SkyWest Inc (SKYW) 2013 Q1 法說會逐字稿

Good morning and welcome to the SkyWest, Inc. first-quarter 2013 financial results conference call. All participants will be in listen-only mode.

(Operator Instructions)

After today's presentation, there will be an opportunity to ask questions.

(Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Mr. Bradford Rich, President of SkyWest, Inc. Please go ahead Sir.

Thank you very much, operator, and thank you to all of you who have taken the time to participate with us on the discussion of our first-quarter results. We are grateful to all of you for making the time and, again, express appreciation for your interest in the Company. First of all, I want to just introduce those who are in the room here at SkyWest headquarters who will be participating this morning.

I have with me Chip Childs, President and Chief Operating Officer of SkyWest Airlines. I also have Brad Holt, President and Chief Operating Officer of ExpressJet. I have Mike Kraupp, Chief Financial Officer of SkyWest, Inc. and subsidiaries, and also Eric Woodward, our Chief Accounting Officer of SkyWest, Inc. and subsidiaries. We also have other members of our staff here with us for support. I want to first of all turn the time to Mike Kraupp, who will read our Safe Harbor Statement on forward-looking statements.

We will be making statements during this conference call which are considered forward looking. Such statements are based on our current beliefs, expectation and assumptions regarding future events that are subject to risks and uncertainties. Words such as expects, intends, believes, anticipates, should, likely, and similar expressions identify forward-looking statements.

All forward-looking statements expressed in this call are made as of the date hereof and are based on information available to us at this time. We assume 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, including those discussed in today's press release or expressed during the conference call or set forth in our 2012 Form 10-K and other reports and filings with the Securities and Exchange Commission.

Thank you very much, Mike. Now first of all I will just give some brief opening comments. I'll then turn the time back to Mike to discuss in more detail than I will discuss the details of the financial performance and our liquidity, our balance sheet, and some of those issues. We will then -- and then I will give a few more remarks just about some of the things going on, not just with our Companies, but as we see some things that are going on in the industry.

So, first of all, as you have seen from the earnings press release this morning, the Company reported, excuse me, consolidated earnings of $3.2 million or earnings per diluted share of $0.06. That compares -- so it's good that it's an increase from the results of the first-quarter of last year, where we reported just about $1 million net loss and a $0.01 loss in diluted earnings per share. So, we are pleased with the progress year-over-year. Admittedly, that level of earnings needs to be more. It is not the earnings that we had expected. I wanted to give some comments about the composition of the earnings.

As you will see in our 10-Q -- which will be filed here in a few days, we get a little bit of information in the 10-Q about the segment reporting or the financial performance of the two operating -- the two primary operating entities. The financial performance at the two airline entities was distinctly different during the quarter. Although we continue to make fundamental progress at ExpressJet and have confidence in what is going on there, the first quarter of 2013 did prove to be a difficult and a challenging quarter. In last quarter's call, I specifically gave a warning that due to the winter storms that we saw in the first part of the quarter, that I gave an indication or a warning that things were not starting out that well. And they weren't and they continued actually to get worse as we went throughout the quarter.

And so, a lot of that winter activity was at locations where our ExpressJet operation is very heavily concentrated and the effect of those winter events was disproportionately felt at the ExpressJet operation and that certainly is showing up in the financial results at ExpressJet for the quarter. These winter events, to give some perspective to it as we detailed in the release this morning, the negative impact was approximately 4,500 fewer block hours than we had projected that were due to approximately 1,900 canceled flights. And again, most of that activity was at the ExpressJet operation. Contributing also to some of the negative results there or the less than expected results were some increased maintenance expenses partly due to timing and partly exacerbated due to some of the weather events that we just mentioned.

