Impact of the COVID-19 Pandemic	3 Months Ended
Mar. 31, 2021
Impact of the COVID-19 Pandemic
Impact of the COVID-19 Pandemic	(2) Impact of the COVID-19 Pandemic COVID-19, which was declared a global health pandemic by the World Health Organization in March 2020, has continued to spread around the world and driven the implementation and continuation 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, the Company and its major airline partners, have experienced an unprecedented decline in the demand for air travel, which has materially and adversely affected the Company’s revenues, particularly under its prorate agreements. The continued spread of the virus and the ongoing global pandemic has affected nearly all of the domestic and international networks of the Company’s major airline partners for whom it conducts flight operations and relies on to set its flight schedules. While the length and severity of the reduction in demand due to COVID-19 are uncertain, the Company presently expects a continued negative impact on its results of operations in 2021 and possibly thereafter. Liquidity. At March 31, 2021, the Company had $1,542.4 million in total available liquidity, consisting of $836.4 million in cash and marketable securities, $41.0 million available under SkyWest Airlines’ line of credit with a bank and an additional $665.0 million available under the Company’s secured loan and guarantee agreement (“Treasury Loan Agreement”) with the U.S. Department of the Treasury (“U.S. Treasury”) related to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). 2021 Appropriations Act. In January 2021, SkyWest Airlines entered into a Payroll Support Program Extension Agreement (the “PSP Extension Agreement”) with U.S. Treasury with respect to a payroll grant program under the Consolidated Appropriations Act, 2021 (“2021 Appropriations Act”). Pursuant to the PSP Extension Agreement, SkyWest Airlines received $233.1 million from U.S. Treasury during the three months ended March 31, 2021. In connection with the receipt of financial assistance under the PSP Extension Agreement, SkyWest Airlines is required to comply with the relevant provisions of the 2021 Appropriations Act, many of which are substantially similar to the requirements placed on SkyWest Airlines by the Payroll Support Program under the CARES Act that the Company entered into with U.S. Treasury in April 2020. The relevant provisions include the requirement that the funding be used exclusively for the continuation of payment of employee wages, salaries and benefits. Similar to the Payroll Support Program under the CARES Act, SkyWest Airlines and, in some cases, the Company was also subject to certain restrictions, including, but not limited to, limitations on involuntary terminations, pay rate reductions and furloughs through March 31, 2021, restrictions on the payment of dividends and the repurchase of shares through March 31, 2022, and certain limitations on executive compensation through October 1, 2022. SkyWest Airlines was also required to recall employees involuntarily terminated or furloughed after September 30, 2020 with pay from December 1, 2020 to March 31, 2021. The PSP Extension Agreement payments received through March 31, 2021 included $193.2 million in the form of a payroll grant and $39.9 million in the form of an unsecured 10-year loan. The loan bears interest at an annual rate of 1.00% for the first five years (through January 2026) and the Secured Overnight Financing Rate plus 2.00% in the final five years. In return, the Company issued to U.S. Treasury warrants to purchase 98,815 shares of the Company’s common stock. These warrants have an exercise price of $40.41 per share and a five-year term from the date of issuance. The relative fair value of the warrants is recorded within stockholder's equity and as a discount reducing the carrying value of the loan, which will be amortized as interest expense in the Company’s income statement over the term of the loan. The proceeds of the grant are recorded in cash and cash equivalents when received and will be recognized as a reduction in expense in payroll support grant in our income statement over the periods that the funds are intended to compensate. Additional Funding Under the PSP Extension Agreement. The Company received an additional $35.0 million on April 23, 2021 from U.S. Treasury under the PSP Extension Agreement. In consideration for the additional funding, the principal amount of the promissory note the Company issued to Treasury on January 15, 2021 was increased by approximately $10.5 million and the Company issued to U.S. Treasury