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Nature of Operations and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2016
Nature of Operations and Summary of Significant Accounting Policies |
Nature of Operations and Summary of Significant Accounting Policies | (1) Nature of Operations and Summary of Significant Accounting Policies SkyWest, Inc. (the “Company”), through its subsidiaries, SkyWest Airlines, Inc. (“SkyWest Airlines”) and ExpressJet Airlines, Inc. (“ExpressJet”), operates the largest regional airlines in the United States. As of December 31, 2016, SkyWest Airlines and ExpressJet offered scheduled passenger service under code-share agreements with United, Delta, American and Alaska with approximately 3,160 total daily departures to different destinations in the United States, Canada, Mexico and the Caribbean. Additionally, the Company provides airport customer service and ground handling services for other airlines throughout its system. As of December 31, 2016, the Company had 652 aircraft in scheduled service out of a combined fleet of 685 aircraft consisting of the following:
|  | CRJ200 |  | CRJ700 |  | CRJ900 |  | ERJ135 |  | ERJ145 |  | E175 |  | EMB120 |  | Total |
United |  | 75 |  | 35 |  | — |  | 5 |  | 140 |  | 58 |  | — |  | 313 |
Delta |  | 109 |  | 62 |  | 64 |  | — |  | — |  | 13 |  | — |  | 248 |
American |  | 29 |  | 33 |  | — |  | — |  | 14 |  | — |  | — |  | 76 |
Alaska |  | — |  | — |  | — |  | — |  | — |  | 15 |  | — |  | 15 |
Aircraft in scheduled service |  | 213 |  | 130 |  | 64 |  | 5 |  | 154 |  | 86 |  | — |  | 652 |
Subleased to an un-affiliated entity |  | 2 |  | — |  | — |  | — |  | — |  | — |  | — |  | 2 |
Other* |  | — |  | 9 |  | — |  | 4 |  | 4 |  | — |  | 14 |  | 31 |
Total Fleet |  | 215 |  | 139 |  | 64 |  | 9 |  | 158 |  | 86 |  | 14 |  | 685 |
*Other aircraft consisted of leased aircraft removed from service that were in the process of being returned to the lessor and owned aircraft removed from service that are in the process of being sold. For the year ended December 31, 2016, approximately 52.2% of the Company’s aggregate capacity was operated for United, approximately 36.5% was operated for Delta, approximately 6.3% was operated for American, and approximately 5.0% was operated for Alaska. SkyWest Airlines has been a code-share partner with Delta since 1987, United since 1997, Alaska since 2011 and American since 2012. As of December 31, 2016, SkyWest Airlines operated as a Delta Connection carrier primarily in Salt Lake City and Minneapolis, a United Express carrier primarily in Los Angeles, San Francisco, Denver, Houston, Chicago and the Pacific Northwest, an American carrier primarily in Chicago, Los Angeles and Phoenix and an Alaska carrier primarily in the Pacific Northwest. As of December 31, 2016, ExpressJet operated as a Delta Connection carrier primarily in Atlanta and Detroit, a United Express carrier primarily in Chicago (O’Hare), Cleveland, Newark and Houston and an American carrier primarily in Dallas. Basis of Presentation The Company’s consolidated financial statements include the accounts of the Company and the SkyWest Airlines, ExpressJet and SkyWest Leasing segments, with all inter‑company transactions and balances having been eliminated. In preparing the accompanying consolidated financial statements, the Company has reviewed, as determined necessary by the Company’s management, events that have occurred after December 31, 2016, through the filing date of the Company’s annual report with the U.S. Securities and Exchange Commission. The Company reclassified certain prior period amounts to conform to the current period presentation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company classified $8.2 million of cash as restricted cash collateralizing letters of credit under the Company’s workers’ compensation insurance policy and classified it accordingly in the consolidated balance sheets as of December 31, 2016 and 2015. Marketable Securities The Company’s investments in marketable debt and equity securities are deemed by management to be available-for-sale and are reported at fair market value with the net unrealized appreciation (depreciation) reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. At the time of sale, any realized appreciation or depreciation, calculated by the specific identification method, is recognized in other income and expense. The Company’s position in marketable securities as of December 31, 2016 and 2015 was as follows (in thousands):
|  |  |  |  | Gross unrealized |  | Gross unrealized |  |  |  |
At December 31, 2016 |  | Amortized Cost |  | holding gains |  | holding losses |  | Fair market value |