On the SkyWest Airlines side, SkyWest Airlines had a very good first quarter. Prorate flying had a very respectable positive margin in the first quarter, which I think is the first time in a long, long time that we have had prorate income in a first quarter. Also, contributing to very positive results at SkyWest Airlines is the maintenance timing. We have been detailing this event for the market for a long time and the mismatch in expenses versus revenue was significantly decreased in the first quarter, which also contributed to improved results at SkyWest Airlines. All in total SkyWest Airlines performance more than doubled in the first quarter, which is very good performance. I am going to, at this point, turn the time back to Mike to let him give -- put a lot more detail to our financial performance during the quarter.

Thank you, Brad. Also I went to extend my appreciation to those of you that are participating on the call today with us. We do appreciate your time and your interest in our Company. I'm going to use the outline of the press release, so many of these numbers that I'm going to walk through here you have already seen and in fact, Brad has just alluded to a couple of them as well.

Nevertheless, this morning we did report net income of $3.2 million or $0.06 per fully diluted share for the quarter ended March 31, 2013. This compares favorably to reporting a net loss of $0.7 million for the same period last year. As noted in our press release, we did experience some negative impact to our financial results from the severe weather experienced and other operational challenges during the quarter. So, overall, we are pleased to be able to report a profit in what has become one of our most challenging quarters.

Consistent with our comments and reporting from the previous two quarters regarding how our major partners are currently purchasing the majority of fuel for our contract flights, we continue to experience a reduction in our operating revenues and operating expenses as a result of no longer purchasing fuel and being reimbursed by our major partners. Due to these changes we experienced a reduction of $99.7 million in our top-line revenues. During the quarter ended March 31, 2013 we also experienced a decrease of $19.7 million in the amount of engine overhauls that are considered pass-through costs under our contracts, which also resulted in a reduction of top-line revenues.

Offsetting these reductions, as outlined, we did experience a 2.8% increase in our block hour production, which translates into about 15,500 additional block hours that did indeed generate additional top-line revenues of about $10.5 million. Our total block hours produced for the quarter just ended were 571,991 compared to 556,421 for the same period last year. Also as noted for the release we did experience the impact of severe weather, which resulted in about 1,900 canceled flights and 4,500 fewer block hours. We have estimated the negative impact of that or those events that occurred to be about $4.5 million pretax.

Our total operating expenses, which does include total operating expenses and interest, decreased by a net amount of $114.6 million or roughly 12.5% for the quarter just ended. After considering the reductions that I just previously outlined in my comments of lower fuel costs and engine overhaul costs, our total airline expenses increased about $4.8 million or less than 1%. That compares favorably to the 2.8% increase in our block hour production. As a result of these items we did report operating income of $15.6 million for the quarter ended March 31, 2013 compared to $20.5 million for the same quarter last year. Also our operating margin was 1.9% for the quarter just ended and that compares to 2.2% for the same period last year.

Let me also point out a couple of items that impacted our other income and expense category. For the quarter ended March 31, 2012, so last year, we had actually recorded a little over $4 million from our share of losses related to ownership of Trip Airlines and Air Mekong. Due to the sale of our ownership in Trip and due to the wind-down of Air Mekong on February 28, 2013, which I believe Brad is going to discuss, we did not record any impact of operations from these two entities for the quarter just ended.

We did, however, record $5.1 million from the receipt of maintenance deposits that were collected from Air Mekong under a sublease arrangement as a result of Air Mekong's termination of these subleases. I also wanted to point out that you will see this in the 10 Q, but we will make reference to it here, and also included within the operating expenses. So, above the other income expense category, we did have a small settlement issue with Delta, wherein we paid them $3 million to settle a matter that we had with them.

Turning to the balance sheet, we have $631.5 million in cash and marketable securities at March 31, 2013. That compares to $709.4 million as of December 31, 2012 or a reduction of about $78 million. This reduction was consistent with the semi-annual lease and debt payments that are paid primarily in January. Our net debt position was $978 million as of March 31, 2013 compared to $1.2 billion as of March 31, 2012. So, a year ago a net results in a net reduction of about $142 million.

