets, 95 of which have been assigned scheduled delivery dates
through 2005, and the Metroliner turbo-propbalance of which have unspecified delivery dates.
All of our aircraft are "cabin class" planes, which reduced the number of aircraft types operated by SkyWest from three to
two. The transition enabled SkyWest to upgrade to an all cabin-class fleet of
larger aircraft with higher operating efficiencies and greater passenger
acceptance. Cabin-class aircraftmeans they offer
stand-up headroom, overhead and under-seatunderseat storage, lavatories and flightin-flight
attendant service. The addition of United as a code-sharing partner andFor the completion of
SkyWest's transition for an all cabin-class fleet, together with other factors,
contributed to the Company's achievement offiscal year ended March 31, 2000, we generated record
consolidated operating revenues and net income for the nine months ended December 31, 1997.
Consolidated operating revenues increased 7.4% to $225.7 million from $210.0of $474.8 million and net income increased 91.9%of $57.1
million, as compared to $17.3operating revenues of $388.6 million from $9.0and net income of
$41.8 million for the ninefiscal year ended March 31, 1999.
INDUSTRY OVERVIEW
Major, Low-fare and Regional Airlines
The airline industry in the United States has traditionally been dominated
by between five and ten "major airlines," including United, Delta, American
Airlines, Continental Airlines, Northwest Airlines and US Airways. The major
airlines offer scheduled flights to most major cities within the United States
and throughout all or part of the world and also serve numerous smaller cities.
The major airlines benefit from wide name recognition, a multi-decade operating
history, control over gates and substantial financial resources. According to
the Air Transport Association, during 1999, the major airlines collectively
reported revenues of $84.2 billion.
"Low-fare" airlines, such as Southwest Airlines and Frontier Airlines,
generally offer fewer conveniences to travelers and have lower cost structures
than major airlines, which permits them to offer flights to and from many of the
same markets as the major airlines, but at lower prices.
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Regional airlines, including SkyWest, Comair, Atlantic Southeast Airlines,
Mesa, Mesaba, Midway, Midwest Express, Horizon Airlines and Atlantic Coast
Airlines, typically operate smaller aircraft on lower-volume routes than major
airlines. Several regional airlines, including Comair, Atlantic Southeast
Airlines and Horizon Airlines, are wholly-owned subsidiaries of major airlines.
In contrast to low-fare airlines, regional airlines generally do not try to
establish an independent route system to compete with the major airlines.
Rather, regional airlines typically enter into relationships with one or more
major airlines, pursuant to which the regional airline agrees to use its
smaller, lower-cost aircraft to carry passengers booked and ticketed by the
major airline between a hub of the major airline and a smaller outlying city. In
exchange for such services, the regional airline is either paid a fixed
per-flight fee by the major airline or receives a percentage of applicable
ticket revenues. See "-- Relationship of Regional and Major Airlines."
Growth of the Regional Airline Industry
The regional airline sector of the airline industry experienced annual
passenger growth of 7.6% between 1989 and 1999. We believe that the growth of
the number of passengers using regional airlines and the revenues of regional
airlines during the last decade is attributable to a number of factors,
including:
- Regional airlines work with, and often benefit from the strength of, the
major airlines. Since many major airlines have incorporated increased use
of regional airlines into their future growth strategies, many regional
airlines have expanded, and may continue to expand, with the major
airlines they serve.
- Regional airlines tend to have a more favorable cost structure and leaner
corporate culture than many major airlines. Many regional airlines were
founded in the midst of the highly competitive market that developed
following deregulation of the airline industry in 1978.
- Many major airlines have determined that an effective method for
retaining customer loyalty and maximizing system revenue, while lowering
costs, is to outsource shorter, low-volume routes to more cost-efficient
regional airlines flying under the major airline's code and name.
- The regional airlines are gradually replacing smaller turboprop planes
with 32 to 79 seat regional jets. Such regional jets feature cabin class
comfort, low noise levels, high speed and range similar to the 120-seat
plus aircraft operated by the major airlines, but are cheaper to acquire
and operate because of their smaller size. The increasing use of regional
jets has led, and may continue to lead, to greater public acceptance of
regional airlines.
Relationship of Regional and Major Airlines
Regional airlines generally enter into code-sharing agreements with major
airlines, pursuant to which the regional airline is authorized to use the major
airline's two-letter flight designator codes to identify the regional airline's
flights and fares in the central reservation systems, to paint its aircraft with
the colors and/or logos of its code-sharing partner and to market and advertize
its status as a carrier for the code-sharing partner. For example, SkyWest flies
out of Los Angeles, San Francisco, Seattle/Tacoma and Portland as United Express
and out of Salt Lake City as The Delta Connection. In addition, the major
airline generally provides reservation services, ticket stock, certain ticketing
services, ground support services and gate access to the regional airline, and
both partners often coordinate marketing, advertising and other promotional
efforts. In exchange, the regional airline provides a designated number of low
capacity (usually between 30 and 70 seats) flights between larger airports
served by the major airline and surrounding cities, usually lower-volume
markets.
The financial arrangements between the regional airlines and their
code-sharing partners usually involve either a revenue-sharing or a per-flight
fixed-fee arrangement.
- Revenue-Sharing Arrangements. Under a revenue-sharing arrangement, the
major airline and regional airline negotiate a proration formula,
pursuant to which the regional airline receives a percentage of the
ticket revenues for those passengers traveling for one portion of their
trip on the
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regional airline and the other portion of their trip on the major
airline. Substantially all costs associated with the regional airline
flight are borne by the regional airline. In such a revenue-sharing
arrangement, the regional airline realizes increased profits as ticket
prices and passenger loads increase or fuel prices decrease and,
correspondingly, realizes decreased profits as ticket prices and
passenger loads decrease or fuel prices increase.
- Fixed-Fee Arrangements. Under a fixed-fee arrangement, the major airline
generally pays the regional airline a fixed fee per flight, with
additional incentives based on completion of flights, on-time performance
and correct baggage handling. In addition, the major and regional airline
often enter into a fuel swap pursuant to which the major airline bears
the risk of the price of fuel rising above, and receives the benefit of
the price of fuel falling below, a fixed price. Regional airlines benefit
from a fixed-fee arrangement because they are sheltered from most of the
elements that cause volatility in airline earnings -- variations in
ticket prices, passenger loads and fuel prices. However, regional
airlines in fixed-fee arrangements do not benefit from a positive trend
in ticket prices, passenger loads or fuel prices and, because the major
airlines absorb most of the risks, the margin between the per-flight
fixed fee and expected per-flight costs tends to be smaller than the
margins associated with revenue-sharing arrangements.
BUSINESS STRATEGY
Our business strategy consists of the following elements:
- Focus on Markets in the Western United States. For the three months ended
DecemberMarch 31, 19972000, SkyWest held the largest market share of regional airline
traffic at San Francisco International Airport (100% of regional airline
passengers), Salt Lake City International Airport (99% of regional
airline passengers) and 1996, respectively.
BUSINESS STRATEGY
The key elementsLos Angeles International Airport (65% of
SkyWest's business strategy are:
Capitalizeregional airline passengers). We believe these markets, as well as the
Pacific Northwest markets which SkyWest began serving in 1998 and the
Denver market which SkyWest will begin serving in October 2000, offer
attractive opportunities for long-term, profitable growth. Generally,
western routes are less congested and, due to longer stage lengths than
many eastern routes, offer significant time savings and convenience over
alternate forms of travel. Many western cities are experiencing
significant population and economic growth, and benefit from mild
year-round weather. We also believe SkyWest is well positioned to
capitalize on United's recently increased presence in western markets.
- Build Upon Relationships withWith Code-Sharing Partners. Historically,We attribute
significant growth in traffic and profitability to SkyWest's growth has been assisted bycode-sharing
agreements with United and Delta, two of the world's four largest
airlines. SkyWest views the development of code-sharing agreements
with Delta, United and Continental. SkyWest views the recent addition of United
as a code-sharing partnerthese relationships as a
significant opportunity to further increase its
traffic and profitability by serving United's Los Angeles and San Francisco hubs
and to develop code-sharing relationships in other hubs served by United.achieve stable, long-term growth. SkyWest
works closely with its code-sharing partners to expand service to
existing markets, open new markets and schedule convenient and frequent
and
profitable flights. SkyWest believesWe believe that the principal reason itSkyWest has attracted
multiple code-sharing partners is its delivery of high-quality, reliable
service.high quality customer
service with an all-cabin class fleet. SkyWest's competitive fares and
ability to offer passengers participation in the frequent flyer programs of
Delta, United and ContinentalDelta are attractive incentives for passengers to fly on
SkyWest. SkyWestWe also believesbelieve that multiple code-sharing agreements with major
carriers diversifies operating risk by reducing reliance on a single
major carrier.
Expand Fleet Size- Provide Excellent Customer Service. We believe SkyWest's insistence on
excellent customer service in every aspect of its operations (personnel,
flight equipment, in-flight amenities, on-time performance, flight
completion ratios and Increase Utilizationbaggage handling) has resulted in customer loyalty
and preference for SkyWest as a regional carrier. We also believe that
excellent customer service is largely responsible for SkyWest's multiple
code-sharing relationships as United and Delta seek to Serve Newbuild customer
loyalty and Existing
Markets. SkyWest seeks to expand and more efficiently utilize its Brasilia and
CRJ aircraft to serve existing and new, profitable markets.preference for major carriers through high quality customer
service provided by their regional partners. SkyWest believes that, Brasilias are most efficiently used on shorter stage lengthsfor
the year ended March 31, 2000, its flight completion ratio was among the
highest of all regional airlines at 98.6%. SkyWest also believes its
on-time performance ratio was among the highest of all regional carriers
at 93.5%.
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Maintaining high performance ratios increases customer satisfaction and adds to
provide
frequentthe Company's profitability by meeting incentive payment standards included in
SkyWest's contract-flying arrangements with United and convenient service. For example, asDelta. SkyWest commenced service as
United Expresshas
achieved these performance measures by:
- operating a modern fleet of aircraft,
- maintaining spare aircraft to assure a high rate of flight completion,
and
- pursuing its commitment to high quality maintenance.
- Operate Limited Types of Aircraft. SkyWest operates two types of
aircraft, Brasilia Turboprops and Canadair Regional Jets. By simplifying
its fleet, SkyWest has gained efficiencies in Los Angeles in October 1997, Brasilias were shifted from less
efficient, non-hub based routes to more efficient Los Angeles hubtraining, maintenance and
spoke
routes connecting with its code-sharing partners. SkyWest's expanded role as
United Express in San Francisco will require the addition of 17 Brasilias by
June 1, 1998. CRJsflight operations. Generally, Canadair Regional Jets are utilized on
longer routes to supplement existing service by major carriers, to
replace larger jets on routes where service is discontinued by 23
25
major
carriers, to replace SkyWest's BrasiliasBrasilia Turboprops as markets growdevelop and demand
increases, and to develop new markets. The design of the Canadair
Regional Jets gives SkyWest the flexibility to configure seating
arrangements and capacities to match market demands. SkyWest believes
its utilization of CRJs is among the highest of
all regional carriers operating CRJs.
Increase Profitability.that Brasilia Turboprops are most efficiently used on shorter stage
lengths to provide frequent and convenient service. For example, as
SkyWest focuses on increasing profitability through
maximizing RASM and minimizing CASM. Revenues are maximized by delivery of
reliable, on-time flights, excellent customerexpanded service in Los Angeles with United in October 1997,
Brasilia Turboprops were shifted from less efficient, utilization of
a revenue management system and the development of profitable code-sharing
relationships. SkyWest uses its recently acquired state-of-the-art revenue
management systemnon-hub based
routes to analyze markets and booking patterns and assist in
scheduling and seat inventory management to maximize revenues. The Company
believes SkyWest's development of multiple code-sharing relationships has
resulted in increased revenues without a proportionate increase in costs. A
Company-wide emphasis on cost management and more efficient utilization of
existing resources, together with the completed transition from three to two
aircraft types, has resulted in lower overhead and lower unit costs while
maintaining excellent customer service. CASM has declined in each fiscal year
since 1993 and decreased from 16.2c for the nine months ended December 31, 1996
to 15.8c for the nine months ended December 31, 1997. These reductions in CASM
have been achieved notwithstanding a decline in stage lengths as Brasilias have
been shifted to shorterLos Angeles hub and spoke routes connecting with
code-sharing partners. Expansion into additional hubs will offer similar
opportunities.
