SkyWest Inc (SKYW) 2008 Q3 法說會逐字稿

Good morning and welcome to the SkyWest third quarter 2008 earnings conference call. For your information, all participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (OPERATOR INSTRUCTIONS). Please note, this conference is being recorded. I would like to turn the conference over to Mr. Brad Rich, Executive Vice President and CFO. Mr. Rich you may begin.

Thank you. Thanks to all of you for joining us this morning. We greatly appreciate your interest and your time this morning. We all know there are a lot of things going on that are occupying people's attention, particularly this morning following an important and significant day yesterday. So very honestly we appreciate your time .

Before we get started, let me just introduce you to who is joining me this morning from SkyWest, and participating in the call, I have Chip Childs, President and Chief Operating Officer of SkyWest Airlines with me. Brad Holt, the President and Chief Operating Officer of Atlantic Southeast Airlines is also with us via phone line this morning. I have Michael Kraupp our Vice President of Finance and Treasurer with us this morning participating who also handles our Investor Relations activities. In fact, I will turn the time right now to Mike to read our forward-looking

Okay. 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 simular expressions identify forward-looking statements. All forward-looking statements included in this release and conference call are made as of the date here of 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.

Thank you, Mike. With that, let's go ahead and jump right in to a discussion of the third quarter results. It has been a interesting quarter from many perspectives, it's been challenging in some ways but actually quite productive and many things have come to light here in the quarter that we actually are optimistic and feeling quite good about.

From a overall perspective looking specifically at the financial performance, obviously we had challenges during the quarter and that that perspective only, from all accounts has been a difficult quarter. I will use primarily as the outlying for the discussion today the press release that went out this morning, I assume that those of you participating on the call this morning have at have access to our release. Let's just start right in to that and discuss the results for the quarter. As you can see from the release we reported operating revenues of $934.1 million, compared to $875.6 million for the same period last year. We reported $26.2 million of net income, or $0.45 in diluted earnings per share, which compared to $42.9 million of net income and $0.68 in diluted EPS for the same period last year. When you roll those quarterly results into our year to date nine month performance, we reported $2.75 billion of operating revenue for the nine months, compared to $2.52 billion for the same period last year. We generated $91.7 million in net income, or a $1.55 in diluted EPS compared to $118.3 million in net income and a $1.83 in diluted EPS for the same nine months of last year.

In discussing some of the significant items that affected our financial performance for the quarter, I think first of all the thing I would point out and we need to keep in mind as an overall frame of reference for the discussion of both revenues and expenses is the fact that our block hour production during the quarter was down 7.6% quarter-over-quarter. The general reason for that reduction is primarily just general reductions in our scheduled block hour utilization, by major partners and in addition to that, we also restructured our agreement with Midwest Airlines and have the impact of that restructuring, which basically ended up with us reducing the fleet from 21 to 2 -- from 21 to 12 revenue lines with Midwest, those two things combined resulted in a -- in 7.6% reduction in block hours. Now when you look at our top line revenue generation, it doesn't really reflect that 7-- the 7.6% reduction in block hours. Most of you that have been following SkyWest closely, I think understand by now how our pass-- how our contracts work and how pass through expenses affect our top line revenue.

So in looking specifically at the top line revenue, where we see a 6.7% increase and a $58.4 million increase in absolute dollars, we need to kind of analyze that from two perspectives, first of all our pass through expenses, which primarily are fuel and heavy engine maintenance were up quarter-over-quarter, $72.2 million so when you look at that $72.2 million keep in mind that our absolute increase is $58.4 million, that obviously means that there are some items offsetting the increase in revenue and those issues are what I just mentioned which are the production, and the impact of the restructured Midwest agreement which went the other way negative, by about $13 million. So I hope that gives some perspective here relative to top line revenue growth, again the most significant item to take out of the revenue at the top line is that you know a combination of production in the Midwest impact really resulted in about $13 million less in operating revenues than we would have expected under normal operating circumstances.

