SkyWest Inc (SKYW) 2007 Q3 法說會逐字稿

Good morning. My name is George and I will be your conference operator today. At this time, I would like to welcome everyone to the SkyWest third quarter 2007 results conference call. (OPERATOR INSTRUCTIONS)

I would now like to open the call to the Executive Vice President and Chief Financial Officer of SkyWest, Mr. Rich. Thank you, sir. You may begin your call.

Thank you, George. Thanks to all of you for joining us this morning. We got started just a little bit late due to the activity of people trying to join the call. We do have quite a few parties on the line this morning. We are trying to allow as many in as we could before we started.

To begin the call, let me just make some introductions, who we have participating on the SkyWest side. This morning, I have with me Mike Kraupp, Vice President--VP of Finance at SkyWest, Inc., as well as Eric Woodward, our Controller. We also have Chip Childs, the President of SkyWest Airlines, as well as Brian LaBrecque, the President of Atlantic Southeast Airlines.

Before we officially begin, I will ask Mike Kraupp to 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 beliefs, expectations, hopes or intentions regarding future events. Words such as expect, intends, believes, anticipates, should, likely and other similar expressions identify forward-looking statements. All forward-looking statements included in this release and conference call are made as of 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 will vary and may vary materially from those anticipated, estimated, projected or expected for a number of reasons. Brad?

Okay. Thanks, Mike. Again, thanks to all of you for joining us this morning.

Before I get into a specific review of the quarter and the numbers and reviewing the press releases and so forth, I would like to make just a general comment or two relative to some of the things that we have had going on during the quarter.

To say the least, it's been a very busy quarter for the SkyWest, Inc. family of companies. We have had some very sensitive, and in some respects, difficult issues going on at both of the operating carriers. We've had some issues relative to labor, and some things that have been generally, very sensitive. And my comment would be that, in spite of those kinds of issues that oftentimes they're not only sensitive issues but they are a bit distracting, we owe a lot of thanks and gratitudes to all of the roughly 15,000 employees of SkyWest, Inc. that have just have done, for the most part, everything they could to create this product every day, day in and day out. And we couldn't be doing it without their commitment and their efforts and their hard work. And, again, in spite of some of these sensitive issues, whenever we are talking about labor issues, they generally become very sensitive. Our employees have done everything they could for the most part to keep the airlines flying properly. And we appreciate that and thank all of the men and women of SkyWest for that.

We will stick -- as you have seen this morning, we have a couple of different releases out. One dealing specifically with the results of the third quarter, another one dealing with an announcement of additional stock repurchase program. We'll stick pretty closely to, using as a script. the announcement, the press release dealing with the third quarter results. If we could focus on that one for a minute, and then we will also talk pretty specifically about the stock repurchase program.

But as you can see from the press release this morning, we reported operating revenue of $875.6 million, which is a 10.6% increase compared to the same period last year. Our net income for the quarter was $42.9 million, which is up 5.4% increase over the $40.7 million we reported for the same period last year. That translates to a 7.9% increase in our diluted EPS, which was $0.68, compared to $0.63 for the same period last year. In looking at the nine-month results, we reported $2.52 billion of operating revenue, which is an 8.4% increase, and our year-to-date net income for the nine months was $118.3 million, compared to $114.6 million for the same quarter last year. That translates into $1. The income for this nine months was $1.83 per diluted share.

Focusing for a minute on some of the significant items affecting the quarter, obviously one of the first things that we look at is our production during the quarter. You look at the 10.6% increase in our operating revenues, and of course, that is directly related to our activity or our production during the quarter. Our ASMs were up 14.7%. Our block hours, which probably with the way that our models work today, our block hour production is probably the most relevant indicator of our revenues. So, you look at our revenues, which were up 10.6%. Our block hour production was up 10.9, so those numbers are pretty consistent and pretty accurate corollary there. Our ASM production, as I mentioned, was up 14.7%. I think our prior guidance for the quarter was about 6.1 billion ASMs. We did 6.06, so we were relatively close on the ASM side, relative to prior guidance.