warrants to purchase an additional 25,958 shares of the Company’s common stock at an exercise price of $40.41 per share pursuant to the warrant agreement entered into by the Company and U.S. Treasury on January 15, 2021. Treasury Secured Loan Amendment. In January 2021, the Company amended the secured loan agreement with U.S. Treasury that extended the deadline pursuant to which SkyWest Airlines may, at its discretion, borrow additional amounts under the facility from March 26, 2021 to May 28, 2021. The other terms of the Treasury Loan Agreement were not affected. As of March 31, 2021, total borrowings under this facility were $60 million. The Company did not draw any additional amounts during the three months ended March 31, 2021. American Rescue Plan Act of 2021. On April 23, 2021, SkyWest Airlines entered into a Payroll Support Program 3 Agreement (the “PSP 3 Agreement”) with U.S. Treasury with respect to a payroll grant program under the American Rescue Plan Act of 2021 (“American Rescue Plan Act”). Pursuant to the PSP 3 Agreement, SkyWest Airlines expects to receive from U.S. Treasury approximately $250.0 million in the aggregate during the second quarter of 2021, $125.0 million of which the Company received on April 23, 2021. In connection with the receipt of financial assistance under the PSP 3 Agreement, SkyWest Airlines is required to comply with the relevant provisions of the American Rescue Plan Act, many of which are substantially similar to the requirements placed on SkyWest Airlines by the Payroll Support Program Agreement under the CARES Act and the PSP Extension Agreement under the 2021 Appropriations Act. The relevant provisions include the requirement that the funding be used exclusively for the continuation of payment of employee wages, salaries and benefits. Similar to the previous Payroll Support Programs, SkyWest Airlines and, in some cases, the Company will also be subject to certain restrictions, including, but not limited to, limitations on involuntary terminations, pay rate reductions and furloughs through September 30, 2021, restrictions on the payment of dividends and the repurchase of shares through September 30, 2022, and certain limitations on executive compensation through April 1, 2023. As partial compensation to U.S. Treasury for the provision of financial assistance under the PSP 3 Agreement, SkyWest Airlines issued, and the Company guaranteed, a promissory note (the “Promissory Note”) to U.S. Treasury on April 23, 2021 (the “PSP 3 Closing Date”). The Promissory Note provides for SkyWest Airlines’ unconditional promise to pay to U.S. Treasury the expected principal sum of up to approximately $45.0 million. On the PSP 3 Closing Date, the principal amount of the Promissory Note was approximately $7.5 million, and such principal amount will be increased by an amount equal to 30% of each additional disbursement of grants to SkyWest Airlines under the PSP 3 Agreement in connection with each additional disbursement following the PSP 3 Closing Date. The Promissory Note will bear interest at a rate equal to 1.00% per annum until the fifth anniversary of the PSP 3 Closing Date, and 2.00% plus an interest rate based on the secured overnight financing rate per annum (but not less than 0.00%) thereafter until the tenth anniversary of the PSP 3 Closing Date (the “Maturity Date”). Accrued interest will be payable in arrears on the last business day of each of March and September of each year, beginning with September 30, 2021. The aggregate unpaid principal amount of the Promissory Note, all accrued and unpaid interest and all other amounts payable under the Promissory Note will be due and payable on the Maturity Date. In connection with the PSP 3 Agreement and as partial compensation to U.S. Treasury for the provision of financial assistance under the PSP 3 Agreement, the Company will issue warrants (each a “Warrant” and, collectively, the “Warrants”) to U.S. Treasury to purchase up to an expected aggregate of 78,317 shares (the “Warrant Shares”) of the Company’s common stock, at an exercise price of $57.47 per share, which was the closing price of the Common Stock on The Nasdaq Stock Market on March 10, 2021. The Warrants will be issued pursuant to the terms of a Warrant Agreement entered into by the Company and U.S. Treasury on April 23, 2021. The number of Warrant Shares to be issued is subject to adjustment as a result of certain anti-dilution provisions contained in the Warrants. On the PSP 3 Closing Date, the Company issued a Warrant to Treasury to purchase 13,058 shares of the Company’s common stock in connection with the PSP 3 Agreement.