- Emphasize Contract Flying. We believe that the shift from revenue-sharing
arrangements to fixed-fee contract flying has reduced SkyWest's exposure
to fluctuations in fuel prices, fare competition and passenger volumes.
In some circumstances, contract flying also enables SkyWest to operate
routes selected by United or Delta for strategic purposes, even though
those routes might not offer margins that are attractive enough to
motivate SkyWest to offer SkyWest-controlled flights. Approximately 65%
of SkyWest's current operations are conducted under contract-flying
arrangements with United and Delta. SkyWest anticipates that its contract
flying operations will increase utilization.
Provide Excellent Customer Service. SkyWest believes its insistence on
excellent customer service in every aspectas a percentage of its operations (including
personnel, flight equipment, in-flight amenities, baggage handling and on-time
performance and flight completion ratios) has increased customer loyalty.
SkyWest also believes that excellent customer service is largely responsible for
its multiple code-sharing relationshipstotal daily
flights as Delta,additional United and Continental seekDelta routes are added to build customer loyalty and preference by partneringthe SkyWest
system; however, we anticipate that margins associated with high-quality regional
carriers. SkyWest completed its transition to an all cabin-class fleet in
December 1996, in part to provide larger, more comfortable aircraft for its
passengers. SkyWest believes that, forcontract
routes will be less than the nine months ended December 31, 1997,
its on-time performance ratio and flight completion ratio were the highest of
all regional airlines at 95.5% and 98.5%, respectively.margins SkyWest has achieved
these performance measures by operating onehistorically generated
on mature SkyWest-controlled routes.
- Foster Our Employees' Best Efforts. With our anticipated growth in
capacity, it is important that we encourage the best efforts of our
employees and minimize turnover in all positions, particularly those
positions that require us to bear significant training expenses. In
addition to offering competitive compensation and benefits, we take a
number of steps to make SkyWest an attractive place to work and build a
career. For example, we have made Company-wide stock option grants twice
since 1995; we contribute 5% of net income to employees' accounts within
our 401(k) plan; and we match employee contributions to those accounts,
up to a maximum of 6% of the youngest fleetsemployee's compensation. We also have an
incentive plan that allows every employee to benefit from our success. In
fiscal 2000, we contributed 10% of our net income to this incentive plan,
in which all employees with two years of service (excluding management)
participate equally. That year, each full-time employee received $4,176
in incentive checks. We have never had a work stoppage, and none of our
employees is represented by a union.
GROWTH OPPORTUNITIES
During the five years ended March 31, 2000, our total operating revenues
expanded at an annual rate of 20.8%, and we increased the number of daily
flights from approximately 550 in 1995 to approximately 1,000 in 2000. All of
our growth during the five-year period was internally generated. We have not
made any material business acquisitions. We believe that we are well-positioned
for continued growth for several reasons, including the following:
- West Coast For United. United does not currently operate any regional
jets from the Los Angeles, San Francisco, Seattle/Tacoma or Portland
markets. We expect United to deploy most of the 20
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Canadair Regional Jets we have designated for United service, and
possibly additional Canadair Regional Jets, to medium and
longer-distance, low-volume markets from such airports.
- Denver For United. We do not currently operate out of Denver
International Airport, but were recently selected by United to commence
Denver operations in October 2000 with two Canadair Regional Jets. In May
2000, United announced that it will build a new $100 million regional
aircraft terminal in Denver. Construction of the facility is scheduled to
begin in 2001, and the terminal is expected to feature up to 36 regional
aircraft gates. We believe that United's Denver hub could support up to
100 regional jets over the next several years. Because SkyWest is the
only United Express carrier located west of Denver, we believe SkyWest is
well-positioned to operate as United Express flying westward out of
Denver.
- Intermountain Flights For Delta. During 1999, Delta replaced its service
to six markets with our Canadair Regional Jets as part of its
rationalization process at Salt Lake City. Delta's rationalization
process involves an increase in the airline industrynumber of longer-haul east/west Delta
flights into Salt Lake City, and continuingthe transitioning of its commitmentregional
flights to high quality maintenance.SkyWest. With its smaller aircraft, SkyWest can often
substitute several flights for each Delta flight, providing increased
frequency of service at a lower overall cost. As such rationalization
continues, we believe that Delta could substitute our Canadair Regional
Jets for many of its flights between Salt Lake City and other cities.
Delta currently has no system-wide limitations on the number of regional
jets operated by its code-sharing partners.
CODE-SHARING AGREEMENTS
The Company's Code-Sharing AgreementsOur code-sharing agreements with Delta, United and ContinentalDelta authorize SkyWestus to use their
two-letter flight designator codes ("DL," "UA"UA" and "CO," respectively)"DL") to identify itsour flights and
fares in majorthe central reservation systems, to paint itsour aircraft with thetheir
colors and/or logos of its
code-sharing partners and to market and advertize itsadvertise our status as the Delta
Connection, United Express or
ContinentalThe Delta Connection carrier. The Code-Sharing
Agreements either allocate to the Company a portion of the total passenger fareUnder our code-sharing agreements with United, we
are compensated on a formula or otherfixed-fee per-flight basis subject to periodic adjustments, or provide for
payments for contracted flyingon 96% of our United Express
flights and on a per departurerevenue-sharing basis for the remaining 4% of our United
Express flights. Under our code-sharing agreement with incentives related
to numberDelta, we are compensated
on a revenue-sharing basis for approximately 86% of passengers carriedour Delta Connection
Flights, and customer service. SkyWest'son a fixed-fee per-flight basis on the remaining 14% of Delta
Connection flights. In addition, under both our United and our Delta
code-sharing agreements, our passengers participate in the frequent flyer programs
of its code-sharing partners. Under
the Code-Sharing Agreements, Delta, Unitedmajor airline, and Continental providethe major airline provides additional services to the Company, including providing reservation services andsuch as
reservations, ticket stock, issuing tickets, providingissuance, ground support services and gate access and
coordinating cooperativeaccess. We pay
negotiated fees with respect to such services. We also coordinate our marketing,
advertising and other promotional efforts.
SkyWest pays negotiated fees to its code-sharing partners for services provided.efforts with United and Delta.
The significant terms of each of the Code-Sharing Agreementsour code-sharing agreements are as
follows:
Delta.The United Code-Sharing Agreement. We provide a designated number of
flights per day as United Express between Los Angeles, San Francisco,
Seattle/Tacoma, Portland and designated outlying cities. United provides
reservation services, tickets, baggage tags, ticket wallets and similar items
with respect to such flights and also controls scheduling, ticket prices and
seat inventories with respect to such flights. In exchange for providing the
designated number of flights and performing our other obligations under the
United agreement, we receive from United a fixed fee per flight, an additional
amount per passenger, and per-passenger incentives based upon on-time
performance, flight completion rates and correct baggage handling. We have also
entered into a fuel reimbursement arrangement with United, pursuant to which
United has agreed to reimburse SkyWest hasfor the actual cost of fuel for all of
SkyWest's contract flights. We presently operate 706 flights per day (96% of our
United Express flights) pursuant to such provisions.
We also operate as a United Express carrier between certain cities with
respect to which we do not receive a fixed fee per flight. With respect to such
flights, we control scheduling, inventory and pricing subject to United's
concurrence that such service does not adversely affect its other operations in
the region. In lieu of a fixed fee with respect to such flights, we share
revenues with United based upon a portion of passenger fares. We presently
operate 26 flights per day (4% of our United Express flights) pursuant to such
provisions.
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The United agreement terminates on May 31, 2008; however, United may
terminate the United agreement in whole or in part at any time for any or no
reason upon 180 days' notice. The United agreement may also be terminated upon
30 days' notice for cause and in the event of a merger or other transaction in
which substantially all of the assets of SkyWest are transferred to another
entity.
Under the United agreement, if we desire to merge with another company,
sell or otherwise transfer our assets to a third party, or issue capital stock
exceeding 5% of our outstanding capital stock (30% if the stock is issued in a
public offering) to such third party, we are required to give United notice of
the proposed transaction, offer to complete such transaction with United instead
of such third party, negotiate with United in good faith terms and conditions on
which we could complete such transaction with United and offer United any terms
and conditions we offer to such third party. If we are unable to agree with
United, we may enter into negotiations with other parties, but we may not enter
into any agreement on terms more favorable to any such party than those we
offered to United. The United agreement also provides that United must concur in
any marketing or code-sharing relationship with any other carrier with respect
to city pairs served by United.
The Delta Code-Sharing Agreement. We have operated as the"The Delta
Connection atConnection" from Delta's Salt Lake City and Los Angeles hubs since 1987. As of
June 30, 2000, 204 of our Delta flights per day (86% of our Delta flights) are
subject to a revenue-sharing arrangement, and the remaining 34 Delta flights per
day (14% of our Delta flights) are subject to a fixed-fee arrangement. Delta has
entered into a fuel reimbursement arrangement with respect to flights subject to
the fixed-fee arrangement, pursuant to which Delta has agreed to reimburse
SkyWest for the actual cost of fuel for all of SkyWest's contract flights.
The Delta Agreement was revised in 1990agreement establishes procedures, allocates responsibility and
modified effective April 1, 1997 to facilitate interline connections in Salt
Lake Citysets standards for such matters as schedule publication, billing and Los Angeles, to adjust proration formulas (the portion of the
passenger fare allocated to SkyWest)accounting
procedures, ticketing, customer services, inconvenienced customers and
to permit SkyWest to seek other
code-sharing relationships in Los Angeles.insurance. The Delta Agreementagreement continues until April 2002June 20, 2010, but is subject to
earlier termination under various circumstances, including upon 180 days'
advance notice by either party for any or no reason.
The Delta Agreement was modifiedreason or upon the occurrence of a
merger or similar transaction in April 1997 to be noncancellable (except for
cause) for a two-year period.which our company or business is acquired.
Delta currently owns approximately 15.1%12.5% of our outstanding common stock
(without giving effect to the outstanding Common Stock,issuance of additional shares of common stock to
be sold in this offering), which was acquired under the Delta Stock Option
Agreement entered into in January 1987, concurrently with the initial Delta
Agreement. See "Description of
Capital Stock -- Common Stock."
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United. In July 1997, SkyWest and United entered into an Agreement in
Principle which contemplated execution of a "United Express Agreement"
(subsequently signed on January 19, 1998) pursuant to which SkyWest became a
United Express carrier at United's Los Angeles hub effective on October 1, 1997.
In January 1998, SkyWest and United also entered into an addendum to the United
Express Agreement, pursuant to which SkyWest will become the United Express
carrier at United's San Francisco hub, beginning June 1, 1998.
Under the United Express Agreement, SkyWest currently operates flights in
Los Angeles city pairs on a contract basis; i.e., United pays SkyWest a flat
rate per flight departure, an additional amount per passenger and per passenger
incentives based upon on-time performance, flight completion rates and number of
passengers carried measured against agreed upon objectives. United controls
scheduling, ticketing, pricing and seat inventories in these city pairs. SkyWest
also operates as a United Express carrier in certain city pairs where SkyWest
receives no contract payments and United controls scheduling, inventory and
pricing. United must also concur in any marketing or code-sharing relationship
with any other carrier with respect to operations covered by the United Express
Agreement. United has consented to SkyWest's Code-Sharing Agreement with Delta
in designated city pairs in Los Angeles.
