SkyWest Inc (SKYW) 2010 Q3 法說會逐字稿

Hello everyone and welcome to the SkyWest Incorporated third quarter 2010 earnings conference call. All participants are currently in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. At this time, I would like to turn the conference called over to Bradford Rich, Executive Vice President and CFO. Mr. Rich, you may begin.

Thank you, operator. Thank you ladies and gentlemen for participating with us this morning and in a discussion of our third quarter results. Let me introduce who is with me and will be available to participate in the call with us this morning. I have Chip Childs, President, Chief Operating Officer of SkyWest Airlines, and Brad Holt, the President and Chief Operating Officer of Atlantic Southeast Airlines and Mike Kraupp, our Vice President of Finance and Treasurer with us as well as our members of the staff here in St. George. Before we get into a discussion of the results, I have asked Mike Kraupp if he would please read our forward looking statements.

Thank you, Brad. In addition to historical information, this release and conference call may contain forward-looking statements. SkyWest may from time to time may 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 as forward-looking statements. All forward-looking statements included in the 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 statements. Actual results may vary and will vary from those anticipated, estimated, projected or expected for a number of reasons.

Thank you, Mike. Again, thank you, all of you for joining us this morning. We recognize that there is a lot going on in the industry. People are very busy and we will try to be sensitive to your time this morning. As we always do, we will stick pretty closely to the press release that was issued this morning and use that to primarily as the outline or the text for our discussion this morning. First of all, let's just review the press release. As you can see, we reported operating revenues of $686.9 million for the third quarter of 2010, which compares to $637.7 million for the same period last year.

Our reported net income is $25.5 million, or $0.45 in diluted earnings per share, for the quarter compared to $28.6 million of net income, or $0.50 in diluted earnings per share, for the same quarter last year. Year-to-date basis, our operating revenues of $1.97 billion for the nine months ended September 30 compared to $2.01 billion for the same year-to-date period last year. Net income of $59.1 million or $1.04 in diluted earnings per share for the nine months ended September 30, 2010, compared to $64.2 million or $1.13 diluted share for the same period last year.

We would like to discuss a few of the items that were the primary factors that resulted in the reduction in net income. Net income decreased $3.1 million. There are primarily three issues that created or resulted in the change or the small decrease from period to period in the net income. Although we are now a large and fairly complex organization, we have a lot of things going different ways. But really the change can be distilled down to a reduction in our rates, our Delta agreements and then the mismatch in our non-pass through maintenance on United 200s which we have been discussing quite a bit throughout this year. We will also have some discussion about our SkyWest Airlines pro-rate flying which actually did very well in this quarter.

So, first of all, the relative to the rates with Delta. I think most of you know that we are operating under Delta Connection agreements with both SkyWest Airlines and Atlantic Southeast Airlines. Those agreements contain contractual provisions which require us at the end of the third year to be at -- to move our rates to the average of the Delta Connection portfolio. And that at the end of the fifth year to move to the second lowest. The impact of those contractual provisions during the quarter created a $4.9 million pre-tax decrease in our operating revenues. When you combine that with the mismatch in the United maintenance on the 200s which, again, I think most of you understand the issue pretty well by now, those of you that have been following the Company, we have been talking about the mismatch for a number of years, actually.

For the last year or so we have been in a period where we have been incurring expenses in excess of the amounts that we collect back in revenue. When you compare that mismatch to the third quarter of last year, the mismatch increased by $2.1 million pre-tax. So, in total, we had a mismatch of $9 million pre-tax in the quarter but that was $2.1 million higher than the mismatch in the third quarter. When you look at those two items alone, that pretty well explains the decrease in the net income. In addition to that, as I mentioned, our SkyWest Airlines pro-rate flying, which we have been paying very close attention to as most of you know, the pro-rate flying has increased substantially over the course of the last year.

Our total pro-rate fleet at SkyWest Airlines was 61 aircraft during the quarter. Last year's third quarter, we lost approximately $2 million in pre-tax loss. This year we made about $6 million pre-tax in pro-rate flying. So, an overall change period-to-period of about $8 million which is very good news in the pro-rate flying. Focusing a little more specifically on our operating revenues, there's some good news here. The good news is that, first of all, we are seeing a lot less volatility in our -- in the top line operating revenues which has been historically created by volatility of the pass through expenses primarily fuel. So, we are seeing less volatility. We are now seeing in a period of year-over-year comparisons that are just a lot more normal and stable.