Total cash and cash equivalents |  | $ | 146,766 |  | $ | — |  | $ | — |  | $ | 146,766 |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Bond and bond funds |  | $ | 410,001 |  | $ | — |  | $ | (116) |  | $ | 409,885 |
Asset backed securities |  |  | 13 |  |  | — |  |  | — |  |  | 13 |
Total available-for-sale securities |  | $ | 410,014 |  | $ | — |  | $ | (116) |  | $ | 409,898 |
Total cash and cash equivalents and available for sale securities |  | $ | 556,780 |  | $ | — |  | $ | (116) |  | $ | 556,664 |
|  |  |  |  | Gross unrealized |  |  | Gross unrealized |  |  |  |
At December 31, 2015 |  | Amortized Cost |  | holding gains |  | holding losses |  | Fair market value |
Total cash and cash equivalents |  | $ | 203,035 |  | $ | — |  | $ | — |  | $ | 203,035 |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Bond and bond funds |  | $ | 286,857 |  | $ | — |  | $ | (220) |  | $ | 286,637 |
Asset backed securities |  |  | 30 |  |  | 1 |  |  | — |  |  | 31 |
Total available-for-sale securities |  | $ | 286,887 |  | $ | 1 |  | $ | (220) |  | $ | 286,668 |
Total cash and cash equivalents and available for sale securities |  | $ | 489,922 |  | $ | 1 |  | $ | (220) |  | $ | 489,703 |
Marketable securities had the following maturities as of December 31, 2016 (in thousands):
Maturities |  | Amount |
Year 2017 |  | $ | 293,928 |
Thereafter |  |  | 115,970 |
As of December 31, 2016 and 2015, the Company had classified $409.9 million and $286.7 million of marketable securities, respectively, as short‑term since it had the intent to maintain a liquid portfolio and the ability to redeem the securities within one year. The Company has classified $2.3 million of investments as non‑current and has identified them as “Other assets” in the Company’s consolidated balance sheet as of December 31, 2015 (see Note 6). Inventories Inventories include expendable parts, fuel and supplies and are valued at cost (FIFO basis) less an allowance for obsolescence based on historical results, excess parts and management’s expectations of future operations. Expendable inventory parts are charged to expense as used. An obsolescence allowance for flight equipment expendable parts is accrued based on estimated lives of the corresponding fleet types and salvage values. The inventory allowance as of December 31, 2016 and 2015 was $40.5 million and $13.9 million, respectively. The significant increase in 2016 was related to additional excess inventory identified as part of the impairment analysis of the 50-seat aircraft. See Note 8, Special items, for additional detail on the impairment. These allowances are based on management estimates, which can be modified based on future changes in circumstances. Property and Equipment Property and equipment are stated at cost and depreciated over their useful lives to their estimated residual values using the straight‑line method as follows:
Assets |  | Depreciable Life |  | Residual Value
New Aircraft |  | 18 years |  | 30 | %
Used Aircraft, rotable spares, and spare engines |  | up to 18 years |  | 0 - 30 | %
Ground equipment |  | up to 10 years |  | 0 | %
Office equipment |  | up to 7 years |  | 0 | %
Leasehold improvements |  | Shorter of 15 years or lease term |  | 0 | %
Buildings |  | 20 – 39.5 years |  | 0 | %
Impairment of Long-Lived Assets As of December 31, 2016, the Company had approximately $3.8 billion of property and equipment and related assets. Additionally, as of December 31, 2016, the Company had approximately $8.2 million in intangible assets. In accounting for these long‑lived and intangible assets, the Company makes estimates about the expected useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate. On September 7, 2005, the Company acquired all of the issued and outstanding capital stock of Atlantic Southeast and recorded an intangible asset for specifically identifiable contracts of approximately $33.7 million relating to the acquisition. The intangible asset is being amortized over fifteen years under the straight‑line method. As of December 31, 2016 and 2015, the Company had $25.5 million and $23.3 million in accumulated amortization expense, attributable to the acquisition, respectively. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long‑lived assets, a significant change in the condition of the long‑lived assets and operating cash flow losses associated with the use of the long‑lived assets. On a periodic basis, the Company evaluates whether impairment indicators are present. When considering whether or not impairment of long‑lived assets exists, the Company groups similar assets together at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and compare the undiscounted cash flows for each asset group to the net carrying amount of the assets supporting the asset group. Asset groupings are done at the fleet or contract level. In December 2016, the Company decided to remove CRJ200 aircraft from ExpressJet’s operation. In connection therewith, the Company plans to remove approximately 46 CRJ200 aircraft from its fleet during 2017. Additionally, in December 2016, the Company entered into a termination agreement covering Bombardier’s residual value guarantee (“RVG”) agreements on 76 CRJ200 aircraft owned by SkyWest Airlines and ExpressJet whereby it agreed to terminate Bombardier’s future RVG commitment in exchange for a cash payment and other consideration valued at $125 million. The agreement also eliminated the Company`s future requirement to return the aircraft to a mid-time maintenance condition and certain remarketing activities. This termination agreement allowed for the acceleration of the retirement of the CRJ 200 fleet. As a result of the scheduled reduction in the CRJ200 fleet in 2017, the termination of the RVG agreements with Bombardier and the current market values of its CRJ200 aircraft excluding Bombardier’s RVGs, the Company concluded that indicators of impairment existed and therefore, evaluated its CRJ200 fleet and related assets for impairment. Pursuant to Accounting Standards Codification (“ASC”) 360-10, Impairment and Disposal of Long-Lived Assets, the Company determined that separate asset groups existed based on the various major partner contracts. A recoverability test was performed utilizing estimated undiscounted future cash flows for each asset group pursuant to applicable contracts with the major partners and associated expenses as well as the value the Company would realize upon disposal of aircraft. This was compared to the carrying value of the related assets resulting in a cash flow deficiency indicating that an impairment existed. The impairment analysis required the Company to perform an assessment of the fair value of its long-lived assets related to the CRJ200 aircraft within the asset groups utilized in the recoverability test. The Company engaged a third party to assist in determining the fair value of certain of the long-lived assets, including the aircraft, spare engines and fixed asset spare parts inventory. These values were estimated based on listed market values or recent third-party market transactions for similar assets. Additionally, the Company estimated the fair value of certain long-lived prepaid lease assets using the net present value of estimated current CRJ200 lease rates. All fair values are considered to be Level 3 within the fair value hierarchy. The amounts the Company may ultimately realize from the disposal of its CRJ200 long-lived assets may vary from the December 31, 2016 fair value assessments. See Note 8, Special Items, for the impairment charges recorded during the year ended December 31, 2016 related to the CRJ200 long-lived assets. Additionally, the Company’s fixed-fee contract with United covering Embraer ERJ145 regional jet aircraft ("ERJ145") is scheduled to expire at the end of 2017, subject to United’s two one-year extension rights intended to facilitate an orderly return of ERJ145 aircraft to United. The ERJ145 aircraft are leased from United and the Company is obligated to return the aircraft to United as each aircraft is scheduled to terminate under the contract. There are no significant unreimbursed return related costs associated with these lease returns. Under the terms of the fixed-fee contract, the Company anticipates removing approximately 45 ERJ145s from its fleet in 2017 and returning the aircraft to United. Due to the uncertainty regarding the probability of extending the ERJ145 fixed-fee arrangement with United beyond the existing terms and as the Company is obligated to return these aircraft to United upon the contract expiration, the Company also evaluated its ERJ145 related assets for impairment including spare engines and related spare parts inventory. The Company engaged a third party to assist in determining the fair value of the spare parts engines and inventory. The spare engines and inventory were valued based on recent market transactions for similar assets. All fair values are considered to be Level 3 within the fair value hierarchy. The amounts the Company may ultimately realize from the disposal of its ERJ145 long-lived assets may vary from the December 31, 2016 fair value assessments. See Note 8, Special Items, for the impairment charges recorded during the year ended December 31, 2016 related to the ERJ145 long-lived assets. The Company