SkyWest Inc (SKYW) 2006 Q4 法說會逐字稿

At this time, I would like to welcome everyone to the SkyWest Inc. fourth quarter 2006 results conference call. [OPERATOR INSTRUCTIONS] Now, I would like to turn the call over to Mr. Brad Rich, Executive Vice President, Chief Financial Officer and Treasurer. Thank you. Mr. Rich, may begin your conference.

Thank you, operator and thanks to all of you for taking the time to join us this morning. By way of introductions, I also have participating in the call this morning, Ron Reber, President and Chief Operating Officer of SkyWest Airlines; Brian LaBrecque, President and Chief Operating Officer of ASA. I also have Mike Kraupp, Chip Childs and other members of our staff here at headquarters participating. To begin, I have asked Mike Kraupp if he would please read our forward-looking statement.

Okay. Here we go. In addition to historical information, this release and conference call may contain forward-looking statements. SkyWest may from time to time make written or oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such statements encompass SkyWest's beliefs, expectations, hopes or intentions regarding future events. Words such as expects, intends, believes, anticipates, should, likely and similar expressions identify forward-looking statements. All forward-looking statements included in this release and conference call are made on the date hereof and are based on information available to SkyWest as of such date. SkyWest assumes no obligation to update any forward-looking statement. Actual results may vary and may vary materially from those anticipated, estimated, projected or expected for a number of reasons.

Okay. Thank you, Mike. During the call today, we willing referencing both the press release that we put out this morning, as well as the press release that was dated January 15, 2007, in which we commented on several factors that had impacted our fourth quarter financial results. I will try to be brief in the prepared remarks this morning and spend most of the time in a question-and-answer session to make sure that we are covering the topics that each of you are most interested in. First of all, just by way of review of the first part of the press release, today we reported operating revenues of $789.6 million for the fourth quarter, which is a 6.4% increase, compared to the $742.4 million that we reported for the same period last year.

Our net income is $31.2 million or $0.48 in diluted EPS, compared to $38.7 million or $0.64 in diluted EPS for the same period last year. Our annual results for the year, we reported $3.1 billion in operating revenues for the year, which is a 58.6% increase, compared to the $1.96 billion that we reported for the same period last year. We reported for the full year results $145.8 million in net income, or $2.30 per diluted share compared to $112.3 million of net income or $1.90 per diluted share for the same period last year. And, of course, those results obviously include the impact of the stock offering of 4 million common shares that we did back in April of '06, as well as the impact of FASB 123R.

At this point, I will probably depart a little bit from the press releases, not necessarily in concept but in the structure. I want to just really talk about some of the factors impacting the quarter. In some ways, this is a bit of a difficult discussion to have, partly from a year-to-date perspective, our results show significant increases in operating revenues, net incomes and diluted EPS. However, it's obvious that our fourth quarter results did not meet either the Company's or the market's expectations. It's also a difficult discussion to have due to the fact that the very nature of the challenges we face during the quarter are the very things that have required the maximum commitment, focus and energy of all of our people.

Our people have done everything that they could possibly do, not only to hold the system together, in spite of extremely challenging conditions, but to bring it back up to full capacity. Knowing that we have had air traffic in the wrong places, crew members in the wrong places with no legal flight time remaining. Customer service representatives doing their very best to take care of our customers who are frustrated and in a very stressful environment. We've got maintenance and ramp personnel doing everything they can and have done everything they could to get the aircraft ready and get them out on time, whenever possible. Our hiring and training programs have been at max capacity. And generally, just people doing everything they can possibly do in spite of very difficult circumstances.

Having said all of that, we certainly are well aware that in some respects, this is the airline industry, and in some ways, it's just a part of life. I think we're also acknowledging that what we have just been through in December and especially through the holidays has not been expected and is not normal. And our people have done, in many, many cases, remarkably things to have done what we did and have accomplished a great deal in spite of some difficult circumstances. Unfortunately, it's a period in which our financial results do not correlate very well at all with the effort of our people.

And the first thing I would like to do and I think it's very appropriate to recognize and express our appreciation and gratitude to the nearly 15,000 people of SkyWest Airlines and Atlantic Southeast Airlines, who have done and continue to give us their maximum commitment and effort and we appreciate that very much. As far as continuing on the theme of things that have impacted the quarter, let me just talk briefly about production. And talking about production and we'll focus on two primary areas.