In looking at our expenses for the quarter, and potentially our operating expenses and interest per ASM, those numbers, pretty flat quarter-to-quarter. Those numbers, actually, we feel relatively good about, given some experience we have here in some of the expense categories. For example, we do have some timing. There's some issues in our maintenance costs, which we'll talk a little bit more specifically about. But given some timing of some heavy maintenance, some issues relative to the fleet aging, we are actually happy that the numbers stayed relatively flat in our nonfuel cost per ASM quarter-to-quarter.

We have some information in the press release relative to the size of the fleet and the composition of the fleet by type and by code. I won't take the time to go through all of that, only to say that by the end of the September quarter, the size of the fleet -- and this is obviously the combined fleet -- has grown to 437 airplanes. And as I said, I won't take the time to go through the mix and where they are flying all that. That information is all in the press release.

We have been very active during the quarter with our stock repurchase program. By the end of the quarter, we had repurchased a total of 4.2 million shares. Under a 5-million share authorization, the average price of those shares was $24.94 that we purchased back, totaling $103.8 million. As of yesterday -- I will just give you a little bit of an update -- through yesterday, November 7th, we were at 4.5 million that we had repurchased at a total of $113.7 million. And then as I indicated, November 6th, our board of directors increased the authorized shares under the repurchase program and added an additional 5 million shares.

We have been, I think, pretty specific in earlier discussions that our intentions were to consider all of our value creation-type of opportunities. We felt like a good use of our cash has been to aggressively repurchase shares. But I have also indicated that on an ongoing basis, we would look to just consistently be in the market repurchasing enough shares to offset the current year dilution from our equity-based compensation programs. And I only mention that because I don't think anything has changed relative to that. And given where we are at in our repurchase program to date, we did need the board to authorize some additional shares in order to just continue purchasing back the current year's dilution from those equity-based compensation programs. And that is still our intention currently.

Now, as you all know, we certainly have the latitude to do more or less than that based on market conditions, based on the repurchase program relative to other uses of cash and other growth opportunities that we see. And we obviously will take all of that into consideration as we consider how much and when these additional shares to repurchase.

On October 12th, we put out a press release that I would like to review just briefly. That press release included information about a program to acquire 22 additional regional jets consisting of 18 CRJ700s, which would go into the United system, an additional four CRJ900s into the Delta system. This is part of a -- we are actually quite proud of the cooperative effort here between these parties, which really was based around some issues relative to the Brasilia fleet -- the early terminations, a desire to downsize the Brasilia fleet, when we can do that, and accommodate fleet upgrade programs, and just transitioning from more Brasilias to additional RJs. And we happen to be able to come up with a transaction here that we think benefited not only ourselves, but our major partners as well.

Obviously, a key to that whole program or the upgrade program is that certainly our objective is to match the deliveries of the new aircraft with the retirements or putting down of the 23 Brasilias. But also an additional objective of the program would be for us to keep the Brasilias flying in productive -- you know, flying as long as we can keep them flying to mitigate any downside risk of the future rents between transition and expiration of those aircraft. So, that will certainly be an objective of ours.

To give a little bit of guidance, we do believe that the four CRJ900s will deliver in the fourth quarter of '08. At least, our current plans right now would be to have two aircrafts in November, two in December, then the 700s would deliver basically between May of '08 and February of '09, with basically one or two aircraft coming in per month in that time period.

Now, we also indicate in the release that we -- and I'm giving you kind of tentative dates, really what our intentions are and then working with manufacturers, that's what we think the delivery dates would be at this point. Having said that, we have not completed a firm purchase order yet. And as we indicate in the release, we were going to take a good look at our alternatives here. We are doing that. We are, we believe, close to completion of agreement, but we don't have that completed as we speak. But we are aggressively working on it.