did not recognize any impairment charges of long-lived assets during 2015. In 2014, the Company had impairments on several long-lived assets relating to Embraer Brasilia EMB 120 (“EMB120”) turboprop aircraft, ERJ145 aircraft type specific assets and an aircraft paint facility located in Saltillo, Mexico. See Note 8, Special Items, for the impairment charges recorded during the year ended December 31, 2014 related to these long-lived assets. Capitalized Interest Interest is capitalized on aircraft purchase deposits as a portion of the cost of the asset and is depreciated over the estimated useful life of the asset. During the years ended December 31, 2016, 2015 and 2014, the Company capitalized interest costs of approximately $1.5 million, $2.2 million, and $1.8 million, respectively. Maintenance The Company operates under a U.S. Federal Aviation Administration approved continuous inspection and maintenance program. The Company uses the direct expense method of accounting for its regional jet engine overhauls wherein the expense is recorded when the overhaul event occurs. The Company has engine services agreements with third-party vendors to provide long-term engine services covering the scheduled and unscheduled repairs for certain of its Bombardier CRJ700 Regional Jets (“CRJ700s”), Embraer ERJ145 regional jet aircraft and Embraer E175 jet (“E175”) aircraft. Under the terms of the agreements, the Company pays a fixed dollar amount per engine hour flown on a monthly basis and the third-party vendors will assume the responsibility to repair the engines at no additional cost to the Company, subject to certain specified exclusions. Maintenance costs under these contracts are recognized when the engine hour is flown pursuant to the terms of each contract. The costs of maintenance for airframe and avionics components, landing gear and normal recurring maintenance are expensed as incurred. Passenger and Ground Handling Revenues The Company recognizes passenger and ground handling revenues when the service is provided under its code-share agreements. Under the Company’s fixed-fee arrangements (referred to as “fixed-fee arrangements, “fixed-fee contracts” or “capacity purchase agreements”) with Delta, United, American and Alaska (each, a “major airline partner”), the major airline partner generally pays the Company a fixed-fee for each departure, flight or block time incurred, and an amount per aircraft in service each month with additional incentives based on flight completion and on time performance. The major airline partner also directly reimburses the Company for certain direct expenses incurred under the fixed-fee arrangement such as fuel expense and landing fee expenses. Under the fixed-fee arrangements, revenue is earned when each flight is completed. Under the Company’s fixed-fee agreements with Delta, United, American and Alaska, the compensation structure generally consists of a combination of agreed‑upon rates for operating flights and direct reimbursement for other certain costs associated with operating the aircraft. A portion of the Company’s contract flying compensation is designed to reimburse the Company for certain aircraft ownership costs. The aircraft compensation structure varies by agreement, but is intended to cover either the Company’s aircraft principal and interest debt service costs, its aircraft depreciation and interest expense or its aircraft lease expense costs while the aircraft is under contract. Under the Company’s ExpressJet United Express ERJ Agreement and ExpressJet American ERJ145 Agreement, the major airline partner provides the aircraft to the Company for a nominal amount. The Company has concluded that a component of its revenue under these agreements is rental income, inasmuch as the agreements identify the “right of use” of a specific type and number of aircraft over a stated period of time. The amounts deemed to be rental income under the agreements for the years ended December 31, 2016, 2015 and 2014 were $516.0 million, $504.9 million and $497.0 million, respectively. These amounts are reflected as passenger revenues on the Company’s consolidated statements of comprehensive income (loss). The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statement of comprehensive income (loss) since the use of the aircraft is not a separate activity of the total service provided. In the event that the contractual rates under the agreements have not been finalized at quarterly or annual financial statement dates, the Company records revenues based on the lower of prior period’s approved rates, as adjusted to reflect any contract negotiations and the Company’s estimate of rates