Also during the quarter just ended, we did spend $23.5 million in non-aircraft capital expenditures. What I wanted to do also real quick is just give you a very quick update of what we see the quarterly ASMs for the next three quarters. For the second quarter, based on our latest estimates, we look to produce 9.9 billion ASMs, in the third quarter its 10.1 billion, and in the fourth quarter 9.2 billion ASMs. And that will conclude my formal remarks. Brad, back to you.

Before we conclude the formal remarks and open for questions, I'd like to just make reference to some other things that we think are material and significant going on with the Companies. First of all, I want to mention we previously discussed our agreement with American where we are flying a total of 23 aircraft in their system. All 23 of those aircraft are in and flying at -- basically 50% of those SkyWest Airlines flying at Los Angeles and ExpressJet flying the remainder in Dallas-Fort Worth. So, all of those airplanes are in and flying.

We continue the execution of the transaction with Delta. That is one that we have been talking about for some time. Where we are taking the 34 dual class airplanes and then in the fourth quarter of this year, we will begin transition out of some of the 200s at Delta, but we are continue very successful execution of that transaction, which we believe is significant.

I think most of you know we previously discussed not just the sale of our ownership in Trip, but the wind-down or the -- I should say, just the closing down of the Air Mekong operation. Now the issue there is the four aircraft that we are operating at Air Mekong are airplanes that we, meaning SkyWest, Inc., have the financial obligations on. We are also pleased to announce that those airplanes we have come to an agreement with US Airways to place those CRJ900s in the US Air operation. Two airplanes will go into service July 1, the other two will go in July 15.

There is a significant amount of activity going on in the industry. We are certainly aware of it. We know that most of you are aware of it. I would just make a general statement that we are working very aggressively in those areas where we see opportunity. We are working aggressively with our major aircraft partners. We are working with aircraft and airframe manufacturers. We are working with engine manufacturers. We are working with our employee groups. We are doing everything, I think, that you would expect us to do in an environment here, where we see a lot of opportunity relative to fleet replacement, fleet rationalization.

We see the major airlines doing what they need to do to take advantage of some of the recent improvements in Scope, and we expect to participate in these opportunities. We have nothing to announce today, but just want you to know that we are doing what you would expect us to do in aggressively working these opportunities. We feel that with the strength of our credit, the strength of our balance sheet, our liquidity, our positioning geographically throughout this country, we are well-prepared and positioned with our people, our resources, to take advantage of these opportunities and we are working hard to achieve some of those. Having said that, we will go ahead and conclude the formal remarks now and we would be happy to answer some questions.

(Operator Instructions).

Jim Parker, Raymond James & Associates.

Brad, I believe you said the profitability or the status of ExpressJet that you have broken that out in your 10Q and I don't think we have seen that yet, is that correct?

That is right, we expect the Q to be filed probably later this week on Friday.

So, can you tell us about the profitability status? It appears ExpressJet is losing money, what is the magnitude of that loss and what are you doing or planning to do to turn it around?

So, I'm going to -- I'm not going to get into the details of the profitability, Jim. It will be there for you to see Friday when the Q is filed. And so I think for FD and those kind of things, I felt that it was important here to at least give some general perspective about the performance of each of the entities, but I need to let you wait, as everyone will, and see it as filed in the Q. But generally, your statement is correct. SkyWest's performance in the quarter was very good. As I mentioned, the margins or I should say the overall net income generated at the SkyWest Airlines entity more than doubled this first quarter. And as I mentioned, partly due to the success of the prorate flying, which was really a significant improvement. Or I should just say significant performance, particularly for a first quarter.

And then as we said, some of the timing of the maintenance events significantly helped as well. But generally, the performance just stays strong and consistent. The ExpressJet operation, we have made significant progress and on a general statement had gotten it back, what I just described as very close to breakeven.