To put this in a little bit of sizing perspective, as I said already, this is not really net new aircraft, but it obviously, when you replace a Brasilia with a CRJ, either a 700 or a 900, there is inherent growth in that. Looking at it from a seat perspective, the 23 EMBs have a total of 690 daily seats. When you put the 22 new aircraft in, weighted out, that's 14 -- well, it's just under 1,500 new seats a day. So, the benefits to SkyWest are that -- I mean, it is, although not net new shells, it is growth by seats and it is growth in certainly ASMs. And the additional inherent benefit to us from this transaction is that we are able to take these 23 Brasilias, which would have expired over the next couple of years, and replacing them with CRJs, which are going in roughly an average of nine-year terms. So, we effectively have done a deal now that extends the term on a significant portion of flying. So we are pleased to have been able to put this transaction together, and really pleased that it came together kind of with the joint help of both ourselves, Delta and United.

We have also included in the press release the information, as we have done consistently here on the expenses from our stock-based compensation programs for the quarter, our pretax expense was $2.9 million, $1.8 million after tax. I would think that obviously we're doing what we can, make some structural changes in some of the programs and try to do the best that we can to still offer a broad-based equity compensation program, which aligns the interest of our employees with those of shareholders. At the same time, we are trying to make some changes to the plan, just that would mitigate the expense, at least the best we can, still keep the benefit intact to the employees, but through some structural changes doing what we can to mitigate the expense. But I would think that still the 2.9 million is a pretty good estimate or a run rate that is fairly accurate for upcoming quarters.

And focusing on some of our balance sheet information, which is not in the financials, we do have a paragraph in the press release that I would like to review just briefly. At the end of September 30th, '07, we had $728.3 million in cash and markable securities, compared to $651.9 million at the end of December 2006. I would just point out that that cash balance is net of the $103.8 million that we expended for the repurchase of the shares, and it's also net of $25 million that we just paid out of our cash balances for the Colorado Springs hangar that we just recently opened.

We have been fairly busy in the quarter. Although not a lot of activity in acquisition or acquiring of new aircraft, we have been very active in financing and refinancing aircraft. We did refinance nine aircraft in the quarter into long-term leases, which is significant given some of the difficulties in placing lease financings in today's market.

Another thing, I will give you a few balance sheet statistics that we think are significant, some simple statistics, obviously, that you can calculate on your own. But for ease, I will just give them to you because we are proud of them. Our cash per share is at $11.90. The current ratio is 2.8 times. And for the first time I think in our history, our book value per share is over $20 a share at $20.04 a share.

We feel strongly that, consistently, we need to make you aware of the timing issue we have and the recognition of revenue and the incurring of maintenance expenses on our United CRJ fleet. And once again, we have given you that number, 7.7 million in the quarter, and again, pertaining to the CRJ200 fleet at United.

I mentioned earlier that we've had a lot of activity in the quarter just relative to some labor issues. And again, we have had completion of the tentative agreement, at least signed a tentative agreement for the pilots at ASA. That agreement has not been ratified yet. It's scheduled to be ratified on November 20th.

We have also had some activity at SkyWest. That vote ended on the 6th. And these are sensitive issues. One contract is still waiting to be ratified. The other is still -- although the voting was completed November 6th and our pilots did not vote in favor of organization, we're still in a very sensitive time period here, basically the equivalent of a quiet period, and we need to be very sensitive about what we can and can't say about that. But there has been obviously a fair amount of activity.

Now, operational performance during the quarter -- and I will bring this up because most of you following the company know that we do receive incentives, performance dollars at each of the entities. The SkyWest Airlines performance during the quarter, their adjusted -- I will say adjusted, controllable, completion and on time is A14. Adjusted completion at SkyWest Airlines is 99.2%. Their A14, again, controllable at 78%. Those numbers were significant improvements and SkyWest Airlines did very well in the collection of incentive performance dollars in the quarter. And that's a very good trend. The operation is running very well.

ASA's numbers have not been as good. Their controllable completion during the quarter was 97.9 and their controllable adjusted A14 was 71.1. For the first time since we've owned ASA, we did not collect any incentive dollars during the quarter. There are a number of complicated issues, but the simple fact of the matter is we've got to improve our performance at ASA. We know that. We are focused on it. And there are no excuses to make. We just need to improve the performance, and it is getting all of our attention and our focus.