The term of the United Express Agreement is for five years ending in
September 2002 with respect to operations in Los Angeles and for ten years,
ending in May 2008 with respect to operations in San Francisco, subject to
termination by United upon 180 days' prior notice. United may, however,
terminate the United Express Agreement for cause upon 30 days' written notice.
Continental. SkyWest entered into a Code-Sharing Agreement with Continental
in October 1995, which provided for service to selected California markets. The
Continental agreement expired in October 1997. SkyWest has continued to operate
as the Continental Connection without an agreement, but on the same terms as
provided in the expired agreement.
Execution of a new agreement with Continental
requires the consent of United.
MARKETS The Company believes itsAND ROUTES
Markets. We believe that our development of hub operations in theLos Angeles,
San Francisco, Seattle/ Tacoma and Portland with United, and Salt Lake City and Los Angeles marketswith
Delta, has been a principal factor in the growth of SkyWest'sour flight operations.operations and
will facilitate implementation of our growth and operating strategy. As of January 1, 1998, SkyWestJune
30, 2000, we scheduled 91326 daily departuresflights to or from Salt Lake City. SkyWest's departures are scheduledLos Angeles International
Airport, 200 daily flights to facilitate
connections with 171 scheduledor from San Francisco International Airport, 238
daily Delta departuresflights to or from Salt Lake City International Airport and 180 daily
flights to or from Seattle/Tacoma International Airport and Portland
International Airport combined. We expect to commence operations with two
Canadair Regional Jets from Denver International Airport on behalf of United in
October 2000.
At the San Francisco International Airport, Salt Lake City International
Airport and Los Angeles International Airport, SkyWest is the largest regional
airline, with market shares as of January 1, 1998.March 31, 2000 of 100% of regional airline
passengers in San Francisco, 99% of regional airline passengers in Salt Lake
City and 65% of regional airline passengers in Los Angeles. As of June 30, 2000,
our primary code-sharing partner in such cities, United, operated 492 daily
flights to or from San Francisco, with 54% of total traffic, and 438 daily
flights to or from Los Angeles, with 23% of total traffic. As of the same date,
SkyWest was the largest regional carrier
at the Salt Lake City hub, with a market share of approximately 99% among
regional carriers and Delta was the largest carrier atoperated 290 daily flights to or from Salt Lake City, with a67% of total
market sharetraffic. In 17 of approximately 70%.
At itsthe 63 cities that SkyWest serves, it is the only scheduled
commercial air service.
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33
Routes. The following tables identify the cities we served as of June 30,
2000:
ARIZONA:
Yuma
CALIFORNIA:
Bakersfield
Carlsbad
Chico
Crescent City
Eureka/Arcata
Fresno*
Imperial/El Centro
Inyokern
Los Angeles
hub, where it is also the largest regional carrier, with
a 33% market share among regional carriers, SkyWest scheduled 170 daily
departures as of January 1, 1998, of which 120 departures were under the United
code and were scheduled to connect with 178 scheduled daily United departures.
As of January 1, 1998, United was the largest carrier at Los Angeles
International Airport ("LAX"), with a total market share of approximately 23%.
As of January 1, 1998, SkyWest also scheduled 50 daily departures at LAX under
the Delta and Continental codes, connecting with 59 Delta departures and 23
Continental departures. As of January 1, 1998, Delta and Continental held market
shares at LAX of approximately ten percent and three percent, respectively. Of
the 288 SkyWest total daily flights under the United code as of January 1, 1998,
240 were contracted flights.
The Company believes its Los Angeles operations have benefitted from the
location of SkyWest's gates and customer service facilities in Terminal 6, one
of the principal terminals at LAX. SkyWest's location in Terminal 6 permits
SkyWest passengers to more quickly and conveniently transfer to and from major
carriers, including SkyWest's code-sharing partners.
25
27
As of January 1, 1998, United was also the largest carrier atMerced
Modesto
Monterey
Ontario
Orange County*
Oxnard
Palm Springs*
Redding
Sacramento
San Francisco
International Airport, with approximately 250 scheduled daily flights,
representing a total market share of approximately 60%. SkyWest presently
anticipates that itsDiego
San Francisco operations will consist of 168 scheduled
daily flights, which the Company believes will represent a market share of
approximately 87% among regional carriers inFrancisco*
San Francisco. Although SkyWest has
announced its intention to commence service inJose
San Francisco on June 1, 1998,
the routes which SkyWest proposes to operate are preliminary and remain subject
to modification in response to a number of factors, including SkyWest's ability
to locate sufficient aircraft, obtain necessary maintenance facilities and hire,
train and integrate qualified pilots, flight attendants, maintenance personnel
and customer service personnel. All of SkyWest's flights under the United code
in San Francisco will be contracted flights.
ROUTES
Operating from its hubs inLouis Obispo
Santa Barbara
Santa Maria
Santa Rosa
Visalia
COLORADO:
Colorado Springs*
Denver*+
Grand Junction*
IDAHO:
Boise*
Idaho Falls*
Pocatello
Sun Valley
Twin Falls
MONTANA:
Billings*
Bozeman*
Butte*
Helena*
Missoula*
West Yellowstone
NEBRASKA
Omaha*
NEW MEXICO:
Albuquerque*
NEVADA:
Elko
Las Vegas
Reno*
OREGON:
Eugene
Medford
Portland*
Redmond
SOUTH DAKOTA:
Rapid City*
UTAH:
Cedar City
Salt Lake City
and Los Angeles, SkyWest serves
approximately 46 cities in 12 states and Canada with approximately 580 scheduled
daily flights. In addition, on June 1, 1998, SkyWest expects to commence service
in San Francisco with 168 scheduled daily flights.
SkyWest operates all of its ten CRJs and 15 of its Brasilias out of Salt
Lake City, with CRJs utilized primarily on longer stage lengths to approximately
18 destinations and Brasilias utilized to serve approximately 13 destinations.
SkyWest provides service to southern California markets, which are characterized
by high frequency service on shorter stage lengths, with 35 Brasilias, resulting
in high aircraft utilization. For example, SkyWest provides service between LAX
and San Diego every half hour and service between LAX and Palm Springs every
hour.
The following table identifies the cities served by SkyWest as of January
1, 1998, as well as the cities SkyWest proposes to serve upon commencement of
its service in San Francisco:
ARIZONA: COLORADO: SOUTH DAKOTA:
Tucson Colorado Springs Rapid City
Yuma Grand Junction UTAH:
CALIFORNIA: IDAHO: Cedar City
Arcata/Eureka* Boise Salt Lake City
Bakersfield* Idaho Falls St. George
Burbank Pocatello Vernal
Chico* Sun Valley WASHINGTON:
Fresno Twin Falls Pasco
Imperial/El Centro MONTANA: WYOMING:
Los Angeles Billings Casper
Merced* Bozeman Cody
Modesto* Butte Jackson Hole
Monterey* Helena CANADA:
Ontario Missoula Vancouver, B.C.
Orange County West Yellowstone
Palm Springs NEW MEXICO:
Redding* Albuquerque
Sacramento* NEVADA:
San Diego Elko
San Francisco Las Vegas
San Jose Reno
San Luis Obispo* OREGON:
Santa Barbara* Eugene
Santa Maria Portland
Santa Rosa*
St. George
WASHINGTON:
Bellingham
Pasco*
Seattle/Tacoma
Spokane
Yakima
WYOMING:
Casper*
Cody
Jackson Hole
CANADA:
Calgary*
Vancouver, B.C.*
- ---------------
* Service to be provided from San Francisco commencing Juneby SkyWest utilizing Canadair Regional Jets.
+ Effective October 1, 1998. Of the
cities to be served by SkyWest's expanded San Francisco operations,
Bakersfield, Monterey, San Luis Obispo and Santa Barbara are currently served
from SkyWest's hubs in Los Angeles or Salt Lake City.
262000.
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2834
FLIGHT EQUIPMENT
As of December 31, 1997, SkyWestJune 30, 2000, we operated a fleet of 60104 aircraft, consisting of 50 Brasilias92
Brasilia Turboprops and 10 CRJs,12 Canadair Regional Jets, as described in the following
table:
SCHEDULED AVERAGE
AIRCRAFT FLIGHT CRUISING AVERAGE
--------------- PASSENGER RANGE SPEED AGE
OWNED LEASED CAPACITY (MILES) (MPH) (YEARS)
----- ------ --------- --------- -------- -------
Brasilias.................. 16 34Brasilia Turboprop................. 21 71 30 450 300 4.4300 5.7
Canadair Regional Jets.....Jet.............. 1 11 50 850 530 5.0
In addition, United has agreed to contract for the use of 10 additional
Canadair Regional Jets on a fixed-fee basis, and Delta has agreed to contract
for the use of 34 additional Canadair Regional Jets on a fixed-fee basis. Based
on such agreements, we have placed a firm order to acquire an additional 54
Canadair Regional Jets over the next four years, and a conditional order to
acquire an additional 40 Canadair Regional Jets. If we acquire all such 94
aircraft, we will also be eligible to exercise options to acquire an additional
155 Canadair Regional Jets, 95 of which have been assigned scheduled delivery
dates through 2005, and the balance of which have unspecified delivery dates. We
have no orders for additional aircraft other than the Canadair Regional Jets.
The following table outlines the number of Canadair Regional Jets we are
scheduled to receive during each of the next four fiscal years and the expected
size and composition of our fleet following the receipt of such Canadair
Regional Jets. The information presented in the table is based on our firm order
for 54 Canadair Regional Jets and does not include any of the 40 Canadair
Regional Jets subject to our conditional order or any aircraft subject to
options. If we acquire any Canadair Regional Jets that are subject to
conditional orders or options, the number of Brasilia Turboprops in flight will
be reduced from the number indicated below.
DURING THE FISCAL YEAR ENDED MARCH 31,
-----------------------------------------
2000 2001 2002 2003 2004
----- ----- ----- ----- -----
Additional 50-seat Canadair Regional Jets................. -- 10 50 600 530 3.17 15 26 7
Total Canadair Regional Jets.............................. 11 18 33 59 66
Total Brasilia Turboprops................................. 92 91 86 75 70
The BrasiliasCanadair Regional Jets are turbo-prop,the quietest commercial jet currently
available and offer many of the amenities of larger commercial jet aircraft,
including a stand-up cabin, overhead and underseat storage, lavatories,
in-flight snack and beverage service, and, in many cases, more leg room than
larger jets. The speed of Canadair Regional Jets is comparable to larger
aircraft operated by the major airlines, and they have a range of up to 1,200
miles; however, because of their smaller size and efficient design, the
per-flight cost of operating a Canadair Regional Jet is less than that of a
120-seat or larger jet aircraft. As of June 30, 2000, we operated our 12
Canadair Regional Jets out of Salt Lake City to approximately 22 destinations,
generally on longer stage lengths.
The Brasilia Turboprops are 30-seat, pressurized aircraft designed to
operate more economically over short-haul routes with lower passenger load
factors than larger jet aircraft. These factors make it economically feasible
for SkyWest to provide high frequency service in markets with relatively low
volumes of passenger traffic. Passenger comfort features of the Brasilia
Turboprop aircraft include stand-up headroom, a lavatory, overhead baggage
compartments and flight attendant service. During fiscal 1997,We expect that United and Delta will
want us to continue to operate Brasilia Turboprops in markets where passenger
load and other factors make the Company acquired 15 additionaloperation of a Canadair Regional Jet
impractical. As of June 30, 2000, we operated 92 Brasilia aircraftTurboprops out of Salt
Lake City, Los Angeles, San Francisco, Seattle/Tacoma and negotiated the early termination of its 18 remaining
Metroliner leases. The Company has secured optionsPortland to
purchase an additional tenapproximately 52 destinations. Our Brasilia aircraft at fixed prices (subject to cost escalation and delivery
schedules). These optionsTurboprops are exercisable through fiscal 1999.