Most of you I think understand that the primary driver -- the most significant factor in our revenue is the fundamental changes in revenue driven by block hour production. Our block hour production was up in the quarter 5.4%. That resulted in $36.6 million worth of the total, $49.1 million increase during the quarter. The remainder is primarily due to the pass through expenses, fuel and some pass through engine maintenance, that thing. In focusing on our airline expenses, we have somewhat the same issues that affects the expenses. Again, the primary issue is how much did the expense increase that is just primarily attributable to the operation itself and not so much just the volatility of pass throughs.

When you exclude fuel and our engine overhaul costs, those that are directly reimbursed through the contracts, our airline expenses increased $44.3 million or 8.7% during the quarter. When looking at our expenses on a non-fuel cost per ASM, our non-fuel CASM decreased to $0.089 for the quarter which is a 1.1% decrease from the third quarter of 2009 and a 2.2% decrease from the second quarter of 2010. So, our non-fuel CASM is moving in the right direction.

Some other items that we would like to discuss with you are, number one, our share repurchase program. We did repurchase a little over 856,000 shares during the quarter at a cost of $11.3 million. That is part of our previously announced share repurchase program. We still have about 6.8 million shares that have been authorized under that program. And then I guess we have just included an additional reminder that we have been very active in our share repurchase program over the last couple of years and have bought a significant amount of shares back. It is our intention to continue our fairly active and aggressive share repurchase program in the future. Excuse me.

On August 4 of 2010, we announced that we had entered into a definitive merger agreement with ExpressJet Holdings whereby we would acquire ExpressJet. That would be effective through Atlantic Southeast Airlines and the acquisition would be effective through a wholly owned merger sub. I would just say that things are progressing according to our intentions. We received early termination as we earlier announced of the Hart-Scott-Rodino review period. We also -- things have gone just as planned relative to the filing of the definitive proxy statement at ExpressJet. ExpressJet has scheduled their stockholders meeting for November 10 and we would expect a closing very shortly thereafter.

So, I would just -- from a general comment perspective, I would say that things are going just as planned and expected. There have been no real surprises from what we have announced previously. We are paying very close attention to our stated objectives of doing a very thorough integration of ExpressJet into Atlantic Southeast Airlines. That will be effective really in several different parts. First of all, a fairly rapid and immediate integration of some of the administrative areas, corporate overhead type areas to be followed by a very aggressive plan on a single operating certificate integration. Those -- I don't expect anything different than what we reviewed with you in our previous quarters discussion relative to that transaction.

During the September quarter, we also made a $7 million investment in Mekong Aviation Joint Stock Company. That investment represents 30% ownership in the entity. Air Mekong started operations on October 9 using four CRJ-900s. All indications are that, that was a very successful start-up. SkyWest, through Atlantic Southeast, has been very involved in assisting in that start-up, both from a intellectual knowledge perspective as well as physically assisting by -- through leadership, pilots, et cetera.

Let's see. September 30, 2010, moving to now our discussion of our balance sheet. Our September 30, 2010, cash and marketable securities is at $883.2 million. That compares to $732.4 million at December 31, 2009. That represents $137.1 million increase from June and $150.8 million increase from December. The primary reason for that increase is that during the quarter, United repaid their term loan in the amount -- principle amount outstanding of $74 million. In addition to that, we've just had good strong cash generation from operations.

Relative to the United loan payoff, I would also remind you that when we made the loan to United that we did it really in two different tranches. One was a $80 million term note. That is what has been paid off. We also did some deferral of some operating cash amounts in the amount of $49 million. That $49 million deferral is still in place. We have outlined for you in the release our long-term debt at the end of the quarter as well as the present value of our lease obligations which are there for you to review. At September 30, 2010, our total combined fleet was a 460 aircraft. That's consisting of 412 regional jets. I won't take the time to go through the exact breakout and composition of the total fleet. That as well is there for you to review.