I would just make one additional comment. Again, I already indicated we need to be careful and sensitive about our discussions relative to these labor issues. But I would just make a general statement that, although the tentative agreement at ASA has not been ratified, we have put the impact of that tentative agreement into the third quarter numbers.

Just a very quick review of the financials that were included in the press release. As I already indicated, our operating revenues are up 10.6, again, on 10.9% increase in block hours. So, pretty close to what we would have expected. When you look at our expense categories and take the change in activity kind of as a starting point, really, the only one that significantly is out of line relative to the change in production are our maintenance expenses. I have already indicated, there are some of those expenses that are simply due to timing and are included in pass-throughs. But our non-engine maintenance, particularly at SkyWest Airlines, is over our budgeted plans, and that's an area that is receiving some focus. There's some issues related to airplanes coming off warranty. I already indicated there's some issues with the aging fleet. But it's the area in here that I would say is the one area that stands out, that is above and beyond what we would have expected given the change in production. But, again, that's another area that Chip and his group and all of us are very focused on.

The other one that looks a little out of whack are the general and administrative expenses. And that one is really an issue with the '06 number, as much as anything that includes a $4 million credit, which was a true up to our workers' comp expense. Making that adjustment, that which was kind of a one-time adjustment in '06, that category looks pretty much okay. You can look down and look at our provision for income taxes. The effective tax rate was 37.2% in the quarter. We think that's a pretty good number to assume for the rest of the year. I have already indicated I went through our income, EPS. You know, interesting, our net income is up 5.5%. Our weighted average common shares on a diluted basis are down 2.5%, which gets us very close to 7.9% increase in diluted earnings per share.

With that review, I think we'll now conclude the prepared remarks and address some questions.

(OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q-and-A roster. Your first question comes from Ray Neidl. Ray, you have the floor.

Good morning.

Hi, Ray.

Just a couple of quick technical questions. 37% tax rate. Should we use that going forward next year, as well?

I think it's a pretty good run rate, yes.

Great. And can you give us an estimate with your share buyback program, what's your share count might be by the end of the year?

Let's see. I don't think it's going to be -- I mean, the weighted average will certainly change a little bit, but we're -- I think we will gradually chip away at a few more shares on a consistent basis between now and the end of the year, but it's not going to be materially different than what it is right now, Ray.

Okay. Great. And what did you say your growth rate you're shooting for for next year?

We haven't given -- I will give you -- let me give you ASM guidance for the fourth quarter, which we think we will be right on 6 billion ASMs. We have enough things kind of still in flux and some things that we're working on in addition to actual finalization of our profit plan for next year that I'm not going to give guidance today beyond the fourth quarter production. But as we complete our '08 budget and we get a little clarity on a couple of other growth opportunities that we're trying to get done, which we think will be done fairly soon, we'll give you that guidance as it becomes a little clearer to us, Ray.

Okay. Then finally, a general question about the talk of flight restrictions and some congested airports, particularly in the northeast, but it could go to other areas, as well. Will that have any effect, do you think, on our jet usage, especially as it applies to your contracts?

You know, I mean, you probably know the answer to that question as well as we do, Ray.

Let me put it this way. We certainly are very focused on a balanced, strategic growth plan, where organic growth is still a very important part of that growth plan. And we still see some opportunity, in spite of the fact that a lot of the industry we know is under the impression that our organic growth is really slowing down, if not stopped. We don't have a firm aircraft delivery scheduled, as we speak. Now, I mentioned we are working on this transaction for the 22 new airplanes that are replacements, so it'll add some growth. But we are still looking at some good, old organic growth in a number of different areas. And I think that's more our focus than specifically what area of the country or particularly which hub that growth could come in and whether we're particularly limited in a particular hub or not. So, we certainly know that that is an issue, but we think we have some growth opportunity in spite of that issue.