When looking at our operating expenses, particularly looking at the expenses excluding fuel expense, we had an increase in our cost per ASM of 6.8% to $0.094 per ASM from $0.088 in the third quarter of last year. There are a couple of primary reasons that those expenses are up. Again, focusing on CASM, less fuel. First of all, our maintenance expenses are up in absolute dollars, $25.6 million. Again, keeping in mind 7.6% reduction in our block hour production. The interesting part of that or relevant part of that maintenance increase is that as I mentioned earlier, our heavy engine maintenance expenses are a pass through, so they go through expense and top line revenue, but of the $25.6 million, $9.6 million are non-through--- or non-pass through non-engine maintenance expenses. I think there are a couple of factors that work here, number one, and I think most significant is that we made a conscious decision to invest in maintenance reliability, and we have some increased expenses specifically due to our emphasis and focus on improving maintenance reliability, particularly on the ASA side.

That has caused some increase in the maintenance expenses, the good side is that it is also been very meaningfully and materially showing up in the improvement in our reliability from just about every way you can measure reliability in airline we seen good consistent improvements particularly in the ASA operation. The SkyWest Airline system has just consistently ranked at or near the top of the regional airline industry. And that has held true in the third quarter as well. In addition to just the fact that our non-engine maintenance expenses are up, when we have a signification reduction in the block hour or overall production, we obviously have the difficult challenge of adjusting our overhead and infrastructure cost, to be proportionate or reflective of the decrease in production. The difficulty is that when there is no consistency to the scheduling, and it's moving from schedule to schedule it makes it very difficult to adjust our infrastructure and-- or our fixed costs relative to the changes in production. So that's been a pretty significant challenge for us during the quarter and one of the reasons that our cost per ASM is up.

Little bit more on the ASM's in the quarter, just strictly from an ASM perspective they are down 7.1% for the quarter. As I already mentioned, primarily due to changes in the schedule from the -- schedule changes and then the reduction of the Midwest line. Our fourth quarter ASM's, we think we are going to have a continuing significant challenge also in the fourth quarter. Because of some of the volatility in the scheduling, not knowing exactly how some of this is going to play out with some of the easing in fuel prices that we seen of late and the way that impacts schedules, we are not going to give at this point specific quarter by quarter ASM estimates as we have done previously, we will give that information to the market as we feel more confident in the accuracy of the schedules. What we do know is that in the fourth quarter, we -- the majority of the ASA, ATR fleet, will be going away. We also have several aircraft that have been involved in some unfortunate incidents on the ground which has caused some damage. We have at least four CRJs that are down for an extended period. So with some of the on going challenges surrounding the schedule, the ATRs going away, several CRJs down due to damage. We are going to see a lower rate of ASM production and block hour production continuing in this fourth quarter.

Another item impacting our net income, obviously is due to decreased earnings rates on our cash investments. Interest income decreased $4 million quarter-to-quarter. Again, just primarily as a result of the reductions in the interest rates on those short-term investments. Not going to spend a lot of time this morning reviewing the fleet. Most of you, again, that have been following us over time understand pretty well the nature of the fleet, the composition of the fleet, I guess just a reminder at the end of the September quarter our fleet did consist of 440 aircraft. I have previously mentioned several times that during the quarter that we did restructure or modify our Airline Services Agreement with Midwest. Due to the financial difficulties of Midwest, the most significant -- I guess a couple of significant items in that restructuring, first, and foremost, we agreed to reduce the fleet from 21 aircraft to 12 aircraft. We also went for a period of time where Midwest did not make the scheduled payments that they were obligated to make, those payments have been rolled into a note and as we indicated in the release, due to kind of the timing and the modified payment terms associated with the deferred amounts, we have not recognized revenue on any of the amounts that have rolled into that note, which in total is $7.7 million. It affected the quarter by-- to the tune of $4.6 million, in deferred amounts, again that were not recognized in revenue. On the positive side, really positive side, we ended the quarter with $729.6 million in cash and marketable securities, compared to $660.4 million at the end of December. The increase in cash is net of the $90.8 million that we have spent in repurchasing our common shares. Probably just worthy of mentioning that we have repurchased 4.5 million shares, we still have 5.5 million shares authorized by our Board to repurchase.

There are several other things that we -- that we disclosed in our press release, just relative to kind of on going issues. The 123R expense, we have consistently given in the release as a point of reference, 123R expense in the quarter was $2.9 million pretax, $1.9 million after tax. The issue with the timing of our collection of reimbursement relative to maintenance, relative to the timing of the maintenance expense, again we consistently brought to the market's attention that number was $7.8 million pretax in the quarter. We previously announced that we are doing a fleet transition plan where we are acquiring 22 additional CRJ Aircraft and that kind of coincide with retirement of 23 Brasilia, we recognize that's not new information. The relevance to that information now is that the first of those 22 new aircraft will begin delivering actually in just a few weeks with the delivery of the first of the four CRJ-900s, the service for those aircraft will be in November. Another one in December. Two in January. The 700s then begin delivering in May through August of next year. We then have two in September. Four October, two in December of '09 and the remaining six will deliver January through the first of March of 2010.