I've already mentioned that as far as our total capacity and ASM -- excuse me, I didn't reference our block hour increase which is 5.4%. Again, primarily because of the increase of the size of the fleet from 440 aircraft to 460 aircraft. As far as our ASM production for the fourth quarter, if you look at the -- our stated objective to have ExpressJet closed sometime in the fourth quarter, I'll give you our ASM estimates both with and without ExpressJet. Without Express, we would expect the ASM production to be right on -- approximately 6.0 billion ASMs. Again, there is some -- obviously, we are estimating here a bit on ExpressJet but we expect there to be in the neighborhood of 1.5 billion from the time we expect to close to the end of the year.

So, in total for the fourth quarter with ExpressJet, we would expect 7.5 billion ASMs. I am not going to give any further guidance on ASMs at this point just simply because of the volatility of the impact of ExpressJet on those numbers. We will go ahead and proceed with our expected and anticipated closing. And we will then give guidance, further guidance on our ASM projections. I previously indicated and discussed a little bit, our contractual arrangements with Delta Air Lines.

As I mentioned, both SkyWest Airlines and Atlantic Southeast Airlines have contractual provisions in our Delta Connection agreements that calls for an adjustment of rates both at the end of three years and at the end of five years. From our previous discussions and previous disclosures, we indicated that for quite some time, we have been discussing both of those provisions and as you can imagine, these are not easy provisions to implement. There is a significant amount of analysis and significant amount of discussion and negotiation that goes into getting these things settled.

In addition to just the rate discussions that we have been having with Delta, there have been a handful of other items that we have been working on and trying to get resolved with Delta. Really some of these items now we are getting to the point where they are a year-and-a-half or so of trying to get resolved. The good news is that we have now entered into a preliminary agreement with Delta which really resolves all the outstanding issues that we are aware of with Delta.

We have a preliminary understanding, conceptual agreement and that agreement is in the process of being documented right now. One of the very good things about the agreement is that this will put is in a position where we will agree on rates for a longer term and hopefully will avoid a lot of the ongoing discussions and in some cases, just outright disagreements that we have had over rates and we will get this settled for a longer term. And I think both we and Delta both agree is a very good thing.

Let's see. Before I open it up for questions, as far as the condensed financial statement goes, I think the only thing that I would just mention is that, as you are reviewing the condensed financial statement, you will notice our objective tax rate in the quarter is a little lower than our normal run rate. It's -- the effective rate for the quarter was 35.1%. We would still expect more of a normal effective rate to be in the 38.5% range. At this time, it is admittedly a little lower due to some discrete tax items. 50% of that primarily is relative to state apportionments and the rest is really the release of 1048 exposures that have been there for quite some time. With that, I will go ahead and conclude the prepared remarks and we would be happy to answer some questions.

At this time, we will begin the Q&A session. (Operator Instructions) The first question from Helane Becker from Dahlman Rose. Please go ahead with your question.

Thanks, operator. Hi, Brad. Hi, everybody. This is one of my questions. With respect to fuel reimbursements and revenues, I don't see in the press release what percent of the revenue increase was due to fuel reimbursement rates. Can you say that?

Yes. So the reason I mentioned that we have more stability here is because we've had recent quarters where the volatility in our revenue was in the $100 million range simply because of the volatility. At this time, the impact of pass through items, whether it's fuel or maintenance was only about -- a little over $10 million. In fact, I think the number specifically for fuel was about $13 million or so for the quarter.

Okay. Then with respect to Delta, the guidance that you are giving us now going forward includes the new agreement that's in the process of being finalized. Is that what you are saying? Is that how we should interpret that?

Yes, so -- let me be a little more clear. So, for really -- for all of this year, we have been reporting revenues based on really, management's best estimate of where these rate agreements would settle with Delta. As a result of our agreement -- as we have said and as I think we have been clear, we have done the best we could to take the best estimate but then I think, as you all know, we are pretty conservative in our estimates. We have been conservative. The settlement will result -- excuse me, in a bit of a pick-up which we will be working on and finalizing in the fourth quarter.