The CRJ is one of the quietest commercial jets currently available and
offers many of the amenities of larger commercial jet aircraft, including a
stand-up cabin, overhead and under-seat storage, lavatories, in-flight snack and
beverage service, and,generally used in many cases, more legroom than larger jets. The Company
also has options at fixed prices (subject to cost escalation and delivery
schedules) for ten additional CRJsour
California markets, which are exercisable at any time with no
expiration.
Scenic's operations are currently conducted using 18 specially modified
sight-seeing VistaLiners and 23 smaller aircraft.characterized by high frequency service on shorter
stage lengths.
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35
GROUND FACILITIES
Employees of the CompanyOPERATIONS
Our employees perform substantially all routine airframe and engine
maintenance and periodic inspection of equipment. Maintenance is performed
primarily at facilities in Salt Lake City, Utah and Fresno and Palm Springs,
California. SkyWest leasesWe lease a 90,000 square foot aircraft maintenance and training
facility at the Salt Lake City International Airport and ownsown a 56,600 square
foot maintenance facility in Palm Springs. TheOur Salt Lake City facility consists
of a 40,000 square foot maintenance hangerhangar and 50,000 square feet of training
and other facilities to support SkyWest'sour growing hub operations. The facility was
constructed and is owned by the Salt Lake City Airport Authority. SkyWest isWe are leasing
the facility under an operating lease arrangement over a 36-year term, expiring
in August 2021. The Palm Springs maintenance facility supports SkyWest'sour expanding
southernSouthern California operations. SkyWest leasesWe also lease a 90,000 square-foot maintenance
hangar and 15,000 square-foot administrative and support facility in Fresno,
California.
We lease ticket counters and check-in, boarding and other facilities in the
passenger terminal areas in the majority of the airports it serveswe serve and staffsstaff
these facilities with SkyWestour personnel. DeltaUnited and UnitedDelta provide ticket handling
and ground support services for SkyWest in 2132 of the 4663 airports SkyWest serves.
Scenic owns a new terminalOur employees provide substantially all training to SkyWest pilots and
hanger facility in Page, Arizona consisting
of 11,500 square feet of officemaintenance personnel, utilizing our training facilities located at Salt Lake
City, Utah and terminal space and 22,000 square feet of
maintenance hanger space. ScenicFresno, California.
We also leases a new terminal and hanger facility
in Las Vegas, Nevada consisting of 39,500 square feet of office and terminal
space and 28,500 square feet of maintenance hanger space.
The Company also owns itsown our corporate headquarters, located in a 63,000 square foot
building in St. George, Utah.
27
29
SCENIC AIR TOURS
Scenic currently provides air tours and general aviation servicesNATIONAL PARKS TRANSPORTATION
In order to maintain our focus on our core business, on July 21, 2000 we
completed the Grand Canyon and other scenic regionssale of northern Arizona, southern Utah and
southern Nevada. Scenic's operations are conducted principally from leased
boarding, tour and flight facilities at the North Las Vegas Airport in Las
Vegas, Nevada. Since the acquisition of Scenic in June 1993, the Company has
operated Scenic as a premium tour provider. In response to increased price
competitionNational Parks Transportation, Inc., which has resulted in decreased revenues and earnings at Scenic, the
Company has changed top management, broadened its offering of tour packages to
appeal to cost conscious customers, implemented cost control measures and
restructured the financing of flight equipment and facilities. The Company
believes Scenic is currently well-positioned to pursue opportunities to increase
revenues and profitability of the air tour business.
NPT AUTOMOBILE RENTAL SERVICES
NPT provides car
rental services at six airports served by SkyWest, including Page, Arizona, Ely
and Elko, Nevada and St. George, Cedar City and Vernal, Utah. NPT's services are provided through a fleetRevenues from the
operations of Avis vehicles
pursuant to a franchise agreement between NPT and Avis.National Parks Transportation, Inc. represented less than 1% of
our revenues during the fiscal year ended March 31, 2000.
EMPLOYEES
As of January 1, 1998, the CompanyJune 30, 2000, we employed 2,3003,593 full-time equivalent employees,
consisting of 796including 1,487 pilots and flight attendants, 246 maintenance
personnel, 9501,425 customer service personnel,
63 reservation443 mechanics and marketingother maintenance personnel and 245 employees engaged in accounting,238 administration and other
functions. The Company'ssupport
personnel. Our employees are not currently represented by any union. The Company isWe are
aware, however, that collective bargaining group organization efforts among itsour
employees occur from time to time and expectsexpect that such efforts will continue in
the future. During August 1999, the question of whether or not to join the Air
Line Pilots Association was submitted to our pilots, who voted against joining
the association by a narrow margin. Under governing rules, our pilots may again
vote on this issue as early as August 2000. If suchunionizing efforts are
successful, the Companywe may be subjected to risks of work interruption or stoppage andand/or
incur additional expenses associated with union representation of itsour employees.
In connection with SkyWest'sour proposed expansion into northern California, it anticipates that
it will hireacquisition of at least 47554 Canadair Regional
Jets and related expansion, we anticipate hiring approximately 2,500 additional
employees, many of whom may be represented by a union in their current
employment. The Company hasWe have never experienced any work stoppages and considers itsconsider our
relationship with itsour employees to be good.
COMPETITION AND ECONOMIC CONDITIONS
The airline industry is highly competitive. SkyWestWe not only competescompete with other
regional airlines, some of which are owned by or are operated as code-sharing
partners of major airlines, but also facesface competition from low-fare airlines and
major airlines on certainmany of our routes. SkyWest isWe are the dominant regional airline
operating out of the Salt Lake City International Airport; however, Southwest
Airlines, Co., a national low farelow-fare airline, also operates out of the Salt Lake City
International Airport,which results in significant price competition at the
Salt Lake City hub. Competition in the southernSouthern California and Pacific Northwest
markets, which are
serviced by SkyWestwe service from its hubour hubs in Los Angeles, Seattle/Tacoma and
Portland, is particularly intense, with a large number of carriers in these
markets. In itsour markets served from LAX,
SkyWest's principal competitors include Wings West, Inc. (operating as "American
Eagle"), Trans States Airlines, Inc. (operating as "US Air Express" and "Trans
World Express") and with Mesa Airlines, Inc. (operating as "Mesa Airlines" and
"United Express"). The Company believes itsLos Angeles
32
36
International Airport, our principal competitor is American Eagle. In our
markets served from airports in San
Francisco will be Trans States Airlines, Inc. (operating as "US Air Express").Seattle/Tacoma and Portland, our principal
competitor is Horizon Airlines.
The principal competitive factors in the regional airline industry are fare
pricing, customer service, routes served, flight schedules, aircraft types and
code-sharing relationships. Certain of the Company'sour competitors are larger and have
significantly greater financial and other resources than the Company.we do. Moreover,
federal deregulation of the industry allows competitors to rapidly enter the Company'sour
markets and to quickly discount and restructure fares. The airline industry is
particularly susceptible to price discounting because airlines incur only
nominal costs to provide service to passengers occupying otherwise unsold seats.
Generally, the airline industry is highly sensitive to general economic
conditions, in large part due to the discretionary nature of a substantial
percentage of both business and leisurepleasure travel. In the past, many airlines have
reported decreased earnings or substantial losses resulting from periods of
economic recession, heavy fare discounting and other factors. Economic downturns
combined with competitive pressures have contributed to 28
30
a number of bankruptcies
and liquidations among major and regional carriers. NegativeThe effect of economic
conditions may havedownturns is somewhat mitigated by our fixed-fee arrangements with respect to
certain flights. Nonetheless, the per passenger component in such fee structure
would be affected by a material adverse effect on regional
airlines, including the Company.economic downturn. In addition, if our major airline
code-sharing partners experience longer-term decline in passenger load or are
injured by low ticket prices or high fuel prices, they will likely seek to
reduce our fixed fees or cancel a number of flights in order to reduce their
costs.
REGULATION
All interstate air carriers, including SkyWest, and Scenic, are subject to regulation
by the DOT, the FAA and certain other governmental agencies. Regulations
promulgated by the DOT primarily relate to economic aspects of air service. The
FAA requires operating, air worthiness and other certificates,certificates; approval of
personnel who may engage in flight maintenance or operations activities,activities; record
keeping procedures in accordance with FAA requirements,requirements; and FAA approval of
flight training and retraining programs. The DOT and the FAA, as
well as otherGenerally, governmental agencies regulating the Company,
enforce their regulations through, among other mechanisms, (i) certifications, which
are necessary for the Company'sour continued operations, and (ii) proceedings, which can result in
civil or criminal penalties or revocation of operating authority. The FAA can
also issue maintenance directives and other mandatory orders relating to, among
other things, grounding of aircraft, inspection of aircraft, installation of new
safety-related items and the mandatory removal and replacement of aircraft parts
that have failed or may fail in the FAA believes might present a safety hazard.
The Company believes it isfuture.
We believe that we are operating in material compliance with FAA
regulations and holdshold all necessary operating and air worthiness certificates and
licenses. The Company incursWe incur substantial costs in maintaining itsour current certifications
and otherwise complying with the laws, rules and regulations to which it iswe are
subject. The Company'sOur flight operations, maintenance programs, record keeping and
training programs are conducted under FAA approved procedures. The Company doesWe do not operate
at any airports where landing slots are restricted.
All air carriers are required to comply with federal law and regulations
pertaining to noise abatement and engine emissions. All air carriers are also
subject to certain provisions of the Federal Communications Act of 1934, as
amended, because of their extensive use of radio and other communication
facilities. The Company isWe are also subject to certain other federal and state laws relating
to protection of the environment, labor relations and equal employment
opportunity. Management believes that the Company iswe are in compliance in all material
respects with these laws and regulations.
INSURANCE
In the opinion of management, the Company maintainsWe maintain insurance policies that we believe are of types customary in
the industry and in amounts it believeswe believe are adequate to protect it and its propertyus against
material loss. The policies principally provide coverage for public liability,
passenger liability, baggage and cargo liability, property damage, including
coverages for loss or damage to itsour flight equipment, and workers' compensation
insurance. There is no assurance, however, that the amount of insurance carried by the Companywe carry
will be sufficient to protect itus from material loss.
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37
LEGAL PROCEEDINGS
The Company is a partyWe are subject to certain legal and administrative actions which we
consider routine to our business activities. As of June 30, 2000 we believe,
after consultation with our legal proceedings incident to its
business. Incounsel, that the opinionultimate outcome of management, none of such proceedings is expected toany
pending legal matters will not have a material adverse effect on the Company.
29our financial
position, liquidity or results of operation.
34
3138
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following are theour executive officers and directors of the Company:directors:
NAME AGE POSITION
---- --- --------
Jerry C. Atkin............ 48Atkin............................ 51 Chairman, President and Chief Executive Officer
Ron B. Reber.............. 43Reber.............................. 46 Executive Vice President and Chief Operating Officer
President -- National Parks Transportation, Inc.
Bradford R. Rich.......... 36Rich.......................... 39 Executive Vice President, Chief Financial Officer
and Treasurer
Sidney J. Atkin........... 62Atkin........................... 65 Vice Chairman
J. Ralph Atkin............ 54Atkin............................ 57 Director
Mervyn K. Cox............. 60Cox............................. 63 Director
Ian M. Cumming............ 56Cumming............................ 59 Director
Henry J. Eyring........... 34Eyring........................... 36 Director
Robert G. Sarver.......................... 39 Director
Hyrum W. Smith............................ 56 Director
Steven F. Udvar-Hazy...... 51 Director
Hyrum W. Smith............ 53Udvar-Hazy...................... 54 Director
Jerry C. Atkin joined the Companyus in July 1974 as a member of our Board of Directors
and as our Director of Finance. In 1975, he assumed the office of President and
Chief Executive Officer. He was elected Chairman of our Board of Directors in
1991. Prior to employment by the Company,with us, Mr. Atkin was employed by a public accounting
firm and is a certified public accountant. Mr. Atkin is a board member of each
of (i) The Regence Group, a medical insurance holding company, and its subsidiary, Regence Blue Cross Blue Shield of Utah, a medical
insurance company, and (ii) Zions
Bancorporation, a Utah bank holding company. Mr. Atkin has servedHe also serves as a directorthe 2000 Chairman
of the Company since 1974.Regional Airline Association.