that will be implemented in accordance with revenue recognition guidelines. In the event the Company has a reimbursement dispute with a major airline partner, the Company evaluates the dispute under its established revenue recognition criteria and, provided the revenue recognition criteria have been met, the Company recognizes revenue based on management’s estimate of the resolution of the dispute. In several of the Company’s agreements, the Company is eligible for incentive compensation upon the achievement of certain performance criteria. The incentives are defined in the agreements and are being measured and determined on a monthly, quarterly or semi-annual basis. At the end of each period, the Company calculates the incentives achieved during that period and recognizes revenue accordingly. The Company’s passenger and ground handling revenues could be impacted by a number of factors, including changes to the Company’s code‑share agreements with Delta, United, Alaska or American, contract modifications resulting from contract re‑negotiations, the Company’s ability to earn incentive payments contemplated under the Company’s code‑share agreements and settlement of reimbursement disputes with the Company’s major airline partners. Under a Revenue Sharing Arrangement (referred to as a “revenue-sharing” or “prorate” arrangement), the major airline and regional airline negotiate a passenger fare proration formula, pursuant to which the regional airline receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on the regional airline and the other portion of their trip on the major airline. Revenue is recognized under the Company’s prorate flying agreements when each flight is completed based upon the portion of the prorate passenger fare the Company anticipates that it will receive for each completed flight. Other ancillary revenues commonly associated with airlines such as baggage fee revenue, ticket change fee revenue and the marketing component of the sale of mileage credits are retained by the Company’s major airline partners on flights that the Company operates under its code-share agreements. The following summarizes the significant provisions of each code-share agreement the Company has with each major airline partner: Delta Connection Agreements
Agreement |  | Aircraft type |  | Number of Aircraft |  | Term / Termination Dates |
SkyWest Airlines Delta Connection Agreement (fixed-fee arrangement) |  | CRJ 200 CRJ 700 CRJ 900 E175 |  | 50 27 36 13 |  | Individual aircraft have scheduled removal dates under the agreement between 2017 and 2026 The average remaining term of the aircraft under contract is 3.7 years |
ExpressJet Delta Connection Agreement (fixed-fee arrangement) |  | CRJ 200 CRJ 700 CRJ 900 |  | 38 35 28 |  | Individual aircraft have scheduled removal dates under the agreement between 2017 and 2022 The average remaining term of the aircraft under contract is 2.8 years |
SkyWest Airlines Delta Connection Prorate Agreement (revenue-sharing arrangement) |  | CRJ 200 |  | 21 |  | Terminable with 30-day notice |
United Express Agreements
Agreement |  | Aircraft type |  | Number of Aircraft |  | Term / Termination Dates |
SkyWest Airlines United Express Agreements (fixed-fee arrangement) |  | CRJ 200 CRJ 700 E175 |  | 53 35 58 |  | Individual aircraft have scheduled removal dates under the agreement between 2017 and 2027 The average remaining term of the aircraft under contract is 5.7 years |
ExpressJet United ERJ Agreement (fixed-fee arrangement) |  | ERJ 145 ERJ 135 |  | 140 5 |  | Individual aircraft have scheduled removal dates under the agreement during 2017, subject to two one-year extensions The average remaining term of the aircraft under contract is 0.9 years |
SkyWest Airlines United Express Prorate Agreement (revenue-sharing arrangement) |  | CRJ 200 |  | 22 |  | Terminable with 120-day notice |
American Agreements
Agreement |  | Aircraft type |  | Number of Aircraft |  | Term / Termination Dates |
SkyWest Airlines American Agreement (fixed-fee arrangement) |  |  CRJ 200  CRJ 700 |  | 9 23 |  |  CRJ200 aircraft are scheduled to expire in 2017 and the CRJ700 aircraft are scheduled to expire in 2019 |
SkyWest Airlines American Prorate Agreement (revenue-sharing arrangement) |  |  CRJ 200 |  | 6 |  |  Terminable with 120-day notice |
ExpressJet American Agreement (fixed-fee arrangement) |  |  CRJ 200  CRJ 700  ERJ 145 |  | 11 10 14 |  |  CRJ200 aircraft are scheduled to expire in 2017 and the CRJ700 aircraft are scheduled to expire in 2020 |
ExpressJet American Prorate Agreement (revenue-sharing arrangement) |  |  CRJ 200 |  | 3 |  |  Terminable with 120-day notice |
Alaska Capacity Purchase Agreement
