The following discussion and analysis presents factors that had a material
effect on the results of operations of SkyWest, Inc. ("SkyWest" "we" or "us")
during the three- and six-month periods ended June 30, 2020 and 2019. Also
discussed is our financial condition as of June 30, 2020 and December 31, 2019.
You should read this discussion in conjunction with our condensed consolidated
financial statements for the three and six months ended June 30, 2020, including
the notes thereto, appearing elsewhere in this Report. This discussion and
analysis contains forward-looking statements. Please refer to the section of
this Report entitled "Cautionary Statement Concerning Forward-Looking
Statements" for discussion of uncertainties, risks and assumptions associated
with these statements.



On January 22, 2019, we completed the sale of our former wholly owned subsidiary
ExpressJet Airlines, Inc. ("ExpressJet"). Our financial and operating results
for the period ended June 30, 2019, contained in this Report, include the
financial results of ExpressJet for the respective period, as we concluded that
the sale of ExpressJet did not meet the criteria for presentation of
discontinued operations.



           Cautionary Statement Concerning Forward-Looking Statements



Certain of the statements contained in this Report should be considered
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements may be
identified by words such as "may," "will," "expect," "intend," "anticipate,"
"believe," "estimate," "plan," "project," "could," "should," "hope," "likely,"
and "continue" and similar terms used in connection with statements regarding
our outlook, anticipated operations, the revenue environment, our contractual
relationships, and our anticipated financial performance. These statements
include, but are not limited to, statements regarding the impact of the COVID-19
pandemic on our business, results of operations and financial condition and the
impact of any measures, including travel restrictions, taken to mitigate the
effect of the pandemic, our future growth and development plans, including our
future financial and operating results, our plans, objectives, expectations and
intentions and other statements that are not historical facts. Readers should
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 incorrect. If one or more risks identified in
this Report materializes, or any other underlying assumption proves incorrect,
our actual results will vary, and may vary materially, from those anticipated,
estimated, projected, or intended for a number of reasons, including but not
limited to: the consequences of the COVID-19 pandemic to global economic
conditions, the travel industry and our major airline partners in general and
our financial condition and results of operations in particular; the challenges
of competing successfully in a highly competitive and rapidly changing industry;
developments associated with fluctuations in the economy and the demand for air
travel, including as a result of the COVID-19 pandemic; the financial stability
of United Airlines, Inc. ("United"), Delta Air Lines, Inc. ("Delta"), American
Airlines, Inc. ("American") and Alaska Airlines, Inc. ("Alaska") (each, a "major
airline partner") and any potential impact of their financial condition on our
operations; fluctuations in flight schedules, which are determined by the major
airline partners for whom SkyWest conducts flight operations; variations in
market and economic conditions; significant aircraft lease and debt commitments;
realization of manufacturer residual value guarantees on applicable SkyWest
aircraft; residual aircraft values and related impairment charges; the impact of
global instability; labor relations and costs; potential fluctuations in fuel
costs, and potential fuel shortages; the impact of weather-related or other
natural disasters on air travel and airline costs; new aircraft deliveries; and
the ability to attract and retain qualified pilots, as well as other factors
identified under the heading "Risk Factors" in Part I, Item 1A of our Annual
Report on Form 10-K for the year ended December 31, 2019, under the heading
"Risk Factors" in Part II, Item 1A of this Report, elsewhere in this Report, in
our other filings with the Securities and Exchange Commission (the "SEC") and
other unanticipated factors. Additionally, the risks, uncertainties and other
factors set forth above or otherwise referred to in the reports that we have
filed with the SEC may be further amplified by the global impact of the COVID-19
pandemic.



There may be other factors that may affect matters discussed in forward-looking
statements set forth in this Report, which factors may also cause actual results
to differ materially from those discussed. We assume no obligation to publicly
update any forward-looking statement to reflect actual results, changes in
assumptions or changes in other factors affecting these statements other than as
required by applicable law.



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Impact of the COVID-19 Pandemic





COVID-19, which was declared a global health pandemic by the World Health
Organization in March 2020, has surfaced in nearly all regions of the world and
driven the implementation of significant, government-imposed measures to prevent
or reduce its spread, including travel restrictions, closing of borders,
"shelter in place" orders and business closures. Consequently, we and our major
airline partners, have experienced an unprecedented decline in the demand for
air travel, which has materially and adversely affected our revenues,
particularly under our prorate agreements (as defined below). The spread of the
virus and the resulting global pandemic has affected the majority of the
domestic and international networks of our major airline partners for whom we
conduct flight operations and rely on to set our flight schedules. While the
length and severity of the reduction in demand due to COVID-19 is uncertain, we
presently expect a continued negative impact on our results of operations for
the remainder of 2020 and into 2021.



In response to these developments, we have implemented measures to focus on the
personal safety of our passengers and employees, while at the same time seeking
to mitigate the impact on our financial position and operations. These measures
include, but are not limited to, the following:



Focus on the Personal Safety of Passengers and Employees. The safety and
well-being of our passengers and employees are our priorities in every decision
we make. As the COVID-19 pandemic has developed, we have taken numerous steps to
help passengers and employees take appropriate safety measures on the ground and
in the air in keeping with current Centers for Disease Control and Prevention
recommendations, including:

? Working with our major airline partners to enhance our aircraft cleaning

procedures.

Working with our major airline partners to provide masks for crewmembers and

? ensuring that all fleet service personnel have the necessary personal

protective equipment for disinfecting the aircraft.

? Providing a number of options to employees who are diagnosed with COVID-19,

including pay protection and extended leave options.

Implementing workforce social distancing and protection measures, enhanced

? cleaning of our facilities, including training facilities, using methods and


   products similar to what we are using on our aircraft.




Capacity Reductions. Beginning in March 2020, we and our major airline partners
experienced an unprecedented decrease in demand for air travel and expect this
decline from 2019 to continue throughout 2020. We depend on our major airline
partners to contract with us to schedule flights. Therefore, in response to this
decreased demand, we have significantly reduced our capacity. Prior to the
COVID-19 pandemic, we anticipated operating approximately 2,500 to 2,600 daily
departures in the month of July 2020; however, in July 2020 we typically
operated between approximately 1,200 to 1,400 daily departures as a result of
COVID-19-related schedule reductions. We also anticipate similar schedule
reductions will likely continue throughout the remainder of 2020 and into 2021.
The number of daily flights operated by us may not return to pre-COVID-19 levels
for the foreseeable future. We will continue to work with our major airline
partners regarding future schedules and make further demand-driven adjustments
to our capacity as needed. We anticipate certain aircraft with scheduled
contract expirations in 2020 will not be extended as a result of decreased
demand including 36 Canadair CRJ200 regional aircraft ("CRJ200") operating under
the SkyWest Airlines Delta Connection Agreement as of June 30, 2020. We also
terminated our American Prorate Agreement on seven CRJ200 aircraft in the second
quarter of 2020 and we may have further reductions in the number of CRJ200
aircraft operating under our prorate agreements. We may receive requests by our
major airline partners to defer deliveries of new or used aircraft that were
previously scheduled for 2020, 2021 and 2022.