First of all, the closure of Denver International Airport, which has gotten quite a bit of attention. But we have, in addition to that, and the impact of the weather system that came through in late December, we also have some utilization issues that I will touch briefly on. First of all, more specifically relative to Denver and that winter weather system that came through, obviously, it had a very significant and material impact to our operation. It's hard to fully describe the full impact of that system.

We can talk about it relative to the approximately 2,850 flight cancellations. That translated into just under 4,000 block hours that we didn't operate. But even doing it that way, it really still falls short of fully describing the impact and the disruption that's caused throughout the system as a result of a major operation like that being completely shut down for basically two full days. It did have a significant impact on the operation. The broader ripple effect of trying to get crew members to the right places, crew members that have legal time left, and all of those things that rippled through the whole system, it had a very material and negative impact on the quarter.

And also relative to our production, in addition to just the flights that were cancelled, due to the weather, we also saw a fairly significant reduction in our scheduled utilization in the quarter. This is something that's -- I won't say it's completely out of the control of SkyWest or ASA, but due to the scheduling practices -- primarily due to schedules that are produced by our network partners, we did have approximately a 5% decrease in total systemwide aircraft utilization.

I want to talk about -- kind of off of production for a minute. I will come back and talk a little bit more about fleet and some of the things that we can expect in the future quarters relative to production in the fleet but continuing on things that impacted the quarter. Maintenance expenses were higher than we had anticipated during the quarter. A couple of reasons for that. First of all, due to the timing of certain maintenance events, these are maintenance events that are not pass-through items in our contracts.

And at the same time as we have been rapidly expanding and preparing for additional flying due to some of the recent awards that we have won, we have taken some previously flown equipment that has required some additional maintenance work and we can throw that kind of into maintenance where the actual line items that it's hitting in total, it's part of the ramp up or start-up in order to get ready to do some of the additional flying that we have committed to do. So in total, we did have some increased maintenance expenses. Admittedly, some of that is timing. Some of it is not timing, it's just additional expense required to get aircraft in the air and to get ready to perform and execute on some of these bids that we have won.

Relative to start up, I think I mentioned earlier, due to the timing, that we need to execute and we'll talk about the timing and when we have aircraft delivering, both in the additional Delta 12 aircraft are being put into service during the first quarter, the additional Midwest 15 aircraft that we'll be talking about more but it will be coming on primarily in the second quarter. All of that has required us to basically go into full capacity on our hiring and training programs. And that -- those expenses are being incurred prior to operation of those systems. And so there is a bit of a mismatch in the timing of the expenses and the timing of reimbursement.

Another item that we did not address in our release on January 15, but is a significant impact during the quarter are 123R expenses. These expenses, I think there's a couple of things worthy of mentioning here. First of all, SkyWest has a very broad-based, all employee participation in stock-based compensation programs. I think that these -- our program is significantly broader based than most companies that we're aware of. And especially, as compared to our peer group in the -- well, in airline industry or especially the regional airline industry. So, we have significant expenses not only due to our 123R.

We've indicated in our press release the expense for the quarter was $3 million both pretax and after tax, which is the other part of the 123R problem for us. Is that not only because our expenses are fairly significant in this item, because of the broad based nature of our program, but the fact that we are getting very little tax benefit from the 123R expenses. This is a complicated area. I will probably not go into much more detail other than that in the call.

But just the 123R expense in the quarter itself, when you look at just the $3 million of 123R expense, plus the true up of the tax treatment of our total 123R expense for the year, the impact of 123R in the quarter was approximately $0.08 in EPS. The tax treatment of the 123R required some true up. It's created a larger than expected effective tax rate in both the quarter and on our year-to-date results. Probably enough talk about 123R.

Had I want to speak briefly about our balance sheet. The balance sheet is an area in which we have some real highlights for the quarter. We are very pleased with the positioning of the balance sheet. We ended the quarter -- or ended the year with approximately $652 million in cash and marketable securities, compared to $324.5 million at the end of last year. Our working capital increased from $77.7 million to $687 million at the end of the year. Our current ratio went from approximately 1.1 to 2.7. So, significant improvement relative to just overall cash and liquidity.

Our book value per share is $18.46. Cash and securities per share $10.19. We made some good progress during the quarter in just some restructuring and refinancing of some previous air traffic liabilities. We've mentioned in previous quarters that we had a lot of short term debt related to ASA aircraft that was there at the time of the acquisition. But we have now permanently financed, have gotten that out of current portion as we have indicated that we would for several quarters now. That's been completed. And in total, the restructuring and the refinancing efforts combined with just good, strong cash flow, free cash generation, has made a significant improvement in the overall positioning of the balance sheet at the end of the period. So we're very pleased with that.