Agreement |  | Aircraft type |  | Number of Aircraft |  | Term / Termination Dates |
SkyWest Airlines Alaska Agreement (fixed-fee arrangement) |  | E175 |  | 15 |  | Individual aircraft have scheduled removal dates under the agreement between 2027 and 2028 |
The Company anticipates placing an additional seven E175 aircraft with United, five additional E175 aircraft with Alaska and six E175 aircraft with Delta throughout 2017. The Company is scheduled to have 49 CRJ700 aircraft in service with American by mid-2017, all of which were previously operated in the existing fleet of other major airline partners. At the end of 2016, the Company had 213 CRJ200 aircraft and 159 ERJ145/135 aircraft in scheduled service. The Company anticipates it will reduce its CRJ200 aircraft by approximately 46 aircraft and its ERJ145/135 aircraft by approximately 59 aircraft during 2017. The Company also anticipates that ExpressJet will transition to flying primarily dual-class aircraft in its CRJ aircraft operation by removing its CRJ200 aircraft from service over the next year. Deferred Aircraft Credits The Company accounts for incentives provided by aircraft manufacturers as deferred credits. The deferred credits related to leased aircraft are amortized on a straight‑line basis as a reduction to rent expense over the lease term. Credits related to owned aircraft reduce the purchase price of the aircraft, which has the effect of amortizing the credits on a straight‑line basis as a reduction in depreciation expense over the life of the related aircraft. The incentives are credits that may be used to purchase spare parts and pay for training and other expenses. Income Taxes The Company recognizes a liability or asset for the deferred tax consequences of all temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that are expected to result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or settled. Net Income (Loss) Per Common Share Basic net income (loss) per common share (“Basic EPS”) excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti‑dilutive effect on net income (loss) per common share. During the years ended December 31, 2016, 2015 and 2014, 2,077,000, 505,000 and 3,191,000 shares reserved for issuance upon the exercise of outstanding options were excluded from the computation of Diluted EPS respectively, as the respective exercise price exceeded the weighted average fair market value of the Company’s stock for such year. The calculation of the weighted average number of common shares outstanding for Basic EPS and Diluted EPS are as follows for the years ended December 31, 2016, 2015 and 2014 (in thousands):
|  | Year Ended December 31,
|  | 2016 |  | 2015 |  | 2014 |
Numerator: |  |  |  |  |  |  |  |  |  |
Net Income (Loss) |  | $ | (161,586) |  | $ | 117,817 |  | $ | (24,154) |
Denominator: |  |  |  |  |  |  |  |  |  |
Denominator for basic earnings per-share weighted average shares |  |  | 51,505 |  |  | 51,077 |  |  | 51,237 |
Dilution due to stock options and restricted stock units |  |  | — |  |  | 748 |  |  | — |
Denominator for diluted earnings per-share weighted average shares |  |  | 51,505 |  |  | 51,825 |  |  | 51,237 |
Basic earnings (loss) per-share |  | $ | (3.14) |  | $ | 2.31 |  | $ | (0.47) |
Diluted earnings (loss) per-share |  | $ | (3.14) |  | $ | 2.27 |  | $ | (0.47) |
Comprehensive Income (Loss) Comprehensive income (loss) includes charges and credits to stockholders’ equity that are not the result of transactions with the Company’s shareholders, including changes in unrealized appreciation (depreciation) on marketable securities. Comprehensive loss for the year ended December 31, 2014 included unrealized gain (loss) on foreign currency translation adjustment related to the Company’s equity investment in Trip Linhas Aéreas, a regional airline operating in Brazil (“TRIP”). Fair Value of Financial Instruments The carrying amounts reported in the consolidated balance sheets for receivables and accounts payable approximate fair values because of the immediate or short‑term maturity of these financial instruments. Marketable securities are reported at fair value based on market quoted prices in the consolidated balance sheets. If quoted prices in active markets are no longer available, the Company has estimated the fair values of these securities utilizing a discounted cash flow analysis as of December 31, 2016. These analyses consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the expectation of the next time the security is expected to have a successful auction. The fair value of the Company’s long‑term debt is estimated based on current rates offered to the Company for