Cost Reductions. With the reduction in revenue, we have, and will continue to implement, cost saving initiatives, including:

? Reducing employee-related costs including by:

o Offering voluntary unpaid leave to employees.

o Suspending all non-scale pay increases.

o Instituting a company-wide hiring freeze.

? Delaying non-essential maintenance projects and reducing or suspending other


   discretionary spending.



Liquidity. At June 30, 2020, we had $828.3 million in total available liquidity,
consisting of $762.1 million in cash and marketable securities and $66.2 million
available under SkyWest Airlines' line of credit. On April 23, 2020,

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SkyWest Airlines entered into a Payroll Support Program Agreement (the "PSP
Agreement") with the U.S. Department of Treasury ("Treasury") with respect to
the grant program (the "Payroll Support Program") under the Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act"), pursuant to which it
expects to receive approximately $438.0 million in the aggregate, 50% of which
was received in April 2020. See Note 2 "Impact of the COVID-19 Pandemic," to the
condensed consolidated financial statements for more information on the Payroll
Support Program. The CARES Act also provides for up to $25 billion in secured
loans to the airline industry, and we have applied for and have entered into a
non-binding letter of intent with Treasury for approximately $497.0 million
under the loan program and we are currently evaluating the timing and our level
of participation.



Overview



We have the largest regional airline operations in the United States through our
operating subsidiary SkyWest Airlines, Inc. ("SkyWest Airlines"). As of June 30,
2020, SkyWest Airlines offered scheduled passenger service with approximately
900 total daily departures under COVID-19 related reduced schedules to
destinations in the United States, Canada, Mexico and the Caribbean. Our fleet
of Embraer E175 regional jet aircraft ("E175"), Canadair CRJ900 regional jet
aircraft ("CRJ900") and Canadair CRJ700 regional jet aircraft ("CRJ700") have a
multiple-class seat configuration, whereas our CRJ200 aircraft have a
single-class seat configuration. As of June 30, 2020, SkyWest Airlines had a
total fleet of 581 aircraft, of which 471 were in scheduled service, summarized
as follows:




                                        CRJ200    CRJ700    CRJ900    E175    Total
Delta                                       57         6        43      67      173
United                                      96        19         -      90      205
American                                     -        61         -       -       61
Alaska                                       -         -         -      32       32

Aircraft in scheduled service              153        86        43     189

471

Subleased to an un-affiliated entity 4 13 5 - 


     22
Other*                                      55        33         -       -       88
Total                                      212       132        48     189      581



*As of June 30, 2020, these aircraft have been removed from service and are in
the process of being placed under a leasing arrangement with a third party, are
aircraft transitioning between code-share agreements with our major airline
partners and being used as supplemental spare aircraft, or are in the process of
being parted out.

As of June 30, 2020, approximately 37% of our aircraft in scheduled service was
operated for Delta, approximately 43% was operated for United, approximately 13%
was operated for American and approximately 7% was operated for Alaska.



Our business model is based on providing scheduled regional airline service
under code-share agreements (commercial agreements, typically in the form of
capacity purchase agreements or prorate arrangements, each as defined below,
between airlines that, among other things, allow one airline to use another
airline's flight designator codes on its flights) with our major airline
partners. Our success is principally dependent on our ability to meet the needs
of our major airline partners through providing a reliable and safe operation at
attractive economics. From June 30, 2019 to June 30, 2020, we added seven new
E175 aircraft, one new CRJ900 aircraft and 31 used E175 aircraft to our fleet.
Additionally, we removed thirteen CRJ700 aircraft and 37 CRJ200 aircraft from
scheduled service with 19 of the CRJ200 aircraft returned to the lessor while
the other aircraft were temporarily removed from service in response to the
COVID-19 schedule reductions, or in transition period between flying contracts
with our major partners, or were placed under a lease with a third party.



We are coordinating with our major airline partners on the timing of upcoming
fleet deliveries under previously announced deals in response to COVID-19
schedule reductions. The anticipated future delivery dates summarized below are
subject to change. As of June 30, 2020, we are scheduled to add four new E175 to
our capacity purchase agreement with Delta during 2020. We also anticipate
adding 20 new E175 aircraft with American under a capacity purchase agreement
with delivery dates starting in late 2021 and ending in 2022.



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As of June 30, 2020, our capacity purchase agreement with Delta
included 36 CRJ200 aircraft that are scheduled to expire in increments during
the remainder of 2020 which we are not expecting to be extended as a result of
the decreased demand caused by the COVID-19 pandemic. We own the 36 CRJ200
aircraft and anticipate parking the 36 CRJ200 aircraft following removal from
service. We have no outstanding financing obligations on the 36 owned CRJ200
aircraft.



Due to the uncertainty of obtaining future contract extensions for our CRJ200
aircraft as a result of the COVID-19 pandemic and considering the average age of
our CRJ200 fleet is 18 years, we reduced the estimated useful lives of our
CRJ200 aircraft to align with each aircraft's anticipated contract removal
dates, which resulted in approximately $30.8 million of incremental depreciation
expense during the three months ended June 30, 2020. We anticipate we will incur
$22.3 million of additional depreciation expense from July to December 2020
resulting from the shorter estimated useful lives of our owned CRJ200 aircraft.



Historically, multiple contractual relationships with major airlines have
enabled us to reduce our reliance on any single major airline code and to
enhance and stabilize operating results through a mix of fixed-fee arrangements
(referred to as "capacity purchase agreements") and revenue-sharing arrangements
(referred to as "prorate" arrangements). For the six months ended June 30, 2020,
capacity purchase revenue and prorate revenue represented approximately 86.9%
and 13.1%, respectively, of our total flying agreements revenue. On contract
routes, the major airline partner controls scheduling, ticketing, pricing and
seat inventories and we are compensated by the major airline partner at
contracted rates based on completed block hours (measured from takeoff to
landing, including taxi time), flight departures and other operating measures.
On prorate routes, our revenue and profitability may fluctuate based on ticket
prices and passenger loads and we are responsible for all costs to operate

the
flight, including fuel.

Second Quarter Summary



Our total operating revenues of $350.0 million for the three months ended June
30, 2020 decreased 53.0% compared to total operating revenues of $744.4 million
for the three months ended June 30, 2019. We had a net loss of $25.7 million, or
$0.51 per diluted share, for the three months ended June 30, 2020, compared to
net income of $88.1 million, or $1.71 per diluted share, for the three months
ended June 30, 2019.