This first quarter, due to the significance of the weather and then sometimes it's hard to distinguish between maintenance events that are just maintenance events and those that are just exacerbated by weather. So, some we code as weather and then some we just code as maintenance, but it was just a pretty material impact in the quarter, which negatively impact the quarter and yes, it took what we had projected in the first quarter as a very modest loss to a fairly material loss, but I don't think that indicative of the run rate. So, we have made significant progress there. We are doing -- we had some fundamental problems relative to some things like the spare ratio of the fleet at particularly on the legacy ExpressJet side, which we are getting fixed. That will help the operating performance.

And then look, we still have part of the overall synergistic value that was to be created at ExpressJet that we've realized about half. And look, I know we've been saying we've got about half of those synergistic benefits for a long time and look, the remainder, a lot of the remaining benefits are dependent on the joint collective bargaining agreements and those are still being worked through. And I think we are making progress there, but we are not where we need to be, yet.

Now, it appears, based on what you're saying and I guess the information that is coming, that the SkyWest operation is considerably more profitable then ExpressJet. Do you have the flexibility on new contracts with legacy carriers to place those additional aircraft at SkyWest, your more profitable operation?

So, what we, Jim, so what we do is we bid primarily what we have -- our approach is we do SkyWest, Inc. bids. In an ideal situation, we would prefer to have -- I mean, we would want two entities that are both very high reliability, very cost-effective and then be able to allocate aircraft based on where the majors want the airplanes to fly and then we could allocate them based on positioning, based on maintenance, based on domiciles, based on crew flows, and those kinds of things to create a natural allocation based on where the majors want the airplanes to fly. Right now, we have -- so we bid SkyWest Inc. bids and then we determine at SkyWest how to allocate those airplanes.

Well, my question, though, has to do with this one operation is more profitable and more efficient than another, why not put those aircraft with the more efficient, more profitable operation.

Well, so, Jim, those are the decisions that we are making at the Company. So, --.

Okay. Yes, thank you.

Duane Pfennigwerth where the, Evercore Partners.

Just a question and this is probably a hypothetical, but if I look at your 10K, it looks like your total fleet declines about 8% a year through 2016, if you do not win any growth. Now, I assume that a lot of that is small jets that you are probably not making much or any money on, frankly, and there is probably some natural lease expirations that match up with that. So, my question is in a no growth scenario, what is the cash flow potential of SkyWest and how does it change over the next three years?

Okay, so, Duane, I think the way that we will answer that question is your observation, first of all, is, I think, very accurate. If you just take the natural terminations of the fleet and assume no replacement, that is what happens and your assessment is also fairly accurate that those aircraft that are terminating happen to be in the lower producing margins of the portfolios. So, yes, declining fleet doesn't necessarily mean declining profitability or decrease in cash flows. Now, the important thing to note is that in some of our contracts we have replacement rights which enable us to replace airplanes as long as the major for which those airplanes are terminating want additional left.

Now, in order to win -- in order to execute on those provisions, we have to be cost competitive and all of that and that is our responsibility to make sure that we are so that we can effectively get the fleet replacement that the respective major feels is important. So, if you just isolate it to just terminations with no replacement, it's lower margin stuff that is going away. But, we do have replacement rights in a lot of these cases, especially on some of the earlier terminations, where we expect to replace it with better producing margins.

I guess that leads me to my second question which is, it seems like you have two options, right, you can pursue this growth business, deploy a bunch of capital to pursue that growth, probably it's earnings accretive, but it's not free cash flow accretive or you can not grow and return capital to your shareholders in what appears to be a pretty mature industry with a bit of a reprieve on growth. So, how do you think about growing and deploying that capital towards growth versus just taking a more focused approach on capital return? It seems like the cash flow potential of your business is pretty substantial relative to your market cap and it seems like that has to be a debate.