That will be good news for us from two stand points, first of all, we will be eliminating some Brasilia which are getting towards the end of their lives and becoming little bit more maintenance intensive. So not only replacing those with brand new aircraft but obviously replacing Brasilia with combination of CRJ-900s and 700s, will be some meaningful growth.

Let's see, we have put some information in release relative to kind of the on going litigation with Delta over our IROP expenses, I wont spend a lot of time here with it, if people have specific questions I will -- I guess we will take some questions relative to that but obviously with on going litigation we are very limited in what we either can or should be talking about there.

In summary, I think I just again just review the more significant items affecting net income for the quarter or the production decreases of 7.6% in our block hour production. The impact of the Midwest restructured agreement. A bit of an increase in our non-engine maintenance expenses. We had some other expenses kind of accumulating to a total of about $4.5 million that span everywhere from increase incentive payments to increase Worker's Comp and Health Insurance, those types of issues that hit us about $4.5 million in the quarter. The reduction in interest income of $4 million pretax. On the positive side we do have the fleet transition as I just explained that will begin this quarter. The elimination of some older Brasilia bringing in newer larger CRJ-700s, 900s is a very good thing. One thing I have not mentioned but we had a significant turn around in our pro rate flying during the third quarter at SkyWest Airlines, both the United and the Delta pro rate activities were not only net income, positive, but significantly cash flow positive. The operational performance of both airlines remains very good at SkyWest Airlines and as I mentioned earlier, very significant, good-- if you look at just the trend line again from about every way you can measure quality and performance at a regional, the trend lines are looking very good at the ASA operation as well. For that, thanks goes to the leadership of both operating entities, to the hard work and efforts of all of our employees, as I mentioned we had some, obviously from a financial performance perspective, it's been a challenging quarter. The good news is, is that the dedication, the hard work, the efforts of the nearly 14,000 men and women of the combined SkyWest Inc. companies just remains very strong, very positive, everybody doing everything they can to create a good high-quality operation and for that we are very appreciative and grateful to all of our employees. With that, I will go ahead and conclude these remarks and we will answer some questions. Do we have questions in the queue?

My apologies, yes. (OPERATOR INSTRUCTIONS). Our first question from Mike Linenberg with Merrill Lynch.

Good morning, all. I guess I have a couple of questions here, Brad, when we look at the information you provided regarding the lawsuit, you indicated that you recognize the total of 32.4 million of revenue. Was that-- when you say recognize did that show up in the revenue line this quarter and what was the catalyst for that? And have-- is this the first time that you've actually recognized revenue with the money that Delta has held back related to this issue?

Mike, that's a good question. I mean, the fact of the matter is, that the initial amount-- the initial amount in dispute when this was brought to our attention actually just about a year ago, the amount in dispute at that time I think was right on 25 million so the only issue here is the present time we have 32-point -- the total amount that has been recorded in the revenue and that really is in dispute or you can see the total amount of our exposure to this is 32.4 million.

Okay. Now, its 32.4. And now that's a associated with funds that Delta with held. How much have they with held at this point? At the end of the June quarter I think it was 32.5, are we still at 32.5 or as of September 30, is that number a bit higher and are they still with holding money?

No, they are still with holding money. The issue here that I'm talking abut is how much of what they with held, how much have we booked, therefore if we were to lose the suit how much do we have exposed that number is 32.4 million. The dispute is on going and Delta continues to withhold money according to their interpretation of how IROP expenses should work in the contracts.

Second question regarding the-- Delta files a motion to dismiss the complain. You did provide a full paragraph in how that played out. In sort of layperson's terms can you explain, what you're able the pursue and maybe what you're not able to pursue? It looked like that there was some by where they received -- a favorable ruling from the court looked like there was a -- looked like that you also received favorable -- can you part in parcel where things stand and maybe what you're not able to pursue or fight?