Significant items affecting our financial performance during the three months ended June 30, 2020 are outlined below.





Revenue




The number of aircraft we have in scheduled service and the number of block
hours we generate on our flights are primary drivers to our flying agreements
revenue under our capacity purchase agreements. The number of flights we operate
and the corresponding number of passengers we carry are the primary drivers to
our revenue under our prorate flying agreements. From June 30, 2019 to June 30,
2020, we decreased the number of aircraft in scheduled service from 482 aircraft
to 471 aircraft, by removing thirteen CRJ700 aircraft and 37 CRJ200 aircraft and
adding 38 E175 aircraft and one CRJ900 aircraft. Our completed block hours
decreased 66.0% over the same period of 2019 primarily due to a significant
reduction in the number of flights we were scheduled to operate under our flying
contracts as a result of the COVID-19 pandemic.



Our total revenues decreased $394.3 million for the three months ended June 30,
2020 compared to the three months ended June 30, 2019, primarily due to the
effects of the COVID-19 pandemic. Additionally, we deferred recognizing revenue
on $69.1 million of fixed monthly payments received under our capacity purchase
agreements during the three months ended June 30, 2020, as further described
under "Results of Operations-Three Months Ended June 20, 2020 and 2019-Operating
Revenues." Since March 2020, the COVID-19 pandemic has had a negative impact on
our revenues, especially under our prorate agreements. The number of aircraft
operating under our prorate agreements decreased from 64 aircraft as of June 30,
2019 to 47 aircraft as of June 30, 2020, or 26.6%. Additionally, our prorate
revenue decreased from $134.9 million for the three months ended June 30, 2019
to $36.2 million for the three months ended June 30, 2020, or 73.2%. The
negative impact to our revenues as a result of the COVID-19 pandemic and its

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associated effects on the travel industry is anticipated to continue throughout the remainder of 2020 and may continue through 2021 and subsequent periods.





Operating Expenses




Our total operating expenses decreased $245.8 million for the three months ended
June 30, 2020, compared to the three months ended June 30, 2019. This decrease
was primarily due to a significant reduction in the number of flights we
operated as a result of the COVID-19 pandemic. Additional details regarding the
increase in our operating expenses are described in the section of this Report
entitled "Results of Operations."



Fleet activity

The following table summarizes our fleet scheduled for service as of:






Aircraft in Service    June 30, 2020    December 31, 2019    June 30, 2019
CRJ200s                          153                  190              190
CRJ700s                           86                   94               99
CRJ900s                           43                   43               42
E175s                            189                  156              151
Total                            471                  483              482




Critical Accounting Policies



Our significant accounting policies are summarized in Note 1 to our consolidated
financial statements for the year ended December 31, 2019, which are presented
in our Annual Report on Form 10-K for the year ended December 31, 2019. Critical
accounting policies are those policies that are most important to the
preparation of our consolidated financial statements and require management's
subjective and complex judgments due to the need to make estimates about the
effect of matters that are inherently uncertain. Our critical accounting
policies relate to revenue recognition, aircraft leases, long-lived assets,
self-insurance and income tax. The application of these accounting policies
involves the exercise of judgment and the use of assumptions as to future
uncertainties and, as a result, actual results will likely differ, and may
differ materially, from such estimates.

Recent Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements for a description of recent accounting pronouncements.





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Results of Operations

Three Months Ended June 30, 2020 and 2019

Operational Statistics. The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below:






                                           For the three months ended June 30,

Block hours by aircraft type:               2020             2019        %

Change
E175s                                         61,455          133,247      (53.9) %
CRJ900s                                        3,433           31,428      (89.1) %
CRJ700s                                       30,666           77,068      (60.2) %
CRJ200s                                       30,472          129,039      (76.4) %
Total block hours                            126,026          370,782      (66.0) %


Departures                                    80,755          215,052      (62.4) %
Passengers carried                         1,802,327       11,383,187      (84.2) %
Passenger load factor                           34.4 %           83.9 %    (49.5) pts

Average passenger trip length (miles)            487              496      

(1.8) %




Operating Revenues

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






                                            For the three months ended June 30,
                                       2020         2019        $ Change      % Change
Flying agreements                    $ 336,370    $ 725,335    $ (388,965)      (53.6) %

Lease, airport services and other       13,669       19,048        (5,379) 

    (28.2) %
Total operating revenues             $ 350,039    $ 744,383    $ (394,344)      (53.0) %




Flying agreements revenue primarily consists of revenue earned on flights we
operate under our capacity purchase agreements and prorate agreements with our
major airline partners. Lease, airport services and other revenues consist of
revenue earned from providing airport counter, gate and ramp services, and
revenue from leasing regional jet aircraft and spare engines to third parties.
Changes in our flying agreements revenue are summarized below (dollar amounts in
thousands).


                                                         For the three months ended June 30,
                                                    2020         2019        $ Change      % Change
Capacity purchase agreements revenue: flight
operations                                        $ 132,061    $ 383,732    $ (251,671)     (65.6) %
Capacity purchase agreements revenue: aircraft
lease and fixed revenue                             168,103      206,678       (38,575)     (18.7) %
Prorate agreements revenue                           36,206      134,925       (98,719)     (73.2) %
Flying agreements revenue                         $ 336,370    $ 725,335    $ (388,965)     (53.6) %




The decrease in "Capacity purchase agreements revenue: flight operations" of
$251.7 million was primarily due to schedule reductions experienced in 2020
resulting from the COVID-19 pandemic. Our completed departures decreased 62% and
completed block hours decreased 66% during the three months ended June 30, 2020
compared to the three months ended June 30, 2019.



The decrease in "Capacity purchase agreements revenue: aircraft lease and fixed
revenue" of $38.6 million was primarily due to the deferral of $69.1 million in
fixed amount per aircraft revenue. Under our capacity purchase agreements, we
are paid a fixed amount per month per aircraft over the contract term. We
recognize the fixed amount per aircraft per month proportionately to completed
flights, which is our performance obligation. We operated a materially

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lower number of flights during the three months ended June 30, 2020 from
previous levels due to a reduction in flight schedules resulting from the
COVID-19 pandemic. We anticipate the future monthly flight levels will increase
over the remaining applicable contract terms compared to the three months ended
June 30, 2020. Due to the materially reduced flight activity during the three
months ended June 30, 2020, and based on an anticipated increase in future
monthly flight volumes over the remaining contract terms, we determined the
fixed amount per month per aircraft received during the three months ended June
30, 2020 was disproportionately high relative to the volume of flights operated
during the three months ended June 30, 2020. Accordingly, we deferred revenue
attributed to the fixed amount per month per aircraft received during the three
months ended June 30, 2020. Our deferred revenue balance will adjust over the
remaining contract terms based on our completed flight levels each period
relative to the anticipated average monthly flight levels over the remaining
contract terms. This decrease in "Capacity purchase agreement revenue: aircraft
lease revenue" was partially offset by the incremental lease revenue generated
from seven new E175 aircraft added to our fleet and economic improvements made
to certain existing capacity purchase agreements since June 30, 2019.