Okay. Great. Thank you.

You're welcome.

Your next question comes from Mike Linenberg with Merrill Lynch. Sir, you have the floor.

Good morning, gentlemen. This is Lily, on behalf of Mike.

Yes. Hi, Lily.

Hi. My first question is regarding your contract specifically with United and Delta. Brad, could you [remind me], like, if there are significant changes that would happen to either company -- and I'm thinking about M&A activity and what not -- what happens to your contract? Do they become open? Or do they go with the company? Are there any provisions?

Well, it depends, obviously, on which end the M&A activity is occurring. You know, if it's on our end, obviously, our major partners need to consent to the transfer or assignment or anything or transfer of the codes. If there's merger activity on the part of the majors, generally speaking, then our contracts would obviously -- I mean, we have valid, enforceable contracts with our major partners, and as a result of a merger or an acquisition, whoever is merging into or acquiring those -- I mean, the acquirer would be acquiring our contracts.

Okay. So the acquirer will have to take on your contracts?

Yes.

And that's pretty set and there's nothing to [put] the negotiation open?

Not that we're aware of. If you know something that we don't, we're all ears.

No. My second question is, Brad, could you update me on your CapEx forecast for both '07 and '08? And if you'll also do the same for your debt maturity.

Lily, as I said earlier, we are just in the process of completing our '08 plan. And I think what we would prefer to do is let us get the plan compiled, which will be complete with CapEx, debt service, certainly production. And as we complete that plan and get those numbers, we will make sure that we get that to the market. I can give you some numbers for the fourth quarter.

Sure.

We expect -- I mean, where our CapEx numbers are at $35 million estimates for the fourth quarter right now and the bulk of that is related to maintenance. You know, it's some heavy maintenance and things, which we put in our CapEx numbers.

Yes.

So, that's what we are expecting fourth quarter. And beyond that, I prefer to wait until we get our plan completed and have some moving pieces settled down and we can give you a little bit more accurate read.

Sure. And finally, real quick number. You talked about how you have accrued for the increases in labor cost in the third quarter per the tentative agreement at ASA. Could you provide us with that number that you've actually put into the quarter, the actual amount?

I think we've got to be very careful here. I can talk to you in general terms and just say -- I mean, in the public domain right now are some pretty good details about that tentative agreement. And so, rather -- we've been counseled that it's not really appropriate for us to go into a lot of detail about this, other than -- I will generally say that we have booked the full amount of expense or exposure, and we have -- well, I will tell you this. That since we have owned ASA, we have certainly anticipated that there would be some expense to get a transaction and an agreement done. And so, we have been accruing a certain amount ever since we have owned ASA, and so we have had that in a reserve. And at the same time, you know, three of the five years of this open agreement were on Delta's watch, and Delta agreed to participate. So, a combination of what we had in our accrual, and add to that, Delta's participation, and it had very little financial impact on the quarter.

Okay. Sounds great. Thank you so much, guys.

You're welcome.

(OPERATOR INSTRUCTIONS) The next question comes from Jim Parker with Raymond James. Sir, you have the floor.

Good morning, Brad.

Hi, Jim.

Regarding floor growth, less CapEx than you have seen historically, based on your growth plan, when do you foresee that you're going to actually begin paying cash taxes and how much might that be?

Okay. I mean, this is an important question, and I -- this is another question I'm not going to be specific on this morning because until we get the growth plan actually nailed down and know what we have in additional aircraft, it's very hard for me to give you that number. But certainly, we are paying very close attention to the fact that we have right now on our balance sheet a significant amount of deferred taxes that are just under $400 million. We deferred 97 or 98% of our total provision last year. And we all know that if growth slows -- I mean, that's the single biggest factor, when those deferred taxes will reverse on us is whether we stop acquiring new aircraft.

So, until we nail down a little bit the -- I mean, as I've said, we need to nail down the growth plan for the year, which we're still trying to complete. I don't know how to answer that question. But as I also said, we are working on it right now.