Okay, so, very good question. And a question that you would expect that we are very well aware of and very focused on. First of all, I would just say that we are at a very -- in assessing our response or how we are going to deal with your question, I think we are at a very important and critical time in our industry. We are at a time when there is fleet replacement and fleet rationalization going on in our part of the industry and our ability to secure additional flying in this market right now, I think, is very important to us answering that question, because if we can get fleet replacement and as the mix of the fleet changes to more and more dual class aircraft or I should just say large regional jet, that we would expect improving performance and I would say, very strong free cash flow in spite of the investment that it will take to get into those airplanes.

Because, look, as I said earlier, we've been for the last three years or 3.5, we have been very aggressively working with manufacturers, engine providers, part suppliers in a new way to manage these fleets. And I think we are doing it in a way which will make us not only very cost-effective, but gives us the flexibility to reduce our cash investment in growth.

So, all of that is going into this equation and if we can grow the aircraft successfully or, excuse me, win some of these opportunities, whether they are growth or just fleet replacement, I think our ability to create additional value and generate cash, and again this is where our Safe Harbor becomes very important and this is my opinion, I just think our ability to generate both respectable margins and increasing cash flow and therefore value, I think our opportunity to do that is very strong. But, if things don't work out as we suspect, then the timing is very important that we address the very question you have asked. So, I will just leave it at that by saying we understand the question. We are focused on it and we are at a very important critical time in our strategic element, in our growth and replacement and all of that to answer that question.

Okay thanks for the perspective.

Michael Linenberg, Deutsche Bank.

I want to go back to just the Trip and the Air Mekong. Mike, I know you went over the impact in the quarter, I missed some of the numbers. I just -- on the last quarterly conference call I know you -- I think you indicated that there would be another $1.3 million write-down of the investment that we would see in this quarter and then I know you mentioned some of the returns of the aircraft. Can you walk through those numbers again and if there was any impact, anything related to Trip or are we completely done on Trip or because I know that that -- there is a closing that's tied to that and there was some time element about when you would ultimately receive everything tied to that. So, just an update on those two investments.

With regards to the comment -- first of all, let me just re-clarify for this quarter. In this quarter we did not book anything in operations -- operational income regarding our ownership, the percent of ownerships that we had in Trip and Air Mekong. We closed our Trip transaction last July and we've been on a quarter lag with regards to reporting our share of particular -- of potential income or losses. So, having said that timeframe on that transaction, we again did not have anything in the quarter with regards to Trip. Now with regards to the investment that we have in Air Mekong, yes, as of the end of last quarter we still had basically a basis of about $1.3 million on that. However, in conjunction with the wind-down of that entity, SkyWest is working out with Air Mekong deposit payments, lease payments, inventory, a few other issues that are concerning winding down that transaction.

So, as a result, we held off reporting anything relating to a final write-down of that particular entity. I will also tell you that even though we have about $1.3 million in basis still left, we actually could end up slightly positive as a result of value that maybe is received as a result of the spare parts that are taken. So, that should -- and once that is done -- in fact, we anticipate that will happen within the second quarter. I'm sorry, the second quarter that we would clear up and finish up everything else on Air Mekong.

One other comment with regard to Trip and the sale that we did, we are going to be receiving payments over a three-year period. We received payment one in last year. We will get another payment this July. And then a payment in the following year, at which point in time we will record a potential gain on that transaction. Okay?

Yes, what was the payment or what should we anticipate in July, how much is that?

Our payment is going to be about $17 million.

Okay, so $17 million comes in and then the $5 million, $6 million non-op positive, though, that was tied to the -- I heard something $5 million for the airplanes coming back. I just wanted --.

Yes, we've already received that. Those are maintenance deposits that were required that Air Mekong pay under our sublease arrangement and just due to the accounting rules, I will not go into all the details of those, but due to the accounting rules and the fact that we are not allowed to accrue maintenance for those aircraft, we simply were required to take those into income.