Ron B. Reber has served in various capacities since joining the Companyus in 1977. He
is currently Executive Vice President and Chief Operating Officer of SkyWest
Airlines, Inc. with general responsibility for flight operations, maintenance,
customer service, market planning, marketing, revenue control and pricing.
He also serves as
President of NPT.
Bradford R. Rich joined the Companyus in 1987 as Corporate Controller. He was
previously employed with a public accounting firmArthur Andersen LLP and is a certified public
accountant. He is currently Executive Vice President, Chief Financial Officer
and Treasurer with responsibility for financial accounting, treasury, public
reporting, investor relations, internal audit and management information systems.technology.
Sidney J. Atkin has served as a member of our Board of Directors since
1973, and was elected Vice Chairman of our Board of Directors in 1988. From 1984
to 1988, he served as our Senior Vice President. For more than five years, Mr.
Atkin has been Presidentpresident of Sugarloaf Corp., a Utah corporation involved in the
operation of restaurants and motels. Mr. Atkin has served as a
director of the Company since 1973.hotels.
J. Ralph Atkin wasis the founder of the Company andour company, served as our President and
Chief Executive Officer from 1972 to 1975.1975, and has served as a member of our
Board of Directors since 1972. He served as Chairman of theour Board of Directors
from 1972 to 1991. From 1984 to 1988 he served as our Senior Vice President of the Company.President.
From March 1991 to January 1993, he was Directordirector of Businessbusiness and Economic Developmenteconomic
development for the State of Utah. He served as Chief
Executive Officerchief executive officer of
EuroSky, a company organized to explore the feasibility of a regional airline in
Austria, during 1994 and 1995. Mr. Atkin is an attorney and is currently engaged
in the private practice of law in St. George, Utah.
Mr.
Atkin is also a director of Fairchild Aircraft Incorporated and Fairchild
Aircraft Services Incorporated. Mr. AtkinMervyn K. Cox has served as a directormember of the
Companyour Board of Directors since 1972.
Mervyn K. Cox has been for more than five years1974.
He is also an orthodontist engaged in private practice, and has also engaged in
the development and management of real estate.
Mr. CoxIan M. Cumming has served as a directormember of the Companyour Board of Directors since 1974.
Ian M. Cumming1986.
He is Chairmanchairman of Leucadia National Corporation, a diversified financial
services holding company principally engaged in personal and commercial lines of
property and casualty insurance, life and health insurance, banking and
35
39
lending manufacturing and the trade stamps business. He has served
as a
30
32
director of the Company since 1986.manufacturing. Mr. Cumming is also a director of Allcity Insurance
Company, a property and casualty insurer, and MK Gold Company, a gold mining and
Allcity Insurance Company, bothexploration company. In addition, he is the chairman of which are public companies.Barbados Light & Power
Co., a Caribbean utilities company.
Henry J. Eyring has beenserved as a member of our Board of Directors since
1995. He is also the director of the MBA Program at Brigham Young University's
Marriott School of Management. From 1989 to 1998, he was employed since 1989 by the Monitor
Company, an international management consulting firm based in Cambridge,
Massachusetts. AtMassachusetts, and he continues to serve as a consultant to the Monitor he serves as President of Monitor Institute, the subsidiary of Monitor
that consults in the public sector.Company.
He is also Chief Operating Officer of the
Huntsman Cancer Institute. He is a director of Global Microtechnologies,Layton Construction, a computer retailingconstruction company, and Assist Cornerstone Technologies, a software
development company, is a
member of the Board of Trustees of Southern Utah University and is Chairman-elect of Artspace, a non-profit real estate
developer. Mr. EyringUniversity.
Robert G. Sarver has served as a member of our Board of Directors since
January 2000. He also serves as chairman of the board and chief executive
officer of California Bank and Trust, positions he has held since 1995. He has
been the executive vice president of Zions Bancorporation, a bank holding
company, since October 1998 and is currently on its board of directors. Mr.
Sarver also serves as an executive director of the CompanySouthwest Value Partners, a real
estate investment company.
Hyrum W. Smith has served as a member of our Board of Directors since 1995.
He is also co-founder and current vice chairman of Franklin Covey Co., a
publicly-held learning and performance solutions company dedicated to increasing
the effectiveness of individuals and organizations. Mr. Smith served as chief
executive officer and chairman of Franklin Covey Co. from February 1997 to March
1998, a position he also held from April 1991 to September 1996. Mr. Smith was
senior vice president of Franklin Quest Co. from December 1984 to April 1991.
Franklin Covey Co. was formerly known as Franklin Quest Co. until its merger
with Covey Leadership Center, Inc. in May 1997.
Steven F. Udvar-Hazy has served as a member of our Board of Directors since
1986. He is also currently President, Directorpresident, director and Chief Executive
Officerchief executive officer of
International Lease Finance Corporation, a wholly owned subsidiary of American
International Group, Inc., which leases and finances commercial jet aircraft
worldwide. Mr. Udvar-Hazy has been engaged in aircraft leasing and finance for
3235 years. He has served as a director of the Company since 1986.
Hyrum W. Smith is co-founder, Chief Executive Officer and Chairman of
Franklin Covey Co., a public company in business to help people gain control
over their lives and increase their productivity. Mr. Smith has been the Chief
Executive Officer of Franklin Covey Co. since February 1997, a position he also
held from April 1991 to September 1996. Mr. Smith was Senior Vice President of
Franklin Quest from December 1984 to April 1991. Franklin Covey Co. was formerly
known as Franklin Quest Co. prior to its merger with Covey Leadership Center,
Inc. in May 1997. Mr. Smith has served as a director of the Company since 1995.
J. Ralph Atkin and Sidney J. Atkin are brothers. Jerry C. Atkin is their
nephew.
KEY EMPLOYEES
In addition to the executive officers listed above, the following are
certain of our key employees of SkyWest or Scenic:employees:
NAME AGE POSITION
---- --- --------
James K. Boyd.......... 40Boyd............................. 43 Vice President -- Customer Service
Eric D. Christensen.... 39Christensen....................... 42 Vice President -- Planning and Secretary
H. Michael Gibson...... 48Gibson......................... 51 Vice President -- Maintenance
Steven L. Hart......... 36Hart............................ 39 Vice President -- Market Development
Brad Holt.............. 38Holt................................. 41 Vice President -- Flight Operations
Michael J. Kraupp...... 36Kraupp......................... 39 Vice President -- Controller
David A. Young......... 56 President -- Scenic
James K. Boyd joined the Companyus in 1981. He is currently Vice President -- Customer
Service with responsibility for SkyWest ticket counter, gate and ramp personnel at all SkyWest cities.personnel.
He also has also served as Director of Stations and Station Manager.
Eric D. Christensen joined the Companyus in 1985. He is currently Vice
President -- Planning and Secretary with responsibility for aircraft
performance
and acquisition analysis,acquisitions, fleet planning and risk management. He has also served as
Assistant to the President and Director of Finance.
H. Michael Gibson joined the Companyus in 1988. He is currently Vice
President -- Maintenance with responsibility for aircraft maintenance, control
of parts,
inventory control and maintenance personnel training. He also has also served as
Director of Quality Assurance for SkyWest.
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40
Steven L. Hart joined the Companyus in 1986. He is currently Vice President -- Market
Development with responsibility for flight scheduling, revenue control and
pricing. He also has also served as Director of Market Planning, Market Analyst and
Director of Marketing.
Brad Holt joined the Companyus in 1983. He is currently Vice President -- Flight
Operations with responsibility for flight crew supervision and dispatch, flight
safety and flight quality standards. He also has also served as Director of Flight
Standards, Chief Flight Instructor, Check Airman and Line Pilot.
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33
Michael J. Kraupp joined the Companyus in 1991 as financial controller for
SkyWest.1991. He has been Vice
President -- Controller since 1993 with responsibility for financial accounting
and public reporting. He previously was previously employed with a
public accounting firmby Arthur Andersen LLP and is a
certified public accountant.
David A. Young joined37
41
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the Companybeneficial
ownership of our common stock as of June 30, 2000, and as adjusted to reflect
the sale of the shares of our common stock offered hereby, by:
- each selling stockholder;
- each person known by us to be a beneficial owner of more than 5% of the
outstanding shares of our common stock;
- each of our directors; and
- all directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares indicated. The address for each of
the directors and officers listed below is 444 South River Road, St. George,
Utah 84790.
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
---------------------- SHARES --------------------
NAME AND ADDRESS OF BENEFICIAL OWNERS SHARES PERCENT OFFERED SHARES PERCENT
------------------------------------- ---------- -------- ------- --------- -------
Delta Air Holdings, Inc.(1)............. 3,107,798 12.5% -- 3,107,798 11.4%
Hartsfield Atlanta International
Airport
Atlanta, Georgia 30320
Wellington Management Co. LLP(2)........ 1,705,800 6.9 -- 1,705,800 6.3
75 State Street
Boston, Massachusetts 02109
Nicholas-Applegate Capital Management... 1,353,243 5.5 -- 1,353,243 5.0
600 West Broadway, 29th Floor
San Diego, California 92101
Jerry C. Atkin.......................... 1,029,828(3) 4.1 30,000 999,828 3.7
Sidney J. Atkin......................... 888,464(4) 3.6 30,000 858,464 3.1
Mervyn K. Cox........................... 332,500(5) 1.3 10,000 322,500 1.2
Bradford R. Rich........................ 64,401(6) * -- 64,401 *
Ron B. Reber............................ 63,026(7) * -- 63,026 *
Ian M. Cumming.......................... 34,000(5) * 30,000 4,000 *
Steven F. Udvar-Hazy.................... 16,500(8) * -- 16,500 *
Hyrum W. Smith.......................... 16,000(5) * 4,000 12,000 *
Robert G. Sarver........................ 8,500 * -- 8,500 *
Henry J. Eyring......................... 8,100(8) * 7,000 1,100 *
J. Ralph Atkin.......................... 4,000(8) * 4,000 -- --
All executive officers and directors, as
a group (11 persons).................. 2,465,319(9) 9.8% 115,000 2,350,319 8.6%
- ---------------
* Represents less than 1% of total outstanding shares.
(1) Pursuant to a Stock Option Agreement we have executed with Delta, we have
granted to Delta certain registration rights which would entitle Delta to
sell shares of common stock in 1997the offering. Delta has not indicated to us
whether it intends to sell shares of our common stock in the offering.
(2) Data for Wellington Management Co. LLP is as President of Scenic Airlines,
Inc. on July 4, 1997. He was previously employedMarch 31, 2000, the most
recent publicly available data for their stockholdings.
(3) Includes 414,470 shares held separately by Carolyn J. Atkin, Mr. Atkin's
wife, and 105,000 shares issuable upon exercise of options.
(4) Includes 604,000 shares held by a family limited partnership of which Mr.
Atkin and his wife are the general partners, 265,744 shares held by Mr.
Atkin as Chief Executive Officertrustee of Air Fiji from 1993 to July 1997a trust for the benefit of his family, 10,720 shares
held by his wife and Chief Executive Officer8,000 shares issuable upon exercise of Air Macau from
1992 to 1993. Mr. Young holds a Ph.D. in aerospace management.options.
(5) Includes 16,000 shares issuable upon exercise of options.
(6) Includes 63,000 shares issuable upon exercise of options.
(7) Includes 38,000 shares issuable upon exercise of options.
(8) Includes 4,000 shares issuable upon exercise of options.
(9) Includes 274,000 shares issuable upon exercise of options.
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DESCRIPTION OF CAPITAL STOCK
The Company'sOur authorized capital stock consists of 40,000,000 shares of Common Stock,common stock,
no par value, (and we are requesting stockholder approval to increase the
authorized number of shares of common stock to 120,000,000) and 5,000,000 shares
of Preferred Stock,preferred stock, no par value.