We know that we are going to be acquiring new -- you know, the 22 new aircraft that we have already talked about, some in the fourth quarter of '08, the remainder in '09. And in fact -- Oh, excuse me.

We'll factor all of that in with a few other things we are working on this year. And again, once we get that nailed down, we'll make sure that the street is updated on the number. But I think the more important thing is that the issue you are bringing up, we certainly are well aware of and paying very close attention to in our cash and our capital planning.

Okay. Second question is with slower growth, you are bringing in fewer new hires, which means that places some upward pressure on your labor costs. Are there offsets? How do you deal with that and keep that from squeezing your margins, or can you deal with it?

I certainly have some thoughts. I'm doing a lot of the talking here. I do have Chip and Brian. Chip is acting like he has a good answer to this.

I don't know what I was acting like to do that, Jim. But I think you are right. Relative to the exact picture that we have today, one would take away that you would certainly have through -- you know, as for the attrition right now, you would have some upward pressure on labor cost, compared to some of the rates that are agreed to in the contract.

One thing that we are seeing right now, particularly on the pilot side more than anything, is we foresee in the near future, and even today at some carriers, not so much here at SkyWest Airlines, the need for pilots. We do have some higher attrition numbers on the pilot side. We don't like those higher attrition numbers. We think that we have a product today across the board for all employees that makes us certainly the employer of choice in the regional airline industry.

I think that there's a lot of things that we can do throughout our system to continue to gain some efficiencies without having an impact on labor to make sure that we can still deliver the right cost model to the marketplace.

You know, I think, relative to what's happened here at SkyWest, I think our pilot group certainly has voted for a system that has been working for the last 35 years. We are going to evolve that system, certainly the things we've learned throughout the campaign a little bit and ensure that we are taking good care of our pilots and all of our employees, overall, and continue to be cost-competitive in the marketplace, as well.

In some regional airlines, I think there are some challenges along those lines. Nonetheless, I think that there are some good things that we have as a good platform here at SkyWest Airlines that will provide for growth down the road. And also, it's not bad having a little break in growth, where we can sit back and kind of do a little bit of a gut check on the existing system to make sure that we are doing things absolutely as efficiently as we can. Whereas we've had some extensive growth periods in the last several years that -- although we have executed those growth plans well, I think it is going to be nice in the short-term here to take a good, hard look at how we are doing things to make sure that we are efficient.

And, Brad, can I add to that down here in Atlanta? One of the ways that, Jim, we're going to offset that -- we, too, have similar attrition issues that we are dealing with, which obviously offset some of the impact. But in fact, a rising experience, in particular, in our maintenance area is not a bad thing. In fact, it's something that we are looking to do here. Because if we can create an increase in experience, our reliability and our ability to work on our aircraft and to troubleshoot will create the environment of higher reliability, which will, in turn, execute and put in place some of our incentives that we have missed out here recently. So, that's one of the ways that we think we will offset that growth in costs.

Okay. Thank you.

Your next question comes from James Higgins with Soleil Securities.

Yes, hi. Good morning, everyone. Related to ASA and the comment about not receiving incentive payments this quarter for the first time since you owned them, if my memory serves, your performance in terms of the sort of the summary statistics isn't that different from what you have been seeing. So, can you just discuss what has changed that you didn't get incentives? Was it a rising bar, or are there other issues there?

I think, Brian, you can comment on this.

I would be happy to.

Because it is a combination of both. The targets are moving targets and there are some issues. But go ahead, Brian.

That's exactly right. The targets have been rising over through the years since the acquisition. And so, that's one of the reasons, obviously, that we have got to do better just to maintain.

The other piece of the puzzle is we've had a very difficult summer. Several things in particular, but most of all, our aircraft utilization went up during the summer. And unfortunately, it spawned a little more and it's certainly a higher impact on our mechanical reliability. And that's something that we are working very hard to fix. And in fact, we have put a great deal of dent in, but our mechanical reliability of our aircraft this summer really created a void for available aircraft to fly on time. The numbers didn't drop dramatically from years gone by, but didn't increase either. And that certainly hurt us in that respect.