Mike, obviously we have to be very careful and I'm going to be very sensitive about what we talk about in a public forum, relative to on going litigation. What I will say is that probably that something that's not unusual in this type of litigation is there are several aspects to and several points included within our compliant. As Delta filed a motion for dismissal on all of the points, the judge granted in favor on some and not in favor on others. From our perspective the fundamentals of our case the fundamentals of our complaint are still alive and will be heard by the Court.

Good. That's all I needed to know, thank you.

You're welcome.

Our next question will come from Duane Pfennigwerth with Raymond James.

Good morning. Wondering if there was any revenue that was actually written off in the quarter from Midwest as opposed to rolled to a note?

Okay. So Duane, so the answer to that question is, is that all deferred amounts that Midwest owes us have been rolled into the note. But all of those amounts, although they've been rolled in to a note, simply due to -- I hate to say it this way, due to our assessment of their financial condition, we have not recorded any of that in revenue, which the other way to say that is we fully reserved all of those amounts. So 100% of our exposure with the note in other words has been reserved.

Okay. So is there I guess is there a one time impact this quarter so if you excluded that full reserve what would the margin look like excluding this one time issue?

So the impact of that in the quarter alone was I think we disclosed this 4.6 -- 4.6 million. So of the total 7.7 million, that's in the note.

Yes.

The -- so the original, 3.1, we took last quarter, 4.6 we took this quarter.

That's helpful. Then Brad you went through it quickly, what are the deliveries in the fourth quarter and in 2009 in total and can you talk about the financing commitments you have in place there?

Yes. Okay, so we have aircraft that will be the first of the 900s will deliver here in a couple of weeks. But more important are the delivery dates we have service dates beginning one in November, one in December, and two in January. Okay. Those are the four CRJ-900s. Then the 700s begin delivering early next year, with service dates that are basically May through August. Let's see, basically a aircraft a month May through August. Then we have two in September. Four in October. Two in December. And then the remaining six are basically two a month January, February, March.

That's great. Then, just on your interest expense, I assume maybe what is happening is some owned aircraft converted to leases or maybe paid off some debt. Can you sort of add detail on why that's come down so much the last couple of quarters.

I didn't highlight it in the discussion only because the actually I mean we do have variable rate debt. The majority of it is in the ASA fleet. So as rates have come down the variable rates have adjusted down, that's the primary reason for the decrease in the interest expense. I didn't highlight it because that aircraft the interest I expense related to ownership expense is a pass through, so it affects expense and revenue the same way and has no impact on income.

That's great. Thank you.

You're welcome.

Our next question will come from Bob McAdoo from Avondale Partners.

Couple of things, we got off on deliveries on Duane's question and he asked you about financing, where did do you stand on that?

Before I answer the question, Bob, let me make a general statement. We've been given a note or two here in the room that, particularly the web cast portion of the audio has been breaking up and in and out, we are not quite sure what the problem is. We know it's happening, we apologize for it. But there is not a whole lot that I know we can do about it. So I guess I can do nothing more than apologizing that we have audio breaking up over the Internet broadcast. First of all obviously this question is getting a lot of attention, we are taking a lot of phone calls from people about our ability to finance the aircraft. We are very confident in our ability to get debt financing for these airplanes, we don't think that's going to be a problem at all.

So if we choose just to own and acquire with straight debt financing, we don't think that's going to be a problem at all in fact we have advanced commitments for the debt on these airplanes. What we are trying to do is still our preference is to have some mix, leveraged lease, single investor lease, as a mix so they are not all just 100% financed. The reason for that, is primarily driven by the fact, if we go out and take 22 brand new aircraft all on our balance sheet, we can't fully utilize the tax benefits currently. So we would just as soon spread that around to people that can benefit in some form of a tax lease and Bobby know you understand this very well, our preference is to have a mix of some leasing, some owned aircraft, but so the equity participation remains very difficult. We are working with some parties, I think it would be wrong to give any indication that we I mean we are not that optimistic about our ability to place leverage leases but if we can't, we have advanced commitments for the debt to 100% to do-- excuse me, to debt finance 100% of the deliveries.

Okay. Given what you said about how variable interest expense is a pass through to the extent that the interest rates get kind of ugly to try to get all of these done over the next several months is that higher interest rate also going to turn in a pass through for these two contracts.

Yes. So what that means is we need to proactively enter discussions with the partners that have those airplanes and jointly come up with a kind of a strategic plan as to whether to continue to let the rates float or whether we should take advantages of options to fix that are embedded in the contracts.