The decrease in prorate agreements revenue of $98.7 million was primarily due to
the impact of COVID-19 and the corresponding decrease in prorate passengers
during the three months ended June 30, 2020 compared to the three months ended
June 30, 2019.

The $5.4 million decrease in lease, airport services and other revenues was primarily related to a decrease in the number of flights at locations where we were contracted to provide airport customer service during the three months ended June 30, 2020 compared to the three months ended June 30, 2019.





Operating Expenses



The following table summarizes our operating expenses and interest expense,
(collectively, "Total airline expenses") for the periods indicated (dollar
amounts in thousands):




                                           For the three months ended June 30,
                                       2020          2019       $ Change     % Change

Salaries, wages and benefits        $   170,218   $  243,766   $  (73,548)     (30.2) %
Aircraft maintenance, materials
and repairs                             121,289      124,789       (3,500)      (2.8) %
Depreciation and amortization           131,638       90,148        41,490       46.0 %
Airport-related expenses                 21,550       30,782       (9,232)     (30.0) %
Aircraft fuel                             6,821       30,851      (24,030)     (77.9) %
Aircraft rentals                         16,697       18,006       (1,309)      (7.3) %

CARES Act payroll support grant       (151,938)            -     (151,938) 

       NM
Other operating expenses                 38,167       61,948      (23,781)     (38.4) %
Total operating expenses            $   354,442   $  600,290   $ (245,848)     (41.0) %
Interest expense                         30,926       32,770       (1,844)      (5.6) %
Total airline expenses              $   385,368   $  633,060   $ (247,692)     (39.1) %





Salaries, wages and benefits. The $73.5 million decrease in salaries, wages and
benefits was primarily due to a reduction in scheduled departures and block
hours related to the COVID-19 pandemic. Additionally, in response to the
COVID-19 pandemic, we have instituted a company-wide hiring freeze, suspended
all non-scale pay increases and offered voluntary unpaid leave to our employees.



Aircraft maintenance, materials and repairs. The $3.5 million decrease in
aircraft maintenance expense was primarily due to a significant reduction in
departures during the three months ended June 30, 2020 partially offset by
increased engine maintenance expense during the three months ended June 30, 2020
compared to the three months ended June 30, 2019.



Depreciation and amortization. The $41.5 million increase in depreciation and
amortization expense was primarily due to a reduction in the estimated useful
life of our owned CRJ200 fleet that resulted in approximately $30.8 million of
incremental depreciation expense during the three months ended June 30, 2020 and
due to the acquisition of seven new E175 aircraft and spare engines since June
30, 2019.

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Airport-related expenses. Airport-related expenses include airport-related
customer service costs such as outsourced airport gate and ramp agent services,
airport security fees, passenger interruption costs, deicing, landing fees and
station rents (our employee customer service labor costs are reflected in
salaries, wages and benefits). The $9.2 million decrease in airport-related
expenses was primarily due to a decrease in scheduled departures resulting

from
the COVID-19 pandemic.




Aircraft fuel. The $24.0 million decrease in fuel cost was primarily due to a
reduction in the number of prorate flights we operated and the corresponding
decrease in gallons of fuel we purchased and a decrease in our average fuel cost
per gallon from $2.57 for the three months ended June 30, 2019 to $1.45 for the
three months ended June 30, 2020. We purchase and incur expense for all fuel on
flights operated under our prorate agreements. All fuel costs incurred under our
capacity purchase agreements are either purchased directly by our major airline
partners or purchased by us and reimbursed by our major airline partners, with
the direct reimbursement recorded as a reduction to our fuel expense. The
following table summarizes the gallons of fuel we purchased under our prorate
agreements, for the periods indicated:




                             For the three months ended June 30,
(in thousands)               2020            2019         % Change
Fuel gallons purchased         4,691           12,019       (61.0) %
Fuel expense              $    6,821     $     30,851       (77.9) %






Aircraft rentals. The $1.3 million decrease in aircraft rentals was primarily
related to a reduction of our fleet size that was financed through leases as a
result of scheduled lease expirations subsequent to June 30, 2019.



CARES Act payroll support grant. In April 2020, we entered into an agreement
with Treasury to receive up to $438.0 million in emergency relief through the
CARES Act payroll support program, of which $336.6 million will be in the form
of payroll support grants paid in installments through the end of July 2020. As
of June 30, 2020, we received $244.6 million in payroll support grants that are
being recognized as a reduction in expense over the periods the grants are
intended to compensate. We recognized $151.9 million as a reduction in expense
during the three months ended June 30, 2020 and expect to recognize the
remainder of the grants from the CARES Act payroll support program as a
reduction in expenses by the end of 2020.



Other operating expenses. Other operating expenses primarily consist of property
taxes, hull and liability insurance, simulator costs, crew per diem, and crew
hotel costs. The $23.8 million decrease in other operating expenses was
primarily related to a decrease in the number of scheduled flights related to
the COVID-19 pandemic during the three months ended June 30, 2020.



Interest Expense. The $1.8 million decrease in interest expense was primarily
related to the reduction in outstanding long-term debt from $3.1 billion as of
June 30, 2019 to $3.0 billion as of June 30, 2020.

Total airline expenses. The $245.8 million decrease in total airline expenses was primarily related to the COVID-19 pandemic and the related decrease in scheduled departures and block hours during the three months ended June 30, 2020.





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





Interest income. Interest income decreased $2.0 million, or 54.8%, during the
three months ended June 30, 2020, compared to the three months ended June 30,
2019. The decrease in interest income was primarily related to a decrease in
interest rates earned on our marketable securities subsequent to June 30, 2019.

Other income (expense), net. Other income increased $0.1 million, or 43.1%, during the three months ended June 30, 2020, compared to the three months ended June 30, 2019. Other income primarily consisted of income related to our investment in a joint venture with a third party.





Income taxes. Our provision for income taxes was 22.6% and 23.7% for the three
months ended June 30, 2020 and 2019, respectively. The decrease in the effective
tax rate primarily relates to a lower discrete tax benefit from excess tax
deductions generated from employee equity transactions that occurred during the
three months ended June 30, 2020 compared to the three months ended June 30,
2019 and a greater impact related to non-deductible expenses for the three
months ended June 30, 2020, compared to the three months ended June 30, 2019 as
a result of lower pretax earnings for the three months ended June 30, 2020
compared to the same period of 2019.