Our long-term debt at the end of the quarter is approximately $1.67 billion compared to $1.42 billion. The present value of the operating leases at the end of the end of December is $2.2 billion. I give those numbers as reference points for those of you that I know want the full picture relative to both on balance sheet and off balance sheet obligations.

Let me talk a little bit about what we're expecting here in upcoming quarters. What's happening with the fleet. I won't go through all of the details and composition of the fleet. That's all detailed out for you in our press release and so you can have access to that if you want it. In total, though, our fleet size has increased to 410 aircraft and we have a lot of activity coming up here in the next two quarters. Basically, at least through -- well, let me just tell you how the -- our air traffic deliveries are scheduled through both first and second quarters. In the first quarter, we will take an additional 10, 700's. that will fly in the Delta system and an additional six CRJ-900s. For a total of 16 additional aircraft that will come in the first quarter.

Second quarter, we will take the first six of the Midwest aircraft. Those will go into service in the second quarter. And we will take an additional two Delta 700's. And then the remaining and final two CRJ-900's, at least, that are on firm order. So in total, 16 aircraft in the first quarter, 10 additional aircraft second quarter. And then as we move through the totals that are upcoming, it will be a total of 15 for Midwest, 12 additional for Delta, eight additional 900's. So just in the next few quarters, we have 35 additional aircraft coming on, which basically in that time period will take our fleet from 410 to 445 aircraft.

But as far as our ASM projections are concerned, we're estimating $5.4 billion in the first quarter, $5.9 billion in the second quarter, $6.2 billion in the third quarter, $6.1 in the fourth quarter. For a total of approximately $23.6 billion ASM's, which is approximately a 16% increase for the year. Relative to our aircraft utilization, I want to talk about utilization, our growth activity. Really, we have a lot of activity and a lot of things going on.

I want to add some caution as it relates to first quarter performance financially and relative to diluted EPS. With all of the activity going on, we do expect some increases in our just ramp up or start-up-type activities. Because of that issue, I would just add some caution. I think some caution is also appropriate given that we have seen some decreases. As I mentioned, through December our third -- excuse me, our fourth quarter schedules, I already indicated we saw about a 5% decrease in our total systemwide -- and I'm talking about this from an Inc. perspective, about a 5% decrease in our daily aircraft utilization.

We hope to see some improvement in that in the first quarter but admittedly, it is still under what it had been in the second and the third quarters of '06. And hopefully between cooperative efforts with both ourselves and our network partners, it certainly would be, I think in all of our best interests to improve utilization in every respect as much as we can. But I just would put out a bit of a voice of caution. And I think with that, I will go ahead and conclude the prepared remarks and open it up for questions. Operator, are you standing by and helping us with questions?

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Mike Linenberg from Merrill Lynch.

Yes. Good morning, everyone. Brad, I got a bunch of questions here. Just right off the bat, when -- the guidance that you gave us for the March quarter on ASM's, the $5.4 billion, does that assume that your utilization rate will -- maybe not down 5% but that it will be not be as good as what it was in the second and third quarters of 2006? Or is there actually downside to the ASM forecast?

No, I think the 5.4 already incorporates the anticipated reductions.

Okay, good. My second question, when several -- whatever, a month ago, when the press releases came out about the Midwest deal and the 15 CRJ-200's, I believe the way the press release read, it almost seemed as if some of the 200's were going to be sourced from your current fleet, whether they would come from the Delta or the United Fleets, it wasn't clear. But just based on some previous comments it sounds like the 15 are completely incremental and maybe the sourced airplanes are unit number 16 through 25. Can you just give us some color on that?

Yes. I can actually give some pretty specific color. The first four aircraft will be sourced from our existing fleet. We have had four aircraft that we acquired, I don't know, at the end of '03. Those aircraft have never been, what I will, say fully utilized. We're taking those aircraft. Two of them have been in the SkyWest airlines fleet, two have been in ASA's fleet and those will be the first four aircraft. So, we will be in the market sourcing 11 additional aircraft. From a revenue perspective and revenue generation perspective, it is a true incremental 15 net new aircraft. Ron wanted comment.

It's just important, Mike, to understand, those -- the four airplanes, two with SkyWest and two with ASA, have been SkyWest airplanes. Never committed to the United or the Delta flying. We used them for charter flying and from time to time for some spare flying while we did either modifications to the Delta or the United fleet. But they've never been committed to the -- we are not pulling these out of the United flight lines or the Delta flight lines.