Okay. Just a couple of quickies, Brasilia that are grounding, are those all on the pro rate side or do you have Brasilia that are under contract?

Brasilia on contract -- Bob I'm not sure I understand the question.

The arrangements under which you are flying the Brasilia, are they pro rated arrangements or do you have any -- some normal kind of like you have on your RJ's where you fly so much an hour contract deals.

Okay. So of the total Brasilia fleet, 24 of them are still in contract. CPA type arrangements.

Right.

And the remainder are those aircraft flying in pro rate.

Okay, so the ones leaving the system, are they contract Brasilia or pro rate Brasilia.

Contract.

So that these new airplanes coming in that replacing Brasilia are replacing Brasilia on contract.

Yes.

Can you give us, just so we can get a sense as fuel prices come down, recently, I assume it's helping the pro rate side of the house, I know pro rate had never been a big number. Can you give us an idea of your fuel expense line, how many gallons to do you have in terms of pro rate versus contractor pass through gallons so we can get a sense of the wind fall, I don't know if it's call a wind fall, benefit so you don't have to pay what you were paying here another 90 or 100 days ago on fuel.

Okay. Our fuel burn in the pro rate system is about a 1 million gallons a month. Is that the number you're after, Bob?

That's what I'm looking for. Is there a way to split out the passenger revenue line, the $900 million line in to pro rate versus contract? In round numbers?

Yes. Bob, you're getting into some detail here that I don't have immediately available. We certainly have it if you can't to call us after we can give you that.

Call Mike and he will come up with it?

Yes.

I think that's it. Thanks a lot.

You're welcome, Bob.

Our next question will come from Keith Weissman from Calyon Securities.

Hi, guys. Hello,. I wanted to ask you about your flying levels with Delta running at minimum leal levels or above in the third quarter?

I think it's fair to say they are yes, very near minimum requirements.

And with the merger complete with Northwest, do you foresee any changes to the contracts or discussions happening where they might try to change the nature of the contract the amount of aircraft under contractor anything related to the contract?

Well, this is a good question. I mean, couple of things come to mind I will try to be short and in answer and su l succinct in answering this. First of all the majority of the fleet with Delta obviously is under contract. We don't expect any changes there, other than Delta's ability to deliver a schedule that will either be at or above the minimum requirements or it may be below. If it's below to deal with whatever issues Delta sees fit to address. If it's below the minimum requirements then rate adjustment is acquired in the contract. Delta certainly that latitude to do that. The other part of this that we are trying to be very sensitive to is that I'm sure we are not the only ones that heard Delta make reference to their CRJ fleet and the fact that they if they had their preference they would fly fewer CRJ-200s. Obviously some of those comments have been made when fuel prices were at their peak. With fuel prices easing, maybe that will affect their perception of the CRJ-200 flying or 50 seat regional jet flying. We suspect that it will.

But at the end of the day I'm sure that if they had their preference they would have a material decrease in 50 CRJs, so we are doing everything we can to try to address that in cooperation with Delta and trying to find alternate uses for the 50 seat lift. So we have several initiatives underway things we are pursuing and investigating and analyzing to try to deal with that. Nothing nothing right here imminent to announce or anything like. That but we are trying to do what we can to creatively find some solutions to that issue. So it's kinds of a multifaceted issue. But I hate to ever answer questions just by saying we have a contract that says we need to fly these. But that is the case. The only really issue there is in spite of what the contract says we are trying to proactively come up with some solutions, if Delta chooses to go below minimum requirements and utilization, there is a rate adjustment required, the thing that's been difficult is when we have schedules that kind of where there is not a lot of consistency and continuity to the schedules. Because if the schedules go under requirements, but then pop up the next month, we really can't make any meaningful long-term corrections in our expenses to deal with it. That's where it -- where it really becomes counterproductive to our financial performance.

Okay. I might have missed this, but with the aircraft going from 21 to 12 at Midwest what is happening with the nine aircraft?

We are we are utilizing those aircraft in some respects in spare aircraft for a couple of the airplanes, we are -- first of all the aircraft are for sale. We are trying to relocate the aircraft. Either find alternate uses or outright sell the aircraft. While we are trying to sell the aircraft, we have some being used to fill in for aircraft out for overhaul, sea checks whatever, being used as maintenance spares but also trying to do the best we can no utilize the aircraft everywhere from charters to just some other ancillary type flying. To bridge the time period until we can get them sold or relocated.