COMMON STOCK
As of January 16, 1998June 30, 2000, there were 10,317,15224,790,254 shares of Common Stockour common stock
issued and outstanding that were held by approximately 1,1001,000 stockholders of
record. No shares of our preferred stock have been issued.
Subject to the rights of the holders of Preferred Stock,our preferred stock, each holder of
Common Stock shall haveour common stock has equal ratable rights to dividends from funds legally
available therefor, if, as and when declared by the Boardour board of Directors of the
Company.directors. The
declaration and payment of all dividends, however, is subject to the discretion
of the Boardour board of Directors.directors. In the event of our liquidation or dissolution or the
winding up of theour affairs, of the Company, the holders of Common
Stockour common stock are entitled to share
ratably in all assets remaining after payment of liabilities and amounts, if
any, due to holders of Preferred Stock.our preferred stock. Holders of Common Stockour common stock are
entitled to one vote per share on all matters whichthat stockholders may vote on at
all meetings of our stockholders. The holders of Common
Stockour common stock do not have
cumulative voting rights. The holders of Common Stockour common stock do not have
preemptive, subscription or conversion rights, and there are no redemption or
sinking fund provisions applicable thereto. All the outstanding shares of Common Stockour
common stock are fully paid and nonassessable, and the shares of Common Stockour common
stock to be outstanding upon completion of this offering will be fully paid and
nonassessable.
Pursuant to the terms of the DeltaStock Option Agreement in the event
the Company proposeswe have executed with
Delta, if we propose to issue any additional voting securities and for so long
aswhile Delta owns
at least ten percent10% of the outstanding shares of Common Stockour common stock and theour code-sharing
agreement with Delta Connection Agreement or a substantially similar agreement with Delta remains in
effect, between Delta and the Company,then Delta has a preemptive right to acquire, on the same terms and
conditions as the proposed issuance of securities, the number of voting
securities which,that, when added to all voting securities then owned by Delta, would
provide Delta with the number of votes necessary to preserve Delta's percentage
voting interest. Delta has elected not to exercise
its preemptive right under the Delta Option Agreement with respect to this
offering. Also pursuant to the terms of the Delta Option Agreement, in the event
Delta desires to sell any of its shares of Common Stock, italso has the right to demand uprequire us to two separate registrationsregister its shares
of our common stock for re-sale under the Securities Act of such shares
of Common Stock. For an unlimited number of times, Delta may, within fifteen
days of receipt of notice fromand has the Company that the Company proposesright to
register
under the Securities Act shares of Common Stock, require the Company to include
shares of Common Stock owned by Delta in such registration.piggyback on any registration we initiate other than at Delta's request.
PREFERRED STOCK
The Company isWe are authorized to issue Preferred Stockpreferred stock from time to time in one or more
series without stockholder approval. No shares of Preferred Stockpreferred stock are presently
outstanding. The BoardWith respect to our preferred stock, our board of Directorsdirectors is
authorized, without any further action by theour stockholders, of the Company, toto: (i) divide the
Preferred Stockpreferred stock into series; (ii) designate each such series; (iii) fix and
determine dividend rights; (iv) determine the price, terms and conditions on
which shares of Preferred Stockpreferred stock may be redeemed; (v) determine the amount
payable to holders of Preferred Stockpreferred stock in the event of voluntary or involuntary
liquidation; (vi) determine any sinking fund provisions; and (vii) establish any
conversion privileges. Thus, the Boardour board of Directors,directors, without stockholder
approval, could authorize the issuance of Preferred Stockpreferred stock with rights which
could decrease the amount of earnings and assets available for distribution to
holders of shares of Common Stockour common stock or otherwise adversely affect the rights
of the holders of Common
Stock.our common stock. Any future issuance of Preferred Stockpreferred stock may
have
32
34 the effect of delaying or preventing a change in control of the Companyour company and
may adversely affect the voting and other rights of the holders of Common Stock.our common
stock. At present, the Company haswe have no plans to issue any Preferred Stock.preferred stock.
BOARD OF DIRECTORS
The Company's BoardOur board of Directors,directors currently consists of nine directors who are elected
for one yearone-year terms at the annual meetings of the Company's
shareholders. As a result of the resignation of a director, as discussed below,
the Board of Directors currently has eight members.our stockholders. Pursuant to the
terms of the Delta Stock Option Agreement, for as long as Delta owns at least
10% of the outstanding Common Stock,shares of our common stock, it has the Company willright to require
us to include at least one Delta designee, of
Delta reasonably acceptable to the Companyus, on the
slate of nominees for election as directors nominated by the Company's Boardour board of Directorsdirectors,
and willwe are further required to use itsour reasonable best
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efforts to assure that such individual is elected to the
Company's Boardour board of Directors.directors.
From August 9, 1988 to April 1, 1997, the date of the resignation of Delta's
most recent nominee, Delta had continuous representation on the Company's Boardour board of
Directorsdirectors through such nominees. Since the
resignation, noApril 1997, Delta has not designated a
nominee has servedto serve on the Company's Boardour board of Directors.
Delta did not nominate any candidate for election to the Board of Directors at
the most recent annual meeting of shareholders.directors.
UTAH CONTROL SHARES ACQUISITION ACT
The Utah Control Shares Acquisition Act (the "Control Shares Act") provides
that any person or entity whichthat acquires 20% or more of the outstanding voting
shares"control shares" of a publicly-heldpublicly held Utah
corporation in a "control share acquisition" is denied voting rights with
respect to the acquired shares, unless a majority of the disinterested
stockholders of the corporation elects to restore such voting rights. The
Control Shares Act provides that a person or entity acquires "control shares"
whenever it acquires shares that, but for the operation for the Control Share
Act would bring its voting power within any of the following three ranges: (i)
20% to 33 1/3%, (ii) 33 1/3% to 50%, or (iii) 50% or more. A "control share
acquisition" is generally defined as the direct or indirect acquisition of
either ownership or voting power associated with issued and outstanding control
shares. The directors or stockholders of a corporation may elect to exempt the
stock of the corporation from the provisions of the Control Shares Act through
adoption of a provision to that effect in the articles of incorporation or
bylaws of the corporation. The
Company'sOur Restated Articles of Incorporation (the "Restated Articles") and Bylaws as amended (the "Bylaws") do
not exempt our common stock from the Company's Common Stock fromprovisions of the Control Shares Act.
Under the Control Shares Act, a person or entity that acquires control
shares pursuant to a control share acquisition acquires voting rights with
respect to those shares only to the extent granted by a majority of
disinterested stockholders of each class of capital stock outstanding prior to
the acquisition. The stockholders of thea corporation must consider the status of thosethe voting
rights of control shares of the corporation acquired in a control share
acquisition at the next annual or special meeting of stockholders.stockholders held following
such acquisition. The acquiror may accelerate the decision and require the
corporation to hold a special meeting of stockholders for the purpose of
considering the status of those rights if the acquiror (i) files an "acquiring
person statement" with the corporation, and (ii) agrees to pay all expenses of
the meeting. If the stockholders do not vote to restore voting rights to the
control shares, the corporation may, if its articles of incorporation or bylaws
so provide, redeem the control shares from the acquiror at fair market value. If
the acquiror fails to file an acquiring person statement, the corporation may,
if its articles of incorporation or bylaws so provide, redeem the control shares
at any time within 60 days of the acquiror's last acquisition of control shares,
regardless of the decision of the stockholders to restore voting rights. The Company'sOur
Restated Articles of Incorporation and the Bylaws do not provide for such
redemption. Unless otherwise provided in the articles of incorporation or bylaws
of a corporation, stockholders are entitled to dissenters' rights if the control
shares are accorded full voting rights and the acquiror has obtained majority or
more control shares. TheOur Restated Articles of Incorporation and the Bylaws do not
deny such dissenters' rights to the Company'sour stockholders.
The provisions of the Control Shares Act may discourage companies
interested in acquiring a significant interest in or control of us.
UNITED'S RIGHT OF FIRST REFUSAL
Under our code-sharing agreement with United, if we desire to merge with
another company, sell or otherwise transfer our assets to a third party, or
issue capital stock exceeding 5% of our outstanding capital stock (30% if the
Company.stock is issued in a public offering) to such third party, we are required to
give United notice of the proposed transaction, offer to complete such
transaction with United instead of such third party, negotiate with United in
good faith terms and conditions on which we could complete such transaction with
United and offer United any terms and conditions we offer such third party. If
we are unable to agree with United, we may enter into negotiations with other
parties, but we may not enter into any agreement on terms more favorable to any
such party than those we offered to United. The existence of this right of first
refusal may adversely affect our ability to negotiate or consummate the sale of
all or part of our business to a company other than United and may adversely
affect the terms of a sale to any company, including United.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stockour common stock is Zions First
National Bank, N.A., Salt Lake City, Utah.
3340
3544
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement dated
, 2000, the Underwriting Agreement, the
Underwritersunderwriters named below, for whom The Robinson-Humphrey Company, LLC and SBC
Warburg Dillon Readthrough their representative,
Raymond James & Associates, Inc. are acting as representatives (collectively, the
"Representatives"), have severally agreed to purchase from the Company,us and
the Company has agreed to sell toselling stockholders the Underwriters, therespective number of shares of Common
Stockcommon stock set
forth opposite the Underwriters' respective names.their names below:
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
The Robinson-Humphrey Company, LLC..........................
SBC Warburg Dillon ReadRaymond James & Associates, Inc. ..........................................................
---------
Total............................................. 1,400,000Total..................................................... 2,615,000
=========
The Underwriting Agreementunderwriting agreement provides that the obligations of the
several
Underwriters thereunderunderwriters are subject to approvalcertain conditions precedent, including the absence
of any materially adverse change in our business and the receipt of certain
legal matters by
counselcertificates, opinions and to various other conditions.letters from us and our attorneys and independent
auditors. The nature of the Underwriters'
obligationsunderwriters' obligation is such that they are
committed to purchase all shares of Common
Stockcommon stock offered hereby if any of the
shares are purchased.
We have granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of 392,250
shares of our common stock at the public offering price, less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
Underwritersunderwriters may exercise this option solely to cover over-allotment, if any, in
connection with the sale of our common stock. If the underwriters exercise this
option, each underwriter will be obligated, subject to certain conditions, to
purchase a number of additional shares of our common stock proportionate to the
underwriter's initial amount set forth in the table above.
The following table summarizes the underwriting discounts and commissions
to be paid by us to the underwriters and the expenses payable by us for each
share of our common stock and in total. This information is presented assuming
either no exercise or full exercise of the underwriters' option to purchase
additional shares of common stock.
PER WITHOUT WITH
SHARE OPTION OPTION
------- ------- -------
Underwriting discounts and commissions payable by us........ $ $ $
Expenses payable by us...................................... $ $ $
We have been advised that the underwriters propose to offer the shares of
Common Stock directlyour common stock to the public at the public offering price set forth on the
cover page of this Prospectusprospectus and to certain dealers at suchthat price less a
concession not in excess of $ per share. The Underwritersunderwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share in sales to
certain other dealers. AfterThe offering of the offering, the public offering price and other selling terms may be
changed.
The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 210,000 shares of Common Stock atcommon stock is made for
delivery when, as and if accepted by the public offering price
less the underwriting discount set forth on the cover pageunderwriters and subject to prior sale
and to withdrawal, cancellation or modification of this Prospectusoffering without notice.
The underwriters reserve the right to cover over-allotments, if any. Ifreject an order for the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
in whole or in part.
We, certain of Common Stock to be purchased by each of them, as shown in the above table,
bears to the 1,400,000 shares of Common Stock offered hereby.