Perfect. And then, my last question is just on some of the recent campaigns, we saw Pinnacle win some Dash 8 business with Continental through their Colgan subsidiary. And I know you guys are turboprop specialists, the Embry Air is a different airplane from the Dash 8, although I know you fly some of the bigger ATR's in the ASA operation. Was that business that you've looked at with other carriers going down the Dash 8 route, I thinking Frontier, as well as Continental? Is there an opportunity there? And then sort of as a corollary to this question, does your agreement with United prevent you from actually offering business in the Denver market? And I only bring that up as it appears that Republic does not face that restriction but I believe one of the other United Express carriers does face that restriction in the Denver market.

Okay. Quite a bit in that question.

Sorry.

No, that's okay. I'm only a little concerned about my ability to keep both questions in mind, as I'm fumbling my thoughts. First of all, relative to the prop flying, we have been and remain very interested in the large turbo prop flying. As you indicated, we are a turbo prop specialist. We know how to operate props. They've worked very effectively in our system, and we're interested in pursuing opportunities that could get us into the larger prop market.

The Continental opportunity was certainly -- we were asked to pursue that by Continental, to discuss it relative to the size -- or due to the size of the fleet and the location of the flying, we chose not to pursue that particular activity -- or opportunity. But it had more to do with getting us in a relatively small fleet so it didn't really present an opportunity to get -- to pull this to an appropriate scale. And it was in a location -- not that we don't like the location, just that it's far away from existing facilities and really would stretch and put some stress on our infrastructure and our ability to do the operation with the quality that we expect to deliver and that Continental expected to deliver. So, we just -- that's one that we chose not to pursue.

Relative to your Denver question and some of the opportunities there, I want to be very delicate about -- and sensitive in my response here. There's a number of -- there's a contractual and kind of legal response to your question, which is that in our SkyWest agreements, we do have some restrictions.

Okay.

Our -- in our ASA agreements, I think we have been pretty clear that one of the benefits or advantages of that operation, that platform is that we don't have operating restrictions. We don't have -- for lack of a better way to describe it, we don't have exclusivity restrictions. Okay. Now -- so there's kind of that response. The other response is we want to be very, very careful and sensitive about opportunities that we pursue and how they may impact in reality or in perception the operations of our existing legacy partners.

Okay.

And again, trying to be very tactful and sensitive about this, an opportunity -- a significant operation that had a high probability of going head to head with existing network opportunities that we're already doing with our existing partners, didn't seem like something that was very appropriate.

Okay. Thanks. I appreciate the answers.

Ron would like to add something to that.

Sure.

I don't think it would surprise -- no one knows more about the Q400 than SkyWest does. And no one has probably looked at it as many times as we have. And, as you said, there's probably not anyone that would operate a turboprop any better than we could. You have to assume that the decisions we've made pursuing turboprop opportunities are pretty much in concert with our major partners. And we've got 700 CRJ's flying to mountain markets and doing so fairly well. So as Brad said, we weighed the opportunities for a long time, and have done some. And with respect to United in Denver, we feel like United really does own most of that market place.

Okay, good. Thank you.

Thanks, Mike.

Your next question comes from the line of Jim Parker from Raymond James.

A couple of questions. One, did you write down the Delta revenues and the United revenue, just how that breaks down?

We didn't do that. Are you -- you're asking about this from the perspective of our fourth quarter results actual?

Yes.

Let's see, we are going to be at about 60/40 split. 60 Delta, 40 United.

Okay. Now, you ended with a little better than $650 million cash. I estimate that you might earn -- generate $200 million more this year, so end of this year, you might have $850. What are you going to do with that cash and when?

I don't know. You ask that like I should have a really definitive answer. Let me tell you what we are considering, though. We certainly know that -- well, part of our evaluation certainly includes things like repurchase programs, increasing dividends, shareholder distribution, things like that. I just indicated that over the next couple of quarters, though, we've got 35 additional aircraft coming into the system.

We still have activity and some opportunities just in responding to RFP's that are in the market. As we get further and further along, some of those are finally being decided and awarded out and some of those we're participating in and some we're not. But we still -- and we're pursuing other types of growth opportunities. Some within our core business, some that would be perceived as some amount of just diversification. And so we're pursuing a lot of things.