How do you see the sale market, pretty slow now?

It's not as -- as slow as some would think. Actually there are some significant efforts that are being invested in relocating and placing some of these aircraft. So we actually are more optimistic about this than some might assume.

One last one on Midwest, what the is the priority of claim on the Midwest note if they were to file for bankruptcy down the line would you be out of that money or have some type of priority on it.

No special priority,we line up with the rest of the unsecured creditors.

Okay, thanks.

Our next question will come from Lily Ng from Merrill Lynch. Please go ahead.

Good morning, guy as really quick question regarding your investment in TRIP. Have you made any progress regarding negotiate some capacity purchase agreement with the network carries on Brasilia, update on that would be great.

Okay. Very good question. I will just say that there is interest there by more than one carrier but the discussions are very early.

Okay. Great, thank you.

You're welcome.

Thank you. Again, ask a reminder if you will like the ask a question, please press star then one on your touch-tone telephone. Please limit yourself to one question and one single follow up. Our next question will come from Bob McAdoo.

You used the term on the ATR going away is the way you said it. Does that mean Delta has decided to go permanently ground those (inaudible) When you bought ASA, were those planes some of the assets you bought or on lease?

Those are on lease, Bob. From day one in the discussions for the acquisition of asa, those airplanes were scheduled to terminate actually the leases did terminate, and we reentered very short-term leases at Delta's request, I think primarily just to give delta more time to evaluate what they wanted to do with the fleet and what portions they wanted to replace and how they wanted to replace and that sort of thing to lease extensions are expiring to airplanes will go back. We really have no exposure there, we don't have ATR parts exposure or anything like that to deal with. This was anticipated and has been anticipated for a long time. It obviously is a meaningful meaningful issue from the standpoint that it's a reduction of the fleet at ASA, so how that impacts crews and infrastructure, and all that is an issue. But it is something we known about for a long time.

Do you have enough turnover in the eastern half of your system in terms of personnel so it doesn't mean layoffs and whatever so you can work through this is something you've been able to plan for? Well, -- not quite as smooth as you like it sounds like?

Yes.

Okay. All right. Thank you.

We have a question from Mike Linenberg from Merrill Lynch.

Just follow up, the Brad I think you made the point you were confident in the company's ability to get debt financing for the airlines coming in. Did you address the equity and are you planning to take all those airplanes and put them on balance sheet or able to get equity participation? What does the market look like on that front?

Again, very confident we have 100% of the aircraft covered on straight debt. Straight debt would mean we bring the airplanes on balance sheet. We don't think that's most optimal was bos we can't utilize all the tax benefit. We love to have the equity participation, the equity participation is very difficult to come by particularly in this market. So we are trying to be very candid. I'm not that optimistic about equity participants.

One more, I know you talked about the whether it was inefficiencies or reduced utilization, reduced production that impacted your numbers in the quarter. On time and completion factor performance for SkyWest and maybe more specifically ASA, you saw significant improvement over the past three or four or five months, seemed like asa is snow like a top five carriers, we are looking at all carrier, I'm wondering in the goal to improve operating performance and it seems like every regional now is sort of under the thumb of their major partners who there is a lot of demands about performance, was with some of that in order to achieve those solid numbers did some of that result in maybe stretch block times, et cetera and drive some of that additional cost. Any color on that front would be great.

Well I don't know what color to add to it other than I think you're assessment is very accurate. I mean there certainly has been some of that, and but I think the main thing to keep in mind is that obviously our major partners I mean they are managing they're managing block time reliability very specifically. And so I mean that certainly at work here but I mean the fundamentals of just keeping our crews productive, implementing technology that's required to enhance your reliability, just to maintenance and just the fundamentals of flowing crews and all those things that impact reliability. I mean, we are very I remain have focused on those types of issues as just, so that's the part we can control. So the controllable elements of reliability were remaining focused on and both Chip and Brad at the respective entities I think under their leadership will remain focused on those issues and it's showing up in the numbers.

Very good, thank you. .

This does conclude today's question and answer session. I would like the turn the conference back over to Mr. Rich for any closing remarks.

I won't take anymore of your time with a lot of closing remarks. Again we just thank you for your interest and your time today. In spite of some of the difficulties and challenges we remain optimistic about the future. So again thank you very much and we will conclude the call.

This does conclude today's conference call, thank you for attending you may now disconnect.