If you look at it from a run rate that we have been recognizing in revenue all through last year, the requirement to go to second lowest will create a little further reduction of the rates but not that materially. And we will give further guidance on this as we get everything completely settled and finalized. But if we look at it from just the run rate that we have been recognizing, it will still be a further reduction of a couple of million a quarter going forward but that we are factoring into all of our profit planning and the guidance that we give the street. That will be included in any guidance that we give.

Okay. Thank you.

You're welcome.

Our next question comes from Michael Linenberg from Deutsch Bank.

Good morning, everyone. Just a couple of questions. Brad, just to clarify on the rate piece, the $5 million hit on revenue in the quarter, does that reflect one month just because the new rates went in effect in September? I'm trying to get a sense of what the annual impact is.

No, it includes impact both from the reduction in the average rate and from September 8 to the end of the quarter, the impact of going to second lowest. So, both of those are in that number.

Oh, I see. So, because both ASA and SkyWest are now, what, in year five of their agreements is that right?

Yes. Both of these provisions were -- the beginning point is September 8 of 2005.

Okay. But then again, when I -- okay. So then when I thinking forward, though, what would be that quarter impact which would include the combination of both going to average and second in one fell swoop? Maybe that's what I'm trying to ask here.

I will be very, very general. I'm not going to give detailed guidance because, as I said, we have reached what I term a preliminary understanding with Delta but we are still in the process of documenting the agreement and I want to make sure that we have everything finalized. So, the first item of guidance that I would give is that as far as SkyWest Airlines is concerned, there is very little impact of any of these adjustments, okay? SkyWest Airlines rates are materially unaffected. The primary issue is on the Atlantic Southeast rates. So that's the first thing I want to give a little perspective to. Then as you look at it relative to what we have been reporting, all along for this year, because we have been fairly conservative in our -- in what we recorded as revenue, from a run-rate perspective, it's going to be another few million per quarter in reduction.

Okay.

Then I think that's the most guidance I want to give at this point until we get everything finalized.

When I just -- when you say a few million, are you saying a few million in addition to the $5 million you took this quarter or just a few million off what we had forecast? I'm trying to get to a base, I'm sorry.

A few million additional from what we have been reporting this year.

Okay. That's helpful. My second question, just on the share count. It looks like you brought back, as you indicated, 856,000 shares in the quarter. When I look at the share count at least for EPS purposes versus end of June quarter versus end of September quarter, the number is flat. I was curious, did this share buyback occur late in the quarter or is it partially offsetting some shares that have been issued to Company employees?

No, it's all to with the fact that it happened late in the quarter, Mike. We were in corporate blackout. We hadn't implemented the provisions of 105b1 program. Once we were out of blackout, we put a 105b1 in place. So that happened later in the quarter.

If I can squeeze in one more on the numbers, you highlighted that the mismatch on the maintenance expense related to the CRJ-200s, the engines there, it was $2 million worse than last year, the $9 million pre-tax. However, it's $3 million to $4 million better sequentially than what we saw in the June quarter, I think it was about $13 million pre-tax. Are we over the hump and as we move forward can we anticipate or expect to see that $9 million pre-tax number moderate a little bit?

You don't know how much I wish what you just said was true but it is not true. We have not hit the hump. And this will continue through the next year.

Okay. Okay. Maybe the $9 million is a good ballpark.

Yes.

Okay. Great. Thank you.

Mike, I wanted to follow-up a little bit more on the rates.

Okay.

When I indicated a little more -- a couple million, I mean, we need to keep in mind, too, that this is all to -- the whole purpose here is to -- the objective was to keep rates competitive and we agreed that we would take responsibility for our own rate structure which highlights the fact that we need to adjust our own cost structure to deal with the rates, right? So, at the same time, yes, we have rate reduction and there is some negative impact of that. But at the same time, we are working very aggressively and very specifically to match the cost structure with the rate structure.

So, yes, there will be a reduction of revenue and then our responsibility is to work to the fullest extent possible to manage the cost structure appropriate with those rates. We will make some progress on the cost structure. The integration of ExpressJet into the combined ASA/Atlantic Southeast Airlines platform I think will only enhance our ability to get just better utilization out of the total combined system and we do expect there to be some benefit from that.