We think there is enough opportunity, both in internal organic growth opportunities, as well as just development opportunities within the industry for growth, that I think our first priority is to continue to pursue those opportunities before we aggressively pursue either increasing dividends or -- I certainly won't exclude maybe as quickly a stock buyback opportunities. We are in the process of having some discussions. As I said, that's a part of our ongoing evaluation and an opportunity that we know of. But I think it is fair to say, our first priority right now is keep some cash available for growth and development opportunities.

We know shareholders -- or stock repurchase is an opportunity. Dividends are opportunity. But first priority is growth opportunities.

Okay. Thanks.

You're welcome.

Your next question comes from the line of Jamie Baker from JPMorgan.

I was hoping to get an update on the Delta situation in terms of the incremental large jet flying. Have you gotten any sense of what is taking place there?

The question is in relation to the incremental large jet opportunities, the RFP that has been out?

Yes.

I honestly don't know that we know a whole lot more than the things that -- I know that there are lot of -- there's some speculation and some rumors going on in the market. I'm not going to comment on those. And other than that, we really -- we probably don't know any more than the market knows.

All right. Is it -- would you be able to give a sense for your margins that you will have with the Midwest agreement? Are they in line with what we have seen so far?

Yes, this is a very good question not only relative to just Midwest but probably just margins in general. I know there's been a lot of talk. It seems like there is -- this topic is kind of a big one in the industry right now. And there may be some carriers in the market that are willing to significantly reduce or compromise their margins to win growth. We're not one of them. We haven't -- we stuck with our model.

We had a targeted required rate of return that we expect as we -- that's appropriate for the operating risks that we take on when we grow. And in order to attract capital and all of those things, we have an expected rate of return that needs to be achieved and we haven't compromised that. Now of course, we have some results here in the fourth quarter that might not indicate that. But it certainly isn't because we have compromised margin expectations or requirements in our bid processes. And what we did with Midwest is very consistent with our other contracts.

Okay. And final question, can you give a sense for CapEx in 2007?

Mike Kraupp can.

Our cash CapEx, we think next year will be in the neighborhood of about $140 to $141 million, so on average $35 million per quarter. We just did a little higher in the last quarter, coming in at about $46 million. We were $41 in the third. We've started to do a few things with respect to our ASA entity and opening up and doing some ground equipment and that. So, those numbers have been running a little bit higher than what we have been accustomed to in previous quarters. But it should be about $140 million we think for next year.

Perfect. Thank you very much.

[OPERATOR INSTRUCTIONS]

Operator, do we have anyone else in the queue?

We're pausing for just a moment to compile the Q&A roster.

Okay.

Your next question comes from the line of Mark Thomas from [Inaudible.]

Good morning, gentlemen. Are you there?

Yes.

My question is more on the operations side. I happened to be a passenger on several SkyWest flights through the Denver market and I have actually seen firsthand some of the severe delays during weather and also during great weather. What are you guys doing to fix that on the inside internally in your business? I happened to be sitting on the ramp actually for over an hour on one occasion in bright, sunlight weather. So that's one of the questions.

And what are you doing to -- you are hiring more pilots. You do have more flying. You are hiring, I'm assuming, more gate personnel, more flight attendants. What are you doing to compete with other airlines, both in the U.S. and abroad? And what are you doing to retain these employees in your Company so you can continue to grow?

Well, what was the name again? Who am I speaking to?

This is Mark.

Mark. Well, first of all your Denver question is a good one and I will try not to use some terms that we use -- or have been using inside, so we are all accustomed to them. But first of all, we optimized our schedule with United several months ago. And many of our hubs in Denver happened a few short months ago. That tightened up our turn times and our schedules and there's been a learning curve. So, yes, the idea that you sat on a -- and I'm assuming you sat on a Denver ramp or maybe even an outstation to the Denver hub. But we have had some issues with our Denver schedule with United. And I think United has been somewhat responsive to some of those issues.

And then through the weather, starting December 20, we've had real issues with our own manpower. Whether they could get to work or not became an issue. And then others being hired away from SkyWest, as I think you have alluded to at the end of your comment. And that is, our pay scale is competitive and can they hold people long term in such a low unemployment environment, in you will, and given the economic situation in Denver and throughout a lot of our system. So I think we are responding as quickly as we can to the manpower issues, above and below wing.

As you've stated, we've got our classes going at probably full-tilt relative to the in-flight hiring and the pilot hiring and the programs that we've got to keep people. Our turnover is probably, if not consistent, it is -- it is less than most regionals in the country. And when the majors are hiring, we expect some turnover in the pilot ranks. So, again, I think we're being responsive. It may not have happened quickly enough and as a customer sitting on the ramp, it needs to happen right now, not next week.