And then my second question, you provided capacity for the second quarter, the 9. -- what was it 9.9 billion ASMs and I believe that is what you had in your previous guidance and yet with the impact of sequester, when I was tracking the cancellations, because I know we had a lot of delays. But I noticed there were a lot of SkyWest and ExpressJet cancellations. So, number one, are you making that up in the quarter with additional flying after it looked like a tremendous amount of cancellations over the first few weeks? And number two, what will be the impact or have you -- can you give us rough numbers maybe what the financial impact of those cancellations may be for the June Q?

With regards to the ASM estimates, I have reflected and we were up slightly from what I had had before. I think we were about a 9.1 or whatever before, so the number is up slightly in both second and third quarters that I've given you. With regards to the FAA delays and that, we have either Chip or Brad that want to comment.

So, I think first of all, Mike, the question were the impact of the sequester built into your numbers and the answer to that is yes. Now, we did have, I think this one we had -- impact of the sequester was, I think -- was -- the biggest impact that we saw was in our LAX operation, where in some of those days we had what is on normal conditions, good weather, good flow, normal arrival/departure rate of 84 per hour that in some case went to 12. So, as you guys and, Mike, I know you follow this closely. There was some impact, but that is built into the projections that Mike gave you and I don't think that is going to have a material impact on our quarter -- on the second quarter.

Okay, that's great then, thank you.

Glenn Engel, Bank of America.

You mentioned a $3 million settlement showing up in other expense can you, with Delta, can you talk about that?

So, let me take this one. I'm actually glad you're bringing that up. This is a settlement with Delta that relates to some travel issues. It affected both airlines. That was booked above the line through our normal operating expenses, which I'm actually glad you're bringing up from the perspective we have some non-operating, which is below the line income of $5 million. We have this, which was a negative above line. So, I think it is very easy to take the $5 million in another and say that all of our earnings were non-operating, which is not exactly the case. We had some stuff above the line, some stuff below the line, but in direct answer to your question, this was, again, this is an issue where we settled out with Delta Airlines some things that relate to non-rev and positive space type travel throughout the systems and it's settled, it's done, and so that's really all there is to that.

The second small question would be on the non-op line it was $6.039 million versus the $5.1 million you mentioned with Air Mekong. What is the other $1 million from?

Just simply our gains or losses that we have got in there. On equipment, other equipment.

The prorate last year was a $2.3 million loss on $69 million of revenues, can you give me what the exact numbers where this year in the first quarter?

Okay, we actually had an operating profit of just $800,000 this year and what was your other question in relation to rate?

There was $69 million in revenues last year.

Roughly $80 million in revenues this time.

The maintenance mismatch was a plus this year in the first quarter?

Yes.

And I thought also the timing, the engine timing issues were, I thought, relatively high in the first quarter. Can you talk about how that looks for the balance of the year, both the maintenance mismatch and just the normal maintenance cycles you have had.

Yes, in fact in conjunction with what you just said for the first quarter, we did have a slight positive. I asked our guys to refresh, if you will, for the remaining three quarters from both entities that have this issue. And we are still on track for being slightly positive for the year. I haven't noticed material movements. Sometimes you can move maybe $1 million or $2 million depending on number of engines that you are actually going to do, but we are still targeting or believe that we will still be on target to have slightly positive amount from that by year-end.

And the regular -- the non-engine mismatch, the timings in terms of airframes and all that I thought they were heavy in the first quarter, when did this start to ease?

They actually were heavy on a year-over-year basis as well. Do you have any forecast with regards to future, happening the rest of the year, anything like that? Do we think they're going to be more heavy than what we just did? So, I don't think any -- I don't think it's going to be heavier than the run we've just seen. Beyond that, I think if anything it's going to trend down and, Glenn, look, if anything changes on that we will have to -- we will make a commitment here to get back to you, but that -- the best information we have right now says that the trend, if anything, will slightly decrease through the remainder of the year.

That's all I have. Thank you very much.

Savi Syth, Raymond James.

Just a follow-up to Glenn's question on the United CRJ mismatch, how does that look in 2014?