The other thing that I would say relative to your comments about the maintenance adjustment. As difficult as that mismatch is right now on our financials, when you adjust SkyWest Airlines performance on more of a steady state and eliminate the mismatch in historical periods, it's been positive most of the time. Now it's negative. If you just eliminate that factor from SkyWest Airlines performance, this quarter's performance at SkyWest Airlines is one of the best quarterly performances that SkyWest has ever produced.

I appreciate that. Thanks for pointing that out.

First of all, it's worth emphasizing but second of all, fundamentally things are going very well at SkyWest Airlines.

That's right. Agreed. Thanks, Brad. Good quarter.

Our next question comes from Duane Pfennigwerth from Raymond James.

Hi, thanks, Good morning, guys.

Good morning.

Wondering if you could give us your thoughts on 2011 without the acquisition of ExpressJet. What would have Skywest growth on an ASM or block hour basis have looked like?

Duane, I think we're going to wait to give that guidance until we get a comprehensive plan that -- we have certainly a plan put together. But we want to make sure, before I give that guidance that we have got all the moving pieces settling down, that we understand and properly optimize the system and all of that before we give that guidance.

Okay. Fair enough. You have given us some longer term accretion estimates on ExpressJet once you get beyond the integration process. Wondering -- assuming this closes in the fourth quarter, any rough estimate, if any, on 2011 accretion?

Let me just give you a little bit of guidance. Certainly, many of you may be wondering just what the financial impact of the transaction will be on the first quarter -- I mean the fourth quarter when we expect to close as well as just as you asked the question relative to 2011. First of all, on the fourth quarter alone with the purchase accounting rules and everything, we have a lot of things to deal with relative to transaction costs. There will be change of control issues, severance issues, those normal things that I think are expected to be incurred in the quarter. We have purchase accounting requirements now as to how we value the beginning balance sheet.

When you take all of that into account, I do not expect any negative impact on the fourth quarter financial performance as a result of the acquisition. So, the first general question or statement I would make. I think any of the negative issues that may come out of the transaction costs and that type of thing will be more than offset with some purchase accounting gain just due to the new purchasing accounting literature. Okay. Then we move into the impact, as you have asked, into 2011. The first thing I would say there is that we are breaking down the impact into two different categories. First of all, we will aggressively go after the things that you would expect us to go after relative to the elimination of public Company expenses, some of the just redundant functions that both entities are doing today from an administrative standpoint that won't be required later.

And we believe the elimination of that will very quickly produce some operational -- at least from an operational level at Express, some positive contributions to income. The real value -- the material value will not come until we achieve single operating certificate which we are aggressively pursuing. We've already began that work, all the planning aspects of that work and would expect that, that would be accomplished over a 12 to 14 month period but not until we achieve single operating certificates will we get the real meaningful accretive value of the transaction and we are expecting the first full year of SOC to be 2012.

That's helpful. Relative to the $0.45 to $0.50, is that still a good estimate, something smaller than that but a positive number in 2011?

Yes.

Okay. Great. Just to follow-up on Delta, most of the conversation was around rate. Was there any change in understanding around the amount of capacity that they are obligated to purchase and then with respect to the conversation around term, is that an extension of the term of these contracts or just an extension of the period of time that you would not expect a rate reset? Thanks for taking the questions.

First of all, on the term issue, it's definitely not an extension of the term. This is all about the mechanism in the contract to adjust rates. There is some wording in there that really is not as clear as either we or Delta would like it to be. This just brings some very clear definition to the establishment of rates going forward. We have actually taken it further than the language to actually , I guess, an effective amendment to the agreement in some respects where we both agreed that we're going to put these rates in place. We have agreed on an escalation formula and we're going to put them in for a longer term and just hopefully not have to negotiate and potentially disagree on the rates as early as the contract might otherwise set us up to

In terms of the minimum utilization levels, are those changing?

No changes in the contract.

Thank you.

You're welcome.

Our next question comes from Ray Neidl of Maxim Group. Please go ahead with your question.

Just three quick clarifications in some of the things we talked about. The Delta revenue situation, did that come as a surprise to you guys? Is it something that you should have foreseen over the three to five year period or were you expecting it or was it a surprise?