Net loss. Primarily due to the factors described above, we generated a net loss
of $25.7 million, or $0.51 per diluted share, for the three months ended June
30, 2020, compared to net income of $88.1 million, or $1.71 per diluted share,
for the three months ended June 30, 2019.

Six Months Ended June 30, 2020 and 2019

Operational Statistics. The following table sets forth our major operational statistics and the associated percentage changes for the periods identified below:






                                           For the six months ended June 30,
Block hours by aircraft type:               2020           2019       % Change
E175s                                        194,134       259,996      (25.3) %
CRJ900s                                       32,353        62,393      (48.1) %
CRJ700s                                       98,740       148,836      (33.7) %
CRJ200s                                      158,022       248,946      (36.5) %
Total block hours                            483,249       720,171      (32.9) %


Departures                                   290,038       408,527      (29.0) %
Passengers carried                        10,666,833    20,998,133      (49.2) %
Passenger load factor                           58.0 %        81.4 %    (23.4) pts
Average passenger trip length (miles)            492           501       (1.8) %





The operating statistics above exclude ExpressJet's statistics prior to our sale
of ExpressJet in January 2019 as ExpressJet's impact on our 2019 statistics

was
not significant.



Operating Revenues

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






                                                         For the six months ended June 30,
                                                  2020           2019         $ Change      % Change
Flying agreements                              $ 1,045,864    $ 1,425,336    $ (379,472)      (26.6) %

Lease, airport services and other                   34,111         42,741  

     (8,630)      (20.2) %
Total operating revenues                       $ 1,079,975    $ 1,468,077    $ (388,102)      (26.4) %




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Flying agreements revenue primarily consists of revenue earned on flights we
operate under our capacity purchase agreements and prorate agreements with our
major airline partners. Lease, airport services and other revenues consist of
revenue earned from providing airport counter, gate and ramp services, and
revenue from leasing regional jet aircraft and spare engines to third parties.
Changes in our flying agreements revenue are summarized below (dollar amounts in
thousands).




                                                        For the six months ended June 30,
                                                 2020           2019         $ Change      % Change
Capacity purchase agreements revenue:
flight operations                             $   498,469    $   770,278    $ (271,809)     (35.3) %
Capacity purchase agreements revenue:
aircraft lease and fixed revenue                  410,838        414,059   

    (3,221)      (0.8) %
Prorate agreements revenue                        136,557        240,999      (104,442)     (43.3) %
Flying agreements revenue                     $ 1,045,864    $ 1,425,336    $ (379,472)     (26.6) %




The decrease in "Capacity purchase agreements revenue: flight operations" of
$271.8 million was primarily due to schedule reductions experienced from the
COVID-19 pandemic.



The decrease in "Capacity purchase agreements revenue: aircraft lease and fixed
revenue" of $3.2 million was primarily due to the deferral of $69.1 million in
fixed amount per aircraft revenue. Under our capacity purchase agreements, we
are paid a fixed amount per month per aircraft over the contract term. We
recognize the fixed amount per aircraft per month proportionately to completed
flights, our performance obligation. We operated a materially lower number of
flights during the six months ended June 30, 2020 from previous levels due to a
reduction in flight schedules resulting from the COVID-19 pandemic. We
anticipate the future monthly flight levels will increase over the remaining
applicable contract terms compared to the six months ended June 30, 2020. Due to
the materially reduced flight activity during the six months ended June 30,
2020, and based on an anticipated increase in future monthly flight volumes over
the remaining contract terms, we determined the fixed amount per month per
aircraft received during the six months ended June 30, 2020 was
disproportionately high relative to the volume of flights operated during the
six months ended June 30, 2020. Accordingly, we deferred revenue attributed to
the fixed amount per month per aircraft received during the six months ended
June 30, 2020. Our deferred revenue balance will adjust over the remaining
contract terms based on our completed flight levels each period relative to the
anticipated average monthly flight levels over the remaining contract terms.
This decrease in "Capacity purchase agreement revenue: aircraft lease revenue"
was partially offset by the incremental lease revenue generated from seven new
E175 aircraft added to our fleet and economic improvements made to certain
existing capacity purchase agreements since June 30, 2019.



The decrease in prorate agreements revenue of $104.4 million was primarily due
to the impact of COVID-19 and the corresponding decrease in prorate passengers
during the six months ended June 30, 2020 compared to the six months ended
June
30, 2019.




The $8.6 million decrease in lease, airport services and other revenues was
primarily related to a decrease in the number of flights at locations where we
were contracted to provide airport customer service during the six months ended
June 30, 2020 compared to the six months ended June 30, 2019.



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Operating Expenses



The following table summarizes our operating expenses and interest expense,
(collectively, "Total airline expenses") for the periods indicated (dollar
amounts in thousands):




                                                      For the six months ended June 30,
                                                 2020          2019        $ Change     % Change

Salaries, wages and benefits                  $   419,379   $   501,354   $  (81,975)     (16.4) %
Aircraft maintenance, materials and repairs       281,505       243,051    

   38,454       15.8 %
Depreciation and amortization                     243,346       180,134        63,212       35.1 %
Airport-related expenses                           52,190        61,429       (9,239)     (15.0) %
Aircraft fuel                                      32,234        56,507      (24,273)     (43.0) %
Aircraft rentals                                   33,752        38,164       (4,412)     (11.6) %
Special items                                           -        21,869      (21,869)         NM

CARES Act payroll support grant                 (151,938)             -    

(151,938)         NM
Other operating expenses                          107,589       125,057      (17,468)     (14.0) %
Total operating expenses                      $ 1,018,057   $ 1,227,565   $ (209,508)     (17.1) %
Interest expense                                   61,130        65,278       (4,148)      (6.4) %
Total airline expenses                        $ 1,079,187   $ 1,292,843   $ (213,656)     (16.5) %





Salaries, wages and benefits. The $82.0 million decrease in salaries, wages and
benefits was primarily due to a reduction in scheduled departures and block
hours related to the COVID-19 pandemic. Additionally, in response to the
COVID-19 pandemic, we have instituted a company-wide hiring freeze, suspended
all non-scale pay increases and offered voluntary unpaid leave to our employees.



Aircraft maintenance, materials and repairs. The $38.5 million increase in
aircraft maintenance expense was primarily due to an increase in direct
maintenance costs incurred on a portion of SkyWest Airlines' CRJ200 and CRJ700
fleet intended to extend the operational performance and reliability of the
aircraft and increased engine maintenance expense during the six months ended
June 30, 2020 compared to the six months ended June 30, 2019.



Depreciation and amortization. The $63.2 million increase in depreciation and
amortization expense was primarily due to a reduction in the estimated useful
life of our owned CRJ200 fleet that resulted in approximately $45.8 million of
incremental depreciation expense during the six months ended June 30, 2020 and
due to the acquisition of seven new E175 aircraft and spare engines since June
30, 2019.