similar debt and was approximately $2,566.5 million as of December 31, 2016, as compared to the carrying amount of $2,570.9 million as of December 31, 2016. The Company’s fair value of long‑term debt as of December 31, 2015 was $1,939.8 million as compared to the carrying amount of $1,948.8 million as of December 31, 2015. Segment Reporting Generally accepted accounting principles require disclosures related to components of a company for which separate financial information is available to, and regularly evaluated by, the Company’s chief operating decision maker when deciding how to allocate resources and in assessing performance. The Company’s three operating segments consist of the operations conducted by SkyWest Airlines, ExpressJet and SkyWest Leasing. Information pertaining to the Company’s reportable segments is presented in Note 2, Segment Reporting. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU No. 2014-09”). Under ASU No. 2014-09, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received for that specific good or service. In July 2015, the FASB deferred the effective date of ASU No. 2014-09 for annual reporting periods beginning after December 15, 2017. In 2016, the FASB issued several amendments to the standard, including principal versus agent considerations when another party is involved in providing goods or services to a customer and the application of identifying performance obligations. The Company continues to assess the potential impacts of ASU No. 2014-09 on its fixed-fee contracts, prorate flying agreements, ground handling agreements and other revenue transactions. The Company anticipates completing its review of the impact by the second quarter of 2017. Interpretations are on-going and could have a significant impact on the Company’s implementation. The Company believes the principal versus agent considerations may change how the Company presents revenue for certain directly-reimbursed expenses under its fixed-fee contracts, such as fuel expenses. ASU No. 2014-09 is required to be applied either full retrospective to each prior reporting period presented or modified retrospective with the cumulative effect of initially applying it at the date of initial application. The Company anticipates using the full retrospective method of adoption. In April 2015, the FASB issued Account Standards Update No. 2015-03, “Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs related to a recognized debt liability to be presented as a direct deduction from the carrying amount of that debt liability. The new guidance only impacts financial statement presentation. The guidance was effective in the first quarter of 2016. The Company adopted this guidance January 1, 2016 on a retrospective basis. As a result, $20.9 million of unamortized debt issuance costs that had been included in the Other assets line on the consolidated balance sheets as of December 31, 2015 are now presented as direct deductions from the carrying amounts of the related debt liabilities. In November 2015, the FASB issued Accounting Standards Update 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU No. 2015-17”). ASU No. 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by ASU No. 2015-17. ASU No. 2015-17 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company’s management currently anticipates the impact of adopting ASU No. 2015-17 to result in reducing the Company’s current deferred tax asset to zero with corresponding resolution in the recorded amount of the Company’s long-term deferred tax liabilities. In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases (Topic 842)” (“ASU No. 2016-02”). ASU No. 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 will be effective beginning in the first quarter of 2019. Early adoption of ASU No. 2016-02 is permitted. ASU No. 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company’s management is currently evaluating the impact the adoption of ASU 2016-02 is anticipated to have on the Company’s consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update No. 2016-09, “Compensation—Stock Compensation (Topic 718)” (“ASU No. 2016-09”). ASU No. 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU No. 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. ASU No. 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The Company’s management anticipates the adoption of ASU No. 2016-09 will likely impact the Company’s income tax provision, shareholders' equity and statement of cash flows consolidated financial statements.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=64851502&loc=d3e6003-108592 + Details
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