Well, no, it's not a surprise at all. We have known these provisions were there. Certainly, as I mentioned, these are not easy provisions to administer. I mean, the analysis and all that goes into establishing what is average and what is second lowest, trying to get everybody's operational performance on an apples to apples basis. That is a difficult issue to go through. So, first of all, it's not a surprise. There are some certainly some issues -- our utilization, for example, particularly Atlantic Southeast, we have seen a material reduction in utilization which makes unit costs harder and harder to contain. So, we have some challenges and some issues that we just have to remain focused on and we have to lead through these issues, but, in no way were these issues a surprise to us.

Okay. Great. With the ExpressJet, is that pretty well cleared up with your contract with your customers? Could something pop up there that would extend or cause problems with the acquisition and are the contracts going to significantly change?

No, we don't expect anything unexpected there at all, Ray.

Okay. Great. The last thing is, it seems like you are growing your pro-rate type of business. I guess that's to diversify away from the contracts. What percentage of that represent of your revenues now and what do you think that will be going in another year or two?

Well, as a percent -- we will come up with a percent of revenue, I don't have that number on the top of my head. As a percentage of the fleet, I think I already indicated that we had a total of 61 airplanes in pro-rate during the quarter. So, it is a significant number. It's about a little under 15% of our revenue but maybe it's just worth reminding people that, this is a mixture of both (inaudible) and CRJ 200s.

So the concern has been trying to make pro-rate flying productive in CRJ 200s. The good news is that as we have said earlier, we have some fleet flexibility with those CRJ 200s which puts us in a position to work with the major partners, go into some very -- what we think are unique markets here where the majors have previously had heavier equipment flying those routes, to and really go in and work with these markets in the event they are not productive.

We are not obligated long term on the equipment. So we do have the ability, if these things aren't working, to downsize the fleet fairly quickly if we need to. That is one thing that we just feel strongly. We have some fleet flexibility that is fairly unusual and that we haven't had before. We had CRJ 200s come off lease or whatever, we extend them short term with very short-term notice periods and that thing. We are doing a lot of this with that fleet flexibility which I think is an important factor to keep in mind.

Great, thank you, Brad.

You're welcome.

Our next quo is from Bob McAdoo from Avondale Partners.

Hi guys. Just a couple of quick ones. What -- the ExpressJet transaction, what does that do going forward to your book and cash tax rates? What should we be thinking about?

As I said earlier, I don't think it's going to materially affect it from what we have been doing, Bob.

Okay. Is there -- do they have a tax loss carryforward that you get to pick up or did that get lost in the process?

What is that? I'm looking for varying opinions. There is some there, Bob, but it's not that material.

Okay.

By the way, it's subject to some limitations.

Yes, yes. Okay. Can you give us a sense of what your Capex has been thus far this year and what it looks like going forward, aircraft versus non-aircraft thing?

So, during the quarter -- well, let's see. Our non-aircraft -- we always -- our Capex, as you know -- I think you know, we always report as non-aircraft but yet we do have engine overhauls that are capped in that Capex. In the quarter was $22.7 million. A run rate for non-aircraft cash Capex in 2011, we would expect to be around $65 million. So, I mean, that number we expect to come down as far as our run rate has been.

And the aircraft side?

At this point we don't have the -- any aircraft that we are working on to come in from this point forward we are expecting to take on lease. All cash capex required. No down payments or that thing.

Okay. What is your year-to-date Capex on aircraft? Is that a number that is handy? Mike and I can talk about it later if he wants to. Somebody --

Bob, I'm not sure -- what are you asking exactly. When you say aircraft related, are you asking how many --

Have you taken on any airplanes this year and what have you had in capex related to those particular airplanes?

Year-to-date September, just under $90 million.

$90 million. That's what I need. Thanks a lot.

Our next question comes from Glenn Engel from Bank of America, Merrill Lynch. Please go ahead with your question.

Good morning. You mentioned that you had 61 aircraft in the pro-rate fleet right now. What was that last year?

Last year's third quarter was 38.

So the revenue has gone up proportional to that?

Yes, if anything a little disproportionate in the positive direction.

And will this extra pro-rate make the earnings more seasonal than the past?