Airport-related expenses. Airport-related expenses include airport-related
customer service costs such as outsourced airport gate and ramp agent services,
airport security fees, passenger interruption costs, deicing, landing fees and
station rents (our employee customer service labor costs are reflected in
salaries, wages and benefits). The $9.2 million decrease in airport-related
expenses was primarily due to a decrease in scheduled departures resulting

from
the COVID-19 pandemic.




Aircraft fuel. The $24.3 million decrease in fuel cost was primarily due to a
reduction in the number of prorate flights we operated and corresponding
decrease in gallons of fuel we purchased and a decrease in our average fuel cost
per gallon from $2.50 for the six months ended June 30, 2019 to $2.00 for the
six months ended June 30, 2020. We purchase and incur expense for all fuel on
flights operated under our prorate agreements. All fuel costs incurred under our
capacity purchase agreements are either purchased directly by our major airline
partners or purchased by us and reimbursed by our major airline partners, with
the direct reimbursement recorded as a reduction to our fuel expense. The
following table summarizes the gallons of fuel we purchased under our prorate
agreements, for the periods indicated:




                              For the six months ended June 30,
(in thousands)               2020            2019        % Change
Fuel gallons purchased         16,107          22,598      (28.7) %
Fuel expense              $    32,234     $    56,507      (43.0) %






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Aircraft rentals. The $4.4 million decrease in aircraft rentals was primarily
related to a reduction of our fleet size that was financed through leases as a
result of scheduled lease expirations subsequent to June 30, 2019.



Special Items. The $21.9 million special items expense for the six months ended
June 30, 2019 related to a non-cash write-off of $18.5 million in aircraft
manufacturer part credits that we forfeited to settle future lease return
obligations with the aircraft manufacturer. The $18.5 million of expense was
included in the SkyWest Airlines segment. The special items expense also
included $3.4 million of expense associated with a cash payout of certain
ExpressJet employees stock equity grants as part of the sale of ExpressJet,
which was reflected in the ExpressJet segment. We did not have a comparable
special items expense during the six months ended June 30, 2020.



CARES Act payroll support grant. In April 2020, we entered into an agreement
with Treasury to receive up to $438.0 million in emergency relief through the
CARES Act payroll support program, of which $336.6 million will be in the form
of payroll support grants, paid in installments through the end of July 2020. As
of June 30, 2020, we received $244.6 million in payroll support grants that is
being recognized as a reduction in expense over the periods the grants are
intended to compensate. We recognized $151.9 million as a reduction in expense
during the six months ended June 30, 2020 and expect to recognize the remainder
of the grants from the CARES Act payroll support program as a reduction in
expense by the end of 2020.



Other operating expenses. Other operating expenses primarily consist of property
taxes, hull and liability insurance, simulator costs, crew per diem, and crew
hotel costs. The $17.5 million decrease in other operating expenses was
primarily related to a decrease in the number of scheduled flights related to
the COVID-19 pandemic during the six months ended June 30, 2020.



Interest Expense. The $4.1 million decrease in interest expense was primarily
related to the reduction in outstanding long-term debt from $3.1 billion as of
June 30, 2019 to $3.0 billion as of June 30, 2020.

Total airline expenses. The $213.7 million decrease in total airline expenses was primarily related to the COVID-19 pandemic and the related decrease in scheduled departures and block hours during the six months ended June 30, 2020.

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





Interest income. Interest income decreased $3.3 million, or 43.6%, during the
six months ended June 30, 2020, compared to the six months ended June 30, 2019.
The decrease in interest income was primarily related to a decrease in interest
rates earned on our marketable securities subsequent to June 30, 2019.



Other income (expense), net. During the six months ended June 30, 2020, we had
other income, net of $0.8 million primarily related to income earned from our
investment in a joint venture with a third party. During the six months ended
June 30, 2019, we had other income of $47.0 million primarily related to the
gain on sale of ExpressJet.



Income taxes. Our provision for income taxes was 26.8% and 23.3% for the six
months ended June 30, 2020 and 2019, respectively. The increase in the effective
tax rate primarily relates to a lower discrete tax benefit from excess tax
deductions generated from employee equity transactions that occurred during the
six months ended June 30, 2020 compared to the six months ended June 30, 2019
and a greater impact related to non-deductible expenses for the six months ended
June 30, 2020, compared to the six months ended June 30, 2019 as a result of
lower pretax earnings for the six months ended June 30, 2020 compared to the
same period of 2019.




Net income. Primarily due to the factors described above, we generated net
income of $4.3 million, or $0.08 per diluted share, for the six months ended
June 30, 2020, compared to net income of $176.2 million, or $3.40 per diluted
share, for the six months ended June 30, 2019.



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  Table of Contents

Our Business Segments

Three Months Ended June 30, 2020 and 2019





For the three months ended June 30, 2020, we had two reportable segments, which
were the basis of our internal financial reporting: SkyWest Airlines and SkyWest
Leasing. Our segment disclosure relates to components of our business for which
separate financial information is available to, and regularly evaluated by, our
chief operating decision maker.


                                        For the three months ended June 30,
                                           (dollar amounts in thousands)
                                   2020          2019        $ Change      % Change
Operating Revenues:
SkyWest Airlines operating
revenue                         $  227,808    $  627,088    $ (399,280)       (63.7) %
SkyWest Leasing operating
revenues                           122,231       117,295          4,936          4.2 %
Total Operating Revenues        $  350,039    $  744,383    $ (394,344)       (53.0) %
Airline Expenses:
SkyWest Airlines airline
expense                         $  279,307    $  549,135    $ (269,828)       (49.1) %
SkyWest Leasing airline
expense                            106,061        83,925         22,136         26.4 %
Total Airline Expenses (1)      $  385,368    $  633,060    $ (247,692)       (39.1) %
Segment profit (loss):
SkyWest Airlines segment
profit (loss)                   $ (51,499)    $   77,953    $ (129,452)      (166.1) %
SkyWest Leasing profit              16,170        33,370       (17,200)       (51.5) %
Total Segment Profit (Loss)     $ (35,329)    $  111,323    $ (146,652)      (131.7) %
Interest Income                      1,685         3,731        (2,046)       (54.8) %
Other Income, net                      402           281            121         43.1 %
Consolidated Income (Loss)
Before Taxes                    $ (33,242)    $  115,335    $ (148,577)      (128.8) %

(1) Total Airline Expenses includes operating expense and interest expense






SkyWest Airlines Segment Profit. SkyWest Airlines block hour production
decreased to 126,026, or 66.0%, for the three months ended June 30, 2020, from
370,782 for the three months ended June 30, 2019, primarily related to the
reduced demand for air travel due to the COVID-19 pandemic. Significant items
contributing to the SkyWest Airlines segment profit are set forth below.