Impact of the COVID-19 Pandemic

3 Months Ended

Mar. 31, 2021

(2) Impact of the COVID-19 Pandemic

COVID-19, which was declared a global health pandemic by the World Health Organization in March 2020, has continued to spread around the world and driven the implementation and continuation 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, the Company and its major airline partners, have experienced an unprecedented decline in the demand for air travel, which has materially and adversely affected the Company’s revenues, particularly under its prorate agreements. The continued spread of the virus and the ongoing global pandemic has affected nearly all of the domestic and international networks of the Company’s major airline partners for whom it conducts flight operations and relies on to set its flight schedules. While the length and severity of the reduction in demand due to COVID-19 are uncertain, the Company presently expects a continued negative impact on its results of operations in 2021 and possibly thereafter.

Liquidity. At March 31, 2021, the Company had $1,542.4 million in total available liquidity, consisting of $836.4 million in cash and marketable securities, $41.0 million available under SkyWest Airlines’ line of credit with a bank and an additional $665.0 million available under the Company’s secured loan and guarantee agreement (“Treasury Loan Agreement”) with the U.S. Department of the Treasury (“U.S. Treasury”) related to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

2021 Appropriations Act. In January 2021, SkyWest Airlines entered into a Payroll Support Program Extension Agreement (the “PSP Extension Agreement”) with U.S. Treasury with respect to a payroll grant program under the Consolidated Appropriations Act, 2021 (“2021 Appropriations Act”). Pursuant to the PSP Extension Agreement, SkyWest Airlines received $233.1 million from U.S. Treasury during the three months ended March 31, 2021.

In connection with the receipt of financial assistance under the PSP Extension Agreement, SkyWest Airlines is required to comply with the relevant provisions of the 2021 Appropriations Act, many of which are substantially similar to the requirements placed on SkyWest Airlines by the Payroll Support Program under the CARES Act that the

Company entered into with U.S. Treasury in April 2020. The relevant provisions include the requirement that the funding be used exclusively for the continuation of payment of employee wages, salaries and benefits. Similar to the Payroll Support Program under the CARES Act, SkyWest Airlines and, in some cases, the Company was also subject to certain restrictions, including, but not limited to, limitations on involuntary terminations, pay rate reductions and furloughs through March 31, 2021, restrictions on the payment of dividends and the repurchase of shares through March 31, 2022, and certain limitations on executive compensation through October 1, 2022. SkyWest Airlines was also required to recall employees involuntarily terminated or furloughed after September 30, 2020 with pay from December 1, 2020 to March 31, 2021.

The PSP Extension Agreement payments received through March 31, 2021 included $193.2 million in the form of a payroll grant and $39.9 million in the form of an unsecured 10-year loan. The loan bears interest at an annual rate of 1.00% for the first five years (through January 2026) and the Secured Overnight Financing Rate plus 2.00% in the final five years. In return, the Company issued to U.S. Treasury warrants to purchase 98,815 shares of the Company’s common stock. These warrants have an exercise price of $40.41 per share and a five-year term from the date of issuance.

The relative fair value of the warrants is recorded within stockholder's equity and as a discount reducing the carrying value of the loan, which will be amortized as interest expense in the Company’s income statement over the term of the loan. The proceeds of the grant are recorded in cash and cash equivalents when received and will be recognized as a reduction in expense in payroll support grant in our income statement over the periods that the funds are intended to compensate.

Additional Funding Under the PSP Extension Agreement. The Company received an additional $35.0 million on April 23, 2021 from U.S. Treasury under the PSP Extension Agreement. In consideration for the additional funding, the principal amount of the promissory note the Company issued to Treasury on January 15, 2021 was increased by approximately $10.5 million and the Company issued to U.S. Treasury warrants to purchase an additional 25,958 shares of the Company’s common stock at an exercise price of $40.41 per share pursuant to the warrant agreement entered into by the Company and U.S. Treasury on January 15, 2021.