The Company, itsour executive officers, our directors and directors (beneficially owning, in
the aggregate, 1,247,430 shares of Common Stock)selling
stockholders have agreed that they will not
offer, sell or otherwise dispose of any shares of Common Stock (other than the
shares offered by the Company in the offering), subject to certain exceptions, for a period of 90 days fromafter the date of this
Prospectusprospectus we and they will not, without the prior written consent of The Robinson-Humphrey Company, LLC on behalfRaymond
James & Associates, Inc., directly or indirectly:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of or otherwise dispose of or transfer any
shares of our common stock or securities convertible into or exchangeable
or exercisable for shares of our common stock, whether now owned or
acquired after the Underwriters.
Pursuantdate of this prospectus by any such person or with
respect to which any such person acquires after the Underwriting Agreement,date of this
prospectus the Company has agreed to indemnify
the several Underwriters against certain liabilities, including liabilitiespower of disposition, or file any registration statement
under the Securities Act.Act with respect to any of the foregoing; or
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45
- enter into any swap or other agreement or any other agreement that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of shares of our common stock whether any such
swap or transaction is to be settled by delivery of our common stock or
other securities, in cash or otherwise.
The Underwritersforegoing restrictions, however, do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
In connection withapply to:
- the offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market may engage in passive market-making
transactionsshares of our common stock being offered by us in the Common Stock on the Nasdaq National Market in accordance
with Rule 103offering;
- any grant of Regulation M, during the one business day prioroptions by us for our common stock under our stock option
plan or employee stock purchase plan; or
- any shares of our common stock issued by us pursuant to the pricingexercise of
the offering before the commencement of offersstock options currently outstanding or sales of the Common Stock.
The passive market-making transactions must comply with applicable volume and
price limitations and be identified as such. In general, a passive market maker
must display its bid at a price not in excess of the highest independent bid for
the security; however, if
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36
all independent bids are lowered below the passive market maker's bid, such bid
must then be lowered when certaingranted under our stock option
plan or employee stock purchase limits are exceeded.plan.
Until the distribution of the Common Stockoffering is completed, rules of the Securities and Exchange Commission (the "Commission")SEC may limit the ability of
the Underwritersunderwriters and certain selling group members to bid for and purchase shares of Common Stock.our
common stock. As an exception to these rules, the Representatives are permitted tounderwriters may engage in
certain transactions that stabilize the price of the Common Stock. Suchour common stock. These
transactions may include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of shares of our common stock than they are
required to purchase in the offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of pegging, fixingpreventing or maintainingretarding a
decline in the market price of the Common Stock. If the Underwriters create a short position in
the Common Stock in connection withour common stock while the offering (i.e., if they sell more shares
of the Common Stock than are set forth on the cover page of this Prospectus),
the Representatives may reduce the short position by purchasing the Common Stockis in
the open market.progress.
The Representatives may elect to reduce any short position
by exercising all or part of the over-allotment option described herein.
The Representativesunderwriters also may impose a penalty bid on certain Underwriters
and selling group members.bid. This means that ifoccurs when a
particular underwriter repays to the Representatives purchase
sharesother underwriters a portion of the
Common Stockunderwriting discount received by it because the representatives have
repurchased shares sold by or for the account of such underwriter in stabilizing
or short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of our common stock. As a result, the price of our
common stock may be higher than the price that otherwise might exist in the open
market to reducemarket. If these activities are commenced, they may be discontinued by the
Underwriters' short
positionunderwriters without notice at any time. These transactions may be effected on
the Nasdaq National Market, or to stabilize the priceotherwise.
Certain of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the offering. In general, purchases of a
security for the purpose of stabilizationunderwriters or to reduce a syndicate short
position could cause the price of the security to be higher than it might
otherwise betheir affiliates have in the absence of such purchases. The imposition of a penalty bid
might have an effect on the price of a security to the extent that it were to
discourage resales of the security by purchaserspast provided,
and may in the offering.
Neitherfuture provide, investment banking or other services for us.
We have agreed to indemnify the Company nor any ofunderwriters against certain liabilities,
including liabilities under the Underwriters makes any representation or
prediction asSecurities Act, and to contribute to payments
which the direction or magnitude of any effect that the transactions
described aboveunderwriters may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engagebe required to make in such transactions or that such transactions, once
commenced, will not be discontinued without notice.respect thereof.
LEGAL MATTERS
The legality of the Common Stockour common stock offered hereby will be passed upon for the
Companyus
by Parr Waddoups Brown Gee & Loveless, a professional corporation, ("Parr Waddoups"), Salt Lake
City, Utah and for the Underwritersunderwriters by King & Spalding, Atlanta, Georgia.Spalding. King & Spalding will
rely upon the opinion of Parr Waddoups as to all matters of Utah law.
EXPERTS
The consolidated financial statements and schedules incorporated by
reference in this Prospectus and elsewhere in the Registration Statement, to the
extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP, independent public accountants, and are incorporated herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
AVAILABLE42
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INCORPORATION OF CERTAIN INFORMATION The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and, in accordance therewith, files
reports, proxy statements, information statements and other information with the
Commission. Such reports, proxy statements, information statements and other
information filedBY REFERENCE
As permitted by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at the principal offices of
the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at
its Regional Offices located in the Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661 and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such material may also be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a web site
that contains reports, proxy statements, information statements and other
information regarding registrants,
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37
including the Company, that file such information electronically with the
Commission. The address of the Commission's web site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (including all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act relating to the Common Stock offered
hereby. This Prospectus, which is part of such Registration Statement,SEC rules, this prospectus does not contain all of the
information set forth,that prospective investors can find in the registration statement of
which it is a part or the exhibits to the registration statement. The SEC
permits us to incorporate by reference, into this prospectus, information filed
separately with the SEC. The information incorporated by reference in the
Registration Statement and the exhibits and schedules thereto. For furtheris deemed to
be part of this prospectus, except as superseded or modified by information
with respect to the Company and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and such exhibits and
schedules, which may be inspected and copied in the manner and at the locations
described above. Statements contained directly in this Prospectus asprospectus or in a subsequently filed document that
also is (or is deemed to the contents of
any contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or as previously filed with
the Commission andbe) incorporated herein by reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The followingThis prospectus incorporates by reference the documents set forth below
that we previously have filed with the Commission (File No. 0-14719) with the SEC pursuant to the
Securities Exchange Act of 1934, Act are hereby incorporated by reference into this
Prospectus:as amended. These documents contain important
information about us and our financial condition.
1. The Company'sOur Quarterly Report on Form 10-Q for the three months ended June 30,
2000.
2. Our Annual Report on Form 10-K for the fiscal year ended March 31, 1997.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997.2000.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997.
5. The Company's Current Report on Form 8-K dated January 21, 1998.
6. The description of the Common Stockour common stock contained in the Company'sour Registration
Statement on Form 8-A as filed on June 15, 1986 with the CommissionSEC under the
1934Exchange Act, including any amendment or report filed for the purpose of
updating such description.
AllWe hereby incorporate by reference all reports and other documents subsequently filed by
the Companyus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934Exchange Act after the
date of this prospectus and prior to the termination of this offering.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and other
information with the offering
shall be deemed to be incorporated by reference in this ProspectusSEC. You may read and to be a
part of this Prospectus fromcopy any reports, statements, or
other information that we file at the date of filing thereof. Any statement contained
in a document incorporated by reference herein shall be deemed to be modified or
supersededSEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
purposes of this Prospectusfurther information on the Public Reference Room. The SEC also maintains an
Internet site (http://www.sec.gov) that makes available to the extentpublic reports,
proxy statements, and other information regarding issuers that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modified or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes tofile
electronically with the SEC.
In addition, we will provide, without charge, to each person to whom a copy of this
Prospectus has beenprospectus is delivered, upon the written or oral request of any such person, a copy
of any andor all of the foregoing documents referred(other than exhibits to above which have been or may besuch documents
that are not specifically incorporated in this Prospectus by reference (other than exhibits)in such documents). RequestsPlease
direct written requests for such copies should be directed to:to SkyWest, Inc., 444 South River Road,
St. George, Utah 84790, Attention: Bradford R. Rich, telephone:Executive Vice President,
Chief Financial Officer and Treasurer. Telephone requests may be directed to the
office of our Chief Financial Officer at (435) 634-3000.
36Shares of our common stock are quoted on the Nasdaq National Market.
Reports, proxy statements and other information concerning us can be inspected
and copied at the Public Reference Room of the National Association of
Securities Dealers, 1735 K Street, N.W., Washington, D.C. 20006.
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[Three aircraft photographs]
39
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY47
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YOU SHOULD RELY ONLY ON THE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,PROSPECTUS. WE
HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF GIVENANYONE PROVIDES YOU WITH DIFFERENT OR
MADE, SUCHINCONSISTENT INFORMATION, OR REPRESENTATIONS MUSTYOU SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BYRELY ON IT. WE ARE NOT, AND THE
COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOESUNDERWRITERS ARE NOT, CONSTITUTEMAKING AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSONTHESE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHERWHERE THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY ORIS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREININ THIS PROSPECTUS IS CORRECTACCURATE ONLY AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.ON THE FRONT
COVER OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION AND PROSPECTS MAY
HAVE CHANGED SINCE THAT DATE.
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TABLE OF CONTENTS
PAGE
----
Prospectus Summary.................... 3Summary..................... 1
Risk Factors.......................... 7Factors........................... 5
Use of Proceeds....................... 11Proceeds........................ 13
Price Range of Common Stock and
Dividends........................... 12
Capitalization........................Dividends............................ 13
Capitalization......................... 14
Selected Consolidated Financial and Operating
Data...................... 14Data................................. 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations....................... 16
Business.............................. 23
Management............................ 30Operations........................... 17
Business............................... 24
Management............................. 35
Principal and Selling Stockholders..... 38
Description of Capital Stock.......... 32
Underwriting.......................... 34Stock........... 39
Underwriting........................... 41
Legal Matters......................... 35
Experts............................... 35
Available Information................. 35Matters.......................... 42
Experts................................ 42
Incorporation of Certain Information by
Reference........................ 36Reference............................ 43
Where You Can Find More Information.... 43
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1,400,000------------------------------------------------------
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2,615,000 SHARES
[LOGO][SKYWEST LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
THE ROBINSON-HUMPHREY
COMPANY
SBC WARBURG DILLON READRAYMOND JAMES &
ASSOCIATES, INC.
, 1998
======================================================2000
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4048
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses in connection with
the issuance and distribution of the Common Stockcommon stock being registered, other than
underwriting discounts and commissions payable by us. We will bear all of the
Company.expenses listed below. All of the amounts shown are estimates, except the
registration fee and the NASD filing and listing fees.
AMOUNT
--------
SEC registration fee........................................ $ 14,75339,371
NASD filing fee............................................. 5,59216,000
NASD listing fee............................................ 17,500
Accounting fees and expenses................................ 75,00090,000
Legal fees and expenses..................................... 90,00075,000
Printing expenses........................................... 100,000
Blue sky fees and expenses.................................. 5,00010,000
Transfer agent fees and expenses............................ 1,000
Miscellaneous expenses...................................... 41,15532,129
--------
Total............................................. $350,000Total..................................................... $375,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
We are a Utah corporation. Section 16-10a-902 ("Section 902") of the Utah Revised Business
Corporation Act (the "Revised Act") provides that a corporation may indemnify
any individual who was, is, or is threatened to be made a named defendant or
respondent (a "Party") in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal (a "Proceeding"), because he or she is or was a director of
the corporation or, while a director of the corporation, is or was serving at
its request as a director, officer, partner, trustee, employee, fiduciary or
agent of another corporation or other person or of an employee benefit plan (an
"Indemnifiable Director"), against any obligation incurred with respect to a
Proceeding, including any judgment, settlement, penalty, fine or reasonable
expenses (including attorneys' fees), incurred in the Proceeding if his or her
conduct was in good faith, he or she reasonably believed that his or her conduct
was in, or not opposed to, the best interests of the corporation, and, in the
case of any criminal Proceeding, he had no reasonable cause to believe hissuch conduct
was unlawful; provided, however, that pursuant to Subsection 902(4): (i)
indemnification under Section 902 in connection with a Proceeding by or in the
right of the corporation is limited to payment of reasonable expenses (including
attorneys' fees) incurred in connection with the Proceeding and (ii) the
corporation may not indemnify an Indemnifiable Director in connection with a
Proceeding by or in the right of the corporation in which the Indemnifiable
Director was adjudged liable to the corporation, or in connection with any other
Proceeding charging that the Indemnifiable Director derived an improper personal
benefit, whether or not involving action in his or her official capacity, in
which Proceeding he or she was adjudged liable on the basis that he or she
derived an improper personal benefit.