So I apologize for that kind of service and I think we'll turn the corner on this.

You've just alluded to programs that you are using to keep and retain these individuals. Can you get a little more specific with that? I do understand that some of your pilots right now, they are going through a union drive. And I'm assuming there's an operational or a management reason that they may consider doing something like that because you have been very fortunate to operate without a union. And I compliment you on that. But what things are happening internally that would require or that would sort of push forward or promote certain groups of employees in your organization to want to do this? So on the outside looking in, it tells me something is not right or is askew.

Well, it might tell you that something is very right, that we haven't had organized labor. And to my way of thinking, there's -- Alpha has had an attempt to organize SkyWest for the last 20 to 25 years. So, it's an ongoing attempt. And our approach to keeping Alpha out is to just have quality leadership within SkyWest Airlines in every work group, not just pilots but every group. The programs that we've got -- I think SkyWest has very creative incentive/bonus programs than we have shared more with our employees than probably the rest of the regionals combined over the last decade. So I think we have been extremely creative in how we attract people and how we retain people. And then how we share the rewards or the financial rewards with our employees.

Our pay scales are competitive. It is not -- and the term "competitive" is a bit ambiguous. But I think our our pay scales are very competitive and we do not have a problem attracting new hires. So, I don't know how much definitive you want me to get or had hoped for me to get, but --.

Your next question comes from the line of Bob Mcadoo from Prudential.

Just a couple of quick ones. You talked about the 5% reduction or decrease in utilization. Is that a Delta deal or a United deal and what is the nature? What's going on that causes them to reduce their utilization?

Do you want to take it or --?

Well, the utilization -- well, first of all, it can happen with days -- it can happen either in a schedule change. Or even Delta and their new scheduling approach is to pull capacity back certain days of the week.

Okay.

So it happens on the Delta side one way and on United side the other way.

What's the United style? What's going on there?

United through fleet optimization has tried to push airplanes as far and as long as they can in the course of the day. And so, they have shortened our turn time in hub and to some degree have pushed every flight line to more utilization. Now at the same time, United is doing it different by equipment type. So, with some of the numbers Brad will share and has shared, talks about total fleet utilization. And we'll have one type that will be extremely over plan and another one that will be less. [Brasilia] utilization, for example, is lower than jet utilization.

That makes sense. And then you talked about some maintenance events that were not reimbursed. I don't know exact words you used. What kind of thing is that -- what do you have going on there?

It's primarily things -- we have done some -- for example, some transitioning of aircraft from one certificate to the other certificate. That's required, in some respects, seat checks. One maintenance program isn't identical to the other, so we start replacing parts and upgrading to get the aircraft consistent with, for lack of a better term, a fleet standard. And it generated some unanticipated costs.

That makes a lot of sense. Thanks a lot. Appreciate it.

Your next question comes from the line of [Shane Calhoun.]

On the same line as the previous gentleman in regards to capacity utilization. Delta I think says it's pulling back on certain takes of the week. Do you know kind of what their goal is or what they are trying to achieve? Are they just getting more efficient from a revenue or a cost perspective?

That's exactly it. They're just trying to match capacity to demand and days of the week demand.

Do you see that in other carriers outside -- that maybe that you don't deal with that you are hearing through the industry?

I think that the brain child -- this has come from other airlines. So, Delta is not the first carrier to do this reduced day of the week line. So, yes, have we experienced it in other carriers? Not necessarily but I believe it is happening in other airlines as well.

And in terms of expected ramp up costs to bring these new planes online, I know you have had some in the fourth quarter, do you have any other kind of color in terms of the first and the second quarter as it relates to Midwest, additional training that's needed?

It -- I think the general answer to that is I think we will -- we are expecting very similar type expenses, if not slightly higher than what we just had in the fourth quarter.

Okay. Great. Thank you.

You're welcome.

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. Mr. Rich, are there any closing remarks?

I would just like to close by expressing, again, appreciation to the participants for taking time this morning. We know schedules are busy, etc. Again, express appreciation to our employees for all of their efforts through some challenging issues. And at the same time, we are very optimistic about opportunities. We have got a lot of work to do, a lot of growth coming up. We continue to aggressively pursue opportunities that are in the market and believe that we have the balance sheet and the liquidity and the resources to take advantage of opportunities. So, having said all of that, again, I thank you for your time and we'll go ahead and conclude.

This concludes today's SkyWest Inc. conference call. You may now disconnect.