The $399.3 million, or 63.7%, decrease in SkyWest Airlines Operating Revenues
for the three months ended June 30, 2020, compared to the three months ended
June 30, 2019, was primarily due to the COVID-19 pandemic that negatively
impacted prorate revenue by $98.7 million and all other revenue (including
capacity purchase agreement revenue) by $300.6 million.



The $269.8 million, or 49.1%, decrease in SkyWest Airlines Airline Expenses for
the three months ended June 30, 2020, compared to the three months ended June
30, 2019, was primarily due to the following factors:

SkyWest Airlines' salaries, wages and benefits expense decreased by $73.7

? million, or 30.3%, primarily due to the reduction in scheduled departures and


   block hours related to the COVID-19 pandemic.

SkyWest Airlines' depreciation and amortization expense increased by $18.8

? million, or 46.2%, primarily due to a decrease in the estimated useful life of

SkyWest Airlines' CRJ200 fleet and the related spare engines.

SkyWest Airlines' fuel expense decreased $24.0 million, or 77.9%, primarily due

to a decrease in the volume of gallons purchased along with a decrease in the

? average fuel cost per gallon in 2020 compared to 2019. The average fuel cost


   per gallon was $1.45 and $2.57 for the three months ended June 30, 2020 and
   2019, respectively.




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SkyWest Airlines recognized $151.9 million as a reduction in expense during the

? three months ended June 30, 2020 and expects to recognize the remainder of the

grants from the CARES Act payroll support program as a reduction in expenses by


   the end of 2020.

SkyWest Airlines' remaining airline expenses decreased $39.0 million, or 16.6%,

? primarily related to a decrease in the number of scheduled flights related to


   the COVID-19 pandemic during the three months ended June 30, 2020.




SkyWest Leasing Segment Profit. SkyWest Leasing profit decreased $17.2 million
during the three months ended June 30, 2020, compared to the three months ended
June 30, 2019, primarily due to additional depreciation expense resulting from a
shortened estimated useful life of certain CRJ200 spare engines as a result of
COVID-19, partially offset by an additional seven new E175 aircraft added to our
fleet subsequent to June 30, 2019.

Six Months Ended June 30, 2020 and 2019





For the six months ended June 30, 2020 and following the sale of ExpressJet, we
had two reportable segments, which were the basis of our internal financial
reporting: SkyWest Airlines and SkyWest Leasing. Our segment disclosure relates
to components of our business for which separate financial information is
available to, and regularly evaluated by, our chief operating decision maker.
Our operating segments for the six months ended June 30, 2019, prior to the sale
of ExpressJet, were SkyWest Airlines, ExpressJet and SkyWest Leasing. During
2019, our corporate overhead expense was allocated to the operating expenses of
SkyWest Airlines and ExpressJet.


                                            For the six months ended June 30,
                                              (dollar amounts in thousands)
                                     2020           2019         $ Change      % Change
Operating Revenues:
SkyWest Airlines operating
revenue                           $   834,650    $ 1,212,856    $ (378,206)      (31.2) %
ExpressJet operating revenues               -         24,050       (24,050)     (100.0) %
SkyWest Leasing operating
revenues                              245,325        231,171         14,154         6.1 %
Total Operating Revenues          $ 1,079,975    $ 1,468,077    $ (388,102)      (26.4) %
Airline Expenses:
SkyWest Airlines airline
expense                           $   875,989    $ 1,098,854    $ (222,865)      (20.3) %
ExpressJet airline expense                  -         28,690       (28,690)     (100.0) %
SkyWest Leasing airline
expense                               203,198        165,299         37,899        22.9 %
Total Airline Expenses (1)        $ 1,079,187    $ 1,292,843    $ (213,656)      (16.5) %
Segment profit (loss):
SkyWest Airlines segment
profit (loss)                     $  (41,339)    $   114,002    $ (155,341)     (136.3) %
ExpressJet segment loss                     -        (4,640)          4,640     (100.0) %
SkyWest Leasing profit                 42,127         65,872       (23,745)      (36.0) %
Total Segment Profit              $       788    $   175,234    $ (174,446)      (99.6) %
Interest Income                         4,249          7,538        (3,289)      (43.6) %
Other Income, net                         800         47,006       (46,206)      (98.3) %
Consolidated Income Before
Taxes                             $     5,837    $   229,778    $ (223,941)      (97.5) %

(1) Total Airline Expenses includes operating expense and interest expense






SkyWest Airlines Segment Profit. SkyWest Airlines block hour production
decreased to 483,249, or 32.9%, for the six months ended June 30, 2020, from
720,171 for the six months ended June 30, 2019, primarily due to the COVID-19
pandemic. Significant items contributing to the SkyWest Airlines segment profit
are set forth below.



The $378.2 million, or 31.2%, decrease in SkyWest Airlines Operating Revenues
for the six months ended June 30, 2020, compared to the six months ended June
30, 2019, was primarily due to the COVID-19 pandemic that negatively impacted
prorate revenue by $104.4 million and all other revenue (including capacity
purchase agreement revenue) by $273.8 million.



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  Table of Contents


The $222.9 million, or 20.3%, decrease in SkyWest Airlines Airline Expenses for
the six months ended June 30, 2020, compared to the six months ended June 30,
2019, was primarily due to the following factors:

SkyWest Airlines' salaries, wages and benefits expense decreased by $67.9

? million, or 14.0%, primarily due to the reduction in scheduled departures and


   block hours related to the COVID-19 pandemic.

SkyWest Airlines' aircraft maintenance, materials and repairs expense increased

by $42.7 million, or 18.5%, primarily attributable to an increase in

? maintenance parts expense and direct maintenance costs incurred on a portion of

SkyWest Airlines' CRJ200 and CRJ700 fleet and increased engine maintenance

expense during the six months ended June 30, 2020 compared to the six months


   ended June 30, 2019.

SkyWest Airlines' depreciation and amortization expense increased by $30.5

? million, or 37.8%, primarily due to a decrease in the estimated useful life of

SkyWest Airlines' CRJ200 fleet and the related spare engines.

SkyWest Airlines included special items related to a non-cash write-off of

? $18.5 million in aircraft manufacturer part credits that we forfeited to settle

future lease return obligations with the aircraft manufacturer during the six


   months ended June 30, 2019.

SkyWest Airlines' fuel expense decreased $24.3 million, or 43.0%, primarily due

to a decrease in the volume of gallons purchased along with a decrease in the

? average fuel cost per gallon in 2020 compared to 2019. The average fuel cost

per gallon was $2.00 and $2.50 for the six months ended June 30, 2020 and 2019,


   respectively.