Section 16-10a-903 ("Section 903") of the Revised Act provides that, unless limited by its
articles of incorporation, a corporation shall indemnify an Indemnifiable
Director who was successful, on the merits or otherwise, in the defense of any
Proceeding, or in the defense of any claim, issue or matter in the Proceeding,
to which he or she was a Party because he or she is or was an Indemnifiable
Director of the corporation, against reasonable expenses (including attorneys'
fees) incurred by him in connection with the Proceeding or claim with respect to which
he or she has been successful.
In addition to the indemnification provided by Sections 902 and 903,
Section 16-10a-905 ("Section 905") of the Revised Act provides that, unless otherwise limited by
a corporation's articles of incorporation, an
II-1
49
Indemnifiable Director may apply for indemnification to the court conducting the
Proceeding or to another court of competent jurisdiction.
On receipt of an application and
after giving any
II-1
41
notice the court considers necessary, (i) the court may order mandatory
indemnification under Section 903, in which case the court shall also order the
corporation to pay the director's reasonable expenses to obtain court-ordered
indemnification, or (ii) upon the court's determination that the director is
fairly and reasonably entitled to indemnification in view of all the relevant
circumstances and regardless of whether the director met the applicable standard
of conduct set forth in Section 902, the court may order indemnification as the
court determines to be proper, except that indemnification with respect to
certain Proceedings resulting in a director being found liable as described in
Subsection 902(4) is limited to reasonable expenses (including attorneys' fees)
incurred by the director.
Section 16-10a-904 ("Section 904") of the Revised Act provides that a corporation may pay
for or reimburse the reasonable expenses (including attorneys' fees) incurred by
an Indemnifiable Director who is a Party to a Proceeding in advance of the final
disposition of the Proceeding if (i)upon the director furnishes the corporation a written affirmationsatisfaction of his good faith
belief that he has met the applicable standard of conduct described in Section
902, (ii) the director furnishes to the corporation a written undertaking,
executed personally or in his behalf, to repay the advance if it is ultimately
determined that he did not meet the required standard of conduct, and (iii) a
determination is made that the facts then known to those making the
determination would not preclude indemnification.certain conditions.
Section 16-10a-907 of the Revised Act provides that, unless a corporation's
articles of incorporation provide otherwise, (i) an officer of the corporation
is entitled to mandatory indemnification under Section 903 and is entitled to
apply for court orderedcourt-ordered indemnification under Section 905, in each case to the
same extent as an Indemnifiable Director, (ii) the corporation may indemnify and
advance expenses to an officer, employee, fiduciary or agent of the corporation
to the same extent as an Indemnifiable Director, and (iii) a corporation may
also indemnify and advance expenses to an officer, employee, fiduciary or agent
who is not an Indemnifiable Director to a greater extent than the right of
indemnification granted to an Indemnifiable Director, if not inconsistent with
public policy, and if provided for by its articles of incorporation, bylaws,
general or specific action of its board of directors or contract.
The Company'sOur Amended and Restated Bylaws (the "Bylaws") provide that, subject to the
limitations described below, the Companywe shall, to the maximum extent and in the manner
permitted by the Revised Act, indemnify any individual made party to a
proceeding because he or she is or was a directorone of our directors or officer of the
Company,officers against
liability incurred in the proceeding if his or her conduct was in good faith, he
or she reasonably believed that his or her conduct was in, or not opposed to,
the
Company'sour best interestinterests and, in the case of any criminal proceeding, he or she had no
reasonable cause to believe hissuch conduct was unlawful. The CompanyWe may not, however,
extend such indemnification to an officer or director in connection with a
proceeding by us or in theour right of the Company in which such personofficer or director was adjudged
liable to the Company,us, or in connection with any other proceeding charging that such
person derived an improper personal benefit, whether or not involving action in
his or her official capacity, in which proceeding he or she was adjudged liable
on the basis that he or she derived an improper personal benefit, unless ordered
by a court of competent jurisdiction. Notwithstanding the foregoing, the Bylaws
obligate the Companyus to indemnify an officer or director who was successful on the merits
or otherwise, in the defense of any proceeding or the defense of any claim,
issue or matter in the proceeding to which hethe officer or director was a party
because he or she is or was a directorone of our directors or officer of the Companyofficers against reasonable
expenses that he or she incurred in connection with the proceeding or claim with
respect to which he or she was successful. The Bylaws also permit the Companyus to pay for
or reimburse the reasonable expenses incurred by an officer or director who is
party to a proceeding in advance of final disposition of the proceeding if (i)
the officer or director furnishes to the Companyus a written affirmation of hisa good faith
belief that he or she has met the applicable standard of conduct necessary for
indemnification, (ii) the officer or director furnishes to the Companyus a written
undertaking to repay the advance if it is ultimately determined that he or she
did not meet the standard of conduct, and (iii) a determination is made that the
facts then known to those making the determination would not preclude
indemnification pursuant to the Bylaws. The Bylaws also provide that any
indemnification or advancement of expenses provided thereby shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any articles of incorporation,
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding such office.
II-2
42
Utah law permits director liability to be eliminated in accordance with
Section 16-10a-841 of the Revised Act, which provides that the liability of a
director to the corporation or its stockholders for monetary damages for any
action taken or any failure to take any action, as a director, may be limited or
eliminated by the corporation except for liability for (i) the amount of
financial benefit received by a director to which he is not entitled; (ii) an
intentional infliction of harm on the corporation or its stockholders; (iii) a
violation of Section 16-10a-842 of the Revised Act, which prohibits unlawful
distributions by a corporation to its stockholders; or (iv) an intentional
violation of criminal law. Such a provision may appear either in a corporation's
articles of incorporation or bylaws; however, to be effective, such a provision
must be approved by the corporation's stockholders.
The Company'sII-2
50
Our Restated Articles of Incorporation, as amended by the
Company's stockholders at the 1993 Annual Meeting of Stockholders (the "Restated
Articles"), provide that the personal liability of any director to the CompanySkyWest, Inc.
or its stockholders for monetary damages for any action taken or the failure to
take any action, as a director, is eliminated to the fullest extent permitted by
Utah law.
The Bylaws provide that the Companywe may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, fiduciaryone of our directors, officers, employees, fiduciaries
or agent of the Company,agents, or is or was serving at theour request of the Company as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her or incurred
by him or her in such capacity or arising out of his or her status in such
capacity, whether or not the Companywe would have the power to indemnify him or her against
such liability under the indemnification provisions of the Bylaws or the laws of
the State of Utah, as the same may hereafter beare amended or modified. The Company maintainsWe maintain insurance
from commercial carriers against certain liabilities whichthat may be incurred by itsour
directors and officers.
Indemnification may be granted pursuant to any other agreement, bylaw or
vote of shareholdersstockholders or directors. Reference is also made to the Underwriting
Agreement filed herewith pursuant to which the Underwritersunderwriters have agreed to
indemnify the Companyus and its offersour officers and directors against certain liabilities,
including liabilities under the Securities Act. The foregoing description is
necessarily general and does not describe all details regarding the
indemnification of our officers, directors or controlling persons of the Company.persons.
ITEM 16. EXHIBITS
EXHIBIT
NO.NUMBER DESCRIPTION
- ------- -----------
11.1* Form of Underwriting Agreement.
4.1 Specimen Form of Common Stock Certificate.
4.2 Restated Articles of Incorporation, as amended.(1)
4.24.3 Amended and Restated Bylaws.(2)
4.34.4 Stock Option Agreement, dated January 28, 1987, between
Delta Air Lines, Inc. and SkyWest, Inc.*
5(3)
5.1* Opinion of Parr Waddoups Brown Gee & Loveless a
professional corporation, as to the
legality of the securities being registered.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Parr Waddoups Brown Gee & Loveless (included in
Item 55.1 above).
2424.1 Power of Attorney (included on signature page of this
Registration Statement).
- ---------------
* To be filed by amendment.
(1) Incorporated by reference to the Exhibits to a Registration Statement filed
as of June 12, 1995, on Form S-8, File No. 33-60173.
(2) Incorporated by reference to the Exhibits to a Registration Statement filed
on January 20, 1994, on Form S-3, File No. 33-74290.
II-3
43(3) Incorporated by reference to the Exhibits to a Registration Statement filed
on January 21, 1998, on Form S-3, as amended, File No. 333-44619.
ITEM 17. UNDERTAKINGS
The Companyundersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Company'sregistrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act)Act of 1934) that
is incorporated by reference in the Registration Statementregistration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Companyregistrant pursuant to the foregoing provisions, or otherwise,
the CompanyII-3
51
registrant has been advised that in the opinion of the Securities and Exchange CommissionSEC such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Companyregistrant of expenses incurred
or paid by a director, officer or controlling person of the Companyregistrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Companyregistrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned Companyregistrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectusprospectus filed as part
of this Registration Statementregistration statement in reliance upon Rule 430A and contained in
a form of Prospectusprospectus filed by the Companyregistrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statementregistration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectusprospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
ITEM 18. FINANCIAL STATEMENTS AND SCHEDULES
Not applicable.
II-4
4452
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Companyregistrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statementregistration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. George, State of Utah, on January 20, 1998.July 28, 2000.
SKYWEST, INC.
By: /s/ JERRY C. ATKIN
------------------------------------
Jerry C. Atkin
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statementregistration statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature to this
Registration Statementregistration statement appears below hereby constitutes and appoints Jerry C.
Atkin and Bradford R. Rich, and each of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his
behalf individually and in the capacity stated below and to perform any acts
necessary to be done in order to file all amendments and post-effective
amendments to this Registration Statement,registration statement, and any and all instruments or
documents filed as part of or in connection with this Registration Statementregistration statement or
the amendments thereto and each of the undersigned does hereby ratify and
confirm all that said attorney-in-fact and agent, or his substitutes, shall do
or cause to be done by virtue hereof.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JERRY C. ATKIN Chairman of the Board, January 20, 1998President July 28, 2000
- ----------------------------------------------------- President and Chief Executive Officer
Jerry C. Atkin Officer (Principal(principal executive officer)
/s/ SIDNEY J. ATKIN Vice Chairman of the Board January 20, 1998July 28, 2000
- -----------------------------------------------------
Sidney J. Atkin
/s/ BRADFORD R. RICH Executive Vice President, January 20, 1998Chief July 28, 2000
- ----------------------------------------------------- Chief Financial Officer and Treasurer
Bradford R. Rich Treasurer (Principal(principal financial and
accounting officer)
/s/ J. RALPH ATKIN Director January 20, 1998, 2000
- -----------------------------------------------------
J. Ralph Atkin
/s/ MERVYN K. COX Director January 20, 1998July 28, 2000
- -----------------------------------------------------
Mervyn K. Cox
/s/ IAN M. CUMMING Director January 20, 1998July 28, 2000
- -----------------------------------------------------
Ian M. Cumming
/s/ HENRY J. EYRING Director January 20, 1998July 28, 2000
- -----------------------------------------------------
Henry J. Eyring
/s/ ROBERT G. SARVER Director July 28, 2000
- -----------------------------------------------------
Robert G. Sarver
II-5
4553
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------ ---------------------------- ----- ----
- ------------------------------------------------------ Director
Steven F. Udvar-Hazy
/s/ HYRUM W. SMITH Director January 20, 1998July 28, 2000
- -----------------------------------------------------------------------------------------------------------
Hyrum W. Smith
Director , 2000
- -----------------------------------------------------
Steven F. Udvar-Hazy
II-6