So, again, the issue here is revenue collected just under our reimbursement of the CPAs relative to total engine maintenance. So, the number continues to -- the actual events in this area of the business that creates the mismatch will just continue to decline. So, I think the question is, in '14, is the -- will we still have more expense versus revenue? And in '14 it will be the first year in this Bell curve that we actually have more revenue than expense. And I think the important thing to note about this, too, is this isn't like on a multiple Bell type curve. This was one big Bell and then it goes away. And so, our projections are the number has continued to come down. '14 will now go back slightly positive and then this event will go away, because these particular aircraft will naturally terminate and these are the only ones in the fleet that have this issue.

And then on the Delta contract, of the 33 are they all in service currently and when is the last one coming in?

Talking about the transition of the 34 dual class that are coming in. We have delivered 33 of them. We just -- taken some of them within the last couple of days. Looking at my guys here there is eightish.

We have got the last five that are coming in in the next two weeks and then that will be it.

And then they will all be in.

That is all in service?

Yes, all in service in the next two weeks.

All right, great. Thanks so much.

(Operator Instructions).

Michael Linenberg, Deutsche Bank.

The United purchase recently of, I guess, if they exercise the option, is up to 70 of the Embraer larger jets. Just thoughts on the fact that you have United doing something that they haven't done in some time, which is to buy these airplanes. What do you think is driving them, number one. Number two, how well positioned are you to even bid on that business given that you don't have the -- you don't have experience flying the larger Embraer jets? Your thoughts on that?

Okay, so, my first thought is we shouldn't have let you ask follow-up question. I thought (multiple speakers) especially the United announcements. (laughter) Actually, I do appreciate the question. So, look, we -- as I stated again today and in previous calls, we are working very aggressively with all manufacturers, including Embraer, on the larger aircraft types. So, this question is a question that will be driven by what the major partners want to fly relative to the costs that we can deliver this service. So, we have been aggressively marketing aircraft costs by Lombardia product and Embraer product. I think that the most salient issue here is United, I think, is trying to accomplish a number of things. First of all, I think they want some diversification in their portfolio. And this is one way to get it.

The next question here is they have announced 30 aircraft. I think we would all agree they probably need more than 30 larger regional jets in their fleet So, the question is specific to these 30, but are they going to want more than those 30? And then the question is, yes, I think we are very well positioned and if that is the type of aircraft that they want to operate then we are prepared and ready to take the aircraft and put it on certificate.

Brad, just as a quick follow-up, through your ownership of Trip, you did have -- I know that they were members of the SkyWest management team down in Brazil, so you have some -- you probably have more familiarity then people realize with the larger Embraer 170, 190 aircraft, because those were both flown by Trip. Is that a fair point?

I think that is a correct statement.

Okay, well good. Thanks.

And in showing no additional questions in the queue, this will conclude our question and answer session. I would like to turn the call back to Brad Rich for his closing remarks.

Again, I always appreciate the opportunity to get on and particularly enjoy our discussions and the opportunity to answer questions. And I think you would be surprised if I did not, again, just make reference to our employees and express appreciation to them. Look, whether it is SkyWest Airlines or ExpressJet or any of the employees of the Company. We have been through a challenging and difficult last few months.

The quarter particularly was -- it was just very challenging from so many perspectives and we really are appreciative and grateful to all of our employees. Sometimes feels like in these difficult times they don't get enough appreciation and we just are very grateful for what they have all gone through and doing the best that they can to keep these systems operating safely and reliably and so for that we are grateful. And we are grateful to the investment community for your interest in the Company and for your continued support. We remain very confident, as I said earlier, in our positioning. We continue to work very aggressively to increase and strengthen what we believe is already a very strong strategic position in this marketplace. And with the quality and talent of our people and our financial resources and our geographic breadth and depth and concentration through the country, we just feel very strongly about the future of the Company. And with that, again, I will thank you and we will go ahead and close the call. Thank you very much.

Thank you, sir. Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. you may now disconnect.