SkyWest Airlines recognized $151.9 million as a reduction in expense during the

? six months ended June 30, 2020 and expects to recognize the remainder of the

grants from the CARES Act payroll support program as a reduction in expenses by


   the end of 2020.

SkyWest Airlines' remaining airline expenses decreased $33.5 million, or 14.8%,

? primarily related to a decrease in the number of scheduled flights related to


   the COVID-19 pandemic during the six months ended June 30, 2020.




SkyWest Leasing Segment Profit. SkyWest Leasing profit decreased $23.7 million
during the six months ended June 30, 2020, compared to the six months ended June
30, 2019, primarily due to additional depreciation expense resulting from a
shortened estimated useful life of certain CRJ200 spare engines as a result of
COVID-19, partially offset by an additional seven new E175 aircraft added to our
fleet subsequent to June 30, 2019.

                                       38

Table of Contents

Liquidity and Capital Resources

Sources and Uses of Cash


Cash Position and Liquidity. The following table provides a summary of the net
cash provided by (used in) our operating, investing and financing activities for
the six months ended June 30, 2020 and 2019, and our total cash and marketable
securities positions as of June 30, 2020 and December 31, 2019 (in thousands):




                                                     For the six months ended June 30,
                                                2020          2019        $ Change     % Change

Net cash provided by operating activities    $  492,283    $   362,123    $ 130,160        35.9 %
Net cash used in investing activities          (70,623)      (249,049)      178,426      (71.6) %
Net cash used in financing activities          (56,619)      (187,797)     

131,178      (69.9) %





                                          June 30,      December 31,
                                            2020            2019          $ Change      % Change
Cash and cash equivalents                $  452,247    $       87,206    $   365,041       418.6 %
Marketable securities                       309,823           432,966      (123,143)      (28.4) %

Total cash and marketable securities     $  762,070    $      520,172    $ 

 241,898        46.5 %

Cash Flows provided by Operating Activities


Cash flows from operating activities increased $130.2 million primarily due to
deferred income related to the CARES Act payroll grant of $92.7 million as of
June 30, 2020, deferred revenue related to the amount of cash allocated under
our capacity purchase agreements in excess of revenue recognized of $69.1
million as of June 30, 2020 and an increase in non-cash depreciation expense of
$63.2 million for the six months ended June 30, 2020 compared to the same period
of 2019, partially offset by a decrease in cash provided by other working
capital accounts during the six months ended June 30, 2020 compared to the same
period of 2019 and by a decrease in pretax income for the six months ended June
30, 2020 compared to the same period of 2019.

Cash Flows used in Investing Activities





The $178.4 million decrease in cash used in investing activities was primarily
due to the acquisition of 70 previously leased aircraft and five new E175
aircraft during the six months ended June 30, 2019, compared to the acquisition
of four used CRJ700 aircraft and two new E175 aircraft for the six months ended
June 30, 2020. These changes represented a $164.8 million decrease in aircraft
purchases and related spare aircraft assets. Additionally, during the six months
ended June 30, 2019, we sold ExpressJet for $79.6 million partially offset by a
note receivable issued to the buyer of $26.4 million, resulting in net cash from
the sale of ExpressJet of $53.2 million.

Cash Flows used in Financing Activities





The $131.2 million decrease in cash used in financing activities was primarily
related to the decrease in principal payments on long-term debt of $96.0 million
for the six months ended June 30, 2020, compared to the six months ended June
30, 2019. This decrease was primarily related to temporary deferrals on
long-term debt payments we received with certain lenders during the six months
ended June 30, 2020. Additionally, during the six months ended June 30, 2020, we
used an additional $26.2 million to purchase treasury shares and make income tax
payments towards vested employee equity awards compared to $68.9 million for the
six months ended June 30, 2019.

Liquidity and Capital Resources as of June 30, 2020


Given the measures discussed above that we have implemented to mitigate the
impact of the COVID-19 pandemic on our financial position and operations and our
assumptions about its future impact on travel demand, which could be materially
different due to the inherent uncertainties of the current operating
environment, we believe the working capital currently available to us (including
funds from government assistance provided or to be provided

                                       39

Table of Contents


pursuant to the CARES Act) will be sufficient to meet our present financial
requirements, including anticipated expansion, planned capital expenditures, and
scheduled lease payments and debt service obligations for at least the next

12
months.

At June 30, 2020, our total capital mix was 44.6% equity and 55.4% long-term debt, compared to 45.3% equity and 54.7% long-term debt at December 31, 2019.





In early July 2020, SkyWest Airlines executed a non-binding letter of intent
with Treasury for approximately $497.0 million in secured loans under the CARES
Act and is evaluating the timing and level of participation in this loan
program.

Significant Commitments and Obligations





General

See Note 7, "Leases, Commitments and Contingencies," to the condensed consolidated financial statements for our commitments and obligations for each of the next five years and thereafter.

Purchase Commitments and Options





We are coordinating with our major airline partners and aircraft manufactures on
the timing of upcoming fleet deliveries under previously announced deals in
response to COVID-19 schedule reductions. The anticipated future delivery dates
summarized below are subject to change. As of June 30, 2020, we had a firm
purchase commitment for 24 new E175 aircraft from Embraer, S.A. with delivery
dates anticipated through 2022.



We have in recent years funded the majority of our aircraft acquisition cost
with long-term debt. At the time of each aircraft acquisition, we evaluate the
financing alternatives available to us, and select an appropriate method to fund
the acquisition. At present, we intend to fund our acquisition of any additional
aircraft through cash on hand and debt financing. Based on current market
conditions and discussions with prospective leasing organizations and financial
institutions, we currently believe that we will be able to obtain financing for
our committed acquisitions, as well as additional aircraft. We intend to finance
the firm order for 24 new E175 aircraft with approximately 85% debt and the

remaining balance with cash.



Long-term Debt Obligations

As of June 30, 2020, we had $3.0 billion of long-term debt obligations, including current maturities, primarily related to the acquisition of E175 aircraft. The average effective interest rate on the debt related to such aircraft was approximately 4.1% at June 30, 2020.





Guarantees

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





Seasonality



Our results of operations for any interim period are not necessarily indicative
of those for an entire year, since the airline industry is subject to seasonal
fluctuations and general economic conditions. Our operations are somewhat
favorably affected by increased travel on our prorate routes, historically
occurring during the summer months, and unfavorably affected by decreased travel
during the months November through February and by inclement weather, which may
occasionally or frequently, depending on the severity of the inclement weather
in any given winter, result in cancelled flights during the winter months. The
COVID-19 pandemic has negatively impacted our summer schedule and we anticipate
that it will continue to have a negative impact throughout the remainder of

2020. The magnitude of the

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impact will depend on various factors including passenger demand and the related
flight schedules we are requested to operate by our major airline partners under
our capacity purchase agreements.

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