Treasury Secured Loan Amendment. In January 2021, the Company amended the secured loan agreement with U.S. Treasury that extended the deadline pursuant to which SkyWest Airlines may, at its discretion, borrow additional amounts under the facility from March 26, 2021 to May 28, 2021. The other terms of the Treasury Loan Agreement were not affected. As of March 31, 2021, total borrowings under this facility were $60 million. The Company did not draw any additional amounts during the three months ended March 31, 2021.

American Rescue Plan Act of 2021. On April 23, 2021, SkyWest Airlines entered into a Payroll Support Program 3 Agreement (the “PSP 3 Agreement”) with U.S. Treasury with respect to a payroll grant program under the American Rescue Plan Act of 2021 (“American Rescue Plan Act”). Pursuant to the PSP 3 Agreement, SkyWest Airlines expects to receive from U.S. Treasury approximately $250.0 million in the aggregate during the second quarter of 2021, $125.0 million of which the Company received on April 23, 2021.

In connection with the receipt of financial assistance under the PSP 3 Agreement, SkyWest Airlines is required to comply with the relevant provisions of the American Rescue Plan Act, many of which are substantially similar to the requirements placed on SkyWest Airlines by the Payroll Support Program Agreement under the CARES Act and the PSP Extension Agreement under the 2021 Appropriations Act. The relevant provisions include the requirement that the funding be used exclusively for the continuation of payment of employee wages, salaries and benefits. Similar to the previous Payroll Support Programs, SkyWest Airlines and, in some cases, the Company will also be subject to certain restrictions, including, but not limited to, limitations on involuntary terminations, pay rate reductions and furloughs through September 30, 2021, restrictions on the payment of dividends and the repurchase of shares through September 30, 2022, and certain limitations on executive compensation through April 1, 2023.

As partial compensation to U.S. Treasury for the provision of financial assistance under the PSP 3 Agreement, SkyWest Airlines issued, and the Company guaranteed, a promissory note (the “Promissory Note”) to U.S. Treasury on April 23, 2021 (the “PSP 3 Closing Date”). The Promissory Note provides for SkyWest Airlines’ unconditional promise to pay to U.S. Treasury the expected principal sum of up to approximately $45.0 million. On the PSP 3 Closing Date, the principal amount of the Promissory Note was approximately $7.5 million, and such principal amount will be increased

by an amount equal to 30% of each additional disbursement of grants to SkyWest Airlines under the PSP 3 Agreement in connection with each additional disbursement following the PSP 3 Closing Date.

The Promissory Note will bear interest at a rate equal to 1.00% per annum until the fifth anniversary of the PSP 3 Closing Date, and 2.00% plus an interest rate based on the secured overnight financing rate per annum (but not less than 0.00%) thereafter until the tenth anniversary of the PSP 3 Closing Date (the “Maturity Date”). Accrued interest will be payable in arrears on the last business day of each of March and September of each year, beginning with September 30, 2021. The aggregate unpaid principal amount of the Promissory Note, all accrued and unpaid interest and all other amounts payable under the Promissory Note will be due and payable on the Maturity Date.

In connection with the PSP 3 Agreement and as partial compensation to U.S. Treasury for the provision of financial assistance under the PSP 3 Agreement, the Company will issue warrants (each a “Warrant” and, collectively, the “Warrants”) to U.S. Treasury to purchase up to an expected aggregate of 78,317 shares (the “Warrant Shares”) of the Company’s common stock, at an exercise price of $57.47 per share, which was the closing price of the Common Stock on The Nasdaq Stock Market on March 10, 2021. The Warrants will be issued pursuant to the terms of a Warrant Agreement entered into by the Company and U.S. Treasury on April 23, 2021. The number of Warrant Shares to be issued is subject to adjustment as a result of certain anti-dilution provisions contained in the Warrants. On the PSP 3 Closing Date, the Company issued a Warrant to Treasury to purchase 13,058 shares of the Company’s common stock in connection with the PSP 3 Agreement.