Segment Reporting

9 Months Ended

Sep. 30, 2016

Segment Reporting

Segment Reporting

Note 5 - Segment Reporting

The Company’s three reporting segments consist of the operations of SkyWest Airlines, ExpressJet and SkyWest Leasing activities. Corporate overhead expenses incurred by the Company are allocated to the operating expenses of SkyWest Airlines and ExpressJet.

The Company’s chief operating decision maker analyzes the profitability of operating the E175 aircraft (including operating costs and associated revenue) separately from the profitability of the Company’s ownership, financing costs and associated revenue of the Company’s E175 aircraft (including depreciation expense, interest expense and associated revenue).  Because of this change, the “SkyWest Leasing” segment includes revenue attributed to the Company’s E175 aircraft ownership cost earned under the applicable fixed-fee contracts and the depreciation and interest expense of the Company’s E175 aircraft.  The “SkyWest Leasing” segment’s total assets and capital expenditures include the acquired E175 aircraft.  The “SkyWest Leasing” segment additionally includes the activity of two CRJ200 aircraft leased to a third party. As a result of the change in segmentation, results for prior periods have been recast to conform to the current presentation.

The following represents the Company’s segment data for the three-month periods ended September 30, 2016 and 2015 (in thousands).

	Three months ended September 30, 2016
	SkyWest				SkyWest
	Airlines		ExpressJet		Leasing		Consolidated
Operating revenues	$	502,600	$	260,362	$	36,814	$	799,776
Operating expense		436,504		261,003		16,435		713,942
Depreciation and amortization expense		34,942		20,726		16,075		71,743
Interest expense		6,584		1,597		11,684		19,865
Segment profit (loss) (1)		59,512		(2,238)		8,695		65,969
Identifiable intangible assets, other than goodwill		—		8,811		—		8,811
Total assets		2,259,640		1,347,418		1,692,706		5,299,764
Capital expenditures (including non-cash)		15,385		3,296		290,420		309,101

	Three months ended September 30, 2015
	SkyWest				SkyWest
	Airlines		ExpressJet		Leasing		Consolidated
Operating revenues	$	485,749	$	283,034	$	25,221	$	794,004
Operating expense		417,599		286,941		11,168		715,708
Depreciation and amortization expense		34,220		21,575		10,808		66,603
Interest expense		9,002		2,757		8,155		19,914
Segment profit (loss) (1)		59,148		(6,664)		5,898		58,382
Identifiable intangible assets, other than goodwill		—		11,061		—		11,061
Total assets		2,377,655		1,400,015		1,125,236		4,902,906
Capital expenditures (including non-cash)		5,251		5,137		124,146		134,534

(1) Segment profit (loss) is equal to operating income less interest expense

The following represents the Company’s segment data for the nine-month periods ended September 30, 2016 and 2015 (in thousands).

	Nine months ended September 30, 2016
	SkyWest				SkyWest
	Airlines		ExpressJet		Leasing		Consolidated
Operating revenues	$	1,473,003	$	794,410	$	95,777	$	2,363,190
Operating expense		1,278,730		809,478		43,202		2,131,410
Depreciation and amortization expense		103,858		63,453		42,120		209,431
Interest expense		19,997		5,337		30,542		55,876
Segment profit (loss) (1)		174,276		(20,405)		22,033		175,904
Identifiable intangible assets, other than goodwill		—		8,811		—		8,811
Total assets		2,259,640		1,347,418		1,692,706		5,299,764
Capital expenditures (including non-cash)		37,270		10,346		583,445		631,061

	Nine months ended September 30, 2015
	SkyWest				SkyWest
	Airlines		ExpressJet		Leasing		Consolidated
Operating revenues	$	1,387,451	$	896,683	$	58,685	$	2,342,819
Operating expense		1,221,909		911,782		26,824		2,160,515
Depreciation and amortization expense		106,692		64,918		25,343		196,953
Interest expense		27,874		9,590		18,996		56,460
Segment profit (loss) (1)		137,668		(24,689)		12,865		125,844
Identifiable intangible assets, other than goodwill		—		11,061		—		11,061
Total assets		2,377,655		1,400,015		1,125,236		4,902,906
Capital expenditures (including non-cash)		30,169		19,713		604,811		654,693

(1) Segment profit (loss) is equal to operating income less interest expense

During the nine months ended September 30, 2016, the Company had nine CRJ700 aircraft that terminated under multiple flying contracts with its major airline partners and were permanently removed from service prior to the lease termination.  The Company also entered into an early lease return arrangement with a lessor on these nine CRJ700 aircraft. 

During the three months ended September 30, 2016, the Company recorded $9.2 million of early aircraft lease return expense for six CRJ700 aircraft that were removed from operations, of which $3.9 million was recorded in the SkyWest Airlines segment and $5.3 million was recorded in the ExpressJet segment.  During the nine months ended September 30, 2016, the Company recorded $19.4 million of early aircraft lease return expense for nine CRJ700 aircraft that were removed from operations, of which $3.9 million was recorded in the SkyWest Airlines segment and $15.5 million was recorded in the ExpressJet segment. 

The early lease return expenses included the write-off of certain prepaid aircraft rents and accrued liabilities under the early lease return arrangement.  As of September 30, 2016, the Company had $8.7 million of accrued liabilities associated with the early lease return arrangement for nine CRJ700 aircraft.