In addition, as a company over the summer, as you know, we have had an ongoing negotiation for quite a long time, which as Brad indicated, we received tentative agreement in the end of September. That obviously came to a head before that period and created some additional areas, where we, as a company, were not all headed in the same direction.

Thanks to our people here over the last couple of months, we have worked hard to rectify nearly all of those situations. We look forward to sort of the ratification. But the primary reason is we had some mechanical issues this summer due to higher utilization of our aircraft, low experience of our maintenance folks, and in fact, some directional issues that we have as an entire company. Those are being taken care of. Our folks are doing a heck of a job.

Just to give you an idea, the numbers increased in the month of October. And so far, in the month of November, our numbers are stellar with 99.7% completion factor and a high 80% on time. So, the effort of our 4,200 employees are making an big impact, but this summer was difficult, primarily due to mechanical.

Okay. That increase in aircraft's utilization, was that driven by Delta's scheduling changes or was there something else going on?

It was, primarily, the Delta scheduling changes. We had approximately a 32% increase in departures during the summer.

Okay. And just one last quick question. How soon can Alpha return for another organizing effort?

Yes, go ahead, Chip.

The way the rules work is it will be at least 12 months from the date of the vote.

Okay.

Before they or any other organizing campaign can take place.

Okay. Great. Thanks very much.

You're welcome.

At this time, I'm showing no more questions in the queue. (OPERATOR INSTRUCTIONS) The next question comes from [Mark Oldgard, Carolina Investments].

No question.

Okay. George, is anyone else in the queue?

Yes, sir, I'm showing two more participants. One second, please.

George, have we got anyone else in the queue there for a question?

The next question comes from Frank Bisk with Pilot Advisors.

Hi, gentlemen. Very nice quarter. I guess you talked a little bit about what happened in October with ASA, things getting better, November, even better. Could you just talk about, on the SkyWest side, any major changes or things status quo there?

Frank, operationally, technically, I think that SkyWest has seen very good improvement over the last five months--slow, steady improvement. Honestly, a lot of it is relative to weather, but I think that we are extremely pleased with the effort of our folks, with a very -- you know, I'm not going to complain too much about the schedule, but it was a very difficult schedule during the third quarter, that was, in many respects, very short. We did have good weather, but at the same time, our folks did a fantastic, outstanding job of delivering a good quarter. We did do well on our United incentives and did good in the DOT rankings, as well. So far, for October and November, we see a similar trend of slight improvement over already good performance, as well.

Okay? George, anyone else? You know, we have taken about 50 minutes of all of your time. I think it's probably -- unless you have -- do you have anything else in the queue, George?

I have one more participant, Megan Cohen.

Okay. We'll take one more question.

Ma'am, you have the floor.

I thank you. I just wanted to clarify when Mr. Rich earlier said there was no firm purchase order, was he referring to the 22 aircraft that you anticipate picking delivery up starting in '08, or have you named a manufacturer for those planes?

No, we -- it's kind of an unusual position for us. I mean, as of today, we haven't been in this position for, I think, as long as I've been at SkyWest, which is over 20 years now, that we haven't had a firm aircraft delivery scheduled. Now, obviously, I have at least made some high-level reference to some additional growth that I think we're going to be able to execute on during this year. And then, we have, in addition to that, the 22 aircraft that we are close to completion of agreement, but it is not finalized yet. So, within the next couple of weeks, we would expect to have that 22 aircraft deal completed and a firm delivery position scheduled.

Okay. All right. Thank you very much for your time.

Okay. Thank you.

Sir, there are no more questions in the queue at this time.

Okay. Again, we really are genuinely appreciative of your time and of your interest in SkyWest. We really are committed to doing everything that we can to creating value. We are very appreciative, again, of the efforts of all the employees of SkyWest and recognize that without their efforts, we couldn't be accomplishing what we are accomplishing. And again, thank you for your time, and we'll go ahead and conclude. Thank you very much.

This concludes the conference.