Yes. I mean, yes, that's just a function of pro-rate flying.

And the fleet itself at 460, does that now change very much going forward? Do you have plans to get rid of aircraft as leases expire or is it going to sit at this level for awhile?

It's going to be very stable through 2011. And, of course, when the ExpressJet transaction closes the fleet will go to just under 700 aircraft.

Thank you very much. I'm sorry, one more question. Purchase accounting adjustments, you mentioned that they were positive for the fourth quarter. Is that a one-quarter phenomenon or are they a positive on an ongoing basis?

It's a one-quarter issue relative to just the purchase accounting debits and credits.

Thank you very much.

You're welcome.

Our next question comes from Helane Becker from Dahlman Rose.

Thanks operator. I just had a follow-up question, Brad. Just on the share repurchase program, is there a way to look at what your core revenues are excluding all the reimbursements to get a sense for what the true revenue rate increase is? What I'm trying to figure out is are you buying back stock in an environment of declining revenues?

Okay. So, I don't think that, that's the case. When you look at -- certainly our reported revenues have been declining because of -- simply due to the volatility of the pass-throughs is one issue as well as just the amount of the structure of our agreements with our major partners. So from a reported standpoint it's coming down. When we have consistent block hour production increases, that indicates that our fundamental operational revenues are still increasing, not decreasing.

Okay. That's what I'm trying to figure out. Ignoring the volatility of the pass-throughs, just getting core business. Obviously with the merger, closing this quarter, that will be -- the revenues will change again.

That's correct.

That's fine. All right. Thank you very much. I appreciate your help.

You're welcome.

Our next question comes from Kim Zotter from Imperial Capital.

Good morning. Quick question. Any updates on your TRIP investment in Brazil and what is your long-term vision with that as well as your Air Mekong International investment?

Well, so, I would just make a general comment about TRIP. TRIP is -- TRIP's performance is not materially different than we had expected. I would say the most significant change is the growth rate is a little higher than we expected. And that we just see as a function of the opportunity that they've had combined with their performance. So, they performed very well. They had some opportunity which put them in a position to grow quicker than expected. Our intentions are still to -- this is a passive investment for us and we don't have any expectations of being more or less involved. Our objectives are relatively unchanged from when we made the initial investment.

The Air Mekong investment, although we have more operational investment with that, I mean, it's still -- both of these investments are -- I mean, they are just that. They are passive investments trying to redeploy some equity into ventures that will provide some meaningful returns in areas of the world that we see as growing economies. And where the economies would -- economics would justify the investment. Unless you have further questions, I'll leave it at that.

No, that's helpful. My second question is a balance sheet question. You gave your total cash and I believe it was long term debt balance at the end of the quarter. So, more specifically, could you provide the unrestricted cash balance and all-in debt balance including current maturities?

Well, yes, I am happy to do that. We don't have a lot of really any material unrestricted cash -- excuse me, restricted cash. So, let's see. Of the $883.2 million of total cash and securities, $6.5 million is restricted.

Okay.

Just not a meaningful number.

Okay.

Okay. Then you asked about if I would give a little more information about the current portion of debt or in other words, total, you are looking at total debt?

Correct.

I think is your question?

Yes.

I think what -- I don't want to give a lot of information here to just those of you on the call that is not in the written release is my only hesitation. So we've got the $1.8 billion of long-term debt. When you add total to it, it's really only adding another $150 million -- $155 million So a total of $1.95 million

Okay. That's helpful. Thank you very much.

This concludes today's Q&A session. I would now like to turn the conference call back over to Mr. Rich for any closing remarks.

Okay. It sounds like that's the extent of the questions. Again, I appreciate your time. I do want to, in closing, just certainly always take the opportunity to express our appreciation to all the men and women of the SkyWest Inc. companies. We recognize that we could not have the success we are having without all of you and we appreciate that tremendously. I also want to thank those involved with the ExpressJet operation. ExpressJet is producing a very high quality sound operation and we appreciate our association. We appreciate the cooperation that we have had with all of you at ExpressJet as well. And with that, I will again thank you for your time and we will go ahead and conclude the call.

The conference is now concluded. We thank you for attending today's presentation. You may now disconnect your telephone lines.